Hey everyone. This is Mark with a special archive episode of With Flying Colors. I hope you enjoy. Today's topic of the day of the podcast is going to be document resolutions and project management. I'm excited that I've got two of my most frequent guests, Steve Farr ar and Todd Miller, formerly of NCUA and currently members of my team. How are you guys doing today? Good and a little bit of an introduction in case somebody is hearing with flying colors for the first time.
Steve, could you give a little bit of your background at NCUA before you change teams and started helping credit unions more directly? Glad to. I always break my career down into two parts. The part is a examiner related, which was half of my career, about 15 years. And then the last 15 years was in the central office and various assignments, but my time as an examiner allowed me to become, really well versed in.
The regulations in the Federal Credit Union Act and credit union operations, and I enjoyed that. And as an examiner, I was involved in multiple administrative actions as a PCO, worked with the ones facing trouble. And then I was able to help the agency and worked in conservatorships. Throughout the nation and all that helps with my background and help me when I went into the central office and worked in risk management there.
And in that, we work on a lot of guidance that's issued to the industry and wrote a number of rules and regulations. And then even after I got out of in and see way and. was retired. One of my first jobs out of retirement was the CFO at a large conservatorship. So that was my first venture with being on the other side and having to be faced with NCOA giving us a significant amount of actions in the sense of a DOR for a conservatorship. So that helps with this discussion today.
Yeah, it certainly does. And when we talk, you, the three of us talk about conservatorships a lot, and of course, conservatorship is the most harsh administrative action NCUA can take. That's when they remove the board and NCUA serves as both regulator. Three roles, regulator, insurer, and they represent the interests of the members. It's a draconian action. Saved for the most challenging cases and we have a separate podcast out there on that topic.
All right, Todd, a little bit of your background. I spent 34 years with NCOA. I can break it up into three different chunks. One part as an examiner problem case officer for about the first third of my career, the middle 10 years from 2000 to 2010. I was a capital market specialist spent the last year at Westcore there as a capital market specialist after NCOA placed them in conservatorship.
And then from 2010 to the end of my career in 2021 I was the director of special actions in the Western region supervising problem case officers and capital market specialists. I did have some regional lending specialists under my purview for a period of time as well. Was also involved in a lot of conservatorships. Probably two of my bright points at NCOA is two of the conservatorships I managed were returned to the members and those guardians are still there today.
So those are always enjoyable exercises when you can continue service in a situation. Like that. So all in all an enjoyable 34 years where I got to see a little bit of everything. Yeah, it was a great journey. We all had, we dealt with a lot of problems at NCUA and Steve, pivoting back to you on, that, that experience you had, you spent 30 some odd years at NCUA. Now you're doing what we do now, but you had that role as a conservatorship.
CFO, if you will, where you were getting into a giving you document resolutions that had a lot of tentacles to it. And a lot of tentacles mean that you probably need to have some sort of project management wrapped around it. So what are your thoughts as it relates to document resolutions and resolving them in a way that makes everybody happy?
I'm going to start with kind of a discussion of a trend that we're seeing that was different from when Todd and I were working with our troubled credit unions and that we are seeing extremely lengthy documents of resolution containing upwards of 30 action items. Of and some of them would have parts underneath them. So they're extremely long. And, because we always had that we would prioritize and say, these are the things we really need to do 1st to make sure we can keep the doors open.
And I know there's more of the I'll cover later. And I thought maybe I'd put the question out for Todd and that. Is this is the reason that these doors are containing the, everything that they find that needs to be fixed, is it because of the system that's being used? The merit system or the exam system? Do you think that's contributing to why the long door item, doors? Possibly, but it shouldn't because prior to merit, NCOA had internal tracking for doors, but not findings under merit.
Now they have reporting on both doors and findings. So merit might contribute to a little bit of it. What I think is probably a bigger contributor to it is lack of experience and problem resolution with examiners. As you get more experience, you get more discerning about what is the most critical. And you. Over time come to understand that cartings have finite resources. So you can only address so many things at once.
And I think just the younger generation of examiners that hasn't went through a recession before. They haven't learned that lesson that where cratings can only do so much. And I think they just experience wise, they don't know how to prioritize, which one of these are these really important and which ones are not. So they treat everything as being important, not understanding that's an impediment to problem resolution, not an aid to it. That's my take on it.
Some of it might be merit, but I think more it's just examiners haven't had to write a lot of during periods of stable time periods. So they have just overreacted. The other thing we're seeing is, in the NSPM, it says indoors, you should use the credit union's language for corrective action and negotiate with that, them about that.
And we see that not happening anymore either, where the examiners are just dictating and they're not having that conversation with management or understanding that part of their requirement is to negotiate this corrective action.
But you're right, some of these doors, when you see a 30 item door and they have to do them all in six months and they're all things that take hundreds of hours and lots of dollars, the examiners are just giving a credit and lengthy door and they're almost guarantee and failure in the process, which doesn't help anyone because it's going to make their job harder and the credit is job harder. And it just makes both sides frustrated and it's just not.
