4804 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

1 12 U.S.C. 1783(a). 

2 12 U.S.C. 1766(j)(3). Other sources of income for 

the Operating Budget include interest income, 

funds from publication sales, parking fee income, 

and rental income. 

3Annual 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 [FCU Act] and to the 

ability of [FCUs] to pay the fee.’’ 1755(b). The 

NCUA Board’s methodology for determining the 

aggregate amount of Operating Fees is discussed in 

a separate Federal Register publication. 

4 12 U.S.C. 1783(a). 

5Accord 12 U.S.C. 1755(a) (‘‘In accordance with 

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

to the [NCUA] an annual operating fee which may 

be composed of one or more charges identified as 

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

NATIONAL CREDIT UNION 

ADMINISTRATION 

Request for Comment Regarding 

Overhead Transfer Rate Methodology 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Request for comment. 

SUMMARY: The NCUA Operating Budget 

has two primary funding mechanisms: 

(1) An Overhead Transfer, which is 

funded by federal credit unions (FCUs) 

and federally insured state-chartered 

credit unions (FISCUs); and (2) annual 

Operating Fees, which are charged only 

to FCUs. In a voluntary effort to invite 

input from stakeholders representing 

federal and state-chartered credit 

unions, the NCUA Board (Board) is 

simultaneously requesting comments on 

the methodologies for both funding 

mechanisms in separate notices in the 

Federal Register. 

This request for comments focuses on 

the methodology NCUA uses to 

determine the Overhead Transfer Rate 

(OTR). To facilitate comments, the 

Board is also assembling and describing 

its existing OTR methodologies and 

processes, which are also available on 

NCUA’s Web site. The Board applies the 

OTR to NCUA’s Operating Budget to 

determine the portion of the budget that 

will be funded from the National Credit 

Union Share Insurance Fund (NCUSIF). 

The Board invites comments on all 

aspects of the OTR methodology and 

any alternatives commenters may offer. 

Areas the Board specifically seeks 

comments on include: 

• Whether the OTR should continue 

to be determined using a formula-driven 

approach, or instead be set largely at the 

discretion of the Board; 

• The definition NCUA uses for 

insurance-related activities; 

• Adjustments or changes to the 

current calculation; and 

• Alternate methodologies to arrive at 

an accurate and fair allocation of costs. 

To be most instructive to the Board, 

commenters are encouraged to provide 

the specific basis for their comments 

and recommendations, as well as 

documentation to support their 

proposed adjustments or alternatives. 

DATES: Comments must be received on 

or before April 26, 2016 to be assured 

of consideration. 

ADDRESSES: You may submit comments 

by any of the following methods (Please 

send comments by one method only): 

• NCUA Web Site: https://www.ncua.

gov/about/pages/board-comments.aspx. 

Follow the instructions for submitting 

comments. 

• Email: Address to boardcomments@

ncua.gov. Include ‘‘[Your name]— 

Comments on OTR Methodology’’ in the 

email subject line. 

• Fax: (703) 518–6319. Include your 

name and the following subject line: 

‘‘Comments on OTR Methodology.’’ 

• Mail: Address to Gerard Poliquin, 

Secretary of the Board, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428. 

• Hand Delivery/Courier: Same as 

mail address. 

Public Inspection: You can view all 

public comments on NCUA’s Web site 

at https://www.ncua.gov/about/pages/

board-comments.aspx as submitted, 

except for those we cannot post for 

technical reasons. NCUA will not edit or 

remove any identifying or contact 

information from the public comments 

submitted. You may inspect paper 

copies of comments at NCUA’s 

headquarters at 1775 Duke Street, 

Alexandria, Virginia 22314, by 

appointment weekdays between 9 a.m. 

and 3 p.m. To make an appointment, 

call (703) 518–6360 or send an e-mail to 

EIMail@ncua.gov. 

FOR FURTHER INFORMATION CONTACT: 

Russell Moore, Loss/Risk Analysis 

Officer, Office of Examination and 

Insurance, National Credit Union 

Administration, 1775 Duke Street, 

Alexandria, Virginia 22314–3428 or 

telephone: (703) 518–6383. 

Authority: 12 U.S.C. 1783(a); 1766(j)(3). 

SUPPLEMENTARY INFORMATION: NCUA 

charters, regulates and insures deposits 

in federal credit unions (FCUs) and 

insures deposits in state-chartered credit 

unions that have their shares insured 

through the NCUSIF. To cover expenses 

related to its statutory mission, the 

Board adopts an Operating Budget in 

the fall of each year. The Federal Credit 

Union Act (FCU Act) authorizes two 

primary sources to fund the Operating 

Budget: (1) Requisitions from the 

NCUSIF ‘‘for such administrative and 

other expenses incurred in carrying out 

the purposes of [Title II of the FCU Act] 

as [the Board] may determine to be 

proper’’; 1 and (2) ‘‘fees and assessments 

(including income earned on insurance 

deposits) levied on insured credit 

unions under [the FCU Act].’’ 2 Among 

the fees levied under the FCU Act are 

annual Operating Fees, which are 

required for FCUs under 12 U.S.C. 1755 

‘‘and may be expended by the Board to 

defray the expenses incurred in carrying 

out the provisions of [the FCU Act,] 

including the examination and 

supervision of [FCUs].’’ Taken together, 

these dual funding authorities 

effectively require the Board to 

determine which expenses are 

appropriately paid from each source, 

though these two provisions give the 

Board broad discretion in this. 

To determine an appropriate division 

of expenses between these two funding 

sources, the Board uses the OTR 

methodology described in this 

publication. This version of the OTR 

methodology was first adopted by the 

Board in 2003 and refined in 2013. The 

OTR represents the allocation formula 

the Board uses to determine which 

expenses are properly characterized as 

insurance related and charged to the 

NCUSIF under Title II, rather than 

collected through annual Operating 

Fees.3 Only two statutory provisions 

limit the Board’s discretion with respect 

to NCUSIF requisitions for NCUA’s 

Operating Budget and, hence, the OTR. 

First, expenses funded from the NCUSIF 

must carry out the purposes of Title II 

of the FCU Act, which relate to share 

insurance.4 Second, NCUA must fund at 

least some part of its Operating Budget 

through fees charged pursuant to 12 

U.S.C. 1766(j)(3).5 NCUA has not 

imposed any additional policy or 

regulatory limitations on its discretion 

for determining the OTR. 

Third, while not a legal requirement, 

the current Board policy is to use a costaccounting methodology that by design 

is both neutral and equitable with 

respect to credit union charter types. 

The methodology satisfies the two 

legal requirements identified above. 

First, the funds transferred from the 

NCUSIF must relate to NCUA’s 

insurance functions. The Board notes 

the breadth of that category, and each 

expense funded from the OTR in 

accordance with the formula explained 

herein, reasonably relates to insurance 

for purposes of 12 U.S.C. 1783(a). 

NCUA’s definition of ‘‘insurance related 

examination procedures’’ that fall under 

Title II includes ‘‘examination or 

supervision contact procedures [that] 


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6See, e.g., 12 U.S.C. 1781(c)(2) (referencing 

‘‘unsafe and unsound’’ financial condition and 

policies in connection with applications for 

insurance); 1782(a)(6)(b) (referencing the phrase 

‘‘unsafe and unsound’’ in connection with a failure 

to obtain an outside, independent audit); 1786 

(addressing ‘‘unsafe or unsound practices’’ or 

‘‘safety and soundness’’ in connection with 

termination of insurance, orders to cease and desist, 

prohibition and removal orders, civil money 

penalties, and delay in publication of final orders); 

1787(b)(2)(D) (authorizing the Board to take actions 

as conservator to put an insured credit union ‘‘in 

a sound and solvent condition’’); 1790d(h)(1) 

(referencing ‘‘safety and soundness’’ in relation to 

prompt corrective action and reclassification of a 

credit union’s net worth category). 

7NCUA’s legal analysis with respect to the OTR 

and APA process is available at the following Web 

page: https://www.ncua.gov/Legal/Documents/

Opinion/OL2015-0818.pdf. Note that even where 

not subject to notice and comment procedures, the 

APA provides that ‘‘[a]gency action made 

reviewable by statute and final agency action for 

which there is no other adequate remedy in a court 

are subject to judicial review.’’ 5 U.S.C. 704. The 

scope of such a review is set forth in 5 U.S.C. 706. 

8Materials related to the OTR can be found at the 

following NCUA Web page: https://www.ncua.gov/ 

About/Pages/budget-strategic-planning/

supplementary-materials.aspx. 

9Section 1783(a) of the FCU Act created the 

NCUSIF and authorized the NCUA Board to use the 

fund to pay for ‘‘such administrative and other 

expenses incurred in carrying out the purposes of 

[Title II] as it may determine to be proper’’. 

address safety and soundness issues.’’ 

Safety and soundness terminology is 

sprinkled throughout Title II of the FCU 

Act with respect to NCUA’s insurancerelated responsibilities.6 As such, this 

definition is contained within the broad 

swath of 12 U.S.C. 1783(a), which 

simply requires that an expense be 

‘‘incurred in carrying out the purposes 

of [Title II]’’ on share insurance to be 

eligible for OTR coverage. Similarly, 

‘‘insurance regulatory related 

examination procedures’’ are defined in 

the OTR methodology as those that 

assess compliance with regulations that 

‘‘address safety and soundness issues.’’ 

This secondary definition expressly 

excludes procedures that assess 

compliance with regulations ‘‘designed 

to protect consumers directly.’’ 

Therefore, this supplemental definition 

narrows, rather than expands, the 

procedures that the OTR methodology 

includes under Title II, since some 

consumer protection regulations may 

also be directed at safety and soundness. 

Further, neither the activities the OTR 

methodology identifies as examples of 

examination or supervision procedures 

that address safety and soundness, nor 

any of the NCUA-specific regulations 

classified as ‘‘insurance regulatory’’ 

related in the regulation mapping in 

Appendix A, fall outside of this 

definition. 

Second, at least some part of the 

Operating Budget comes from fees 

charged to insured credit unions under 

12 U.S.C. 1755. The imposition of the 

annual Operating Fees on FCUs and 

their use to pay expenses in the 

Operating Budget is sufficient evidence 

of the proper exercise of the Board’s 

discretion under these two limitations. 

Within these broad statutory bounds, 

the Board is seeking additional public 

input on its OTR methodology through 

Federal Register processes. 

Since its inception, NCUA has taken 

the position that the OTR is not a 

legislative rule under the 

Administrative Procedure Act (APA) 

and is, therefore, exempt from notice 

and comment rulemaking processes.7 As 

such, NCUA has never used notice and 

comment rulemaking to establish either 

an individual determination of the OTR 

or the general methodology used to 

calculate the OTR. However, the OTR 

has been explained, discussed, and 

reviewed in various public records, 

including in annual Board Action 

Memorandums related to budget 

matters, independent evaluations, and 

other documents available in public 

records and on NCUA’s Web site.8

Beyond its APA obligations, the Board 

has chosen to solicit public comments 

on the OTR processes and 

methodologies through this Federal 

Register publication. 

Table of Contents 

I. Overview 

II. Context For OTR 

III. History 

IV. Detailed Discussion of OTR Methodology 

a. Examination Time Survey 

b. Workload Budget 

c. Financial Budget 

d. Calculation of Insurance and NonInsurance Costs 

e. Allocation of Insurance and NonInsurance Costs 

f. Calculating the OTR 

g. State Supervisory Authority (SSA) 

Imputed Value 

V. Request for Comment 

VI. Appendix A—Mapping of Regulations 

VII. Appendix B—Examination Time Survey 

Instructions 

I. Overview 

NCUA is the independent federal 

agency created by the U.S. Congress to 

regulate, charter and supervise FCUs. 

With the backing of the full faith and 

credit of the United States, NCUA also 

operates and manages the NCUSIF. 

Congress enacted Title II of the FCU Act 

on October 19, 1970.9 Title II 

established the NCUSIF, requiring all 

federal credit unions to immediately 

apply for insurance and permitting the 

Board to insure accounts in statechartered credit unions. After enactment 

of Title II, the Board established an 

allocation formula, the Overhead 

Transfer Rate, to determine the amount 

of the Operating Budget that it would 

requisition from the NCUSIF for 

insurance-related expenses. Over time, 

the Board has refined the OTR process 

to ensure the equitable allocation of 

costs between NCUA’s dual roles of 

insurer (insurance related activities) and 

regulator that charters federal credit 

unions (non-insurance related 

activities). 

NCUA’s current methodology, in 

place since 2003 and refined in 2013, 

determines the OTR using the results of 

an examiner time survey (ETS). The ETS 

captures the time NCUA spends 

examining and supervising FCUs, 

carrying out its dual mission as insurer 

of federally insured credit unions 

(FICUs), and the chartering authority for 

federal credit unions. The OTR 

methodology also factors in the 

following: 

• The value to the NCUSIF of the 

insurance-related work performed by 

state supervisory authorities (SSAs). 

• The cost of NCUA resources and 

programs with different allocation 

factors from the examination and 

supervision program. 

• The distribution of insured shares 

between FCUs and federally insured 

state-chartered credit unions (FISCUs). 

• Operational costs charged directly 

to the NCUSIF. 

The goal of the methodology is to 

create a comprehensive and equitable 

calculation and allocation of costs to set 

the OTR annually within a framework 

that can be administered at minimal 

cost. 

II. Context for the OTR 

There is a distinct overlap between 

the historical role of a regulator, 

concerned with enforcing laws and 

implementing public policy, and that of 

an insurer. Though not motivated by the 

associated financial liability that comes 

with the role of insurer, regulators 

address threats to the viability of their 

financial institutions to protect 

consumers and their jurisdiction’s 

economy. This focus on viability 

benefits the insurer. The primary roles 

of an insurer are to protect depositors 

and the taxpayer, and contribute to the 

stability of the financial system. 

Before the advent of federal deposit 

insurance, federal financial institution 

regulators were concerned with 

protecting the stability of the financial 

system by ‘‘regulating’’ it. Thus, 

financial institution examinations 

focused on ensuring (1) statutes and 

regulations were followed to protect 

consumers, and (2) institutions were 

viable to protect consumer deposits, 


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10The Office of the Comptroller of the Currency 

(OCC) charters, regulates, and supervises all 

national banks and federal savings associations as 

well as federal branches and agencies of foreign 

banks. On its Web site, the OCC lists its mission as 

ensuring that national banks and federal savings 

associations operate in a safe and sound manner, 

provide fair access to financial services, treat 

customers fairly, and comply with applicable laws 

and regulations. Similarly, the Board of Governors 

of the Federal Reserve System has supervisory and 

regulatory authority over a wide range of financial 

institutions, including state-chartered banks that are 

members of the Federal Reserve System, bank 

holding companies, thrift holding companies and 

foreign banking organizations that have a branch, 

agency, a commercial lending company subsidiary 

or a bank subsidiary in the United States. On its 

Web site, The Federal Reserve states its mission is 

to provide the nation with a safer, more flexible, 

and more stable monetary and financial system. 

One of its four stated general duties is supervising 

and regulating banking institutions to ensure the 

safety and soundness of the nation’s banking and 

financial system and to protect the credit rights of 

consumers. On its Web site, the Federal Deposit 

Insurance Corporation states its mission is to 

maintain stability and public confidence in the 

nation’s financial system by insuring deposits, 

examining and supervising financial institutions for 

safety and soundness and consumer protection, 

making large and complex financial institutions 

resolvable, and managing receiverships. 

11 12 U.S.C. 1783. 

12 12 U.S.C. 1782(a)(5). 

13 12 U.S.C. 1783(a). 14 12 U.S.C. 1784(a) (emphasis added).); see also 

1789(a)(7). 15 § 1766(j)(3) (emphasis added). 

16 § 1755. 

17 § 1789(a) 

18NCUA staff have mapped all examination 

related rules and regulations to one of two 

categories: insurance regulatory related, or noninsurance and consumer regulatory related. This 

regulatory mapping provides the key basis for 

determining how examination time is measured for 

purposes of the budgetary Overhead Transfer Rate. 19http://www.gao.gov/assets/210/203181.pdf. 

preserve access to financial services, 

and safeguard the stability of the 

economy.10

NCUA has a unique dual role in that 

it serves as both the regulator of FCUs 

and the insurer of FCUs and FISCUs. 

Given this dual role, it is appropriate to 

allocate examination and supervision 

costs between the NCUSIF and 

Operating Fees charged to FCUs. The 

policy rationale for this allocation is 

supported by various provisions of the 

FCU Act. 

