84376 Federal Register / Vol. 85, No. 248 / Monday, December 28, 2020 / Notices 

1Request for Comment Regarding National Credit 

Union Administration Overhead Transfer Rate 

Methodology and Operating Fee Schedule 85 FR 

53854 (Aug. 31, 2020). 

in via toll number, you must use a 

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Note: If dialing in, please ‘‘mute’’ your 

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includes the following topics: 

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Update 

—Office of the Chief Technologist 

Update 

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It is imperative that this meeting be 

held on this day to accommodate the 

scheduling priorities of the key 

participants. 

Patricia Rausch, 

Advisory Committee Management Officer, 

National Aeronautics and Space 

Administration. 

[FR Doc. 2020–28489 Filed 12–23–20; 8:45 am] 

BILLING CODE P 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

[Notice (20–100)] 

NASA Advisory Council; Human 

Exploration and Operations Committee 

Meeting, Including Joint Meeting With 

Science Committee 

AGENCY: National Aeronautics and 

Space Administration. 

ACTION: Notice of meeting. 

SUMMARY: In accordance with the 

Federal Advisory Committee Act, the 

National Aeronautics and Space 

Administration (NASA) announces a 

meeting of the NASA Advisory Council 

(NAC) Human Exploration and 

Operations Committee. This meeting 

will include a joint meeting with the 

NAC Science Committee. These 

committees report to the NAC. 

DATES: Wednesday, January 13, 2021, 

11:30 a.m. to 2:30 p.m., Eastern Time; 

and Thursday, January 14, 2021, 1:00 

p.m. to 5:15 p.m., Eastern Time. 

ADDRESSES: Meeting will be virtual 

only. See dial-in and Webex information 

below under SUPPLEMENTARY

INFORMATION. 

FOR FURTHER INFORMATION CONTACT: Dr. 

Bette Siegel, Designated Federal Officer, 

Human Exploration and Operations 

Mission Directorate, NASA 

Headquarters, Washington, DC 20546, 

via email at bette.siegel@nasa.gov or 

202–358–2245. 

SUPPLEMENTARY INFORMATION: As noted 

above, this meeting will be open to the 

public telephonically and by Webex. 

Webex connectivity information is 

provided below. For audio, when 

joining the Webex event, you may use 

your computer or provide your phone 

number to receive a call back, 

otherwise, call the U.S. toll conference 

number listed. The Webex event address 

for January 13, 2021, is https://

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nasaenterprise/onstage/g.php?MTID=

ef268da6a9daa9bd

59ba35b80dd54bd65. The event number 

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is 7mP6pAJvW@7. If needed, the U.S. 

toll conference number is 1–415–527– 

5035, the global call-in number is 

https://nasaenterprise.webex.com/

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e2674fb32caeca0bff43bda0b1cae7208, 

and the access code is 199 568 2184. 

The Webex event address for January 

14, 2021, is https://nasaenterprise.

webex.com/nasaenterprise/onstage/ 

g.php?MTID=e6a0f7dd70d769cb

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If needed, the U.S. toll conference 

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call-in number is https://nasaenterprise.

webex.com/nasaenterprise/

globalcallin.php?MTID=

ef59221cc82e122a9c22f81cede9fc9b9, 

and the access code is 199 200 6220. 

The agenda for the meeting includes 

the following topics: 

—Artemis Overview 

—International Space Station 

—Commercial Space 

—Space Communications and 

Navigation 

—Artemis Lunar Exploration and 

Science Planning by NASA’s Human 

Exploration and Operations Mission 

Directorate (HEOMD) and Science 

Mission Directorate (SMD) 

It is imperative that this meeting be 

held on this day to accommodate the 

scheduling priorities of the key 

participants 

Patricia Rausch, 

Advisory Committee Management Officer, 

National Aeronautics and Space 

Administration. 

[FR Doc. 2020–28488 Filed 12–23–20; 8:45 am] 

BILLING CODE P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

Overhead Transfer Rate Methodology 

and Operating Fee Schedule 

Methodology 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Notice. 

SUMMARY: In July 2020, the NCUA Board 

(Board) invited comment on the 

methodology used to determine the 

Overhead Transfer Rate (OTR). The 

Board also requested comment on 

proposed changes to the methodology it 

uses to determine how it apportions 

operating fees charged to federal credit 

unions (FCUs). The Board also 

proposed: clarifying the treatment of 

capital project budgets when calculating 

the operating fees; clarifying the 

treatment of miscellaneous revenues 

when calculating the operating fees; and 

modifying the approach for calculating 

the annual inflationary adjustments to 

the thresholds for the operating fee rate 

tiers. This final notice adopts those 

proposals and responds to comments on 

these topics as well as other subjects on 

which the Board sought comment in the 

notice. 

FOR FURTHER INFORMATION CONTACT: 

James Holm, Supervisory Budget 

Analyst, Office of the Chief Financial 

Officer, at (703) 518–6570, Amy Ward or 

Julie Decker, Risk Officers, Office of 

Examination and Insurance at (703) 

819–1770 or (703) 518–6384. 

SUPPLEMENTARY INFORMATION: In July 

2020, the Board issued a notice and 

request for comment on the OTR and 

operating fee methodologies.1 In the 

notice, the Board detailed the legal 

background and historical and current 

practice for both methodologies. The 

notice also described how each process 

works within the Board’s annual budget 

process. 

The Board applies the OTR to the 

NCUA’s operating budget to determine 

the portion of the budget that will be 

funded from the National Credit Union 

Share Insurance Fund (Share Insurance 

Fund). The Board described and sought 

comment on the current OTR 

methodology. 

The Board also described and 

requested comment on three proposed 

changes to the methodology it uses to 

determine how it apportions operating 

fees charged to federal credit unions 

(FCUs). The Board uses operating fees to 

fund part of the NCUA’s annual budget. 


tkelley on DSKBCP9HB2PROD with NOTICES
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2Fees Paid by Federal Credit Unions, 85 FR 

53708 (Aug. 31, 2020). 

3See, e.g., 12 U.S.C. 1783(a) (making the Share 

Insurance Fund available ‘‘for such administrative 

and other expenses incurred in carrying out the 

purpose of [Title II of the FCU Act] as [the Board] 

may determine to be proper.’’). 

4 12 U.S.C. 1755(a) (‘‘In accordance with rules 

prescribed by the Board, each [FCU] shall pay to the 

[NCUA] an annual operating fee which may be 

composed of one or more charges identified as to 

the function or functions for which assessed.’’) and 

12 U.S.C. 1766(j)(3). Other sources of income for the 

Operating Budget include interest income, funds 

from publication sales, parking fee income, and 

rental income. 

5 12 U.S.C. 1783(a). 

6 12 U.S.C. 1755. 

7 12 U.S.C. 1755(a). 

8 12 U.S.C. 1755(b). 

9 Id. 

10 12 U.S.C. 1755(d). 

11 Gen. Accounting Off., Examination of Financial 

Statements of the Nat’l Credit Union Admin. (Sept. 

18, 1973), available at http://www.gao.gov/assets/ 

210/203181.pdf. 

12https://www.ncua.gov/files/publications/ 

budget/2001DeloitteReportonOTRProcess.pdf 

In particular, the Board proposed: (1) 

Clarifying the treatment of capital 

project budgets when calculating the 

operating fees; (2) clarifying the 

treatment of miscellaneous revenues 

when calculating the operating fees; and 

(3) modifying the approach for 

calculating the annual inflationary 

adjustments to the thresholds for the 

operating fee rate tiers. The Board also 

solicited comment on adjusting the 

asset-size rate tiers in the operating fee 

scale, increasing the current $1 million 

asset-size threshold below which an 

FCU pays no fee, and on incentivizing 

FCUs and federally insured, statechartered credit unions (FISCUs) to 

complete an annual, voluntary diversity 

survey. 

In a separate proposed rule, the Board 

proposed amending its regulation 

governing the determination of total 

assets used as the basis for calculating 

the operating fee due from any FCU and 

encouraged public comments on that 

proposed rule.2

The Board received eight comments 

on the July 2020 notice, three from 

credit union trade associations, four 

from credit union leagues, and one from 

a credit union service organization. The 

following sections reiterate the 

background from the July 2020 notice, 

respond to the comments, and adopt as 

proposed three changes to the operating 

fee methodology for application to the 

2020–2021 NCUA budget. The Board 

will study the remainder of the issues 

and comments in connection with 

potential future changes to these 

practices. 

