COVID-19 Altering Credit Union Internal Auditing : Part-1

Throughout the COVID-19 pandemic we want to keep our readers up-to-date with how this crisis affects Credit Unions and more specifically, Credit Union Internal Auditors. If you haven’t read our previous articles about this pandemic please take a look at Auditing In Times Of Uncertainty and Coronavirus: Affecting Us All In Different Ways for our thoughts on how to navigate this pandemic. Rather than provide you with my opinions in this article, I want to give our readers some real-life examples of what Credit Unions are doing to adjust to the current environment and the limitations that are placed on their institutions. 

This is a two part series in which I interviewed Chief Audit Executives. I chose Credit Unions of various sizes across the country to see how their Credit Unions and audit shops have changed over the past few weeks and what plans they have during the pandemic. My hope is that you will be inspired and encouraged by the ideas other auditors are implementing. I’m impressed by the resiliency of our colleagues and want to personally thank everyone who volunteered to be a part of this project.  

Athena Clingman – Oregon & Northern California

Athena is the Project and Audit Coordinator at Pacific Crest FCU. PCFCU has $176 Million in assets, 66 employees, and 6 branches across Oregon and Northern California. Athena is the sole Internal Auditor at PCFCU and must devote much of her time to non-audit work due to the size of the Credit Union.  She continues to serve as the BSA and OFAC Officer and performs some compliance functions. This allows staff that is cross-trained in member-facing duties, and would normally be performing this work, to assist members.

PCFCU had a Disaster Recovery plan and a pandemic policy in place prior to the COVID-19 pandemic. Thankfully, they also had the foresight to conduct a tabletop exercise before both states issued a stay at home order.  Their goal, which so far has been achieved, was to ensure that 50% of each department be able to work remotely, when possible.

Like most Credit Unions, branch lobbies are open by appointment only at this time. PCFCU has expanded drive-through capabilities to include items not traditionally completed via drive-throughs, such as cashiers checks and cash advances.

Branch audits have not stopped completely, but the process has altered due to our current circumstances. Branch managers will complete a self-evaluation, a process review for efficiency, will rate themselves, and list areas of concern and self-identified improvement. Athena will then complete some random sampling of scanned documents, review camera footage, and ask random staff some regulatory questions utilizing Survey Monkey.

Although most of the projects she has planned for the year will not be impacted severely, she has prepared a memo to the Supervisory Committee to convey that some audits may be delayed or limited in scope based on the current situation.

Athena pointed out that this is a great opportunity for us to make sure our audit processes are evolving to stay current with technology. Although she truly misses her 10-key calculator, she is trying to use this situation to be as efficient as possible!

Dean Atchison – Oklahoma

Dean is the Internal Auditor at Allegiance Credit Union ($283M in assets) in Oklahoma City, Oklahoma. He says that Allegiance was rather prepared for the pandemic. They had a good Disaster Recovery Plan in place, conduct a tabletop test every year and he has an audit of the plan on his schedule. Additionally, many ACU employees have had the ability to work from home for several years and they recently purchased 20 laptops for employees to utilize while working at home. 

Like many financial institutions, ACU has closed all branch lobbies, but members can come inside by appointment. By design, the tellers are already spaced out at least 8 feet apart at their desks. Additionally, social distancing concerns have not affected any of the dual control procedures the Credit Union has in place already. 

Dean has not had to adjust his audit plan much due to the pandemic. He has suspended branch audits indefinitely. However, these engagements are a surprise, so the branch staff will not know anything is different. All the audits he planned in the near future do not directly affect front line staff, so the rest of his audit plan remains intact. 

Because ACU had already implemented the ability for much of its staff to work from home, most documents are already scanned into the system. He has only run into one issue where management didn’t have a document scanned into the system he needed to review, but they will be able to get it to him shortly. 

Dean’s Supervisory Committee has enjoyed having their meetings via videoconference. With many of them spread out across the city, the members do not have to worry about travel time to and from the meetings and they began using electronic signatures at their last meeting. 

When I asked Dean what he wanted to convey to his colleagues during this time he said he wants us to remember that we will get through this, and hopefully learn a lot from it. He also said that once the pandemic is over, he thinks it is essential to sit down, review what was and wasn’t successful, and then rework the disaster recovery plan accordingly. 

Elizabeth Bagwell – South Carolina

Elizabeth is the Chief Audit Officer at Founders FCU ($2.8B in assets) and manages a team of 5 other auditors in Lancaster, SC. Founders has had a Disaster Recovery Policy and Pandemic Plan in place for quite awhile. They also regularly complete tabletop exercises on an enterprise level. However, during a recent audit Elizabeth’s team recommended more testing of these plans on a departmental level. Now, due to COVID-19 they are getting first hand experience of how these plans work, and thankfully, they are working well!

Branch lobbies are closed and drive-through lanes are processing all transactions, except safe deposit access, which is done by appointment only. Founders has seen a 500% increase in skip-a-pay requests and has decided to waive the fee normally associated with that service. One third of the branches have extended their hours to 7a.m.-7p.m. (normally 8-5 M-Th & 8-6 F) to meet additional demand and avoid overcrowding.

There has been some panic among members, so the Credit Union has decided to limit cash withdrawals to $2,500 via the drive-through, unless more cash is absolutely necessary. This also protects the members’ safety. Additionally, the CEO has sent letters or personally called members with deposits over $250,000 to ensure them that their money is safe. 

The daily life of the Internal Auditor team has changed drastically. Elizabeth reached out to management several times to insist that Internal Audit help out as much as possible during the pandemic. Consequently, two auditors are doing Internal Audit work from home and the other four auditors are working in branches. These four auditors are not processing transactions or auditing, but instead are offering assistance by cleaning and directing traffic. They clean off each canister that comes through the drive-through and disinfect ATMs and other equipment regularly.

Elizabeth and her team are constantly working to build positive relationships between Internal Audit, management, and other staff. Although there was some pushback at first, they believe they will see a positive response in this effort as staff get to know and trust the auditors more. She also stressed that relationship building is essential to have an effective Internal Audit department! (Olivia and I agree and often include information in our blogs to give our readers ideas for how to help build those relationships. For further reading, check out Management is NOT the Enemy! and Honing Your Approach to Internal Auditing.)

Management has expressed that some segregation of duties and controls may need to be relaxed during this period. Thankfully, Elizabeth is included in all of these discussions and can offer her expert opinion and advice on such decisions. She wants to remind our readers that we are INTERNAL Audit and we are all in this to help people. (After all, we work for Credit Unions, not banks!) This is an opportunity to turn a negative into a positive and build relationships within our organization and with our members.

Conclusion

I hope you have learned something from your colleagues and gained some ideas to take back to your own audit shop. Again, I’d like to thank everyone who participated in this project. Keep an eye out for my next blog entry where I will highlight how other Credit Union Internal Auditors are adjusting during the pandemic. 

How are you adjusting to the effects of the COVID-19 pandemic? Do you have any advice for our readers? Please share in the comments below!

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