[Federal Register Volume 89, Number 213 (Monday, November 4, 2024)]
[Notices]
[Pages 87608-87650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25568]


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NATIONAL CREDIT UNION ADMINISTRATION

[NCUA-2024-0135]


The NCUA Staff Draft 2025-2026 Budget Justification

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice.

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SUMMARY: The NCUA's staff draft ``detailed business-type budget'' is 
being made available for public review as required by Federal statute. 
The proposed resources will finance the agency's annual operations and 
capital projects, both of which are necessary for the agency to 
accomplish its mission of protecting the system of cooperative credit 
and its member-owners through effective chartering, supervision, 
regulation, and insurance. The briefing schedule and comment 
instructions are included in the supplementary information section.

DATES: Requests to deliver an in-person statement at the November 22, 
2024, budget briefing must be received on or before November 13, 2024. 
Written statements and presentations for those scheduled to appear at 
the budget briefing must be received on or before 1 p.m. Eastern, 
November 18, 2024.
    Written comments may be submitted by November 27, 2024.

ADDRESSES: You may submit comments by any of the following methods 
(please send comments by one method only):
    <bullet> In-person presentation at public budget briefing: submit 
requests to deliver a statement at the briefing to 
<a href="/cdn-cgi/l/email-protection#1d5f68797a78695f6f74787b74737a5d737e687c337a726b"><span class="__cf_email__" data-cfemail="c381b6a7a4a6b781b1aaa6a5aaada483ada0b6a2eda4acb5">[email protected]</span></a> by November 13, 2024. Include your name, title, 
affiliation, mailing address, email address, and telephone number. The 
NCUA Board Secretary will inform you by November 14, 2024, if you have 
been approved to make a presentation. In order to present at the public 
meeting, you must submit a statement. Your statement must be submitted 
to <a href="/cdn-cgi/l/email-protection#501225343735241222393536393e37103e3325317e373f26"><span class="__cf_email__" data-cfemail="cf8dbaaba8aabb8dbda6aaa9a6a1a88fa1acbaaee1a8a0b9">[email protected]</span></a> by 1 p.m. Eastern, November 18, 2024. Your 
presentation must be delivered in person at the public budget briefing. 
You will be allotted five minutes during the budget briefing to deliver 
your remarks.
    <bullet> Written comments without an in-person presentation: submit 
written comments by November 27, 2024, through the Federal eRulemaking 
Portal: https://www.regulations.gov. The docket number is NCUA-2024-
0135. Follow the instructions for submitting comments.
    <bullet> Copies of the NCUA Draft 2025-2026 Budget Justification 
and associated materials are also available on the NCUA website at 
https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx.

FOR FURTHER INFORMATION CONTACT: Eugene H. Schied, Chief Financial 
Officer, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428, or telephone: (703) 518-6571.

SUPPLEMENTARY INFORMATION: The following itemized list details the 
sections in this Notice made available for public review:

I. Introduction and Strategic Context
II. The NCUA Budget in Brief
III. Key Themes of the Proposed 2025-2026 Budget
IV. Operating Budget
V. Capital Budget
VI. Share Insurance Fund Administrative Budget
VII. Financing the NCUA's Programs
VIII. Appendix A: Supplemental Budget Information
IX. Appendix B: Capital Projects
X. Appendix C: Glossary of Terms and Acronyms

    Section 212 of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act amended 12 U.S.C. 1789(b)(1)(A) to require the NCUA 
Board (Board) to ``on an annual basis and prior to the submission of 
the detailed business-type budget make publicly available and publish 
in the Federal Register a draft of the detailed business-type budget.'' 
Although 12 U.S.C. 1789(b)(1)(A) requires publication of a ``business-
type budget'' only for the agency operations arising under the Federal 
Credit Union Act's subchapter on insurance activities, in the interest 
of transparency the Board is providing the NCUA's entire staff draft 
budget for 2025-2026 in this Notice.
    The staff draft budget details the resources required to support 
NCUA's mission. The staff draft budget includes personnel and dollar 
estimates for three major budget components: (1) the Operating Budget; 
(2) the Capital Budget; and (3) the Share Insurance Fund Administrative 
Budget. The

[[Page 87609]]

resources proposed in the staff draft budget are to carry out the 
agency's operations in 2025 and 2026. This document is a draft, staff-
level budget proposal made available to the NCUA Board members and the 
public for their consideration and comment. The NCUA Board directed the 
NCUA Executive Director to develop the staff draft budget under 
delegated authority. The staff draft budget may change based on public 
comments, Board member decisions, and staff's ongoing consideration of 
estimates and programs that impact the budget.
    The NCUA Chief Financial Officer will present the staff draft 
budget at a budget briefing open to the public and scheduled for 
Friday, November 22, 2024, at 10 a.m. eastern at the NCUA headquarters 
building, 1775 Duke Street, Alexandria, Virginia 22314. Interested 
parties unable to attend in person may visit the agency's homepage 
(https://www.ncua.gov/) to access the provided webcast link.
    If you wish to participate in the briefing and deliver a statement, 
you must email a request to <a href="/cdn-cgi/l/email-protection#d597a0b1b2b0a197a7bcb0b3bcbbb295bbb6a0b4fbb2baa3"><span class="__cf_email__" data-cfemail="9cdee9f8fbf9e8deeef5f9faf5f2fbdcf2ffe9fdb2fbf3ea">[email protected]</span></a> by November 13, 
2024. Your request must include your name, title, affiliation, mailing 
address, email address, and telephone number. Statements must be 
delivered in person at the briefing. The NCUA will work to accommodate 
as many public statements as possible at the November 22, 2024, budget 
briefing. The Board Secretary will inform you if you have been approved 
to make a presentation and you will be allotted five minutes during the 
budget briefing to deliver your remarks. A written copy of your 
statement must be delivered to the Board Secretary by email at by 1 
p.m. Eastern, November 18, 2024. In addition to delivering their 
remarks at the budget briefing, registered presenters will be provided 
the opportunity to ask questions of NCUA staff about the staff draft 
budget. The initial round of questions will be limited to five minutes 
per presenter, and one subsequent round of questions, limited to five 
minutes per presenter, may be permitted by the Chairman if time allows.
    Written comments on the staff draft budget will also be accepted by 
November 27, 2024, through the Federal eRulemaking Portal: https://www.regulations.gov. The docket number is NCUA-2024-0135. Commenters 
should follow the portal instructions for submitting comments.
    All comments should provide specific, actionable recommendations 
about the staff draft budget rather than general remarks. The NCUA 
Board will review and consider any comments from the public prior to 
approving the NCUA 2025-2026 budget.

    By the National Credit Union Administration Board on October 30, 
2024.
Melane Conyers-Ausbrooks,
Secretary of the Board.

I. Introduction and Strategic Context

About the NCUA

    Credit unions have provided financial services to their members for 
more than 100 years. Credit unions are not-for-profit financial 
cooperatives created to serve a membership with a common bond.
    In 1970, the U.S. Congress established the NCUA as an independent 
federal agency to regulate, charter, and supervise federal credit 
unions. The NCUA operates and manages the National Credit Union Share 
Insurance Fund (Share Insurance Fund) with the backing of the full 
faith and credit of the United States, insuring the deposits of the 
account holders in all federal credit unions and most state-chartered 
credit unions.
    As of June 30, 2024, the NCUA regulates and supervises 4,533 
federally insured credit unions, which have approximately 141 million 
members and more than $2.3 trillion in assets across all states and 
U.S. territories.\1\
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    \1\ Source: NCUA quarterly call report data, second quarter 
2024.
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Statutory Authority

    Pursuant to the Federal Credit Union Act, authority for NCUA 
management is vested in the NCUA Board. The Board determines the 
resources needed for carrying out the NCUA's responsibilities under the 
Act.\2\ The Board is authorized to expend such funds and perform such 
other functions or acts as it deems necessary or appropriate, per the 
rules, regulations, or policies it establishes.\3\
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    \2\ See 12 United States Code (U.S.C.) 1752a(a).
    \3\ See 12 U.S.C. 1766(i)(2).
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    Upon determination of the budgeted annual expenses for the agency's 
operations, the Board determines a fee schedule to assess federal 
credit unions. The Board considers federal credit unions' ability to 
pay such a fee and the necessity of the expenses the NCUA will incur in 
carrying out its responsibilities in connection with federal credit 
unions.\4\ In December 2023, the Board approved a notice with changes 
to its methodology for determining the operating fees due from federal 
credit unions.\5\
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    \4\ See 12 U.S.C. 1755(a)-(b).
    \5\ See https://www.federalregister.gov/d/2023-28303.
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    Pursuant to the law, the NCUA deposits fees collected are deposited 
in the agency's Operating Fund at the Treasury of the United States, 
and those fees are expended by the Board to defray the cost of carrying 
out the agency's operations, including the examination and supervision 
of federal credit unions.\6\ Per its authority to use the Share 
Insurance Fund to carry out its insurance-related responsibilities, the 
Board approved an Overhead Transfer Rate (OTR) methodology and 
authorized the Office of the Chief Financial Officer to transfer 
resources from the Share Insurance Fund to the Operating Fund to 
account for insurance-related expenses.\7\
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    \6\ See 12 U.S.C. 1755(d).
    \7\ See 12 U.S.C. 1783(a).
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Mission, Goals, and Strategy

    The proposed budget for 2025-2026 supports the NCUA's fourth year 
implementing its 2022-2026 Strategic Plan. Throughout 2025 and 2026, 
the agency will continue fulfilling its mission of ``protecting the 
system of cooperative credit and its member-owners through effective 
chartering, supervision, regulation, and insurance.'' The agency's 
three strategic goals are:
    <bullet> Ensure a safe, sound, and viable system of cooperative 
credit that protects consumers.
    <bullet> Improve the financial well-being of individuals and 
communities through access to affordable and equitable financial 
products and services.
    <bullet> Maximize organizational performance to enable mission 
success.
    The NCUA's strategic plan is the foundation for the agency's 
performance management and resource allocation processes. The annual 
performance plan functions as the agency's operational plan for each 
calendar year. It outlines the annual or short-term objectives, 
strategies, and corresponding performance goals and activities that 
contribute to the accomplishment of the agency's strategic goals. The 
NCUA budget provides the resources necessary for the agency to 
implement its strategic priorities and related programs and activities, 
to identify key challenges facing the credit union industry, and to 
leverage agency strengths to help credit unions address those 
challenges.
    Appendix A provides additional information about how the budget 
aligns to the NCUA's strategic goals.

