63256 Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Rules and Regulations

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 363

RIN 3064–AC06

Independent Audits and Reporting

Requirements

AGENCY: Federal Deposit Insurance

Corporation (FDIC or Corporation).

ACTION: Final rule.

SUMMARY: The FDIC is amending its

regulations concerning annual

independent audits and reporting

requirements which implement section

36 of the Federal Deposit Insurance Act

(FDI Act). Section 36 is generally

intended to facilitate early identification

of problems in financial management at

larger insured depository institutions

through annual independent audits,

assessments of the effectiveness of

internal controls and compliance with

designated laws and regulations, and

more stringent reporting requirements.

Section 2301 of the Economic Growth

and Regulatory Paperwork Reduction

Act of 1996 (EGRPRA) repealed section

36(e) of the FDI Act which required that

each insured depository institution over

a certain size have an independent

public accountant perform specified

procedures for determining compliance

with designated safety and soundness

laws. Accordingly, the FDIC is

eliminating Schedule A to Appendix A,

‘‘Agreed Upon Procedures for

Determining Compliance with

Designated Laws’’.

Section 2301 of EGRPRA also permits

the FDIC in certain circumstances to

exempt institutions from the

requirement that audit committees be

comprised entirely of outside directors.

It further permits the FDIC to designate

certain information filed under section

36 as privileged and confidential and

therefore not available to the public.

The FDIC is also making several

technical changes to the Guidelines and

Interpretations (Guidelines) published

as an appendix to the annual

independent audit rule. The changes

delete certain filing requirements that

have been determined to be

unnecessary, and clarify ambiguities

identified by the Corporation, financial

institutions, and accountants since the

audit rule was promulgated.

EFFECTIVE DATE: The final regulation is

effective January 1, 1998.

FOR FURTHER INFORMATION CONTACT:

Doris L. Marsh, Examination Specialist,

Division of Supervision (202) 898–8905,

FDIC, 550 17th Street, N.W.,

Washington, DC 20429, or Sandra

Comenetz, Counsel, Legal Division,

(202) 898–3582, FDIC, 550 17th Street

N.W., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

Section 112 of the Federal Deposit

Insurance Corporation Improvement Act

of 1991 (FDICIA) added section 36,

‘‘Independent Annual Audits of Insured

Depository Institutions,’’ to the FDI Act

(12 U.S.C. 1831m). As enacted, section

36 required the FDIC, in consultation

with the appropriate federal banking

agencies, to promulgate regulations

requiring each insured depository

institution over a certain asset size

(covered institution) to have an annual

independent audit of its financial

statements performed in accordance

with generally accepted auditing

standards and section 37 of the FDI Act

(12 U.S.C. 1831n), and to provide a

management report and an independent

public accountant’s attestation

concerning the effectiveness of the

institution’s internal controls for

financial reporting and its compliance

with designated safety and soundness

laws. Section 36 also requires each

covered institution to have an

independent audit committee. The audit

committee of each large covered

institution (total assets exceeding $3

billion) must meet certain additional

requirements.

In June 1993, the FDIC published 12

CFR part 363 (58 FR 31332, June 2,

1993) to implement the provisions of

section 36 of the FDI Act. Under part

363, the requirements of section 36

apply to each insured depository

institution with $500 million or more in

total assets at the beginning of any fiscal

year that begins after December 31,

1992. Part 363 also includes Guidelines

and Interpretations (Appendix A to part

363), which are intended to assist

institutions and independent public

accountants in understanding and

complying with section 36 and part 363.

Section 314 of the Riegle Community

Development and Regulatory

Improvement Act of 1994 amended

sections 36(i) and 36(g)(2) of the FDI Act

(12 U.S.C. 1831m (i) and (g)(2)). The

purpose of section 314(a) was to provide

relief from certain duplicative reporting

under section 36 of the FDI Act for

sound, well managed insured

depository institutions with over $9

billion in total assets which are

subsidiaries of multibank holding

companies. The regulation was

amended effective April 1, 1996, to

implement section 314.

