Callahan & Associates Chairman Chip Filson and his Co-Ops for Change campaign challenged the NCUA's audit of the National Credit Union Share Insurance Fund's 2013 financial statements.
Although the clean opinion was presented accurately from an accounting standpoint, Filson said in an April 17 release, it offers little value, due to flawed methodology revealed from back testing, and no discussion about the results.
Specifically, Filson said the fund's expense provision for losses has no correlation to actual net losses incurred last year. Additionally, he said, the Central Liquidity Facility does not specify if the NCUSIF or CLF member credit unions would receive first access to the credit line in a liquidity crisis.
Filson also questioned the increase in the overhead transfer rate charged to the NCUSIF, from 52% in 2008 to nearly 70% in 2014.
“The analysis shows huge fluctuations, no real patterns, and little correlation between how NCUA estimates its provision expense and actual cash losses,” Filson said. “The graphs demonstrate the lack of any consistent accounting relationships.”
The former NCUA director of examination and insurance said he's concerned the NCUA operates the NCUSIF at a breakeven level, resulting in the overhead transfer rate increase. Subtracting the 2014 transfer rate from projected NCUSIF investment income leaves nothing for provision expense, Filson said, let alone additions to retained earnings to keep up with share growth and the 1.3% normal operating ratio.
“When you take a look at the (NCUA's) performance record, it's alarming because the agency is seeking even more control over individual credit unions' financial decisions through the proposed risk-based capital regulation,” he said.
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