The NCUA's Annual Budget Process

    Each regional and central office director at the NCUA develops an 
initial budget request identifying the resources necessary for their 
office to support the agency's mission, goals, and objectives. These 
budgets are developed to ensure

[[Page 87610]]

requirements are individually justified and remain consistent with the 
agency's overall strategic framework. This effort also includes a 
field-level review of every federally insured credit union to estimate 
the workload to carry out credit union examinations in the forthcoming 
year, which is translated into the cost of the staff and associated 
expenses necessary to meet the agency's safety and soundness goals. In 
addition to this workload analysis, each NCUA office estimates its 
fixed and recurring expenses, such as for employee travel, rental 
payments for leased property, operations and maintenance for owned 
facilities or equipment, supplies, telecommunications services, major 
capital investments, and other administrative and contracted services 
costs.
    The Office of the Chief Financial Officer presents draft budgets to 
the public on the agency's website and in the Federal Register as part 
of the NCUA Board's commitment to transparency in the agency's 
budgeting processes. The Board also holds a public briefing about the 
draft budget and facilitates dialog between public stakeholders and 
NCUA staff to develop a common understanding of the agency's resource 
needs. The NCUA is the only Financial Institutions Reform, Recovery, 
and Enforcement Act agency that releases such a detailed draft budget 
and solicits public comments on it.
    The NCUA Board reviews the comments from the public about the draft 
budget and makes revisions in response to stakeholder views, individual 
Board office priorities, and changing economic conditions. The Board 
then approves the final budget levels and the associated OTR and the 
operating fees paid by credit unions to finance the agency's programs.

II. The NCUA Budget in Brief

Proposed 2025 and 2026 Budgets

    The NCUA 2022-2026 Strategic Plan sets forth the agency's goals and 
objectives that drive the agency's resource needs and allocations. The 
agency's annual budgets provide the resources to execute the strategic 
plan, to implement important initiatives, and to undertake the NCUA's 
major programs: examination and supervision, insurance, credit union 
development, consumer financial protection, and asset management.\8\
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    \8\ Budget information presented in this document excludes 
funding for the CLF, which has its own budget reviewed and decided 
upon separately by the CLF Board.
[GRAPHIC] [TIFF OMITTED] TN04NO24.017

    The NCUA's 2025-2026 staff draft budget justification includes 
three separate budgets: the Operating Budget, the Capital Budget, and 
the Share Insurance Fund Administrative Expenses Budget. Combined, 
these three budgets total $433.0 million for 2025, which is $0.3 
million lower than the $433.3 million 2025 funding level approved by 
the NCUA Board as part of the two-year 2024-2025 budget.
    Three significant factors, when combined, account for most of the 
12.2 percent increase in the total budget between 2024 and 2025:
    1. An increase of $25.9 million in funding for contracted services 
for 2025 compared to 2024. Of this amount, approximately $18.0 million 
results from a lower 2024 surplus carried over as part of the 2025 
budget when compared to the surplus carried over from 2023 as part of 
the 2024 budget. Of the residual $7.9 million increase for contracted 
services, much of the additional funding will address new and evolving 
operational risks such as cybersecurity threats and for tools used to 
identify and resolve credit union system risk concerns such as interest 
rate risk, credit risk, and industry concentration risk. Growth in the 
contracted services budget category also results from new operations 
and maintenance costs for recently delivered capital investments. Other 
increased costs include general price inflation for core agency 
business operation systems such as accounting and payroll processing 
and various other recurring support costs.
    2. An increase of $19.5 million for current employee compensation 
in 2025 compared to 2024. This increase accounts for merit pay raises 
for the NCUA's employees as required by the Collective Bargaining 
Agreement and expected inflationary cost increases for employee 
benefits.
    3. A proposed increase of 14 positions compared to 2024, which 
equates to a headcount increase of 10 positions and four positions 
approved by the NCUA Board in the 2024 budget for 2025. Of

[[Page 87611]]

the 10 positions recommended in the staff draft budget, eight are new 
positions and the remaining two are existing positions currently 
unfunded in the 2024 budget.\9\ Explanations for each of the proposed 
new positions are included later in this document.
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    \9\ These positions are also known as ``overhire'' positions and 
are funded by surplus pay and benefits budgets that result from 
vacancies.
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Proposed 2025 Operating Budget: $419.3 Million
    The following chart presents the major categories of spending 
supported by the proposed 2025 Operating Budget.
[GRAPHIC] [TIFF OMITTED] TN04NO24.018

    As shown in the following chart, the relative size of the NCUA 
budget (dotted line) has generally decreased when compared to balance 
sheets at federally insured credit unions (FICU, solid line).
BILLING CODE 7535-01-P

[[Page 87612]]

[GRAPHIC] [TIFF OMITTED] TN04NO24.019

Proposed 2026 Operating Budget: $450.6 Million
    The Operating Budget estimate for 2026 is $450.6 million and 
includes 11 additional positions compared to the 2025 level.

[[Page 87613]]

[GRAPHIC] [TIFF OMITTED] TN04NO24.020


[[Page 87614]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.021

BILLING CODE 7535-01-C
Proposed 2025 Capital Budget: $8.2 Million
    The proposed 2025 Capital Budget is $2.0 million higher than the 
2024 Board-approved budget.
    The Capital Budget supports the NCUA's ongoing effort to modernize 
its IT infrastructure and applications. Funding in the Capital Budget 
for upgrades to or replacement of obsolete IT systems is higher in 2025 
than in 2024 and includes an increase in capital investment for 
cyclical system updates to the Modern Examination and Risk 
Identification Tool (MERIT) examination system. Other IT investments in 
the proposed 2025 Capital Budget include funds to ensure that agency 
systems comply with evolving cybersecurity requirements required of all 
federal agencies, enhancements to agency information security, 
investments to begin transitioning legacy hardware to a cloud-based 
storage environment, and various hardware investments to refresh agency 
networks and ensure staff have the tools necessary to achieve the 
agency's mission.
    The Capital Budget also includes $480,000 for NCUA facility 
maintenance and improvements.
Proposed 2025 Share Insurance Fund Administrative Expenses: $5.5 
Million
    The proposed 2025 Share Insurance Fund Administrative Expenses 
Budget is $0.4 million higher than the 2024 Board-approved budget. The 
Share Insurance Fund Administrative Expenses Budget funds the tools and 
technology used by the Office of National Examinations and Supervision 
(ONES) to oversee credit union-run stress testing for the largest 
credit unions, travel for state examiners attending NCUA-sponsored 
training, audit support for the Share Insurance Fund's financial 
statements, and certain insurance-related expenses for Asset

[[Page 87615]]

Management and Assistance Center (AMAC) operations.

III. Key Themes of the Proposed 2025-2026 Budget

Overview

    The proposed 2025-2026 budget includes funding for the NCUA to 
increase staffing in critical areas necessary to operate as an 
effective federal financial regulator capable of addressing emerging 
issues and responding to changes in economic conditions that may impact 
the credit union system.
    The percentage of insured shares in credit unions with composite 
Capital adequacy, Asset quality, Management, Earnings, Liquidity risk, 
and Sensitivity to market risk (CAMELS) ratings 1 and 2 has decreased 
each quarter since December 2021.\10\ Between the reporting periods of 
December 31, 2021, and June 30, 2024, credit unions with composite 
CAMELS 4 and 5 ratings and total assets greater than $500 million 
increased from 2 to 9, while these credit unions' insured shares 
increased from $4.4 billion to $13.8 billion--an increase of 214 
percent. During the same period, credit unions with composite CAMELS 3 
ratings and assets greater than $500 million increased from 15 to 66, 
and their insured shares increased from $11.3 billion to $127.0 
billion--an increase of 1,024 percent. Under the agency's rules, credit 
unions with total assets greater than $500 million are considered 
complex. Liquidations of such complex credit unions would cause greater 
losses for the Share Insurance Fund than non-complex credit unions.
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    \10\ The NCUA's composite CAMELS rating consists of an 
assessment of a credit union's Capital adequacy, Asset quality, 
Management, Earnings, Liquidity risk, and Sensitivity to market 
risk. The CAMELS rating system is designed to consider and reflect 
all significant financial, operational and management factors field 
staff assess in their valuation of credit unions' performance and 
risk profiles. CAMELS ratings range from 1 to 5, with 1 being the 
best rating. Credit unions with a composite CAMELS rating of 3 
exhibit some degree of supervisory concern in one or more 
components. CAMELS 4 credit unions generally exhibit unsafe or 
unsound practices, and CAMELS 5 institutions demonstrate extremely 
unsafe or unsound practices and conditions. The NCUA collectively 
refers to CAMELS 4 and 5 credit unions as ``troubled credit 
unions.''
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    The NCUA must have the necessary resources to continue to monitor 
credit union performance and mitigate risks at these complex credit 
unions and all other non-complex credit unions through the examination 
process, offsite monitoring, and tailored supervision, consistent with 
its mission.
    The NCUA employees are the agency's most valuable resource for 
achieving its mission. The agency is committed to maintaining a 
workforce with integrity, accountability, transparency, inclusion, and 
proficiency.\11\ The NCUA will continue investing in its workforce 
through training and development, ensuring employees have the skills 
they need to work effectively. These investments will also facilitate 
the agency's succession planning as it undertakes a generational 
leadership shift as the Baby Boom cohort retires.
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    \11\ See https://ncua.gov/files/agenda-items/strategic-plan-20220317.pdf, page 6.
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    The proposed 2025-2026 budget includes investments across a range 
of NCUA priorities, including:
    <bullet> Ensuring robust cybersecurity in the credit union system 
and at the agency.
    <bullet> Continuing to strengthen and mature analytic capabilities 
and capacity in the areas of fraud and anti-money laundering, 
quantitative analytics and stress testing, and climate-related 
financial risk.
    <bullet> Recalibrating examination and supervisory oversight over 
credit unions based on a prioritization of the risks presented to the 
system.
    <bullet> Providing program and staff resources to increase 
assistance to small credit unions and credit unions designated as 
minority depository institutions (MDIs).
    <bullet> Expanding the resources allocated to the NCUA's 
examination of credit unions' compliance with consumer financial 
protection laws and regulations.
    <bullet> Investing in information technology systems and 
infrastructure to bolster the NCUA's supervisory capabilities.
    The efficiency and effectiveness of the agency's workforce depends 
upon the availability of modern analytical tools and the resiliency of 
the NCUA's information technology systems. The NCUA is committed to 
implementing its new technology responsibly and delivering secure, 
reliable, and innovative solutions. The investments funded in the 
NCUA's Capital Budget will provide the tools and technology the 
workforce needs to achieve the NCUA mission.

