Easing the Pain of a Compliance Audit
By: RKL Risk Management Compliance Team
You tossed and turned all night. Nightmares invaded your dreams. You reluctantly left your home and faced the day with dread. When will this torture end? How much longer will this audit take?
We understand your frustration and feel your pain. Audits take up time, resources, and space in your office. And, to top it off, you’re paying for the time it takes us to review files, run tests, review policies and meeting minutes, address questions, and write reports. There are just so many pain points.
Honestly, we’d like audits to move more smoothly and take less time, too. We enjoy your company, but we’d rather join you for happy hour than work late. So here are some tips from your auditors on how to speed up the process and make it more enjoyable (okay – let’s say “less painful”) for everyone.
- PURGE: Clean up your loan files. No one really wants to see both the unsigned and signed copies of the same disclosure or form. Provided the version in the file shows how you complied with the requirements, one copy will suffice. If you can’t remove a duplicate from an electronic filing system, consider setting up a “junk” or “duplicate” folder and move the extras and unsigned versions there. If you are uncomfortable with tossing copies for a paper file, set a tap for “duplicates” or “junk” and put the extras there.
- DOCUMENT: Thoroughly documenting your files for things like how income was calculated, or why a condition was not met, or when a booklet was provided to the consumer, goes a long way in avoiding unnecessary preliminary findings or exceptions that you will have to take time to clear. We’re big fans of checklists and conversation sheets that include dates of any actions and responsible party information.
- ORGANIZE: Review your policies, meeting minutes, and other documentation that we request. Consider re-structuring them to make the information we need (not to mention your staff and your regulators) easier to find. Microsoft Word has simple tools for creating leveled or staggered headings that work to easily create a table of contents. (Use Styles on the tool bar for headings and subheadings. Then go to References > Table of Contents and select your favorite table of contents style. It’s like magic!)
- HIGHLIGHT: You’re likely to know exactly where the reference to Anti-Money Laundering training is in the Board Minutes. We’re not. It’s super helpful – and saves time – if you highlight what we’re looking for when it’s buried in a lot of information.
- DIGITIZE: When possible, provide us with the documentation we request electronically via secure e-mail, CD, or flash drive. This saves time and might allow us to work remotely (reducing travel expenses and freeing up your office space).
- SIMPLIFY: In an age of having to cover your own posterior for every possible accusation of misrepresentation or failure to notify, many institutions have gone to an extreme with disclosures that is beyond necessary or meaningful. And just because you’ve provided a disclosure for decades or it exists in your vendor’s software does not mean it’s actually required – or even compliant. Take a look at your disclosure stack. Get rid of what’s not necessary or meaningful. If you need help making that determination, ask us. Not only will your auditors love you…your customers will be thrilled with having fewer papers to read and file…and they will be less confused.
- LOG: Many activities that have regulatory compliance tests occur in person in your branch or other location. For instance, there are timing requirements around issuing a requested pay-off statement. In many small institutions, these activities are handled immediately without any documentation. That makes it hard to us to test – and prove – your compliance with regulatory requirements. Maintaining simple logs of these activities helps us establish your compliance.
While it might be a stretch to hope that you look forward to our arrival, we would like you to dread it less. Working together, we can streamline the process and focus on what is really important – an audit that results in high ratings for your institution and leads to outstanding ratings from your regulator.