Proposed Rule2025-22488
Supervisory Committee Audits and Verifications
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Published
December 11, 2025
Issuing agencies
National Credit Union Administration
Abstract
The NCUA Board is proposing to amend its regulations governing supervisory committee audits to eliminate unnecessary, redundant, and overly prescriptive provisions. This action is necessary to reduce regulatory burden, increase operational flexibility for credit unions, and streamline the rules by removing requirements that are outdated or duplicative of other authorities. The intended effect of this proposal is to simplify compliance for credit unions without compromising the integrity of the audit process.
Full Text
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<title>Federal Register, Volume 90 Issue 236 (Thursday, December 11, 2025)</title>
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[Federal Register Volume 90, Number 236 (Thursday, December 11, 2025)]
[Proposed Rules]
[Pages 57393-57397]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-22488]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 715
RIN 3133-AF74
Supervisory Committee Audits and Verifications
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The NCUA Board is proposing to amend its regulations governing
supervisory committee audits to eliminate unnecessary, redundant, and
overly prescriptive provisions. This action is necessary to reduce
regulatory burden, increase operational flexibility for credit unions,
and streamline the rules by removing requirements that are outdated or
duplicative of other authorities. The intended effect of this proposal
is to simplify compliance for credit unions without compromising the
integrity of the audit process.
DATES: Comments must be received by February 9, 2026.
ADDRESSES: Comments may be submitted in one of the following ways.
(Please send comments by one method only):
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
The docket number for this proposed rule is NCUA-2025-1303. Follow the
``Submit a comment'' instructions. If you are reading this document on
<a href="http://federalregister.gov">federalregister.gov</a>, you may use the green ``SUBMIT A PUBLIC COMMENT''
button beneath this rulemaking's title to submit a comment to the
<a href="http://regulations.gov">regulations.gov</a> docket. A plain language summary of the proposed rule
is also available on the docket website.
<bullet> Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428.
<bullet> Hand Delivery/Courier: Same as mailing address.
Mailed and hand-delivered comments must be received by the close of
the comment period.
[[Page 57394]]
Public inspection: Please follow the search instructions on <a href="https://www.regulations.gov">https://www.regulations.gov</a> to view the public comments. Do not include any
personally identifiable information (such as name, address, or other
contact information) or confidential business information that you do
not want publicly disclosed. All comments are public records; they are
publicly displayed exactly as received, and will not be deleted,
modified, or redacted. Comments may be submitted anonymously. If you
are unable to access public comments on the internet, you may contact
the NCUA for alternative access by calling (703) 518-6540 or emailing
<a href="/cdn-cgi/l/email-protection#571810141a363e3b173934223679303821"><span class="__cf_email__" data-cfemail="9fd0d8dcd2fef6f3dff1fceafeb1f8f0e9">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Ian Marenna, Associate General
Counsel, Office of General Counsel, at (703) 518-6540 or at 1775 Duke
Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
The NCUA Board proposes to amend its regulations at 12 CFR part
715, which govern the supervisory committee audit and verification
responsibilities for federally insured credit unions (FICUs). The
primary purpose of this regulation is to ensure that FICUs meet
required financial reporting objectives and establish practices and
procedures sufficient to safeguard members' assets from error,
conflicts of interest, self-dealing, and fraud.
The current proposal seeks to partially or wholly eliminate several
sections of this part. The following is a description of the purpose
and function of those sections as they currently exist.
Section 715.2 defines key terms used throughout the part. It
establishes the meaning of technical terms such as financial
statements, financial statement audit, GAAP, and GAAS. It also defines
terms specific to the rule's framework, such as compensated person,
which refers to an accounting or auditing professional compensated for
performing more than one supervisory committee audit per year, and
working papers, which are the records supporting the auditor's
findings. This section distinguishes a formal financial statement audit
from the broader supervisory committee audit responsibility, which can
be fulfilled through several alternative engagements.