Cybersecurity

    The NCUA's cybersecurity program focuses on two main efforts: 
supervision of credit union cybersecurity programs and protection of 
the agency's systems, assets, data, and mission capabilities.
    Cyberattacks continue to pose significant and growing risks to all 
organizations. The NCUA places credit union cybersecurity as a top 
enterprise and supervisory priority because of continued attacks on the 
nation's financial sector and the broader national critical 
infrastructure.

Supervision of Credit Union Cybersecurity

    The NCUA engages in interagency cybersecurity preparedness as a 
member of the FFIEC and of the Financial and Banking Information 
Infrastructure Committee. The NCUA monitors cyber threats identified by 
federal and non-federal sources and shares relevant information about 
them with the credit union industry and financial sector partners.
    The NCUA maintains a team within the Office of Examination and 
Insurance dedicated to developing and maintaining supervisory policies, 
procedures, and tools and examiner training for cybersecurity. The 
regions and the ONES employ highly trained regional information 
security specialists for information security examinations and 
supervision of credit unions.
    All credit unions will periodically receive an information security 
examination as part of the agency's new Information Security 
Examination program (ISE). The ISE uses a risk-focused approach to 
examine credit unions' information security, providing examiners 
flexibility to focus on areas of material current or potential risk 
relevant to each credit union's unique business model. The objectives 
of an information security examination include:
    <bullet> Evaluating management's ability to recognize, assess, 
monitor, and manage information systems and technology-related risks.
    <bullet> Assessing whether the credit union has sufficient 
expertise to adequately plan, direct, and manage information systems 
and technology operations.
    <bullet> Determining whether the board of directors has adopted and 
implemented adequate information systems and technology-related 
policies and procedures.\12\
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    \12\ See https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/board-director-engagement-cybersecurity-oversight.
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    <bullet> Evaluating the adequacy of internal information systems 
and technology controls and oversight to safeguard member information.
    The NCUA built and maintains the Automated Cybersecurity Evaluation 
Toolbox (ACET) to help credit unions voluntarily assess their level of 
cybersecurity preparedness. The tool incorporates appropriate 
cybersecurity standards and practices established for financial 
institutions. The tool maps each of its declarative statements to the

[[Page 87616]]

practices found in the FFIEC Information Technology Examination 
Handbook, regulatory guidance, and leading industry standards like the 
National Institute of Standards and Technology's (NIST) Cybersecurity 
Framework. The ACET also provides a plain-language explanation and 
references for each of the statements included within the assessment.
    Enhanced and continuing examiner training related to information 
security and evolving cyber risks is planned for 2025.

Protection of the Agency's Information and Systems

    The NCUA's approach to agency cybersecurity is based on 
requirements established by federal statute such as the Federal 
Information Security Management and Federal Information Security 
Modernization Act (FISMA), and government-wide policy such as the 
NIST's Cybersecurity Framework, and Executive Order (E.O.) 14028, 
Improving the Nation's Cybersecurity. Based upon the most recent FISMA 
reporting metrics, the NCUA earned a Level 4 maturity rating for its 
information security program. This is the highest rating the NCUA has 
earned to date and demonstrates the agency's commitment a strong 
cybersecurity posture that mitigates risk and protects sensitive data. 
The proposed 2025 budget includes over $22 million for the cost of 
compliance with and implementation of these requirements, of which $3.2 
million is budgeted for capital investments. Many government 
cybersecurity requirements are not necessarily expected of non-
governmental entities; however, as a federal agency the NCUA must carry 
them out.

Examination Workforce

    In 2021, a cross-agency working group at the NCUA conducted an 
internal review to determine the appropriate level of specialist 
positions required to ensure compliance with the Bank Secrecy Act (BSA) 
and consumer financial protection laws and regulations. The review 
evaluated staffing needs for three potential regional specialist groups 
in the areas of electronic payment systems, consumer compliance, and 
the BSA. Unlike other specialist areas where credit union asset size is 
a reasonable basis for allocating supervisory resources, BSA and 
consumer compliance risks are not necessarily concentrated in a 
particular asset group.
    Since this review, the NCUA added specialist positions to each of 
the regions in two separate phases. These new specialist positions were 
offset by a reduction in general examiner positions throughout the 
regions. These positions are now fully annualized in the 2025 budget 
and no new specialist positions are proposed in the 2025 budget. The 
proposed 2025 budget recommends a net reduction of 10 positions across 
the NCUA's three regions. The draft budget is based on certain 
adjustments to the examination program that result in a net decrease in 
the staff time required to carry out the examination program. These 
changes would provide incentives for federally insured credit unions 
with assets between $1 billion and $10 billion to remain very sound. In 
return, sound practices at credit unions would allow the regions more 
flexibility to work with state regulators on coordinating joint 
examinations and reduce the time between exams for certain federal 
credit unions whose practices and management necessitate closer 
scrutiny. These changes would also result in a further cycle-time 
extension between exams for well-managed and well-capitalized smaller 
and mid-sized credit unions.

Support for Small Credit Unions and Minority Depository Institutions

    Small credit unions with less than $100 million in assets and MDIs 
are uniquely positioned to improve financial inclusion by offering 
their communities access to safe, fair, and affordable credit and other 
services. The NCUA's Small Credit Union and MDI Support Program is 
designed to support and preserve these credit unions. This program 
provides dedicated resource hours for field staff to conduct this 
important work, and the proposed 2025 budget continues to support this 
important effort.
    Program assistance focuses on identifying available resources, 
providing training and guidance, and supporting credit union management 
in their efforts to address operational matters. Additional benefits of 
the program include:
    <bullet> Building greater awareness of the unique needs of small 
credit unions and MDIs and their role serving underserved communities.
    <bullet> Expanding opportunities for these credit unions to receive 
support through NCUA grants, training, and other initiatives.
    <bullet> Furthering partnerships with organizations and industry 
mentors that can support small credit unions and MDIs.

Fair Lending and Consumer Financial Protection

    The NCUA's consumer financial protection program supports the 
agency's statutory responsibility and strategic goal of ensuring a 
safe, sound, and viable system of cooperative credit that protects 
consumers. Within the division of fair lending supervision, NCUA staff 
conduct targeted fair lending examinations at federal credit unions to 
assess compliance with federal fair lending laws and regulations. These 
reviews are critical to identifying discriminatory lending patterns or 
practices and to reducing barriers to economic equity. Past 
examinations conducted by NCUA examiners have identified patterns or 
practices of discrimination violations, illegal race-based redlining, 
indirect lending pricing concerns, systemic Home Mortgage Disclosure 
Act violations, Regulation B notification and government monitoring 
information violations, and numerous instances of inadequate fair 
lending compliance management systems, including those related to 
discrimination based on age and marital status.
    In 2024, the NCUA joined the other Federal Financial Institution 
Examination Council agencies to issue a statement of examination 
principles related to valuation discrimination and bias in residential 
real estate lending. The staff draft budget includes funding for the 
current division of fair lending supervision and for one new program 
officer who will help to develop Home Mortgage Disclosure Act analyses 
and examinations, oversee the annual fair lending examination selection 
process through outlier analysis, and fulfill fair lending speaking and 
Freedom of Information Act requests submitted by the public.
    The agency is also engaged in a project to develop an expanded 
consumer compliance examination and enforcement program. That project 
will develop and be implemented over the course of several years.

Chartering Investments

    Credit unions are an important part of the financial services 
industry and can play a key role in helping families achieve financial 
freedom by building generational wealth, aiding entrepreneurs in 
starting a business, and helping to create jobs and strengthen 
communities. To extend financial services to more individuals and 
communities, the 2025 capital budget supports a multi-year process 
automation project to implement an external facing portal that will 
make it

[[Page 87617]]

easier for organizing groups to submit new charter applications. When 
this project is complete, organizing groups will be able to upload 
forms and supporting files and track the status of their submissions 
through an intuitive, user-friendly interface, significantly reducing 
the time to process these requests.

