GRAND RAPIDS, Mich.–How much does compliance really cost a credit union in actual dollars?
The winners of the CU*Answers/Audit Link Cost of Compliance Contest.
One credit union has won $2,500 for determining its cost of compliance is 10% of operating expenses. Columbus, Ohio-based Pathways Financial Credit Union won the money as part of CU*Answers “Cost of Compliance” contest, sponsored by the CUSO’s compliance division, AuditLink. Pathways Financial was one of three credit unions recognized for quantifying compliance costs during CU*Answers’ Annual Leadership Conference here.
This is the second year CU*Answers has run the contest. In the inaugural competition in 2014, credit unions were tasked with creating a template for calculating and accounting for the cost of compliance. In the 2015 contest, contest participants applied the winning template to their credit union operations in order to definitively answer the question, “How much does my credit union spend on compliance related costs?”
“The goal was not only to derive and display costs, but to associate them with the overall profitability of the credit union,” said CU*Answers’ CEO Randy Karnes. “Industry leaders know these costs are soaring, but when asked have no idea what the actual dollar amount of the expense is. The CU*Answers network started this initiative to begin to understand these costs and their effects on credits union profitability. (Pathways Financial) CEO Greg Kidwell and his team did an excellent job of taking on the challenge and assimilating these costs into the operational areas of the credit union and understanding their negative impact on the CU’s ROA. We as an industry can no longer be apathetic to overreaching regulatory burdens and the only way to win the argument with our regulatory bodies is to quantify these costs through our income and expense statements.”
According to CU*Answers, Pathways Financial was able to determine that compliance related costs accounted for 10% of actual operating expenses. “If we could have saved 50% of those costs, the credit union’s ROA would have been 57 basis points,” said Kidwell.
CU*Answers said its hope is that by shedding light on these costs and engaging with NCUA and regulators, the industry will start pushing towards more effective and efficient regulatory practices.
The winners of the $1,500 second place and $1,000 third place awards were CFO Amber Stevens of KALSEE Credit Union in Kalamazoo, Mich., and Director of Operations Sue Beckwith of Oak Trust Credit Union in Aurora, Ill., respectively.
To learn more and read the winning entries, visit http://auditlink.cuanswers.com.