In Title II of the FCU Act, Congress 

established the NCUSIF and housed it 

within NCUA for administration by the 

NCUA Board.11 Congress envisioned 

efficiencies from this arrangement, as 

well as NCUA’s partnership with state 

regulators. Evidence of this intent to 

streamline can be found in 12 U.S.C. 

1782(a)(5), which requires reports FCUs 

must file under Title I of the FCU Act 

to be prepared so ‘‘that they can be used 

for share insurance purposes.’’ 

Similarly, this provision requires NCUA 

to use the reports filed by FISCUs with 

their state regulators ‘‘for share 

insurance purposes . . . [t]o the 

maximum extent feasible. . . .’’ 12

Congress also recognized that, in 

addition to losses related to credit union 

failures, the NCUSIF would incur 

expenses related to its administration, 

including examination staff and other 

employees. Title II empowers the NCUA 

Board to determine the proper 

allocation of ‘‘administrative and other 

expenses incurred’’ under Title II that 

may be funded by direct requisitions 

from the NCUSIF.13 Title II further 

subjects the resources expended for 

‘‘insurance purposes’’ to the Board’s 

discretion by empowering the Board to 

‘‘appoint examiners who shall have 

power, on its behalf, to examine any 

insured credit union, any credit union 

making application for insurance of its 

member accounts, or any closed insured 

credit union whenever in the judgment 

of the Board an examination is 

necessary to determine the condition of 

any such credit union. . . .’’ 14 Title I 

confirms this design by requiring that 

salaries and expenses of the Board and 

NCUA employees ‘‘be paid from fees 

and assessments (including income 

earned on insurance deposits) levied on 

insured credit unions under [the FCU 

Act].’’ 15 In addition to assessments 

charged to all insured credit unions 

simply by nature of their NCUSIF 

insurance, Title I requires an annual 

Operating Fee charged to FCUs in 

recognition of the additional duties 

required of NCUA under Title I with 

respect to FCUs.16

NCUA also has the authority to 

promulgate rules and regulations to 

carry out the provisions of Title II.17

Accordingly, the NCUA Board has 

approved rules and regulations that 

specifically address safety and 

soundness and protect the NCUSIF.18

Under the discretion vested in it 

under the FCU Act, the NCUA Board’s 

primary motivation for the agency’s 

regulations and examination program 

has been managing risk to the NCUSIF 

posed by all insured credit unions, 

whether state chartered or federal. The 

Board notes that NCUA’s role as insurer 

is best fulfilled by a proactive approach 

to preventing losses, in addition to 

paying the post-failure obligations that 

NCUSIF insurance coverage requires. 

Since the implementation of federal 

share insurance in 1970, the NCUA 

Board has instituted a much more 

proactive examination and supervision 

program geared toward safety and 

soundness, which focuses on insurance 

related issues. In 2002, the NCUA Board 

strengthened its commitment to 

fulfilling NCUA’s role as insurer by 

implementing the Risk-Focused 

Examination Program. This program 

bases examination scope and timing to 

a large extent on the risks an institution 

poses to the NCUSIF. The OTR’s portion 

of NCUA’s Operating Budget, including 

its changes over time, reflects the 

Board’s fulfillment of its insurance 

responsibilities under the FCU Act 

under evolving economic and legislative 

circumstances. 

III. History 

The NCUSIF was established in 1970 

through an amendment to the FCU Act. 

Section 203(a) of the FCU Act, 12 U.S.C. 

1783(a), created the NCUSIF and 

authorized the Board to use it to pay for 

‘‘such administrative and other 

expenses incurred in carrying out the 

purposes of [the FCU Act] as it may 

determine to be proper.’’ 

In 1972, a Government Accountability 

Office (GAO) audit 19 recommended 

NCUA adopt a method of allocating 

costs between NCUA and the newly 

formed NCUSIF. Between 1973 and 

1980, various cost allocation methods 

were employed, including direct 

charges to the NCUSIF for insurance 

expenses, including costs to close 

institutions, liquidation and merger 

costs, and, examiner time spent 

supervising—as opposed to 

examining—institutions. Starting in 

1981, the OTR ranged between 30 and 

34 percent, and stayed in that range 

through 1984. 

From 1985 through 1994, NCUA’s 

Office of Examination and Insurance 

(E&I) coordinated an annual ETS to 

determine an appropriate factor for 

apportioning the agency’s total 

operating expenses. Examiners 

completed 1,000 to 1,200 survey forms 

each year. The survey results supported 

a transfer rate between 50.1 percent and 

60.4 percent for insurance related 

activities; however, the NCUA Board 

maintained the OTR at 50 percent. 

In 1994, and again in 1997, the NCUA 

Board approved conducting examiner 

time surveys once every three years. 

Three-year surveys covered fiscal years 

1995 through 1997 and fiscal years 1998 

through 2000. During that period, the 

OTR remained at 50 percent through 

2000. 

The NCUA Board then voted to 

resume annual examiner time surveys in 

2000 and expanded the survey to 

include more examiners, as well as 

central and regional office staff. The 

fiscal year 2000 survey results 

supported a transfer rate of 66.72 

percent. After 15 years of holding the 

transfer rate at 50 percent, the NCUA 


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20The full independent report from Deloitte is 

available on NCUA’s Web site: https://www.ncua.

gov/About/Documents/Budget/Misc%20

Documents/2001DeloitteReportonOTRProcess.pdf. 

21The examiner time survey process is discussed 

in detail later in this document. 

22http://www.gao.gov/new.items/d0491.pdf. 

23The pre-decisional staff proposal is available on 

NCUA’s Web site: https://www.ncua.gov/About/

Documents/Budget/Misc%20Documents/Additional

%20Documents/2003%20Task%20Force%20

Proposal.pdf. 

24A summary of the comments received is 

available on NCUA’s Web site: https://www.ncua.

gov/About/Documents/Budget/Misc%20

Documents/Additional%20Documents/2003%20

Summary%20of%20Pre-Adoption%20OTR%20

Stakeholder%20Meeting%20Comments.pdf. 

25https://www.ncua.gov/About/Documents/

Budget/Misc%20Documents/2003OTRBAM.pdf. 

26https://www.ncua.gov/About/Documents/

Budget/Misc%20Documents/2011PwCOTR

Review.pdf. 

27As described in the ETS section, the ETS cycle 

runs from June 1, Year 1 to May 31, Year 2. The 

PricewaterhouseCoopers report was issued midcycle, January 2011. 

28This included the Credit Union National 

Association, the National Association of Federal 

Credit Unions, the National Association of State 

Credit Union Supervisors, and the National 

Federation of Community Development Credit 

Unions. 

Board increased the transfer rate to 

66.72 percent for fiscal year 2001. 

The Board also decided to hire an 

independent party to assess the OTR 

process. Deloitte & Touche’s review of 

the OTR process was issued on 

September 5, 2001 and included several 

recommendations to improve the OTR 

process.20 These recommendations were 

implemented in 2002. 

In 2002, as a result of the Deloitte & 

Touche review, NCUA automated the 

examiner time survey 21 and enhanced 

examiner training and guidance. The 

agency also initiated a task force to 

conduct a comprehensive review of the 

OTR, in part to better define insurancerelated activities. In October 2003, GAO 

issued report GAO–04–91 22

recommending continuous 

improvement of the process for and 

documentation of the OTR, updating the 

rate annually, and completing the 

examiner time surveys with full 

representation. Noting the task force 

review, NCUA agreed to set the rate 

annually, improve the methodology and 

documentation, and ensure examiner 

time survey sampling was statistically 

valid. 

The agency task force completed its 

review of the OTR in 2003 and 

recommended a revised, comprehensive 

methodology for calculating the OTR 

annually.23 The NCUA Board received 

comments from credit union trade 

groups 24 on the proposed revised 

methodology and ultimately approved 

adoption of the revised methodology 

and an OTR of 59.8 percent for fiscal 

year 2004 at the November 20, 2003, 

open Board meeting.25

Using the revised methodology 

approved in 2003, the OTR approved 

annually by the NCUA Board ranged 

between 52.0 percent and 57.2 percent 

for fiscal years 2005 through 2010. The 

NCUA Board approved funding for an 

independent review of the OTR at the 

November 2009 open Board meeting. 

PricewaterhouseCoopers issued its first 

of two reports to NCUA in January 

2011.26 Based on the 2011 

PricewaterhouseCoopers report, the 

definitions used in the examiner time 

survey were clarified over the next two 

ETS cycles. 

The 2010–2011 ETS cycle defined 

insurance-related and non-insurance 

related activities as follows: 27

Insurance Related Examination 

Procedures—Insurance Related examination 

or supervision contact procedures address 

safety and soundness issues. On the time 

survey forms, respondents should classify the 

time used to evaluate safety and soundness 

as ‘‘insurance related.’’ ‘‘Insurance Related’’ 

time is 

• Evaluating financial trends and Call 

Report data 

• Determining the credit union’s solvency 

position 

• Evaluating risks, and potential costs, the 

credit union presents to the NCUSIF (when 

appropriate) 

• Assessing management’s efforts to 

protect earnings and net worth by 

identifying, evaluating, controlling, and 

monitoring internal and external risks 

• Assessing management’s abilities to 

develop strong policies and a reliable 

internal control structure 

Non-Insurance Related Examination 

Procedures—Non-Insurance Related 

examination or supervision contact 

procedures address compliance with the laws 

and regulations that NCUA enforces. On the 

survey forms, respondents should classify the 

time used to evaluate issues not related to 

safety and soundness 

• Compliance with consumer protection 

laws, NCUA Rules and Regulations, the FCU 

Act, and Bylaws 

• Review of previously cited regulatory 

violations, areas of concern, and corrective 

actions taken 

• Call report accuracy and timeliness 

After the issuance of the 

PricewaterhouseCoopers report in 

January 2011, NCUA improved the ETS 

Instruction definitions for insurance and 

non-insurance related activities for the 

2011–2012 ETS cycle. Specifically, new 

categories were established to help 

examiners distinguish between 

regulations established to protect the 

NCUSIF, labeled ‘‘insurance 

regulatory’’, from regulations 

established to provide consumer 

protection or otherwise govern how 

federal credit unions operate, labeled 

‘‘consumer regulatory.’’ This resulted in 

a more accurate assessment of insurance 

related activities (including insuranceregulatory) and consumer regulatory or 

non-insurance related activities. NCUA 

solicited comments from representatives 

of key stakeholders on the proposed 

changes to the definitions of the 

agency’s activities as they related to the 

OTR methodology.28 The 2011–2012 

ETS Instructions contained the 

following definitions: 

Insurance Related Examination 

Procedures—No change from 2010–2011 ETS 

Instruction definition stated above. 

Insurance Regulatory Related Examination 

Procedures—Insurance Regulatory related 

examination or supervision contact 

procedures address regulations that are not 

designed to protect consumers directly. This 

includes assessing compliance with all 

regulations outside of consumer oriented 

regulations—see listing of consumer 

regulations in the following section— 

Consumer Regulatory examination 

procedures. Insurance Regulatory related 

regulations include those regulations that 

address safety and soundness issues. 

Examples include (this is not all inclusive): 

• 701.21—Loans to Members and Lines of 

Credit to Members 

Æ Includes total loan limit to one 

individual, limitation on maturity, rate of 

interest, and security. 

• 702—Prompt Corrective Action 

Æ Establishes net worth categories and 

mandatory and discretionary supervisory 

actions 

• 703—Investments and Deposit Activities 

Æ Establishes permissible investments and 

requires credit analysis prior to purchase and 

requires ongoing monitoring of securities 

• 712—Credit Union Service 

Organizations 

Æ Establishes investment and loan limits 

as well as outlines permissible activities 

• 713—Fidelity Bond and Insurance 

Coverage 

Æ Requires minimum bond coverage 

• 715—Supervisory Committee Audits and 

Verifications 

• 722—Appraisals 

Æ Establishes minimum appraisal 

standards based on loan size 

• 723—Member Business Loans 

Æ Establishes prohibited activities, 

requires specific policies and sets overall 

loan limits as well as limits to one member 

or group of associated members 

Consumer Regulatory Related Examination 

Procedures—Consumer Regulatory Related 

examination or supervision contact 

procedures address compliance with 

consumer regulations. The regulations 

include: 

• Reg. B—Equal Credit Opportunity Act 

• BSA—Bank Secrecy Act 

• Reg. C—Home Mortgage Disclosure Act 

• Reg. CC—Expedited Funds Availability 

• COPPA—Children’s Online Privacy 

Protection Act 

• Reg. D—Reserve Requirements 

• Reg. E—Electronic Funds Transfer Act 


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4808 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

29https://www.ncua.gov/About/Documents/

Budget/2013/2013ETSAnalysis.pdf. 

30The dollar amount of the OTR in this graph is 

based on the NCUA Board approved budget, not 

actual expenditures. The OTR is applied to actual 

expenses incurred each month. 

31https://www.ncua.gov/Resources/Documents/

LCU1998-16.pdf. 

32CUMAA imposed a new aggregate limit on a 

credit union’s outstanding member business loans 

of the lesser of 1.75 times the credit union’s net 

worth or 12.25% of the credit union’s total assets. 

• FACTA—Fair and Accurate Credit 

Transactions Act 

• FCPR—Fair Credit Practice Rule 

• FCRA—Fair Credit Reporting Act 

• FDCPA—Fair Debt Collections Practices 

Act 

• FDPA—Flood Disaster Protection Act 

• FHA—Fair Housing Act 

• GLBA—Gramm-Leach Bliley Act 

• HOEPA—Home Ownership and Equity 

Protection Act 

• HOPA—Home Owner’s Protection Act 

• Reg. M—Consumer Leasing 

• OFAC—Office of Foreign Asset Control 

• PCFI—Privacy of Consumer Financial 

Information 

• RFPA—Right to Financial Privacy Act 

• SCRA—Service Members Civil Relief Act 

• Reg.—X Real Estate Settlement 

Procedures Act 

• Credit Card Act 

• Unlawful Internet Gaming Enforcement 

Act 

• SAFE Act—Secure and Fair Enforcement 

for Mortgage Licensing Act 

• Reg.—Z Truth in Lending 

• Rules and Regulations Part 706—Credit 

Practices 

• Rules and Regulations Part 707—Truth 

in Savings 

• Rules and Regulations Part 717—Fair 

Credit Reporting 

In 2012, the Office of Examination 

and Insurance (E&I) further clarified the 

application of the insurance-related and 

non-insurance related definitions in the 

ETS. Specifically, all relevant NCUA 

regulations were explicitly mapped to 

the survey classifications to provide 

more uniformity and consistency of 

reporting. This breakdown and mapping 

of regulations was consistent with the 

existing overall definitions of insurancerelated and non-insurance related 

activities. The primary definitions did 

not change; the regulations were merely 

explicitly mapped based on the 

overarching definitions. This 

clarification resulted in more 

consistency by respondents on the ETS. 

Appendix A contains the mapping 

provided to ETS participants. In 2013, 

NCUA also obtained an independent 

review of the mapping of the regulations 

from PricewaterhouseCoopers.29 The 

mapping of NCUA’s regulations 

outlined in the PricewaterhouseCoopers 

October 2, 2013 report, is available on 

NCUA’s Web site. 

Based on the validated mapping of 

NCUA regulations to guide examiners in 

completing the annual time survey, the 

average survey results for insurance 

related activities increased from 67 

percent to 88 percent of examiner time. 

This resulted in an OTR for 2014 of 69.2 

percent, which was approved at the 

November 2013 open NCUA Board 

meeting. The OTR rose to 71.8 percent 

for 2015 and to 73.1 percent for 2016. 

Figure 1 shows the trends in the OTR 

since 2004.30

Since the creation of the NCUSIF in 

1970, NCUA’s allocation of funds 

between its dual roles has evolved to 

address changes in the credit union 

system and changes to NCUA 

operations. As credit unions have 

become larger and more complex, the 

potential risk to the NCUSIF has 

increased. As a result, NCUA’s 

operations have adapted. This has 

resulted in an increased focus on 

insurance-related activities, and this 

focus remains in place today. 