IT Enhancements: MERIT and Cloud Migration

    Two information technology investments in the 2025 budget support 
efforts to create cost efficiencies and avoid cost escalation in future 
years.
    The NCUA recompeted the operations and maintenance contract for 
NCUA's examination platform in 2024. The new contract reduced the 
estimated cost of core MERIT Operations and Maintenance (O&M) support 
activities by $1.7 million for the 2025 operating budget when compared 
to the cost of the previous support vendor.
    Migrating to a cloud computing environment offers significant 
advantages by enhancing efficiencies and improving security. By moving 
IT services from physical datacenters to cloud service providers, the 
NCUA can lower the risk and expense of maintaining physical 
infrastructure such as servers, storage, and networking equipment. 
Cloud infrastructure also enables faster and more efficient deployment 
of new services and system upgrades. This scalability leads to greater 
operational flexibility, reducing the time and cost of managing 
information technology operations. Furthermore, cloud service providers 
offer advanced cybersecurity measures, ensuring that data is protected 
with the latest encryption and security standards, enhancing the 
reliability and security of the NCUA's information technology 
environment. By leveraging cloud services, the NCUA can focus its 
resources on innovation and mission-critical tasks, rather than on 
costly and resource-intensive management of physical infrastructure.

NCUA Organizational Changes

    The staff draft budget proposes a new Office of the Executive 
Secretary, which is a common function in many other federal agencies. 
The new office will centralize responsibility for the NCUA's policy 
review and decision-making processes, coordinate the clearance and 
submission of all policy documents to the Chairman and the NCUA Board, 
as appropriate, for review and approval, and facilitate discussions 
between the NCUA's program offices to align appropriate policies, among 
other things. Policy documents include regulations, recommendation 
memos, action memos, briefing memos, responses to correspondence, 
reports to Congress, and other policy documents. Appendix A includes a 
separate table illustrating the budget for the proposed Office of the 
Executive Secretary.

IV. Operating Budget

Overview

    The NCUA Operating Budget provides the resources required for the 
agency to conduct activities prescribed by the Federal Credit Union 
Act. These mandates include: (1) chartering new federal credit unions; 
(2) approving field of membership applications of federal credit 
unions; (3) promulgating regulations and providing guidance; (4) 
performing regulatory compliance and safety and soundness examinations; 
(5) implementing and administering enforcement actions, such as 
prohibition orders, orders to cease and desist, orders of 
conservatorship and orders of liquidation; and (6) administering the 
Share Insurance Fund. The NCUA must also implement mandates required by 
other statutes including those related to BSA compliance, consumer 
financial protection, and diversity, equity, and inclusion.

Operating Budget Categories

    There are five major expenditure categories in the Operating 
Budget. This section explains how these expenditures support the NCUA's 
operations and presents an overview of the Operating Budget.
[GRAPHIC] [TIFF OMITTED] TN04NO24.022

    Pay and Benefits. Pay and benefits increase by $19.5 million in 
2025, or 6.7 percent compared to 2024, for a total of $312.3 million. 
Pay and benefits costs make up approximately 74.5 percent of the annual 
NCUA Operating Budget. There are four primary drivers of increased 
costs in 2025 for the pay and benefits category:
    <bullet> Merit and locality pay increases for the NCUA's employees 
are paid per the agency's Collective Bargaining Agreement (CBA) and its 
merit-based pay system.
    <bullet> Contributions for employee retirement to the Federal 
Employee Retirement System (FERS), which are set by the U.S. Office of 
Personnel Management (OPM) based on actuarial estimates and cannot be 
negotiated or changed by the NCUA. The mandatory FERS contribution rate 
increases total NCUA benefits costs by 2.7 percent in 2025 compared to 
2024. OPM's current assumptions for actuarial valuation of FERS remain 
unchanged in 2025 but remain a cost driver for the agency's pay and 
benefits growth. Because the NCUA must contribute 18.4 percent of

[[Page 87618]]

employee salaries to the retirement fund in 2025, the estimated impact 
on the NCUA budget is an increase of approximately $2.5 million in 
mandatory payments.
    <bullet> Contributions for employee health insurance are also set 
by OPM. This insurance contribution increases total NCUA benefits costs 
by 1.3 percent in 2025 compared to 2024. The annual OPM estimate for 
the 2025 government share of the Federal Employees Health Benefits 
Program (FEHBP) premiums is expected to be released in October 2024, 
and the budget will be updated if there are material changes to FEHBP 
costs estimates.
    <bullet> The employee salary and benefits category includes costs 
associated with other mandatory employer contributions such as Social 
Security, Medicare, transportation subsidies, unemployment, and 
workers' compensation. The limit on employee earnings subject to Social 
Security taxes increased in 2025 and applies to all employers in the 
United States. The projected additional employer Social Security 
contributions that result from this increase account for approximately 
one percent of the total adjustment to employee salaries.
    Attracting a well-qualified workforce requires the agency to pay 
competitive salaries. In 2025, the NCUA's compensation levels will 
continue to ``maintain comparability with other federal bank regulatory 
agencies'' as required by the Federal Credit Union Act.\13\ More than 
85 percent of the NCUA workforce has earned a bachelor's degree or 
higher, compared to approximately 35 percent of the private-sector 
workforce.
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    \13\ The Federal Credit Union Act states that, ``In setting and 
adjusting the total amount of compensation and benefits for 
employees of the Board, the Board shall seek to maintain 
comparability with other federal bank regulatory agencies.'' See 12 
U.S.C. 1766(j)(2).
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    The pay and benefits budget includes all employee pay raises for 
2025, such as merit and locality increases consistent with the CBA in 
place for 2024, and those for promotions, reassignments, and other 
changes, as described below. Consistent with other federal pay systems, 
the NCUA's compensation includes base pay and locality pay components.
    The proposed 2025 Operating Budget supports a total agency staffing 
level of 1,261 positions.\14\ This is a net increase of 14 positions, 
or 1.1 percent, compared to the agency's 2024 staffing level. The net 
increase includes 12 new positions, four of which were approved by the 
NCUA Board in the 2024 budget for 2025 and incorporates into the 2025 
budget two existing positions currently unfunded in the 2024 budget. 
The first-year cost of the 12 net new positions for 2025 is estimated 
to be approximately $1.9 million. The cost for 2025 of the two existing 
positions currently unfunded is estimated to be approximately $0.7 
million.
---------------------------------------------------------------------------

    \14\ Does not include five positions assigned to the CLF.
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    The proposed 2025-2026 draft budget includes funding for the NCUA 
to increase permanent staffing in critical areas necessary to operate 
more effectively and address emerging risks. The staffing levels 
proposed for 2025 also reflect the resource requirements that support 
the NCUA's continued efforts to ensure its examination processes keep 
pace with the growing scale and complexity of the credit union system 
while the agency enhances the efficiency and effectiveness of its 
supervisory efforts.
    The following chart illustrates the NCUA's staffing levels in 
recent years.
BILLING CODE 7535-01-P
[GRAPHIC] [TIFF OMITTED] TN04NO24.023


[[Page 87619]]


