Credit Union Sector
The Credit Union sector has undergone significant changes in the last few years. The sector has been impacted by the changes in the Irish economy with increased loan provisioning, shrinking loan books and decreased investment yields. The legislative environment for Credit Unions has changed considerably, brought about mainly by the enactment of the Credit Union and Co-operation with Overseas Regulators Act 2012. REBO has been set up to facilitate and oversee the restructuring of Credit Unions. Additional compliance and regulatory requirements have been introduced in the Credit Union sector which require not only an annual statutory audit, but also the development of an internal audit function to provide for the independent oversight of the governance of Credit Unions.
Nestor & Co have extensive experience in working with Credit Unions. We have a knowledge of the sector and an understanding of the challenges and risks affecting Credit Unions in the current environment.
Key Credit Union Services:
- Statutory Audit
- Internal Audit
- Loan book and Asset Reviews
- Mergers and Acquisitions
Statutory Audit:
The primary objective of the annual audit is to provide an independent opinion on the Credit Unions financial statements. Our credit union team have gained valuable experience over the years in the area of Credit Union Statutory Audit. We believe in conducting the audit in an efficient and effective manner. To this end:
- We communicate with management before the commencement of the audit to agree the timing requirement.
- On site work is arranged to cause minimal disruption to the day to day activities of the Credit Union.
- We value the importance of meeting the full Board of Directors of the Credit Union at the end of the audit assignment so that we gain knowledge of any additional needs of the Credit Union.
- We attend the Annual General Meeting of the Credit Union and address any queries which the Credit Union members may have in respect of the audited financial statements.
Internal Audit:
The Credit Union & Co Operation with Overseas Regulators Act 2012 requires Credit Unions to develop an internal audit function to provide for the independent oversight of the governance of Credit Unions. In our Internal Audit assignments we:
- Develop an annual Internal Audit Plan which is specific to each Credit Union, addressing the areas of importance for each Credit Union.
- On site work is arranged to cause minimal disruption to the day to day activities of the Credit Union
- Produce quarterly reports for the Board of Directors addressing the areas which were covered in the quarter and any issues identified
Loan Book and Asset Reviews
Loan provisioning and asset valuation has been a key sector of focus in the past few years. The performing loan book reviews by Credit Unions is now becoming more common. The loan book review may be performed to comply with requests from The Central Bank or by Credit Unions who want an independent assessment of their loan book and associated provisioning.
Asset reviews involve an assessment as to whether the assets of the Credit Union are impaired. This means that they would be likely to realise less than their book value.
In general the primary assets of Credit Unions consist of:
- Fixed Assets ( with a particular emphasis on Land and Buildings)
- Investments
- Loan Book
To this end:
- We assess the quality loan book of the Credit Union by way of loan analysis by categorisation.
- We assess Investments with a focus on area including impairment and compliance with guidance notes on Investments issued by The Central Bank.
- We assess whether the market value of Fixed Assets are less than their carrying value. Comprehensive Value in Use calculations are prepared where the carrying value of assets are less than market value.
- We then report on the degree of loan provisioning, Investment Impairment or Fixed Asset impairment which we have identified by way of our testing.
- Any additional loan provisioning or impairment will have an impact on the results of the Credit Union. In our reporting we set out the implication any additional provisions or impairment would have on current year surpluses and reserves ratios.
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