I. Legal Background 

The NCUA charters, regulates, and 

insures deposits in FCUs and insures 

deposits in state-chartered credit unions 

that have their shares insured through 

the Share Insurance Fund. To cover 

expenses related to its tasks, the Board 

adopts an annual budget in the fall of 

each year. The Federal Credit Union Act 

(FCU Act) provides two primary sources 

to fund the budget: (1) Requisitions from 

the Share Insurance Fund, referred to as 

the OTR; 3 and (2) Operating Fees 

charged to FCUs.4

The first budget funding source, the 

OTR, represents the methodology the 

NCUA uses to allocate insurance-related 

expenses to the Share Insurance Fund 

under Title II of the FCU Act. Two 

statutory provisions directly limit the 

Board’s discretion with respect to the 

OTR. First, expenses funded from the 

Share Insurance Fund must carry out 

the purposes of Title II of the Act, which 

relate to share insurance.5 Second, the 

NCUA may not fund its entire annual 

budget through charges to the Share 

Insurance Fund.6 The NCUA has not 

imposed additional policy or regulatory 

limitations on its discretion for 

determining the OTR. 

With regard to the Operating Fee, the 

FCU Act requires each FCU to, ‘‘in 

accordance with rules prescribed by the 

Board, . . . pay to the [NCUA] an 

annual operating fee which may be 

composed of one or more charges 

identified as to the function or functions 

for which assessed.’’ 7 The fee must ‘‘be 

determined according to a schedule, or 

schedules, or other method determined 

by the Board to be appropriate, which 

gives due consideration to the expenses 

of the [NCUA] in carrying out its 

responsibilities under the [FCU Act] and 

to the ability of [FCUs] to pay the fee.’’ 8

The statute requires the Board to, among 

other things, ‘‘determine the periods for 

which the fee shall be assessed and the 

date or dates for the payment of the fee 

or increments thereof.’’ 9

Accordingly, the FCU Act imposes 

three requirements on the Board in 

connection with assessing an operating 

fee on all FCUs: (1) The fee must be 

assessed according to a schedule or 

schedules, or other method that the 

Board determines to be appropriate, 

which gives due consideration to 

NCUA’s responsibilities in carrying out 

the FCU Act and the ability of FCUs to 

pay the fee; (2) the Board must 

determine the period for which the fee 

will be assessed and the due date for 

payment; and (3) the Board must 

deposit collected fees into the Treasury 

to defray the Board’s expenses in 

carrying out the FCU Act. Once 

collected, Operating Fees, ‘‘may be 

expended by the Board to defray the 

expenses incurred in carrying out the 

provisions of [the FCU Act,] including 

the examination and supervision of 

[FCUs].’’ 10

II. Historical Practice in Determining 

the Overhead Transfer Rate and 

Assessing the Operating Fee 

Overhead Transfer Rate 

The Share Insurance Fund was 

established by Title II of the FCU Act on 

October 19, 1970. Section 1783(a) of 

Title II authorizes the Board to use 

Share Insurance Funds to pay for ‘‘such 

administrative and other expenses 

incurred in carrying out the purposes of 

this title as it may determine to be 

proper.’’ 

In 1973, a Government Accountability 

Office audit 11 recommended the NCUA 

adopt a method of allocating costs 

between the operating fund and the 

newly formed Share Insurance Fund. 

Between 1973 and 1980, various cost 

allocation methods were employed, 

including direct charges to the Share 

Insurance Fund for insurance expenses 

including costs to liquidate or merge 

credit unions and examiner time spent 

conducting safety and soundness 

examinations. Starting in 1981, the OTR 

ranged between 30 and 34 percent, and 

stayed in that range through 1984. 

From 1985 through 1994, the NCUA 

conducted annual examiner time 

surveys (ETS) to determine an 

appropriate factor for apportioning the 

agency’s total operating expenses. The 

survey results supported a transfer rate 

between 50.1 percent and 60.4 percent 

for insurance related activities; 

however, the Board maintained the OTR 

at 50 percent. 

Following the 1994 survey, the Board 

approved surveys that were conducted 

every three years. Three-year surveys 

covered fiscal years 1995 through 1997 

and fiscal years 1998 through 2000. 

During that period, the OTR was kept at 

50 percent. The Board voted to resume 

annual ETS in 2000 and expanded the 

survey to include more examiners. The 

2000 survey results supported an OTR 

of 66.72 percent and, after 15 years of 

holding the OTR at 50 percent, the 

Board increased the OTR to 66.72 

percent for fiscal year 2001. 

In 2001, the Board hired an 

independent party, Deloitte & Touche, 

to assess the OTR process. Deloitte & 

Touche’s review 12 of the OTR process 

was issued on September 5, 2001 and 

included several recommendations to 

improve the OTR process. These 

recommendations were implemented in 

2002. 


tkelley on DSKBCP9HB2PROD with NOTICES
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13The methodology was refined in 2013. 

14 81 FR 4804 (Jan. 27, 2016). 

15 82 FR 29935 (June 30, 2017). 

16 82 FR 55644 (Nov. 22, 2017). 

17https://www.ncua.gov/About/Pages/budgetstrategic-planning/supplementary-materials.aspx. 

18The percentage of actual expenses funded by 

the Share Insurance Fund as they are incurred each 

month. 

At the November 20, 2003 Board 

meeting,13 the Board adopted a revised, 

comprehensive methodology for 

calculating the OTR that was in place 

until 2017. The methodology used the 

results of an automated annual ETS 

process. The following were also 

factored into the methodology: 

• The value to the Share Insurance 

Fund of the insurance-related work 

performed by state supervisory 

authorities (SSAs). 

• The cost of the NCUA resources and 

programs with different allocation 

factors from the examination and 

supervision program. 

• The distribution of insured shares 

between FCUs and FISCUs. 

• Operational costs charged directly 

to the Share Insurance Fund. 

In 2016, the NCUA published in the 

Federal Register the OTR methodology 

used to calculate the OTR and requested 

comments from the public.14 In 

conjunction with the 2016 Federal 

Register notice, the Board committed to 

periodically review the methodologies 

for calculating both the OTR and the 

Operating Fee, and to propose changes 

to the methodologies that would result 

in more equitable alignment of fees to 

the resource levels required to supervise 

and regulate both FCUs and FISCUs. 

In 2017, the NCUA published in the 

Federal Register a request for comment 

regarding a revised OTR methodology 

based on the Board’s internal 

assessment and comments received 

from the 2016 notice.15 The primary 

goal of the proposed changes to the OTR 

methodology at that time was to 

simplify and streamline the 

methodology and reduce the resources 

needed to administer the OTR. The 

simplified OTR methodology 

incorporated four key principles in 

allocating agency operating costs: 

Principle 1: 50 percent insurance 

related—Time spent examining and 

supervising FCUs. 

Principle 2: 100 percent insurance 

related—All time and costs the NCUA 

spends supervising or evaluating the 

risks posed by FISCUs or other entities 

the NCUA does not charter or regulate 

(e.g. third-party vendors and credit 

union service organizations). 

Principle 3: Zero percent insurance 

related—Time and costs related to the 

NCUA’s role as charterer and enforcer of 

consumer protection and other 

noninsurance based laws governing the 

operation of credit unions, for example, 

field of membership requirements. 

Principle 4: 100 percent insurance 

related—Time and costs related to the 

NCUA’s role in administering federal 

share insurance and the Share Insurance 

Fund. 

The Board adopted this principlesbased OTR methodology in 2017.16 At 

that time, the Board committed to 

subject the four principles, but not the 

particulars of their application, to 

public comment every three years and 

in the event it proposes a change to one 

or more of the principles. 

III. Overhead Transfer Rate 

Methodology 

To calculate the OTR, the four 

principles are applied to the activities 

and costs of the agency to arrive at the 

portion of the agency’s budget to be 

charged to the Share Insurance Fund. 

Step 1—Workload Program 

Annually, the NCUA develops a 

workload budget based on the NCUA’s 

examination and supervision program to 

carry out the agency’s core mission. The 

workload budget reflects the time 

necessary to examine and supervise 

federally insured credit unions (FICUs), 

along with other related activities, and 

therefore the level of NCUA field staff 

needed to implement the exam program. 

Applying principles 1, 2, and 3 (those 

relevant to the workload budget) to the 

applicable elements of the workload 

budget results in a composite rate that 

reflects the portion of the agency’s 

overall insurance related mission 

program activities. 

