Credit Union Exam Solutions Presents With Flying Colors

Hey everyone, this is Mark with a special
Archive episode of With Flying Colors.

I hope you enjoy.

So the examination has a term which is
called agreed upon corrective action.

I'm calling this podcast What is the
meaning of agreed upon corrective action?

Back when I was at NCUA.

And I was interpreting regulations or
having conversations or trying to find the

exact precise word that I wanted to use
for a communication written or otherwise,

I would oftentimes go to dictionary.

com, which would be a beacon.

I would often go to dictionary.

com, which would assist me in
making sure that I fully understood

the word that I was choosing, and
which would give me further resolve

that I had chosen the right word.

Because sometimes what a word means
forever, because you've said it,

you've used it 30, 40, 50 years,
however long you've been communicating

with words on this planet, and so I
will go there to find some clarity.

And, when you look, go to dictionary.

com.

The word agree is a verb to have the
same views, emotion, et cetera, harmonize

an opinion or feeling, to give consent,
assent, to live in con, in conquered or

without contention, get along together,
to come to open to come to one opinion

or mind, come to an arrangement or
understanding, arrive at a settlement.

So that last one fits in particular as I
think what NCUA means when they speak to.

Agreed upon corrective action, and I've
often said here on the podcast that

I believe in the concept of the bell
curve, and sometimes you just don't

get the best resolution from an exam.

Sometimes you get the perfect resolution
of the exam, and it tends everything in

life tends to fall out on a bell curve.

Well, I got a call yesterday or excuse
me recently from a person who's not

a client, but they're just a small
credit union who wanted some advice.

They found me either here.

On the podcast, or via LinkedIn,
or via my web page, but they set up

a calendar meeting, which you can
do on my web page, by the way, and

reached out and just wanted to have a
little chat about some frustrations.

They had on their examination.

And so the examiner came in, the
examiner was relatively quiet,

the credit union had a good code
previously, and the draft reports that

were left had some examiner findings.

That word read upon, and so everything
worked, they had come to one opinion or

mine, they had come to an arrangement or
understanding on the examiner findings,

and then it was crickets for a while.

And that can happen.

These reports have to be reviewed
before I left and see way.

We put in place or NCOA put in place
a higher level of review of all exam

reports that a supervisor had to have
a review and it couldn't just come from

the examiner and the bigger the credit
union, the worse, the code, the higher.

The level of review, however, most
small credit unions could be reviewed

by just the supervisory examiner.

So again, the credit union had crickets
silence asked where things were at

and then dropped from the sky was.

An email saying, here's the report.

It's a final report and they then wanted
to go and make the next steps and have

a meeting with the board of directors.

And the CEO was frustrated because
they reached out and said, what's

going on with the resolution?

And oh, by the way,
the camel code changed.

As an aside, you will not find out
what the camel code is until that

higher level of supervisory review,
as opposed to before, when you'd get

a draft report, you may get a draft
camel that doesn't happen anymore.

You will just get the draft
agreed upon procedures again.

They're supposed to be agreed upon.

If you're doing a document, a
resolution, examiner findings, and

even a letter of understanding and
agreement last word in that is agreement.

So where this situation
went off the rails is that.

The credit union had no opportunity to see
a draft of any kind, the credit union had

no opportunity to discuss that draft, the
credit union had no opportunity to say,

hey, maybe we could come up with a better
solution that you might even like better.

That'll better fit our needs.

That didn't happen.

And when you get to January, and you
have just come off an exam that ended in

November or December that goes into the.

Review process at that point in time,
I think sometimes what can happen

is that there can be a complication
because there's a desire to get

the exam finalized by year end.

So that can quote unquote, unquote counted
as a completed examination because again.

They have internal goals and requirements.

It used to be that they had to do every
federal credit union in a calendar year.

And December was oftentimes crazy as
you tried to get them all uploaded.

And when that happens, maybe the due
process that is built in for credit

unions tends to disappear a little bit.

And it may have happened
in this situation.

But this is, I'm just
using this as one example.

I've heard this before.

I had this happen.

Saw this happen when I was at NCOA, but
basically the report was dropped as a

final and I advised the credit union
that it was probably changed by the

supervisory examiner that the supervisory
examiner probably said, no, we're going

to have a document resolution here
for whatever reason, not going into

specifics of topics and things like that.

