The reduction is primarily a direct result of the NCUA modifying its state examination program to align with National Supervision Policy Manual requirements. The result will be fewer NCUA examiners in state-chartered credit unions, the regulator said.

The 2017 budget included the same number of FTEs.

However, that $4.3 million savings was not a net figure – the salary and benefits budget for 2016 was $210,928,398, a 4.5% increase over 2015. The 2016 salary budget was $151,053,793, a 3.6% increase over 2015. The 2016 benefits budget increased 6.7% to $59,874,605.

Those figures included four new positions: A human resources position that would replace a contracted position, an IT program manager position to manage the AIRES system upgrade and two security positions.

Salary and benefits represented 73% of the NCUA's 2016 budget.

The reduction in examiner positions showed in the agency's 2016 travel budget, which increased only $4,595 from 2015, to $29,586,321.

Rent, communications and utilities increased significantly – 17.2% – to $6,765,525 for 2016. Contracted services also increased 7.8% to $28,226,641.

Administrative costs decreased 3.9% from 2015 to $15,701,976.

“I know there will always be those who argue that (the) NCUA should cut the budget each year as the number of credit unions declines. However, that argument has a fatal flaw,” Matz said. Most of the insured shares and troubled assets from those credit unions do not disappear — they are acquired by other credit unions. As a result, the remaining credit unions are growing larger and more complex, posing a greater concentration risk to the insurance fund.

Larger, more complex institutions require examiners with specialized expertise in commercial lending, sophisticated investments, cutting-edge technology and cybersecurity, Matz continued. “These specialists often require higher compensation than generalist examiners. However, these specialists are essential so that (the) NCUA can keep up with the growing complexity of the credit unions we supervise,” she said.

Download and read Matz' prepared remarks here.

The NCUA's capital budget will experience increases in 2016 and 2017 as the agency upgrades computer systems to accommodate, among other things, field of membership regulatory relief that was also proposed Thursday. The 2016 capital budget will swell to $10,068,920, up from $8,872,500 in 2015. The capital budget will increase to $13,671,826 in 2017.

The capital budget increase will support new field of membership software that will automate the FOM application process. It will allow credit unions to track the approval process of their applications online, and will ultimately expedite the approval process, Matz said.

The CU Online call report system will be modernized so credit unions will only be required to complete sections that pertain to their operations. Finally, the NCUA's AIRES exam platform will be modernized to allow examiners to conduct more off-site monitoring, reducing the travel budget and decreasing the amount of time examiners will spend onsite and credit unions, Matz said.

“The new exam platform could even pave the way for a return to an 18-month exam cycle in the future,” Matz said.

The 2016 Corporate Stabilization Fund budget was reduced 2.4% to $4 million. The 2017 budget nudged up 1.8% to $4.1 million.

The overhead transfer rate for 2016 increased to 73.7%, up from 71.8% in 2015. The primary driver of the increase was an increase in the percentage of insured shares held by state chartered credit unions, up 0.9 percentage points to 47.7%, the NCUA said.

The board approved the delegation of the authority to set the OTR and administer the rate's calculation to the director of the Office of Examination and Insurance, beginning with the 2016 rate. Matz will ask the board in January to approve posting the current OTR methodology in the Federal Register for public comment, and periodically thereafter in conjunction with the NCUA's Strategic Plan.

“Under the anticipated comment process, the NCUA Board would analyze the comments and determine whether or not to adjust the methodology. With this process, (the) NCUA would also seek prior public comment on any future changes to the OTR methodology. Any such changes to the OTR methodology would require a vote of the NCUA Board. However, there would no longer be a need for staff to bring the rate resulting from the OTR calculation to the NCUA Board annually for approval,” the memo read, explaining the motion to delegate annual OTR calculation to the Office of Examination and Insurance.

NCUA Chief Financial Officer Rendell Jones announced at the meeting credit unions will not pay a corporate assessment or a share insurance fund assessment in 2015. For 2016, Jones said under a best case scenario, credit unions would not pay a share insurance fund assessment at all. Under a worse case scenario, that assessment would be as high as six basis points.