As Prepared for Delivery on December 15, 2022
Thank you, Eugene, Jim, and the team in the Office of the CFO for your presentation and for getting us a draft Budget early enough for a thoughtful public hearing. Thank you to the stakeholders who took time to comment in-person and in-writing. I’d also like to thank my fellow Board members and management for their willingness to work together to find common ground.
To state the obvious, with regards to NCUA and the 4800 credit unions we insure, every dollar in our little “universe” comes from credit union members. That’s the only source of cash there is. There are only three places a dollar can ‘reside’:
- Most of the money is at credit unions helping America’s credit union families.
- The second most common thing to happen to a credit union dollar is that it’s sent to NCUA and goes into our Share Insurance Fund, where it at least still belongs to the credit unions and is sitting there, available for use, invested in US Treasuries.
- But the 3rd thing that can happen to a dollar is that it’s sent to NCUA but winds up being spent by NCUA in our Budget. Those dollars are gone forever. Thus, our Budget should always be created with the mindset that there are two other, great uses for any given dollar.
I’m aware that, next weekend, my son’s Christmas presents are essentially paid for by credit union members, since that’s who pays my salary. Any unnecessary spending in our Budget is taking presents, or food, or clothes, away from some credit union member out there.
But I know our Agency has necessary expenses. And I’m happy that my NCUA colleagues will be taking great vacations and having enjoyable celebrations of various faiths and traditions. Prosperity is wonderful, and I wish everyone had it. I will say that during the pandemic, when were doing virtual meetings, I was struck how many NCUA employees were at their second home. And that’s great for them; in this country, we celebrate success and abundance. But I think we all understand why the general public looks at DC with something approaching disdain.
That’s my general view on budgetary matters. Now to the specifics:
The 2023 Budget originally called for 12.3 percent growth over 2022. Although we appreciate that staff brought that down to 8.1 percent, it was still too much. Today we are voting on a budget with a 6.2 percent growth rate, which is very similar to FDIC’s budget. I don’t pretend to know the ideal budget number, but I do know that agency budgets are written by those receiving that money, and not by those paying the money. The budget is the price we charge for NCUA’S services. Our staff argues that a 6.2 percent increase is on the low side, that credit unions are getting a good deal here. Perhaps. But in any discussion of the price of anything, you can be that those receiving the cash think it’s a more reasonable price than those paying it. That’s not NCUA, that’s human nature.
That said. I am pleased that personnel growth is prioritized to where the credit unions and the Agency need it most — closest to the credit unions. The addition of regional staff, in particular the Bank Secrecy Act specialists, reflects that priority.
Cybersecurity is a high priority for all of us. Although complete transparency may not be possible due to confidentiality concerns, I ask that the Board be briefed annually on cybersecurity investments and their effectiveness. And to the extent possible, we make the information public.
Technology investments, whether they be for cybersecurity, MERIT, or contract services related to technology-based solutions must have an expected return. We invest in technology for business reasons, and we should be clear on our expectations. Technology spending is the largest category in the budget outside of employee compensation. What are the business reasons for making the investment? What does success look like? When can we expect to see results? What happens when goals slip?
I realize the MERIT system began development before this Board was in place, but this Board is responsible for MERIT and the technological investments in this budget. We cannot abdicate our responsibility to ensure accountability for the money we are spending going forward and for the results used to justify it.
Given the size of the investments we are making in technology, this area of the Budget deserves greater Board oversight and better communication with stakeholders. Today I’m calling on my fellow Board members to join me in asking for a bi-annual or quarterly update on the justification, money spent, and results — including the timing of results — for investments in technology.
Again, I’d like to thank the staff, management, and my fellow Board members for the willingness to work together on this budget. We have a better work product because we listened to each other.
Thank you, Mr. Chairman, that concludes my remarks. I have a few questions for Eugene.
The annual operating fee charged to federal credit unions is intended to pay the Agency’s annual expenses – not to build reserves. Can you explain the plan for returning excess funds in the Operating Budget back to credit unions?
The Board is voting today on a two-year budget. What happens in year two? Does the Board reconsider the second year, which would be for 2024?