Items in NCUA's 2022 Budget Called 'Significant, Costly and Unnecessary'
Testimony is overwhelmingly against the NCUA’s increased travel and employee addition budgets for 2022.
The NCUA’s draft budget of $345.3 million for 2022 faces an uphill climb to be approved in its current form. On Wednesday for nearly three hours, the NCUA held a public briefing on its proposed budget, and board members heard testimony from those mostly against the increases for travel and the addition of 48 new employees next year.
Inside the proposed budget was a decrease of $13.1 million to the capital budget (a 30.7% decline from 2021), a $8.5 million travel budget (a 69.7% increase from 2021), a $6.2 million Share Insurance Fund administrative budget (a 21.7% decrease from 2021) and the proposed addition of 48 new full-time agency staff members.
While NCUA Chairman Todd Harper said this proposed budget is “only our starting point for discussions and not a final product,” the budget proposal was announced three weeks ago and the board meets next week to vote on the final budget. This expedited timeline to approve the budget has been met with some consternation.
When questioned by NCUA Vice Chairman Kyle Hauptman about the short time frame to read the budget, receive public comments and then finalize the budget, the NCUA’s CFO, Eugene Schied, agreed that the timing hasn’t been ideal.
“I think the timing, as it’s already been noted, is sub-optimal for this year. I think that we continue a very good practice of having comment and providing this public forum. I do think the timing this year is not what it should have been,” Shied said.
Of those testifying at Wednesday’s public briefing was CUNA Chief Economist Mike Schenk, who categorized many items in the budget proposal as “significant, costly and unnecessary.” Schenk questioned the need of adding 48 more full-time employees in 2022; the majority of those positions would be for new examiners. “There is no detail [included in the budget] for a compelling need, or whether there is a compelling need for those duties to actually be performed. So we’re concerned about that as well,” he said.
It was noted that the NCUA currently has 34 open examiner positions. Schied attributed that number to ongoing turnover in the examination area as well as “probably some challenge with recruitment.”
NAFCU Vice President of Regulatory Affairs Ann Kossachev testified, “This unnecessary focus on increasing the number of examiners without first explaining: Which risks they are intended to mitigate; the cost of failures in their absence and why current resources are insufficient – renders the process opaque.”
While the NCUA saved millions in the past 21 months just in reduced travel alone, due to the pandemic, the need for a proposed $8.5 million travel budget was questioned. Schied said the proposed travel budget was put together early in the fall and now that the number of COVID cases are climbing again going into the winter months, he believes that number should possibly be revised downward.
According to NAFCU, the budget proposal also includes “a change in expectations for how the extended exam cycle would operate, resulting in more credit unions being subject to annual exams.” The NCUA would expand the criteria for credit unions that meet the annual examination requirements to include credit unions with assets between $500 million and $1 billion.
Kossachev said the NCUA should “maintain the existing exam flex criteria for credit unions to qualify for extended exams and incorporate exam modernization efforts, including a hybrid, virtual and in-person exam posture.”
Most board members and those who testified at Wednesday’s meeting said they believe the NCUA should continue the hybrid exam approach going forward.
The comment period for the NCUA proposed budget in the Federal Register closes on Dec. 9.