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IG recommends monitoring DOR improvements at NCUA
ALEXANDRIA, Va. (10/6/11)--The National Credit Union Administration’s (NCUA) inability to properly monitor or follow up on unresolved Documents of Resolution (DOR) related to troubled credit unions resulted in “missed opportunities to mitigate losses to the National Credit Union Share Insurance Fund (NCUSIF),” the NCUA Office of the Inspector General (OIG) has concluded. The OIG report said 45% of the 74 credit unions that were closed and/or merged between 2008 and 2010 “historically received composite CAMEL 1 or 2 ratings,” and noted that 18 of these credit unions were so troubled that they closed or were merged within one year of their downgrade. A total of 55 unresolved DOR items were found in examinations of 14 of these failed credit unions, and the OIG overall noted that NCUA examiners considered CAMEL Code 1 or 2 credit unions “low risk and therefore did not aggressively pursue timely resolutions for the unresolved DOR items.” The 74 failed credit unions resulted in $649 million in NCUSIF losses, with the 33 failed credit unions that historically received composite CAMEL 1 or 2 ratings accounting for $559 million of these losses, the OIG reported. An OIG examination also identified 26,000 unresolved DOR items as of December 2010. These unresolved issues impacted 63% of all federally insured credit unions. Specifically, the OIG in its review of the NCUA’s DOR follow up process found that “neither NCUA’s Office of Examination and Insurance (E&I) nor the five regional offices effectively monitored or followed up on unresolved DOR items,” adding that “E&I performed limited DOR monitoring and that monitoring in each region varied based on their individual policy.” The OIG also noted that the “establishment of timeframes for DOR completion was left to the examiner's judgment” and was not set by the agency. The NCUA in its response to the OIG report said it did not “believe it is feasible to establish specific time limits for examiners to resolve and close DOR items given the innumerable circumstances examiners must consider when determining the appropriate needed action.” Although it deferred to NCUA management’s in this case, the OIG also urged the NCUA to “continue to look for ways to reduce the time to close DORs” as it revises its examination programs. The OIG also recommended the agency ensure that regional staff take stronger supervisory actions when a credit union fails to correct DOR items, and urged the NCUA to require credit union management to provide a written response for DOR items that are not resolved in a timely fashion. For the full NCUA OIG report, use the resource link.
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