To conduct periodic control checks in specific areas in an effort to protect members' accounts and to ensure compliance with both State and Federal regulatory agencies.

It shall be the responsibility of the Audit Committee or the person designated by the audit committee to conduct such control checks and to report to the Board any errors or discrepancies in operations that are noted as a result of such checks.

The Audit Committee will consist of four (4) members. There will be: one board member as liaison, a Chairperson of the Committee who will be appointed by the Board of Directors, and two other members selected by the Chairperson and approved by the Board of Directors.

Beginning in 1990, one member shall serve a one (1) year term; one member shall serve a two (2) year term; and one member shall serve a three (3) year term. Beginning in 1991 and each year thereafter, the Board of Directors shall appoint one member to serve a three (3) year term.

* The Audit Committee Chairperson will define the scope of audit procedures. However, certain Specific Control Areas listed below will be included in the Audit Committee's functions.

1. Teller Drawer Cash Verification.
1. Teller drawer cash shall be balanced to the general ledger (G/L) daily.
2. A surprise cash count of all tellers' drawers and vault cash will be conducted and balanced to the proper G/L account as deemed necessary by the Audit Committee.
3. A record of this count shall be dated, signed and kept by the Audit Committee with a notation of whether the drawer balanced, and if not, an explanation.

2. Cash Items Examination and Verification.
1. Cash items (created by the return of checks marked NSF, closed account, or stop payment, etc. that members have presented for deposit or payment) must be tracked and collected on a timely basis.
2. Management is responsible for establishing an on-going system of tracking and disposing of cash items. The Audit Committee will review this system from time to time.

3. Installment Loan Examination and Verification.
The Audit Committee will review loans that have been made and check the following:

1. All Officials and Employees loans for unusual activity.
2. A percentage of loans made to determine that the necessary paper work is accurately completed and in file.
3. Trace approved loans to the minute sheets of the approving Loan Officer or Loan Committee's minute sheets for the date it was approved and initialed by the person verifying and the date verified.
4. Spot verify through mail verification that the member has made a loan, when it was made, and other terms as deemed appropriate.
5. Board approval and the proper handling of all charged-off loans.
6. Review recoveries for proper entry of monies received, making sure that amounts recovered in excess of amounts charged off are properly credited to expenses or returned to the member as may be proper under the circumstances.

4. Share Drafts Overdraft Review.
5. Deposits Examination and Verification.
On a continuing basis, all undelivered statements are to be returned to an authorized employee for appropriate follow-up. Maintain a file for undelivered statements with a note on documents stating disposition of the returned item. Any member complaints concerning lost or unposted deposits are to be referred to management.

6. Teller Controls.
On a sporadic, unannounced basis:

1. Compare several days' teller cash drawer totals to the G/L.
   
2. Check for signatures on cash withdrawal slips.

7. Other Controls.
At least annually:

1. ** Perform a sample confirmation of members' accounts and balances (unless performed by a CPA audit annually).
2. Spot-check not less than 5% of the interest calculations on loans.
3. Review all Officials' and Employees' statements for unusual activity.

8. Investments Verification.
At least annually:

1. Check investment subsidiary ledger with the G/L totals.
2. Verify the posting of interest received and interest accruals.

9. Certificates of Deposit Verification and Examination.
At least annually:

1. Review the current CD's issued for unusual activity.
2. Compare the interest rate stated on CD to rate on computer master file.
3. Check the interest posting to ensure posting of the correct amount.

10. Dormant Accounts.

Management will review daily a computer generated dormant accounts report. The Audit Committee will verify that the report is being reviewed by management.

11. Voucher Payment Verification.

Perform random review of expense voucher payments.

12. ** Employee Transactions.

Verify that no employee has performed any transactions on any accounts belonging to the employee, any employee's family member, any accounts of members residing in the same household, or any account that the employee is an authorized signatory.

13. ** Night Depository Controls.

Verify that two employees open the night depository, retrieve and log the contents, sign the log, post the contents and verify the posted receipts to the log.

14. ** Extra Teller Cash Drawer Keys.

Teller cash drawer keys are assigned to individual tellers that are kept by those tellers. Management will keep extra keys. In the event a teller's cash drawer must be accessed, but the teller is not present, management will take certain measures to assure controlled access by using sealed and initialed envelopes. Verify that envelopes are initialed by both management and the teller, and that all extra keys are in sealed envelopes.

15. ** Unused Safe Deposit Box Keys.

Keys to unrented safe deposit boxes shall be kept in an unrented safe deposit box. Access will be limited to Credit Union personnel. Verify that unrented keys are kept in the box and that the key to that box is hidden.

16. ** Wire Transfer Control Procedures.

Wire Transfer Request forms will be completed whenever transfers of this type are made. When checking the bank statements, make sure that there are completed forms for each wire transfer.

 

Approved February 28, 1990
Revised April 25, 1990
Revised July 25, 1990
* Revised July 21, 1994
** Revised May 18, 1995
Reviewed April 18, 1996
Reviewed August 20, 1998
Reviewed August 26, 1999
Reviewed February 20, 2003