Section 2301 of EGRPRA repealed

section 36(e) and amended sections

36(a)(3) and 36(g)(1) of the FDI Act.

Section 36(e) required that each covered

institution have an independent public

accountant perform specified

procedures for determining compliance

with designated safety and soundness

laws. To comply with the repeal of

section 36(e), the FDIC is removing

Schedule A to Appendix A, ‘‘Agreed

Upon Procedures for Determining

Compliance with Designated Laws,’’

and is making conforming changes to

the regulation and the Guidelines.

The amendment to section 36(g)(1) of

the FDI Act grants authority for each

appropriate federal banking agency to

permit a covered institution under its

supervision to have an audit committee

consisting of a majority of outside

directors, instead of consisting entirely

of outside directors, if the agency

determines that the institution has

encountered hardships retaining and

recruiting a sufficient number of

competent outside directors to serve on

the committee. The amendment to

section 36(a)(3) permits the FDIC and

the appropriate federal banking agency

to designate certain information filed

under section 36 as privileged and

confidential and not available to the

public.

Since 1993 when part 363 was

promulgated, no institution has

requested relief from the FDIC because

the institution had difficulty in

recruiting or retaining outside directors

for its audit committee nor has any

institution requested confidential

treatment of any otherwise public

information filed under section 36.

Because the banking agencies would

consider such matters on a case-by-case

basis, and to avoid additional burden,

no implementing regulations are being

promulgated.

II. Discussion of Amendment

The FDIC is amending part 363 to:

conform it to the amended statute,

update certain references, eliminate an

unnecessary filing by independent

public accountants, and align the filing

requirements with the FDIC’s current

approach for supervising banking

organizations.

The FDIC is deleting Schedule A to

Appendix A, ‘‘Agreed Upon Procedures

for Determining Compliance with

Designated Laws’’, and Guideline 19 to

conform the regulation to the amended

statute which repealed the requirement

that each covered institution have an

independent public accountant perform

specified procedures for determining

compliance with designated safety and

soundness laws. In addition, §§ 363.3(b)

and 363.4 (a) and (b) have been

amended to delete references to
Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Rules and Regulations 63257

Schedule A and the independent public

accountant’s attestation on compliance

with Designated Laws and Regulations

(Designated Laws). Guidelines 8, 16,

and 18 likewise have been revised.

Although section 2301 of EGRPRA

repealed the statutory requirement that

an independent public accountant

provide an attestation report on the

performance of agreed-upon procedures

for determining an institution’s

compliance with Designated Laws,

management is still required to file an

annual report with the FDIC and

appropriate federal and state banking

agencies which includes a statement of

its responsibility for complying with

Designated Laws and an assessment of

the institution’s compliance with such

laws and regulations. Revised Guideline

12 identifies the two categories of

Designated Laws. Table 1 to Appendix

A lists the specific federal laws and

regulations within these categories.

The Introduction to the Guidelines

and Interpretations has been amended

to remove outdated language. Also, the

references to documents which provide

information on safeguarding of assets

and standards for internal control in

footnote 2 to Guideline 10 have been

updated.

The FDIC has removed the provision

in Guideline 16 that an accountant may

elect to file a list of covered institutions

that are audit clients in lieu of a peer

review report for each client. The FDIC

has found that the list of client

institutions is not needed.

Revised Guideline 22 (previously

numbered Guideline 23) has been

amended to reflect the FDIC’s current

approach to supervising banking

organizations which own more than one

depository institution. In such cases,

one FDIC region is designated to manage

supervision of the entire organization.

The amended guideline states that

covered institutions filing under part

363 on a holding company basis should

submit their reports to the appropriate

FDIC regional office.

III. Public Comment Waiver and

Effective Date

The Administrative Procedure Act, 5

U.S.C. 551 et seq. (APA), requires that

general notice of a proposed rulemaking

be published in the Federal Register. 5

U.S.C. 553(b). An exception to the rule

exists if the agency for good cause finds

‘‘* * * that notice and public procedure

thereon are impracticable, unnecessary,

or contrary to the public interest.’’ 5

U.S.C. 553(b)(B). The FDIC is publishing

the amendments to part 363 as a final

rule without notice and comment

because the amendments consist of only

minor and technical changes. The FDIC

finds that publication in this case is

unnecessary.

