In an internal review requested by the U.S. Congress, the National Credit Union Administration's (NCUA) Office of the Inspector General (OIG) found inconsistencies in how small credit union examination policies and procedures are implemented. However, the OIG noted, the NCUA's recently released National Supervision Policy Manual addresses these and other examination concerns.
The report, which was developed at the request of Senate Banking Committee Chairman Tim Johnson (D-SD), details the agency's examination and complaint processes for small credit unions.
Johnson, in February, asked the NCUA OIG and inspectors general at the U.S. Treasury, Federal Reserve, and the Federal Deposit Insurance Corp. to report on their examination processes for small credit unions and community banks.
The OIG interviewed or obtained documentation from the agency's Office of the Executive Director, Office of Examination and Insurance, Office of Consumer Protection, Office of General Counsel, and regional offices as it compiled the report. NCUA policies and procedures were also reviewed by the OIG. The audit addressed examinations for natural-person credit unions with $1 billion or less in assets.
The OIG report found that the agency provides "clear standards and policies" for agency staff that examine small credit unions. The OIG report also found that the NCUA has "a robust appeals process which allows credit unions to question examination results."
However, the NCUA report noted some inconsistencies in how these examination policies are implemented. The report also found some organizational issues related to regional determinations, the NCUA's Supervisory Review Committee, and the NCUA's internal ombudsman position.
The examination inconsistencies are likely a result of the NCUA's structure, which consists of five separate regional offices, each with their own supervisory manuals, the OIG said. This may have contributed to the Senate committee's perception that, nationally, examiners conducted examinations with "inconsistent application of agency policies and procedures," the report noted.
The OIG did not recommend any changes to the NCUA's examination regime, noting that the new standardized examination manual would likely address any examination inconsistencies. However, the OIG did recommend some changes to how the NCUA communicates internally and tracks the status of ongoing examinations, and the agency agreed with these recommendations.
The new manual, according to the NCUA, will help ensure that credit unions are treated more consistently from region to region. The manual is an attempt to remove regional differences in quality control.
The Credit Union National Association earlier this year said that while examination consistency can be positive, the goal is to have examiners treat credit unions in a consistently professional manner, allowing the credit unions to develop and implement their own solutions to address problems.
For the full OIG report, click here.