OIG makes 3 recommendations to address NCUA supervision QA program deficiencies

Three recommendations to bring the federal credit union regulatory agency’s quality assurance program (QAP) into full compliance with its own National Supervision Policy Manual (NSPM) are provided in an inspector general report dated Aug. 8 and posted on the agency’s website.

The three recommendations to National Credit Union Administration (NCUA) management – and with which management concurred – by the agency’s Office of Inspector General are detailed in Report #OIG-23-07.

“Our audit determined the NCUA substantially conducted its Quality Assurance Program in compliance with requirements. However, we did not find full compliance with the requirements for performing or documenting quality assurance reviews and completing quality assurance reviews or issuing response memos within established timeframes,” the OIG wrote.

In briefer terms, the report concluded that QA reviews are not consistently performed and not conducted in a timely fashion.

The OIG said its self-initiated review focused on QAP activities from Jan. 1, 2020, through Dec. 31, 2022. Recommendations to NCUA management for improvements focus mostly on the agency’s Office of National Examinations and Supervision (ONES), which is responsible for supervising all corporate credit unions plus natural-person credit unions that have $15 billion or more in assets. Recommendations are:

  • Ensure the NCUA fully complies with the National Supervision Policy Manual and the ONES Division of Supervision (DOS) Policy and Procedures Manual requirements regarding when quality assurance reviews are to be performed and the number of specialist reviews to be completed.
  • Ensure that ONES supervisory examiners are using the pre-release secondary review form to document their pre-release secondary review of examinations.
  • Ensure NCUA personnel involved in quality assurance activities fully comply with the National Supervision Policy Manual and the Office of Examination and Insurance and ONES Guidelines for Communication and Collaboration requirements for completing quality assurance reviews within established timeframes.

The report notes that the pre-release secondary review, completed prior to the issuance of examination reports, was added to the NSPM in September 2021 and is the primary quality assurance process for the examination and supervision function. “These reviews are completed on all examination and supervision contact reports where the NCUA issues the report, including federally insured, state-chartered credit unions where the NCUA performs solo examinations or where the State Supervisory Authority (SSA) participates on examinations led by the NCUA,” the report states.

These reviews by supervisory examiners – focusing on, among other things, the quality of the examination report and verification that CAMELS and risk ratings are appropriate and “sufficiently” justified – are supposed to be completed within 10 business days of receiving the completed examination work and draft report, the OIG wrote. The Division of Supervision is then required to complete its pre-release secondary reviews within 15 business days after it is notified that the supervisory examiner’s review has been completed and is ready for division review.

Areas for potential improvement noted

The OIG, in its report, also said it identified areas for potential improvements to the QAP based on interviews conducted for this review; it said it was making no official recommendation but is providing those comments “in a separate document to management for its review and consideration.”

Audit of the NCUA’s Quality Assurance Program (Report #OIG-23-07)