Section 31306 - Supervisory committee(a) The supervisory committee shall consist of no fewer than three members of the credit union, none of whom shall simultaneously serve as a director, serve on the credit committee, serve as an officer of the credit union, and be otherwise regularly employed by such credit union. Supervisory committee members shall be members of the credit union in good standing.(b) Supervisory committee members shall be appointed by the directors at the first regularly scheduled meeting of the entire governing body at which a quorum is present following the annual meeting of the members. Supervisory committee members shall hold office for the term provided in the bylaws, as long as such supervisory committee member remains qualified to serve, and until the committee member's successor has been duly appointed and qualified. The term of a supervisory committee member shall not exceed three years. A supervisory committee member may serve more than one term. If the supervisory committee members are appointed for terms in excess of one year, their terms of office shall be staggered so that, insofar as possible, an equal number expires each year.(c) The supervisory committee shall be responsible for ensuring that members of senior management and directors meet required financial reporting objectives and establish practices and procedures sufficient to safeguard members' assets. To meet its responsibilities, the supervisory committee shall determine whether internal controls are established and effectively maintained; accounting records and financial reports are promptly prepared and accurate; relevant plans, policies, and procedures established by the governing body are properly administered; and the governing body's plans, policies, and control procedures are sufficient to safeguard against error, carelessness, conflict of interest, self-dealing, and fraud.(d) The supervisory committee shall have the sole authority to engage or terminate outside and internal auditors. The supervisory committee may engage any assistance necessary for the performance of its duties, including having any audit, examination, or verification required by law, regulation, or bylaw. Any agreement between the supervisory committee and an outside auditor shall be documented by an engagement letter that specifies the terms, conditions, and objectives of the engagement or statement of agreed-upon procedures in accordance with this subsection and shall permit access by the Commissioner to the work papers of the auditor.(e) The supervisory committee shall make or cause to be made a comprehensive annual audit of the books and affairs of the credit union, including its assets, liabilities, capital, income, expense accounts, and the minutes of all governing body and governing-body-appointed committee meetings. Such audit shall cover the period elapsed since the last audit. The annual audit shall include an assessment of internal controls and security measures in place covering the credit union's electronic information processing and its electronic commerce systems, if any. Any compensated outside auditors performing audits for the supervisory committee shall be independent of any management employee, any member of the governing body, any member of a governing-body-appointed committee, the credit manager, any loan officer, and any member of the immediate families of any of these. The annual audit shall meet the following minimum guidelines:(1) a credit union with total assets of $100 million or more shall have an opinion audit of the credit union's financial statement performed by an independent licensed certified public accountant; and(2) a credit union with total assets of less than $100 million shall have:(A) an opinion audit of its financial statements performed by an independent licensed certified public accountant; or(B) an opinion audit of its balance sheet performed by an independent licensed certified public accountant; or(C) an agreed-upon procedures engagement performed by a person having adequate technical training and proficiency as an auditor commensurate with the level of sophistication and complexity of the credit union under audit, provided if such engagement is not comprehensive, the supervisory committee shall satisfy any remaining requirements of a comprehensive audit in accordance with this subsection and that, in any event, shall meet the minimum standards and guidelines established by regulation of the National Credit Union Administration (NCUA); or(D) a comprehensive audit performed by the supervisory committee or the credit union's internal auditors or the internal auditor of another credit union, which audit shall meet the minimum standards and guidelines established by regulation of the NCUA.(f) The supervisory committee shall perform or cause to be performed a verification of members' accounts at least once every two years through:(1) verification of share and loan accounts of all members;(2) statistical sampling of member share and loan accounts done in connection with an opinion audit of the financial statements performed by an independent licensed certified public accountant; or(3) verification of accounts and passbooks in accordance with the requirements of the National Credit Union Administration.(g) The supervisory committee shall make any additional audits and supplemental verifications and examinations of the affairs of the credit union that it deems appropriate or that the governing body or Commissioner requires.(h) Promptly following the completion of an audit or other verification or examination, the supervisory committee shall: (1) file a written report at the main office of the credit union;(2) present the report to the governing body at its next meeting;(3) 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, and if the audit was not performed by the supervisory committee, the outside auditor shall provide the written or oral summary thereof; and(4) file a copy of the written report and any written summary with the Commissioner.(i) The supervisory committee shall provide related working papers, policies, and procedures concerning the annual audit, internal audit, examination, and verification to the Commissioner upon the Commissioner's request and shall require any independent licensed or certified public accountant, internal auditor, or any other auditor to provide such related working papers, policies, and procedures concerning the annual audit, internal audit, examination, and verification to the Commissioner upon the Commissioner's request. The governing body shall require that the auditor submit to the governing body a signed report of the audit or examination showing the condition of the credit union within a reasonable period of time from the effective date of the audit or examination.(j) At any time that the supervisory committee discovers any operating practices of the credit union that it deems unsafe that have not been corrected by the governing body, the supervisory committee shall give notice to all credit union members of a special meeting of members to be held for the purpose of receiving the report of the supervisory committee of such operating practices. The membership of the credit union shall have the authority to accept or reject the report of the supervisory committee.(k) The supervisory committee shall meet as often as necessary and at least annually and shall keep complete minutes of all of its meetings, including the names of those members present.(l) If the supervisory committee or its independent auditor or other person fails to comply with requirements of this section or the terms of an engagement letter required by this section, the Commissioner may: (1) reject the audit report and provide a reasonable opportunity to correct deficiencies;(2) impose the remedies available in subsection (m) of this section, provided any of the conditions specified in that subsection are present; and(3) seek formal administrative sanctions against the supervisory committee or its independent auditor, or both.(m) The Commissioner may compel a credit union to obtain an audit that meets the minimum requirements of subdivision (e)(1) or (2)(A) of this section for any fiscal year in which any of the following three conditions are present: (1) the supervisory committee has not obtained or performed an audit;(2) the supervisory committee had obtained or performed an audit that does not meet the requirements of this section; or(3) the credit union has experienced serious and persistent recordkeeping deficiencies.(n) The Commissioner may compel a credit union to obtain an opinion audit of its financial statement performed in accordance with generally accepted auditing standards by an independent person who is licensed by the State of Vermont, even if such audit is not required by subsection (e) of this section, for any fiscal year in which the credit union has experienced serious and persistent recordkeeping deficiencies.(o) For purposes of this section, a recordkeeping deficiency is "serious" if the Commissioner reasonably believes that the governing body and the management of the credit union have not met financial reporting objectives in a timely manner and established practices and procedures sufficient to safeguard members' assets. A serious recordkeeping deficiency is "persistent" when it continues beyond a usual, expected, or reasonable period of time.Amended by 2022 , No. 105, § 326, eff. 7/1/2022.Added 2005, No. 16, § 1, eff. 7/1/2005; amended 2007, No. 178 (Adj. Sess.), § 4.