The way to approach things You know, I don't know. I think it's maybe a combination of a lot of different factors and merit is probably part of it. But you would think merit would have actually reduced it because they can track findings now when they couldn't in the past. A couple thoughts there that popped into my mind that I wrote down is, yeah, they should be negotiable, but with the new approach. It's not so new anymore.
Four or five years old approach where all reports are reviewed by a higher level that has complicated things. And if something gets reviewed in the office, we're seeing the office drop something in that was a document resolution that surprises the credit union. And oh, by the way, when they drop that in there and they link it to the dates that they established when they might have given them the draft, all of a sudden, the days have passed, which can be very frustrating.
Another thing that popped into my mind, Steve, you mentioned, 3840 document resolutions and in 1 report. Two things that jumped into my head. I remember giving one of our clients some guidance saying, hey, why don't you ask into a in their mind what the priorities here are here. We've suggested that in many instances, but in one instance the examiner got. obnoxiously frustrated that they were asking for that information, which isn't how it should be.
If you're going to tell me I have to do 40 things, you should tell me a little bit of which ones are more important. And then lastly, phone numbers are seven digits long for a reason. The optimal size of a board or a group is seven for a reason, because it gets too unwieldy if it gets bigger. And we're, there's a frustration that I'm seeing when the reports get so long, or if everything's a priority, nothing's a report priority.
All right, back to you, Steve on that or anything else on this topic. We'll pull it back right, to the topic, of that project management and we'll start with kind of everything that we seem to deal with in our clients that are expressing some frustration and sue a, it, it's that communication, communication, communication, the same as real estate location, location, location, and we're seeing a, a variety of these communications being more difficult than they should be.
And the only thing you can do is control what's within your, Stephen Covey would say, within your circle of influence. So you need to make the efforts. That you can make in trying to communicate with your examiner and make sure number one, you clearly understand what they're asking for in that document of resolution and, those dates are particularly useful. And then, even as we speak, we've looked at a report that we got last night and what are we here? 22nd of August.
And it was a really big request for turning basically the operation around from unprofitable for a long time to profitable. And they want it completed by the end of September. It's I don't think you could do a real quality one and get it through your board in that sort of a time frame. So that's the thing where they start to have to communicate to the examiner and say, this is an item that would be approved by the board of directors. The board, we have to prepare it.
We have to get it to the board. They have to review it and all that. That can't be done in that time frame. So the communication is the most important thing that you to get through. Now, I'm going to open that up for you guys to talk about that communication. Todd, any thoughts on what Steve said there about communication as it relates to the door and project management? It keeps us busy. Our failures in communication keep us busy.
It seems to be a common pattern with Folks that call us up and hire us is quite often there's been breakdowns in communication. There's a lot of other things going on too, but that seems to be involved in that exam process with many of our clients. I think you hit the nail on the head, Mark.
In their quality assurance program is creating some of this because the examiner and credit unions reach some set of agreements and then the quality control process changes that so credit unions end up surprised that doesn't help anyone. I also think some of this is COVID related, you know they spent two years essentially working off site. So you had things that weren't looked at.
So they're getting surprises during exams because examiners haven't looked at a specific area in detail in a couple years now that they're back on site. And some of it's the credit union side too because credit unions now and many of them, their executives are off site too. So there's roadblocks being put up. A well, I wouldn't call them roadblocks.
Let's call them hurdles that you have to get over on both sides, so we just had a shift in culture During the whole pandemic and after that and that kind of creates some of this too where You know good communication takes effort on both sides and we see breakdowns sometimes on the crediting side sometimes on the examiner side so that contributes to some of it but doors, this is a sticky point.
Examiners, a lot of times, and we talked about it earlier in the podcast they don't have the experience they used to. So a lot of times when examiners are writing these doors, they have no idea what the cost of these is. And the cost is real. Some of these doors, when they take hundreds of hours and involve third parties, you're looking at costs that hit 100, 000, half a million dollars really easy.
And then, they're complaining about crediting's profitability, but then they're putting a burden on them that, okay, you just cost them another five basis points of expenses by what you're requiring. And. Outside of really experienced people or problem case officers, and even in many cases, then I don't think examiners understand the cost implications of what they're asking credit unions to do. That's a great point. That's a great point.
And then the document resolution can become incongruent, right? Because we want you to improve your profitability, but we want you to do these 10 things.
And five of those things might require going outside and hiring An expert, a consultant, and oh, by the way, we want it done by September, which gives you one board meeting and you still have to go out and find the consultant or even if they give them three, four months, sometimes, consultants, everybody has a how do you get fully staffed issue, credit unions, banks, schools, police office, police officers, the military, nobody can be fully staffed. And or has challenged being fully staffed.
