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 if you're a casual listener, I would appreciate it if you would subscribe, and then you will automatically get down to downloaded to your favorite app every episodes, which come out at least once, sometimes twice a week.
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 of with flying colors, subscribe on your favorite podcast app to hear future episodes where subject matter experts of all varieties will provide tips on how to achieve success with NCUA.
If you would like to learn more about how we assist credit unions, check out our services at markteichl. com.