Collective Investment Funds

Audit and Compliance Monitoring

The bank’s compliance program should address CIFs. Activities that should receive compliance testing include:

• Account eligibility.

• Procedures for admitting and withdrawing interests of participating accounts.

• Procedures for valuing CIF assets and the participating interests.

As discussed in greater detail in appendix B, 12 CFR 9.18(b)(6) requires an annual audit of each CIF by auditors responsible only to the bank’s board of directors; the regulation also requires a bank-prepared financial report of the fund. In most cases, the bank will retain an independent accounting firm to review the financial report and perform the audit required under 12 CFR 9.18. The audit expense is customarily charged to the CIF. This type of audit is primarily a financial statement audit rather than a compliance review. If administration of CIFs is a significant fiduciary activity, the CIF audit should be included in the bank’s fiduciary audit program. Internal fiduciary audits should test compliance with 12 CFR 9.18 and other regulations regarding eligibility, management, and other matters, including testing whether fund investments comply with established investment objectives.

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