Section 715.8 sets forth the requirements for the verification of
member accounts. This requirement is derived from 12 U.S.C. 1761d and
obligates the supervisory committee to verify members' passbooks and
accounts against the credit union's records at least once every two
years. The regulation permits several methods for this verification,
including a 100 percent controlled verification of all member share and
loan accounts, a statistical sampling method, or a non-statistical
sampling method consistent with GAAS when performed by a state-licensed
independent person.
Section 715.9 governs the engagement of an outside, compensated
person to assist the supervisory committee. To ensure auditor
independence, the section prohibits such a person from being related by
blood or marriage to any management employee or official of the credit
union. It also mandates that the engagement be formalized through a
written engagement letter contracted directly with the supervisory
committee. This letter must specify the terms, conditions, objectives,
and compensation for the engagement; identify the basis of accounting
to be used; and set a target date for the delivery of the written audit
report. The engagement letter must also certify that regulators will be
provided unconditional access to the complete set of original working
papers and acknowledge that these papers will be retained for at least
three years.
Section 715.10 outlines the supervisory committee's
responsibilities for the audit report and working papers. Upon
receiving a written audit report, the committee must submit it to the
board of directors and provide a summary of the audit to the members at
the next annual meeting. If a member requests it, the committee must
provide access to the full audit report. This section also holds the
supervisory committee responsible for maintaining a complete set of
original working papers for each audit and for providing the NCUA with
unconditional access to these papers upon request.
Section 715.12 provides statutory remedies for the NCUA Board to
address non-compliance by a federal credit union (FCU). The Board may
compel a credit union to obtain a supervisory committee audit performed
by an independent, state-licensed person if the credit union's
supervisory committee fails to obtain a required annual audit or
obtains one that does not meet the requirements of part 715. The Board
may also compel a full financial statement audit if the credit union
has experienced ``serious and persistent recordkeeping deficiencies.''
The rule defines a deficiency as ``serious'' if financial reporting
objectives are not met and member assets are not safeguarded, and
``persistent'' if it continues beyond a reasonable period.
Section 741.202 applies supervisory committee audit and
verification and other requirements of part 715 to all FICUs, which
extends coverage to federally insured, state-chartered credit unions.
The reasons for the proposed changes are discussed in the preamble,
under the heading ``Discussion.''
B. Legal Authority
Sections 115 and 202(a)(6) of the FCU Act set forth provisions
addressing auditing and accounting requirements.\1\ Section 115 of the
FCU Act requires a FCU's supervisory committee to make an annual audit
and submit a report of that audit to the FCU's board of directors and a
summary of that report to the FCU's members at the next annual
meeting.\2\ Further, the supervisory committee is required to make
supplemental reports as it deems necessary.
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\1\ 12 U.S.C. 1761d; 12 U.S.C. 1782(a)(6).
\2\ 12 U.S.C. 1761d.
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Section 202(a)(6)(A) of the FCU Act is a general grant of authority
to the Board to prescribe audit standards that require an outside,
independent audit by a certified public accountant for any fiscal year
for which a FICU has not conducted an annual supervisory committee
audit, has not received a complete and satisfactory supervisory
committee audit, or during which the FICU has experienced persistent or
serious recordkeeping deficiencies.\3\
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\3\ 12 U.S.C. 1782(a)(6)(C).
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Section 202(a)(6)(C) of the FCU Act generally requires FICUs having
assets of $10 million or more to use accounting principles consistent
with GAAP in all reports or statements required to be filed with the
Board. The Board, and state credit union supervisors under applicable
state law, may require credit unions having less than $10 million in
assets to follow GAAP.
Section 202(a)(6)(D) of the FCU Act imposes audit requirements for
larger FICUs. Specifically, a FICU having assets of $500 million or
more is required to obtain an annual independent audit of its financial
statements performed in accordance with GAAS, hereafter referred to as
a ``financial statement audit.'' That audit must be performed by an
independent certified public accountant or public accountant licensed
to do so by an appropriate state or jurisdiction.\4\
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\4\ 12 U.S.C. 1782(a)(6)(D).
