NCUA considering a $156.5 million budget

ALEXANDRIA, Va. (10/22/07) — The Credit Union National Association (CUNA) Monday commended the National Credit Union Administration (NCUA) for its use of the annual budget briefing process to promote credit union understanding of how the agency uses its resources.

Testifying Monday at the seventh annual briefing, CUNA said the public forums also facilitate agency accountability and budget transparency. Thomas Gaines, chairman of the CUNA Examination and Supervisions Subcommittee, represented CUNA at the budget session. Gaines is also president/CEO of the Tennessee CU League.

"The briefing is an extraordinary undertaking for a federal regulator and reflects the agency's recognition that credit unions—and not the federal government—provide the vast majority of the financial support for the agency's operations," Gaines said.

Gaines added that CUNA will always urge the agency to achieve efficiencies and minimize costs, but never at the risk of safety and soundness for the credit union movement.

He said one of the NCUA's biggest challenges for the 2008 budget cycle may be determining appropriate staffing levels, a spending category to which more than 80% of the agency's budget is dedicated. That category covers expenses such as salaries, benefits, and travel costs.

Gaines said there is a "point of diminishing returns" on efforts to reduce staff to reflect a decline in credit union numbers. He said that the increasing complexity of credit unions suggests that staffing requirements will not fall in proportion to the number of credit unions.

"On the other hand, inflated staff levels will result in inefficiencies, artificially large budgets, and bigger fees to credit unions, " the Tennessee credit union rep warned.

Gaines also raised broader policy issues that have budget implications, such as improved communications regarding assisted mergers; the implication of the Outreach Task Force; and handling problem credit unions in a manner that is least harmful to the credit unions, their members and the credit union system.

He requested that, going forward, the NCUA provide to briefing participants in advance of the briefing a summary of the larger budget issues staff will recommend in order to improve the process and facilitate the ability of commenters to provide useful views.

At the briefing, the NCUA discussed a $156.5 budget for 2008, representing a 2.97% increase over 2007 spending. The increase is largely attributed to personnel costs, including health and other benefits, and agency travel expenses -- about 87% of the budget.

The budget carries a recommended increase of seven full-time equivalent (FTE) employees to 965, a reverse of a recent trend to trim staff numbers. The new FTE's represent positions the NCUA will need to fill as a result of reassigning some experienced examination staff to Region V, according to NCUA Executive Director Leonard Skiles. This is first time since 2000 NCUA would be adding FTEs.

The increase is necessary, according to the NCUA presentation, because regulatory issues are not subsiding and safety and soundness issues are likely to increase.

In addition to the geographic concentration of risk in areas such as Region V, the NCUA is concerned about monitoring member business lending activity, mortgage lending, third-party relationships and outsourcing and other issues that raise potential safety and soundness issues. Regulatory issues for federal credit unions continue to grow according to Skiles and include BSA, Home Mortgage Disclosure Act and fair lending issues.

Skiles said that in 2008, the agency plans to prorate state examiner training by charging states a proportionate amount for training staff who examine privately insured credit unions.

Under the NCUA plan, the operating fee for credit unions will increase 8-12% and the Overhead Transfer Rate is expected to decline slightly to 52.3%.

The NCUA budget estimates presented at the briefing may be subject to change before the agency presents a final budget proposal in November.

National Association of State CU Supervisors Chairman George Reynolds and National Association of Federal CU President Fred Becker also testified.

For more details on the NCUA proposals, use the resource link below.

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Resource Links
NCUA Budget Projections


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