DATE: February 27, 1997 LETTER NO. 97-CU-2
DEAR SUPERVISORY COMMITTEE
MEMBERS AND BOARD OF DIRECTORS:
You may have read reports in the press
that persons who are not licensed to practice accountancy under
state law may not perform supervisory committee audits for credit
unions and, if they do so, may be subject to prosecution for "practicing
auditing without a license." The purpose of this letter
is to correct these inaccurate reports and to reemphasize to credit
unions that NCUA continues to support the supervisory committee's
right to hire anyone it deems qualified to meet its responsibilities.
FEDERAL LAW PREEMPTS STATE LICENSING
LAW. The issue is whether
state statutes which limit the practice of public accountancy
to licensed individuals prohibit member volunteers or non-licensed
individuals from performing supervisory committee audits for credit
unions. It is NCUA's long-standing opinion that, insofar as a
state's statute prohibits a supervisory committee from performing
a supervisory committee audit itself, or prohibits such audits
from being performed by non-licensed individuals, it is preempted
by Federal law and regulation.
This means that the Federal Credit
Union Act, 12 U.S.C. 1761d, and NCUA's supervisory committee audit
regulation, 12 C.F.R. 701.12, override state accountancy
laws and licensing requirements.
NCUA is committed to defending the
supremacy of federal law over state accountancy laws whenever
those laws restrict the right of credit union supervisory committees
and chosen non-licensed individuals to perform supervisory committee
functions as mandated and permitted by the Federal Credit Union
Act and NCUA's supervisory committee audit regulation.
NCUA DOES NOT REQUIRE OPINION AUDITS.
NCUA accepts that those who set standards governing the practice
of accounting by licensed individuals have the authority "to
regulate" those licensed individuals relative to auditing
functions within auditing standards. Similarly, NCUA has authority
to establish supervisory committee requirements within the law
and interpret what it will accept as satisfactory in meeting those
requirements. NCUA will accept a supervisory committee product
which is less than an opinion audit on the financial statements.
Supervisory committee volunteers and
the individuals chosen to assist them in performing supervisory
committee functions may continue their work as has been the case
previously.
Sincerely,
/S/
David M. Marquis
Director
Office of Examination and Insurance