Section 205 ILCS 305/34 - Duties of supervisory committee(1) The supervisory committee shall make or cause to be made an annual internal audit of the books and affairs of the credit union to determine that the credit union's accounting records and reports are prepared promptly and accurately reflect operations and results, that internal controls are established and effectively maintained to safeguard the assets of the credit union, and that the policies, procedures and practices established by the board of directors and management of the credit union are being properly administered. The supervisory committee shall submit a report of that audit to the board of directors and a summary of that report to the members at the next annual meeting of the credit union. It shall make or cause to be made such supplementary audits as it deems necessary or as are required by the Secretary or by the board of directors, and submit reports of these supplementary audits to the Secretary or board of directors as applicable. If the supervisory committee has not engaged a licensed certified public accountant or licensed certified public accounting firm to make the internal audit, the supervisory committee or other officials of the credit union shall not indicate or in any manner imply that such audit has been performed by a licensed certified public accountant or licensed certified public accounting firm or that the audit represents the independent opinion of a licensed certified public accountant or licensed certified public accounting firm. The supervisory committee must retain its tapes and working papers of each internal audit for inspection by the Department. The report of this audit must be made on a form approved by the Secretary. A copy of the report must be promptly delivered to the Secretary as set forth in paragraph (C) of subsection (3).(2) The supervisory committee shall make or cause to be made at least once each year a reasonable percentage verification of members' share and loan accounts, consistent with rules promulgated by the Secretary.(3)(A) The supervisory committee of a credit union with assets of $10,000,000 or more shall engage a licensed certified public accountant or licensed certified public accounting firm to perform an annual external independent audit of the credit union's financial statements in accordance with generally accepted auditing standards and the financial statements shall be issued in accordance with accounting principles generally accepted in the United States of America.(B) The supervisory committee of a credit union with assets of $5,000,000 or more, but less than $10,000,000, shall engage a licensed certified public accountant or licensed certified public accounting firm to perform on an annual basis: (i) an agreed-upon procedures engagement under attestation standards established by the American Institute of Certified Public Accountants to minimally satisfy the supervisory committee internal audit standards set forth in subsection (1); (ii) an external independent audit of the credit union's financial statements pursuant to the standards set forth in paragraph (A) of subsection (3); or (iii) an external independent audit of the credit union's financial statements in accordance with subsection (5).(C) Notwithstanding anything to the contrary in Section 6, each credit union organized under this Act shall select the annual period it desires to use for purposes of performing the external independent audit, agreed-upon procedures engagement, or internal audit described in this Section. The annual period may end on the final day of any month and shall be construed to mean once every calendar year and not once every 12-month period. Irrespective of the annual period selected, the credit union shall complete its external independent audit report, agreed-upon procedures report, or internal audit report and deliver a copy to the Secretary no later than 120 days after the effective date of the audit or engagement, which shall mean the last day of the selected annual period. A credit union or group of credit unions may obtain an extension of the due date upon application to and receipt of written approval from the Secretary.(D) If the credit union engages a licensed certified public accountant or licensed certified public accounting firm to perform an annual external independent audit of the credit union's financial statements pursuant to the standards in paragraph (A) of subsection (3) or an annual agreed-upon procedures engagement pursuant to the standards in paragraph (B) of subsection (3), then the annual internal audit requirements of subsection (1) shall be deemed satisfied and met in all respects.(4) In determining the appropriate balance in the allowance for loan losses account, a credit union may determine its historical loss rate using a defined period of time of less than 5 years, provided that: (A) the methodology used to determine the defined period of time is formally documented in the credit union's policies and procedures and is appropriate to the credit union's size, business strategy, and loan portfolio characteristics and the economic environment of the areas and employers served by the credit union;(B) supporting documentation is maintained for the technique used to develop the credit union loss rates, including the period of time used to accumulate historical loss data and the factors considered in establishing the time frames; and(C) the external auditor conducting the credit union's financial statement audit has analyzed the methodology employed by the credit union and concludes that the financial statements, including the allowance for loan losses, are fairly stated in all material respects in accordance with U.S. Generally Accepted Accounting Principles, as promulgated by the Financial Accounting Standards Board, or the regulatory basis of accounting identified in subsection (5).(5) A credit union with total assets of less than $10,000,000 that does not engage a licensed certified public accountant or licensed certified public accounting firm to perform an annual external independent audit of the credit union's financial statements pursuant to the standards in paragraph (A) of subsection (3) is not required to determine its allowance for loan losses in accordance with generally accepted accounting principles. Any such credit union may instead use any reasonable reserve methodology, including incurred loss, if it adequately covers known and probable loan losses and complies with the Department's rule addressing loan loss accounting procedures in 38 Ill. Adm. Code 190.70. Any such credit union shall also have the option of engaging a licensed certified public accountant or licensed certified public accounting firm to perform a financial statement audit in accordance with this regulatory basis of accounting rather than the standards in paragraph (A) of subsection (3).(6) A majority of the members of the supervisory committee shall constitute a quorum.(7) On an annual basis commencing January 1, 2015, the members of the supervisory committee shall receive training related to their statutory duties. Supervisory committee members may receive the training through internal credit union training, external training offered by the credit union's retained auditors, trade associations, vendors, regulatory agencies, or any other sources or on-the-job experience, or a combination of those activities. The training may be received through any medium, including, but not limited to, conferences, workshops, audit closing meetings, seminars, teleconferences, webinars, and other Internet-based delivery channels.Amended by P.A. 102-0774,§ 5, eff. 5/13/2022.Amended by P.A. 102-0496,§ 5, eff. 8/20/2021.Amended by P.A. 101-0081,§ 425, eff. 7/12/2019.Amended by P.A. 100-0778,§ 5, eff. 8/10/2018.Amended by P.A. 098-0784,§ 5, eff. 7/24/2014.Amended by P.A. 097-0133,§ 5, eff. 1/1/2012.Amended by P.A. 096-0963,§ 5, eff. 7/2/2010.Amended by P.A. 096-0141,§ 5, eff. 8/7/2009.