By Brian Carmody, Director, Marketing & Communications
For credit unions, the periodic—and required—audit conducted by the National Credit Union Association (NCUA) is arguably one of the most important tasks the organization must undergo. It provides a critically important review of the credit union’s financial health, its IT procedures and cyber security protocol, along with other consumer protection metrics to ensure it is compliant with applicable laws and regulations. Failing the exam can cost money, resources and, potentially, the credit union’s ability to operate. Large, federally insured credit unions are examined by the NCUA, usually about every two years. Smaller, federally insured state-chartered credit unions are typically examined by the state regulator with participation and oversight from the NCUA at least every five years. Whatever the timing, the importance of passing these exams cannot be overstated.
NCUA examiners can flag violations using a variety of tools. A Supplemental Finding is used to identify and address specific strengths and weaknesses in the organization. A Finding means the credit union has violated a law, rule or regulation. A Document of Resolution is more specific and prescriptive, identifying unacceptable risk with an accompanying plan, timeline and persons responsible in order to correct the problem. A Memorandum of Understanding—considered the final notice—is a formal agreement between the NCUA and the credit union that details expectations and corrective actions the credit union must take to remediate violations. If these requirements are not met in the agreed-upon timeframe, the NCUA can take over the credit union.
Being ready for NCUA exams involves good risk management protocol, up-to-date security SOPs, compliance checks and reviews, and ongoing evaluations and updates of consumer protection policies. With all that credit unions have to deal with in their daily business and to be prepared when exam time comes, there is one element they can easily outsource to ensure compliance and accuracy: property tax monitoring and escrow payment processing. Credit unions are good at many things, but monitoring and paying real estate taxes isn’t always one of them, and for good reason given all they have to manage. For any size credit union, but particularly for smaller and mid-size ones, outsourcing this task ensures it’s being handled by experts who specialize in property taxes all day, every day. That’s no small feat when you consider there are more than 24,000 taxing agencies across the country, many of which have different ways they issue tax bills, require payments and handle exceptions.
Working with a company that specializes in property taxes offers several benefits. In the first place and crucial for assisting with exam preparation and passage, it improves compliance with local and federal laws and regulations. Outsourcing to a company that understands all of the changing tax laws removes the burden from credit union staff having to manage this daunting task. Moreover, outsourcing to a tax specialist makes good sense in terms of improving accuracy and timeliness with tax payments, avoiding costly penalties. At LERETA, we work with credit unions of all sizes and asset classes to remove the burden of property tax monitoring and payments—not just in preparation for an exam, but on an ongoing basis for efficient and cost-effective operations. Whether our clients outsource to us on a turn-key basis, including issuing on-time payments, or we simply provide monitoring and regularly updated tax info, it saves the credit union significant time and human resources.
In fact, outsourcing is recognized as so valuable, the NCUA recommends it. We work with a Pennsylvania-based credit union that was issued a Supplemental Finding in their exam and, as a result, the examiner recommended they outsource tax monitoring. The credit union didn’t take that recommendation and a subsequent exam resulted in the examiner issuing a higher-level Document of Resolution specifically citing the credit union for failing to outsource their tax monitoring within the agreed-to deadline.
Beyond the benefits of ensuring smooth sailing during audits, outsourcing the property tax component increases productivity—which saves time and money—by allowing staff to focus on tasks that are more central to efficient and profitable operations, such as revenue generation, account growth and customer care.
Outsourcing to a capable partner can deliver numerous benefits, but don’t just take our word for it. Here’s what the Director of Mortgage Servicing at Lake Michigan Credit Union had to say: “As the largest mortgage originator in the state of Michigan, and one of the top 25 credit unions in the nation, Lake Michigan Credit Union knows our success is a direct result of our dedicated staff and strong relationships with vendors that provide impeccable service. LERETA is one of those valued partners. They always are responsive and are personally vested in the service they provide…even the President of LERETA stays connected with quarterly touch-base calls with each customer. I would highly recommend LERETA to anyone looking for an incredible property tax and flood partner.”
With so many moving parts that make credit unions a great resource for their members, it only makes sense for them to streamline and save money by outsourcing to a tax expert.
