NAFCU, CUNA respond to upcoming overhead transfer rate review

ALEXANDRIA, Va.-Allowing credit union groups to comment on the external review of the overhead transfer rate is the first time the stakeholders have been permitted to take such an action in the agency’s history, by Acting NCUA Chairman Dennis Dollar’s recollection. CUNA and NAFCU have taken advantage of this opportunity to put their two cents into the process through meetings and information sharing. NCUA selected Deloitte and Touche to perform the audit in the latter half of May. “Our view is that it needs to be fair,” CUNA Associate General Counsel Mary Dunn said. “No one outside of NCUA knows if it’s fair or not.” CUNA had met with Deloitte and Touche last week but its information packet for the auditors was not available at press time. Federal credit unions stand to gain from an increase in the overhead transfer rate because they will pay a smaller operating fee. On the other hand, with more money coming from the insurance fund to pay for the administration of the agency, all federally-insured credit unions would receive a smaller dividend. CUNA represents both groups. Numbers provided by NAFCU Chief Economist Tun Wai show a $31.71 million underpayment since 1990 by the National Credit Union Share Insurance Fund (NCUSIF) toward the NCUA’s budget. The NCUSIF is supposed to foot the bill for all of the agency’s “insurance related” duties. Federal credit unions pay a standard operating fee to make up the difference between the insurance fund’s contribution and the remainder of the agency’s budget. According to Wai, federal credit unions pay 70% of the agency’s $140 million total budget, or $99.3 million. Subsequently, in a letter to Dollar, NAFCU stressed its belief that a review of the agency’s entire budget should be performed in conjunction with the overhead transfer rate audit. “Given the scope of the review that will be conducted by Deloitte and Touche in studying the overhead transfer rate, we believe that a review of the agency’s staffing level would not only be cost effective but could be conducted at a relatively nominal additional cost,” NAFCU’s letter read. While Dollar rejected the idea of adding a simultaneous, full budget analysis for budgetary and logistical reasons, he wrote NAFCU that he did support the idea. “As I stated during last year’s budget process, I remain willing to budget the dollars necessary to enter into a separate contract to accomplish this purpose,” he wrote. “There is no doubt but that the agency would benefit from a third-party management audit of our overall structure and resource allocation process.” In stark contrast to NAFCU, NASCUS believes the overhead transfer rate process as a whole, is entirely unfair to federally insured, state chartered credit unions (see story on this page). NASCUS also claims that the issue could threaten the dual chartering system. The trade group argues that state chartered credit unions may see the federal credit unions paying less for regulation and switch charters. One way to determine whether NCUA’s decision process regarding the level of the overhead transfer rate is fair would be for NCUA to be more open about their methodology. According to CUNA General Counsel Eric Richard, “NCUA needs decision criterion for what’s insurance related and what’s not.” CUNA argues that anyone should be able to go back and see precisely how the agency came up with their numbers and duplicate the process. Because CUNA represents both federal and state chartered credit unions, one would imagine the trade association would be caught between a rock and a hard place; not so, says CUNA’s Dunn. “It would seem that way…but I think the real issue for many credit unions is what is fair and what is reasonable…,” she said. “If credit unions feel the overhead transfer rate is fair, they’re not going to want to second guess NCUA.” [email protected]