# Financial Institutions (GFI)

## Title 6. Credit Unions

### Subtitle 4. Examinations and Reports

#### Section 6-401

(a) Each credit union shall have a supervisory committee.

(b) The board shall appoint the members of the supervisory committee at:

  (1) The first meeting of the board following the annual meeting of the members; and

  (2) Any time there is a vacancy.

(c)

  (1) Subject to the provisions of paragraph (2) of this subsection, the board shall determine the number of members on the supervisory committee.

  (2) The supervisory committee shall have at least three and not more than seven members.

(d)

  (1) Each member of the supervisory committee shall be appointed from among the members of the credit union.

  (2) Not more than one member of the supervisory committee may be a director.

  (3) An officer of the credit union, a member of the credit committee, or an employee of the credit union may not be a member of the supervisory committee.

  (4) At least one member of the supervisory committee shall have experience in:

    (i) Accounting;

    (ii) Auditing; or

    (iii) General business.

  (5) Each member of the supervisory committee:

    (i) Shall be bonded;

    (ii) May not have been convicted of any criminal offense involving dishonesty or breach of trust;

    (iii) May not have habitually neglected to pay any debts;

    (iv) May not become insolvent or bankrupt while serving on the supervisory committee; and

    (v) May not have been removed by the Commissioner or any state or federal regulatory agency as an officer, official, or employee of a financial institution.

(e) The members of the supervisory committee shall elect the chairman of the supervisory committee:

  (1) At the beginning of each term of appointment to the committee; and

  (2) At any time there is a vacancy and the board is notified.

(f) A member of the supervisory committee serves for 1 year and until a successor is appointed and qualifies.

(g) Each member of the supervisory committee shall take an oath to perform faithfully the duties of the office.

(h)

  (1) The board shall appropriate funds:

    (i) For an audit conducted by an outside auditor; and

    (ii) If required, for an internal auditing function.

  (2) The supervisory committee has the sole authority to engage or terminate outside and internal auditors.

#### Section 6-402

(a) The supervisory committee is responsible for ensuring that the officials and officers:

  (1) Meet required financial reporting objectives; and

  (2) Establish practices and procedures sufficient to safeguard members' assets.

(b) To meet its responsibilities, the supervisory committee shall determine whether:

  (1) Internal controls are:

    (i) Established and effectively maintained to achieve the credit union's financial reporting objectives; and

    (ii) Sufficient to satisfy the requirements of the supervisory committee audit, verification of members' accounts, and the supervisory committee's additional responsibilities;

  (2) The credit union's accounting records and financial reports are promptly prepared and accurately reflect operations and results;

  (3) The relevant plans, policies, and control procedures established by the board are properly administered; and

  (4) The board's plans, policies, and control procedures are sufficient to safeguard against error, carelessness, conflict of interest, self-dealing, and fraud.

(c)

  (1) The supervisory committee shall submit:

    (i) A report on the annual audit to the board; and

    (ii) A summary of the report on the annual audit to the members at the annual meeting of the members.

  (2) The supervisory committee shall conduct or cause to be conducted and shall submit to the board, supplementary audits as the supervisory committee deems necessary.

  (3) The supervisory committee shall submit written reports periodically to the board addressing activities since the last report.

(d)

  (1) The supervisory committee audit of a credit union shall occur at least once each calendar year and shall cover the period elapsed since the last audit period.

  (2) The supervisory committee annual audit shall meet the following minimum guidelines:

    (i) A credit union with assets over $250,000,000 shall have an opinion audit of the credit union's financial statements performed by an independent licensed certified public accountant; and

    (ii) A credit union with assets of less than $250,000,000 may satisfy the audit requirements by:

      (1) An opinion audit of the credit union's financial statements performed by an independent licensed certified public accountant;

      (2) In accordance with the provisions of paragraph (3) of this subsection, an agreed upon procedures engagement performed by a qualified person with appropriate knowledge of auditing concepts and credit union procedures; or

      (3) An audit performed by the supervisory committee or the credit union's internal auditors.

  (3) The following minimum procedures shall be satisfied under paragraphs (2)(ii)2 and (2)(ii)3 of this subsection:

    (i) Determine that the reserve fund is sufficient in accordance with Sec. 6-703 of this title;

    (ii) Determine that the credit union meets minimum net worth requirements in accordance with Sec. 6-702 of this title;

    (iii) Review and test the bank statement reconciliations by testing for mathematical accuracy and ensuring that reconciling items are reasonable and clear promptly;

    (iv) Perform an unannounced cash count at some time during the period covered by the audit and ensure that the amount of cash counted agrees to the general ledger;

    (v) Review a sufficient number of current and delinquent loans to determine whether or not they are in accordance with the credit union's underwriting policies and procedures as established by the board;

    (vi) Determine that the trial balance listing of loans agrees with the general ledger;

    (vii) Determine that the allowance for the loan and lease loss account meets the minimum standards required under Sec. 6-704 of this title;

    (viii) Determine that all loans that are delinquent 60 days or more are reported to the board monthly;

    (ix) Determine that the investment subsidiary or list of investments agrees with the general ledger by performing the following procedures:

      (1) Compare the balance of investments and accrued interest receivable from the subsidiary ledger to the general ledger;

      (2) Choose a sample of investments and compare the market value per the subsidiary ledger to an outside source;

