NCUA examiners and regional officials didn't adequately followup on documents of resolution and 45% of the 74 credit unions thatfailed from 2008-2010 were regularly given CAMEL 1 and 2ratings, the agency's Office of Inspector General concluded in areport.

The report found that the agency's Office of Examination andInsurance “performed limited DOR monitoring and that monitoring ineach region varied based on their individual policy.”

As a result, of the 74 failed credit unions , five regularlyreceived CAMEL 1 and 2 ratings despite receiving “repeat DOR itemsthat examiners did not properly follow up on through strongersupervisory actions, which we believe helped contribute to thecredit union's failure.''

The report also found that 18 of these credit unions hadproblems so severe that they were closed or merged within a yearafter being downgraded. Also, 14 of those credit unions had a totalof 55 unresolved DORs during the last examination in which theyreceived a CAMEL 1 or 2 rating.

According to the report, as of yearend 2010, the agency had morethan 26,000 unresolved DOR items, encompassing 63% of all federallyinsured credit unions. And 23% of the unresolved items related tomanagement issues that had been cited as a cause of the failure ofmany credit unions.

To avoid a recurrence of these problems the Office of Inspector General recommended developing a standardDOR monitoring process; requiring a written response from creditunions on how they are resolving problems spelled out in a DOR; andensuring the agency's regional staff takes stronger actions whenproblems aren't corrected.

NCUA Executive Director David Marquis wrote in response that theagency is developing a National Supervision Policy Manual toreplace regional standards with national ones and the requirementto get a written response from credit unions on DORs is included inthe manual. He also noted that since the financial crisis, theagency has increased the frequency of examinations and this allowsthe agency's examiners to “significantly mitigate risks in creditunions on a continuing basis.”

NCUA's Inspector General has issued a spate of reports this yearregarding failures and natural person and corporate credit unions, pointing blame at management as well as the NCUA.