Response to Office of Inspector General’s Report of Investigation 18-01

The Office of the Inspector General (OIG) of the National Credit Union Administration (NCUA) conducted an extensive investigation regarding an anonymous allegation received relating to expenditures of the NCUA Chairman J. Mark McWatters. The report is available on the NCUA’s website at the following link: Report of Investigation No. 18-01 J. Mark McWatters, May 14, 2018.

As noted in the most recent OIG Semiannual Report to Congress, the OIG investigation found Chairman McWatters had not violated any laws.

In accordance with OIG standard procedures applied to all investigations, the findings were provided to the United States Attorney’s Office for the Eastern District of Virginia during the second quarter of 2018. The attorney’s office advised the OIG the findings did not warrant the pursuit of any additional action.

The OIG report alleges excess spending on the part of the Chairman’s Office, which is a subjective standard. In matters of opinion expressed within the OIG report, reasonable minds may disagree, which is the case. The objective criteria to be applied included compliance with law, which the OIG has stated were not violated.

The OIG report did not benchmark the various types of listed expenses to other agencies and therefore, did not note the expenditures for meals and transportation services compare favorably to the way similar business is conducted at other agencies. For example, most agencies have full-time dedicated drivers and cars, with some having fleets, dedicated to transporting the executives. The costs for this type of structure far exceed any cost the NCUA has incurred for car services. Senior officials holding business meetings over meals is considered a regular course of operation for many agencies. In some of these agencies, it includes dedicated dining facilities and staffed cafeteria services, which the NCUA does not have. From a cost comparison and efficiency perspective, the NCUA would compare very favorably.

The Office of the Executive Director determined that NCUA’s internal travel and representation expense policies were inconsistent, and needed further clarification, as outlined in the enclosed documents. Also, the claims for reimbursement were within the parameters of agency policy.

We are providing five documents that supplement the record. They include:

Enclosure A – 2018 Legal Opinion on Alcohol and Representational Activity issued April 27, 2018. The opinion reaffirms a legal opinion originally issued on May 11, 2000, which notes the reimbursement for alcohol related expenditures is permissible.

Enclosure B – Office of General Counsel Supplemental Statement of Facts. The document provides insight to the OIG investigation and conclusions that were not captured in the report issued by the OIG from the perspective of the agency’s legal counsel.

Enclosure C – Office of Executive Director’s Supplemental Statement of Facts. The document provides insight to the OIG investigation and conclusions that were not captured in the report issued by the OIG from the perspective of the office responsible for developing and administering the agency’s travel policies and procedures.

Enclosure D – NCUA Policy for Travel by Board Members and Senior Policy Advisors. The document is the travel policy issued on July 31, 2018 applicable to the NCUA board members and their policy advisors.

Enclosure E – Representation Expenses Instruction. The document is the official NCUA policy regarding the use of funds for conducting representational activities that are incurred as part of work on behalf of the NCUA.

Response to OIG Report of Investigation 18-01

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