IV. Paperwork Reduction Act

This regulation contains

modifications to a collection of

information that have been reviewed

and approved by the Office of

Management and Budget on November

5, 1997, under control number 3064–

0113 pursuant to the Paperwork

Reduction Act (44 U.S.C. 3501 et seq.).

The primary modification is the

deletion, from Appendix A, of Schedule

A ‘‘Agreed Upon Procedures for

Determining Compliance with

Designated Laws’’.

Comments are invited on: (a) Whether

the collection of information is

necessary for the proper performance of

the FDIC’s functions, including whether

the information has practical utility; (b)

the accuracy of the estimates of the

burden of the information collection; (c)

ways to enhance the quality, utility, and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the information collection on

respondents, including through the use

of automated collection techniques or

other forms of information technology.

Comments should be addressed to the

Office of Information and Regulatory

Affairs, Office of Management and

Budget, Attention: Desk Officer

Alexander Hunt, New Executive Office

Building, Room 3208, Washington, D.C.

20503, with copies of such comments to

Steven F. Hanft, Assistant Executive

Secretary (Regulatory Analysis), Federal

Deposit Insurance Corporation, Room

F–4001–B, 550 17th Street, NW,

Washington, D.C. 20429. All comments

should refer to ‘‘3064–0113’’.

The estimated reporting burden for

the collection of information under part

363 is:

Number of Respondents: 420.

Number of Responses per

Respondent: 3.

Total Annual Responses: 1,260.

Hours per Response: 32.

Total Annual Burden Hours: 40,320.

V. Regulatory Flexibility Act

The rule expressly exempts insured

depository institutions having assets of

less than $500 million, and, for that

reason, is inapplicable to small entities.

Therefore, pursuant to section 605(b) of

the Regulatory Flexibility Act (Pub. L.

96–354, 5 U.S.C. 601 et seq.), it is

certified that the rule would not have a

significant impact on a substantial

number of small entities.

VI. Small Business Regulatory

Enforcement Fairness Act

The Small Business Regulatory

Enforcement Fairness Act of 1996

(SBREFA) (Title II, Pub. L. 104–121)

provides generally for agencies to report

rules to Congress and the General

Accounting Office (GAO) for review.

The reporting requirement is triggered

when a federal agency issues a final

rule. The FDIC will file the appropriate

reports with Congress and the GAO as

required by SBREFA.

Because the Office of Management

and Budget has determined that the rule

does not constitute a ‘‘major rule’’ as

defined by SBREFA, the final rule will

take effect on January 1, 1998.

List of Subjects in 12 CFR Part 363

Accounting, Administrative practice

and procedure, Banks, banking,

Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, the Board of Directors of the

FDIC hereby amends Part 363 of title 12,

chapter III, of the Code of Federal

Regulations as follows:

PART 363—ANNUAL INDEPENDENT

AUDITS AND REPORTING

REQUIREMENTS

1. The authority citation for part 363

continues to read as follows:

Authority: 12 U.S.C. 1831m.

2. Section 363.3 is amended by

revising paragraph (b) to read as follows:

§ 363.3 Independent public accountant.

* * * * *

(b) Additional report. Such

independent public accountant shall

examine, attest to, and report separately

on, the assertion of management

concerning the institution’s internal

control structure and procedures for

financial reporting. The attestation shall

be made in accordance with generally

accepted standards for attestation

engagements.

* * * * *

3. Section 363.4 is amended by

revising paragraphs (a) and (b) to read

as follows:

§ 363.4 Filing and notice requirements.

