Each November, the NCUA puts forth its budget for the following year. Every year, NAFCU has steadfastly pressed NCUA to be vigilant in keeping every possible cost down.
It is important for NCUA, as steward of the money it receives from federally insured credit unions and their members, to administer each penny with the utmost diligence since credit unions pay for the operating expenses and administration of the agency. The NCUA should look carefully at what works and reprioritize any agency resources that can be used more effectively. Credit unions are still recovering from the economic downturn and are retooling their staffing to accommodate the overwhelming regulatory burden.
Between 2009-2012, through mergers and liquidations, approximately 1,000 credit unions have ceased doing business. That is about 250 each year. Unfortunately, 2013 is on track to see credit unions disappear at the same clip. With the number of credit unions NCUA oversees shrinking, the budgeting should correspond. Yet, NCUA’s budget has increased from $178 million in 2009 to $251 million in 2013. NCUA argues that it needs more resources because credit unions are becoming more complex, but NAFCU has urged the agency to look at efficiencies in other areas.
NAFCU has urged NCUA to keep the 2014 budget levels at or below the 2013 levels. We applaud NCUA’s recent cost saving measures such as the creation of the Office of National Examinations and Supervision (ONES) and the 2014 regional realignment. The realignment should save more than $900,000 annually in improved efficiency and reduced travel costs.
Additionally, we have long lobbied NCUA to reevaluate its methodology for assessing the overhead transfer rate (OTR) to ensure that it charges credit unions the least amount possible for its operations and that its budget process is fair, transparent and equitable. Very few, if any, regulatory activities can be defined as only insurance-related or as only consumer regulations. Last year, NCUA took steps to address certain aspects of the OTR which were improvements, but more can be done in this regard.
Furthermore, credit unions face reduced concerns about safety and soundness, so the frequency of examinations should be reduced. Percent of insured shares in Camel 4 and 5 credit unions has gone from 5.7 percent to 1.5 percent since 2009. The burden of examinations should be reduced accordingly. That would reduce NCUA’s travel expenses, which is the second largest operating expense after salaries.
Another major improvement in the budget process would be for NCUA to return to holding hearings on the budget before the NCUA Board adopts it. This would underscore the transparency and efficacy that credit unions are seeking from the agency.
Bottom line: Credit unions are willing to pay their fair share but in this challenging regulatory and economic climate, every credit union is stretching every dollar as much as it can while having to add staff to meet the ever-increasing regulatory burden. NCUA should leave no stone unturned to find opportunities to decrease expenses, which are borne by credit unions.
B. Dan Berger
President and CEO