The Year of the Report: NCUA, GAO Come Out with Modest Means, Executive Compensation Studies
WASHINGTON -- As a result of hearings in the House Ways and Means Committee late in 2005, NCUA and the Government Accountability Office released data recently outlining credit union service to those of modest means and providing executive compensation data; GAO also performed a study of NCUA's objectivity. The two studies came out with somewhat differing viewpoints based on the information analyzed. NCUA surveyed a statistically valid sample of federal credit unions, while the GAO relied on data collected as part of the Federal Reserve's most recent Survey of Consumer Finance. NCUA's data showed that federal credit unions are generally serving whom they were chartered to serve. NCUA's Member Service Assessment Pilot program report illustrated that 60% of all federal credit union member households earned $60,000 or less, 82% earned $75,000 or less, and 96% earned $100,000 or less, based on 2000 Census data. NCUA's report said this mix of diverse income levels is crucial to "an economically viable credit union system."
By comparison, NCUA pointed out, nationally, 85% of U.S. households earned $100,000 or less, according to the 2000 census.
Additionally, NCUA provided a "descriptive analysis"--because the data collected was not statistically accurate according to charter type--but based on the sampling, that percentage increased broader field of membership types. The agency also noted that community charters have only existed a relatively short time and most have not had time to penetrate their fields of membership, which it feels would make the numbers more positive. NCUA was careful to clarify whom credit unions can and should serve.
NCUA also looked into executive compensation as requested by retiring Ways and Means Committee Chairman Bill Thomas (R-Calif.). NCUA discovered that about 4% of FCUs are still entirely volunteer-run while another 1% of FCU CEOs are paid by the institution's sponsor organization. Including all of these, the median CEO compensation was $55,588 and the average was $74,020. Salary did generally increase based on the size of the credit union.
NCUA staff made a number of recommendations, including continuing and expanding the data collection, possibly as part of FCUs' regular examination. NCUA Director of Public and Congressional Affairs John McKechnie distinguished this recommendation from the Community Reinvestment Act, which attempts to "dictate behavior." Staff also recommended that its board evaluate ways to collect and aggregate executive compensation and consider periodic disclosure to the membership. Internally, the agency should study the effectiveness of its outreach programs. Finally, staff recommended pursuing legislation to permit all FCU charters to adopt underserved areas.
Just weeks later, the GAO unveiled its findings, which showed credit unions' interest rates on 15 loan and savings products to be better than comparably sized banks, by one to two percentage points on car loans and 0.4 percentage points on regular savings, and the larger the asset size the bigger the difference.
NCUA highlighted a number of places where GAO agreed that it might not have complete enough information to draw accurate conclusions, including member income, which GAO based on the Federal Reserve's Survey of Consumer Finances given that NCUA's report was unavailable for GAO's research. Credit union supporters were quick to point out that the SCF was not intended for that type of comparison and does not account for cost of living variances. Some were puzzled as to why the GAO did not review the data from the Home Mortgage Disclosure Act. The GAO report stated that things like loan rates alone cannot determine the use of the tax-exemption, because they can differ based on creditworthiness or regional differences. In addition, savings from the tax-exemption can also translate into lower fees being one of those benefits. By contrast, the banking groups and Chairman Thomas touted the statistics at face value and pointed to the statistics from the GAO report showing banks serving 41% of lower income households, compared to 31% at credit unions. The report also said the credit union percentage has been on the decline while banks have increased service to lower income families. Credit union groups pointed out--and GAO acknowledged--that field of membership restrictions, mainly occupationally based, keep credit unions from serving more low- and moderate-income Americans. GAO also found that executive compensation at federal credit unions is hard to track since federal credit unions are not required to file IRS Form 990. Like NCUA staff, GAO recommended expanding and continuing tracking member income data and services, as well as executive compensation. GAO's report on NCUA's objectivity found that the agency had many of the same basic controls in place as similar regulators. However, GAO suggested that the agency consider some NCUA-specific controls, which the agency was receptive to, and expanding the NCUA Board to five members, which NCUA rejected as costly and unnecessary.
Though trade publications have picked up on the reports, the mainstream media has paid little attention to them. A CUNA lobbyist forecast that the report would likely be lost in the shuffle of the changing of the Congresses and Thomas' retirement. Still, between NCUA and GAO's reports, CUNA and NAFCU jointly sponsored a Capitol Hill publication advertising campaign just in case. --firstname.lastname@example.org