The NCUA Board voted at its Nov. 15 meeting to increase its fiscal year 2013 budget by 6.1% from that of fiscal year 2012. But it voted to leave other numbers associated with the budget, the overhead transfer rate and operating fee for federal credit unions, largely unchanged.
This means NCUA is budgeted to spend $251.4 million in fiscal year 2013, an increase of $14.5 million over 2012’s $236.9 million.
“This is not something we take lightly,” said NCUA Board Chairman Debbie Matz who shared the board table with the board’s lone Republican member, Michael Fryzel.
Matz called the budget a strong signal that credit unions are coming out of the Great Recession, and she noted that this was the first year since 2008 that the agency has not had to add more full-time staff positions as a reaction to the impacts of the economic crisis.
She also said the NCUA regions had used zero-based budgeting to keep increases down, and the agency kept travel expenses below an increase of 3% and administrative costs to below a 1% increase.
Matz noted that personnel and travel expenses are the largest items in the agency’s budget, reflecting how much of its work involves examiners working at credit unions spread across the country. Employee pay and benefits combined with travel expenses account for 84% of the agency’s spending this year.
The employee pay and benefits figure climbed from $170.8 million in fiscal 2012 to $183.6 billion, a 7.5% increase, because in part the agency wanted the budget to reflect the impact of a possible pay raise for federal employees, should the Congress pass one in 2013.
Matz observed that such an increase was a possibility and said that the agency had to budget as though it were a certainty. But she also said the NCUA would return any excess at the board’s mid-year budget review in July.
The agency saved money by removing unneeded full-time positions that were unfilled and also cut the use of outside consultants, according to NCUA Chief Financial Officer Mary Ann Woodson. She reported to the board that rent, communication and utility costs dropped by 3.3%, much of that attributed to decreased postage as the agency used electronic means to distribute and gather information. This drop of $182,000 was more than enough to offset smaller increases in rent for office spaces.
The NCUA's 2013 budget increase is relatively small compared to recent years. This increase is higher than the 5.1% increase approved for fiscal year 2012, but significantly less than the 12.1%, approved for fiscal year 2009, 13.0% for fiscal year 2010, and 12.2 % approved for fiscal year 2011.
Reactions to the budget ranged from cool to frustrated.
NAFCU CEO Fred Becker said that he thought the agency was spending too freely.
“This year’s $14.5 million increase, which follows last year’s increase, is difficult to justify in the current economic climate,” Becker said. “Perhaps most troubling is that $12.8 million of this increase is for a 7.5% increase in pay–provided the president approves an increase in the general schedule pay scale.”
“NAFCU has continually urged NCUA to demonstrate greater restraint in its spending to address the agency’s most urgent needs.” he continued. “We also believe NCUA should be more transparent with regard to the budget process. There was planned spending of $236.9 million last year, but that was cut by $2 million in July. NCUA said that would go to offset 2013 operating fees, but we would be hard-pressed to see how that is being carried out. If this 7.5% pay raise, which is in and of itself highly questionable, doesn’t go through, where will that money go, and how will it affect 2014?”
CUNA CEO Bill Cheney expressed similar sentiments.
“For credit unions, this budget increase is exasperating, particularly as other federal financial institution regulators have held the line on their own budgets,” Cheney wrote in a comment about the increase. “Clearly, the NCUA Board believes it has no reason to take a similar line–one that the president of the United States has personally mandated for federal agencies. The issue of ever-increasing budgets at the agency, in our view, necessitates greater oversight, accountability and transparency. We will express our deep concerns to the Obama administration, as well as lawmakers regarding oversight of the NCUA’s budget. The agency must be held accountable for its budget decisions–and we intend to ensure that will happen.”
But while the overall budget for fiscal year 2013 increased 6.1%, the agency left two key numbers that go into making up its budget largely unchanged, marginally reducing the amount the agency takes from the NCUSIF to fund its operations and somewhat increasing the amount it charges federally chartered credit unions.
The board voted to approve an overhead transfer rate of 59.1%, a small decrease from the 59.3% that the agency used in 2012. The overhead transfer rate is the amount of its budget that the agency takes from the NCUSIF to fund its oversight and management of the fund.
The agency cited increased clarity and improved methodology in the way it gathers data for what goes into the rate, noting that it had implemented the recommendations from a 2009 Price Waterhouse Coopers study into how it calculates the rate into this year’s calculations.
“Price Waterhouse Coopers recommended enhancements documenting the allocation factors tied to insurance related activities,” the agency wrote in a memo supporting the move. “In response, we required each office to develop procedures for monitoring activity as it relates to ‘insurance’ related activities versus ‘regulatory’ related activities and incorporated the results.”
The agency also suggested a similar approach will be used in the future.
“NCUA plans to further evaluate the definitions for insurance versus regulatory related activities. The agency will consult with an independent expert firm to review staff’s analysis of the definitions."