Step 2—Annual Budget 

The annual budget represents the 

costs of the activities associated with 

achieving the strategic goals and 

objectives set forth in the NCUA’s 

Strategic Plan. The annual budget is 

based on agency priorities and 

initiatives that drive resulting resource 

needs and allocations. Information 

related to the NCUA’s budget process, 

including details on the Board-approved 

budgets, is available on the agency’s 

website.17

The agency achieves its primary 

mission through the examination and 

supervision program. The percentage of 

insurance-related workload hours 

derived from Step 1 represents the main 

allocation factor used in Step 2 and is 

applied to the budgets for the 

examination and supervision programs 

to calculate the insurance-related costs 

of the offices conducting field work 

(currently the Regions and ONES). A 

few agency offices have roles distinct 

enough to warrant their own allocation 

factors, which are developed by 

applying the four factors described 

above to their respective activities. Each 

of these offices tracks their activities 

annually to determine their factors. 

These factors are then applied to the 

respective offices’ budgets to determine 

their insurance-related costs. 

A weighted average allocation factor, 

calculated by dividing the aggregate 

insurance-related costs for the field 

offices conducting the examination and 

supervision program and the agency 

offices with their own unique allocation 

factors by their aggregate total budgets, 

is applied to the central offices that 

design or oversee the examination and 

supervision program or support the 

agency’s overall operations. This factor 

is then applied to the aggregate budgets 

for the remaining offices. As such, the 

proportion of insurance-related 

activities for these offices corresponds 

to that of the mission offices. The 

NCUA’s total insurance-related costs are 

calculated by summing the insurance 

cost calculated for the field offices, the 

offices with unique allocations factors, 

and the insurance cost for all other 

NCUA offices. 

Step 3—Calculate the OTR 

The OTR represents the percentage of 

the NCUA budget funded by a transfer 

from the Share Insurance Fund.18 The 

OTR is calculated by dividing the total 

insurance-related costs determined in 

Step 2 by the NCUA’s total annual 

budget. 

IV. Responses to Comments on OTR 

Methodology 

In the July 2020 notice, the Board 

sought comment on the current OTR 

methodology. The Board noted that the 

principles-based OTR methodology has 

streamlined the process for calculating 

the OTR and reduced the resources 

needed to gather the cost center time 

allocation used in the calculation. In 

addition, the methodology established 

some consistency in the calculated OTR 

each year, seen previously only briefly 

during the three-year period ended 

2013. 

The Board also noted that the 

consistency in the calculation allows for 

the minor variations in the OTR to be 

driven by the variables that affect the 

OTR, not the calculation itself. These 

variables include, but are not limited to, 

the normal fluctuations in the workload 

budget from one calendar year to the 


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Federal Register / Vol. 85, No. 248 / Monday, December 28, 2020 / Notices 84379 

19https://www.ncua.gov/files/publications/ 

budget/overhead-transfer-rate-summary-2020.pdf 

next, changes in FICU CAMEL ratings, 

variation in the number and size of 

FICUs that meet the annual exam and 

extended exam eligibility criteria, 

emerging risk indicators inherent in 

FICU operational changes, variations in 

individual state regulator programs, and 

small fluctuations in the timing of the 

examinations related to a particular 

calendar year. This streamlined and 

simplified approach to calculating the 

OTR has provided a level trend in the 

OTR, with only minor fluctuations due 

to the variables that affect the OTR. 

Finally, the Board stated that the 

current OTR methodology is fair and 

equitable, more transparent and less 

complex than prior methodologies, 

reduces OTR administrative costs as 

compared to the prior OTR 

methodology, and recognizes that safety 

and soundness is not the sole domain of 

the NCUA as insurer. 

Accordingly, while the Board did not 

propose changes to the OTR 

methodology, it invited comments on its 

OTR methodology. The Board 

specifically invited comments on the 

four principles used in the methodology 

to calculate the OTR discussed in the 

preceding section.19

The Board received eight comments 

from credit union leagues, trade 

associations, and CUSOs. Many of the 

commenters stressed the importance of 

having an OTR methodology that 

allocates the agency’s operating costs 

equitably among FCUs and FISCUs, but 

emphasized that prudent management 

of NCUA’s budget is necessary to reduce 

costs to credit unions. Overall, the 

commenters believe apportioning a 

proportionate share of the capital budget 

to the NCUSIF is consistent with the 

2017 OTR methodology and presents a 

more equitable treatment of capital 

expenditures with respect to the OTR 

and the FCU’s operating fees. 

Commenters who supported the 

inclusion of the capital budget in the 

OTR also supported including 

miscellaneous revenues in the OTR. 

General Comments on the OTR 

Methodology 

Transparency; Fair and Equitable 

Allocation of Expenses 

Commenters appreciated NCUA’s 

transparency in seeking comments on 

the OTR process and while they 

acknowledge the conflicting viewpoints 

among stakeholders throughout the 

industry, overall, commenters are 

seeking a fair and equitable means for 

determining and substantiating 

insurance-related costs and 

apportioning these costs among insured 

credit unions. Commenters hope the 

furtherance of technology will be 

beneficial in NCUA’s future 

identification, tracking, and allocation 

of insurance-related costs among 

insured credit unions. 

OTR Methodology Comments and 

Responses 

There were several comments specific 

to the allocations used in the OTR 

methodology and the distinction and 

differentiation between NCUA’s role as 

a charterer/regulator and that of insurer. 

50 Percent Allocation—Examining and 

Supervising FCUs—Distinction Between 

NCUA’s Role as Regulator Versus 

Insurer 

One commenter questioned NCUA’s 

assessment of a 50 percent allocation to 

the insurance-related costs of 

supervising FCUs when NCUA has not 

demonstrated publicly that its role as 

insurer reflects 50 percent of its 

operating costs. The commenter 

requested more documentation to 

substantiate that NCUA’s role as insurer 

truly encompasses 50 percent of its 

operating costs. One commenter 

suggested a sensible compromise would 

be for NCUA to examine FCUs pursuant 

to Title I of the FCU Act; and the 

NCUSIF-related time would be based on 

NCUA’s review of those Title I 

examinations in the same manner as it 

does for state FISCU examinations, thus 

providing a clearer distinction between 

NCUA’s role as regulator versus insurer. 

One commenter questioned NCUA’s 

statement that the 50 percent allocation 

for FCUs ‘‘is consistent with the 

alternating examinations FDIC and state 

regulators conduct for insured statechartered banks as mandated by 

Congress’’ because there is no public 

evidence available to demonstrate that 

NCUA’s supervision process emulates 

the FDIC’s practice of alternating 

examinations with prudential state 

banking regulators. Not specific to the 

OTR calculation, the commenter stated 

that if NCUA’s practice does emulate a 

supervision program that differentiates 

between its insurance function and its 

prudential regulator function, then it 

follows that there must be uniqueness or 

differentiation between the protocols of 

a regulatory exam and an insurance 

review. 

NCUA Response: The Board still 

believes the 50 percent allocation is a 

realistic approximation of the split 

between NCUA’s roles as regulator and 

insurer of FCUs. NCUA’s focus with 

each examination of an FCU is to assess 

the ongoing safety and soundness of the 

credit union and to determine if the 

FCU’s operations pose a risk to the 

Share Insurance Fund. In instances 

where an FCU’s financial condition or 

operations do pose a risk to the Share 

Insurance Fund, the workload naturally 

contributes a heavier weight toward 

NCUA’s role of insurer. On the contrary, 

in instances where the FCU’s safety and 

soundness is not a concern to the Share 

Insurance Fund, NCUA’s insurancerelated time spent on these credit 

unions is lower. The FDIC asserts its 

primary focus is to protect its insurance 

fund by ensuring the safety and 

soundness of the institutions it insures. 

Like the FDIC, NCUA’s primary focus in 

its role as insurer is to protect the Share 

Insurance Fund; but unlike the FDIC, 

NCUA also has chartering and 

regulatory authority. Since the NCUA 

has the dual responsibility of serving as 

both the primary regulator with 

chartering authority and insurer of 

FCUs, attributing equal weights to each 

of NCUA’s dual roles creates a cost 

sharing similar in time structure to 

NCUA employing FDIC’s alternating 

exam cycle within one regulatory 

agency. 

