‘Deficient’ Financial Report: KPMG on NCUA’s Accounts

Michelle Remo, “Big 4″ observer
May 17, 2011 /

The National Credit Union Administration’s (NCUA) financial report for the year ended December 31, 2010 contains “significant deficiency” in accounting for some of its funds, according to an independent audit conducted by KPMG LLP.

The internal audit report, presented using the US generally accepted auditing standards and the Government Auditing Standards, gave NCUA’s financial report unqualified opinions, saying it fairly presents the financial position of the NCUA Operating Fund, the Central Liquidity Facility, the Community Development Revolving Loan Fund, and the Share Insurance Fund, “in all material respects.”

However, KPMG LLP found “significant deficiency” in how NCUA reported the accounts of its Operating Fund.

“The Fund needs improvement in reporting the activity of property, plant and equipment and intangible assets in the financial statements, enhancing the quality of certain supporting documentation thereby increasing the efficiency of the financial statements close process, and better segregating the preparation and review of manual journal entries,” KPMG LLP said.

According to the accounting firm, NCUA management failed to provide the key documentation of its property and equipment.

NCUA lacks the efficiency in record keeping, documentation of activities, and financial close procedures, KPMG LLP found.

“We believe that the incomplete documentation for certain non-routine activity and lack of familiarity with the new general ledger system contributed, in part, to management’s inability to efficiently prepare the financial statements and relating supporting documentation in a timeframe that would be expected to consistently enable robust review,” KPMG LLP said.

KPMG LLP also took into consideration the internal controls of NCUA over its financial reporting. This was used “as a basis for designing audit procedures that are appropriate in the circumstances,” KPMG LLP said in a statement.

But the accounting firm clarified that it did not express an opinion on the effectiveness of the Fund’s internal control over financial reporting.

“We did not test all internal controls relevant to operating objectives as broadly defined by the Federal manager’s Financial Integrity Act of 1982,” it added.

On NCUA’s compliance programs, KPMG LLP found “no instances of noncompliance or other matters that are required to be reported.”

NCUA has already addressed the deficiencies found in its financial report, the federal agency said.


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