BILLING CODE 7535-01-C
    The proposed changes for the NCUA's 2025 staffing level include:
    <bullet> Reducing the number of generalist examiners by a net of 
eight positions across the NCUA's three regional offices, including the 
reduction of one supervisory examiner.
    <bullet> Adding two new Division of Supervision Director positions 
(one each in the Eastern and Western regions) while simultaneously 
reducing the number of regional Division of Supervision Deputy Director 
positions by four positions. The net change in regional staff is a 
reduction of two positions.
    <bullet> Creating a new Office of the Executive Secretary with two 
dedicated staff positions authorized for 2025 and a third position for 
2026. This office will centralize responsibility for coordinating the 
review of documents, related decision-making processes, and the 
clearance and submission of all documents to the NCUA Board members, as 
appropriate.
    <bullet> Increasing ONES by three positions. The three new 
positions include a supervisor for the capital planning and stress 
testing division, a financial data analyst, and a new executive 
position to lead the financial risk management team. Additionally, 
three positions are recommended for 2026: one national credit union 
examiner, one national lending specialist, and one national payment 
systems officer.
    <bullet> Increasing the Office of Business Innovation by two 
positions. The new positions include one artificial intelligence (AI) 
officer and one business innovation officer. Additionally, two new AI 
officers are recommended for 2026.
    <bullet> Adding one new senior Equal Employment Opportunity (EEO) 
specialist in the Office of Minority and Women Inclusion.
    <bullet> Increasing the Office of Consumer Financial Protection 
(OCFP) by three positions. The new positions include one consumer 
affairs specialist, one fair lending program officer, and a new 
division director in 2025.
    <bullet> Increasing the Office of Examination and Insurance by 
three positions. The new positions include two new fraud officers and 
one climate financial risk officer in 2025. Additionally, one new 
systems officer is recommended for 2026.
    <bullet> Increasing the Office of External Affairs and 
Communications by three positions. The new positions include one 
section 508 compliance manager and two division directors in 2025. 
Additionally, two new positions are recommended for 2026. These include 
one technical writer/editor and one stakeholder relations specialist.
    <bullet> Funding two positions previously unfunded but authorized 
within the total NCUA staffing plan. These positions are both within 
the Office of Human Resources.
    The proposed 2026 budget for pay and benefits is estimated at 
$329.2 million, a $16.9 million increase from the 2025 level. Included 
within this total is the full-year cost impact of new positions 
proposed for 2025 (approximately $4 million), $1.6 million for 11 new 
positions (three in ONES, two in the Office of Business Innovation, two 
in the Office of General Counsel, two in the Office of External Affairs 
and Communications, one in the Office of the Executive Secretary, and 
one in the Office of Examination and Insurance). The 2026 budget for 
pay and benefits also includes projected merit and locality pay 
increases consistent with recent compensation agreements (approximately 
$8.8 million), and associated increases in benefits for all employees 
(approximately $2.5 million).
    Travel. The proposed travel budget increases by $2.1 million, or 
10.5 percent, compared to 2024, for a total of $22.1 million. The 
travel cost category includes expenses for employees' airfare, lodging, 
meals, auto rentals, reimbursements for privately owned vehicle usage, 
and other travel-related expenses. These are necessary expenses for 
examiners' onsite work in credit unions. Close to two-thirds of the 
NCUA's workforce is comprised of field staff who spend part of their 
time traveling to conduct the examination and supervision program. The 
NCUA staff also travel for routine and specialized training and other 
work assignments.
    During the COVID-19 pandemic, the NCUA and its employees 
transitioned to an offsite examination posture, developing new 
procedures and processes to continue examination and supervisory work. 
In 2025, the NCUA will continue to conduct portions of examinations 
offsite, which is expected to constrain the growth of future travel 
budgets. Nevertheless, per trip costs have increased in recent years 
due to price inflation across the U.S. economy. Despite the projected 
growth in travel expenses for 2025, the total budget for travel is 
approximately $4.7 million, or 17.4 percent, below the pre-pandemic 
2019 travel budget of $26.8 million.
    The proposed 2026 budget for travel is estimated at $24.2 million, 
a 9.5 percent increase compared to the 2025 level. This budget level 
reflects an expectation for continued travel-related cost inflation and 
travel to support a national training conference planned for 2026.
    Rent, Communications, and Utilities. The proposed budget for rent, 
communications, and utilities decreases by $0.3 million in 2025, or 4.3 
percent compared to 2024, for a budget of $6.8 million. The 2025 
decrease is largely driven by a one-time reduction in the first-year 
rent for the new Southern Region office lease.
    Funding within this budget category pays for facilities-related 
costs, telecommunications services, data storage, and information 
technology network support. Telecommunications charges include leased 
data lines and data service subscriptions, Voice over Internet Protocol 
and mobile telephony, and other network charges. Facilities-related 
budgets pay for the cost of the office leases, utilities, rental of the 
disaster recovery and continuity of operations sites, meeting space 
rental for offsite events, and postage.
    The proposed 2026 budget for the rent, communications, and 
utilities category is $7.9 million, or a 15.4 percent increase compared 
to 2025. The full, second-year cost of the Southern Region office lease 
is the primary driver for this increase.
    Administrative Expenses. The draft budget proposes a $2.4 million 
decrease in administrative expenses for 2025, which is a reduction of 
31.8 percent compared to 2024, for a budget of $5.1 million. The 2025 
decrease is driven almost entirely by reclassifying the $2.4 million 
Federal Financial Institutions Examinations Council costs from this 
budget category to the contracted services budget category, which more 
accurately captures the nature of this spending.
    Recurring costs in the administrative expenses category include 
employee relocation expenses, recruitment and advertising expenses, 
shipping, printing, subscriptions, examiner training and meeting 
supplies, office furniture, and employee supplies and materials. The 
NCUA pays relocation costs to employees who are competitively selected 
for a promotion or new job within the agency in a different geographic 
area than where they live.
    The proposed 2026 budget for administrative expenses is $5.9 
million, an increase of $0.8 million, or 14.7 percent increase from the 
level proposed in the 2025 budget. The costs associated with a planned 
agency-wide National Training Conference is the major contributor to 
the budget increase.
    Contracted Services. The proposed budget for contracted services 
increases by $25.9 million in 2025, or 55.1

[[Page 87620]]

percent compared to 2024, for a total budget of $73.0 million.\15\ A 
significant portion of the growth in this budget results from the 
assumption that approximately $18.0 million in 2024 contracted services 
funded by carryover budget surplus from previous years will not be 
available for 2025. Since 2021, the NCUA has used unspent budget 
amounts from previous years to reduce its budget levels in the 
following year.
---------------------------------------------------------------------------

    \15\ The total budget for Contracted Services in 2025 before 
offsets of prior year unspent funds is estimated to be $78.0 
million.
---------------------------------------------------------------------------

    The remaining $7.9 million of budgetary growth is driven by a 
combination of factors, including operations and maintenance costs for 
newly delivered capital projects, inflationary cost increases for 
contracted services, and additional analytic and operational tools 
necessary to address cybersecurity threats and growing complexity and 
risk in the credit union system.
    Acquiring specific expertise or services from contract providers is 
often the most cost-effective way for the NCUA to accomplish its 
mission. Such services include critical mission support such as 
information technology equipment and software development, accounting 
and auditing services, and specialized subject matter expertise that 
enable staff to focus on executing core mission requirements. Most of 
the funding in the contracted services category supports the NCUA's 
supervision framework, including tools used to identify and address 
risk concerns such as interest rate risk, credit risk, and industry 
concentration risk.
    Growth in the contracted services budget category also results from 
new operations and maintenance costs for deployed capital investment 
projects. Other costs include core NCUA business operation systems such 
as accounting and payroll processing, and various recurring costs, as 
described in the following seven major categories:

<bullet> Information Technology Operations and Maintenance (44.9 
percent of contracted services)
    --IT network support services and help desk support
    --Contractor program and web support and network and equipment 
maintenance services
    --Administration of software products such as Microsoft Office, 
SharePoint, and audio-visual services
<bullet> Administrative Support and Other Services (22.2 percent of 
contracted services)
    --Examination and supervision program support
    --Technical support for examination and cybersecurity training 
programs
    --Equipment maintenance services
    --Legal services and other expert consulting support
    --FFIEC reimbursements
<bullet> IT Security (14.2 percent of contracted services)
    --Secure data storage and operations
    --Information security programs
    --Security system assessment services
<bullet> Accounting, Procurement, Payroll, and Human Resources Systems 
(5.2 percent of contracted services)
    --Accounting and procurement systems and support
    --Human resources, payroll, and employee services
    --EEO and diversity programs
<bullet> Training (5.0 percent of contracted services)
    --Technical and specialized training and professional development 
for staff
<bullet> Audit and Financial Management Support (4.6 percent of 
contracted services)
    --Annual audit support services
    --Material loss reviews
    --Investigation support services
    --Financial management support services
<bullet> Building Operations, Maintenance, and Security (3.9 percent of 
contracted services)
    --Headquarters facility operations and maintenance
    --Building security and continuity programs
    --Personnel security and administrative programs

    The following chart illustrates the breakout of the seven 
categories for the total proposed 2025 contracted services budget of 
$78.0 million, of which $5.0 million is funded from prior year 
available balances.

[[Page 87621]]

[GRAPHIC] [TIFF OMITTED] TN04NO24.024

    Major programs within the contracted services category include:
    <bullet> Training requirements for the examiner workforce. The 
NCUA's most important resource is its highly educated, experienced, and 
skilled workforce. Staff must have the proper knowledge, skills, and 
abilities to perform assigned duties and meet emerging needs. Each 
year, examiners complete a wide range of training classes to ensure 
their skills and industry knowledge remain current, including in core 
areas such as capital markets, consumer compliance, and specialized 
lending. Major training deliverables for 2025 include examiner training 
development, including subject matter expert conferences, and planned 
leadership forums for all the NCUA's executives and managers. The NCUA 
continues to control training costs with a blended schedule of both in-
person and virtual sessions.
    <bullet> Information security program. This NCUA program supports 
ongoing efforts to strengthen the agency's cybersecurity and ensure its 
compliance with the Federal Information Security Modernization Act and 
other standards for federal agencies.
    <bullet> Agency financial management services, human resources 
technology support, and payroll services. The NCUA contracts for these 
back-office support services with the U.S. Department of 
Transportation's Enterprise Service Center and the General Services 
Administration. The NCUA's human resource system, also adopted by other 
federal agencies, is a shared solution that automates routine human 
resource tasks and improves time and attendance functionality.
    <bullet> Audit. The NCUA's Office of the Inspector General (OIG) 
contracts with an accounting firm to conduct the annual audit of the 
agency's four permanent funds. The results of these audits are posted 
annually on the NCUA website and included as part of the agency's 
Annual Report.
    A significant share of the budget for contracted services finances 
ongoing IT infrastructure support for the agency. The 2025 budget 
includes operations and maintenance of the MERIT system, which replaced 
the legacy Automated Integrated Regulatory Examination System (AIRES) 
in 2021. Several of the NCUA's other core information technology 
systems and processes also require contract support in 2025, which 
results in increased costs for contracted services, as described below.
    Within the Office of Chief Information Officer's budget, an 
additional $2.0 million compared to the 2024 budget level is required 
for:
    <bullet> Implementation of the NCUA's Cybersecurity Supply Chain 
Risk Management tools, which help identify, assess, and mitigate risks 
to ensure integrity and security of products and services purchased by 
the agency. NIST standards require implementation of robust supply risk 
management procedures.
    <bullet> IT software, infrastructure services, and operations and 
maintenance labor support for NCUA systems, including legacy 
applications.
    <bullet> O&M associated with the agency's new onboarding and 
offboarding system, which is being designed to fulfill new personnel 
background investigation standards required by the Defense 
Counterintelligence and Security Agency.
    The Asset Management Assistance Center's contracted services budget 
increases by $1.1 million compared to the 2024 budget level. These 
funds will provide additional examination support for NCUA's field 
examiners and ensure sufficient surge resources are available to 
respond to emergent matters.
    The Office of External Affairs and Communication's contracted 
services budget increases by $688,000 compared to the 2024 budget 
level. These funds will provide for a new website hosting and services 
support.
    Within the Office of General Counsel, the contracted services 
budget increases by $470,000 compared to the 2024 budget level. This 
increase primarily relates to anticipated legal fees associated with 
agency consumer financial protection efforts.
    Within the Office of Business Innovation, the contracted services 
budget increases by approximately $331,000 compared to the 2024 budget 
level. These funds will provide contract support for the agency's 
information system security processes and fund a survey administered by 
a third party about credit unions' examination experiences.