The FCU Act and NCUA Rules and 

Regulations have also evolved in recent 

history, and as a result, the agency has 

placed more of a focus on safeguarding 

the NCUSIF. In particular: 

1. The Credit Union Membership 

Access Act (CUMAA) was enacted into 

law in 1998.31 This law resulted in new 

obligations on credit unions and NCUA 

designed to protect the NCUSIF, such 

as: 

a. Imposing new requirements on 

federally insured credit unions with 

respect to financial statements and 

audits, and member business loans.32


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33A net worth standard of 7 percent of assets was 

established for insured credit unions, as well as 

risk-based capital standards for ‘‘complex’’ credit 

unions as defined by NCUA. For credit unions not 

meeting these standards, progressively more 

stringent ‘‘prompt corrective action’’ requirements 

apply. 

34https://www.ncua.gov/newsroom/Pages/

RegulatoryModernizationInitiativeResults.pdf. 

35For a discussion of recommendations not 

adopted and the associated rationale, see the 

Overhead Transfer Rate (OTR)—Timeline on 

NCUA’s website at https://www.ncua.gov/About/

Documents/Budget/Misc%20Documents/overheadtransfer-rate-chronology.pdf. 

36The Deloitte & Touche Study is available on 

NCUA’s public website. https://www.ncua.gov/

About/Documents/Budget/Misc%20Documents/

2001DeloitteReportonOTRProcess.pdf. 

b. Establishing a new system of tiered 

capital requirements for all federally 

insured credit unions.33

2. During the aftermath of the 

financial crisis, from 2010 to 2015, the 

NCUA Board strengthened critical safety 

and soundness rules, such as: 

a. Codifying interest rate risk 

guidance into a rule ensuring that 

federally insured credit unions holding 

the vast majority of the credit union 

system’s assets have appropriate 

policies to manage interest rate risk in 

adverse scenarios. 

b. Designing a targeted emergency 

liquidity rule ensuring that federally 

insured credit unions at various asset 

levels have scalable contingency plans 

to tap reliable sources of liquidity 

during a crisis. 

c. Establishing concentration limits 

and required due diligence on loan 

participations. 

3. From 2011 through 2015, NCUA 

also modernized various regulations to 

provide credit unions with more 

flexibility and authority.34 While these 

modernized rules reduced compliance 

burdens, they resulted in examiners 

devoting more time to ensuring safety 

and soundness through the examination 

process rather than relying on regulatory 

limits. For example, NCUA: 

a. Expanded regulatory relief 

eligibility for small and non-complex 

credit unions. 

b. Eliminated the fixed assets cap for 

FCUs. 

c. Eased troubled debt restructuring 

rules. 

d. Authorized ‘‘plain-vanilla’’ 

derivatives for FCUs. 

Since 2001, various independent 

third-party assessments have also 

resulted in recommendations to 

improve and refine the OTR 

methodology, most of which NCUA has 

adopted.35 NCUA is now seeking public 

comment on the current OTR 

methodology, as described throughout 

the remainder of this document, for 

possible additional improvement. 

IV. Detailed Discussion of OTR 

Methodology 

a. Examination Time Survey 

NCUA’s mission is to foster the safety 

and soundness of federally insured 

credit unions, which is primarily 

achieved through its examination 

program. Consequently, the majority of 

NCUA’s resources are dedicated to the 

examination and supervision of 

federally insured credit unions. 

Examiners expend time on both 

regulatory and insurance activities 

during examinations and supervision 

contacts at FCUs. Therefore, one of the 

key components needed to calculate the 

cost for NCUA’s regulatory role and 

insurance roles is the annual ETS. The 

ETS applies only to FCU examination 

and supervision contacts, as 

examinations (insurance reviews) of 

FISCUs have by definition the sole 

purpose of managing risk to the 

NCUSIF. The Board invites comment on 

the existing ETS process. 

Since its inception in 1985, the ETS 

evolved from a manually completed 

form to the automated system used now. 

From 1985 to 1994, NCUA collected 

1,000 to 1,200 manually completed 

survey forms annually. Survey forms 

were completed by participants for each 

FCU examination (work classification 

code [WCC] 10) and each FCU 

supervision contact (WCC 22). Since 

survey results were consistent, NCUA 

reduced the sample size considerably 

and instead of annual collection, moved 

to a 3-year cycle. In 1994, 1997, and 

2000, the sample size ranged from 60 to 

100 survey forms. There were no 

surveys completed in 2001. 

In 2001 Deloitte & Touche completed 

a study of the ETS process and 

concluded it was reasonable and 

appropriate for use in allocating 

NCUA’s costs between insurance-related 

and regulatory-related activities.36 The 

study included some recommendations 

to enhance the survey process, such as 

automating the survey form, improving 

communications, and varying the period 

of collection, but did not recommend 

any changes to the survey’s content. 

NCUA implemented those 

recommendations. 

In 2002, E&I randomly selected one 

Supervisory Examiner (SE) group (via 

lottery draw) from each region to 

participate in the survey process. The 

regions selected three experienced 

Principal Examiners (PEs) from these SE 

groups to complete surveys for all FCU 

examination and supervision contacts 

initiated and completed during the ETS 

period. Since 2002, the participating SE 

groups in each region have rotated 

annually. The annual rotation ensures 

representative coverage of the 

population of FCUs across each region 

while minimizing the burden on field 

staff. 

From 1985 through 2000, examiners 

completed time surveys during a set 

period, often occurring near the end of 

the exam program year. Starting in 2002, 

examiners completed surveys for all 

examination and supervision contacts 

they conducted during a 12-month 

period that starts on June 1, and ends on 

May 31, of the following year. Utilizing 

groups from all of NCUA’s regions and 

collecting the data throughout a 12- 

month period provides a variety of 

FCUs, completion dates, and geographic 

locations resulting in a sample that 

better represents the entire population. 

Prior to introducing the automated 

form, NCUA did not provide formal 

training to survey participants. 

Beginning in 2002, E&I held a training 

session and a subsequent teleconference 

for the selected participants, their 

supervisors, and a regional office 

analyst from each region. E&I also 

dedicated an email address for 

examiners to use to request help with 

the survey. In addition, E&I created a 

shared electronic database to store 

information such as answers to 

Frequently Asked Questions (FAQs), 

summary reports, and training 

information. 

Since 2002, communications 

regarding the survey process have 

improved, which helps to ensure 

consistent application and reliable 

results. E&I provides training prior to 

the start of every ETS cycle; including: 

• A discussion of the objectives of the 

ETS and its importance in determining 

the OTR, 

• how to access and complete the 

ETS form, 

• how to classify examination and 

supervision activities, 

• how to correct data if necessary, 

• a review of tools for reporting 

hours, 

• expectations of the ETS 

participants, and 

• resources available to the 

participants. 

The instructions provided to the ETS 

participants are included in Appendix 

B. 

As previously discussed, the NCUA 

Board approved funding for an 

independent review of the OTR at the 

November 2009 open Board meeting. 

PricewaterhouseCoopers’ January 2011 

report resulted in several changes to the 


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4810 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

37https://www.ncua.gov/About/Documents/

Budget/Misc%20Documents/2011PwCOTR

Review.pdf. 38https://www.ncua.gov/About/Documents/

Budget/2013/2013ETSAnalysis.pdf. 

39The current mapping has not been updated for 

NCUA’s most recent final rules. Similar to other 

activities not explicitly classified in the ETS 

instructions, ETS participants defer to the 

overarching definitions of insurance and noninsurance related activities provided in the ETS 

instructions (see Appendix B) to appropriately 

allocate time as insurance or non-insurance. 

ETS.37 The definitions used in the ETS 

were modified to more clearly define 

the work of NCUA’s examination staff. 

Specifically, all relevant NCUA 

regulations were explicitly mapped to 

the survey classifications to provide 

more uniformity and consistency of 

reporting. The report also recommended 

that NCUA use sample sizes that are 

consistent with the calculated sample 

sizes for the two main types of activities 

(i.e. programs) under survey, and 

specifically, that NCUA consider 

increasing the sample sizes for the 

federal supervision program. To 

improve the confidence interval, E&I 

chose one additional SE group per 

region to increase the number of 

supervision surveys. As the report 

concluded the examination survey size 

met the desired confidence level, the 

additional SE group was instructed to 

upload only the supervision contacts 

the PEs completed during the ETS 

period. This reduced the overall burden 

of completing the surveys for additional 

examinations. 

At the end of each ETS period, NCUA 

monitors the results of the time study to 

ensure the sample size is statistically 

valid. Using the ETS examination 

upload report, NCUA calculates the 

mean and standard deviation for 

percentage of consumer regulatory 

hours of the WCC 10 examination 

uploads. For the most recent ETS 

period, there were 142 WCC 10 

examination uploads with a total of 

2,621.6 consumer regulatory hours. The 

mean was calculated to be 13.37 percent 

and the standard deviation was 9.09 

percent. A statistically valid sample size 

is calculated for 99 percent, 95 percent, 

and 90 percent confidence intervals 

using these statistics, the corresponding 

Z factor from a standard normal 

distribution table, and a 3 percent 

margin of error. Table 1 illustrates the 

calculations for the most recent ETS 

period. NCUA’s sample size of 142 

exceeds the 60.92 necessary to achieve 

a 99 percent confidence interval. 

TABLE 1—SAMPLE SIZE

C P = (100%-C)/2 X S Z E N = ((Z*S)/e)2

Confidence interval Confidence 

factor Mean Standard deviation 

From standard 

normal tables Margin of error Sample size 

99% ...................................................... 0.005 13.37 9.09 2.576 3.00 60.92 

95% ...................................................... 0.025 13.37 9.09 1.960 3.00 35.27 

90% ...................................................... 0.050 13.37 9.09 1.645 3.00 24.84 

NCUA also performs these 

calculations for the sample size for WCC 

22 supervision contact uploads. Using 

the ETS WCC 22 upload report, NCUA 

calculates the mean and standard 

deviation for percentage of consumer 

regulatory hours of the WCC 22 

supervision contact uploads. For the 

most recent ETS period, there were 100 

WCC 22 uploads with a total of 350.4 

consumer regulatory hours. The mean 

was calculated to be 16.9 percent and 

the standard deviation was 30.9 percent. 

Based on these statistics, NCUA’s 

sample size produces a confidence 

interval of approximately 69 percent. To 

achieve a 95 percent confidence interval 

with 3 percent margin of error, would 

require approximately 408 uploads. 

NCUA accepts a lower confidence 

interval for the WCC 22 uploads because 

the WCC 10 examination program is the 

primary focus of the time study and to 

reduce the burden on field staff. Also, 

the combined WCC 10 and WCC 22 

contacts result in a sample size of 242 

uploads with total of 2,972 hours. The 

mean of the combined sample 

calculated to be 14.84 percent and the 

standard deviation was 21.07 percent. 

Using these statistics, a sample size of 

151 provides a greater than 99 percent 

confidence level. The sample size is 

sufficient to provide reliable results. 

In 2013, NCUA also obtained an 

independent review of the mapping of 

the regulations.38 The mapping of 

NCUA’s regulations is outlined in 

PricewaterhouseCoopers’ October 2, 

2013 report, which is available on 

NCUA’s website and in Appendix A of 

this document. E&I reviews the 

regulatory mapping prior to the 

beginning of each ETS cycle for any 

necessary updates.39 Going forward, 

NCUA intends to clearly state in the 

preamble to proposed rules whether a 

rule is promulgated under its Title II 

authority (insurance) or its Title I 

authority (regulatory). 

As stated earlier, two SE groups from 

each region participate in the ETS 

process. One group uploads both FCU 

examination contacts and FCU on-site 

supervision contacts while the second 

SE group uploads only FCU on-site 

supervision contacts. All PEs in the 

selected groups participate in the 

survey. PEs are selected because they 

possess the necessary level of 

experience to ensure accurate results 

where examiner judgment is necessary. 

If an SE group has less than four PEs, 

a second group is added to ensure an 

adequate number of examinations and 

supervision contacts are uploaded for a 

statistically relevant sample. The 

participating SE groups rotate each year 

in alphabetical order (Group A one year, 

Group B the next year, etc.) to ensure a 

fair distribution of work and to ensure 

a wider number of FCUs are captured in 

the survey over time. PEs who transfer 

to a different SE group during the ETS 

period continue uploading surveys until 

the survey cycle ends. However, PEs 

from a non-participating group that 

transfer into a group participating in the 

ETS do not upload any time surveys. 

NCUA utilizes its Automated 

Integrated Regulatory Examination 

System (AIRES) examination system to 

capture the ETS information. There are 

twelve categories of activities on the 

survey form, modeled on the risk-based 

examination program. The scope 

categories are: 

1. Planning/Scope Development 

2. Call Report Review 

3. Supervisory Committee Review 

4. Financial Analysis 

5. Loan Analysis 

6. Investment Analysis 

7. Liquidity Analysis 

8. Asset Liability Management 

9. Compliance 

10. Information Systems Technology 

11. Management Analysis 


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12. Contact Report/Joint Conference/

Follow-Up Procedures 

For each examination or supervision 

contact, the examiner inputs the hours 

spent on insurance, insurance 

regulatory related and non-insurance 

and consumer regulatory related 

activities in each of the categories. A 

full year’s worth of survey results are 

used to calculate the percentage of 

hours devoted to regulatory and 

insurance-related (insurance and 

regulatory) activities for the Federal 

Examination and Federal Supervision 

Programs. As previously mentioned, the 

ETS period runs from June 1 to May 31. 

Only examinations started after June 1 

and completed and uploaded by the 

following May 31 are included in the 

survey to maintain consistency. 

Results of the ETS 

The ETS is used to determine the 

percentage of Workload Budget Hours 

related to regulatory and insurancerelated tasks for the following two 

programs: 

• Federal Examination (WCC 10); and 

• Federal Supervision (WCC 22). 

NCUA uses a full year’s worth of 

survey results when determining the 

regulatory cost driver applied to the 

budgeted workload hours for its Core 

Programs and Special Programs. The 

Workload Budget is discussed later in 

this document. The results of the ETS 

concluded on May 31, 2015 are 

illustrated in Table 2. 

TABLE 2—RESULTS OF ETS 

Contact type (WCC) Total surveys 

collected 

Insurance 

related % 

Non-insurance 

related % 

(regulatory) 

Examination (WCC 10) ................................................................................................................ 142 86.83 13.17 

Supervision (WCC 22) ................................................................................................................. 100 87.21 12.79 

Total ...................................................................................................................................... 242 86.87 13.13 

Table 3 shows the ETS results by the 

scope categories. 

TABLE 3—ETS RESULTS BY SCOPE CATEGORY

Time category results Insurance 

related % 

Non-insurance 

related % 

(regulatory) 

Planning/Scope Development ................................................................................................................................. 85.95 14.05 

Call Report Review .................................................................................................................................................. 95.61 4.39 

Supervisory Committee ........................................................................................................................................... 94.61 5.9 

Financial Analysis .................................................................................................................................................... 96.98 3.02 

Loan Analysis .......................................................................................................................................................... 93.65 6.35 

Investment Analysis ................................................................................................................................................. 93.05 6.95 

Liquidity Analysis ..................................................................................................................................................... 93.84 6.16 

Asset Liability Management ..................................................................................................................................... 96.15 3.85 

Compliance .............................................................................................................................................................. 41.28 58.72 

Information Systems Technology ............................................................................................................................ 81.28 18.72 

Management ............................................................................................................................................................ 90.73 9.27 

Examination Report/JC/Follow-Up ........................................................................................................................... 89.85 10.15 

Total .................................................................................................................................................................. 86.87 13.13 

NCUA also reviews the ETS results by 

CAMEL code. For the most recent ETS 

period, NCUA calculated the number of 

contacts by CAMEL Code as a 

percentage of the sample size. The 

results are documented in Table 4. The 

percentage of WCC 10 examinations by 

CAMEL code correlate strongly with the 

total FICU population at May 31, 2015. 

As expected the percentage of WCC 22 

supervision contacts is weighted more 

heavily toward CAMEL 3 and CAMEL 4 

FICUs since supervision is focused on 

credit unions with financial and 

operational weaknesses. 

TABLE 4—CAMEL CODE DISTRIBUTION

CAMEL code 

Percent of sample 

WCC 10 

examination 

(%) 

WCC 22 

supervision 

(%) 

Total FICU 

population 

(%) 

1 & 2 ............................................................................................................................................ 71.83 22.00 73.56 

3 ................................................................................................................................................... 24.65 51.00 22.41 

4 ................................................................................................................................................... 3.52 27.00 3.90 

5 ................................................................................................................................................... 0.00 0.00 0.13 


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40 Discussed in Section IV.a. 

41 Including programs administered by the Office 

of Small Credit Union Initiatives (OSCUI) and the 

Office of Consumer Protection (OCP) as discussed 

in Section IV.c. 