(a) Annual reporting. Within 90 days

after the end of its fiscal year, each

insured depository institution shall file

with each of the FDIC, the appropriate

federal banking agency, and any

appropriate state bank supervisor, two

copies of an annual report containing

audited annual financial statements, the

independent public accountant’s report

thereon, management’s statements and
63258 Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Rules and Regulations

2 In considering what information is needed on

safeguarding of assets and standards for internal

controls, management may review guidelines

provided by its primary federal regulator; the

FDIC’s Division of Supervision Manual of

Examination Policies; the Federal Reserve Board’s

Commercial Bank Examination Manual and other

relevant regulations; the Office of Thrift

Supervision’s Thrift Activities Handbook; the

Comptroller of the Currency’s Handbook for

National Bank Examiners; and standards published

by professional accounting organizations, such as

the American Institute of Certified Public

Accountants’ (AICPA) Statement on Auditing

Standards No. 55, ‘‘Consideration of the Internal

Control Structure in a Financial Statement Audit,’’

as amended by Statement of Auditing Standards

No. 78; the Committee of Sponsoring Organizations

(COSO) of the Treadway Commission’s Internal

Control—Integrated Framework, including its

addendum on safeguarding of assets; and other

internal control standards published by the AICPA,

other accounting or auditing professional

associations, and financial institution trade

associations.

assessments, and the independent

public accountant’s attestation report

concerning the institution’s internal

control structure and procedures for

financial reporting as required by

§§ 363.2(a), 363.3(a), 363.2(b), and

363.3(b), respectively.

(b) Public availability. The annual

report in paragraph (a) of this section

shall be available for public inspection.

* * * * *

4. Appendix A to part 363 is amended

by revising the table of contents entry

for item 18, by removing the table of

contents entry for item 19, by

redesignating table of contents entries

20 through 37 as 19 through 36,

respectively, by revising the

introduction and guidelines 8, 10, 12,

16, 18 to read as follows:

Appendix A to Part 363—Guidelines

and Interpretations

Table of Contents

* * * * *

18. Attestation Report

* * * * *

Introduction

Congress added section 36, ‘‘Early

Identification of Needed Improvements in

Financial Management’’ (section 36), to the

Federal Deposit Insurance Act (FDI Act) in

1991.

The FDIC Board of Directors adopted 12

CFR part 363 of its rules and regulations (the

Rule) to implement those provisions of

section 36 that require rulemaking. The FDIC

also approved these ‘‘Guidelines and

Interpretations’’ (the Guidelines) and

directed that they be published with the Rule

to facilitate a better understanding of, and

full compliance with, the provisions of

section 36.

Although not contained in the Rule itself,

some of the guidance offered restates or refers

to statutory requirements of section 36 and is

therefore mandatory. If that is the case, the

statutory provision is cited.

Furthermore, upon adopting the Rule, the

FDIC reiterated its belief that every insured

depository institution, regardless of its size or

charter, should have an annual audit of its

financial statements performed by an

independent public accountant, and should

establish an audit committee comprised

entirely of outside directors.

The following Guidelines reflect the views

of the FDIC concerning the interpretation of

section 36. The Guidelines are intended to

assist insured depository institutions

(institutions), their boards of directors, and

their advisors, including their independent

public accountants and legal counsel, and to

clarify section 36 and the Rule. It is

recognized that reliance on the Guidelines

may result in compliance with section 36 and

the Rule which may vary from institution to

institution. Terms which are not explained in

the Guidelines have the meanings given them

in the Rule, the FDI Act, or professional

accounting and auditing literature.

* * * * *

Annual Reporting Requirements (§ 363.2)

* * * * *

8. Management Report. Management

should perform its own investigation and

review of the effectiveness of internal

controls and compliance with the Designated

Laws defined in Guideline 12. Management

also should maintain records of its

determinations and assessments until the

next federal safety and soundness

examination, or such later date as specified

by the FDIC or appropriate federal banking

agency. Management should provide in its

assessment of the effectiveness of internal

controls, or supplementally, sufficient

information to enable the accountant to

report on its assertion. The management

report of an insured branch of a foreign bank

should be signed by the branch’s managing

official if the branch does not have a chief

executive or financial officer.

* * * * *

10. Standards for Internal Controls. Each

institution should determine its own

standards for establishing, maintaining, and

assessing the effectiveness of its internal

controls.2

* * * * *

12. Compliance with Laws and

Regulations. The designated laws and

regulations are the federal laws and

regulations concerning loans to insiders and

the federal and state laws and regulations

concerning dividend restrictions (the

Designated Laws). Table 1 to this Appendix

A lists the designated federal laws and

regulations pertaining to insider loans and

dividend restrictions that are applicable to

each type of institution.

