NCUA transparency, and the question of whether the agency is willing to be more transparent, has been a hot topic for several years for NAFCU, CUNA, NASCUS and, perhaps most notably, NCUA Chairman Debbie Matz and Board Member Mark McWatters.
McWatters has lashed out at the NCUA, stating it has become much less transparent since Matz became chairman. However, Matz said in the last few months, she has made significant improvements in the transparency department. She even told Congress so, and promised that the agency's line-by-line budget items and overhead transfer rate documents would be posted to its website. The following day, they were indeed online.
But after the NCUA posted the documents, many still asked: Is this enough?
NASCUS President/CEO Lucy Ito said the NCUA's overhead transfer rate documents further prove the agency needs to hold public hearings and comments on the OTR. That call for more input from credit unions came after an unredacted version of a 2011 PriceWaterhouseCoopers LLC (PWC) report was brought to the public's attention by Rep. Mick Mulvaney (R-S.C.) in a congressional hearing. It was the first time Matz had testified at a congressional hearing since 2011.
The report recommended the NCUA consider feedback from stakeholders on how it classifies its insurance-related and operational activities for determining the OTR.
"More than four years ago, PWC in its report noted that there was 'dissatisfaction within the industry with respect to the NCUA's efforts to communicate and explain the OTR methodology in adequate detail,'" Ito said, quoting the report. "However, the recommendation in the report that the NCUA 'possibly seek feedback' was not included in any materials made public by the agency until last week. Had the agency followed up on that recommendation, the NCUA should have been receiving by now formal feedback on the OTR, which is what our legal analysis finds is required by the agency. It is unfortunate it has taken so long for this view to be revealed by the NCUA – and even more unfortunate that the agency has chosen to ignore the recommendation from the report that the NCUA itself commissioned."
In the July 23 congressional hearing, Mulvaney asked Matz if she saw the irony in redacting the portion of the report that called for greater transparency, to which she responded in the affirmative.
However, McWatters isn't convinced that placing those documents online is enough and said a "document dump" doesn't mean the NCUA had completed its job.
"I have no idea if all of the OTR related documents are online," McWatters said. "It's difficult to prove a negative. The agency should explain how it derives the OTR, why the OTR has increased so dramatically over the past few years, and how changes to the budget during the year are treated relative to the OTR and operating budget components.
"The agency should draft an OTR regulation and submit the proposal for a 90-day comment period. In that document, the agency should unpack the OTR methodology with cross references to all sources employed in the process. Transparency consists of more than a document dump. The agency needs to relate how these documents influence the derivation and implementation of the OTR."
Another major concern for McWatters was that the NCUA used accounting firms, not law firms, to make legal determinations. This was just one of many NCUA practices that McWatters named as regrettable, another being the agency's failure to inform him that the complaints he voiced in November had been resolved.
During the July mid-year budget review, McWatters reiterated the need for transparency and prudence with credit union dollars, reading from a statement that was nearly identical to one he had read in November.
Matz then argued that eight out of his 11 complaints voiced in November had been largely resolved. McWatters said at the time, he had not been briefed on those resolutions, and as of July 30, still hadn't despite his request to be present at the review.
"I have not been briefed and have no idea if the agency has satisfied my requests," he said. "The shocker is that I was informed of this at the board table and the chair took it upon herself to deem satisfaction of my requests. I feel confident that the CFO will offer a briefing in due course."
However, at the hearing, McWatters agreed that the agency had been more transparent in recent months than it had been in the past five years.
NCUA Public Affairs Specialist John Fairbanks said the NCUA has been a leader in transparency in comparison to its peers.
"NCUA makes public numerous documents concerning the agency's budgets, posted on the Budget and Supplementary Materials page on our website," Fairbanks said. "These include a line-by-line, office-by-office budget detail document and an eight page frequently asked questions document. Each year, the agency goes through a zero-based budgeting process in which each office's budget request must be justified. As noted by Ranking Member Clay and Rep. Maloney at last week's hearing, the NCUA continues to lead its peer agencies in terms of budget transparency."
Not everyone is ready to throw caution to the wind, however.
A statement from CUNA showed that the trade association is still keeping a close eye on the NCUA.
"We're still reviewing the NCUA budget and OTR documents, but we remain concerned it took a congressional hearing for these documents to see the light of day," the statement read. "Credit unions and their members – who fund the NCUA – deserve full transparency on the way the NCUA allocates credit unions' resources."
Carrie Hunt, NAFCU's senior vice president of government affairs and general counsel, said the trade association believes progress has been made in regard to the NCUA budget process.
"NAFCU has long sought increased transparency and disclosure from the NCUA on its budgeting process," Hunt said. "We appreciate the progress made in this regard. The more credit union eyes on how the NCUA is spending its money, the more fair the budget will be. NAFCU and our members still believe that credit unions need a yearly forum to air concerns and suggestions on how the NCUA's budgeting impacts their institutions and their members."
Ito, however, was not satisfied with Matz's promise to solicit comments on the OTR methodology every three years.
"State regulators and state chartered credit unions deserve to know what the elements of the OTR are when developed by the NCUA, and have the opportunity to comment on it," she said.
Ito said the 2011 PWC report recommended that the NCUA "check if the OTR decisions are subject to the Administrative Procedure Act and if formal notice or comments are required on its OTR calculation process and results."
"According to the NCUA timeline released [July 27], the 'agency's General Counsel had already opined in 2001 on this matter,'" Ito said. "Our members would like to review that 14-year-old opinion, so that they may evaluate the merits of the differing legal conclusions between the NCUA's general counsel, and our outside legal analysis. We urge the NCUA to release the opinion as soon as possible."
And despite the release of the documents, other questions remain, one being why the Office of Public and Congressional Affairs spent $412,700 on miscellaneous contracted services in addition to employing NCUA staff to handle congressional relations.
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