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MLR: Alleged Fraud Caused Failure of Six Small Pennsylvania CUs "Credit News 24"

A Material Loss Review (MLR) by the National Credit Union Administration (NCUA) Office of Inspector General (OIG) found that Chester Upland School Employees Federal Credit Union (Chester), O P S EMP Federal Credit Union (OPS), Electrical Inspectors Federal Credit Union (Electrical), Triangle Interests % Service Center Federal Credit Union (Triangle), Cardozo Lodge Federal Credit Union (Cardozo) and Servco Federal Credit Union (Servco) failed due to alleged fraud.

All six Credit Unions outsourced their management, recordkeeping, and maintenance of financial records to a third party provider, Service Center for Credit Unions, Inc. (SCCU), in Bensalem, Pennsylvania.

NCUA liquidated all six credit unions on April 5, 2017. The failure of the six credit unions resulted in an estimated loss of $3.2 million to the National Credit Union Share Insurance Fund (NCUSIF).

The MLR reported that the six credit unions failed due to overstatement of approximately $3.2 million in assets, primarily investments in certificates of deposit (CDs).

The MLR cited three reasons for the failure of these six credit unions:

• Management displayed a lack of integrity and did not manage the six credit unions in the best interest of their members; 
• The Supervisory Committees failed to obtain Supervisory Committee Audits that included confirmation of investments; and 
• The Boards of these six credit unions exercised weak oversight.

The MLR further stated that the alleged fraud could have been discovered sooner, if examiners "had followed National Supervision policies and identified the Supervisory Committee Audits as unacceptable, confirmed account balances directly with institutions, and addressed risks related to the failures of the Supervisory Committees and Boards of Directors." This would have potentially mitigated the loss to the NCUSIF.

Read the Material Loss Review.
Title : MLR: Alleged Fraud Caused Failure of Six Small Pennsylvania CUs "Credit News 24"
link : MLR: Alleged Fraud Caused Failure of Six Small Pennsylvania CUs "Credit News 24"