ALEXANDRIA, Va. - The NCUA Board tackled three controversialmeasures in one board meeting last week: the agency's budget,operating fee and overhead transfer rate. In a lengthy discussionof how NCUA arrived at the OTR, Executive Director Len Skilesannounced that it proposed lowering the OTR to 59.8% from thecurrent 62%. Additionally, he suggested the setting of the OTRbecome an annual event. The board unanimously concurred with bothrecommendations. If NCUA had stuck with its old formula ofcalculating the OTR, it could have risen to between 68% and 76%,according to Skiles. However, by taking into consideration thevalue of the states' work on state chartered credit unionexaminations, the cost of NCUA resources and programs from theexamination and supervision program, the distributions of federalversus state chartered credit unions' insured shares, and directoperational costs to the NCUSIF, the final decision was to set itat 59.8%. The "key factor" in determining the OTR remains the datacollected from examiner surveys, but even that has changed. Infurther delving into and following up on the Deloitte & Touchestudy conducted two years ago, an internal working group determinedthat instead of a one-time survey at year-end, examiners canconstantly log what time they spend doing insurance-related andnon-insurance-related work. Throughout the process of determiningan appropriate formula, NCUA consulted with CUNA, NAFCU and NASCUS,Skiles explained. "Importantly, several suggestions were made,which we did incorporate in this final proposal and actually causedan adjustment downward of the OTR from the rate that was initiallybriefed," he added. The credit union trade associations expressedapproval of NCUA's willingness to open up the process to thepublic. Transparency in the OTR rate-setting process historicallyhas been a complaint from the trade organizations. NCUA BoardMember Deborah Matz pointed out during the meeting that from thefirst day she arrived at NCUA, she had been hearing about thisissue. "I think it's impossible to please everyone; I've come tothat conclusion," she said. While she supported the OTR presentedat the meeting, Matz added that she thinks it is important to lookinto other factors as well, such as the nine states that permitprivate insurance. "[They're] receiving imputed value from NCUAthat is not factored into the formula," Matz advocated. This is oneof the federal equity points that NAFCU has been pushing. CUNAAssociate General Counsel Mary Dunn also said that her organizationsupports looking at all relevant factors, even though thisparticular one may not amount to much dollar-wise. In any case,NCUA Chairman Dennis Dollar said, "As anyone from this presentationcan see, this was not just taking the easy way out." NCUA ViceChair JoAnn Johnson added that the changes to the OTR settingprocess "represents the forward thinking-visionary type ofthinking-that's currently here at the agency." The NCUA Board alsodecided to slice $463,319 off its budget that was proposed a monthago at the budget briefing and public forum to drop it down to$149,927,592, just 2.63% over this year's budget. This included anaverage pay increase of 4.1% for NCUA staff. The agency will not beproviding an upfront lump sum payment to employees as it has in thepast two years to save money because it will actually save theagency $2.4 million to add the funds into employees' regularsalaries. Dollar pointed out that in the last three years, sincehe's been chairman, the agency budget has increased an average of2.19% as opposed to the previous three years when it jumped anaverage of 8.79%. The full-time equivalent staffing authorization,which accounts for three-quarters of the agency budget, has beenreduced 7.72 positions to 963.30 from 2003, according to the BoardAction Memorandum. Since 2000, FTEs have fallen 85.77 positions or8.18%, the BAM said. "Even though we thought we had the budget set,it didn't preclude us from trimming.excess," Johnson said. Also,financially related, NCUA reduced its operating fees to federalcredit unions by 6.81% for natural person credit unions or $4.19million. The net amount necessary from operating fees was $57.42million, but using this year's formula would provide $61.61million. Dollar was also quick to point out that the averageoperating fee decrease since 1992 was 2.54% by comparison.Corporate operating fees represent just 1-2% of total operatingfees at $1.01 million. Operating fees are due by Friday, April 16,2004. Finally, NCUA unanimously approved its 2004 AnnualPerformance Plan, which Dollar said is one of the most debatedissues between the board members' offices. The Board also decided,in line with the other federal financial regulators, to delay itsadvance notice of proposed rulemaking regarding privacy noticesuntil final language is worked out in H.R. 2622, the Fair andAccurate Credit Transactions Act. -

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