100 Percent Allocation—Examining and 

Supervising FISCUs 

A commenter stated that if the 

alternating exam practice that NCUA 

uses to describe its 50 percent allocation 

between its role as regulator versus 

insurer of FCUs is an actual practice and 

there is no discernable difference 

between an NCUA regulatory exam and 

an NCUSIF insurance review, then a 

state regulatory examination could serve 

to fulfill the requirements of Title II of 

the FCU Act, thus reducing budgeted 

NCUA workload hours for FISCUs and 

more properly reflecting the distinction 

between the proper authority of the state 

regulator and the insurer. One 

commenter questioned NCUA’s 100 

percent allocation for third-party 

vendors and CUSOs. The commenter 

noted that NCUA does not have 

supervisory authority of third-party 

vendors and CUSOs like other federal 

regulators and state regulators, but 

NCUA, as chartering authority for FCUs, 

has an obligation to ensure that FCU 

CUSOs and other third parties are 

operating safely and complying with 

applicable rules and regulations. Thus, 

NCUA’s review of these entities is 

related to the FCU’s examination 

process and does not necessarily have a 

direct impact to the NCUSIF unless 

noncompliance has led to a safety and 

soundness issue that impacts the Share 

Insurance Fund. 

NCUA Response: The Board has 

clearly defined NCUA’s role with 

FISCUs and other entities that NCUA 


tkelley on DSKBCP9HB2PROD with NOTICES
84380 Federal Register / Vol. 85, No. 248 / Monday, December 28, 2020 / Notices 

does not charter or regulate as 100 

percent insurance-related. The 

alternating exam example is used as a 

description of NCUA’s dual functions of 

regulator and insurer of FCUs and is not 

actual practice. NCUA has taken steps 

in recent history to reduce the workload 

budget and costs to FISCUs, providing 

greater responsibility on the State 

regulator. The Board’s adoption of the 

Exam Flexibility Initiative in 2016 

served to lengthen the examination 

cycle and reduce the frequency with 

which NCUA participates on FISCU 

examinations. Likewise, NCUA does not 

charter or regulate CUSOs or third-party 

vendors and therefore the NCUA’s role 

is also solely as the insurer. A CUSO 

and third-party vendor are at times 

subject to a limited review during a 

FICU examination. This review 

generally covers compliance with the 

CUSO’s lending and investing 

regulatory requirements and a review of 

the service or function the third party 

provides the FICU. Examiners may also 

assess the risk a CUSO or third-party 

vendor’s activities pose to the FICU as 

part of the FICU examination. This 

CUSO/third-party vendor-related time is 

captured in the examination and 

supervision of an FCU under Principle 

1 and a FISCU under Principle 2. The 

Board has no direct regulatory authority 

with respect to CUSOs and third-party 

vendors, and currently there is no 

support to allocate time specifically 

designated for CUSO and third-party 

vendor reviews as anything other than 

the NCUA’s role as insurer. 

Zero Percent Allocation—NCUA’s Role 

as Charterer and Enforcer of Consumer 

Protection and Other NoninsuranceBased Laws 

One commenter questioned the zero 

percent allocation for consumer 

protection enforcement, stating that 

noncompliance with consumer 

regulations could result in a safety and 

soundness issue and therefore this 

function is not entirely unrelated to 

insurance. 

NCUA Response: The Board 

recognizes the importance of ensuring 

compliance with consumer protection 

laws and regulations. As such each full 

scope examination of a FICU includes a 

review of the FICUs’ compliance with 

consumer laws and regulations. This 

review time is allocated to examining 

and supervising FCUs and FISCUs in 

Principle 1 and Principle 2, 

respectively. The zero percent allocation 

is associated with the non-examination 

aspect of consumer protection focused 

on supporting low-income and minority 

FICUs and all FICUs seeking growth and 

development in areas of charter 

conversions and expansions, bylaw 

amendments, field of membership 

expansions, and low-income 

designations. The safety and soundness 

and risk to the Share Insurance Fund 

considered in the growth and 

development areas is a very small 

portion of NCUA’s workload budget and 

does not warrant an allocation factor. 

Other Office Allocation 

One commenter requested NCUA to 

provide more clarity on the unique 

allocation factors used by certain offices 

within NCUA’s central office. The 

commenter suggested that rather than 

relying on weighed allocation factors to 

determine the OTR, simply calculating 

how much time each regional and 

central office spends on insurancerelated activities each year might be a 

more straightforward method of 

determining how much of the operating 

budget should be borne by the NCUSIF. 

NCUA Response: The weighted 

average allocation applied to the central 

offices is based on the aggregate 

insurance-related costs for the field 

offices and agency offices with their 

own unique allocation factors. NCUA 

uses a weighted average allocation 

factor applied to the central offices’ 

aggregate total budget because these 

offices provide direct support to the 

field offices in their examination and 

supervision of FICUs and to the other 

central offices. Therefore, the central 

offices’ time is allocated proportionate 

to the weighted average of these offices. 

Central offices that have ‘‘unique 

allocation factors’’ have chartering 

functions that are not entirely related to 

insurance, so their insurance-related 

time is allocated separately. The Asset 

Management Assistance Center, on the 

other hand, manages liquidation 

payouts and assets acquired from 

liquidations on behalf of the Share 

Insurance Fund. Since AMAC’s role is 

100 percent insurance related, AMAC’s 

‘‘unique allocation factor’’ is based on 

its sole function being insurance related. 

Other Comments 

Inequity in the OTR Methodology 

Other comments focused on the 

OTR’s inequity between FISCUs and 

FCUs. One commenter noted the 

importance of the OTR methodology 

because FISCUs pay the full cost of their 

state examinations and then through the 

OTR pay 100 percent of NCUA’s 

insurance reviews of FISCUs, as well as 

a portion of FCU examinations and 

CUSO and third-party reviews. One 

commenter noted that FISCUs make up 

only 37 percent of the total number of 

credit unions, but because FISCUs 

encompass approximately 50 percent of 

insured shares, the cost of the OTR is 

borne equally from the funds of both 

FISCUs and FCUs even though there are 

more FCUs whose examination costs are 

being charged to the NCUSIF. While this 

commenter recognized the alternative 

argument that FCUs would assert that 

they pay an aggregate greater amount of 

NCUA’s overall budget when 

aggregating the total expense to FCUs 

from the operating fee and the OTR, the 

commenter noted the assertion ignores 

the fact that the NCUSIF is not 

expending resources to conduct 

examinations on a majority of FICUs 

because it relies on exam work 

conducted by the state regulators; exam 

work that is paid for entirely by FISCUs. 

The commenter noted that historically, 

the majority of NCUA’s annual budget 

has been paid by the OTR, reaching a 

high of nearly 75 percent of NCUA’s 

2016 budget. The commenter 

highlighted the significance of the OTR 

funding the majority of the budget 

because of the perceived inequities 

within the methodology that result in 

FISCUs shouldering an ‘‘inordinate cost 

of supervising the safety and soundness 

of the credit union system.’’ The 

commenter also noted its concern with 

the overall increase in the OTR from the 

current proposal. 

NCUA Response: The Board fully 

supports an equitable distribution of 

costs among FICUs. The Board 

continues to believe the current OTR 

methodology is a fair and equitable 

means of allocating costs to the Share 

Insurance Fund. The operating fee is 

charged to FCUs based on a tiered 

assessment structure that recognizes the 

FCU’s ability to pay the operating fee 

based on its total assets. The operating 

fee funds a portion of NCUA’s 

operations similar to the assessments 

some State regulatory agencies charge 

FISCUs to fund the respective State 

agencies’ operations. Since NCUA also 

serves in the role as insurer, the FCU 

Act permits for a portion of NCUA’s 

operations to be funded by the Share 

Insurance Fund. This funding is not a 

direct cost to the FISCUs or the FCUs. 

Principles-Based Methodology vs 

Metric-Based Methodology—Precision 

vs Assumption 

A commenter noted that the adoption 

of the current principles-based 

methodology marked a departure from 

the well-established ETS, which was a 

metrics-based approach designed to 

capture examiner time spent on 

insurance related matters versus noninsurance related through the 

assessment of individual regulations 

and other measures. The commenter felt 


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20 82 FR 55655 (November 2017). 

21 Ibid. 

22 Information on the last regulatory mapping 

performed by the NCUA in 2017 can be found on 

the NCUA’s website https://www.ncua.gov/files/ 

publications/about/mapping-ncua-regulations2017.pdf. 

23 12 CFR 701.6. 

24 Id. 

25 5 U.S.C. 551 et seq. 

26 81 FR 4674 (Jan. 27, 2016). 

27 44 FR 11785 (Mar. 2, 1979). 

