NCUA Audit: MDI Program Effective, but Lacks Recertification Review

A report from the NCUA's Inspector General highlighted the need for a review process to ensure MDIs continue to meet qualifications. Learn why.

David Baumann


Sep 14



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David Baumann

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David Baumann

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Report from agency’s Inspector General highlights need for review process to ensure MDIs continue to meet qualifications.

The NCUA does a good job of nurturing Minority Depository Institutions (MDIs) but fails to ensure that those institutions continue to meet MDI requirements, the agency’s Inspector General said, in a report released Monday.

“Specifically, we determined the NCUA took actions to preserve the present number of minority depository institutions, preserve the minority character of MDIs, provide technical assistance to prevent insolvency of MDIs, promote and encourage the creation of MDIs, and provide training, technical assistance, and educational programs,” the IG stated in an audit of the MDI preservation program.

But the IG also warns that “the NCUA did not conduct a required review to determine if MDIs continued to meet the MDI definition because the agency did not design and implement a process to validate the self-certification.”

As a result, some MDI credit unions continue to receive the benefits of being an MDI even though they no longer meet the requirements.

Positive Findings

The report noted that the NCUA has taken action to help preserve the present number and character of MDIs by providing technical assistance to prevent insolvency and has promoted and encouraged the creation of MDIs.

The IG added that although the overall number of MDIs has decreased, the number of federally insured credit unions also has decreased. The primary cause of the decline was the merging of MDIs with other credit unions.

When an MDI has gone through an involuntary merger, the NCUA has taken steps to seek a merger partner that also is an MDI, the inspector general’s office said. And when an MDI seeks a voluntary merger, the agency again encourages the financial institution to merge with another MDI.

The IG further endorsed the agency’s Advancing Communities through Credit, Education, Stability and Support (ACCESS), which has led to the establishment of an MDI working group. In addition, NCUA officials have sent letters to potential MDIs informing them of the benefits of certification.

Issues Found

However, the audit also cited problems with the MDI program.

The report states that the agency’s Office of Credit Union Resources and Expansion has identified that a credit union self-designating itself as an MDI without meeting the program’s requirements was a risk to program administration.

The IG made a formal recommendation stating that the agency should “implement and document in appropriate policy and procedures a process to validate whether minority depository institutions continue to meet the minority depository institution definition.”

Moving Forward

The report noted that agency officials had already identified the need and will implement a process by March 31.

The IG reported that the MDI working group has proposed a certification process similar to the one used by the agency in determining if a credit union meets the criteria for a low-income designation.

The MDI working group plans to present the proposed criteria to the agency’s executive director next month, according to the audit report.

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