October 20, 2022

NAFCU’s Long urges NCUA to examine opportunities for cost-savings in proposed 2023-2024 budget

During yesterday's NCUA Board 2023-2024 budget briefing, NAFCU Chief Economist and Vice President of Research Curt Long thanked the board for its ongoing commitment to transparency surrounding the budget while stressing the need for the agency to fully adopt lessons learned in its approach to travel and examinations to achieve long-term budget reductions.

Long noted that the NCUA’s budget continues to increase, and the proposed 2023-2024 budget once again overlooks opportunities for cost-savings. “NAFCU urges the NCUA to rein in the recent trend of substantially increased budgets,” said Long.

Among Long's recommendations to achieve budget reductions, he urged the NCUA to prioritize a hybrid exam model to reduce travel costs. The draft budget currently includes a large increase for travel expenses, reaching 75 percent of pre-pandemic levels of spending.

“NAFCU questions why, when reduction in travel did not negatively impact agency operations over the past three years, the NCUA would choose to only use offsite examination procedures and virtual training ‘when suitable’ instead of offsite examinations with limited onsite presence,” said Long.

Long also noted that the draft budget’s inclusion of an $11.1 million increase from the 2022 budget for contracted services for the Model Examination and Risk Identification Tool (MERIT) is of significant concern. He noted Chairman Todd Harper, in a letter sent in March 2021 to Senator Patrick Toomey, R-Pa., estimated $18.9 to $37.9 million for MERIT, while the proposed budget for contracted services in 2023 has grown to $65.6 million.

Regarding a dramatic increase in the number of specialist examiners, resulting in a net increase of 10 full-time employees focused on consumer compliance and bank secrecy issues, Long requested specifics on which areas of consumer compliance warrant these additional positions and why the NCUA believes it is currently underequipped to address them.

In addition, Long noted the association was pleased to see the NCUA facilitate a return of excess cash from the operating fund to federal credit unions earlier this year. However, Long explained that the current cash balance is elevated once again, and he urged the agency to “carefully scrutinize cash needs and to provide a refund to credit unions in the amount of any surplus.”

On the topic of cybersecurity, Long recommended the NCUA seek to measure, through transparent metrics, the added value of new cybersecurity investments included in each budget cycle. He also stated the credit union industry would benefit from a periodic update regarding the industry’s accomplishment of each of these efforts and their discrete costs.

Long also offered support for the addition of one new position in the Office of Minority and Women Inclusion to support the agency’s mission of promoting diversity, equity, and inclusion, as well as the creation of the Office of the Ombudsman and the inclusion of two subsequent full-time employees for the office.

Today, the NCUA Board is set to meet and receive two board briefings: one on cybersecurity and another on the Central Liquidity Facility. The agency will also discuss its Risk Appetite Statement. 

The meeting, scheduled to begin at 10 a.m. Eastern, and will be held in-person and it will also be available via livestream on the agency’s websiteNAFCU will monitor the meeting and will update credit unions via NAFCU Today. View more on the agenda.

NAFCU is committed to ensuring a strong, independent NCUA as credit unions' sole industry regulator and fostering a strong, collaborative relationship with the agency. The association will continue to advocate for credit unions' best interests.