42Time budgeted for core and special programs 

is considered productive time, while administrative 

hours are considered non-productive time. These 

classifications are used during the SSA Imputed 

Value step of the OTR calculation. 

43Field office refers to each of NCUA’s five 

Regional Offices and the Office of National 

Examinations and Supervision (ONES). 

44Each year NCUA issues a Letter to Credit 

Unions outlining the Supervisory Priorities for the 

year. https://www.ncua.gov/regulation-supervision/

Pages/policy-compliance/communications/lettersto-credit-unions/2016/01.aspx. 

45NCUA examiners are assigned a district of 

specific FCUs and FISCUs and are responsible for 

managing examination and supervision of the credit 

unions assigned to their district. 

46Workload hours include hours for 

examinations, on- and off-site supervision, and 

reviews by regional and national specialized 

examiners. 

47Numbers may not reconcile exactly due to 

rounding. 

48These are the budgeted hours allocated to 

insurance-related, regulatory work in 2016. 

As Table 2 and Table 3 show, the ETS 

determined NCUA examiners spend 

86.87 percent of their time on insurance 

related activities and 13.13 percent of 

their time on non-insurance related 

activities during examinations and 

supervision contacts between June 1, 

2014 and May 31, 2015. As the next 

section will describe, the results of the 

ETS are applied to NCUA’s budgeted 

workload program hours to determine 

the agency’s budgeted hours for 

insurance and non-insurance related 

activities. 

b. Workload Program Hours 

This step in NCUA’s OTR calculation 

determines the percentage of work the 

agency expects to perform in insurance 

and non-insurance related activities. 

Specifically, the results of the ETS,40

and the assessment of work performed 

for other programs administered by 

other offices 41 are applied to the 

workload program hours derived from 

NCUA’s annual resource budget. This 

results in a weighted average of program 

hours devoted to NCUA’s regulatory and 

insurance roles. 

NCUA’s annual resource budget is a 

comprehensive workload analysis that 

captures the amount of time budgeted to 

conduct examinations and supervision 

of federally insured credit unions, and 

other programs necessary to carry out 

NCUA’s dual mission as insurer and 

regulator. The annual resource budget 

estimates hours in three major 

categories: 42

1. Core Programs includes NCUA’s 

FCU and FISCU examinations and onand off-site supervision. 

2. Special Programs includes NCUA’s 

specialized examination programs in the 

areas of capital markets, information 

systems, and lending, credit union 

service organization (CUSO) reviews, 

chartering and field of membership, and 

small credit union development. 

3. Administrative includes NCUA 

field staff time related to training and 

staff development, leave, and travel. 

The annual resource budget process 

starts with a planning session with 

management representatives from each 

field office,43 OCP and E&I. During the 

planning session, resource requirements 

for programs such as focused areas of 

review,44 central office details, and 

working groups are vetted. Examination 

and supervision requirements are also 

reviewed and guidance is issued to all 

field staff. NCUA field staff review each 

FICU in their district 45 to determine the 

anticipated number of workload 

hours 46 needed for the next calendar 

year. The workload estimates are refined 

by field management to ensure 

consistency. Field offices submit their 

final resource budget proposals to E&I 

for review and analysis. E&I reviews the 

program recommendations from the 

field offices and submits any 

recommendations for adjustments to the 

Executive Director. The final resource 

budget for each field office establishes 

the foundation for their budget requests 

and is used to allocate the results of the 

ETS. 

Table 5 shows the 2016 budgeted 

hours for NCUA’s core and special 

programs and how those hours are 

allocated to non-insurance related 

activities based on the results of the 

ETS. Administrative time is not 

allocated in this step of the OTR 

calculation. 

TABLE 5—ALLOCATION OF BUDGETED PROGRAM HOURS

2016 budgeted 

workload hours 

Non-insurance 

percent 

Non-insurance 

hours 47 Allocation basis 

Core Programs ........................................................ 728,556 na 70,691 Sum of Core Programs 

Federal Examination ............................................... 454,115 13.17% 59,807 Examiner time survey 

Federal Supervision ................................................ 53,687 12.79% 6,867 Examiner time survey 

State Exam & Supervision ...................................... 175,722 0% 0 FISCU work is insurance-related 

State Exam Review ................................................ 5,321 0% 0 FISCU work is insurance-related 

5300 Program—FCU .............................................. 30,503 13.17% 4,017 Uses FCU examination results from examiner 

time survey 

5300 Program—FISCU ........................................... 9,208 0% 0 FISCU work is insurance-related 

Special Programs .................................................... 35,637 na 2,607 Sum of Special Programs 

Regional Lending Specialists .................................. 4,190 13.17% 552 Allocation based on % from time surveys 

Regional Capital Market Specialists ....................... 4,130 0% 0 NCUSIF risk management program 

Regional Information Systems Officers .................. 3,320 13.17% 437 Allocation based on % from time surveys 

Field of Membership & Chartering .......................... 500 100.00% 500 Regulatory program 

Small Credit Unions ................................................ 18,633 6.00% 1,118 Allocation based on OSCUI’s time reporting results 

CUSO Examinations ............................................... 4,864 0% 0 NCUSIF risk management program 

Total Core & Special Programs ....................... 764,193 na 48 73,298 

Percent of 2016 core and special programs devoted to NCUA’s Non-Insurance Role ............. 9.6% = 73,298 ÷ 764,193 

Detailed Explanation of Allocation Basis 

Table 5 shows how NCUA’s core and 

special program hours are allocated to 

non-insurance and thereby insurance 

related activities. A detailed explanation 

of the allocation basis for each core 

program and special program is outlined 

below. 

Core Programs 

NCUA’s federal examination and 

federal supervision programs’ noninsurance related activities are allocated 

at 13.17 percent and 12.79 percent, 

respectively, based on the results of the 


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49The results of the time study are documented 

in Tables 2 and 3. 

50https://www.ncua.gov/About/Pages/budgetstrategic-planning/supplementary-materials.aspx. 

ETS.49 The results of the ETS from June 

2014 to May 2015 determined that 

examiners spent 13.17 percent of their 

time on non-insurance related activities 

during the examination of FCUs and 

12.79 percent of their time on noninsurance related activities during the 

supervision of FCUs. These percentages 

(13.17 percent and 12.79 percent) are 

respectively applied to the 2016 

budgeted hours for federal examinations 

and federal supervision to determine the 

number of hours for non-insurance 

related activities. 

NCUA examiners conduct 

examinations and supervision of 

FISCUs, and generally do so in 

conjunction with the governing state 

supervisory authority (SSA). It is also 

NCUA’s policy to conduct reviews of 

examinations completed by the SSA. 

NCUA’s FISCU related work 

(examinations, supervision and state 

exam reviews) is solely associated with 

the agency’s role as an insurer. For 

purposes of calculating the OTR, 100 

percent of the budgeted hours for FISCU 

examinations, supervision and state 

examination reviews are allocated to 

insurance-related activities. 

All federally insured credit unions 

file quarterly 5300 Call Reports with 

NCUA. NCUA examiners are 

responsible for performing quarterly 

reviews of the 5300 Call Report 

information for all federally insured 

credit unions in their district. For FCUs, 

NCUA examiners are also responsible 

for validating the information submitted 

by the FCUs. For this reason, more time 

is budgeted for the federal 5300 program 

than for the state 5300 program. An 

extension of the examination program, 

the budgeted hours for the federal 5300 

program are allocated as insurance and 

non-insurance hours based on the 

results of the ETS for federal 

examinations. Thus, 13.17 percent of 

federal 5300 program hours are 

allocated to non-insurance activities. 

Consistently, the budgeted hours for the 

state 5300 program are allocated the 

same as the FISCU examination 

program, 100 percent to insurance 

related activities. 

Special Programs 

Regional lending, information 

technology and capital market 

specialists participate in the 

examination and supervision of 

federally insured credit unions to 

perform focused reviews of more 

complex areas of credit union 

operations. Regional specialists do not 

participate in the ETS. The work 

performed by regional lending and 

information technology specialists is a 

combination of insurance and noninsurance related activities. Therefore, 

the budgeted hours for regional lending 

specialists and regional information 

systems officers is allocated 

conservatively at 13.17 percent for noninsurance related activities, based on 

the ETS results. The work performed by 

regional capital market specialists is 

focused on credit unions’ asset liability 

management and serves as a risk 

management program for the NCUSIF. 

Thus, budgeted hours for regional 

capital market specialists is allocated 

100 percent to insurance-related 

activities. 

NCUA budgets hours for examiners to 

support OCP with chartering and field 

of membership applications and 

expansion requests. One-hundred 

percent of the hours budgeted for 

examiners to assist with this activity are 

allocated to NCUA’s non-insurance 

function. 

NCUA also budgets hours for 

examiners to support OSCUI with 

providing assistance to small credit 

unions. The budgeted hours for 

examiner participation in the small 

credit union program are allocated to 

insurance and non-insurance related 

activities on the same basis as the 

OSCUI programs. As described in the 

financial budget section, OSCUI 

conducts its own time survey each year 

and has determined that 6 percent of its 

work should be allocated to noninsurance related activities. Thus, 

NCUA allocates 6 percent of these 

budgeted workload hours to noninsurance related activities. 

The agency’s CUSO examination 

program is a risk-management program 

focused on protecting the NCUSIF 

(NCUA does not charter and has no 

regulatory authority over CUSOs). Thus, 

100 percent of the hours budgeted for 

CUSO examinations is allocated to 

insurance related activities. 

As Table 5 shows, the combination of 

non-insurance workload hours for core 

and special programs is compared to the 

overall workload budget for those 

programs, to develop the overall 

weighted average of non-insurance 

related work across all programs. The 

percentage of non-insurance activities 

derived from the ETS and the annual 

resource budget are applied to NCUA’s 

Operating Budget as outlined in the 

Financial Budget section. 

c. Financial Budget 

NCUA’s budget process uses the 

agency’s strategic goals and objectives 

set forth in the NCUA Strategic Plan as 

a framework to ensure agency priorities 

and initiatives drive resulting resource 

needs and allocations. The annual 

budget provides the resources to execute 

the strategic plan and undertake tasks in 

NCUA’s major programs. 

Each NCUA office develops a budget 

request identifying resources required to 

support NCUA’s mission and strategic 

goals and objectives. These budgets are 

developed using zero-based budgeting 

techniques to ensure each office’s 

requirements are individually justified 

and consistent with the agency’s overall 

strategic plan. One of the primary inputs 

in the development of the financial 

budget is the workload analysis 

described in the workload budget 

section. The final workload analysis 

establishes the foundation for the field 

office budget requests in addition to 

establishing the amount of work related 

to insurance and non-insurance related 

activities for the OTR. The workload 

analysis is also used to develop 

personnel and travel costs, and all 

offices develop cost estimates for fixed 

and recurring items such as rent or 

leased property, operations and 

maintenance, repair on owned facilities, 

supplies, telecommunications, and 

other administrative and contracted 

services costs. Information related to 

NCUA’s budget process, including 

detailed information on the NCUA 

Board-approved 2016 Operating Budget 

are available on the agency’s Web site.50

Table 6 shows how NCUA’s 2016 

Operating Budget is allocated to noninsurance related activities, using the 

weighted average derived from the core 

and special programs (9.6 percent) and 

the results of the assessment of 

insurance and non-insurance related 

activities for programs administered by 

other offices. The allocation basis for all 

offices is outlined in detail below Table 

6. The Board invites comment on the 

current process for allocating NCUA’s 

Operating Budget used in the OTR 

calculation. 


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51The weighted average, previously determined, 

is applied to all other cost centers (CFO, human 

resources, etc.) as these are overhead functions that 

support the agency’s mission. 

TABLE 6—ALLOCATION OF NCUA OPERATING BUDGET

Cost area 2016 Financial Budget Dollar budget 

($M) 

Non-insurance 

percent 

Non-insurance 

cost ($M) 

All Regional Costs: Based on non-insurance related portion of core and special programs ..... $155.49 9.6% $14.91 

Asset Management Assistance Center and Assistance Program: Manages liquidation payouts, assets acquired from liquidations and assistance programs, and recoveries for the 

NCUSIF .................................................................................................................................... $6.92 0% $0 

Office of Consumer Protection: Primarily non-insurance (regulatory) function i.e. chartering/

FOM—net of work related to share insurance coverage for members and FISCUs .............. $9.54 82.3% $7.86 

Office of Small Credit Union Initiatives: Ensures small credit unions operate in safe and 

sound manner through its consulting program. However, it also addresses consumer regulatory issues ............................................................................................................................. $6.37 6.0% $0.38 

Office of National Examinations and Supervision: NCUSIF risk management function to supervise corporate credit unions and large natural person credit unions. CFPB examines the 

natural person credit unions assigned to this office for consumer compliance ...................... $10.48 0% $0 

Office of Minority and Women Inclusion ..................................................................................... $2.94 86.0% $2.53 

All Other Offices 51: Based on non-insurance percent of core and special programs ................ $99.18 9.6% $9.51 

Total 2016 NCUA Budget ..................................................................................................... $290.92 ........................ $35.19 

Explanation of Allocation Basis For 

Financial Budget 

Regional Offices 

The financial budget for the agency’s 

five regional offices is allocated based 

on the weighted average of noninsurance and insurance related 

activities calculated in the workload 

budget section. Resources in the regions 

execute NCUA’s core and special 

programs, thus, the budgeted costs 

related to these programs should receive 

the same allocation basis as the 

programs themselves—as determined by 

the ETS. The budget for the regional 

offices is allocated at 9.6 percent for 

non-insurance related activities. 

AMAC 

NCUA conducts credit union 

liquidations and performs management 

and recovery of assets through the Asset 

Management and Assistance Center 

(AMAC). AMAC assists NCUA regional 

offices with the review of large, complex 

loan portfolios and actual or potential 

bond claims. It also participates 

extensively in the operational phases of 

conservatorships and records 

reconstruction. The purpose of AMAC is 

to manage and reduce costs to the 

NCUSIF and credit union members of 

credit union failures. Thus, 100 percent 

of AMAC’s activities are allocated as 

insurance-related. 

OCP 

OCP is responsible for NCUA’s 

consumer financial literacy efforts, 

consumer inquiries and complaints, 

consumer protection compliance and 

rulemaking, fair lending examinations, 

interagency coordination and outreach, 

chartering and field-of-membership 

matters, low-income designations, 

charter conversions and bylaw 

amendments. OCP monitors time 

performing insurance related activities, 

insurance-regulatory related activities, 

and consumer-regulatory related 

activities by division. OCP has four 

divisions: 

• Consumer Affairs, 

• Consumer Compliance Policy and 

Outreach, 

• Consumer Access, and 

• Consumer Access South 

The Division of Consumer Access and 

Division of Consumer Access South do 

not specifically track the amount of time 

devoted to insurance related, insurance 

regulatory related, and consumer 

regulatory related issues. Instead, these 

divisions have developed estimates by 

using standard factors based on the type 

of work inherent in each project 

category. The divisions assume the 

following, based on a blend of time 

among Consumer Access Analysts, 

Technicians, and Specialists: 

• 25 percent of time is devoted to 

determining if any safety and soundness 

issues exist when processing various 

chartering and field of membership 

expansion applications; 

• 10 percent of time is devoted to 

addressing insurance related questions, 

membership concerns, and bylaw 

disputes directly relevant to consumer 

related regulatory concerns; and 

• The remaining 65 percent of time is 

devoted to regulatory issues primarily 

pertaining to reviewing applications for 

new charters and charter expansions to 

ensure the proposals are consistent with 

regulatory requirements. To a lesser 

extent, the Divisions of Consumer 

Access associate this time with the 

enforcement of NCUA’s chartering 

policies. 

The Division of Consumer 

Compliance Policy and Outreach 

focuses on consumer regulatory related 

issues and does not regularly work on 

matters categorized as insurance related 

or insurance-regulatory related in the 

ETS instructions. This division spends 

100 percent of productive time 

addressing regulations the ETS 

instructions classify as consumerregulatory related regulations. These 

regulations include regulations 

implementing the Equal Credit 

Opportunity Act, the Home Mortgage 

Disclosure Act, the Truth in Lending 

Act, and the Real Estate Settlement 

Procedures Act. Therefore, OCP 

estimates this division spends 100 

percent of its time on consumer 

regulatory related issues. 