28 Id. at 11786. 

the ETS approach was, by necessity, 

more complex than the current 

principles-based allocation 

methodology, but it also made fewer 

assumptions about the allocation of the 

NCUA’s insurer and examiner 

resources. The commenter noted that 

eliminating the data-oriented 

assessment of insurance-related 

activities under the ETS would make it 

harder to track how much time 

examiners actually spend on insurancerelated activities. In the absence of the 

ETS data, the commenter opined it is 

now harder to evaluate the effectiveness 

of the current methodology. The 

commenter highlighted the potential 

inequities resulting from using the 

current assumption-based methodology 

versus the precision from the older 

model. 

NCUA Response: While the current 

OTR methodology is less complex than 

the ETS, the OTR methodology is 

objective and remains formula driven. 

The NCUA’s goal in using a formuladriven OTR methodology is to provide 

a comprehensive, fair, and equitable 

allocation of costs within a framework 

that can be administered at a relatively 

low cost such as the current 

methodology. As noted in the Final 

Notice for the current methodology, this 

methodology is simpler than its 

predecessor and is still both objective 

and formula driven. Additionally, the 

ETS and the assignment of time as 

insurance, insurance regulatory, and 

consumer regulatory has been an area of 

debate. The Board noted that continued 

refinement of the categories would not 

alleviate this debate or eliminate the 

confusion that existed around the 

process.20 Further, while the OTR is 

formula driven, the Board can adjust the 

methodology at any time to ensure it 

continues to reflect the most equitable 

and suitable approach to allocating 

costs. 

Quantification of Benefits Derived From 

the Current OTR Methodology 

One commenter acknowledged the 

administrative benefit in adopting a 

simpler methodology, but stated NCUA 

has not sought to quantify its statement 

that the adoption of a principles-based 

OTR has ‘‘reduced the resources needed 

to gather the cost center time allocation 

used in the OTR calculation.’’ The 

commenter continued by saying there 

has also been no attempt to compare the 

noted savings with those predicted by 

the agency when it first proposed the 

principles-based methodology. The 

commenter’s expectation is that when 

NCUA says there are cost savings 

associated with a particular rule or 

policy change, it should endeavor to 

maintain a level of transparency and 

supply estimates and retrospective data 

for the industry to consider. 

NCUA Response: When the Board 

adopted the revised OTR methodology 

in 2017,21 the NCUA saw an immediate 

cost savings in 2018 due to the 

elimination of the ETS. As noted in the 

2017 OTR Final Notice, under the prior 

OTR methodology, ETS were conducted 

annually. The process included 

regulatory mapping prior to the 

beginning of the ETS cycle to make any 

necessary adjustments to 

classifications.22 Additionally, the 

examiners and their supervisors 

participating in the ETS received 

training on how to complete the survey. 

Examination or supervision time was 

also increased at each contact where an 

ETS was completed by roughly one 

hour. The process also included 

aggregation and analysis of the data by 

the Office of Examination and Insurance 

(E&I). Eliminating the ETS from the OTR 

methodology resulted in a resource 

savings in examiner time, training time, 

and office analysis and support. 

Working Group or Advisory Committee 

To Oversee the OTR 

Some commenters suggested NCUA 

establish a working group or advisory 

committee made up of equal 

representation of NCUA and state 

regulators to establish a new OTR 

methodology that accurately and fairly 

represents the shared work and 

contributions of the insurer and the 

state regulator. The commenters 

suggested this committee would be 

charged with continuing oversight and 

review of all factors contributing to the 

OTR methodology and recommendation 

of future OTR charges. Another 

commenter offered that the 

establishment of a credit union advisory 

committee would provide a means for 

the debate and exchange of ideas about 

the OTR that is difficult to facilitate in 

the notice and comment process. 

NCUA Response: The Board believes 

the current OTR is transparent and 

provides for stakeholder input, 

therefore, a committee to oversee the 

OTR is not needed. Further, while not 

required by the Administrative 

Procedure Act, the Board remains 

committed to solicit through the Federal 

Register public comment on the OTR 

methodology at least every three years, 

and whenever the NCUA seeks to 

change the OTR methodology. 

V. Operating Fee for FCUs 

The NCUA’s regulations govern 

certain of the operating fee processes.23

The regulation establishes: (i) The basis 

for charging operating fees (total assets); 

(ii) a notice process; (iii) rules for new 

charters, conversions, mergers, and 

liquidations; and (iv) administrative fees 

and interest for late payment, among 

other principles and processes.24

Certain aspects of and adjustments to 

the operating fee process, such as 

changes to which FCUs are exempt from 

operating fees or the multipliers used to 

determine fees applicable to FCUs that 

fall within designated asset tiers, are 

usually not published in the Federal 

Register. Instead, in November 2015, the 

Board delegated authority to the 

NCUA’s Chief Financial Officer to 

administer the Board-approved 

methodology, and to set the operating 

fees as calculated per the approved 

methodology during each annual budget 

cycle beginning with 2016. Although it 

is not required to do so under the 

Administrative Procedure Act,25 in 

January 2016, the Board published its 

methodology in the Federal Register 

and requested comment.26 The Board 

provided notice of a clarification to the 

operating fee methodology in July 2020, 

and sought comment on several 

potential updates to the methodology. 

This notice provides the NCUA’s 

response to comments about the July 

2020 methodology, and documents the 

Board’s final revisions to the operating 

fee methodology. 

The Board proposed the current 

operating fee methodology in 1979, after 

Congress passed the Financial 

Institutions Regulatory and Interest Rate 

Control Act of 1978.27 This legislation 

permitted the Board to consolidate 

previously separate chartering, 

supervision, and examination fees into 

a single operating fee, charged ‘‘in 

accordance with schedules, and for time 

periods, as determined by the Board, in 

an amount necessary to offset the 

expenses of the Administration at a rate 

consistent with a credit union’s ability 

to pay.’’ 28 In combination with a 

proposed change to § 701.6 of the 

NCUA’s regulations in 1979, the Board 

proposed an initial fee schedule in the 

Federal Register, including rates for 12 


tkelley on DSKBCP9HB2PROD with NOTICES
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29 Id. at 11787. 30 44 FR 27379 (May 10, 1979). 31 55 FR 29857 (July 23, 1990). 32 57 FR 34152 (Aug. 3, 1992). 33 60 FR 32925 (June 26, 1995). 34 Id. 35Board Action Memorandum on 2013 Operating 

Fee (Nov. 15, 2012). 

36 12 U.S.C. 1755(b). 

37 12 CFR 701.6(c). 

38Additional information on the NCUA budget 

may be found at the following Web address: http:// 

www.ncua.gov/About/Pages/budget-strategicplanning/supplementary-materials.aspx. 

39 12 U.S.C. 1783(a). 

asset tiers.29 It later published a final 

rule in the Federal Register, which 

included a finalized fee schedule for 

1979.30

On four additional occasions prior to 

the July 2020 notice, the Board had 

requested comments on potential 

changes to the operating fee schedule 

through a Federal Register notice, 

independent of any changes to 12 CFR 

701.6. First, in 1990, the Board provided 

notice to the public that it was 

considering consolidating the operating 

fee schedule from 14 asset tiers to two 

asset tiers, retaining an exemption for 

FCUs under $50,000 in assets and 

implementing a $100 minimum fee.31

Second, in 1992, the Board requested 

comments on a plan to limit operating 

fees to the first $1 billion of each FCU’s 

assets.32 Third, in 1995, the Board 

requested comments on a plan to 

restructure the operating fee schedule 

for natural person FCUs, to exempt 

FCUs with assets of $500,000 or less 

based on concern about small FCUs’ 

ability to pay the fees.33 The Board also 

requested comments on imposing a 

minimum fee of $100 on all natural 

person FCUs with assets over $500,000 

but less than or equal to $750,000.34

In 2016, the Board published its 

current methodology in detail in the 

Federal Register and solicited comment. 

The Board made no changes in response 

to comments on the methodology 

published in 2016 and delegated 

authority to the NCUA Chief Financial 

Officer to apply the published 

methodology. Since then, the Chief 

Financial Officer has applied the 

published Operating Fee methodology 

and explained its application in the 

NCUA’s annual budget documents. 

In general, the Board has not used 

Federal Register notices in connection 

with annual adjustments to the asset 

tiers and rates of the operating fee 

schedule. Instead, the Board has opted 

to adopt such changes at open meetings. 

