The Basics Broke Everywhere: What Four NCUA Inspector General Reviews Say About How Credit Unions Fail

Four failures, $8.62 million

The NCUA Office of Inspector General (OIG) has done four limited reviews of credit unions that failed: Teamsters Local 92 Federal Credit Union in Canton, Ohio; Team Financial Federal Credit Union in Houston; North Bay Credit Union in Santa Rosa, California; and Copper and Glass Federal Credit Union in Glassport, Pennsylvania. Three ended in assisted mergers; Copper and Glass went to conservatorship and liquidation.

The losses to the National Credit Union Share Insurance Fund totaled $8.62 million: $800,000 at Local 92, $700,000 at Team Financial, $4.24 million at North Bay, and roughly $2.9 million at Copper and Glass. Eighty-three percent came from the last two. As a share of reported assets, the range was wide — North Bay was the biggest dollar loss at only 3.6 percent of assets, while Copper and Glass and Teamsters each ran about 41 percent.

NCUA is a regulator, but it’s also an insurance company. What’s worth your time is what these four have in common.

Why these were limited reviews

None of the four hit the statutory material loss threshold, so the OIG wasn’t required to review them. The OIG found no unusual circumstances warranting an in-depth review. Jackson Area Federal Credit Union will be different. That one is large enough that the OIG will have to do a full review, and I expect it will probably lead to changes in NCUA policies and procedures.

Ten themes, four in every report

I downloaded all four reports and scored them against ten failure themes — central finding, indicator, or not raised. The scoring is my reading of their words. Four themes were central findings in every report: unreliable books or no reconciliation, weak internal controls and segregation of duties, thin or inexperienced staff, and board and audit oversight gaps. Liquidity stress was central in three. One credit union had a fidelity bond failure, and one grew into higher-risk lines with a BSA lapse.

The basics broke everywhere, and the exotic broke once.

The books are where every road met. Team Financial’s share trial balance didn’t balance to the general ledger — the first thing examiners look at. Local 92 had no completed audit since September 2021. Copper and Glass had the same record-keeping concerns through five exams. When the books don’t reconcile, nobody can measure the hole until it’s too late.

Keep the structure in mind. NCUA does an exam, with a limited scope, and relies on your supervisory committee and your CPA firm. That isn’t an excuse. It’s how it’s set up.

Thin benches and insiders

Local 92 ran with two employees for an extended period — no way to segregate duties without compensating controls. Team Financial had relatives on staff and a former manager with a federal conviction the board didn’t know about, and it went eight years on a fictitious fidelity bond. At Copper and Glass, a teller cited in 2022 for insider transactions was promoted to manager in 2024 with sole access to everything. The OIG describes about $3.5 million in fraudulent balances, roughly half the credit union’s assets, through one login; the manager allegedly raised limits on her own and her spouse’s accounts.

Who raised the alarm, and how long it ran

From first red flag to resolution: Team Financial eight months, after a former employee called the OIG fraud hotline. North Bay ten. Local 92 fifteen. Copper and Glass sixty.

NCUA has given itself some flexibility on follow-up timing because of resources. For a well-run credit union, fewer visits is a good thing. For the fund, it will mean more of these losses coming through, ultimately. Over the long term, losses like these add up, and with growth in insured shares that could eventually mean a premium. That’s a legitimate call for an insurer to make, and it puts more weight on your own board and supervisory committee.

The complexity pattern

North Bay took a different road. A subsidiary serving fintechs without monitoring, a cannabis CUSO without appropriate due diligence, an untested core conversion that left roughly two months without BSA transaction monitoring, and commercial loans over statutory limits. Before a new program goes live, share the plan and your proposed policies with your exam staff and ask for buy-in on the front end.

What to ask this quarter

Is the supervisory committee audit done and on time? Has the bond been confirmed with the carrier? Does every subledger tie to the GL monthly? Does any one person have sole control of a system that moves money? Are repeat exam findings treated as a board emergency?

In these four reports, the small credit unions failed when no one checked the books, and the bigger one failed when growth outran its controls. If you’d like a second set of eyes on any of these questions, Credit Union Exam Solutions can help.