The Division of Consumer Affairs 

develops estimates based on the number 

of inquiries, complaints and telephone 

calls processed by staff, and the average 

amount of time needed to address those 

contacts. OCP estimates the Division of 

Consumer Affairs spends: 

• 5 percent of the division’s time 

addressing share insurance questions 

received from consumers; 

• 90 percent on consumer-regulatory 

related activities; and 

• 5 percent of time administering the 

Financial Literacy Program. 

Based on the allocation method 

described above, 82.3 percent of OCP’s 

work is non-insurance related. This 82.3 

percent is applied to the OCP Operating 

Budget to determine the allocation of 

costs between insurance and noninsurance related activities. 

OSCUI 

OSCUI supports the success of small 

credit unions through its four main 

functional areas—training, grants and 


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loans, partnership and outreach, and 

consulting. The office only monitors 

ETS activities for its consulting 

function. The other program areas do 

not regularly work on matters 

categorized as insurance related, 

insurance-regulatory related or 

consumer-regulatory related functions 

but provide support for the consulting 

function. 

OSCUI monitors time related to the 

ETS categories through data collected 

during credit union consulting contacts. 

Since the consulting work covers a wide 

range of topics (many of which don’t 

cleanly fit into an ETS activity 

category), OSCUI developed a weighting 

system to measure ETS related activity. 

The weighting system identifies the 

percentage of time allocated to each of 

the three ETS categories for each 

consulting topic. OSCUI consultants 

(Economic Development Specialists) 

record consulting time by topic. Time is 

allocated to the ETS categories by 

multiplying the number of consulting 

hours per topic, by the percentage of 

time allocated for the topic. The 

assumptions for monitoring and 

allocation of time to ETS categories, and 

used to develop the weighting system, 

are as follows: 

• Consulting assistance that helps 

credit unions address safety and 

soundness issues is catalogued as an 

insurance related activity. 

• Consulting assistance that addresses 

regulations that are not designed to 

protect the consumer directly are 

catalogued as insurance-regulatory 

related activity. 

• Consulting assistance that addresses 

regulations that are designed to protect 

the consumer directly are catalogued as 

consumer-regulatory related activity. 

Table 7 documents each consulting 

topic and OSCUI’s assumptions for the 

ETS activity related to the topic. For 

example, OSCUI assigns consulting 

work on asset liability management to 

an insurance-related activity so it is 

weighted at 100 percent in that area; 

consulting work related to investments 

is weighted 50 percent insurance related 

and 50 percent insurance-regulatory 

related. 

OSCUI’s Economic Development 

Specialists completed 11,003 hours of 

assistance to credit unions enrolled in 

the OSCUI Consulting Program during 

the ETS cycle ending on May 31, 2015. 

The hours were allocated as follows: 

• 7,952 (72 percent) insurance related 

activities addressing safety and 

soundness issues. 

• 2,434 (22 percent) insuranceregulatory related activities. 

• 617 (6 percent) consumer-regulatory 

related activities. 

Based on the allocation method 

described above, 6 percent of OSCUI’s 

work is non-insurance (consumer 

regulatory) related. This 6 percent is 

applied to OSCUI’s Operating Budget to 

determine the allocation of costs 

between insurance and non-insurance 

related activities. 

TABLE 7—OSCUI TIME ALLOCATION

Consulting type of work 

Percent insurance related 

activity 

Percent insurance-regulatory 

related activity 

Percent consumer-regulatory 

related activity 

Asset Liability Management ............................................................................................. 100 0 0 

BSA/OFAC ....................................................................................................................... 0 0 100 

Budgeting ......................................................................................................................... 100 0 0 

Collections ....................................................................................................................... 75 25 0 

Consumer Compliance .................................................................................................... 0 0 100 

Credit Committee ............................................................................................................. 60 20 20 

Disaster Recovery ........................................................................................................... 70 20 10 

FOM Expansion ............................................................................................................... 50 50 0 

Grant Writing .................................................................................................................... 100 0 0 

Internal Controls .............................................................................................................. 100 0 0 

Investments ...................................................................................................................... 50 50 0 

Lending ............................................................................................................................ 70 20 10 

Low-Income Designation ................................................................................................. 0 100 0 

Marketing ......................................................................................................................... 50 40 10 

Merger Guidance ............................................................................................................. 50 50 0 

New Product Development .............................................................................................. 70 20 10 

Net Worth Restoration Plan (NWRP)/Prompt Corrective Action (PCA) .......................... 0 100 0 

Operational Assistance Other .......................................................................................... 70 20 10 

Other Policies .................................................................................................................. 70 20 10 

Recordkeeping ................................................................................................................. 100 0 0 

Relocation of Home Base CUs ....................................................................................... 100 0 0 

Secondary Capital ........................................................................................................... 50 50 0 

Strategic Issues Other ..................................................................................................... 100 0 0 

Strategic Planning ............................................................................................................ 100 0 0 

Succession Planning ....................................................................................................... 70 20 10 

Technology ...................................................................................................................... 70 20 10 

Training ............................................................................................................................ 70 20 10 

Training Board ................................................................................................................. 70 20 10 

Training Staff ................................................................................................................... 70 20 10 

Training Supervisory Committee ..................................................................................... 70 20 10 

ONES 

ONES oversees the unique 

examination and supervision issues 

related to consumer credit unions with 

assets greater than $10 billion and all 

corporate credit unions. ONES was 

established on January 1, 2013, but was 

not assigned responsibility for consumer 

credit unions with $10 billion or more 

in assets until January 1, 2014. ONES 

did not complete time surveys for its 

large natural person credit unions in 

2014 or 2015, but will complete time 

surveys for all its large natural person 

credit unions in 2016. 

ONES does not have the ability to 

automatically complete and submit the 

ETS for corporate credit unions since 

the corporate examination program is 

not integrated into AIRES. ONES staff 


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manually completed the time survey 

two consecutive years (2011 and 2012) 

for all corporate credit unions following 

the E&I instructions. ONES found the 

percentages of time allocated for the 

activities using the E&I guidance did not 

substantially change year to year and 

used the information from these two 

measurement periods as a baseline for 

estimating and reporting the time 

allocated to Insurance Related, 

Insurance Regulatory Related, and 

Consumer Regulatory Related activities 

for the calendar years 2013, 2014, and 

2015. ONES will complete time surveys 

in 2016 for both corporate credit unions 

and assigned natural person FCUs. 

Because corporate credit unions do 

not perform and are not responsible for 

Consumer Regulatory issues, this 

category is reported as zero. The 

remaining time is allocated between 

Insurance Related and Insurance 

Regulatory Related activities. ONES 

provides a report of corporate credit 

unions with a table that breaks out the 

following information: 

• Total Examination and Supervision 

hours 

• Total Insurance Related hours 

• Total Insurance Regulatory Related 

hours, and 

• Total Consumer Regulatory Related 

hours. 

ONES reports the information for each 

corporate credit union. Total 

examination and supervision hours are 

reviewed. The time allocations derived 

from the 2011 and 2012 time surveys are 

applied to determine the specific 

amounts of time reported for each 

category. ONES also reviews each 

corporate credit union individually to 

ensure there were no special 

circumstances that would have 

warranted a deviation from the original 

surveyed estimates. ONES’ estimates for 

the most recent ETS period are shown 

in Table 8. 

TABLE 8—ONES TIME ALLOCATION

Corporate credit union 

Total examination and 

supervision 

hours 

Insurance 

related hours 

Insurance 

regulatory related hours 

Consumer 

regulatory related hours 

A ....................................................................................................................... 1654 1316 338 0 

B ....................................................................................................................... 1124 942 182 0 

C ...................................................................................................................... 1192 1007 186 0 

D ...................................................................................................................... 1053 913 140 0 

E ....................................................................................................................... 1353 945 409 0 

F ....................................................................................................................... 769 514 256 0 

G ...................................................................................................................... 567 332 235 0 

H ...................................................................................................................... 981 788 194 0 

I ........................................................................................................................ 575 387 188 0 

J ....................................................................................................................... 621 415 205 0 

K ....................................................................................................................... 95 6 89 0 

L ....................................................................................................................... 694 607 87 0 

M ...................................................................................................................... 481 357 124 0 

N ...................................................................................................................... 919 712 207 0 

Totals ............................................................................................................... 12,077 9,239 2,838 0 

% of Total ................................................................................................. ........................ 76.5% 23.5% 0.0% 

Based on the allocation method 

described above, 100 percent of ONES’ 

work is insurance related. This 

percentage is applied to ONES’ 

Operating Budget to determine the 

allocation of costs between insurance 

and non-insurance related activities. 

Office of Women and Minority 

Inclusion (OMWI) 

OMWI oversees the agency’s equal 

employment opportunity program and 

all matters relating to measuring, 

monitoring and establishing policies for 

diversity in the agency’s management, 

employment and business activities as 

well as responsibility for assessing the 

diversity policies and practices of 

entities regulated by the agency and 

preserving credit unions designated as 

minority depository institutions. 

OMWI does not monitor time related 

to the ETS categories but does estimate 

staff time spent on insurance related 

and non-insurance related activities. 

The insurance related time is primarily 

time spent administering and reporting 

to Congress on various programs, 

including the agency’s Minority 

Depository Institution Preservation 

Program and responding to requests 

related to insurance-regulatory issues. 

Staff working on tasks related to these 

activities includes the OMWI Director, 

one Diversity Outreach Program 

Analyst, and one Management Analyst. 

OMWI estimates the percentage of 

time spent on these programs as 

compared to the total time spent 

performing all tasks and responsibilities 

for the Diversity Outreach Program 

Analyst, Management Analyst, and 

OMWI Director. OMWI applies the 

estimated percentage of time allotted to 

insurance activities to its total estimated 

working hours. Then, those hours are 

compared to the estimated number of 

total hours worked by all OMWI staff. 

OMWI’s time estimates for the most 

recent ETS period resulted in the 

following allocation: 

• 14 percent of staff time spent on 

insurance related activities; and 

• 86 percent of time is spent on noninsurance activities. 

Based on the allocation method 

described above, 86 percent of OMWI’s 

work is non-insurance related. This 

percentage is applied to OMWI’s 

Operating Budget to determine the 

allocation of costs between insurance 

and non-insurance related activities. 

All Other Offices 

NCUA’s remaining offices do not 

provide estimates on their insurance 

and non-insurance related activities. 

Rather, because these offices are support 

functions for NCUA’s main program— 

the examination and supervision of 

credit unions—the same allocation basis 

used for the regional offices is used to 

determine the costs of insurance and 

non-insurance related activities for 

these support functions. The budgeted 

costs for the offices of the NCUA Board, 

Executive Director, General Counsel, 

Chief Financial Officer, Chief 

Information Officer and Chief 

Economist as well as Human Resources, 


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52Payouts on insured shares of failed institutions. 

53Budgeted amounts are used to calculate the 

OTR; however, the OTR is applied to actual 

expenses incurred each month. 

54NCUA relies on SSA examination work. 

Different SSAs are funded by various means, such 

as fees paid by state-chartered credit unions or 

through general state tax revenues. 

55The calculation of the SSA imputed value is 

discuss in detail in Section IV.g. 

Examination and Insurance, Public and 

Congressional Affairs, and Continuity 

and Security Management are allocated 

at 9.6 percent non-insurance related 

activities for purposes of calculating the 

OTR. 

Combining the calculation steps in 

the workload program hours and 

financial budget section, the OTR 

methodology thus far has established 

the amount of NCUA’s Operating 

Budget related to insurance and noninsurance related activities. NCUA’s 

2016 Operating Budget of $290.92 

million includes $35.19 million 

allocated to non-insurance (regulatory) 

activities. The remaining $255.73 

million of NCUA’s Operating Budget is 

allocated to insurance-related activities. 

Identifying the portion of NCUA’s 

Operating Budget allocated to 

insurance-related activities is the first 

step in determining NCUA’s total 

insurance related costs. Consideration 

must also be given to the direct costs to 

the NCUSIF and the SSA Imputed 

Value, discussed in the next section. 

d. Calculating NCUSIF Insurance and 

Non-Insurance Costs 

Based on the ETS results for NCUA’s 

core programs, the determination of 

insurance and non-insurance activities 

for special and other programs (Section 

IV.b) and applying the percentage of 

insurance and non-insurance activities 

to NCUA’s Operating Budget (Section 

IV.c), the agency arrives at the dollar 

amount of insurance related costs 

included in the NCUA Operating 

Budget. As noted above, for 2016, this 

amount is $255.73 million (NCUA’s 

2016 Operating Budget of $290.92 

million less non-insurance related costs 

of $35.19 million). 

In addition to NCUA budgeted costs, 

there are operational costs charged 

directly to the NCUSIF which must be 

added to the insurance related portion 

of NCUA’s Operating Budget when 

calculating the total cost of providing 

insurance. For 2016, these direct 

operational costs are budgeted at $1.56 

million. The NCUSIF directly pays for 

the costs associated with SSA staff 

attendance at NCUA-sponsored training 

and the related travel expenses ($1.4 

million), as well as SSA computer and 

related equipment leases ($0.16 

million). These direct operational costs 

must be factored into the total 

operational costs of providing NCUSIF 

insurance, which needs to be absorbed 

by all FICUs. NCUA does not include 

credit union failure related costs 52 in 

the calculation, as these losses (charges 

to the NCUSIF) are already allocated 

based on the mutual nature of NCUSIF 

deposit insurance and are not costs of 

operating the NCUSIF. 

This step of the calculation results in 

total insurance related costs to be 

absorbed by all FICUs of $257.29 

million.53 See Table 9. 

TABLE 9—NCUSIF COSTS

[millions] 

2016 NCUA Operating Budget ................................................... $290.92 

Non-Insurance Related Costs ..................................................... ¥35.19 Table 6. 

Direct Operational Charges to NCUSIF ..................................... +1.56 Budgeted costs for SSA training, travel, and equipment. 

Total 2016 Budgeted Insurance Related Costs .................. 257.29 

e. Allocation of Insurance Costs 

This step of the OTR methodology is 

designed to calculate the total cost of 

providing share insurance, including 

work currently performed by SSAs, and 

then allocate these costs on an insured 

shares basis between FCUs and FISCUs. 

The steps in the OTR methodology thus 

far have determined the total budgeted 

operating costs and direct charges 

applicable to NCUA’s role as insurer to 

be absorbed by all FICUs, $257.29 

million. During the revision to the OTR 

methodology in 2003, the agency 

concluded it is appropriate to recognize 

NCUA relies on SSAs, to the fullest 

extent possible, to perform insurance 

related supervision of FISCUs. The cost 

NCUA, and thus the NCUSIF, avoids 54

should be taken into account when 

determining and allocating the total cost 

of providing NCUSIF insurance. The 

calculation of this imputed SSA value is 

a multi-step process outlined in Section 

IV.g, SSA Imputed Value. In 2016, the 

SSA imputed value is $40.6 million. 

The OTR methodology also considers 

that the most fair and appropriate basis 

to allocate the cost of providing NCUSIF 

insurance between FCUs and FISCUs is 

the distribution of insured shares. This 

is consistent with the mutual nature of 

the insurance provided by the NCUSIF, 

and the statutory allocation method for 

any NCUSIF premiums and dividends. 

Section IV.d, Calculation of Insurance 

and Non-Insurance NCUSIF Costs, 

determined NCUA’s cost to fulfill its 

role as insurer is $257.29 million. 

However, the value provided by 

NCUA’s reliance on SSA work should 

be factored in to determine the total cost 

to the federally insured credit union 

system of providing NCUSIF insurance. 

To do this, the imputed value of the 

insurance related work performed by 

the SSAs ($40.60 million) 55 is added to 

the total budgeted insurance related 

costs ($257.29 million): 

TABLE 10—TOTAL COST OF PROVIDING NCUSIF INSURANCE

[millions] 

Total 2016 Budgeted Insurance Related Costs ......................... $257.29 Table 9. 

SSA Imputed Value .................................................................... + $40.60 Value NCUA places on worked performed by SSAs. Table 32. 

Total Cost of Providing NCUSIF Insurance ........................ $297.89 


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56Based on insured shares reported on NCUA’s 

5300 Call Report as of June 30, 2015. 

57Mathematically, this computation must be used 

to arrive at the total costs (based on budget) to be 

absorbed by the NCUSIF, through the OTR, since 

this amount is the unknown to be solved for based 

on the addition of imputed, but not actual, costs to 

the budget. 

58Other funding sources, in addition to the FCU 

Operating Fee (including federal corporate credit 

union Operating Fees) and fees collected for various 

services and publications. 

