Financial Reporting
That Time of Year Again! - Kids Back to School and Credit Union Audits
By Des O'Neill, OmniPro, ACCA, CPA, ACIS
Sep 1, 2009 - 1:52:38 PM

Credit Unions like all financial institutions and businesses have found 2009 to be challenging year. Based on the predictions of experts in the field the next 12 months may be even more difficult but with the 30^th of September 2009 year ends looming, those issues can be shelved in the short term. Auditors up and down the country are beginning to focus their attention on planning the 2009 audits to enable them identify and respond to the risks so they may form appropriate opinions on the financial statements presented by their credit union clients.

In the face of the global crisis, one of the big issues and new challenges for credit unions is achieving and maintaining financial stability. Financial stability hinges on the availability of adequate reserves and in response to this issue, the Financial Regulator has produced guidance titled Regulatory Reserve for Credit Unions. It was issued with immediate effect on 21^st of August 2009.

With effect from 30^th of September 2009 all credit unions are now required to maintain a Regulatory Reserve Ratio of not less than 10% on an ongoing basis. The reserves to be included in the regulatory reserve ratio must be realised, unrestricted and non-distributable. The Regulatory Reserve may be made up of the Statutory Reserve and any additional non-distributable reserves of which at least 8% must be held in the Statutory Reserve. Additional Regulatory Reserves can be created provided the Statutory Reserve meets it’s 8% target.

If at any stage a credit union falls below the 10% Regulatory Reserve Ratio the board must notify the Registrar of Credit Unions and take appropriate action within agreed timeframes to restore the ratio

Where a credit union does not have adequate reserves to meet the Regulatory Reserve Ratio by 30^th September 2009 they must provide the registrar of Credit Unions with a plan as to how and when they are going to comply. Where there is a shortfall the maximum timeframes for compliance with the Regulatory Reserve Ratio percentages have been set at:

·        30^th September 2009 – 7.5%

·        30^th September 2010 – 8%

·        30^th September 2011 – 8.5%

·        30^th September 2012 – 9%

·        30^th September 2013 – 10%

Any credit unions who have achieved a surplus but do not meet with the 10% Regulatory Reserve Ratio must discuss their dividend proposals with the Registrar.

Individual credit unions do have the option to calculate their Regulatory Reserve Ratio based on their individual risk profile. Specific guidelines are given for any credit union wishing to go down this route.

To assist auditors, accountants and anyone involved in credit union audits we have established a Credit Union Corner within accountingnet.ie in the Auditing Section of our Standards and Guidelines Resource. The full Regulatory Reserve for Credit Union Guidance Document my be downloaded from within this section of our website

Anybody who uses the ICAI programmes, as guidance for performing their Credit Union Programmes, should be aware that an updated 2009 version has recently been released which can be purchased directly from the ICAI online shop

OmniPro are running nationwide seminars at 4 locations dealing with regulated entities including, auctioneers, solictors, charities, insurance brokers, investment intermediaries and focussing an entire afternoon on credit unions. You will get the opportunity to hear about the latest developments in each area and hear from a range of speakers in relation to the regulations, the Institute monitoring perspective, the practical challenges and issues and what the regulators and the representative bodies have to say. Please click here to find out more about the Credit Union seminars near you.

For further information visit www.omnipro.ie

T: 059 91 83888

E: info@omnipro.ie

W: www.omnipro.ie

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