In October, NCUA proposed an operating budget increase to a total tune of $350 million. Chief among the reasons for the increase was a need for more regional staff members for examinations and supervisory tasks. This went along with NCUA’s earlier announcement that it would be moving forward with plans to return to onsite examinations in full.
Trade groups and leagues opposed the hefty budget increases, questioning their necessity. For example, the Ohio Credit Union League said “During the pandemic, NCUA effectively and efficiently pivoted to a remote examination posture out of necessity without impacting credit union safety and soundness.”
NCUA Chairmen Todd Harper may disagree with that assertion though.
Per Harper, onsite examinations have shed light on issues that might otherwise have gone unnoticed during a remote examination. “As examiners return onsite, they have found an increase in recordkeeping deficiencies, problems with internal controls, and instances of fraud,” Harper said.
Further citing the failure of four credit unions in 2022 resulting in $7 million in losses, Harper suggested fraud played a role in those. “Even though we learned during the pandemic that many more of our examination procedures can be completed offsite, it is important that examiners go into credit unions to examine documents, ask questions, interact with staff, and review internal controls.”
On a side note, the NCUA Board also announced a strong performance for the National Credit Union Share Insurance Fund (NCUSIF) in the third quarter of 2022 (ending 9/30). The Fund recorded a net income of $26.2 million, with the equity ratio remaining at 1.26 percent.
However, the number of composite CAMELS codes 3, 4, and 5 increased from the second quarter as rising interest rates and inflationary pressures affect credit unions and households alike.