[[Page 87622]]

    The proposed contracted services budget for 2026 is $83.5 million. 
Excluding the $5.0 million from surplus carryover used in 2025, the 
2026 budget level represents a net increase of $5.5 million, or 
approximately 7.1 percent.

V. Capital Budget

Overview

    Annually, the NCUA carries out a rigorous review of agency's needs 
for IT, facility improvements and repairs, and other multi-year capital 
investments. The NCUA's executives and staff review the agency's 
inventory of IT systems, IT hardware, and owned facilities and 
equipment to determine what requires repair, major renovation, or 
replacement. The staff then make recommendations for prioritized 
investments to the NCUA Board.
    The proposed 2025 Capital Budget is $8.2 million. This amount 
includes $7.7 million for IT development projects and investments and 
$480,000 for central office building minor construction and maintenance 
projects. Within the total 2025 Capital Budget, the agency has 
identified $1.5 million of past-year capital project budget surpluses, 
which reduces by the same amount the level of new capital funding 
provided for 2025.
    IT systems and hardware require significant capital expenditures 
for modern organizations. The 2025 Capital Budget's highest priorities 
include continuing investments to bolster the NCUA's cybersecurity 
posture and enable the agency to comply with E.O. 14028, Improving the 
Nation's Cybersecurity, along with enhancements to the MERIT platform. 
The budget also supports ongoing efforts to modernize the NCUA's IT 
infrastructure and applications through the Information Technology 
Infrastructure, Platform and Security Refresh project. Finally, the 
2025 Capital Budget continues support for two multi-year projects: 
development of a personnel security system in compliance with the 
Trusted Workforce 2.0 directive from the Office of the Director of 
National Intelligence (ODNI) and OPM, and further technology 
enhancements to streamline and automate NCUA processes for reviewing 
field of membership and new charter requests from credit unions and 
organizing groups.
    Routine repairs and lifecycle-driven property renovations are also 
necessary to maintain investments in the NCUA-owned facilities. Each 
year the NCUA assesses the physical condition of the agency's 
properties to determine the need for essential repairs, replacement of 
building systems that have reached the end of their engineered lives, 
or renovations required to support changes in the agency's 
organizational structure, or address revisions to building standards 
and codes. The 2025 Capital Budget includes funding for the costs 
associated with routine repairs, maintenance, and lifecycle-driven 
property renovations for the agency's Alexandria, Virginia, 
headquarters. Following an assessment and recommendations presented to 
the Board, a decision was made to sell the NCUA-owned office building 
in Austin, Texas, which is expected to be completed in 2025. Given 
potential challenges in the commercial real estate market, however, 
proceeds from this transaction have not been factored into the 2025 
staff draft budget.
[GRAPHIC] [TIFF OMITTED] TN04NO24.025

    Detailed descriptions of all proposed 2025 capital projects, 
including a discussion of how each project helps the agency achieve its 
goals and objectives, are provided in Appendix B.

Summary of Capital Projects

Examination and Supervision Solution/MERIT Enhancements ($1.8 Million)
    Investments in the MERIT platform in 2025 will focus on upgrading 
the MERIT system platform to take advantage of security improvements, a 
streamlined interface, and new record management capability; modifying 
the ISE output files for more efficient import into MERIT; and 
implementing single sign-on for Partner Gateway applications including 
for new reports.
Cloud Migration and Modernization ($1.3 Million)
    The Cloud Migration and Modernization project is a major multi-year 
investment that involves moving applications, data, and IT 
infrastructure from servers located at NCUA controlled facilities to 
cloud computing environments. This project will also include updating 
and optimizing existing applications for cloud-native capabilities. By 
leveraging cloud computing solutions, the NCUA can reduce costs related 
to data center hosting, IT hardware purchasing, IT maintenance, and 
associated IT labor costs. The cloud computing environment also 
provides enhanced security functionality for the agency's systems. 
Aspects of this project were included under the ``Executive Order on 
Improving the Nation's Cybersecurity'' project in past years' budgets.
Network Access Control ($1.0 Million)
    This project will strengthen the NCUA's network security by 
automating and enhancing security patch management and scanning 
functions for users connected to the agency's networks. In addition, 
this project will integrate the NCUA's firewall services within the 
overall network infrastructure and with the new patch and scanning 
functionality.
CURE Process Automation ($1.0 Million)
    This capital investment supports the development of initial 
requirements and scoping for a public-facing portal that credit unions 
and organizing groups will use to submit their field of membership and 
new charter requests.

[[Page 87623]]

E.O. on Improving the Nation's Cybersecurity ($0.9 Million)
    The purpose of this capital investment is to ensure the NCUA 
complies with E.O. 14028. The project will continue efforts to enable 
Multi-Factor Authentication for certain NCUA applications, adhere to 
best practices for supply chain risk management, and implement Zero 
Trust Architecture for the agency's infrastructure and applications.
Information Technology Infrastructure, Platform, and Security Refresh 
($0.8 Million)
    This capital project will improve system availability and stability 
by replacing outdated or end-of-life network and platform hardware to 
ensure business continuity and efficient operations. Proposed projects 
for 2025 include refreshing hardware and software, and costs associated 
with backup storage at the NCUA's disaster recovery site.
Performance Management System ($0.8 Million)
    This investment will support a modernized, phased workflow, 
dashboards, and automated management of over 350 performance plan 
packages to facilitate the employee performance management program for 
the NCUA's employees.
Enterprise Laptop Refresh ($0.6 Million)
    The purpose of this multi-year capital investment is to boost 
overall agency productivity, efficiency, and security by providing the 
NCUA staff with new laptops that offer improved processing power and 
speed to multitask more effectively, enhanced mobility features like 
reduced weight and longer battery life, and advanced security features 
to better combat evolving cyber threats. The budgeted amount for 2025 
will support testing and selection of new, standard laptop 
configurations that will work with the NCUA's business applications and 
requirements.
Headquarters Building Minor Construction and Maintenance Projects ($0.5 
Million)
    The proposed 2025 budget supports the NCUA's multi-year 
headquarters building improvement plan that identifies projects that 
can be completed incrementally, prioritizing the replacement of health 
and safety infrastructure. The headquarters building is 30 years old, 
and many original components need replacement. The ongoing multi-year 
approach recognizes the critical building management and maintenance 
needs while reducing the potential budgetary impact of such projects in 
a single budget year.
System Updates for Significant Regulatory Changes ($0.3 Million)
    This project will allow NCUA to update applications and databases 
to accommodate new regulatory requirements or initiatives. Multiple 
legacy systems are often impacted when regulatory changes are 
finalized, or new initiatives are approved by the NCUA Board. These 
changes can require significant time and programming resources to 
ensure that related systems maintain their functionality before updated 
rules take effect.
Onboarding/Offboarding Solution and Personnel Security Case Management 
System ($0.3 Million)
    The purpose of this project is to develop a new personnel security 
management system for the NCUA in compliance with the Trusted Workforce 
2.0 directive promulgated by ODNI and OPM. This system will centralize 
personnel security case management and serve as a repository for 
agencywide onboarding/offboarding actions.
Management Automated Resource System (MARS), Time Management System 
(TMS), and Credit Union Service Organization (CUSO) Development and 
Reports ($0.3 Million)
    This project funds short-term contractor support to develop CUSO 
Reports, data collection forms such as the CUSO Registry Online form, 
and to realign MARS and TMS development in support of regional 
redistricting, new work code classifications, new examiner specialties, 
and new supervisory examiner groups.
Off-Site Monitoring Project ($0.3 Million)
    The goal of this capital investment is to leverage data analytics 
solutions to minimize technology burdens on examination staff during 
off-site monitoring while streamlining the way that offices identify 
emerging and increasing risks to the Share Insurance Fund.
ONES Dedicated Computing Resources ($0.05 Million)
    This capital investment will provide dedicated computing resources 
required for data ingested through the ONES large credit union data 
collection program.
Generative AI Licensing ($0.03 Million)
    This capital project investment will fund a pilot program to test 
the capability of Microsoft's AI tool, Microsoft 365 Copilot, for 
possible development across the NCUA.

VI. Share Insurance Fund Administrative Expenses Budget

Overview

    The Share Insurance Fund Administrative Expenses Budget funds 
direct costs associated with authorized Share Insurance Fund 
activities.\16\ Direct costs to the Share Insurance Fund include items 
such as travel for state examiners attending NCUA-sponsored training, 
data subscriptions and technology tools for ONES' analysis of large 
credit unions, audit support for the Share Insurance Fund's financial 
statements, and certain insurance-related expenses for AMAC operations.
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    \16\ Direct costs do not include any costs that are shared with 
the Operating Fund through the Overhead Transfer Rate, and with 
payments available upon requisition by the Board, without fiscal 
year limitation, for insurance under section 1787 of the Federal 
Credit Union Act, and for providing assistance and making 
expenditures under section 1788 of the Federal Credit Union Act in 
connection with the liquidation or threatened liquidation of insured 
credit unions as it may determine to be proper.
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    The Share Insurance Fund Administrative Expenses Budget also pays 
for costs associated with the corporate resolution program and related 
NCUA Guaranteed Notes (NGN) program. On June 14, 2021, the last 
outstanding NGN Trust matured. Given the significantly reduced size of 
the legacy asset portfolio in the corporate asset management estates, 
the proposed 2025 budget for the corporate resolution program continues 
to decrease compared to the 2024 funding levels. The remaining assets 
held by the NCUA are subject to ongoing litigation and will be sold 
once all claims to ownership of underlying assets are resolved.