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Additionally, if an FCU having total assets of less than $500
million but
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more than $10 million elects to obtain a financial statement audit, the
audit must be performed consistent with the accountancy laws of the
appropriate state or jurisdiction.\5\
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\5\ 12 U.S.C. 1782(a)(6)(D)(ii).
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II. Proposed Rule
The Board is proposing several amendments to 12 CFR part 715 to
reduce regulatory burden, eliminate unnecessary and redundant
provisions, and increase flexibility for FICUs. These changes are
consistent with the Board's ongoing efforts to modernize its
regulations and ensure they remain effective and efficient without
imposing undue burdens. The proposed changes are discussed in detail
below.
A. Elimination of Unnecessary and Prescriptive Requirements
The Board proposes to eliminate several provisions that are overly
prescriptive, unnecessarily rigid, or redundant of existing statutory
duties. These changes are intended to provide FICUs with greater
flexibility in meeting their audit compliance obligations while
maintaining the integrity of the audit and verification process.
1. Section 715.2
The Board is proposing to amend Sec. 715.2(h), which defines
``Internal control'' for part 715. The current definition defines this
term as the process designed by a FICU's board, officers, and employees
to provide reasonable assurance of reliable financial reporting and
safeguarding of assets against unauthorized acquisition, use, or
disposition. The definition also describes internal control components
in detail, specifying five components and describing reliable financial
reporting. The second sentence of the paragraph, which enumerates the
five components of an internal control structure, is overly
prescriptive and risks becoming obsolete. This list is derived from a
specific framework that may evolve over time. Removing this static
definition would make the regulation more durable and allow FICUs and
auditors to apply current, industry-accepted frameworks for evaluating
internal controls. The third sentence, which defines reliable financial
reporting by referencing only the preparation of Call Reports, is
unduly narrow and is also proposed for removal to provide a more
comprehensive understanding of the term.
2. Section 715.8
The Board is proposing to amend Sec. 715.8(a), which details
specific methods for the verification of member accounts. The FCU Act,
at 12 U.S.C. 1761d, imposes a clear and self-executing duty on the
supervisory committee to verify member accounts at least once every 2
years. The regulation requires members' accounts to be verified against
the records of the treasurer of the credit union. The Board proposes to
amend this requirement to state more generally that members' accounts
must be verified against the credit union's records. The Board notes
that the treasurer's records belong to the credit union. Thus, while
the treasurer must maintain the records under the FCU Act, the
supervisory committee is responsible for checking these records against
members' account records.
3. Section 715.9
The Board is proposing to amend Sec. 715.9(b), which provides
details on engagement letters with outside, compensated auditors. The
current provision requires the scope of work to be documented in an
engagement letter contracted with the supervisory committee. The
provision also details how the engagement letter must be signed by both
parties. The Board finds this additional detail and prescription
unnecessary. Without this description, the provision is clear that the
supervisory committee must enter into a contract with the outside,
compensated auditor. Prescribing this process in greater detail adds to
the body of regulations that FICUs must follow without any clear
benefit. Therefore, the Board proposes to remove the final sentence of
this provision.
4. Section 715.10
The Board is also proposing to amend Sec. 715.10(a) by removing
the sentence that requires a supervisory committee to provide the NCUA
with a copy of audit reports upon request. This provision is entirely
redundant of the Board's existing authority. The Board has broad
statutory power under the FCU Act to access all books and records of
any FICU during its examination and supervision activities.\6\ This
inherent authority includes the power to obtain audit reports, which
are records of the credit union. Eliminating this duplicative
regulatory language streamlines the rule without in any way diminishing
the agency's access to information or its oversight capabilities.
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\6\ 12 U.S.C. 1756, 1784, 1789.
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5. Section 715.12
Finally, the Board proposes to remove two sentences from Sec.
715.12(b). This provision currently describes the objective of a
financial statement audit compelled by the NCUA and states that an
``adverse opinion or disclaimer of opinion should be the exception
rather than the norm.'' This language is unnecessary because GAAS
already establishes the objectives of a financial statement audit. This
commentary in the regulation is best read as guidance and could cause
confusion if auditing standards evolve to provide different objectives
or expectations for financial statement audits. Therefore, the Board
proposes to remove the final two sentences of this provision to reduce
potential confusion.