As recently as 2012, for example, the 

Board increased the asset threshold 

used to exempt FCUs from operating 

fees from $500,000 to $1 million at an 

open meeting, without requesting 

advance comment in the Federal 

Register.35 While the Board has varied 

its practice with respect to fee schedule 

changes, it has done so within the FCU 

Act’s broad directive that the fee 

schedule should be as ‘‘determined by 

the Board to be appropriate,’’ subject to 

its consideration of its expenses and the 

ability of FCUs to pay.36 In addition, the 

NCUA’s regulation on operating fee 

processes includes a standing invitation 

for written comments from FCUs on 

existing fee schedules 37 and each year 

the Board invites comments on the draft 

NCUA budget, which includes a 

detailed explanation of how the 

operating fee is calculated and how 

changes to the operating fee rate are 

determined based on application of the 

published methodology. 

VI. Methodology for Determining the 

Aggregate Operating Fee Amount 

The Board adopts an annual budget in 

the fall of each year, which includes as 

an operating budget the costs of day-today operations such as employee 

compensation, travel and training 

expenses, support purchased through 

contracts with service providers that 

have expertise outside of the agency’s 

core capabilities, and other 

miscellaneous administrative expenses. 

The annual budget also includes as a 

capital budget the estimated spending 

on capital projects, such as for computer 

hardware and software, and for 

investments in agency owned real 

property and equipment, and provides 

the resources required to execute the 

goals and objectives as outlined in the 

NCUA’s strategic plan.38 As discussed 

above, two primary sources fund the 

annual budget: (1) requisitions from the 

Share Insurance Fund, determined 

through the OTR and (2) operating fees 

paid by FCUs. 

Adjustments to the Budget. When 

calculating the aggregate annual 

operating fee requirements, the Board 

first subtracts amounts transferred from 

the Share Insurance Fund through the 

OTR and other expected income 

amounts, as discussed below, from the 

operating budget, which funds the dayto-day needs for the upcoming year. 

Overhead Transfer Rate: As discussed 

above, the FCU Act authorizes the 

NCUA to expend funds from the Share 

Insurance Fund for administrative and 

other expenses related to federal share 

insurance.39 An overhead transfer from 

the Share Insurance Fund covers the 

expenses associated with insurancerelated functions of the NCUA’s 

operations. The OTR is one of the 

funding sources for the budget, but the 

OTR does not affect the amount of the 

annual budget. The Board approves the 

annual budget separately and without 

regard to the OTR. The OTR is applied 

to actual expenses incurred each month. 

Other Income: Other income reduces 

the required operating fees by providing 

an additional source of funds to cover 

regulatory (i.e., non-insurance) related 

aspects of operating the NCUA. Other 

income is projected based on the latest 

financial statements and includes 

interest income and miscellaneous 

revenues. Interest income includes 

interest on operating fund balances 

invested in short-term Treasury 

securities because the funds are not 

immediately required to pay expenses. 

Other income includes miscellaneous 

revenues, such as revenues from the 

production or sale of NCUA reports and 

publications, rent collected from other 

federal agencies that share NCUA 

facilities, and parking fee revenues. The 

NCUA owns a share of the parking 

garage underneath the complex of 

buildings that includes the agency’s 

Central Office, and the NCUA receives 

its share of the revenue collected from 

fees charged to those who park in the 

garage. 

Adjustments for capital project 

budgets and notes payable. The budgets 

for capital projects and notes payable 

are added to the balance remaining after 

deducting the estimated overhead 

transfer share of the operating budget. 

These budgets include capital 

acquisitions planned for the year and 

the annual payment of the note payable 

for the NCUA Central Office building on 

King Street. 

Capital Projects. Each year the NCUA 

conducts a rigorous assessment of its 

needs for information technology (IT), 

facility improvements and repairs, and 

other multi-year capital investments. 

Routine repairs and lifecycle-driven 

property renovations are necessary to 

properly maintain investments in the 

NCUA’s Central Office building in 

Alexandria, Virginia, and the agency’s 

office building in Austin, Texas. IT 

systems and hardware are another 

significant capital expenditure for 

modern organizations, and the budget 

includes investments both for 

maintaining and upgrading currently 

operational systems and networks as 

well for developing replacements for 

systems and hardware that has reached 

the end of its useful life. 

Repayment of NCUA Central Office 

on King Street, Note Payable. In 1992, 

the Operating Fund entered into a 

commitment to borrow up to $42.0 

million in a 30-year secured term note 

with the Share Insurance Fund to fund 

the costs of constructing the NCUA’s 

Central Office in 1993. Since the 


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40https://www.ncua.gov/files/agenda-items/ 

AG20191212Item1b.pdf, pages 57 to 64. 

Operating Fund borrowed monies from 

the Share Insurance Fund, the annual 

scheduled principal payments are 

excluded from the OTR and overhead 

transfer amount. The annual scheduled 

principal payments are treated as a cash 

need and applied as an increase to 

operating fee requirements. 

Operating Fee Requirements. The 

result after adjustments for capital 

project and notes payable needs is the 

total budget subject to the operating fee 

and payable by both natural person and 

corporate FCUs. The natural person 

FCU operating fees are determined by 

deducting the corporate FCU operating 

fees from the total budget operating fee 

requirements. 

VII. Methodology for Determining the 

Operating Fee Schedule 

The corporate credit union fee 

schedule was established in 1979 and 

has changed little over the years. 

Corporate FCUs hold assets of natural 

person credit unions, which are already 

assessed under the natural person 

operating fees for those members that 

are FCUs. Assessing corporate FCUs at 

the same rate would, effectively, assess 

the same assets twice for natural person 

FCU members of corporate FCUs. 

Corporate FCUs return a large portion of 

their earnings to natural person credit 

unions in the form of lower fees and 

higher dividends. Raising operating fee 

assessments for corporate FCUs would 

result in higher expenses for corporate 

FCUs. Corporate FCUs would need to 

pass the higher expenses to natural 

person credit unions in the form of 

higher fees and lower investment yields. 

The corporate FCU fee schedule is a 

method of charging corporate FCUs a 

supervisory fee to defray costs and is 

now published annually in the budget. 

The Board delegated authority to the 

Chief Financial Officer to administer the 

methodology approved by the Board for 

calculating the operating fees, and to set 

the fee schedule as calculated per the 

approved methodology, beginning in 

2016. After determining the operating 

fee requirements for natural person 

FCUs, the Chief Financial Officer 

creates the natural person FCU 

operating fee schedule for the upcoming 

year. The FCU operating fee schedule is 

published annually in the budget. 

The current fee schedule for natural 

person FCUs uses three asset tiers. A 

different assessment rate is applied to 

each tier, and the threshold for each tier 

is adjusted annually to reflect 

inflationary growth of the credit union 

system. FCUs with $1 million or less in 

assets pay no operating fee. 

There are two steps used to determine 

adjustments to the operating fee 

schedule for the upcoming year: (1) 

Updating the prior-year asset tier 

thresholds using the projected asset 

growth rate; and (2) updating the prioryear assessment rates for each asset tier 

by determining the average assessment 

rate adjustment. 

Updating prior year asset levels. The 

first step in determining the new 

operating fee schedule is to increase the 

threshold for each asset tier from the 

prior-year by the projected asset growth 

rate. Tier thresholds are adjusted 

annually to preserve the same relative 

relationship of the scale to the 

applicable asset base. 

The projected asset growth rate is a 

forecast of FCU asset growth rates for a 

year. The NCUA’s Office of Chief 

Economist (OCE) uses three different 

methods to forecast asset growth and 

combines them to generate an overall 

asset growth rate forecast. 

Forecasting method one uses Call 

Report data for the first half of the year 

to predict full-year asset growth. This is 

done by first calculating the ratio of 

first-half asset growth to full-year asset 

growth. The percentage of full-year 

growth accounted for by first-half asset 

growth varies from year to year but, on 

average, nearly 80 percent of the asset 

growth for FCUs occurs in the first half 

of the year. Using the growth rate in the 

first half of the year, OCE projects the 

full-year growth rate. 

Forecasting Method two uses Call 

Report data to determine the most 

recent four-quarter growth rate and sets 

this rate to the full-year asset growth 

rate. This approach is based on the idea 

that an FCU is likely to establish and 

maintain a relatively constant growth 

rate over a short period, after accounting 

for variations in the growth rate that is 

attributable to seasonal fluctuations. 

This implies that a good forecast of fullyear asset growth is the most recently 

available four-quarter asset growth. 

