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Highlights

During recent congressional hearings and in public speeches, statements made by the National Credit Union Administration's (NCUA) Chairman and another board member raised congressional interest in the ability of NCUA to collect and objectively analyze data on credit union membership and executive compensation. More generally, these statements also raised issues about the agency's overall vigilance as a regulator and the independence and objectivity of NCUA's board and senior staff from the industry being regulated. As a result, Congress asked us to expand upon our current work looking at the tax-exempt status of credit unions to include a review of governance policies and procedures for NCUA's board of directors and senior staff and more specifically how the policies and procedures address independence and objectivity issues. This correspondence (1) compares controls and related procedures applicable to NCUA that help ensure the independence and objectivity of its board members with those of other federal financial regulatory agencies and relevant recommended management practices identified in academic and industry literature and (2) describes NCUA's use of Schedule C staff compared with that of other federal financial regulatory agencies.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
National Credit Union Administration To address perception issues regarding NCUA's independence from and objectivity about the industry being regulated, the Chairman of NCUA should consider adopting practices that other financial regulators use to enhance their independence and objectivity. These practices include drafting agency-specific rules to maintain an arm's length relationship with the regulated industry and including independence and objectivity as core values in the agency's strategic plan.
Closed - Implemented
The NCUA Board followed GAO's recommendation and added the terms "independent" and "objective" to NCUA's Mission Statement and added and defined the terms "integrity" and "objectivity" in NCUA's list of values in our 2007 Performance Budget, the annual update to the Strategic Plan. On December 31, 2007, the NCUA Board issued a new, comprehensive Instruction (1235.07), entitled NCUA Policy on Objectivity, Independence and Standards of Ethics. The Instruction was sent out to all NCUA staff and is posted on both the ethics page of NCUA's intranet as well as on the NCUA e-library. The second paragraph of the Instruction specifically addresses the Board's rulemaking and adjudicatory functions.

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