ALEXANDRIA, Va. - Unraveling the mystery that is the overheadtransfer rate is key to dissolving, at least partially, thecontroversy surrounding it, according to three national creditunion trade associations. CUNA has expressed support for equity inthe determination of the OTR. "We focused on the process ratherthan the number," CUNA Associate General Counsel Mary Dunn said."And our board policy now.is that we support a policy that is fairto both state and federal credit unions as well as to the agencyand that there is accountability and transparency to credit unionsin how the rate is determined." She added that the agency deserves"high marks" for instituting its annual budget hearing and theDeloitte & Touche study, but even the recent U.S. GeneralAccounting Office report found that the process still needed sometinkering. NAFCU Director of Research and Analysis Tun Wai has saidthat even behind closed doors, NCUA is not as open about its OTRprocess as one might think. "Overall, our comments to NCUA havebeen just to make sure that the calculation is fair to allfederally insured credit unions," NAFCU Director of RegulatoryAffairs Gwen Baker remarked. "We put a lot of stock to make surethe agency doesn't have a lot of excess budgetary expenditures, soin some sense, NAFCU's position is to make sure that the agencydoesn't spend too much, let alone where the cost happens to go,"Wai agreed. "So the benefits of having the agency not spend as muchis both to the federals as well as to the states equally." NASCUSacting-President and CEO Mary Martha Fortney referred back toChairman Roger Little's testimony at the recent NCUA BudgetHearing. She reiterated, "We regard the overhead transfer ratecontroversy as merely a symptom of a broader NCUA structural andorganizational dilemma, and that is the mixing together,administratively, budgetarily, functionally, and organizationallyof the regulation of federal credit unions and the management of ashare insurance business. Our concern with the NCUA's budget isless one of spending than one of accountability and appropriatesegregation of functions." She also emphasized that NASCUS supportsthe NCUSIF remaining under NCUA's wing and that NCUA maintain itsindependence. The credit union trade groups have said the agencymust clearly define what activities are insurance related in orderto properly allocate resources from the National Credit Union ShareInsurance Fund to cover the agency's "insurance related" costs.This was a recommendation from the Deloitte & Touche study andreappeared in the GAO report just this month. CUNA Chief EconomistBill Hampel pointed out, "In the last several years, it's gone from50 to 67 down to 62%, and I don't think most credit unions aretotally convinced that the nature and structure of the exam processhas changed that much over the last few years, which suggests thatthey are changing the method and the technique for determining theoverhead transfer rate looking for what they think the appropriaterate is." Each of the organizations said the issue goes back toaccountability. "I think all of this gets back to the agency beingmore accountable for its budget, and we do applaud their efforts totry to keep those costs down, but to the extent that they do, it'sless pressure to transfer funds from the share insurance fund." Sheadded that CUNA's indirect goal is that value states provide NCUAis recognized and that federal credit unions are not overcharged inthe operating fee. Hampel said that if you assume NCUA's definitionof "insurance related" is correct and the examiner survey of timespent is done properly and all other expenses are allocatedproperly, then the OTR is probably set too high. However, theprocess is not transparent enough to fully analyze it. "There's noperfect answer, but the more informed the constituency, creditunions, are about what went into it and how the answer was arrivedat then there's less disagreement and there'll be more agreement onthis," he advocated. "Part of the problem is that the lack oftransparency.everyone's going to say, it's probably too much theother way." While CUNA and NASCUS would like to see more creditgiven for the states' involvement in the examination process, NAFCUfocused on other considerations. "What we want the agency to takeinto account is the value that the agency is providing [inservices] to the state regulators.in terms of the federally insuredstate [chartered credit unions]," Wai explained. CUNA and NASCUShave come out in support of an annual review of the OTR, assuggested in the GAO report. NAFCU's Wai has stated, "We don't havea position on it. We support any review that would reflect a fairand accurate assessment of the situation." "In some ways," Dunncommented, "almost regardless of how NCUA determines the overheadtransfer rate, they're going to get criticized. There's no doubtabout it, but our big push is, whatever system you use should befair, should be easily understood, and there should beaccountability so that one group isn't paying moredisproportionately to another group." [email protected]