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NAFCU to NCUA: provide better transparency on operating fund
NAFCU President and CEO Dan Berger Tuesday wrote to the NCUA urging for increased transparency and scrutiny on the agency’s Operating Fund. The NCUA Operating Fund, managed by the NCUA Board, enables the administration and service of the federal credit union system.
The fund’s primary source of revenue comes from the annual operating fee charged to federal credit unions. The Operating Fund is also reimbursed by the NCUA Share Insurance Fund, specifically for insurance-related expenses according to the overhead transfer rate.
“In recent years, the cash balance of the Operating Fund has risen dramatically,” wrote Berger. “In general, the balance follows a seasonal pattern of peaking each April with the collection of the federal credit union operating fee and gradually declining in the months that follow before being replenished with the following year’s operating fee.”
While the cash balance was consistently below three months of budgeted expenses over the past few years, it has more than doubled to roughly 5.5 months—or an increase of $70 million—of budgeted expenses.
“Even when the cash balance was at its lowest point of the current cycle in March 2021, it was still above its average level prior to 2018,” stated Berger. “It should be noted that one month of budgeted expenses is itself a growing dollar amount.”
While NAFCU understands that the NCUA requires sufficient funds to operate and pay for agency expenses, more transparency on the cash needs of the Operating Fund is essential to identify any surpluses which could be directed back to credit unions.
“Credit unions deserve to know how their members’ funds are being spent. Furthermore, credit unions are still enduring the stress of recent economic turmoil, and so it is critical that the NCUA explore every option to reduce financial burdens associated with funding agency operations,” concluded Berger.
NAFCU remains vigilant on transparency and cash needs reporting from the NCUA Operating Fund. The association will provide any updates on the Operating Fund’s cash balance and any surplus. Read the full letter here.