Submitted by sevans on Fri, 01/02/2015 - 4:32pm

Examiners should be aware of any “red flags” which may indicate that the examiner needs to expand analysis and review of the applicable operations. Red flags as they relate to management may include the following:

• Overly dominant manager;

• Manager or key employee involvement in gambling;

• Manager or key employee not taking regular vacations or always working late hours;

• Nepotism on part of the directors or management;

• Other forms of insider abuse or preferential treatment;

• Limited personnel not conducive to segregation of duties;

• Lack of adequate segregation of duties when the credit union has adequate staffing to achieve such;

• Failure to provide, or delays in providing, standard reports, records, and documents;

• Records maintained at home and not in credit union’s control;

• Management or staff provide copies of documents rather than originals;

• Inactive supervisory committee;

• Lack of, unacceptable, or non-independent audit or verification;

• Inadequate internal controls and information systems (IS) controls;

• No internal review of override of non-financial reports;

• Bank account frequently overdrawn;

• Large amounts of cash in transit;

• High volume of excessive transactions;

• Use of borrowed funds in spite of large cash balances;

• Lack of a fraud policy;

• Extravagant management or employee lifestyle relative to salary;

• Low return on assets or on various asset categories; and/or

• Payment of above market dividends to attract deposits.

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