Summary: During an audit of the National Credit Union Administration (NCUA) financial statements for the 15 months ended September 30, 1977, GAO noted certain matters that should be adopted to improve NCUA management.
GAO found that the share insurance fund has been suffering a loss from involuntary liquidations because credit unions do not have sufficient assets to pay shareholders. However, credit checks and other investigations indicated that many borrowers could repay their loans. NCUA wrote off over $400,000 in loans during calendar years 1977 and 1978, although the records indicate the borrowers had the ability to repay them. NCUA examiners rely heavily upon automatic data processing (ADP) generated information to determine credit unions' financial condition; however, this information may or may not be correct. Examiners are not required to assess the reliability of these ADP systems. GAO found that the internal audit staff can make contributions to the ADP system by designing necessary controls into the automated system, making post-installation evaluations, and ascertaining system reliability. However, to be able to make these contributions, the internal audit staff need appropriate ADP skills. GAO believes that an ADP committee with the continuous active participation of top management and user management overseeing data processing is necessary to make sure NCUA benefits from its ADP resources. Finally, GAO found that NCUA had no ADP security plan and that existing ADP security needs improvement in several areas.
