ALLOWANCE POLICY REVIEW & TUNE UP

The Allowance for Loan Losses (ALL) is considered the most critical estimate within the financial structure of every credit union.  Determining the ALL balance requires both the proper application of Generally Accepted Accounting Principles and considerable judgement of management. Having a well thought out, and carefully documented ALL policy provides management with the ammunition that is often needed to support the ALL balance when questioned by auditors and examiners.  Also, regulations require that the Board of Directors review ALL methodologies on at least an annual basis, thereby increasing the value of an ALL review on by an outsider expert annually.

Overview of Engagement

  1. Meet with Lending, Collections and Accounting staff to obtain an understanding of current loan and delinquency trends.
  2. Review current methodology used to determine ALL balance.
  3. Review current ALL policy and update/rewrite the policy.
  4. Review processes related to and methods for recording of troubled debt restructures.
  5. Review the appropriateness of qualitative & environmental factors used in the determination of the Allowance for Loan Losses.
  6. Conduct 90-minute educational session with senior management team (lending& collections, operations, accounting & finance, internal audit & others as appropriate) on ALL with the objective of ensuring mutual understanding of ALL issues.

This engagement requires approximately one to two days of my assistance.  Your credit union will receive feedback and advice resulting in an articulate, well-reasoned ALL methodology and will demonstrate to your auditors, examiners and Board of Directors an approach that meets the professional standards which you are required to follow.

If you are interested in discussing the Allowance for Loan Losses Policy& Methodology Review engagement, please give me a call or drop me a line. mike@sacherconsulting.com