The total cost of providing NCUSIF 

insurance must be allocated between 

FCUs and FISCUs. As mentioned, the 

allocation is based on their respective 

proportions of insured shares. FCUs and 

FISCUs represent 52.3 percent and 47.7 

percent,56 respectively, of the $935 

billion in NCUSIF insured shares as of 

June 30, 2015. Thus, the distribution of 

costs is as follows: 

TABLE 11—ALLOCATION OF TOTAL COSTS OF PROVIDING NCUSIF INSURANCE

FCUs FISCUs 

Total Cost of Providing NCUSIF Insurance (millions) ................................................................... $297.89 Table 10. 

Proportion of insured shares .......................................................................................................... × 52.3% × 47.7% 

Allocated total insurance costs (millions) ....................................................................................... $155.80 $142.09 

FISCUs are responsible for $142.09 

million of the total costs of providing 

NCUSIF insurance. However, SSAs are 

providing $40.6 million worth of 

imputed value toward the cost of 

providing NCUSIF share insurance. 

Therefore, FISCUs are responsible for 

absorbing only $101.49 million of the 

total insurance costs: 

TABLE 12—NET COST OF NCUSIF INSURANCE FOR FISCUS

[millions] 

FISCU portion of total insurance costs ................................... $142.09 Table 11. 

SSA Imputed Value ................................................................. ¥ $40.60 Table 32. 

Net Cost of NCUSIF Insurance for FISCUs ..................... $101.49 

f. Calculating the OTR 

This final step of the OTR 

methodology computes the OTR as a 

percentage of the NCUA Operating 

Budget. Section IV.e, Allocation of 

Insurance and Non-Insurance Costs, 

determined the net cost of providing 

NCUSIF insurance to be absorbed by 

FISCUs through the OTR is $101.49 

million. This amount divided by the 

percentage of total insured shares held 

by FISCUs (47.7 percent) results in the 

total dollar cost to be absorbed by the 

NCUSIF for providing insurance to all 

federally insured credit unions. To state 

it another way, if FISCUs are 

responsible for 47.7 percent of the cost 

of providing NCUSIF insurance, and 

this represents $101.49 million, then the 

dollar amount of NCUA costs to be 

absorbed by the NCUSIF, through the 

OTR, must equal $212.78.57 See Table 

13. 

TABLE 13—COSTS TO BE ABSORBED BY THE NCUSIF, THROUGH THE OTR 

Net Cost of NCUSIF Insurance for FISCUs (millions) ............ $101.49 Table 12. 

FISCU Proportion .................................................................... ÷ 47.7% Table 11. 

Costs to be Absorbed by the NCUSIF, through the OTR 

(millions).

$212.78 

Now that the dollar amount of the 

NCUA budget to be absorbed by the 

NCUSIF via the OTR has been 

calculated, the Overhead Transfer Rate 

itself, as a percentage of the budget can 

be calculated. The dollar amount of the 

NCUA budget to be absorbed by the 

NCUSIF ($212.78 million) divided by 

the total NCUA Budget ($290.92 

million) equals the rate at which actual 

expenses will be funded by the NCUSIF 

as they are incurred each month (73.1 

percent). This rate is what is called the 

OTR. 

TABLE 14—OVERHEAD TRANSFER RATE

Costs to be Absorbed by the NCUSIF, through the OTR (millions).$212.78 Table 13. 

NCUA Operating Budget ......................................................... ÷ $290.92 Table 9. 

Overhead Transfer Rate .......................................................... 73.1% 

Table 14 illustrates that 73.1 percent 

of NCUA’s operating expenses, $212.78 

million based on the 2016 budget, are 

funded by the NCUSIF via the OTR. The 

remaining 26.9 percent of NCUA’s 

operating expenses, $78.14 million 

based on the 2016 budget, must be 

funded by other sources, primarily the 

FCU Operating Fee.58 Thus, the explicit 

and implicit distribution of total 

Operating Budget costs for FCUs and 

FISCUs is 65.1 percent and 34.9 percent, 

respectively. 


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59NCUA realizes that the imputed value may be 

higher or lower than what SSAs actually spend to 

conduct insurance related supervision programs 

NCUA relies upon. Nonetheless, the relevant factor 

for purposes of computing the OTR is the value to 

the NCUSIF derived from this work. 

60Another consideration is the fact each SSA 

program may not represent the same percentage of 

insurance related supervision of institutions based 

on each state’s unique program and cost structure, 

necessitating separate regulatory and insurance cost 

factors be calculated for each state. Such an 

endeavor would be costly and would require each 

SSA to divulge detailed financial and operating 

information, which they may not be inclined to 

provide. 

TABLE 15—OPERATING BUDGET DISTRIBUTION

Portion of 2016 operating budget covered by: FCUs FISCUs 

FCU Operating Fee ................................................................. 26.9% 0.0% 

OTR × Percent of Insured Shares ........................................... 38.2% 

(73.1% × 52.3%) 

34.9% 

(73.1% × 47.7%) 

Total .................................................................................. 65.1% 34.9% 

g. SSA Imputed Value 

To develop an OTR that properly 

reflects the total cost to insured credit 

unions of providing NCUSIF insurance, 

it is necessary to factor in the value of 

the insurance related supervision 

provided by state examination programs 

and relied upon by NCUA in managing 

the NCUSIF. NCUA developed a four 

step process to calculate (impute) the 

value of the insurance work performed 

by SSAs that NCUA relies upon. The 

imputed value derived from these 

calculations is factored into the 

calculation of the OTR as discussed in 

Section IV.e. 

NCUA determined the best measure 

available for the value of state 

examination programs to the NCUSIF is 

what it would cost NCUA to perform 

this work.59 An alternative measure of 

the value of this work is the actual cost 

of SSA supervision programs. However, 

these do not necessarily reflect the value 

to NCUA in managing the NCUSIF 60

and are not readily available to NCUA. 

The Board invites comment on the 

methodology for determining the SSA 

imputed value including proposals for 

alternative methods for valuing the 

insurance work performed by SSAs in 

the OTR calculation. 

Throughout this discussion, we will 

present the calculations used to 

determine the values for the 2016 OTR. 

In these calculations we use the 

following information: 

• Average exam time based on 2014 

actual results, 

• percentage of exam time used for 

insurance work based on the 2015 ETS 

results, and 

• budget projections for 2016. 

Step 1—NCUA FISCU Workload 

Projection 

The first step in this process is to 

determine the workload required for 

NCUA to examine all FISCUs. To 

calculate this figure, NCUA determines 

the examination hours that field staff 

expended on FCUs by asset size and 

CAMEL rating. The results for 2014 are 

documented in Table 16. 

TABLE 16—FCU AVERAGE EXAMINATION TIME (HOURS) FOR 2014 

Asset range 

(millions) 

<$10 $10–$100 $100–$250 $250–$500 >$500 

CAMEL 1 .............................................................................. 39 80 162 192 408 

CAMEL 2 .............................................................................. 41 88 186 234 445 

CAMEL 3 .............................................................................. 45 100 223 279 407 

CAMEL 4 .............................................................................. 65 142 312 225 438 

CAMEL 5 .............................................................................. 109 219 0 0 0 

NCUA then determines the 

distribution of FISCUs using the same 

asset and CAMEL rating categories. The 

distribution for 2014 is documented in 

Table 17. 

TABLE 17—NUMBER OF FISCUS IN EACH CATEGORY

[as of December 2014] 

Asset range 

(millions) 

<$10 $10–$100 $100–$250 $250–$500 >$500 

CAMEL 1 .............................................................................. 54 99 45 30 83 

CAMEL 2 .............................................................................. 342 664 205 102 147 

CAMEL 3 .............................................................................. 188 230 46 16 12 

CAMEL 4 .............................................................................. 40 32 5 2 4 

CAMEL 5 .............................................................................. 0 0 0 0 0 


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61Numbers may not add up exactly due to 

rounding. 

62From the 2016 NCUA Workload Budget. 

The average examination time 

estimates from Table 16 are then 

applied to the distribution of FISCUs in 

Table 17 using the same asset and 

CAMEL rating categories. This provides 

an estimate of the examination time 

needed if NCUA were to conduct all of 

the state examination work on the same 

basis employed for FCUs. Based on the 

average examination hours for FCUs and 

the number of FISCUs in each asset and 

CAMEL category, NCUA would have 

needed 318,573 hours to complete 

examinations of all FISCUS in the same 

manner as it examined FCUs in 2014. 

The estimated hours are documented in 

Table 18. 

TABLE 18—PROJECTED FISCU EXAM HOURS

Asset range 

(millions) 

<$10M $10–$100 $100–$250 $250–$500 >$500 Totals 61

CAMEL 1 .................................................. 2,116 7,911 7,295 5,766 33,898 56,986 

CAMEL 2 .................................................. 13,982 58,225 38,232 23,845 65,408 199,692 

CAMEL 3 .................................................. 8,499 22,889 10,256 4,465 4,882 50,992 

CAMEL 4 .................................................. 2,616 4,530 1,558 449 1,750 10,902 

CAMEL 5 .................................................. ........................ ........................ ........................ ........................ ........................ ........................

Totals ................................................ 27,213 93,555 57,340 34,526 105,938 318,573 

Step 2—Allocation of Projected Fiscu 

Exam Hours 

Step 1 calculated that it would take 

318,573 hours for NCUA to conduct 

examinations in all FISCUs. However, 

not all examination time is used to meet 

NCUA’s role as insurer. The ETS results 

for cycle ending on May 31, 2015, 

indicate that 86.83 percent of 

examination time was used to meet 

NCUA’s needs in managing risks to the 

NCUSIF. For consistency and fairness, 

this same distribution is applied to 

FISCUs when determining the total time 

it would take NCUA to supervise 

FISCUs to meet its role as insurer, 

resulting in 276,617 hours for insurance 

related time. Table 19 illustrates this 

calculation. 

TABLE 19—PROJECTED FISCU EXAM HOURS USING ETS 

Hours 

Gross FISCU Exam Hours .................................................................................................................................................................. 318,573 

Times Insurance Factor Based on Exam Survey ............................................................................................................................... × 86.83% 

Equals Total Insurance Hours ...................................................................................................................................................... = 276,617 

NCUA also estimates total FISCU 

examination time by multiplying 

current NCUA budgeted FISCU 

examination time 62 by two. This 

reflects that FISCU examinations are 

conducted jointly with the SSA, and 

that all NCUA examination time is for 

insurance purposes. Table 20 

documents this calculation. 

TABLE 20—PROJECTED FISCU EXAM HOURS USING MULTIPLIER

Hours 

Current Budgeted FISCU Insurance Hours ......................................................................................................................................... 149,914 

Times 2 (Assuming Joint Examinations and 50/50 time split with SSA) ............................................................................................ × 2 

Equals Projected Examination Insurance Hours for State Program ............................................................................................ = 299,828 

The result of the calculation in Table 

20 is compared to the result from Table 

19 and the greater of the two numbers 

is selected, in this case 299,828 hours, 

from Table 20. Using the greater of the 

two results benefits the SSA imputed 

value as it requires more resources and, 

therefore, increases the imputed value. 

Next, NCUA takes the results from the 

previous step and subtracts the current 

budgeted state examination program 

hours since they are already included in 

the resource budget. NCUA also makes 

an adjustment for additional FISCU 

supervision hours. NCUA’s 2016 

workload program budgets 25,808 hours 

for FISCU supervision. Since 

supervision is typically performed 

jointly with SSAs, NCUA would need 

an additional 25,808 hours. The result is 

the number of additional insurance 

hours necessary for NCUA to examine 

and supervise all FISCUs without any 

SSA assistance. The calculation for the 

2016 OTR indicates NCUA would need 

an additional 175,722 hours to complete 

all the FISCU work. The calculation is 

illustrated in Table 21. 


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63As part of its fiduciary responsibility, NCUA 

examiners review all state examination reports. 

This time is assigned to work classification code 26. 

64Total workload hours include various leave 

benefits, training, and administrative time. 

TABLE 21—ADDITIONAL HOURS FOR FISCU INSURANCE WORK

Hours 

Projected FISCU Insurance Hours ...................................................................................................................................................... 299,828 

Less Current Budgeted FISCU Examination Hours ............................................................................................................................ ¥ 149,914 

Plus Additional FISCU Supervision Hours .......................................................................................................................................... + 25,808 

Equals Total Additional FISCU Insurance Hours ......................................................................................................................... = 175,722 

Finally, NCUA deducts the time 

budgeted for FISCU examination report 

reviews to arrive at the net additional 

insurance hours needed to complete all 

FISCU examinations and supervision.63

The FISCU examination report review 

time would no longer be needed if 

NCUA performed the FISCU 

examinations. NCUA’s 2016 workload 

budget contained 5,231 hours for FISCU 

examination report review. Deducting 

those hours from the results from Table 

21 results in net additional insurance 

hours of 170,401. This calculation is 

illustrated in Table 22. 

TABLE 22—NET ADDITIONAL HOURS FOR FISCU INSURANCE WORK

Hours 

Total Additional FISCU Insurance Hours ............................................................................................................................................ 175,722 

Less Current Budgeted FISCU Examination Review Hours ............................................................................................................... ¥ 5,321 

Equals Net Additional FISCU Insurance Hours ........................................................................................................................... = 170,401 

Step 3—Projected Additional Staff 

Required 

The next step in the calculation is to 

determine how many additional fulltime equivalent (FTE) examiners are 

needed to complete the net additional 

FISCU insurance hours calculated in 

Step 2. To accomplish this, NCUA first 

calculates the total annual productive 

work hours for an FTE examiner. Total 

Core and Special Workload hours from 

the Workload Budget must be divided 

by Total Estimated Workload Hours to 

determine the productivity ratio.64 The 

productivity ratio for 2016 is 52.7 

percent. The productivity ratio 

calculation is illustrated in Table 23. 

TABLE 23—EXAMINER PRODUCTIVITY RATIO

Budgeted Core and Special Workload Program Hours ...................................................................................................................... 764,193 

Divided by Total Budgeted Workload Program Hours ........................................................................................................................ ÷ 1,448,716 

Equals the Productivity Ratio ....................................................................................................................................................... 52.7% 

Applying the productivity ratio to the 

total annual work hours for an examiner 

FTE results in the number of productive 

hours per year for each examiner. The 

budgeted productive hours for an 

examiner for 2016 is 1,097. This 

calculation is illustrated in Table 24. 

TABLE 24—PRODUCTIVE HOURS PER FTE 

Total Annual Work Hours per examiner FTE ...................................................................................................................................... 2,080 

Times the Productivity Ratio ................................................................................................................................................................ × 52.7% 

Equals Annual Productive Hours per examiner FTE ................................................................................................................... = 1,097 

The additional number of examiner 

FTEs necessary to complete the net 

additional FISCU insurance work is 

calculated by dividing the net 

additional FISCU insurance hours from 

Table 22 in Step 2 by the annual 

productive hours per FTE. The 2016 

OTR calculation resulted in 155.3 

additional examiner FTEs needed to 

complete the additional insurance work 

in FISCUs. Table 25 illustrates this 

calculation. 

TABLE 25—EXAMINER FTES NEEDED FOR ADDITIONAL FISCU WORK

Net Additional FISCU Insurance Hours ............................................................................................................................................... 170,401 

Divided by Annual Productive Hours per FTE .................................................................................................................................... ÷ 1,097 

Equals Additional Examiner FTEs Needed .................................................................................................................................. = 155.3 


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65Other central offices are considered sufficiently 

scalable or not directly impacted to absorb such an 

increase in regional positions without needing 

additional staff. 

Adding an additional 155.3 examiners 

would necessitate additional staffing in 

other areas, including additional 

Supervisory Examiners and Regional 

Office staff. Based on NCUA’s staffing 

patterns and organizational structure, 

the following ratios of examiners to 

other regional positions were used to 

determine additional staffing needs and 

costs. The ratios are documented in 

Table 26. 

TABLE 26—OTHER REGIONAL FTES NEEDED

Additional staff needed 

Ratio 

examiners 

to position 

FTEs per 

position 

Examiners ................................................................................................................................................................ 1/1 155.3 

Supervisory Examiners ............................................................................................................................................ 1/9 17.3 

Regional Office Analysts ......................................................................................................................................... 1/15 10.4 

Regional Office Directors ......................................................................................................................................... 1/25 6.2 

Other Regional Support Staff .................................................................................................................................. 1/20 7.8 

Total Number of Additional Regional FTEs Needed ........................................................................................ ........................ 196.9 

Step 4—Dollar Amount of the SSA 

Imputed Value 

The next step is to calculate the dollar 

amount of the SSA imputed value. The 

first step in this process is to calculate 

the average cost per regional FTE. The 

average cost is based on the actual 

budget for regional offices and field staff 

and includes employee pay and 

benefits, travel, rent, communications, 

utilities, administrative, and contracted 

services. The average cost of a regional 

FTE for the 2016 OTR calculation was 

$185,508 based on 838.2 FTEs. The 

calculation is illustrated in Table 27. 

