ALEXANDRIA, Va.–The NCUA board has voted 2-0 in favor of its proposed 2019-2020 budgets.
The approved 2019 Operating Budget is $304.4 million, representing 1,173 full-time equivalents (FTEs). Of that, the Capital Budget is $22.0 million, and the Share Insurance Fund Administrative Budget is $8.4 million.
The agency budget for 2019 calls for a reduction of 10 full-time employees.
The 2020 Operating Budget approved by the board is $316.2 million.
The approval of the budgets for the next two years comes a month after NCUA held a budget briefing at which three people testified and provided input, as CUToday.info reported here.
Justifying The Increases
Both credit union trade groups have been calling on the agency to reduce its budget, including during the recent budget briefing hosted by the agency. The trades have repeatedly pointed out the $304.3 million proposed operating budget for 2019 represents a 71% increase in the NCUA's budget over the past 10 years, even as the number of credit unions has been reduced by 25%.
But NCUA has responded by stating the increases are being driven by the growing sophistication of credit union balance sheets, and that it is investing in technology to reduce on-site examinations and reduce costs.
Indeed, during remarks following a presentation on the status of the National Credit Union Share Insurance Fund by NCUA CFO Rendell Jones, it was noted the fund paid out nearly three-quarters of a billion dollars during Q3 to cover losses. NCUA Chairman J. Mark McWatters cited the big losses that can be caused by a handful of credit unions as one reason the agency cannot assume a lower level of regulation is needed.
Steps to Cut Costs
During his remarks to the board, Jones said that in nominal terms the 2019 Operating Budget, which represents more than 80% of the agency’s funding, reflects an increase of $6.3 million, or 2.1%. NCUA said that after adjusting for inflation, the Operating Budget actually is a decrease of 0.2% in real dollar terms when compared to the 2018 board-approved levels.
As he has done previously, Jones said reviewed efforts by NCUA to cut costs, including consolidating from five regions to three, and eliminating regional office staff. He said NCUA has reduced its leased office space needs by 80%.
Details on NCUA’s full operating budget can be found in CUToday.info’s The Vault.
Proposed Rule on Fidelity Rule
Separately, the NCUA board voted to put out for 60-day comment a proposed rule that would amend the fidelity bond requirements under Part 704 for corporate credit unions and under Part 713 for natural person credit unions.
According to NCUA, the proposed rule would accomplish four objectives:
- It would strengthen a board of directors’ oversight of a credit union’s fidelity bond coverage.
- The proposed rule would ensure there is an adequate period to discover and file covered claims following a credit union’s liquidation.
- The proposed rule would formalize a 2017 OGC legal opinion that permits a natural person credit union’s fidelity bond to include coverage for certain credit union service organizations (CUSOs).
- The proposed rule would clarify the documents subject to the NCUA board’s approval and require all bond forms receive the NCUA board’s approval every 10 years.