The Board requests public comment on all of these proposed changes.
Commenters are also invited to address whether the removal of
prescriptive language in Sec. Sec. 715.9(b) and 715.12(b) achieves
the goal of reducing administrative burden without compromising audit
integrity.
III. Regulatory Procedures
A. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) (Act) requires that a notice of proposed rulemaking
include the internet address of a summary of not more than 100 words in
length of a proposed rule, in plain language, that shall be posted on
the internet website under section 206(d) of the E-Government Act of
2002 (44 U.S.C. 3501 note) (commonly known as <a href="http://regulations.gov">regulations.gov</a>). The
Act, under its terms, applies to notices of proposed rulemaking and
does not expressly include other types of documents that the Board
publishes voluntarily for public comment, such as notices and interim-
final rules that request comment despite invoking ``good cause'' to
forgo such notice and public procedure. The Board, however, has elected
to address the Act's requirement in these types of documents in the
interests of administrative consistency and transparency.
In summary, the Board is proposing to amend its regulations
governing supervisory committee audits to eliminate unnecessary,
redundant, and overly prescriptive provisions. This action is necessary
to reduce regulatory burden, increase operational flexibility for
credit unions, and streamline the rules by removing requirements that
are outdated or duplicative of other authorities. The intended effect
of this
[[Page 57396]]
proposal is to simplify compliance for credit unions without
compromising the integrity of the audit process.
The proposal and the required summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
B. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), as amended by Executive Order 14215, a determination must be
made whether a regulatory action is significant and therefore subject
to review by the Office of Management and Budget (OMB) in accordance
with the requirements of the Executive Order.\7\ Executive Order 13563
(``Improving Regulation and Regulatory Review'') supplements and
reaffirms the principles, structures, and definitions governing
contemporary regulatory review established in Executive Order 12866.\8\
This proposed rule was drafted and reviewed in accordance with
Executive Order 12866 and Executive Order 13563. OMB has determined
that this proposed rule is not a ``significant regulatory action'' as
defined in section 3(f)(1) of Executive Order 12866.
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\7\ 58 FR 51735 (Oct. 4, 1993).
\8\ 76 FR 3821 (Jan. 21, 2011).
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Executive Order 14192 (``Unleashing Prosperity Through
Deregulation'') requires that any new incremental costs associated with
new regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with at least 10 prior
regulations.\9\ This proposed rule is expected to be a deregulatory
action for purposes of Executive Order 14192.
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\9\ 90 FR 9065 (Feb. 6, 2025).
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C. Regulatory Flexibility Act
The Regulatory Flexibility Act \10\ generally requires an agency to
conduct a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. If the agency makes such a certification, it
shall publish the certification at the time of publication of either
the proposed rule or the final rule, along with a statement providing
the factual basis for such certification.\11\ For purposes of this
analysis, the NCUA considers small credit unions to be those having
under $100 million in assets.\12\ The Board fully considered the
potential economic impacts of the regulatory amendments on small credit
unions.
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\10\ 5 U.S.C. 601 et seq.
\11\ 5 U.S.C. 605(b).
\12\ 80 FR 57512 (Sept. 24, 2015).
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The proposed changes would reduce burden and confusion by
streamlining certain provisions in the NCUA's audit regulations that
apply to all FICUs. The changes would not substantially change FICUs'
audit obligations or the nature of these audits. Rather, the proposed
changes would provide clarity and generally reduce the level of detail
in the regulations, which may provide relief to FICUs, but are not
likely to have a significant economic impact.
Accordingly, the NCUA certifies the proposed rule would not have a
significant economic impact on a substantial number of small credit
unions.
D. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) generally provides that
an agency may not conduct or sponsor, and not withstanding any other
provision of law, a person is not required to respond to, a collection
of information, unless it displays a currently valid Office of
Management and Budget control number. The PRA applies to rulemakings in
which an agency creates a new or amends existing information collection
requirements. For purposes of the PRA, an information-collection
requirement may take the form of a reporting, recordkeeping, or a
third-party disclosure requirement. The NCUA has determined that the
changes described in this notice do not create a new information
collection or revise an existing information collection as defined by
the PRA.