TABLE 27—ANNUAL COST PER REGIONAL FTE 

Total Cost of Regions (2016 budget) .................................................................................................................................................. $155,492,604 

Divided by FTEs in Regions (2016 budget) ........................................................................................................................................ ÷ 838.2 

Equals Annual Cost Per Regional FTE ........................................................................................................................................ = $185,508 

Next, NCUA applies the annual cost 

per regional FTE to the total number of 

additional FTEs necessary if NCUA 

were to complete all FISCU 

examinations and supervision. In Table 

26, NCUA calculated the total number 

of regional FTEs to be 196.9 for 2016. 

Multiplying the additional FTEs by the 

average projected cost per FTE results in 

additional regional costs of $36,525,336 

for 2016. Table 28 illustrates this 

calculation. 

TABLE 28—TOTAL ADDITIONAL REGIONAL COST

Projected Average Cost per FTE for 2016 .......................................................................................................................................... $185,508 

Times Additional FTEs Needed ........................................................................................................................................................... × 196.9 

Equals Total Additional Regional Cost ......................................................................................................................................... = $36,525,336 

The additional regional staffing would 

also have an impact on the workload of 

the following NCUA central offices: 

• Office of Human Resources, 

• Office of the Chief Financial Officer 

Division of Financial Control, and 

• Office of the Chief Information 

Officer Division of IT Operations. 

Adding 196.6 additional staff 

members to NCUA would represent a 

15.6 percent increase in staffing. This 

percentage increase is calculated by 

dividing the number of additional 

regional FTEs by NCUA’s existing 

number of FTEs, which was 1,260.2 for 

the 2016 OTR calculation. Table 29 

illustrates the calculation. 

TABLE 29—PERCENTAGE INCREASE IN FTES

Office Budget 

Additional FTEs Needed ...................................................................................................................................................................... 196.9 

Divided by Current Number of FTEs ................................................................................................................................................... ÷ 1,260.2 

Equals the Percentage Increase in FTEs .................................................................................................................................... = 15.6% 

The workload will increase for the 

central offices indicated above, as these 

offices directly support staff by 

processing personnel actions, providing 

computer support, and processing 

payroll and travel vouchers.65

Therefore, NCUA applies the 15.6 

percent increase to each of the above 

office’s budget to account for additional 


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resources and workload. The combined 

budgets for these three offices for 2016 

was $36,064,124. The projected increase 

in cost for 2016 based on the 15.6 

percent increase was $5,634,664. The 

calculations are shown in Table 30. 

TABLE 30—ADDITIONAL CENTRAL OFFICE COSTS

Office Budget 

Office of Human Resources ................................................................................................................................................................ $15,547,400 

Plus Office of the Chief Financial Officer Division of Financial Control .............................................................................................. + $7,956,891 

Plus Office of the Chief Information Officer Division of IT Operations ............................................................................................... + $12,559,833 

Equals Total Other Office Budgets Affected ................................................................................................................................ = $36,064,124 

Times 15.6 percent .............................................................................................................................................................................. × 15.6% 

Equals Additional Central Office Costs ........................................................................................................................................ = $5,634,664 

In addition to the increases in certain 

costs, there would be some areas of 

savings to NCUA if it conducted all of 

the insurance related FISCU work. 

There would be no need to pay for the 

training of state examiners, or provide 

SSAs with computers and other 

equipment. The cost savings projected 

for the 2016 OTR calculation was 

$1,562,408. Table 31shows the 

breakdown of the cost savings. 

TABLE 31—TOTAL COST SAVINGS

SSA Training and Travel ..................................................................................................................................................................... $1,400,000 

Plus SSA Computer Leases ................................................................................................................................................................ + $162,408 

Equals Total Cost Savings ........................................................................................................................................................... = $1,562,408 

The SSA imputed value is calculated 

by adding the additional regional and 

central office costs from Table 28 and 30 

and then subtracting the cost savings 

from Table 31. The SSA imputed value 

for the 2016 OTR is $40,597,592. Table 

32 illustrates the calculation. 

TABLE 32—SSA IMPUTED VALUE

Additional cost area Cost 

Additional Regional Costs ................................................................................................................................................................... $36,525,336 

Plus Additional Central Office Costs ................................................................................................................................................... + $5,634,664 

Less SSA Training and Equipment Cost ............................................................................................................................................. ¥ $1,562,408 

Equals Imputed SSA Value .......................................................................................................................................................... = $40,597,592 

The SSA Imputed Value of $40.6 

million is used to determine the total 

costs to NCUA of providing NCUSIF 

insurance (Table 10) and to determine 

the net cost of NCUSIF insurance for 

FISCUs (Table 12). As previously 

discussed in Section IV.e, Allocation of 

Insurance and Non-Insurance Costs, 

NCUA includes the SSA Imputed Value 

in the OTR calculation to account for 

NCUA’s reliance, to the fullest extent 

possible, on SSAs to perform much of 

the insurance related supervision of 

FISCUs. Therefore, the costs NCUA and 

thereby the NCUSIF avoid are taken into 

account when determining and 

allocating the total cost of providing 

NCUSIF insurance. 

V. Request For Comment 

The Board invites comments on all 

issues discussed in this document. In 

particular, the Board solicits specific 

comments on the OTR’s allocation of 

insurance and non-insurance related 

activities to the Operating Budget and 

the methodology used to determine the 

value of the work performed in FISCUs 

by SSAs. Further, commenters should 

not feel constrained to limit their 

comments to the issues discussed above. 

Rather, commenters are encouraged to 

discuss any other relevant OTR issues 

they believe NCUA should consider. 

Commenters are encouraged to provide 

documentation to support any 

alternatives they may suggest to adjust 

the existing methodology or 

components therein. 

By the National Credit Union 

Administration Board on January 21, 2016. 

Gerard Poliquin, 

Secretary of the Board. 

VI. Appendix A—Mapping of NCUA 

Regulations 

In its January 20, 2011, Overhead Transfer 

Rate Review, PricewaterhouseCoopers 

recommended that NCUA consider steps 

aimed at making the OTR methodology more 

transparent, along with all of the 

assumptions and steps that are utilized. In 

response, NCUA modified the classification 

of insurance and non-insurance related 

activities in May 2011 for the 2011–2012 ETS 

by establishing Insurance Related Activities, 

Insurance Regulatory Related Activities and 

Consumer Regulatory Related Activities. 

These definitions are mapped to the NCUA 

Regulations and were distributed to ETS 

participants as part of the ETS Instructions. 

The mapping of regulations deemed part of 

the examination process and distributed to 

the time study participants for the ETS 

period covering June 1, 2014 to May 31, 

2015, is provided below. Footnotes have been 

added to provide additional insight. The 

current mapping has not yet been updated for 

NCUA’s most recent final rules. Similar to 

other activities not explicitly classified in the 

ETS instructions, ETS participants defer to 

the overarching definitions of insurance and 

non-insurance related activities provided in 

the ETS instructions (see Appendix B) to 

appropriately allocate time as insurance or 

non-insurance. 


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NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

§ Part 701—Organization and Operations of FCUs 66.

.1—Federal credit union chartering, field of 

membership modifications, and conversions.

........................ X This part addresses the location of NCUA’s 

chartering and field of membership policies 

.2—Federal Credit Union Bylaws .................... ........................ X Requires FCU’s to operate in accordance 

with their approved bylaws. 

.3—Member inspection of credit union books, 

records, and minutes.

........................ X This part grants a group of members the right 

to inspect the books and records of an 

FCU. 

.4–.5—Reserved.

.6—Fees paid by federal credit unions ........... ........................ X This section establishes the fees to be paid 

by the credit union to the NCUA. 

.7–.13—Reserved.

.14—Change in official or senior executive officer in credit unions that are newly chartered or are in troubled condition.X ........................ This section establishes parameters under 

which a newly chartered credit union or a 

troubled credit union must operate with regard to management decisions and operations. 

.15–.18—Reserved.

.19—Benefits for employees of federal credit 

unions.

X ........................ This section allows a FCU to pay employees 

certain benefits as part of their employment 

with the FCU. 

.20—Suretyship and guaranty ......................... X ........................ This section establishes the ability of a FCU 

to enter into suretyship and guaranty 

agreements under certain conditions and 

limitations. 

.21—Loans to members and lines of credit to 

members.

X ........................ This section establishes the parameters for a 

FCU’s overall lending program. 

.22—Loan participation ................................... X ........................ This section establishes the ability of an FCU 

to enter into loan participation agreements, 

and establishes limitations and parameters 

under which an FCU can do so. 

.23—Purchase, sale, and pledge of eligible 

obligations.

X ........................ This section of the regulation establishes the 

ability of an FCU to purchase, sell, or 

pledge eligible obligations (loans) of the 

FCU. 

.24—Refund of interest ................................... X ........................ This section of the regulations authorizes an 

FCU to refund interest to members under 

certain conditions. 

.25—Charitable contributions and donations .. X ........................ This sections grants authority of an FCU to 

make charitable contributions. 

.26—Credit union service contracts ................ X ........................ This sections grants authority for an FCU to 

enter into service contracts with other 

FCUs. 

.27–.29—Reserved.

.30—Services for nonmembers within the 

field of membership.

........................ X This section grants authority to FCUs to provide limited services to non-members within 

their field of membership. 

.31—Nondiscrimination requirements ............. ........................ X This section prohibits an FCU from discriminating against a person or group of persons and establishes parameters under 

which it must operate to ensure non-discrimination and notify others of its non-discrimination policies. 

.32—Payment on shares by public units and 

nonmembers.

X ........................ This section grants permission to FCUs to receive payments on shares from public 

units. 

.33—Reimbursement, insurance, and indemnification of officials and employees.X ........................ This section establishes the parameters 

under which an FCU may compensate officials, and volunteers. 

.34—Designation of low-income status; acceptance of secondary capital accounts by 

low-income designated credit unions.

X ........................ Grants permission to LICU’s to accept secondary capital accounts.67

.35—Share, share draft, and share certificate 

accounts.

........................ X Regulation grants permission for credit unions 

to offer share, share draft and certificate 

accounts to members. 

.36—FCU Ownership of fixed assets .............. X ........................ Sets parameters and limitations on a FCU’s 

ownership and treatment of fixed assets 

37—Treasury Tax and Loan Depositaries; 

Depositaries and Financial Agents of the 

Government.

X ........................ Grants permission for FCU’s to act as Treasury tax and loan depositary as well as a 

depositary of public money. 

.38—Borrowed funds from natural persons .... ........................ X Grants permission for FCU’s to borrow funds 

from natural persons. 

.39—Statutory lien ........................................... ........................ X Grants permission to an FCU to establish a 

lien against the property of members to secure a financial obligation to the FCU by 

that member. 


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NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

§ 702—Prompt Corrective Action 68.

.1—Authority, purpose, scope and other supervisory authority......................... ........................ This Part of the NCUA regulations (including 

subparts A, B, C and D) deals exclusively 

with safety and soundness issues that impact directly or indirectly the financial condition of the credit union. 

.2 Definitions.

Subpart A ...................................... .101—Measures and effective date of net 

worth classification.

X 

.102—Statutory net worth categories .............. X 

.103—Applicability of net worth req’t .............. X 

.104—Risk portfolios defined .......................... X 

.105 Weighted-average life of investments ..... X 

.106—Standard calculation of risk-based net 

worth requirement.

X 

.107—Alternative components for standard 

calculation.

X 

.108—Risk mitigation credit ............................ X 

Subpart B—Mandatory and Discretionary Supervisory Actions..201—Prompt corrective action for ‘‘adequately capitalized’’ credit unions.X 

.202—Prompt corrective action for ‘‘undercapitalized’’ credit unions.X 

.203—Prompt corrective action for ‘‘significantly undercapitalized’’ credit unions.X 

.204—Prompt corrective action for ‘‘critically 

undercapitalized’’ credit unions.

X 

.205—Consultation with State officials on proposed prompt corrective action.X 

.206—Net worth restoration plans .................. X 

Subpart C—Alternative Prompt 

Corrective Action for New Credit 

Unions.

.301—Scope and definition.

.302—Net worth categories for new credit 

unions.

X 

.303—Prompt corrective action for ‘‘adequately capitalized’’ new credit unions.X 

.304—Prompt corrective action for ‘‘moderately capitalized,’’ ‘‘marginally capitalized’’ 

or ‘‘minimally capitalized’’ new credit unions.

X 

.305—Prompt corrective action for 

‘‘uncapitalized’’ new credit unions.

X 

.306—Revised business plans for new credit 

unions.

X 

.307—Incentives for new credit unions ........... X 

Subpart—D Reserves ................... .401—Reserves.

.402 Full and fair disclosure of financial condition.X 

.403—Payment of dividends ........................... X 

§ 703—Investment and Deposit 

Activities 69.

.1—Purpose and scope ................................... ........................ ........................ This part of NCUAs regulations deal with investment and deposit permissions of FCU’s 

and the compliance or non-compliance with 

this section impacts either directly, or indirectly, the financial condition of the credit 

union. 

.2—Definitions.

.3—Investment policies ................................... X 

.4—Recordkeeping and documentation requirements.X 

.5—Discretionary control over Investments 

and investment advisers 

X 

.6—Credit Analysis .......................................... X 

§ 704—Corporate Credit Unions 70 .1—Scope ........................................................ ........................ ........................ This entire part of NCUAs regulations sets 

parameters on the financial operations of 

corporate credit unions. The compliance or 

non-compliance with this section could impact directly, or indirectly, the financial condition of the corporate credit union. 

.2—Definitions.

.3—Corporate Credit Union Capital ................ X 

.4—Prompt Corrective Action .......................... X 

.5—Investments ............................................... X 

.6—Credit Risk Management .......................... X 

.7—Lending ..................................................... X 

.8—Asset-Liability Management ...................... X 

.9—Liquidity Management ............................... X 

.10—Investment Action Plan ........................... X 

.11—Corporate CUSO’s .................................. X 

.12—Permissible Services .............................. X 

.13—Board Responsibilities ............................ X 

.14—Representation ........................................ X 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
4826 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

.15—Audit Requirements ................................ X 

.16—Contract/Written Agreements ................. X 

.17—State-chartered corporate credit unions X 

.18—Fidelity bond coverage ........................... X 

.19—Disclosure of executive compensation ... X 

.20—Reserved ................................................. X 

.21—Enterprise Risk Management ................. X 

.22—Membership Fees ................................... X 

§ 706—Credit Practices 71 ............. .1—Definitions ................................................. ........................ ........................ This entire section protects the member from 

unfair or deceptive acts by an FCU as well 

as compliance with other federal law designed to protect the consumer (member). 

.2—Unfair credit practices ............................... ........................ X 

.3—Unfair or deceptive cosigner practices ..... ........................ X 

.4—Late charges ............................................. ........................ X 

§ 707—Truth in Savings 72 ............ .1—Authority, purpose, coverage and effect 

on state laws.

........................ ........................ This entire section protects the member from 

unfair or deceptive acts by an FCU as well 

as compliance with other federal law. 

.2—Definitions ................................................. ........................ X 

.3—General disclosure requirements .............. ........................ X 

.4—Account disclosures .................................. ........................ X 

.5—Subsequent disclosures ............................ ........................ X 

.6—Periodic statement disclosures ................. ........................ X 

.7—Payment of dividends ............................... ........................ X 

.8—Advertising ................................................ ........................ X 

.9—Enforcement and record retention ............ ........................ X 

.10—Reserved.

.11—Additional disclosure requirements for 

overdraft services.

........................ X 

§ 712—Credit Union Service Organizations 73.

.1—what does this part cover? ....................... ........................ ........................ This entire section of NCUAs regulations deal 

with the structure and operations of a 

CUSO. The compliance or non-compliance 

with these regulations could have a direct 

or indirect impact on the financial condition 

of an FCU. 

.2—How much can an FCU invest in or loan 

to CUSOs, and what parties may participate?.

X 

.3—What are the characteristics of and what 

requirements apply to CUSOs?.

X 

.4—What must an FCU and a CUSO do to 

maintain separate corporate identities?.

