Piloting a More Flexible Exam Process

In May 2016, then-NCUA Board Chairman Rick Metsger established the Exam Flexibility Initiative working group to evaluate ways to modernize and improve the efficiency of our examination and supervision programs. With stakeholder input from many at NCUA and across the credit union system, the working group made 10 recommendations that were approved by the NCUA Board in November.

One of the recommendations, which is the focus of this article, was the expanded use of offsite examination procedures to reduce the agency’s onsite presence at credit unions.

Consistent with this recommendation, NCUA’s Region IV piloted a flexible exam program—commonly called FLEX— during the second half of 2016. Nearly 70 NCUA staff members took part in the pilot, which included 39 examinations completed in the latter half of 2016. During the program, examiners received additional training and were encouraged to use agency-approved, secure technology to send and receive credit union information electronically in order to perform as many procedures as possible offsite.

The pilot program revealed a number of benefits, as well as challenges, with conducting offsite examinations that could have implications for both credit unions and NCUA going forward.

Benefits

While the pilot was limited in scope, it confirmed many assumptions about working offsite. Benefits observed during the pilot included:

  • Reductions in the agency’s travel costs;
  • Improvements in the work-life balance of NCUA employees, which could result in better retention of qualified, trained examiners; and
  • Reductions in NCUA’s onsite presence at credit unions and less interruptions to the daily operations of credit unions.

Challenges

The pilot also revealed some challenges to expanding NCUA’s examination program to include offsite examination procedures. These challenges included:

  • Reduced or limited communication between examiners and credit union staff because of the lack of an onsite presence;
  • Reduced opportunities for training and transfers of knowledge due to examiners not working together onsite during larger team examinations; and
  • Limited availability of important documentation due to credit unions being unable or unwilling to provide it electronically to field staff working offsite.

Conclusion

Ultimately, the pilot illustrated what is needed for a successful offsite examination program and procedures. Many of these elements were noted previously in the Exam Flexibility Initiative Report, including the need for:

  • A reliable and secure file transfer portal;
  • Effective communication between examiners and credit unions;
  • Enhanced data collection methods;
  • Critical business intelligence tools to expand offsite analytical capabilities; and
  • Sufficient preparation and planning prior to initiating examinations.

Because of the program’s success and its potential for additional improvements in NCUA’s efficiency and effectiveness, Region IV extended the FLEX pilot into 2017. The extended pilot will address the challenges experienced with the offsite procedures. It will also allow the agency to test additional ways in which it can reduce its regulatory footprint further, while simultaneously reducing costs and improving the quality of life for its field staff.