And that that determined the camel code.

So I provided some advice
about how to best approach

this and it's consistent with.

What's in the examination report
and oh, by the way, where does this

term agreed upon procedure come out?

It's about in the 4th or 5th
sentence on the cover page.

So there's a standard cover page
that comes with every examination and

in the, you've seen it every time.

You may skip over it.

You've seen so many times, but
what does this report cover?

The last sentence of that category
is this report documents, yeah.

Our conclusions and agreed upon
corrective actions, if warranted,

again, agreed upon corrective actions.

If you don't get a opportunity to see
something before it is called final, then.

It's not an agreed upon corrective action.

Now, how can NCUA rectify this
and what will they probably do?

They'll say, yeah, when we meet with
you and your board of directors, if your

camel code requires that they meet with
the board of directors, we can take a

look at it and we will consider at that
point making a change now, sometimes

they will, sometimes they won't.

Generally speaking, the higher up
the, the higher up the chain of

command it went, the more difficult
it would be to get some changes made.

And if you've got well seasoned examiners
and well seasoned supervisory examiners,

you might be able to achieve that.

As a matter of fact, recently I
had a credit union client that was

trying to do some negotiation on some
language and I could tell by what

they'd already received that it had
probably gone up to the highest levels.

That it could have based on their camel
code and based on their asset size

that therefore it was a final report.

I encouraged them to push back to get
the facts straight because there was a

factual item that needed to be cleared up.

But I told them other than the facts,
if there were other opinions that

you were trying to get in there
and influence them on the language.

That it may be more difficult
now that they already had their

camel codes and things like that.

Now, in that instance, that
credit union was successful and

again, you got to play to win.

So they were able to get
into a to make changes to the

report that better portrayed.

What had actually happened
at the credit union.

And again, NCOA wants to get there, but
there are situations sometimes where they

run out of time and that's not an excuse.

It's just the reality.

Only so much water will go down
and drain at one point in time.

And when you get to the end of the year,
there can tend to be a scramble, but that

doesn't mean you don't have your rights.

So if you find yourself in this.

I would push back.

I would push back to the examiner.

I would push back if that doesn't work
to the supervisory examiner, and you can

already always raise it to a high level.

This informal level of appeal is outlined
on the 2nd page of the examination report

and says have an immediate dialogue.

Well, if it's thrust upon you as final,
it's hard to have an immediate dialogue.

And unfortunately, the desire to
have a higher level of review.

Of examination reports, which will take
will which creates some consistency.

So it's a good thing.

It's good intent, but that sometimes
makes it harder to have that immediate

dialogue, especially when drops it from
the sky at the last minute and then says

it's final and then starts asking if they
can meet with your board of directors.

Again, it comes down to, as always,
things come down to people and I would

encourage you if you find yourself in this
situation to, Decide if it's something

that is worth pushing to get the best
proper language in there, but at least

as a courtesy, they should acknowledge
the fact that it was never agreed upon

and have at least one dialogue where
you have the opportunity to do that.

That's only right.

And if it was raised to ultimately higher
level, the examiner and supervisory

examiner would be embarrassed in this
in this situation, which is another

reason they are likely to have some
conversations with you in this regard.

Again, it's.

I've said here, I've said on LinkedIn
that oftentimes credit unions have to

decide if they are going to go along to
get along, that every time NCUA makes a

request or makes a demand, you have to
decide if it's something that you think

is a great idea, a mediocre idea, or a bad
idea, but in any event, they should, and

are required to, give you an opportunity
To agree upon it now push come to shove if

it's material enough safety and soundness,
they're not going to cave, but they are

going to give you and they should give
you that opportunity to be heard that

opportunity to influence the language
so that you can make it consistent

with something that meets the needs of
NCUA from a safety and soundness and or

regulatory perspective, but also meets
the needs of you and your credit union.

And more importantly, your members.

All right, that's it for today.

Again, 1st page of the examination
report says that the report includes

agreed upon corrective actions.

Make sure you agree.

Make sure you use finesse.

Use all your people skills to get
language that makes sense for you,

your credit union and your members.

Lastly, if you like this podcast,
please share it with a friend, and

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And you could tell by the title, if
it's something that might be worthwhile

for you listening to in any event,
I thank you for listening today.

And this is Mark Treychel.

Signing off with flying colors.

Thank you for joining us on this episode
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