Almost 11 months after it was due, the NCUA has not given Congress its annual report for 2008, and several sources have said that the reason for the delay is a dispute with its auditing firm, Deloitte and Touche, relating to the problems of the corporate credit unions.
According to two industry sources, the NCUA is attempting to determine how to account for the losses incurred when it placed U.S. Central Corporate Credit Union and Western Corporate Credit Union into conservatorship. Although the agency placed the corporates into conservatorship in March 2009, the Federal Accounting Standards Board changed the accounting standards so that the losses recorded in March 2009 were determined to have occurred in 2008. The agency could issue a combined financial statement that incorporates the finances of U.S. Central and WesCorp with those of the agency.
Another issue is how the agency will identify the corporates' legacy assets as of Dec. 31, 2008. Classification of those assets could have an effect on corporate restructuring and recapitalization going forward.
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In 2008, U.S. Central had a net loss of $4.8 billion, and WesCorp had a net loss of $7.7 billion.
NCUA Office of Public and Congressional Affairs Director John McKechnie said the agency is working on preparing the report, but he isn't sure when the report will be finished. He declined to discuss the reasons for the delay.
According to the Federal Credit Union Act, the agency must submit an annual report to Congress by April 1 each year. This report must "summarize the operations of the administration and set forth such information as is necessary to review the financial program approved by the [NCUA] Board."
The last NCUA annual report was submitted to Congress in April 2008 and covered the agency's activities in 2007.
In economic terms, 2007 represented the calm before the storm, and in 2008, many financial institutions-including some corporate and natural person credit unions-began feeling the effects of the recession.
In January 2009, as a result of the losses at U.S. Central, the agency injected $1 billion in capital into the troubled corporate and gave a temporary guarantee of uninsured shares in the corporates to prevent a widespread withdrawal of funds.
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