And then you've got new staff. So you have all these challenges. And then, out of thin air, they drop a date on 4, 10, 12, 15 requirements that many times are untenable and incongruent. Very good. Let's move it to the kind of next thing that we've done. What we see is the initial start process of now you get you've done got your exam. You communicated with the examiner. You have you understand what that door requires those action items.
And and the timeframes for doing them, now you have to deal with it internally is the project management. And it, it's the same as you would have any other process for project management. And you may have people on your staff that have taken the courses and have project management certifications. I've found that doesn't necessarily make them a really good project manager. And there's different systems of doing it, but, now you have to deal with that internal communication.
That you're going to have to deal with. And, it always starts with, here's the door. Here's the primary point person on that. Yeah. Here's the resources that we're going to need on that, in tracking the timeframe, I would leave it up to individuals as to how they like to document their project management system. But in that 1, another important thing needs to be that internal reporting. That's going to take place. How is that going to be? Or is there a community?
Committee that's going to meet, bi weekly, monthly based on, volume and thing. But, the strategy needs to be put in place and thought through on those items. So it really is that basic project management thing, but it needs to be, established early on and communicated internally. I have thoughts on that. I have a couple things written down and they just reinforce things that Steve said. The first one is transparency in this reporting process.
Whatever tools you use, where you're at in this project needs to be transparent across your management team and with your board of directors and supervisory committee. One, it demonstrates that, there's commitment to correcting the issues. Within it another thing I wrote down here. There needs to be staff accountability in this project management. Steve mentioned it right up front. But without that accountability assigned to specific people, projects have a way of falling apart.
The thing that thinking about accountability, think about thinking about internal reporting, the light bulb that goes on in my head is NC ways. Focus on corporate governance, right? That reporting the progress to the board. So the board's aware and that will allow there to be appropriate. Should help improve the fact that there is appropriate accountability and it should make NCOA a little bit more comfortable that.
Everybody's taking it serious if it's being tracked and watched and then also watched by the board. It's on that like I said, and then it emphasizes that commitment to correct most credit unions Not most but a lot of the credit unions that have documents of resolution.
They're either a code three or a code four So if they're of any size their examiner are gathering up their financial reports and board minutes every month And it makes it a lot easier to With your examiner communications if they can see every month, here's what you're doing or once a quarter. Here's what you're doing to address these items in the document or resolution. We talked a little bit about prioritization before we started in the project management.
It's good to set those priorities within your project management plan. If you got three or four door items or a number of findings include the findings to but prioritize these this. Some don't, but some and hours involved in get because sometimes it's si it's interesting.
You I think we were on a call with a client where I might have brought this up, but when I was at NCUA and at the time Mark McWaters was the chairman, we would be doing a budget briefing with him, and it was like OPM did X, and it's going to cost us this much more, and Congress did this, and we have to do this, and it's going to cost us this much more, and he said, and we have a chart that says, here's the increases to the budget because other government agencies made us do something, We put it
in the budget in maybe 2018, 2019, and every year since then it's there. It's something that gets purported. But, every action has a cost, more so now than yesterday. And it's something to be cognizant of. Steve, what else we got? What's next on project management? That was a, pretty much says it isn't difficult, but it's just has to be properly managed and resourced itself. Very good. Very good thing. And that's the cost benefit of this reporting.
Because we do see doors that end up where you can reach a point where you're reporting on projects and you're not getting anything done because you're spending all your time reporting. Be careful to balance out what you put in those reports, you do need to be transparent and let people know. throughout the organization, be informed where you're at. But there is a point where sometimes you can spend more time reporting than you do fixing the problem, and you want to avoid that issue too.
Summary reports are good, and I think disparity is when you do, especially if you have one of these big long items where you have 10 or 20 things that you have to fix in a short period of time, you have to be careful that you don't spend all your time reporting and End up not getting actual progress made because reporting has taken up all your time and we have seen situations where that has happened, where that reporting becomes such a burden that you're not actually getting any corrective
action done. Those are great. Yeah. Thoughts on that, Steve. Total agreement. Total agreement. I've got two, I've got two reporting things that popped into my mind when you said that number one was dating ourselves here, 20 2000 Y2K, and we had to report to the examiner had to report to the credit union, had to report to the examiner had to report to the S. E. The S. E. had to report. To the office.
The office had to report to the central office and the central office had to report to Washington, DC. If every system was red, yellow, or green, and we broke our back, making sure that we reported that two, three times a day, and thank God there weren't any problems because there was no time to do anything. Other than report that everybody was green or yellow or there weren't any reds. The other reporting comment is a guy near and dear to all of our hearts.
Bob Blattner in the old region six said to me one time there was a report that he had to send into the office that he thought was so dumb that he changed the last sentence that said, if anybody ever reads this report, please give me a call. Nobody ever called. Very good. That has not a lot to do with project management, anytime you can think about Bob Blattner it's a good day. Thanks guys. I appreciate your time today. All right. Take care. Good luck. Good luck and listeners.
I want to thank you as always for listening. This is Mark Treichel signing off with Flying Colors.