Budget Requirements and Description

    The proposed 2025 Share Insurance Fund Administrative Expenses 
Budget is $5.5 million, which is $0.4 million, or 7.0 percent, higher 
than 2024.
    The proposed 2025 budget increase is primarily driven by an 
increase in the projected costs of state examiners traveling to NCUA-
sponsored training, increases in the cost of data and analytic models 
used for analysis of large credit unions, costs of AMAC activities, and 
inflationary growth in the cost of audit support. The proposed 2024 
Share Insurance Fund Administrative Expenses Budget includes:
    <bullet> $2.5 million for operating and maintenance costs of the 
Asset and Liabilities Management system, which allows the NCUA to build 
internal

[[Page 87624]]

analytical capabilities to conduct supervisory stress testing analyses 
and to perform other quantitative risk assessments of large credit 
unions.
    <bullet> $0.3 million for certain insurance-related activities and 
expenses of AMAC, such as consulting expenses necessary to avoid or 
attempt to prevent a liquidation or conservatorship and staff travel 
for consultation on complex or problem cases.
    <bullet> $1.5 million for state examiner travel to NCUA-sponsored 
training classes and $0.2 million to ensure that state supervisory 
authorities can securely and efficiently access NCUA applications and 
the NCUA's MERIT system for state examination and supervision 
activities.
    <bullet> $0.9 million for financial reporting, including the annual 
financial audit and for contractor support to ensure effective internal 
controls for the fund.
    <bullet> $0.1 million for corporate resolution program legacy asset 
waterfall models and valuation analysis support and data. The budget 
for NGN support decreases by 60.1 percent between 2024 and 2025.
BILLING CODE 7535-01-P
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[[Page 87625]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.027

BILLING CODE 7535-01-C
    The proposed 2026 budget supports similar workload and resources 
for the Share Insurance Fund, which at $5.4 million is $0.1 million 
lower than the proposed 2025 level. With the anticipated wind-down of 
the program in 2025 (subject to the status of ongoing litigation), 
there is no corporate resolution budget planned for 2026 at this time.

VII. Financing the NCUA's Programs

Overview

    The NCUA incurs various expenses to achieve its statutory mission, 
including those involved in examining and supervising federally insured 
credit unions. The NCUA Board adopts an Operating Budget, a Capital 
Budget, and a Share Insurance Fund Administrative Expenses Budget each 
year to fund most of the costs to operate the agency.\17\ When 
formulating the annual budget, the NCUA is mindful that its funding 
comes from credit unions and strives to operate in an efficient, 
effective, transparent, and fully accountable manner.
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    \17\ Some costs are directly charged to the Share Insurance Fund 
when appropriate to do so. For example, costs for training and 
equipment provided to SSAs are directly charged to the Share 
Insurance Fund.
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    The Federal Credit Union Act authorizes two primary sources to fund 
the Operating Budget:

    (1) Requisitions from the Share Insurance Fund ``for such 
administrative and other expenses incurred in carrying out the 
purposes of [Title II of the Act] as [the Board] may determine to be 
proper,'' \18\ and
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    \18\ 12 U.S.C. 1783(a).
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    (2) ``[F]ees and assessments (including income earned on 
insurance deposits) levied on insured credit unions under [the 
Act].'' \19\ Among the fees levied under the Act are annual 
Operating Fees, which are required for federal credit unions under 
12 United States Code (U.S.C.) 1755 ``and may be expended by the 
Board to defray the expenses incurred in carrying out the provisions 
of [the Act,] including the examination and supervision of [federal 
credit unions].''
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    \19\ 12 U.S.C. 1766(j)(3). Other sources of income for the 
Operating Budget have included interest income, funds from 
publication sales, parking fee income, and rental income.

    Taken together, these authorities effectively require the Board to 
determine which expenses are appropriately paid from each source while 
giving the Board broad discretion in allocating expenses.
    In 1972, the U.S. Government Accountability Office recommended the 
NCUA adopt a method for allocating Operating Budget costs--that is, the 
portion of the NCUA's budget funded by requisitions from the Share 
Insurance Fund and the portion covered by operating fees paid by 
federal credit unions.\20\ The NCUA has since used an allocation 
methodology known as the OTR to determine how much of the Operating 
Budget to fund with a requisition from the Share Insurance Fund.
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    \20\ See https://www.gao.gov/products/b-1640314-31.
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    The NCUA uses the OTR methodology to allocate agency expenses 
between these two primary funding sources. Specifically, the OTR is the 
formula the NCUA uses to allocate insurance-related expenses to the 
Share Insurance Fund under Title II of the Act. Almost all other 
operating expenses are funded through collecting annual

[[Page 87626]]

operating fees paid by federal credit unions.\21\
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    \21\ Annual operating fees must ``be determined according to a 
schedule, or schedules, or other method determined by the NCUA Board 
to be appropriate, which gives due consideration to the expenses of 
the [NCUA] in carrying out its responsibilities under the [Act] and 
to the ability of [federal credit unions] to pay the fee.'' 12 
U.S.C. 1755(b).
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    Two statutory provisions directly limit the Board's discretion with 
respect to Share Insurance Fund requisitions for the NCUA's Operating 
Budget and, hence, 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.\22\ Second, the NCUA may not fund its 
entire Operating Budget through charges to the Share Insurance 
Fund.\23\
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    \22\ 12 U.S.C. 1783(a).
    \23\ The Act in 12 U.S.C. 1755(a) states, ``[i]n accordance with 
rules prescribed by the Board, each [federal credit union] 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.'' See also 12 U.S.C. 1766(j)(3).
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    The NCUA conducts a comprehensive workload analysis annually. This 
analysis estimates the amount of time necessary to conduct examinations 
and supervise federally insured credit unions to carry out the NCUA's 
dual mission as insurer and regulator. This analysis starts with a 
field-level review of every federally insured credit union to estimate 
the number of workload hours needed for the year. These estimates are 
informed by the overall parameters of the NCUA's examination program, 
as most recently updated by the Exam Flexibility Initiative approved by 
the Board.\24\ The workload estimates are then refined by regional 
managers and submitted to the NCUA headquarters for the annual budget 
proposal. The OTR methodology accounts for the costs of the NCUA, not 
the costs of state regulators. Therefore, there are no calculations 
made for state examiner hours.
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    \24\ The Exam Flexibility Initiative started with the January 1, 
2017, examination cycle, and it allows for extended examination 
cycles for eligible credit unions. Letters to Credit Unions 16-CU-
12, December 2016.
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Overhead Transfer Rate

    There have not been any major changes to the parameters of the 
examination program since the current OTR methodology went into 
effect.\25\ The minor variations in the OTR since 2018 are the result 
of routine, small fluctuations in the variables that affect the OTR, 
including normal fluctuations in the workload budget from one calendar 
year to the next.
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    \25\ On November 16, 2017, the NCUA Board adopted a new 
methodology for calculating the Overhead Transfer Rate starting with 
the 2018 Overhead Transfer Rate. 82 FR 55644, November 22, 2017.
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    The NCUA Board approved the current methodology for calculating the 
OTR at its November 2017 open meeting.\26\ In 2023, the Board published 
in the Federal Register a request for comment regarding the OTR 
methodology but did not propose or adopt any changes to the current 
methodology.\27\ The OTR is designed to cover the NCUA's costs of 
examining and supervising the risk to the Share Insurance Fund posed by 
all federally insured credit unions, as well as the costs of 
administering the fund. The OTR represents the percentage of the 
agency's operating budget paid for by a transfer from the Share 
Insurance Fund. Federally insured credit unions are not billed for and 
do not have to remit the OTR amount; instead, it is transferred 
directly to the Operating Fund from the Share Insurance Fund. This 
transfer, therefore, represents a cost to all federally insured credit 
unions.
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    \26\ 82 FR 55644 (Nov. 22, 2017).
    \27\ See https://www.federalregister.gov/documents/2023/12/20/2023-28000/request-for-comment-regarding-overhead-transfer-rate-methodology.
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    Based on the Board-approved methodology and the proposed budget, 
the OTR for 2025 is estimated to be 61.7 percent, which is the same 
percentage as 2024.\28\ Thus, 61.7 percent of the total 2025 Operating 
Budget is estimated to be paid out of the Share Insurance Fund. The 
remaining 38.3 percent of the Operating Budget is estimated to be paid 
for by operating fees collected from federal credit unions. The 
explicit and implicit distribution of total Operating Budget costs for 
federal credit unions and federally insured, state-chartered credit 
unions (FISCUs) is outlined in the table below:
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    \28\ See https://www.federalregister.gov/documents/2020/12/28/2020-28487/overhead-transfer-rate-methodology-and-operating-fee-schedule-methodology.
[GRAPHIC] [TIFF OMITTED] TN04NO24.028

    At the start of each year, the Office of the Chief Financial 
Officer estimates the share of annual spending that will be paid by the 
Share Insurance Fund through the OTR and calculates a monthly cash 
advance that is transferred from the Share Insurance Fund to the 
Operating Fund at the start of each month. During the financial close 
at the end of each month, the OTR is multiplied by each month's actual 
Operating Fund cash disbursement and expenditures, and the product of 
that calculation is transferred from the Operating Fund to the Share 
Insurance Fund or vice versa depending upon whether the Share Insurance 
Fund share of the cash disbursements was lower or higher than the OTR 
cash advance. This monthly reconciliation captures the variance between 
actual and budgeted amounts, so that when the NCUA's expenditures are 
less than budgeted, the amount charged to the Share Insurance Fund is 
also less--and those lower expenditures benefit both federally 
chartered and federally insured, state-chartered credit unions.
    The following chart illustrates the share of the proposed 2025 
Operating Budget that would be paid by federal credit unions (69.3%) 
and federally insured, state-chartered credit unions (30.7%).

