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Q&A about Member Account Verifications
Thursday, December 17, 2015 6:35 AM

By Susan Laird, Internal Audit Specialist, Credit Union Resources

As one of my many duties, I frequently get questions about member account verifications. These range from rather simple to complex questions. However, I want to share with you several recurring questions I receive while performing the member account verification.

What requires a member account verification to be performed? The Federal Credit Union Act and state credit union regulation requires a credit union to verify the members’ accounts with the credit union’s records at least every two years. The bylaws of a credit union, however, may require the audit be performed more often, such as annually.

What is the purpose of a verification of accounts? To prevent fraud and identify any errors in the accounts or statements. It is recommended the audit be conducted by a credit union committee or an outside professional. This allows the credit union to maintain the independence and compliance of the audit.

What are the pros and cons of positive vs. negative membership verification? A positive verification requires a reply from the member and involves many steps including multiple attempts to contact the member. The negative audit assumes that accounts are accurate and does not require any response from the member.

Why verify 100 percent of accounts instead of a sampling of accounts? Statistical sampling is much more involved and is not always feasible. A 100 percent negative verification is the easiest especially when conducted with a quarterly statement run which will save on processing costs.

What is done with statements that are not mailed? These are considered “no-mail” or “hold” statements. A list of these statements should be maintained and included in the audit. The statements must be printed for the verification audit in order for the audit to be considered 100 percent verification.

How are e-statements included in the audit? An email is sent to the member notifying them of their statement and should inform the member of the verification. A report should be generated identifying any email address that was not deliverable or rejected. These members’ statements should be printed and included in the audit.

How long does the verification process take to conclude? Typically, it takes 60-90 days to capture as much of the return mail as possible. A sampling of the return statements should be verified to the detailed member trial balance.

What happens if a member sends notification of a discrepancy? This should be forwarded to credit union management and researched to determine the discrepancy. The persons overseeing the audit should be notified of the resolution to the member’s concern.

How long must the credit union maintain the member account verification audit? All audit documents should be maintained until the next verification is performed.

So, what’s a credit union to do? Most importantly, make sure the verification is done regularly and correctly. As for positive, negative, 100 percent, or sampling, consider who will be performing the verification and make the best decision for the credit union.

If you need assistance with member account verifications, Financial & Technical Resources is here to help. To learn more about all of the products and services we offer visit the Financial & Auditing on the Resources website or contact Deana Brown at 469-385-6464.