A credit union’s internal controls consist of procedures, approval processes, reconciliations, reviews, and other mechanisms designed to provide assurance that the credit union manages liquidity risk consistent with board-approved policy. Internal control systems are designed to ensure limits are followed, and exceptions to policy and procedures are readily identified, reported, and addressed by management. All exceptions to policy limits and management’s responses to material audit findings are reported to the board of directors.
Prerequisites
Perform an initial assessment of liquidity before completing this exam step.
People to Interview
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President/Manager
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Chief Financial Officer
Documents to Review
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Liquidity Policy
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Independent reviews of the liquidity function
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ALCO minutes
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Board minutes
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Audit tracking reports
Questions to Consider
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Since the preceding examination, has there been a review of the liquidity-risk management process by internal or external auditors? What were the results of the audit?
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Have audit findings and management responses been adequately followed-up and cured?
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If there has not been an audit of liquidity risk management process and procedures since the preceding examination, have there been any changes to the liquidity risk models? Have changes to assumptions been justified and are they consistent with approved strategies?
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Is the documentation for cash flow assumptions readily accessible, understandable, and in an auditable format?
Last updated August 30, 2021
