Investments

Investments—such as certificates of deposit and mutual funds—serve as an important source of liquidity and income for credit unions. Examiners can review investment operations to determine if controls are in place to ensure management is properly monitoring and recording transactions to these accounts—for example, placing funds, recording funds, and reconciling transactions to the investment confirmations or statements.

To review investment controls, examiners:

• Review the investment policies and procedures to determine segregation of duties, permissible investments, and investment authority limits

• Obtain the Investment Subsidiary Ledger Report, General Ledger History Report, and the Asset/Liability Management Committee Investment Reports (for larger credit unions) and review for unusual transactions

• Test the controls over the purchase of a sample of the investments by confirming the following:

  • Investments were purchased in compliance with credit union policy

  • Duties were segregated for the purchasing, recording, and reconciling of the investments

  • Evidence of the investment or a safekeeping receipt is available for each investment

  • If concerns are present, examiners may confirm the investment independently, and look to the credit union’s transactional account tracing the investment purchase to the safe keeper

• Determine if there is a periodic independent review of the investment function for compliance with board-approved policy and NCUA regulations part 703, Investment and Deposit Activities

• Verify the board of directors receives reports showing the makeup of the investment portfolio, including recent purchases or sales

• Identify and follow-up on red flags

Last Updated on October 14, 2021