Forecasting method three uses a time 

series statistical model. Using quarterly 

Call Report data, NCUA predicts future 

four-quarter asset growth using the fourquarter growth in assets for the period 

ending two quarters earlier (that is, fourquarter asset growth lagged two 

quarters). 

In general, forecasting literature 

shows that combining forecasts from 

different approaches can improve 

forecast accuracy and decrease the 

likelihood of forecast errors. Using the 

root mean squared error statistic to 

calculate the accuracy of the individual 

approaches and combined forecast 

approaches, NCUA has found that the 

combined forecast approach is better at 

predicting the final asset growth rate 

than any of the individual approaches. 

NCUA therefore averages the forecasts 

from the three approaches to maximize 

accuracy. 

Updating the prior year’s assessment 

rates. After updating the prior-year asset 

tier thresholds, the next step is to 

project operating fees using the updated 

asset tier thresholds and the prior year 

assessment rates charged for each tier. 

The percentage difference between the 

projected operating fee collections and 

the operating fee collections required to 

support the budget is the average rate 

adjustment. 

The average rate adjustment is used to 

amend the prior-year’s assessment rates 

for each asset tier either upwards or 

downwards. If the projected amount of 

operating fees is less than the required 

budgeted amount, then the assessment 

rates for each asset tier are adjusted 

upwards. If the projected amount is 

more than the required budgeted 

amount, then the assessment rates for 

each asset tier are adjusted downwards. 

The resulting new operating fee 

schedule and due date are 

communicated via a Letter to Federal 

Credit Unions and posted to NCUA.gov 

within 30 days of Board approval of the 

annual budget. The Board also makes 

available an online operating fee 

calculator on the NCUA website for 

FCUs to estimate their individual fees 

for the upcoming year. No later than 

March of each year, natural person 

FCUs with assets greater than $1 million 

will receive an invoice for their 

operating fee. Operating fees are based 

on actual assets reported as of December 

31 of the previous year. The NCUA 

combines operating fee and 

capitalization deposit adjustment into a 

single invoice normally due in April. As 

required by the FCU Act, the NCUA will 

deposit the collected fees in the United 

States Treasury.40

VIII. Changes to Operating Fee 

Methodology 

As summarized above, the Board 

sought comment on three proposed 

changes to the Operating Fee 

methodology and is adopting each 

change as proposed. 

1. Treatment of Capital Budget 

Under current practice, the Board 

initially funds the NCUA’s planned 

capital projects budget entirely through 

operating fees assessed on FCUs. The 

Board proposed to change this practice 

by reimbursing the appropriate portion 

of these expenditures through the OTR. 

In recent years, the NCUA Office of 

the Chief Financial Officer (OCFO) has 


tkelley on DSKBCP9HB2PROD with NOTICES
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worked to improve the agency’s 

financial management processes and 

modified some of its practices to align 

with contemporary Federal financial 

management standards. This allows the 

agency to manage its cash flow more 

effectively and to record appropriately 

on its books the contractual 

commitments its makes, particularly for 

complex and multi-year capital projects. 

As a result of these improvements and 

modifications, in the 2018 budget 

NCUA clarified how non-cash 

transactions such as the estimated value 

of employees’ earned but unused annual 

leave and projected depreciation 

expenses for capital assets would be 

treated from a budgetary perspective. 

Namely, such amounts would no longer 

be included in annual budgets 

presented to the Board as they result in 

no expenditure tied to the recognition of 

an expense under GAAP. Since that 

time, the calculation for the operating 

fee has also excluded such items when 

determining the allocation of the annual 

budget between the share paid through 

the OTR and the share paid through the 

operating fee. 

Accordingly, in the July 2020 notice, 

the Board proposed to clarify that for 

the purposes of calculating the 

operating fee, the budget for capital 

projects will be included within the 

total annual budget subject to the OTR. 

This approach ensures that the cost of 

new capital acquisitions is borne 

equitably between FCUs and FISCUs at 

the time such acquisitions are made and 

is consistent with the 2018 change that 

excluded other non-cash expenses from 

the budget. Under the existing 

methodology, the Share Insurance Fund 

reimburses the operating fund for 

capital projects at the OTR and over 

several years according to depreciation 

schedules, which are non-cash 

transactions. Including capital project 

budgets in the total annual amount 

subject to the OTR at the point of 

acquisition effectively accelerates OTR 

reimbursements for capital project 

spending to the point at which such 

expenditures occur. This change also 

increases consistency with the current 

OTR methodology, which generally 

requires that a proportionate share of 

expenses not exclusively related to the 

regulation of FCUs be borne in part by 

the Share Insurance Fund. 

As provided in the July 2020 notice, 

the following table compares how the 

operating fee calculation for the 2020 

budget would have differed had funds 

for capital projects been subject to the 

OTR like for the other parts of the 

annual budget for that year. 


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Comments Received: None of the 

commenters objected to the proposed 

change to the treatment of capital 

project budgets for purposes of 

computing the operating fee. One 

commenter recommended that the costs 

of capital projects whose sole benefit 

accrues to the NCUA should not be 

subject to the OTR and provided as an 

example the fact that the agency will 

discontinue its NCUSIF computer lease 

program for State Supervisory 

Authorities in 2021, meaning that 

capital project funds will be used to 

provide computers only to NCUA 

employees. 

NCUA Response: While it is a factual 

statement that the NCUA will 

discontinue its NCUSIF computer lease 

program for State Supervisory 

Authorities in 2022, the agency believes 

it misstates the purpose of applying the 

OTR to the capital budget. The 

computed OTR is an estimate of the 

share of the NCUA’s work that relates to 

its role as insurer. Although the NCUA 

will not provide computers for State 

Supervisory Authorities in the future, 

that does not eliminate the share of 

insurance-related work that NCUA 

employees perform. As a result, even 

though some capital projects such as the 

agency’s computer lease provides direct 

benefit only to NCUA employees, it is 

still appropriate to apply the OTR to 

such project costs since the purpose of 

the OTR is to pay for the insurancerelated share of the NCUA’s budget via 

reimbursement from the SIF. 

Accordingly, the Board adopts this 

change to the operating fee methodology 

without modification. 


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84386 Federal Register / Vol. 85, No. 248 / Monday, December 28, 2020 / Notices 

2. Treatment of Miscellaneous Revenues 

Under current practice, miscellaneous 

revenues collected by the NCUA reduce 

operating fees charged to FCUs. The 

Board proposed to change the treatment 

of miscellaneous revenues, reducing the 

percentage of the NCUA budget funded 

by the OTR transfer from the Share 

Insurance Fund. 

As discussed in the preceding 

sections, miscellaneous revenues 

includes revenues from the production 

and sale of NCUA reports and 

publications, rent collected from other 

federal agencies that share NCUA 

facilities, and parking fee revenues. The 

NCUA’s miscellaneous revenues vary 

from year to year, but typically total 

approximately $1,000,000. 

The Board proposed to clarify that for 

the purposes of calculating the 

operating fee, projected miscellaneous 

revenues will be included within the 

total annual budget subject to the OTR. 

The Board stated that it believes this 

approach is consistent with its proposed 

change to the treatment of capital 

project budgets, and that it better 

reflects the equitable distribution of the 

agency’s net expenses between FCUs 

and FISCUs. 

As provided in the July 2020 notice, 

the following table compares how the 

operating fee calculation for the 2020 

budget would have differed had 

miscellaneous revenues reduced the 

amount of the budget funded through 

the OTR for that year. 


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Federal Register / Vol. 85, No. 248 / Monday, December 28, 2020 / Notices 84387 

41 85 FR 53708 (Aug. 31, 2020). 

Comments Received: The majority of 

the commenters that supported the 

inclusion of the capital budget in the 

OTR also commented on and stressed 

the importance of including the 

projected miscellaneous revenues in the 

OTR calculation to reduce the overall 

amount of funding needed from the 

Share Insurance Fund. Accordingly, the 

Board adopts this change to the 

operating fee methodology. 

3. Annual Inflationary Updates to 

Operating Fee Schedule Asset Tier 

Thresholds 

Separately from the July 2020 notice, 

the Board proposed to amend its rule at 

12 CFR 701.6 for determining total 

assets used as the basis for calculating 

the operating fee due from any FCU.41

Under the proposed rule, total assets 

would be calculated as the average of 

total assets reported on an FCU’s 

previous four Call Reports available at 

the time the NCUA Board approves the 

agency’s budget for the upcoming year. 

