As Prepared for Delivery on November 16, 2023
Thank you, Mr. Chairman. And good morning, everyone. I want to start off by thanking all the NCUA staff who have helped prepare and deliver today’s budget presentation and all those who had a hand in the development of the proposed budget. I know it’s a long and extensive exercise that requires a lot of effort, collaboration, and patience, and I just want to share my gratitude for all the hard work that went into it.
Now to the business at hand. I am delighted to be back with you all to participate in this democratic exercise by holding the NCUA’s budget briefing publicly and listening to testimony from our external stakeholders on their views on the proposed budget. After all, federally insured credit unions are the largest contributor to NCUA’s funding, and it’s only fair that they get a seat at the table to communicate their thoughts.
Ladies and gentlemen, the 2024–2025 proposed budget represents an overall 9.5 percent increase year-over-year for 2024 and 9.9 percent for 2025. The 2024 year over year increase in the proposed budget amounts to a little over $34 million. This includes a proposal for an additional 28 staff members, 17 of which are conversions of what we considered “over hires”, which were positions previously unfunded through the operating budget. The remaining 11 staff members are proposed to be spread between the regions to support the large credit union examination procedures and offices in the headquarters.
Additionally, the proposed budget includes three items that I view as critical in today’s uncertain environment, including an increased focus on enhancing the field examination program, supporting small and MDI designated institutions, and enhancing cybersecurity preparedness at the NCUA and in the credit union system.
However, as I have said before and will say again this afternoon, I continue to champion responsible spending by the NCUA and look for efficiencies wherever possible to ensure we are being faithful to our fiduciary responsibilities of managing the credit union’s resources that have been entrusted to us. To our external presenters today from NASCUS, CUNA, NAFCU, VCUL, and GoWest, I welcome you and look forward to hearing your remarks and engaging in a meaningful dialogue. Thank you, Mr. Chairman, that concludes my opening remarks.
Remarks for the NCUA Staff
Thank you, Mr. Chairman. And, to Eugene, Jim, thank you for your detailed briefing of the proposed budget. As I mentioned in my opening remarks, I believe we have a responsibility to ensure we are being judicious in our use of credit union funds and that always looking for efficiencies wherever possible. Our examiners in the field work with credit unions to implement such recommendations, and its only logical that we apply those same standards to ourselves to ensure we are not placing any undue financial strain on the federally insured credit union system. With that, I have a few questions to go over with the NCUA panel.
I recognize the agency went through an extensive effort to staff up our examiner ranks in the regions to ensure we have the right number of resources in place to handle what might come out of the current post-pandemic economic conditions. Can one of you give us a brief overview of the current makeup of the staffing levels, specifically discussing the percentage breakdown between the number of resources dedicated to the field staff for the regions and ONES, and those assigned to the headquarters?
Thank you, and to continue along the same theme, can one of you tell me what our current vacancy rate for the field staff, including the regions and ONES, and that of the remaining NCUA staff in the headquarters?
Great thank you. The budget is calling for converting 17 authorized positions previously unfunded into the operating budget. Can one of you talk to me about what percentage of the current overall staffing fit in that category? What about the 17 specific positions proposed to be converted in this budget? what is that percentage as compared to the entire staff?
Staying on the same theme, I think it’s important to be transparent about the funding process. Can one of you share the mechanism we used to pay for those positions when they were considered unfunded “over-hires”?
Very well, and as I understand it, because we don’t have the same levels of vacancy rates as we did in prior years, I would take it that the mechanism we used to pay for such authorized but unfunded positions doesn’t exist anymore or exists in a limited capacity. Having said that, can one of you share what the alternative approaches to pay for those positions would be if they weren’t converted?
Thank you and having said that I recognize our options might be limited on how to deal with those roles, but we do have the authority and flexibility to consider what to do about future vacancies that occur organically. I have previously called on the NCUA Board to consider the need to refill positions once they are vacant and to assess what roles can be consolidated, repurposed, or not refilled. I continue to propose the same recommendation to my fellow Board members, especially considering the number of over-hire conversions being proposed in this budget.
Speaking of which, can one of you speak to the percentage of historical organic attrition that the agency has experienced while, of course, adjusting for the abnormal years of 2020–2022?
Thank you, now I think this is certainly an area worth exploring further to offset those costs associated with converting authorized unfunded positions into the operating budget.
Moving on, while credit unions are shrinking in numbers, their total assets continue growing and are on pace to reach approximately $2.3 by year-end. Therefore, I recognize the need for additional resources to support large credit union supervision.
However, focusing strictly on non-field, or non-safety and soundness-related roles, the proposed budget calls for several new positions, including for building out a new office, and adding other senior and non-senior roles to headquarters offices. How do these HQ new roles provide a direct benefit to the industry?
Shifting gears to the consumer compliance resources being proposed in the budget, given the current economic dynamics and the unknowns heading into 2024, what type of assessment or justification went into supporting the proposed shift in those existing resources? And I also want to confirm these would all amount to a shift in existing resources not an addition to the total FTE count, correct?
Very well. Thank you all for responding to my questions and for your thorough explanations. I look forward to working in partnership with my fellow Board members to advance a budget that takes into consideration all these items, and is transparent, fair, and efficient. Thank you, Mr. Chairman, that concludes my part.
Remarks for the External Presenters
Great. Thank you, Mr. Chairman. And thank you again to all our presenters today. I appreciate your candidate thoughts, your recommendations, and your remarks about not only how we can achieve more efficiencies, but also to acknowledge what is working. I have a few questions to follow up with you on.
A number of you mentioned the need to be vigilant on our spending as it related to our focus on addressing cybersecurity threats. You all have probably heard this from me several times before, but I have been championing this cause since my chairmanship a few years ago. I continue to be deeply concerned about the issue of cybersecurity threats; it is truly one of the chief things that keeps me up at night. That’s why it is imperative for credit unions and the NCUA to remain vigilant and prepared, especially given the current climate we find ourselves in, with the historic amount of hacks and cybersecurity incidents that keep happening in the financial services industry.
With that being said, can you all tell me about what you are hearing from your credit unions on this issue? Are credit unions concerned with their exposure to cybersecurity threats? And to what level do they feel confident in their cybersecurity hygiene and preparedness?
Moving on to a more positive note, I do want to express my gratitude for several of you for acknowledging the NCUA’s commitment to supporting small and MDI designated credit unions through our several dedicated support programs and grants.
What are some of the things you are hearing from your credit unions on how they are taking advantage of all these programs offered by the NCUA to support the small and MDI credit unions?
Very well. Thank you all for responding to my questions, and one last thing to circle back to from your remarks. I agree that we need to continue exploring ways to adopt efficiencies in our examination program through the deployment of technological advances. This is one of the reasons why I am proud of our first of its kind MERIT examination system and one of the reasons why I created the Fintech and Access office during my tenure as Chairman, which as many of you know, is responsible for the development of our forward-looking Virtual Examination Program. And we have Charles Vice now as the Director of that Office, and we are looking forward to all the great work that will come out of it.
And we will continue exploring these important tools as we, as regulators, want to take advantage of technological advancements, while balancing the need for on-site presence, and being vigilant about how to mitigate risks that might arise from such shifts. As you know, there is always a lot of value in an examiner being physically present to assess a credit union’s conditions, especially in cases of fraud vulnerabilities. But I commit to you that we will continue exploring options as we have been doing through the adoption of our current hybrid model approach to our examinations.
With that, I have no further questions or comments. Thank you again for joining us this afternoon. Back to you Chairman Harper.