Role of Independent Public Accountant

(§ 363.3)

* * * * *

16. Filing Peer Review Reports. Within 15

days of receiving notification that the peer

review has been accepted, or before

commencing any audit under the Rule,

whichever is earlier, two copies of the most

recent peer review report, accompanied by

any letter of comments and letter of response,

should be filed by the independent public

accountant (if not already on file) with the

FDIC, Registration and Disclosure Section,

550 17th Street, N.W., Washington, D.C.

20429, where they will be available for

public inspection. All corrective action

required under any qualified peer review

report should have been taken before

commencing services under this Rule.

* * * * *

18. Attestation Report. The independent

public accountant should provide the

institution with an internal controls

attestation report and any management letter

at the conclusion of the audit as required by

section 36(c)(1). If a holding company

subsidiary relies on its holding company

management report, the accountant may

attest to and report on management’s

assertions in one report, without reporting

separately on each subsidiary covered by the

Rule. The FDIC has determined that

management letters are exempt from public

disclosure.

* * * * *

5. Appendix A to part 363 is amended

by removing Guideline 19 and

redesignating Guidelines 20 through 37

as 19 through 36, respectively.

6. Appendix A to part 363 is amended

by revising newly designated Guideline

22 to read as follows:

* * * * *

Filing and Notice Requirements (§ 363.4)

22. Place for Filing. Except for peer review

reports filed pursuant to Guideline 16, all

reports and notices required by, and other

communications or requests made pursuant

to, the Rule should be filed as follows:

(a) FDIC: Appropriate FDIC Regional Office

(Supervision), i.e., the FDIC regional office in

the FDIC region in which the institution is

headquartered or, in the case of a subsidiary

institution of a holding company, the FDIC

regional office that is responsible for

monitoring the consolidated company. A

filing made on behalf of several covered

institutions owned by the same parent

holding company should be accompanied by

a transmittal letter identifying all of the

institutions covered.

(b) Office of the Comptroller of the

Currency (OCC): appropriate OCC

Supervisory Office.

(c) Federal Reserve: appropriate Federal

Reserve Bank.

(d) Office of Thrift Supervision (OTS):

appropriate OTS District Office.

(e) State bank supervisor: the filing office

of the appropriate state bank supervisor.

* * * * *

7. Schedule A to Appendix A of part

363 and the Tables to Schedule A are

removed.

8. Table 1 is added to Appendix A to

read as follows:
Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Rules and Regulations 63259

TABLE 1 TO APPENDIX A

Designated Federal Laws and Regulations Applicable to

National

banks

State member banks

State nonmember

banks

Savings associations

Insider Loans—Parts and/or Sections of Title 12 of the United States Code

375a .................. Loans to Executive Officers of Banks .............................................. ✔ ✔ (1) (1)

375b .................. Prohibitions Respecting Loans and Extensions of Credit to Executive Officers and Directors of Banks, Political Campaign, Committees, etc.✔ ✔ (1) (1)

1468(b) .............. Extensions of Credit to Executive Officers, Directors, and Principal

Shareholders.

.................... .................... .................... ✔

1828(j)(2) .......... Provisions Relating to Loans, Extensions of Credit, and Other

Dealings Between Member Banks and Their Affiliates, Executive

Officers, Directors, etc.

.................... .................... ✔ ....................

1828(j)(3)(B) ...... Extensions of Credit Applicability of Provisions Relating to Loans,

Extensions of Credit, and Other Dealings Between Insured

Branches of Foreign Banks and Their Insiders.

(2) .................... (3) ....................

Parts and/or Sections of Title 12 of the Code of Federal Regulations

23.5 ................... Application of Legal Lending Limits; Restrictions on Transactions

With Affiliates.

✔ .................... .................... ....................

31 ...................... Extensions of Credit to National Bank Insiders ................................ ✔ .................... .................... ....................

