Development Best Practices in Credit Union Supervision: Examination Definition, Objectives, Scope, and Process

This paper discusses the role of on-site examination, which is an important risk-determining tool.

The paper discusses:

• The definition of the full scope of the examination process, stating that:
  • The examination is a series of procedures used to determine the economic and financial status of credit unions;
  • It focuses on trends, ratios, management and operations.
• The examination's objectives, such as:
  • Evaluating the credit union's financial soundness;
  • Appraising the quality of management, etc.
• Scheduling the examination frequency, taking into consideration the size and complexity of the credit union and its geographic location;
• The scope of examination, listing the five major areas that the examination should analyze;
• The procedures to be carried out to determine the scope of the exam, like reviewing the external audit, the financial information, ratio trends, etc.
• The contents of a normal full scope examination, which consists of a review of:
  • General ledger and financial statements;
  • Cash and investment analysis, etc.
• Initiation of the examination process, which includes:
  • Pre-examination planning;
  • On-site execution of the process.
• The total analysis process, describing the procedures of collecting, reviewing and interpreting data.

The paper concludes by describing limited scope or follow-up exams.