How Does NCUA Decide When to Issue a DOR?

A problem becomes a Document of Resolution (DOR) when the examiner concludes they'd recommend escalating to the next level of enforcement if you failed to correct it. Everything below that line is supposed to be an Examiner's Finding.

The escalation test

The National Credit Union Administration (NCUA) puts it plainly in the "Document of Resolution" section of its National Supervision Policy Manual (NSPM) 26.0, page 223: problems in a DOR must be significant enough that an examiner would recommend escalating to the next level of elevated enforcement action, such as a Regional Director Letter (RDL) or a Letter of Understanding and Agreement (LUA), for failure to correct the problem. DOR items are the ones management must begin to address immediately or within a compressed timeframe, for one of three reasons: material financial risk, significant non-compliance with laws or regulations, or substantial safety and soundness concerns.

The four questions

Under "Content Criteria" on page 226, NSPM 26.0 gives examiners four questions to run a problem through:

•      If left unresolved, could the violation or problem cause the credit union serious financial or operational damage?

•      Does the problem result in significant noncompliance with laws or regulations?

•      Would the problem need to be escalated to the next level of enforcement action, such as a Preliminary Warning Letter (PWL), an LUA, a cease and desist order, or conservatorship, if unresolved?

•      Is the problem widespread throughout the credit union?

A problem meeting those criteria likely warrants a DOR, but NSPM 26.0 says examiner judgment is necessary, weighing the circumstances and the financial impact at that particular credit union.

The question that came off the list

NSPM 10.0 asked a fifth question: whether the problem resulted from management's inability or unwillingness to properly identify, measure, monitor, and control the risk. That question isn’t in the 26.0 criteria. The phrase survives in the Closed Information Questionnaire (District Management, page 184), which is internal to NCUA and which you never see.

In my read, "unwilling or unable" tracks the CAMELS management code 3 definition almost word for word. When you hear it applied to a DOR, you’re hearing a rating judgment.

Push on that and the examiner has an answer. The four questions are a judgment aid, not a closed list, and Exclusions on page 227 says a DOR addressing uncooperative or ineffective management may be warranted. Management capability is still a legitimate basis for a DOR, just not one of the four screening questions.

Where judgment doesn’t enter into it

BSA violations go in a DOR under the agreement between NCUA and the Financial Crimes Enforcement Network (FinCEN), listed in Content Criteria on page 225. There the examiner can’t negotiate with you.

Audit and accounting problems sit close by. NCUA won’t only react to a late audit or unreconciled accounts, it will overreact, because those lead to fraud and to losses at the National Credit Union Share Insurance Fund (NCUSIF). Other than BSA, accounting is the least likely thing you’ll get negotiated.

What’s supposed to stay out

That same Exclusions section keeps suggestions and items for management to consider out of a DOR, along with broad statements telling you to "comply with the examination report." It also excludes Examiner’s Findings escalated only because they went unresolved, so age alone doesn’t promote one.

My colleague Todd Miller, 34 years at NCUA and formerly director of special actions in the Western Region, traces long DORs to a different cause: examiners who haven’t worked through a recession treat everything as critical, and you end up with a 30-item DOR due in six months that guarantees failure on both sides.

The decision isn’t final when you first see it

The Development Process section, pages 228 and 229, starts with the examiner discussing the problem with management and working toward agreement that it exists. If management produces sustainable, lawful, and prudent corrective action that will effectively solve the problem, the examiner should use it and note that management developed it. NSPM 26.0 also tells examiners to focus on the desired end result, not the pathway to that result.

Todd’s read from client work is that skipping this conversation is behind a lot of the unworkable DORs we see. Treat the first one you get as a draft: bring the facts the examiner didn’t have, and ask whether the item belongs in Examiner’s Findings instead.

The counterweight: negotiating with the examiner in the room doesn’t always settle it. Since NCUA started reviewing all reports at a higher level, I’ve seen the office drop in a DOR the examiner never raised with the credit union.

If you don’t agree

Under Disagreements on pages 232 and 233, the examiner in charge (EIC) evaluates the reasons, confirms the core problem has been identified, and asks management for a corrective action plan. If management won’t agree to an EIC-developed plan, the EIC will weigh management’s failure to identify and resolve problems in the management component and composite CAMELS ratings, and will incorporate language into the DOR stating the plans weren’t approved by the officials, with a date for them to notify the Regional Director of the actions to be taken. For particularly severe problems, the EIC notifies their supervisor and considers an RDL.

Disagreeing is contemplated and documented. It also costs you on the management rating.

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