NAFCU Letter to Matz on NCUA Budget and Pay Freeze

January 9, 2013

The Honorable Debbie Matz
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314

RE: NCUA’s Budget for 2013

Dear Chairman Matz:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions, I am writing in regard to our continued concerns over the agency’s budget.

First and foremost, we believe that it is incumbent on the National Credit Union Administration (NCUA), as the steward of the money it receives from federally-insured credit unions and their members, that each penny it collects is administered in the utmost diligence and respect to credit unions that pay for the operating expenses and administration of the agency.  In this regard, while we appreciate the agency’s increased attempts at cost saving measures, we have significant concerns regarding NCUA’s overall increases in its operating budget for 2013 following significant increases in 2012. This represents a $14.5 million or 6.1% increase over the prior year and an increase of more than 58% over the past 5 years. More specifically, NAFCU is very concerned about the $12.8 million increase to the pay and benefits section of the budget.

Our review of the questions and answers recently provided by the agency to the industry indicates that 5.4% of the rise in pay and benefits represents the budget increase to cover a “contingent” pay adjustment that is indexed to the General Schedule pay scale for federal employees.  On December 27, 2012, President Obama issued an Executive Order that would lift the current pay freeze on federal employees and implement a 0.5% across-the-board increase for federal employees, but The American Taxpayer Relief Act of 2012 (H.R. 8) which was signed into law on January 2, 2013, extended that pay freeze through March 27, 2013. We strongly urge the NCUA to honor the federal government employee pay freeze and keep salaries at the current levels. Without a federal pay raise, NCUA pay and benefits would still increase by more than $3.7 million due to fully funded positions approved in 2012 and net adjustments.  Should NCUA honor the freeze, we would ask that you adjust any operating assessments on credit unions accordingly, instituting such adjustment before the 2013 assessment on federal credit unions.

Recently, the Federal Deposit Insurance Corporation (FDIC) reported that it had chosen to reduce its 2013 operating budget by more than 18% from 2012 while reducing its authorized staff by 7.9%. With more failures and fewer staff in proportion to the number of institutions it oversees as compared with the FDIC, we continue to seriously question why the NCUA sees fit to increase its budget year after year.

NAFCU also encourages the agency to pull back on its increased spending related to examinations.   The NCUA has made no secret of the fact that it has invested heavily on examinations in recent years.  However, as the agency has emphasized in recent months, the state of the industry has improved steadily over the past year and fewer credit unions pose safety and soundness concerns.  Despite this fact, however, the 2013 budget does not decrease expenses related to examinations in proportion to the improvements the agency has seen.  Rather than reducing the agency’s costs associated with examinations, the agency is currently reallocating resources as it opens its new Office of National Examinations and Supervision.

Further, our members continue to find that examinations are far too onerous and costly, and that regulations continue to be inconsistently applied.  Specifically, we continue to hear from our members that examiners are still misusing examination tools, such as Document of Resolutions (DORs), in situations where an examiner’s findings are more appropriate.  NAFCU strongly believes that NCUA examiners should only use DORs and similar formal actions in limited and prescribed circumstances.  Further, examinations should not be a “gotcha” exercise; credit unions should reasonably expect the results from an examination based on the process. Simply put, as the NCUA and other regulators pile on the regulations, it is crucial that NCUA find ways to make examinations less burdensome.

We do appreciate the agency’s improved transparency regarding the budget in posting various documents on the NCUA website.

I look forward to hearing from you regarding this important matter. Should you have any questions or would like to discuss these issues further, please contact me by telephone at (703)
842-2215 or by email at


Fred R. Becker, Jr.

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