[[Page 87627]]

[GRAPHIC] [TIFF OMITTED] TN04NO24.029

Operating Fee

    The Board delegated authority to the Chief Financial Officer to 
administer the methodology approved by the Board for calculating the 
operating fee and to set the fee schedule as calculated per the 
approved methodology. In December 2023, the Board approved and 
published in the Federal Register the current operating fee 
methodology, which forms the basis for how the operating fee is 
calculated in this section.\29\ Consistent with its triennial schedule 
for regulatory reviews, the NCUA requested public comment about the 
operating fee methodology in 2023. At its December 2023 open meeting, 
the NCUA Board approved three changes to the methodology for computing 
the operating fee. First, for purposes of calculating the operating 
fee, the asset exemption threshold was increased from $1 million to $2 
million. Second, the NCUA Board agreed to adjust the asset exemption 
threshold annually in future years by the computed rate of aggregate 
asset growth at Federal Credit Unions. Third, in response to comments 
from the public, as part of future reviews of the operating fee 
schedule methodology the NCUA Board plans to analyze options to adjust 
the distribution of operating fee costs.\30\
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    \29\ See https://www.federalregister.gov/documents/2023/12/26/2023-28303/national-credit-union-administration-operating-fee-schedule-methodology.
    \30\ See https://ncua.gov/newsroom/press-release/2023/board-approves-ncua-2024-2025-and-central-liquidity-facility-budgets.
---------------------------------------------------------------------------

    Under the current methodology to determine the annual operating fee 
assessed on federal credit unions serving consumers, the NCUA first 
calculates the average of total assets reported in the preceding four 
calendar quarters available at the time of the calculation, net of any 
reported Paycheck Protection Program loans. Credit unions with assets 
less than approximately $2 million are not assessed an operating fee 
and their assets are therefore excluded from this calculation.\31\
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    \31\ The exemption threshold for 2025 is estimated at 
$2,080,250, which accounts for 4.01% aggregate growth in credit 
union system assets.
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    Based on the Board-approved operating fee methodology, which is 
summarized in the following tables, the share of the proposed 2025 
budget funded by the operating fee is $155.8 million. This equates to 
0.01354 percent of the actual average of natural person federal credit 
union assets for the four calendar quarters ending on June 30, 2024. 
The calculated operating fee rate for 2025 increases by 9.02 percent 
compared to the rate in 2024. This computation is shown in the table on 
the following page.
    As part of the Board-approved operating fee methodology, the NCUA 
can adjust the share of the budget funded by the operating fee based on 
an analysis of the agency's future cash flow requirements compared to 
past years' collections that were not spent as planned. Any projected 
surplus cash from past years' fee collections not required to finance 
agency operations can accordingly be used to lower the operating fee 
share of the proposed budget. Because such cash surpluses result from 
past years' operating fee collections, they do not offset the portion 
of the budget funded by the OTR. As the final 2025-2026 budget is 
prepared for consideration by the NCUA Board, the Chief Financial 
Officer will evaluate the agency's cash position and make a 
recommendation about any surplus cash that can be credited to the 
operating fee.
    To set the assessment scale for 2025, total growth in natural 
person federal credit union assets is calculated as the change between 
the average of the four most-current quarters (that is, the third and 
fourth quarters of 2023 and the first two quarters of 2024) and the 
previous four quarters (that is, the third and fourth quarters of 2022 
and the first two quarters of 2023), which is calculated as 4.01 
percent. The fee exemption threshold and the asset level dividing 
points for the fee tiers are likewise increased by this same growth 
rate to preserve the same relative relationship of the scale to the 
applicable asset base.

[[Page 87628]]

[GRAPHIC] [TIFF OMITTED] TN04NO24.030

Operating Fee Scale

    To illustrate the rate for each asset tier for which operating fees 
are charged, the tables below show the effect of the average 9.02 
percent increase in the operating fee for natural person federal credit 
unions, using the current $2.08 million exemption threshold.
[GRAPHIC] [TIFF OMITTED] TN04NO24.031


[[Page 87629]]



VIII. Appendix A: Supplemental Budget Information

Budget by Strategic Goal

    The table below shows the combined total of the 2025 Operating, 
Capital, and Share Insurance Fund Administrative Expenses budgets, 
organized by the NCUA's three current strategic goals.
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[[Page 87631]]


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[[Page 87640]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.043


[[Page 87641]]


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[[Page 87642]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.045


[[Page 87643]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.046


[[Page 87644]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.047


[[Page 87645]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.048


[[Page 87646]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.049


[[Page 87647]]


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[[Page 87648]]


[GRAPHIC] [TIFF OMITTED] TN04NO24.051


[[Page 87649]]


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[GRAPHIC] [TIFF OMITTED] TN04NO24.053


[[Page 87650]]


BILLING CODE 7535-01-C

X. Appendix C: Glossary of Terms and Acronyms

A

    Asset Management and Assistance Center (AMAC): The office at the 
NCUA responsible for conducting credit union liquidations and 
performing management and recovery of assets. Additionally, this office 
supports the NCUA's regional offices' review of large complex loan 
portfolios and actual or potential bond claims.
    Automated Cybersecurity Evaluation Toolbox (ACET): The NCUA's ACET 
application provides credit unions the capability to conduct a maturity 
assessment aligned with the FFIEC's Cybersecurity Assessment Tool. 
Using the assessment within the toolbox allows institutions of all 
sizes to easily determine and measure their own cybersecurity 
preparedness over time.
    Automated Integrated Regulatory Examination System (AIRES): AIRES 
is the NCUA's legacy examination system, which was replaced by MERIT.

C

    CAMELS: The NCUA's composite CAMELS rating consists of an 
assessment of a credit union's Capital adequacy, Asset quality, 
Management, Earnings, Liquidity risk, and Sensitivity to market risk.
    Central Liquidity Facility (CLF): The CLF is a mixed-ownership 
government corporation that serves as a source for emergency funding 
for consumer credit unions and corporate credit unions that join the 
facility.
    Credit Union Resources and Expansion (CURE): The NCUA's Office of 
Credit Union Resources and Expansion supports credit union growth and 
development. CURE assists low-income and minority credit unions, as 
well as all credit unions seeking assistance with chartering, charter 
conversions, bylaw amendments, field-of-membership expansion requests 
and low-income designations. CURE also provides access to online 
training and resources and to grants and loans through the Community 
Development Revolving Loan Fund.

E

    Office of Examination and Insurance (E&I): The office at the NCUA 
responsible for supervision programs, which ensure the safety and 
soundness of the credit union system and that manages risk to the Share 
Insurance Fund.

F

    Federal Credit Union: A federal credit union is a member-owned and 
controlled, not-for-profit, cooperative financial institution chartered 
by the NCUA and formed to provide its members with affordable and safe 
financial services.
    Federal Information Security Modernization Act: A federal statute 
enacted in 2014 that enables the government to better respond to 
cyberattacks on departments and agencies.
    Federal Employees Retirement System (FERS): FERS is a defined-
benefit retirement plan for civilian employees of the federal 
government.
    Field of Membership: A credit union's field of membership defines 
who is eligible to join the credit union.
    Federally Insured, State-chartered Credit Union (FISCU): A FISCU is 
a member-owned and controlled, not-for-profit, cooperative financial 
institution chartered by the state in which it is located. FISCUs are 
insured by the NCUA and supervised jointly with the state supervisory 
authority that chartered them.

I

    Information Security Examination (ISE): A risk-focused approach to 
examine credit unions' information security focused on areas of 
material current or potential risk relevant to each credit union's 
unique business model.

M

    Modern Examination and Risk Identification Tool (MERIT) examination 
system: MERIT is the NCUA's new web-based examination platform that 
replaced AIRES.
    Minority Deposit Institution (MDI): By law, MDI describes a 
federally insured credit union in which a majority of its current 
members, its board of directors, and the community it services, as 
designated in its charter, fall within any of the eligible minority 
groups described in Section 308 of the Financial Institutions Reform, 
Recovery and Enforcement Act of 1989.\32\
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    \32\ See https://www.federalreserve.gov/publications/2013-preserving-minority-depository-institutions-section-308-firrea.htm.
---------------------------------------------------------------------------

O

    Office of the Chief Informational Officer (OCIO): The office at the 
NCUA responsible for establishing the organization's enterprise IT 
vision, security strategy, roadmap and related policies and management 
controls.
    Office of Consumer Financial Protection (OCFP): The office at the 
NCUA responsible for the consumer financial literacy efforts, the 
NCUA's Consumer Assistance Center, consumer financial protection 
compliance policy and rulemaking, fair lending examinations, 
interagency coordination on consumer financial protection compliance 
matters, and the agency's consumer-focused website MyCreditUnion.gov.
    Office of the Inspector General (OIG): The office at the NCUA 
responsible for promoting the economy, efficiency, and effectiveness of 
NCUA programs and operations, and detects and deters fraud, waste and 
abuse, thereby supporting the NCUA's mission of monitoring and 
promoting safe and sound federally insured credit unions. OIG conducts 
independent audits, investigations, and other activities, and keeps the 
NCUA Board and U.S. Congress fully and currently informed of its work.
    Office of Management and Budget (OMB): An agency within the 
Executive Office of the President responsible for overseeing the 
performance of federal agencies and administering the federal budget.
    Office of National Examination and Supervision (ONES): The office 
at the NCUA responsible for overseeing the examination and supervision 
issues related to consumer credit unions with assets greater than $15 
billion and all corporate credit unions.
    U.S. Office of Personnel Management (OPM): An agency responsible 
for human resources matters and personnel policy for the federal 
government.
    Overhead Transfer Rate (OTR): The share of the NCUA's operating and 
capital budgets that comes from the Share Insurance Fund. The OTR 
represents the insurance-related costs that are paid for out of the 
Share Insurance Fund.

[FR Doc. 2024-25568 Filed 11-1-24; 8:45 am]
BILLING CODE 7535-01-P


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