215 .................... Subpart A—Loans by Member Banks to Their Executive Officers,

Directors, and Principal Shareholders.

✔ ✔ (4) (5)

Subpart B—Reports of Indebtedness of Executive Officers and

Principal Shareholders of Insured Nonmember Banks.

✔ ✔ (4) (5)

337.3 ................. Limits on Extensions of Credit to Executive Officers, Directors, and

Principal Shareholders of Insured Nonmember Banks.

.................... .................... ✔ ....................

349.3 ................. Reports by Executive Officers and Principal Shareholders ............. .................... .................... ✔ ....................

563.43 ............... Loans by Savings Associations to Their Executive Officers, Directors, and Principal Shareholders..................... .................... .................... ✔

Dividend Restrictions—Parts and/or Sections of Title 12 of the United States Code

56 ...................... Prohibition on Withdrawal of Capital and Unearned Dividends ....... ✔ ✔ .................... ....................

60 ...................... Dividends and Surplus Funds ........................................................... ✔ ✔ .................... ....................

1467a(f) ............. Declaration of Dividends ................................................................... .................... .................... .................... ✔

1831o ................ Prompt Corrective Action—Dividend Restrictions ............................ ✔ ✔ ✔ ✔

Parts and/or Sections of Title 12 of the Code of Federal Regulations

5.61 ................... Payment of dividends; capital limitation ........................................... ✔ .................... .................... ....................

5.62 ................... Payment of dividends; earnings limitation ........................................ ✔ .................... .................... ....................

6.6 ..................... Prompt Corrective Action—Dividend Restrictions ............................ ✔ .................... .................... ....................

7.6120 ............... Dividends Payable in Property Other Than Cash ............................ ✔ .................... .................... ....................

208.19 ............... Payments of Dividends ..................................................................... .................... ✔ .................... ....................

208.35 ............... Prompt Corrective Action .................................................................. .................... ✔ .................... ....................

325.105 ............. Prompt Corrective Action .................................................................. .................... .................... ✔ ....................

563.134 ............. Capital Distributions .......................................................................... .................... .................... .................... ✔

565 .................... Prompt Corrective Action .................................................................. .................... .................... .................... ✔

1Subsections (g) and (h) only.

2Applies only to insured federal branches of foreign banks.

3Applies only to insured state branches of foreign banks.

4See 12 CFR parts 337.3 and 349.3.

5See 12 CFR part 563.43.
63260 Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Rules and Regulations

By Order of the Board of Directors.

Dated at Washington, D.C., this 12th day of

November, 1997.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 97–30860 Filed 11–26–97; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 95–NM–29–AD; Amendment

39–10223; AD 97–24–16]

RIN 2120–AA64

Airworthiness Directives; Fokker

Model F28 Mark 0070 and 0100 Series

Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule.

SUMMARY: This amendment adopts a

new airworthiness directive (AD),

applicable to certain Fokker Model F28

Mark 0070 and 0100 series airplanes,

that requires a one-time operational test

of a certain pitot heating system, repair

or replacement of failed elements, and

repair or replacement of the pitot

heating system with a new improved

system. This amendment also requires

installation of new power supply wiring

with increased gauge thickness, and a

circuit breaker with an increased

amperage rating. This amendment is

prompted by the issuance of mandatory

continuing airworthiness information by

a foreign civil airworthiness authority.

The actions specified by this AD are

intended to prevent icing of the No. 1

pitot tube, which could result in failure

of the No. 1 Air Data Computer, or

output of erroneous airspeed data to all

on-side subsidiary systems, including

the Automatic Flight Control and

Augmentation System.

DATES: Effective January 2, 1998.

The incorporation by reference of

certain publications listed in the

regulations is approved by the Director

of the Federal Register as of January 2,

1998.

ADDRESSES: The service information

referenced in this AD may be obtained

from 95–NM–29–AD. This information

may be examined at the Federal

Aviation Administration (FAA),

Transport Airplane Directorate, Rules

Docket, 1601 Lind Avenue, SW.,

Renton, Washington; or at the Office of

the Federal Register, 800 North Capitol

Street, NW., suite 700, Washington, DC.

