ALEXANDRIA, Va.—NCUA needs to improve in one area in particular when it comes to its joint examination process with state supervisory authorities (SSAs), according to a new report by NCUA’s Office of Inspector General.
The OIG said the purpose of its audit was to determine whether NCUA provided shared oversight of federally insured state-chartered credit unions (FISCUs) to assess their condition and address material risks that could negatively affect the Share Insurance Fund, and furthermore to determine whether NCUA effectively monitored FISCUs using off-site monitoring tools and joint oversight processes with state supervisory authorities (SSAs).
The scope of the audit covered the period of January 2013 through December 2018.
“Our audit determined the NCUA provides shared oversight of FISCUs and that the NCUA effectively monitors FISCUs using off-site monitoring tools,” the OIG said. “Although we determined the NCUA met the objectives of our audit, we also determined there are aspects of the joint examination process with the SSAs that are in need of improvement. Specifically, we found that NCUA’s regional offices did not have updated optional operating agreements with each individual SSA that defined roles and responsibilities at a high level for joint on-site examinations of FISCUs.
Additional Findings
“In addition, we determined that NCUA management needed to enhance its guidance to clarify work classification code (WCC) 26 reviews of FISCUs when NCUA examiners participate in joint examinations,” the OIG report continues. “Finally, although not a requirement, we determined that as a best practice, supervisory examiners (SE) did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews.”
Specifically related to operating agreements with each individual SSA that defined roles and responsibilities for joint on-site examinations of FISCUs, the OIG said it found NCUA had 18 signed operating agreements on file and 11 unsigned operating agreements on file. There were no operating agreement on file with 16 SSAs.
Five states do not offer a state charter option.
“The OIC concludes that because NCUA did not having updated and useable operating agreements with each SSA, there could be confusion regarding roles and responsibilities during joint on-site examinations,” the report states. “The OIG concluded that having an executed operating agreement in place would help bring consistency to the working relationship and across the joint examination process.
Lack of Documentation
The OIG also determined supervisory examiners did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews.
NCUA management has agreed with the recommendation and indicated the agency will implement a formal process that addresses the recommendation by Dec. 31, 2020.