Leaders of all the organizations within the credit union system are stewards of a mutually endowed legacy. That legacy includes financial and physical resources, but it also includes the values and promises to each other that were the basis for accumulating the resources in the first place.
Cooperatives depend on this ability to work together for common interest. If one participant in the system becomes ineffective or dysfunctional then all of the other participants will suffer as well. This interdependence is at the heart of the cooperative success.
The ultimate challenge is whether leaders will pass to their successors an enhanced legacy or, in the worse case, no legacy at all. Ms. Matz has inherited a very difficult set of circumstances – aspects of which resemble a train wreck. Moreover, the first months of her tenure have been filled with predictions that things will only get worse.
Questions for the Agency Leadership
However, a critical question is whether circumstances are causing these outcomes or whether it is the "mindset" that exists at the Agency. Are the Agency's legacy resources, and the promises made in accumulating them, being used in the best interests of the credit union system? Or are other motivations at work?
A case in point: the Federal Credit Union Act requires that, "Not later than April 1 of each calendar year, and at such other times as the Congress shall determine, the Board shall make a report to the President and Congress. Such a report shall summarize the operations of the Administration and set forth such information as is necessary for the Congress to review the financial program approved by the Board."
No one, to my knowledge, has seen this report (traditionally called the Agency's Annual Report) for 2008. This is not just a bureaucratic delay, for this report contains the external audit of the three funds provided solely by credit unions and managed by the Agency: the NCUSIF, the CLF, and the operating fund.
This audit is not a casual commitment. When the 1% funding proposal was presented to credit unions to seek their support, the most common question was, "How do we know our [credit union] funds will be well managed? How do I know that government won't just spend my members' money? Isn't that what governments do?"
One of the responses was the assurance of external oversight through a timely, annual external private audit of the Agency's funds done in accordance with GAAP. Prior to this, NCUA's only external audits were by the GAO – once every two years, often produced very late, and not presented in accordance with GAAP. It took three years for the NCUSIF to establish the accounting processes and procedures to achieve a clean audit opinion. It was the first government managed fund to do so.
Today, the 2008 audits have not been made available. One can only speculate about the hold up. Yet in August, the Board assessed credit unions $2.0 billion to add to the NCUSIF. How could the NCUA Board require credit unions to forward a premium in the absence of an audit that would certify, among other numbers, the Agency's loss reserve calculations? Do current actions fulfill the promises that were made when the 1% funding was proposed as "A Better Way" a generation ago? These commitments were in the Agency's Annual Reports, repeated at multiple meetings, and included in the Board's own discussions approving the legislation and implementation.
Audits not only provide transparency, but they can also facilitate better decisions. The Board's August action in taking $ 1 billion from credit union's collective capital as a premium expense, not only reduces the system's ability to lend by as much as $14 billion; the action was also contrary to administration policy to assure a continuing flow of credit to consumers as well as the counter-cyclical role Congress mandated for credit unions.