      (3) Test the accrued interest and compare it to the subsidiary ledger;

      (4) Test a sample of investment purchases or sales during the audit period for proper authorization to make sure that the accounting treatment is correct, compare the terms of the transactions to a broker advice, and make sure that the investment is in accordance with board policy; and

      (5) Confirm all investments with any depository institution, broker, or third party safekeeping agent, or inspect the original certificate, if it is in the possession of the credit union;

    (x) Determine that the trial balance listing of shares and deposits agrees with the general ledger;

    (xi) Perform a minimum of 20 share and deposit dividend and interest calculations paid during the audit period;

    (xii) Obtain a list of all overdrawn share and deposit accounts and determine that management is attempting to collect these items;

    (xiii) Obtain a listing of other asset and other liability accounts, make a selection of five of these accounts including any suspense or clearing accounts, and perform the following procedures:

      (1) Obtain reconciliations of the selected accounts and compare the balance to the general ledger;

      (2) Test the mathematical accuracy of the reconciliation; and

      (3) Determine whether any reconciling items have been outstanding for more than 30 days;

    (xiv) Perform a minimum of 20 loan interest calculations collected during the audit period;

    (xv) Review the minutes of the board meetings to ensure that they document relevant decisions, including decisions about charged off loans, interest rate changes, policy changes, interest and dividend rates, personnel issues, and the annual budget; and

    (xvi) Other auditing procedures as are deemed necessary by the board, the Commissioner, or the supervisory committee.

(e)

  (1) At least once every 2 years the supervisory committee or its designee shall verify the accounts of the members in accordance with paragraph (2) of this subsection.

  (2) The verification shall be performed using one of the following methods:

    (i) A 100% verification of the share and loan accounts of all members;

    (ii) A statistical sampling of member share and loan accounts done in connection with an opinion audit of the financial statements performed by a licensed certified public accountant; or

    (iii) A statistical sampling method that provides a random selection that is expected to be representative of the membership.

(f)

  (1) A credit union with assets in excess of $250,000,000 shall have an internal audit function in accordance with paragraph (2) of this subsection.

  (2) The supervisory committee shall:

    (i) Hire one or more internal auditors to assist the supervisory committee in the performance of the audit duties of the supervisory committee;

    (ii) Adopt and execute an annual internal audit plan that adheres to board policies and includes:

      (1) An evaluation of internal controls; and

      (2) Operational procedures; and

    (iii) Direct the duties of the internal auditor.

(g) 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 arrangement.

(h)

  (1) All work performed by the supervisory committee, outside auditors, or internal auditors shall be documented by appropriate work papers.

  (2) The Commissioner shall have access to the work papers for a period of up to 3 years after the completion of the audit procedure.

(i)

  (1) At any time, by a unanimous vote, the supervisory committee may suspend a director, an officer, or a member of the credit committee for cause.

  (2)

    (i) Subject to the provisions of subparagraph (ii) of this paragraph, the suspension will take effect immediately and stay in force until the board convenes a special meeting of the members to act on the suspension.

    (ii) The meeting of the members shall take place no later than 15 days from the date of the vote to suspend, for the purpose of voting on the suspension.

  (3) The supervisory committee shall notify the Commissioner in writing immediately at the time of the suspension of the director, officer, or member of the credit committee.

(j) The supervisory committee shall send promptly to the Commissioner a copy of the annual audit and all recommendations, charges, and significant findings that the supervisory committee presents to the board.

#### Section 6-403

(a) In this section, "examiner" means:

  (1) The Commissioner; and

  (2) An individual whom the Commissioner designates as examiner.

(b) An examiner shall visit each credit union and examine its business:

  (1) At least once during each calendar year, unless the Commissioner determines that, during a calendar year, an examination is unnecessary, in which event an examination shall occur no less frequently than once every 18 months;

  (2) When requested by the board or supervisory committee of the credit union; and

  (3) At any other time that the Commissioner considers necessary.

#### Section 6-404

(a) On or before March 31 of each year, each credit union shall report to the Commissioner on the business of the credit union during the preceding calendar year.

(b) The Commissioner may require any other reports from a credit union that the Commissioner considers necessary.

(c) Each report made under this section shall be:

  (1) On the form that the Commissioner provides; and

  (2) Signed and acknowledged by:

    (i) A majority of the members of the supervisory committee; and

    (ii) The president, vice-president, secretary, or treasurer of the credit union.

(d) If a credit union fails to make any report as required by this title, the credit union shall pay to the Commissioner $50 for each day that the report is overdue.

#### Section 6-405

(a) If the Commissioner finds that the supervisory committee of a credit union is not performing its duties properly, the Commissioner may require the credit union to have a certified public accountant audit the credit union for any period of time that the Commissioner considers necessary.

(b) The audit required under subsection (a) of this section shall be made at the expense of the credit union.

#### Section 6-406

(a) The board may call a meeting of the members of the credit union to act on any practice of the credit union that the supervisory committee considers unsafe or unauthorized.

(b) The board shall give the Commissioner advance notice of a meeting of the members that is called under subsection (a) of this section.

#### Section 6-407

In order to carry out the purposes of this title, the Commissioner may enter into cooperative and information sharing agreements with any other credit union supervisory agency.

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Md. Code Ann., Fin. Inst. (as displayed at mgaleg.maryland.gov, October 16, 2026)