NCUA Releases Long-Awaited 2010 Stabilization Fund Financial Statements

The National Credit Union Administration (NCUA) released the much-anticipated 2010 audited financial statements for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) on Tuesday. The fund’s financial statements received an unqualified or “clean” audit opinion from KPMG LLP, the independent firm that audits the NCUA, with the caveat that better preparation would have allowed for more timely reporting.

Credit Union National Association (CUNA) President and CEO Bill Cheney noted in an email on Tuesday that while the assessment of the fund’s financial statements was generally positive, KPMG “did report a ‘significant deficiency’ related to the ‘lack of sufficient preparation for the accounting and reporting of the Corporate System Resolution Program.’”

“We knew that the volume, complexity, valuations, and accounting requirements associated with the Stabilization Fund’s establishment and the NCUA Guaranteed Notes program’s implementation would create unprecedented hurdles for the 2010 audit,” NCUA Board Chairman Debbie Matz said. “As a financial services regulator, NCUA takes financial audits very seriously. We therefore decided it was most important to take the time to deliver a high-quality financial report. The Stabilization Fund’s clean audit opinion by an independent body demonstrates our commitment to robust financial reporting.”

In issuing a clean audit opinion, KPMG also issued one finding related to the timeliness of producing financial statements for the Stabilization Fund, acknowledging that the NCUA faced unprecedented developments related to finalizing the 2010 financial statements and making recommendations to ensure that similar pitfalls are avoided in the future, saying:

“During 2010, the National Credit Union Administration undertook a new initiative, the Corporate System Resolution Program (CSRP), as a result of the failing corporate credit unions (CCUs) due to the financial system crisis. The broad-reaching inter-related implications of this unprecedented initiative, which included actions to accumulate and value assets of liquidated CCUs and their corresponding temporary bridge entities, presented significant financial reporting challenges. Simultaneously, the agency was transitioning to new accounting standards for another fund as well as implementing a new accounting system. This unprecedented initiative and its reporting challenges hindered NCUA’s ability to fully plan and execute timely all the related accounting requirements for the TCCUSF and contributed to delays in the publication of the financial statements by OMB [Office of Management and Budget] established deadlines.”

“CUNA has been urging NCUA to provide much more information to credit unions on a regular basis about the condition, performance, and disposition of the legacy assets of the conserved corporate credit unions, and we were concerned the December 2010 statements had not been provided sooner,” Cheney said. “We will be reviewing the statements in detail.”

Matz, meanwhile, offered assurances that the NCUA was making adjustments based on the feedback from the audit.

“NCUA continues to strengthen the necessary processes, systems, and procedures to handle the vast complexity involved in accounting for ongoing transactions relating to the Stabilization Fund,” added Chairman Matz. “NCUA is committed to producing more timely audits for the Stabilization Fund going forward.”

Congress created the Stabilization Fund in 2009 to provide the NCUA with the flexibility to manage the impact of the costs to consumer credit unions associated with the troubled mortgage-backed securities purchased by the five failed corporate credit unions.

“To facilitate transparency, we made the results of the Stabilization Fund’s 2010 audit available for public review immediately,” concluded Chairman Matz. “Transparency will continue to be a hallmark of NCUA’s operations. In this regard, NCUA will soon release a website dedicated to providing timely information about the performance of the NCUA Guaranteed Notes.”

The entire 2010 independent audit for the Stabilization Fund is available online.


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