The Board has adopted that proposed 

rule without change, and it will go into 

effect 30 days after publication in the 

Federal Register. 

In the July 2020 notice, to maintain 

consistency between the total assets 

used for billing the operating fee to an 

individual FCU and the asset thresholds 

used for determining the rate tier into 

which each FCU falls, the Board 

proposed changing its approach for 

adjusting the rate tier thresholds. 

Specifically, for purposes of 

determining the annual adjustment to 

the rate tier thresholds, the Board 

proposes comparing the average of total 

system assets reported in Call Reports 

for the four quarters available at the 

time it approves the budget to the 

average of total system assets in Call 

Reports for the four quarters of the 

respective previous years. In this way, 

the tier thresholds shown on the 

operating fee schedule would be 

increased each year based on the same 

reporting data that will be used for 

computing individual FCU invoice 

amounts. 

Comments Received: None of the 

commenters objected to the proposed 

change to adjusting the operating fee 

rate tier thresholds. Accordingly, the 

Board adopts this change to the 

operating fee methodology. 

4. Other Requests for Comment on 

Operating Fee Methodology 

The Board also solicited comment on 

three additional topics to inform 

potential future enhancements to the 

methodology. The Board will study 

these comments and consider future 

changes in these areas. 

First, the Board noted that it has not 

substantially modified the current threetier operating fee schedule since 1993. 

The current fee schedule is regressive; 

that is, credit unions with a larger 

amount of total assets pay a lower 

marginal rate on those assets above the 

threshold levels for the lower tiers. 

Given growth and consolidation in the 

credit union system, the Board is 

interested in whether such an approach 

is an equitable method for allocating the 

agency’s operating costs. There is a 

potentially wide range of approaches for 

distributing the cost of the NCUA’s 

budget that is funded by the operating 

fee. For example, the Board could adopt 

a single, flat-rate operating fee for all 

credit unions with total assets that 

exceed a standard exemption threshold. 

Overall, a flat-rate operating fee would 

shift costs away from relatively smaller 

credit unions to relatively larger ones, 

making the fee schedule less regressive. 

The Board could also make the 

operating fee schedule less regressive by 

increasing the rates for the second and 

third tiers on the schedule. 

Alternatively, adjusting the rates 

upward for the first and second tiers of 

the current operating fee would create a 

more regressive schedule. The Board 

sought comment on approaches to this 

issue. 

Comments Received: None of the 

commenters provided specific 

recommendations for how or whether to 

revise the current three-tier operating 

fee schedule. Two commenters 

recommended that the NCUA review its 

operating fee schedule in a fully 

transparent process. The first 

commenter recommended that the 

NCUA convene a representative 

working group of credit union 

executives who could provide their 

perspectives on adjustment to the 

operating fee schedule. The second 

commenter recommended that the 

NCUA consider how share growth that 

resulted from the COVID–19 pandemic 

could affect the intent of proposed 

changes to the operating fee schedule. 

NCUA Response: The Board agrees 

with the respondents to this question 

that recommend following a fully 

transparent process for developing a 

new operating fee schedule. The Board 

will study the issue further and consider 

potential future changes. The Board is 

not making any changes to the current 

operating fee schedule at this time. 

Second, the Board sought comment 

on changing the threshold below which 

FCUs are not required to pay an 

operating fee. Currently, the Board does 

not assess an operating fee to FCUs with 

assets less than $1 million. This level 

was most recently adjusted in 2012 for 

the 2013 assessment. In the past, the 

Board has accounted for the ability of 

small FCUs to pay the fees by exempting 

those under this threshold from paying 

any fee. In light of growth in total FCU 

assets, and of consolidation among 

FCUs, the Board sought comment on 

what factors it might consider when 

adjusting this threshold. The Board 

provided the following table to inform 

the public of the potential impact of 

raising the exemption threshold to 

various levels above the current $1 

million threshold: 


tkelley on DSKBCP9HB2PROD with NOTICES
84388 Federal Register / Vol. 85, No. 248 / Monday, December 28, 2020 / Notices 

42Section 342(b)(2)(C) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Public 

Law 111–203. 

Comments Received: Five 

commenters provided their views about 

the exemption threshold. One 

commenter did not believe the 

exemption threshold should be 

changed, three commenters 

recommended raising the exemption 

threshold from $1 million to $10 

million, and one commenter noted they 

were not opposed to raising the 

exemption threshold but argued that 

any foregone revenue should result in a 

dollar-for-dollar reduction to the NCUA 

budget. 

NCUA Response: Given the lack of 

consensus between the respondents to 

this question, the Board will study the 

operating fee exemption threshold 

further and consider potential future 

changes. The Board is not making any 

changes to the current exemption 

threshold at this time. 

Third, the Board sought comment on 

ways to encourage FCUs and FISCUs to 

complete an annual diversity survey. 

The NCUA provides credit unions an 

annual voluntary diversity selfassessment, as authorized by law.42 The 

Board sought comment on whether and 

in what amount FCUs that complete an 

annual voluntary diversity selfassessment should receive a modest 

discount on the FCU operating fee due 

in the subsequent year. The Board also 

sought comment on appropriate 

incentives in this area for FISCUs, 

which do not pay an annual operating 

fee to the NCUA. Alternatively, the 

Board sought comment on other nonfinancial incentives that might 

encourage both FCUs and FISCUs to 

participate in the survey. 

Comments Received: The NCUA 

received six comments in response to 

questions about incentives for 

completing the voluntary diversity selfassessment. None of the commenters 

provided specific or actionable 

recommendations for incentives that 

would encourage participation in the 

self-assessment. Four commenters 

encouraged the NCUA to ensure that 

equal incentives are provided to both 

FCUs and FISCUs, while one 

commenter raised concerns that any 

incentive provided to FCUs not result in 

changes to the OTR without appropriate 

notice to the public. One commenter 

opposed any incentives for participating 

in the assessment. 

NCUA Response: Given the lack of 

clear consensus among respondents to 

this question, the Board believes it must 

study further how to create incentives 

for completing the voluntary diversity 

self-assessment. The Board will be 

mindful of those commenters that 

suggested that there should be equity 

between FCUs and FICUs for any 

incentive program. The Board is not 

establishing any incentives for 

completing the diversity self-assessment 

at this time. 

By the National Credit Union 

Administration Board on December 17, 2020. 

Melane Conyers-Ausbrooks, 

Secretary of the Board. 

[FR Doc. 2020–28487 Filed 12–23–20; 8:45 am] 

BILLING CODE 7535–01–P 

NATIONAL SCIENCE FOUNDATION 

Sunshine Act Meetings 

The National Science Board (NSB), 

pursuant to NSF regulations (45 CFR 

part 614), the National Science 

Foundation Act, as amended, (42 U.S.C. 

1862n–5), and the Government in the 

Sunshine Act (5 U.S.C. 552b), hereby 

gives notice of the scheduling of 

meetings for the transaction of NSB 

business as follows: 

TIME AND DATE: Wednesday, December 9, 

2020 from 11:00 a.m. to 6:30 p.m., and 

Thursday, December 10, 2020 from 

11:00 a.m. to 6:45 p.m. EST. 

PLACE: These meetings will be held by 

videoconference. There will be no inperson meetings to attend. The public 

may observe the public meetings, which 

will be streamed to the NSF You Tube 

channel. For meetings on Wednesday, 

December 9, go to: https://

www.youtube.com/watch?v=Rl3HttPA_

b4. For meetings on Thursday, 

December 10, go to: https://

www.youtube.com/ 

watch?v=uGjqM0yX4rI. 

STATUS: Some of these meetings will be 

open to the public. Others will be closed 

to the public. See full description 

below. 

MATTERS TO BE CONSIDERED: 

Wednesday, December 9, 2020 

Plenary Board meeting 

Open Session: 11:00 a.m.–12:55 p.m.; 

1:25 p.m.–2:10 p.m. 

• NSB Chair’s Remarks 

• NSF Director’s Remarks 

• NSB Chair Activity Summary 

• COVID–19 Impact on Women 

• NSF Planning and Response to 

COVID–19 

• Vision 2030 Implementation Working 

Group Update 

Committee on Oversight (CO) 

Open Session: 2:10 p.m.–3:25 p.m. 

• Committee Chair’s Opening Remarks 

• Approval of Committee Meeting 

Minutes 

• Approval of Merit Review Digest 

Overview 

• Presentations and Discussion of 

Broader Impacts 

• Inspector General’s Update 


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