E. Executive Order 13132 on Federalism
Executive Order 13132 encourages certain regulatory agencies to
consider the impact of their actions on state and local interests. The
NCUA, an agency as defined in 44 U.S.C. 3502(5), complies with the
executive order to adhere to fundamental federalism principles. The
NCUA's audit regulations apply to all FICUs, including federally
insured, state-chartered credit unions. The proposed changes would not
change or impose any new burdens on FICUs, including state-chartered
credit unions. The proposed changes would streamline and clarify
certain provisions without changing FICUs' audit obligations. The
rulemaking would therefore not have direct effect on the states, the
relationship between the national government and the states, or the
distribution of power and responsibilities among the various levels of
government.
F. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed rule would not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999.\13\ The proposed rule
concerns FICUs' audit obligations and procedures. Any effect on
members' accounts, and by extension their financial well-being, is
likely to be indirect.
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\13\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects in 12 CFR Part 715
Accounting, Credit unions, Reporting and recordkeeping
requirements.
By the National Credit Union Administration Board, this 8th day
of December 2025.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA Board proposes to
amend 12 CFR part 715 as follows:
PART 715--SUPERVISORY COMMITTEE AUDITS AND VERIFICATIONS
0
1. The authority citation for part 715 continues to read as follows:
Authority: 12 U.S.C. 1761(b), 1761d, 1782(a)(6).
0
2. Revise Sec. 715.2 (h) to read as follows:
Sec. 715.2 Definitions used in this part.
* * * * *
(h) Internal control refers to the process, established by the
credit union's board of directors, officers and employees, designed to
provide reasonable assurance of reliable financial reporting and
safeguarding of assets against unauthorized acquisition, use, or
disposition. Internal control over safeguarding of assets against
unauthorized acquisition, use, or disposition refers to prevention or
timely detection of transactions involving such unauthorized access,
use, or disposition of assets which could result in a loss that is
material to the financial statements.
* * * * *
Sec. 715.8 [Amended]
0
3. In Sec. 715.8(a), remove the words ``of the treasurer''.
0
4. Revise Sec. 715.9 (b) to read as follows:
Sec. 715.9 Assistance from outside, compensated person.
* * * * *
(b) Engagement letter. The engagement of a compensated auditor to
[[Page 57397]]
perform all or a portion of the scope of a financial statement audit or
supervisory committee audit shall be evidenced by an engagement letter.
In all cases, the engagement must be contracted directly with the
Supervisory Committee.
* * * * *
0
5. Revise Sec. 715.10 (a) to read as follows:
Sec. 715.10 Audit report and working paper maintenance and access.
(a) Audit report. Upon completion and/or receipt of the written
report of a financial statement audit or a supervisory committee audit,
the Supervisory Committee must verify that the audit was performed and
reported in accordance with the terms of the engagement letter
prescribed herein. The Supervisory Committee must submit the report(s)
to the board of directors, and provide a summary of the results of the
audit to the members of the credit union orally or in writing at the
next annual meeting of the credit union. If a member so requests, the
Supervisory Committee shall provide the member access to the full audit
report.
* * * * *
0
6. Revise Sec. 715.12(b) to read as follows:
Sec. 715.12 Statutory audit remedies for Federal credit unions.
* * * * *
(b) Financial statement audit required. The NCUA Board may compel a
federal credit union to obtain a financial statement audit performed in
accordance with GAAS by an independent person who is licensed by the
State or jurisdiction in which the credit union is principally located
(even if such audit is not required by Sec. 715.5), for any fiscal
year in which the credit union has experienced serious and persistent
recordkeeping deficiencies as defined in paragraph (c) of this section.
* * * * *
[FR Doc. 2025-22488 Filed 12-10-25; 8:45 am]
BILLING CODE 7535-01-P
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