An audit by NCUA's Office of the Inspector General (IG) found that NCUA needs to improve its follow-up process with regard to Document of Resolution (DOR).
The audit report concluded that "neither NCUA's Office of Examination and Insurance (E&I) nor the five regional offices effectively monitored or followed up on unresolved DOR items." This failure to follow up on these DORs represented "missed opportunities to mitigate losses" to the share insurance fund.
A DOR is issued by NCUA examination staff outlining "plans and agreements reached with credit union officials to reduce identified areas of unacceptable risk." The DOR will identify persons responsible and timeframes for correction.
The audit noted that in five of ten credit union failures reviewed by the IG, the same DOR issues were repeated over several examinations at the same credit union and these unaddressed DOR issues contributed to the failure of these credit unions.
The IG audit further notes that 4,653 federally insured credit unions had over 26,000 unresolved DOR items at the end of 2010. Fifty-seven percent of the credit unions had a composite CAMEL rating of 2 during their last exam.
Twenty-three percent of these credit unions had unresolved DOR items related to management issues. The report noted that 88 percent of the management-related DOR issues were associated with "Management Understanding/Response” and “Management Practices” risk factors.
The IG audit notes that a number of these unresolved DOR issues have been around for a long time. Fifty-even were over 10 years old; 776 were 5-10 years old; 2,305 were 3-5 years old; 3,098 were 2-3 years old, 9,055 were 1-2 years old, and 10,870 were less than one year old.
The IG stated that examiners failed to take timely corrective actions with regard to unresolved DORs. These actions could have included a CAMEL ratings downgrade or a stronger supervisory action.
Read the report.
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