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ALEXANDRIA, Va. – The NCUA Board tackled three controversial measures in one board meeting last week: the agency’s budget, operating fee and overhead transfer rate. In a lengthy discussion of how NCUA arrived at the OTR, Executive Director Len Skiles announced that it proposed lowering the OTR to 59.8% from the current 62%. Additionally, he suggested the setting of the OTR become an annual event. The board unanimously concurred with both recommendations. If NCUA had stuck with its old formula of calculating the OTR, it could have risen to between 68% and 76%, according to Skiles. However, by taking into consideration the value of the states’ work on state chartered credit union examinations, the cost of NCUA resources and programs from the examination and supervision program, the distributions of federal versus state chartered credit unions’ insured shares, and direct operational costs to the NCUSIF, the final decision was to set it at 59.8%. The “key factor” in determining the OTR remains the data collected from examiner surveys, but even that has changed. In further delving into and following up on the Deloitte & Touche study conducted two years ago, an internal working group determined that instead of a one-time survey at year-end, examiners can constantly log what time they spend doing insurance-related and non-insurance-related work. Throughout the process of determining an 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 caused an adjustment downward of the OTR from the rate that was initially briefed,” he added. The credit union trade associations expressed approval of NCUA’s willingness to open up the process to the public. Transparency in the OTR rate-setting process historically has been a complaint from the trade organizations. NCUA Board Member Deborah Matz pointed out during the meeting that from the first day she arrived at NCUA, she had been hearing about this issue. “I think it’s impossible to please everyone; I’ve come to that conclusion,” she said. While she supported the OTR presented at the meeting, Matz added that she thinks it is important to look into other factors as well, such as the nine states that permit private insurance. “[They're] receiving imputed value from NCUA that is not factored into the formula,” Matz advocated. This is one of the federal equity points that NAFCU has been pushing. CUNA Associate General Counsel Mary Dunn also said that her organization supports looking at all relevant factors, even though this particular one may not amount to much dollar-wise. In any case, NCUA Chairman Dennis Dollar said, “As anyone from this presentation can see, this was not just taking the easy way out.” NCUA Vice Chair JoAnn Johnson added that the changes to the OTR setting process “represents the forward thinking-visionary type of thinking-that’s currently here at the agency.” The NCUA Board also decided to slice $463,319 off its budget that was proposed a month ago 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 an average pay increase of 4.1% for NCUA staff. The agency will not be providing an upfront lump sum payment to employees as it has in the past two years to save money because it will actually save the agency $2.4 million to add the funds into employees’ regular salaries. Dollar pointed out that in the last three years, since he’s been chairman, the agency budget has increased an average of 2.19% as opposed to the previous three years when it jumped an average of 8.79%. The full-time equivalent staffing authorization, which accounts for three-quarters of the agency budget, has been reduced 7.72 positions to 963.30 from 2003, according to the Board Action Memorandum. Since 2000, FTEs have fallen 85.77 positions or 8.18%, 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 federal credit unions by 6.81% for natural person credit unions or $4.19 million. The net amount necessary from operating fees was $57.42 million, but using this year’s formula would provide $61.61 million. Dollar was also quick to point out that the average operating fee decrease since 1992 was 2.54% by comparison. Corporate operating fees represent just 1-2% of total operating fees at $1.01 million. Operating fees are due by Friday, April 16, 2004. Finally, NCUA unanimously approved its 2004 Annual Performance Plan, which Dollar said is one of the most debated issues between the board members’ offices. The Board also decided, in line with the other federal financial regulators, to delay its advance notice of proposed rulemaking regarding privacy notices until final language is worked out in H.R. 2622, the Fair and Accurate Credit Transactions Act. -

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