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AFMD-82-21 1 (1981-12-16)

handle is hein.gao/gaobabcsq0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE n0 WASHINGTON, D.C. 20548 ACCOUNTING AND PINANCI^A. MANAGEMENT DIVISION B-202052 DECEMBER 16, 1981 The Honorable E. F. Callahan Chairman, National Credit Union Administration Board Dear Mr. Callahan: Subject: Improvements Needed in the Accounting and Financial Management of the National Credit Union Administration (AFMD-82-21) During our recent examination of the National Credit Union Administration's (NCUA's) 1980 financial statements, we tested NCUA's internal controls and the manner in which its accounting functions were performed. Our tests, based predominately on a judgmental sampling of transactions, disclosed numerous areas in which improvement can be made. The weaknesses we found in inter- nal controls and accounting practices did not materially affect the financial statements taken as a whole. For this reason, we were able to render an unqualified opinion on NCUA's financial statements for calendar 1980. We did not examine the adequacy of the share insurance fund in this review. However, credit unions have encountered severe financial difficulties during the past few years. If interest rates persist for an extended period at high levels, credit unions with total savings of $2.1 billion as of May 1981 could face liqui- dation. Such an occurrence would represent a substantial liabil- ity to the National Credit Union Share Insurance Fund. We believe this potential liability emphasizes the need for improved account- ing and financial management. The purpose of this report is twofold: (1) to provide recom- mendations which we believe will improve the efficiency of NCUA's operations and the accuracy of its financial statements and (2) to help you discharge your responsibilities under 12 U.S.C. 1789 (b)2. This law requires NCUA to follow the principles and procedures ap- plicable to commercial corporate transactions. These principles and procedures are commonly referred to as generally accepted ac- counting principles. Under generally accepted accounting principles, the responsi- bility for reliable financial statements rests with management. In this respect, effective systems of accounts and internal control 11(920570) 117077

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