FOR FURTHER INFORMATION CONTACT:

International Branch, ANM–116, FAA,

Transport Airplane Directorate, 1601

Lind Avenue, SW., Renton, Washington

98055–4056; telephone (425) 227–2110;

fax (425) 227–1149.

SUPPLEMENTARY INFORMATION: A

proposal to amend part 39 of the Federal

Aviation Regulations (14 CFR part 39) to

include an airworthiness directive (AD)

that is applicable to certain Fokker

Model F28 Mark 0070 and 0100 series

airplanes was published as a

supplemental notice of proposed

rulemaking (NPRM) in the Federal

Register on February 3, 1997 (62 FR

4944). That action proposed to require

a one-time operational test of the No. 1

pitot heating system, repair or

replacement of failed elements, and

repair or replacement of the pitot

heating system with a new improved

system. That action also proposed to

require installation of new power

supply wiring with increased gauge

thickness, and a circuit breaker with an

increased amperage rating.

Interested persons have been afforded

an opportunity to participate in the

making of this amendment. Due

consideration has been given to the

comments received.

One commenter supports the

proposed rule.

Requests To Extend the Compliance

Time for Replacement of Pitot Tube

Two commenters request that the

compliance time, specified in paragraph

(b)(2) of the proposed AD, for

accomplishing the replacement of the

pitot tube and associated electrical

modifications be extended from the

proposed 18 months to 24 months. The

commenters state that such an extension

will allow the replacement to be

accomplished during a regularly

scheduled heavy maintenance check for

all but 7 of its affected airplanes, and

thereby minimize any additional

expenses that would be associated with

special scheduling.

The FAA does not concur with the

commenters’ request. In developing an

appropriate compliance time for this

action, the FAA considered not only the

degree of urgency associated with

addressing the subject unsafe condition,

but the manufacturer’s and foreign

airworthiness authority’s

recommendations as to an appropriate

compliance time, the availability of

required parts, and the practical aspect

of installing the required replacement

within an interval of time that parallels

the normal scheduled maintenance for

the majority of affected operators. The

FAA has determined that the

compliance time, as proposed,

represents the maximum interval of

time allowable for the affected airplanes

to continue to operate prior to

accomplishing the required replacement

without compromising safety. In

addition, the commenters have not

provided any data to substantiate why

an extension of the compliance time

would not compromise safety.

In consideration of all of these factors,

and in consideration of the amount of

time that has already elapsed since

issuance of the original NPRM, the FAA

has determined that further delay of this

modification is not appropriate.

However, under the provisions of

paragraph (d) of the final rule, the FAA

may approve requests for adjustments to

the compliance time if data are

submitted to substantiate that such an

adjustment would provide an acceptable

level of safety.

Conclusion

After careful review of the available

data, including the comments noted

above, the FAA has determined that air

safety and the public interest require the

adoption of the rule as proposed.

Cost Impact

The FAA estimates that 129 Fokker

Model F28 Mark 0100 and 0070 series

airplanes of U.S. registry will be affected

by this AD.

The required operational check will

take approximately 1 work hour per

airplane to accomplish, at an average

labor rate of $60 per work hour. Based

on these figures, the cost impact for the

operational check required by this AD

on U.S. operators is estimated to be

$7,740, or $60 per airplane.

The required replacement of the pitot

heating system will take approximately

36 work hours per airplane, at an

average labor rate of $60 per work hour.

Required parts will cost approximately

$16,000 per airplane. Based on these

figures, the cost impact of this

replacement required by this AD on U.S.

operators is estimated to be $18,160 per

airplane.

For airplanes on which replacement

of the pitot heating system has been

accomplished previously, the required

installation of the power supply

electrical wiring and circuit breaker will

take approximately 12 work hours per

airplane, at an average labor rate of $60

per work hour. Required parts will cost

approximately $350 per airplane. Based

on these figures, the cost impact is

estimated to be $1,070 per airplane.

The cost impact figures discussed

above are based on assumptions that no

operator has yet accomplished any of

the requirements of this AD action, and

that no operator would accomplish