Examiner Responsibilities
Exam staff review and document red flags for fraud or opportunity for fraud to occur and take appropriate steps when necessary to expand the scope of exams to investigate red flags. Credit unions are in the best position to create proper internal controls, establish appropriate policies and procedures, implement segregation of duties to the maximum extent possible, and conduct periodic and independent audits and MAVs. Together, these steps help deter fraud in credit unions and can also be red flags for fraud when they are inadequate or nonexistent.
Review of Internal Controls and Recordkeeping during Examinations
The most important fraud deterrents are proper internal controls and recordkeeping.
The NCUA conducts two types of onsite examinations: risk-focused examinations and defined-scope examinations. Depending on the size of the credit union, examiners will conduct one or the other. The defined-scope examination outlines specific exam steps that focus on a credit union’s internal controls, recordkeeping, and lending practices to identify fraud. When conducting examinations for a:
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Defined-scope exam—Perform the required steps. If an examiner suspects that fraud is occurring, consult with the SE.
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Risk-focused exam—If an examiner notes one or more red flags, discuss with the SE.
Supervisory Committee Audit and Member Account Verification Requirements
NCUA regulation part 715, Supervisory Committee Audits and Verifications, sets forth the minimum requirements for a supervisory committee audit and MAV consistent with the FCUA. Examiners review the audit and verification for consistency with NCUA regulations and the 20-RA-01, Other Supervisory Committee Audits—Minimum Procedures.
For additional exam procedures, see the General Ledger and Supervisory Committee sections of the Examiner’s Guide.
NCUA Fraud Hotline
NCUA’s Fraud Hotline includes a telephone line (800-827-9650) and a public-facing website that allows credit union employees, members, or officials in federally insured credit unions to report suspicious or illegal activities. Examiners may notify credit union staff they have the option to report fraud concerns through the NCUA Fraud Hotline, and credit unions’ best practices can require policies and procedures to deter fraud and report employee concerns appropriately, including to the NCUA. Callers to the Fraud Hotline can remain anonymous, but must provide enough information so the problem, individual(s), and credit union involved can be identified. All reports are kept confidential.
For hotline complaints received with enough identifying information for further action, the information is sent to the appropriate regional office. The region investigates the allegation(s) and takes any necessary corrective action if the investigation reveals fraudulent or improper conduct.
Additional information about the NCUA’s Fraud Hotline is available in the NSPM.
Bond Requirements
NCUA regulation § 713.3, What bond coverage must a federally insured credit union have? establishes the bond coverage a credit union must maintain. Credit unions are required to purchase bond coverage that covers fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members. Prudent credit unions evaluate each employee during the hiring process to determine if they are bondable and maintain a record of this verification to provide to examiners (and other outside auditors) when requested. A prudent credit union will also verify that the individual has not been prohibited by any Federal Banking Agency by checking prohibition lists at each agency. For additional information, see NCUA’s Fraud Prevention Resources.
See the Fidelity Bond Coverage section of the Examiner's Guide to determine how to review the adequacy of the bond coverage.
Last updated on May 01, 2023
