FINAL_3133-0059_Justification_12CFR715_082216

SUPPORTING STATEMENT
National Credit Union Administration
Supervisory Committee Audits and Verifications, 12 CFR 715
OMB No. 3133-0059

A.

JUSTIFICATION

1.

Necessity of collection of information.
Title 12 CFR part 715 prescribes the responsibilities of the supervisory committee to
obtain an audit of the credit union and verification of member accounts as outlined in
Section 115 of the Federal Credit Union Act, 12 U.S.C. §1761d. A supervisory
committee audit is required at least once every calendar year covering the period since the
last audit and to conduct a verification of members’ accounts not less frequently than
once every two years.
The Credit Union Membership Access Act of 1998 (CUMAA), Pub.L. 105-219, 112 Stat.
918, amended certain audit and financial reporting requirements of the Federal Credit
Union Act (FCUA). Final amendments to the FCUA specify the minimum annual audit a
credit union is required to obtain according to its charter type and asset size, the licensing
authority required of persons performing certain audits, the auditing principles which
apply to certain audits, and the accounting principles which must be followed in reports
filed with the NCUA Board.

2.

Purpose and use of the information collection.
The information is collected by the credit union’s supervisory committee or its designated
representative, through a supervisory committee audit which is required at least once
every calendar year covering the period since the last audit. The information is used by
both the credit union and the NCUA to ensure through audit testing that the credit union’s
assets, liabilities, equity, income, and expenses exist, are properly valued, controlled and
meet ownership, disclosure and classification requirements of sound financial reporting.
A written report on the audit must be made to the board of directors and, if requested,
NCUA. Working papers must be maintained and made available to NCUA.
Independence requirements must be met; standards governing verifications and the
methods used to verify member’s passbooks and accounts are set forth. Section 741.202
makes these requirements applicable to federally insured state-chartered credit unions.
Audits can be preventative and contribute substantially to the safety and soundness of the
credit union system. Audits have been used by the agency as a third party attestation of
the fair presentation of financial statements in all material respect; as “value-added” in the
detection of errors and irregularities; and as a means of identifying internal control

OMB No. 3133-0059; August 2016

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reportable conditions in advance of the occurrence of material misstatement or errors and
irregularities.
3.

Consideration given to information technology
In recent years, this information has migrated to scanned, automated, electronic,
mechanical or other technological collection means. Generally the engagement letter, the
working papers and the audit report(s) are generated initially in electronic form and
printed in hardcopy paper form. The form of subsequent storage and retention is a
decision of the credit union. A credit union may choose to store the information through
any reasonable means which would permit an NCUA examination, e.g., optical scanning,
microfiche, Microsoft, Adobe, etc. Credit unions are not precluded from using
information technology to collect this information.

4.

Duplication.
Section 115 of the FCUA requires audit and verification for all FCUs. Part 715 are the
implementing regulations for FCUs and federally-insured state credit unions required to
comply by insurance agreement and part 741 of NCUA regulations. Other NCUA efforts
to collect similar information, e.g., through the Call Report and through the examination
process, do not include the independent tests of controls and substantive testing on which
to ensure sound financial reporting.

5.

Effect on small entities.
The majority of requirements are not applicable to smaller credit unions. If the
supervisory committee or an uncompensated designated representative will be performing
the supervisory committee audit, many of the provisions of this part are less complex.
These exemptions were added to minimize the burden on small credit unions.

6.

Consequences of not conducting the collection of information.
Statute requires an annual audit and a report to the members at the annual meeting.
There would be substantial risk to the credit union members and to the National Credit
Union Share Insurance Fund which insures members’ deposits in credit unions, if the
collection of information were not conducted

7.

Inconsistencies with guidelines in 5 CFR 1320.5(d)(2).
The collection is conducted within the guidelines.

OMB No. 3133-0059; August 2016

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8.

Consultations outside the Agency.
A 60-day notice was published in the Federal Register on June 14, 2016, at 81 FR 38737,
soliciting comments from the public. NCUA did not receive any comments regarding the
collection.

9.

Payment or gifts.
No payments or gifts are offered.

10.

Confidentiality.
Some of the information the supervisory committee or its designated representative may
gain in the course of its audit, may contain some information of a confidential nature,
e.g., transactions of a member. Section 748 requires credit union officials to hold such
transactions in confidence. NCUA, too, is bound to ensure the confidentiality of
information obtained by the supervisory committee in the normal course of an audit or
verification.

11.

Questions of a sensitive nature.
This is a recordkeeping requirement. No personally identifiable information (PII) is
collected.

OMB No. 3133-0059; August 2016

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12.

Burden of information collection.
The obtaining of an annual audit by a financial institution is a customary and usual
business practice. Nonetheless, we provide the following annual hour burden estimates:
# of
Respondents

Activity

12 CFR

# Responses
per
Respondent

Annual
Responses

Hours per
Response

Annual Hour
Burden

Supervisory Committee Audit
Performed by State-Licensed Person
715.5 &
715.6

Financial Statement Audit

2,150

1

2,150

1.5

3,225

715.7(a)

Balance Sheet Only Audit

178

1

178

1.5

267

715.7(b)

Internal Control Attestation

66

1

66

1.5

99

715.6(c)

Agreed Upon Procedures

1,160

1

1,160

2

2,320

1

1,985

2

3,970

486

1

486

20

9,720

5,538

1

5,538

1

5,538

6,025

1

6,025

0.25

1,506

3,012

1

3,012

4

12,048

6,025

3.42

20,600

1.88

38,693

Performed by Non-Licensed Person
Compensated External
1,985
Person*

715.6(c)

Supervisory Committee
Volunteer
715.9(b)

Engagement Letter
715.10(b)

Working Papers
715.8(a) & (b)

Membership Verification
Totals

* Not Licensed, or if licensed, not acting within their license (e.g., league employee).

There are no costs to respondents. The completion of audits and the related contracting
through engagement letters and the preparation of working papers in support of an audit
is a customary and usual business practice for a financial institution, therefore, we have
not included cost burden estimates for the work paper requirements.
13.

Capital start-up costs and operation and maintenance costs.
There are no capital start-up or operation and maintenance costs.

14.

Cost to the Federal government.
There are no costs to the Federal government.

OMB No. 3133-0059; August 2016

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15.

Reason for change.
Adjustments in the number of credit unions reflect a decrease from the previous
submission and recordkeeping requirements associated with the membership verification
under §715.8, are now included (previously omitted).

16.

Information collection planned for statistical purposes.
No plans for publication.

17.

Approval to omit OMB expiration date.
The OMB control number and expiration date associated with this PRA submission will
be displayed on the Federal government’s electronic PRA docket at www.reginfo.gov.

18.

Exceptions to Certification for Paperwork Reduction Act Submissions.
There are no exceptions to the certification statement.

A.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS

This collection does not involve statistical methods.

OMB No. 3133-0059; August 2016

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