NCUA Approves 2024 Budget, Trimming $8.8M From Draft Version

NCUA board members reached a compromise Thursday over the agency’s 2024 overall budget, unanimously approving a final version totaling $385.7 million.

The final budget reflects a 7% increase over the 2023 budget, and includes 1,247 staff positions. The NCUA’s draft budget, which drew scrutiny from credit union trade associations for being too high, was set at $394.5 million and reflected a 9.5% increase over the 2023 budget.

The $385.7 total is the sum of the following: A $374.5 million operating budget, $6.1 million capital budget and $5.1 million Share Insurance Fund administrative budget.

“The recommended budget before us represents a consensus. It includes compromises by each of us at the table,” NCUA Chairman Todd Harper stated. “Compared to the funding and staffing levels shown in the staff draft budget, this budget is smaller in dollars by approximately $8.8 million or 7%. With these compromises, the NCUA is making critical investments in its field examination program to protect the system’s safety and soundness as credit unions respond to growing liquidity, interest rate, credit and cybersecurity risks.”

NCUA Vice Chairman Kyle Hauptman stated, “Today is my third anniversary with the NCUA and although I’ve learned a great deal since that first board meeting, my views on the budget have largely remained unchanged. Every dollar in this budget comes from credit union members, many of whom are under greater financial stress than this time last year and find themselves having to prioritize the basics like buying gas or making a car payment. Our own data show a dramatic increase in delinquencies in the third quarter, especially for credit card debt and auto loans.”

Key elements of the final budget included the following, according to Harper and Hauptman:

• A net total increase of 13 staff positions for field staff in the examination program in the NCUA regions and Office of National Examinations and Supervision (ONES), which reflect the latest updates to the NCUA’s anticipated examination and supervision program needs for 2024.
• Support for small and Minority Depository Institution (MDI) credit unions, as well as investments to improve the automation and processing of field-of-membership applications.
• Investments to further protect credit union members’ rights, prepare large credit unions for the transition to oversight by the CFPB, and strengthen the system and the Share Insurance Fund against emerging risks.
• Adjustments to the pay and benefits of the NCUA’s workforce, allowing it to remain a competitive employer and able to attract talent.
• A travel budget reduction of $2 million compared with the draft budget.
• $45 million in contracts for technology-related investments.

Harper also noted the combined budget for 2025 is estimated at $433.3 million and 1,251 staff positions. The total estimated figure includes a $418.4 million operating budget, $10 million capital budget and $4.9 million Share Insurance Fund administrative budget.

In response to the 2024 budget decision, Virginia Credit Union League President/CEO Carrie Hunt commented, “It’s vitally important the industry remains engaged with the NCUA on its budget priorities, with the goal of striking a balance between protecting against risk, while also fostering an environment of innovation that best positions credit unions to succeed. Being a good steward of the funds entrusted to the agency by credit unions is important, but equally important is recognizing every dollar the agency requires from credit unions is a dollar not deployed for the benefit of members or our communities.”

Central Liquidity Facility Budget Approved

Unlike in past years, the Central Liquidity Facility (CLF) budget will be kept separate from the NCUA’s overall budget in 2024. This decision was in line with the NCUA board’s recent move to fully separate the CLF into a distinct entity with its own president and staff.

In Thursday’s board meeting, a final 2024 CLF budget was approved unanimously. The budget totals $2,199,065 and represents a decrease of 2% or $35,557 from the 2023 budget.

Operating Fee Methodology Revision Approved

Thursday’s board meeting also resulted in the unanimous approval of the NCUA’s proposed revision to its operating fee methodology. This decision raises the threshold below which federal credit unions are exempt from paying an operating fee from the existing $1 million to $2 million. It also increases the number of federal credit unions eligible for the exemption from 128 to 225.

Additionally, the change allows the NCUA to adjust the exemption threshold for inflation annually going forward. According to Harper, the NCUA will approach inflation-based adjustments by altering the exemption threshold by the percentage by which average quarterly assets reported for federal credit unions for the most-current four quarters have increased compared to the previous four quarters, using the Call Report data available at the time the NCUA budget is published.

OTR Comments Requested

Finally, NCUA board members used Thursday’s meeting to issue a notice and request for comment on the existing Overhead Transfer Rate (OTR) methodology.

The NCUA currently uses a principles-based methodology for calculating the OTR, which has remained in place since 2017 and places different risk weights on the NCUA’s many activities to assist in calculating the final OTR each year – some of which are fully related to the Share Insurance Fund and others partially related, Harper said. The request for comment aims to clarify the NCUA’s four principles for calculating the OTR and the various cost allocations associated with the calculation, as well as asks for input on whether the NCUA should continue to seek comment through the Federal Register on this methodology or add it to the NCUA’s long-standing annual review of one-third of its regulations.

Comments are due 60 days after the notice’s publication in the Federal Register.