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WASHINGTON – By its own admission, NASCUS’ recent meeting with representatives from Deloitte & Touche to discuss the approach the firm will take in its independent study of NCUA’s overhead transfer rate funding formula, went better than NASCUS expected. NASCUS President/CEO Doug Duerr admitted he was “concerned” going into the meeting that Deloitte’s study of NCUA’s overhead transfer would “be just a recalculation of the numbers.” But in fact, Duerr said afterwards that he was “pleasantly surprised to learn that the scope of the work is still being developed and that Deloitte is apparently being asked to identify which activities of NCUA are regulatory in nature and which are insurance related. “NCUA is clearly not asking Deloitte simply to audit its calculations,” Duerr continued. “Instead, the agency is asking them to test the entire approach.” In addition to Duerr, attending the one-hour meeting on May 18 representing NASCUS were NASCUS Chairman Jim Forney, superintendent, Iowa Division of Credit Unions; NASCUS Council Vice Chair Loren Rush, president/CEO, Universal 1 CU; and NASCUS CPA Beverly Jones. Representing Deloitte & Touche were Melissa Krause, partner; Carol Weatherly, Management Solutions Services, staff; Eric Longfield, Management Solutions Services, staff; and Vanessa Tran, Federal Assurance Services, staff. In attendance from NCUA was Executive Director Len Skiles. Several senior management people from the agency also attended the meeting as observers. According to information obtained by NASCUS under the Freedom of Information Act and shared with Credit Union Times, Deloitte was one of five accounting firms that received a letter and “a Statement or Work for the services required” from NCUA. In preparing for the meeting with Deloitte which was arranged by NCUA, the NASCUS representatives had six key points they wanted to make: * An accurate study of the overhead transfer practice would first measure which of the activities the regulator would be obligated to perform if the insurance fund didn’t exist, and then, the remaining work would be what is necessary to protect the insurance fund; * NCUA has two distinct roles – regulator of federal credit unions and insurer of all federally insured credit unions, including state-chartered credit unions. This dual role complicates the matter and causes serious conflicts concerning NCUA’s activities; * The supervisory roles of the federal regulator and the state regulator are identical. Safety and soundness related activities are regulatory functions that are beneficial to the share insurer; * There is a statutory relationship between the NCUSIF, state regulators, and NCUA as federal regulator which obligates each to perform examinations in a manner that is of use to the insurance fund. State regulators use the same examination platform as the federal regulator, and it’s inaccurate to believe that portions of that examination are solely of interest to the insurer; * There are legal questions that have to be resolved regarding the overhead transfer system; * There are serious dual chartering implications arising from the current NCUA overhead transfer practice, and there are growing concerns in the CU community about the fairness, legality, and justification for the current overhead transfer practice. NASCUS in its testimony to Deloitte, expressed its concern that “the study, though well intentioned, may be flawed from the very beginning.” The association based its concerns on the fact that, “verbal explanations about the scope suggest that the parameters which define the study may be flawed. ” The representatives emphasized their opinion that, “ the work and efforts of Deloitte & Touche will be relevant only if steps are taken first to determine what activities the NCUA, as the regulator of federal credit unions, would be obligated to perform if the insurance fund did not exist and then, what remaining activities are necessary to protect the insurance fund.” They further stated pointedly that, “What the NCUA, as regulator, does versus what NCUA does as administrator of the NCUSIF in an insurance review is key to this complicated issue.” Speaking afterwards with Credit Union Times, Duerr said, “Clearly the framers of the Federal Credit Union Act realized there were redundant uses of information collected by NCUA. As a regulator, for example, the agency wants to know that a credit union’s assets and liability are matched. Yet the insurance fund wants to know that as well. We have to be certain there is no `double billing’ going on,” he said using a term frequently used by state-chartered credit unions when describing NCUA’s overhead transfer practice. NASCUS has expressed its interest in continuing to work with NCUA and Deloitte and Touch in completing the independent study. The association has asked for the opportunity to talk with NCUA when the agency and accounting firm identify the final scope of the study to see what further information NASCUS can provide. NASCUS has also offered to provide information to Deloitte on the results of the association’s own study on NCUA’s overhead transfer practice. -

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