The last five embezzlement reviews I have performed all hadsimilar characteristics. The embezzlement had been going on foryears, but was not detected. I was asked to assist in a review forwhat examiners thought were some minor irregularities. All thecredit unions had been examined by federal and/or state examinersat least three times, and contracted individuals performed agreedupon procedure exams at least twice or three times. Some of thecredit unions were getting their AUP exam every 18 months. All ofthe resulting bond claims filed were in the six figures. When westarted, we were told there might be a little problem. Two of theclaims exceeded the credit union's bond coverage limits. But thesimilar characteristic they all had, was that there were fraudwarning signs in a lot of different areas that were ignored, notfollowed up on or not discovered.

In all of these cases, if some basic minimum procedures had beenperformed by the supervisory committee, treasurer of the board, orsome responsible individual at each credit union, these activitieswould have been caught early on. For the credit unions that had tobe merged, these procedures may have saved the credit union and itsmembers from their merger fate. In most credit unions, some of theprocedures discussed below are being handled by the internalauditor or a contracted individual. The definition of a smallcredit union has been increased to $100 million in assets, andthese comments are geared toward the small credit union audience.However, they should be considered for inclusion in every creditunion's control procedures.