X 

.5—What activities and services are 

preapproved for CUSOs?.

X 

.6—What activities and services and prohibited for CUSOs?.X 

.7—Reserved.

.8—What transaction and comp. limits apply 

to an FCU and a CUSO?.

X 

.9—When must an FCU comply with this 

part?.

X 

.10—How can a state supervisory authority 

obtain an exemption for state chartered 

credit unions from compliance with 

§ 712.3(d)(3)?.

X 

§ 713—Fidelity Bond and Insurance Coverage for Federal 

Credit Unions 74.

.1—What is the scope of this section? ........... ........................ ........................ This entire section of NCUA’s regulations requires credit unions to obtain fidelity bond 

insurance coverage. This coverage protects 

the credit union from covered losses and 

therefore protects the NCUSIF. 

.2—What are the responsibilities of a credit 

union’s board of directors under this section?.

X 

.3—What bond coverage must a credit union 

have?.

X 

.4—What bond forms may be used? .............. X 

.5—What is the required minimum dollar 

amount of coverage?.

X 

.6—What is the permissible deduction? ......... X 

.7—May the NCUA Board require a credit 

union to secure additional insurance coverage?.

X 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 4827 

NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

§ 714—Leasing 75 .......................... .1—What does this part cover? ...................... ........................ ........................ This entire section of NCUAs regulations 

deals with the ability of FCUs to enter into 

leasing agreements and sets parameters 

on types of leases and limitations on financial arrangements. The compliance or noncompliance with this part could have a direct or indirect impact on the financial condition of the credit union. 

.2—What are the permissible leasing arrangements?.X 

.3—Must you own the leased property in an 

indirect leasing arrangement?.

X 

.4—What are the lease requirements? ........... X 

.5—What is required if you rely on an estimated residual value greater than 25% of 

the original cost of the leased property?.

X 

.6—Are you required to retain salvage powers over the leased property?.X 

.7—What are the insurance requirements applicable to leasing?.X 

.8—Are the early payment provisions, or interest rate provisions, applicable in leasing 

arrangements?.

X 

.9—Are indirect leasing arrangements subject 

to the purchase of eligible obligation limit?.

X 

.10—What other laws must you comply with 

when engaged in leasing?.

X 

§ 715—Supervisory Committee 

Audits and Verifications 76.

.1—Scope of this part ..................................... ........................ ........................ This entire section of NCUAs regulations 

deals with the roles and responsibilities of 

the Supervisory Committee which are designed to ensure the safe and sound operation of an FCU. 

.2—Definitions used in this part ...................... X 

.3—General responsibilities of the Supervisory Committee.X 

.4—Audit responsibility of the Supervisory 

Committee.

X 

.5—Audit of Federal Credit Unions ................. X 

.6—Audit of Federally-insured State-chartered 

credit unions.

X 

.7—Supervisory Committee audit alternatives 

to a financial statement audit.

X 

.8—Requirements for verification of accounts 

and passbooks.

X 

.9—Assistance from outside, compensated 

person.

X 

.10—Audit report and working paper maintenance and access.X 

.11—Sanctions for failure to comply with this 

part.

X 

.12—Statutory audit remedies for Federal 

credit unions.

X 

§ 716—Privacy of Consumer Financial Information 77.

1. Purpose and scope ..................................... ........................ ........................ This entire section of NCUA’s regulations 

deals with an FCU’s communication with its 

members and the safeguarding of member 

information. 

.2 Model privacy form and examples.

.3 Definitions.

Subpart A—Privacy and Opt Out 

Notices.

.4—Initial privacy notice to consumers required......................... X 

.5 Annual privacy notices to members required......................... X 

.6 Information to be included in privacy notices......................... X 

.7—Form of opt out notice to consumers and 

opt out methods.

........................ X 

.8—Revised privacy notices ............................ ........................ X 

.9—Delivering privacy and opt out notices ..... ........................ X 

Subpart B—Limits on Disclosures .10—Limits on disclosure of nonpublic information to third parties......................... X 

.11—Limits on re-disclosure and reuse of information......................... X 

.12—Limits on sharing of account number information for marketing purposes......................... X 

Subpart C—Exceptions ................. .13—Exception to opt out requirements for 

service providers and joint marketing.

........................ X 

.14—Exceptions to notice and opt out requirements for processing transactions......................... X 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
4828 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

.15—Other exceptions to notice and opt out 

requirements.

........................ X 

Subpart D—Relation to Other 

Laws; Effective Date.

.16—Protection of Fair Credit Reporting Act .. ........................ X 

.17—Relation to state laws ............................. ........................ X 

.18—Effective date; transition rule .................. ........................ X 

§ 717—Fair Credit Reporting 78 ..... .1 Purpose, scope and effective dates. ........ ........................ ........................ This entire section of NCUAs regulations, including Subparts A through I, deals with 

the implementation of the Fair Credit Reporting Act which is designed to protect 

consumers (members) from unfair or deceptive practices. 

.2—Examples.

.3—Definitions.

Subpart B ...................................... Reserved.

Subpart C—Affiliate Marketing ...... .20—Coverage and definitions ........................ ........................ X 

.21—Affiliate marketing opt-out and exceptions......................... X 

.22—Scope and duration of opt-out ................ ........................ X 

.23—Contents of opt-out notice; consolidated 

and equivalent notices.

........................ X 

.24—Reasonable opportunity to opt-out ......... ........................ X 

.25—Reasonable and simple methods of opting out......................... X 

.26—Delivery of opt-out notices ...................... ........................ X 

.27—Renewal of opt-out ................................. ........................ X 

28—Effective date, compliance date, and prospective application......................... X 

Subpart D—Medical Information ... .30—Obtaining or using medical information 

in connection with a determination of eligibility for credit.

........................ X 

.31—Limits on re-disclosure of information .... ........................ X 

.32—Sharing medical information with affiliates......................... X 

Subpart E—Duties of Furnishers 

of Information.

.40—Scope.

.41—Definitions.

.42—Reasonable policies and procedures 

concerning the accuracy and integrity of 

furnished information.

........................ X 

.43—Direct Disputes ....................................... ........................ X 

Subparts F–H ................................ Reserved.

Subpart I—Duties of Users of 

Consumer Reports Regarding 

Address Discrepancies and 

Records Disposal.

.80–.81 Reserved.

.82—Duties of users regarding address discrepancies.......................... X 

.83—Disposal of consumer information .......... ........................ X 

.84–.89 Reserved.

.90—Duties regarding the detection, prevention, and mitigation of identity theft.......................... X 

.91—Duties of card issuers regarding 

changes of address.

........................ X 

§ 722—Appraisals 79 ...................... .1—Authority, Scope and Purpose .................. ........................ ........................ This entire section of NCUAs regulations establishes rules for obtaining appraisals on 

collateral securing financial obligations of 

members. The compliance or non-compliance with this section could have a direct 

or indirect impact on the financial standing 

of the credit union. 

.2—Definitions.

.3—Appraisals required; transactions requiring a State certified or licensed appraiser.X 

.4—Minimum appraisal standards ................... X 

.5—Appraiser Independence ........................... X 

.6—Professional association membership; 

competency.

X 

.7—Enforcement .............................................. X 

§ 723—Member Business Loans 80 1.—What is a member business loan? ........... ........................ ........................ This entire section of NCUAs regulations establishes parameters under which an FCU 

must act in the creation, implementation 

and monitoring of a member business lending program, including: underwriting guidelines, loan limitations and loan types. The 

compliance or non-compliance with this 

part could impact the financial condition of 

an FCU. 

2.—What are prohibited activities?.


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 4829 

NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

.3—What are the requirements for construction and development lending?.X 

.4—What other regulations apply to member 

business lending?.

X 

.5—How do you implement a member business loan program?.X 

.6—What must your member business loan 

policy address?.

X 

.7—What are the collateral and security requirements?.X 

.8—How much may one member or a group 

of associated members borrow?.

X 

.9—Reserved.

.10—What waivers are available? .................. X 

.11—How do you obtain a waiver? ................. X 

.12—What will NCUA do with my waiver request?.X 

.13—What options are available if the NCUA 

Regional Director denies my waiver request, or a portion of it?.

X 

.14—.15—Reserved.

.16—What is the aggregate member business 

loan limit for a credit union?.

X 

.17—Are there exceptions to the aggregate 

loan limit?.

X 

.18—How do I obtain an exception? ............... X 

.19—What are the recordkeeping requirements?.X 

.20—How can a state supervisory authority 

develop and enforce a member business 

loan regulation?.

X 

.21—Definitions.

§ 740—Accuracy of Advertising 

and Notice of Insured Status 81.

.0—Scope ........................................................ ........................ ........................ This entire section of NCUA regulations requires federally insured credit unions to display signage in facilities and in advertising 

notifying members that deposits are insured by NCUA. 

.1—Definitions.

.2—Accuracy of advertising ............................ X 

.3—Advertising of excess insurance ............... X 

.4 Requirements for the official sign ............... X 

.5—Requirements for the official advertising 

statement.

X 

§ 741—Requirements for Insurance 82.

0—Scope.

Subpart A—Regulations That 

Apply to Both Federal Credit 

Unions and Federally Insured 

State-Chartered Credit Unions 

and That Are Not Codified Elsewhere in NCUA’s Regulations.

.1—Examination .............................................. ........................ ........................ This section, subpart A of Part 741, of 

NCUAs regulations governs certain actions 

by FCUs as well as FISCUs that relate directly to their insurance coverage under the 

NCUSIF. 

.2—Maximum borrowing authority .................. X 

.3—Criteria ...................................................... X 

.4—Insurance premium one percent deposit .. X 

.5—Notice of termination of excess insurance 

coverage..

X 

.6—Financial and statistical and other reports X 

.7—Conversion to a state-chartered credit 

union.

X 

.8—Purchase of assets and assumption of liabilities.X 

.9 –Uninsured membership shares ................. X 

.10—Disclosure of share insurance ................ X 

.11—Foreign branching ................................... X 

Subpart—B—Regulations Codified 

Elsewhere in NCUA’s Regulations as Applying to Federal 

Credit Unions That Also Apply 

to Federally Insured StatedChartered Credit Unions.

.201—Minimum fidelity bond requirements ..... X ........................ This section requires any credit union applying for insurance under the NCUSIF to obtain fidelity bond coverage. Failure to obtain and maintain bond coverage could impact the credit unions financial condition. 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
4830 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

.202—Audit and verification requirements ...... X ........................ This section requires a Supervisory Committee to make or cause to be made an 

audit of the credit unions books and 

records. Non-compliance can impact the 

credit union’s financial condition. 

.203—Minimum loan policy requirements ....... X ........................ This section establishes certain requirements 

for an FCU’s compliance with parts 723 

and 701 of NCUA regulations, and exempts 

FISCUs if the SSA has adopted their own 

rules governing certain lending programs/

practices. 

.204—Maximum public unit and nonmember 

accounts, and low income designation.

X ........................ This section requires compliance with part 

701.32 regarding acceptance of non-member deposits. 

.205—Reporting requirements for credit 

unions that are newly chartered or in troubled condition.

X ........................ This section required newly chartered credit 

unions in existence under 2 years or credit 

unions designated as in troubled condition 

to comply with part 701.14 of the regulations. 

.206—Corporate credit unions ........................ X ........................ Requires corporate credit unions to comply 

with part 704 of NCUA regulations. 

.207—Community development revolving loan 

program for credit unions.

........................ X This part of section 741 requires any insured 

credit union to adhere to part 705 of NCUA 

regulations governing loans to LICU’s for 

the purposes of community investment. 

.208—Mergers of federally insured credit 

unions; voluntary termination or conversion 

of insured status.

X ........................ Requires compliance with section 206 of the 

FCU act and parts 708a and 708b of the 

regulation regarding termination or conversion of insured status. 

.209—Management official interlocks ............. X ........................ Prohibits an official of one credit union serving as an official of another, competing 

credit union. 

.210—Central liquidity facility .......................... X ........................ Requires insured credit unions to comply with 

part 725 of the regulation governing the 

membership of credit unions in the CLF. 

.211—Advertising 83 ........................................ X ........................ This section of this part of NCUAs regulations 

requires an insured credit union to comply 

with Part 740 of the regulations governing 

the advertising and notification of NCUSIF 

insurance. 

.212—Share insurance .................................... X ........................ This section addresses the insurance of 

member accounts as prescribed in subpart 

A of part 745 of the regulations. 

.213—Administrative actions, adjudicative 

hearings, rules of practice and procedure.

X ........................ This section addresses an insured credit 

unions compliance with part 747 of the regulations. 

.214—Report of crime or catastrophic act and 

Bank Secrecy Act compliance.

........................ X This section of part 741 requires insured 

credit unions to comply with Part 748 a regulation that deals with consumer protection. 

.215—Records preservation program ............. ........................ X This section of part 741 requires and insured 

credit union to comply with part 749 of the 

regulations which addresses the preservation of credit union records, including member information. 

.216—Flood insurance .................................... ........................ X This section of part 741 requires and insured

credit union to comply with part 760 of the 

regulations which addresses the requirement for flood insurance on real estate 

loans where required for protection of the 

member’s property and credit unions collateral. 

.217—Truth in savings .................................... ........................ X This section of part 741 requires insured 

credit unions to comply with part 707 of the 

regulations which addresses compliance 

with the Truth in Savings act, as previously 

discussed above. 

.218—Involuntary liquidation and creditor 

claims.

X ........................ Requires all insured credit unions to comply 

with part 709 of the regulation regarding involuntary liquidation and creditor claims 

against FCUs. 

.219—Investment requirements ...................... X ........................ Requires compliance of all insured credit 

unions to comply with Part 703 of the regulations. Part 703 is discussed earlier in this 

chart. 

.220—Privacy of consumer financial information......................... X Requires compliance of all insured credit 

unions to comply with part 716 of the regulation. Part 716 is discussed earlier in this 

chart. 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 4831 

NCUA Regulation Part 

Insurance 

regulatory 

related 

Non-insurance 

and consumer 

regulatory 

related 

Description 

.221 Suretyship and guaranty requirements ... X ........................ Requires compliance with Part 701.20 of 

NCUA regulations regarding an FCU entering into a suretyship arrangement, and limits a FISCUs ability to enter into such arrangements to the applicable state law. 

.222—Credit Union Service Organizations ..... X ........................ Requires all insured credit unions to comply 

with part 712.(d)(3) and 712.4 of NCUA 

regulations regarding the establishment 

and operation of CUSOs. 

§ 745—Share Insurance and Appendix 84.

.......................................................................... ........................ ........................ This entire section, including subparts A and 

B, addresses membership accounts and 

payments to members. 

Subpart A—Clarification and Definition of Account Insurance and 

Coverage.

.0—Scope.

.1 Definitions.

.2—General principles applicable in determining insurance of accts.X 

.3—Single ownership accounts ....................... X 

.4—Revocable trust accounts ......................... X 

.5 Accounts held by executors or administrators.X 

.6—Accounts held by a corporation, partnership or unincorporated association.X 

.7—Shares accepted in a foreign currency .... X 

.8—Joint ownership accounts ......................... X 

.9–1 Trust accounts ......................................... X 

.9–2 Retirement and other employee benefit 

plan accounts.

X 

.10—Accounts held by government depositors.X 

.11—Accounts evidenced by negotiable instruments.X 

.12—Accounts obligations for payment of 

items forwarded for collection by depository 

institution acting as agent.

X 

.13—Notification to members/shareholders .... X 

Subpart B—Payment of Share Insurance and Appeals..200—General.

.201—Processing of insurance claims ............ X 

.202—Appeal ................................................... X 

.203 Judicial review ......................................... X 

§ 748—Security Program, Report 

of Suspected Crimes, Suspicious Transactions, Catastrophic Acts, and Bank Secrecy Act Compliance 85.

.0—Security program ...................................... ........................ ........................ This section addresses the requirement for 

insured credit unions to comply with the 

Bank Secrecy Act (BSA). 

.1 Filing of reports ........................................... ........................ X 

.2—Procedures for monitoring Bank Secrecy 

Act (BSA) compliance.

........................ X 

§ 749—Records Preservation Program 86.

.0—Purpose and Scope .................................. ........................ ........................ This part addresses the requirements of and 

best practices of preserving the records of 

the credit union. 

.1—Definitions.

.2—Vital records preservation program .......... X 

.3—Vital records center ................................... X 

.4—Format for vital records preservation ....... X 

.5—Format for records required by other 

NCUA regulations.

X 

§ Part 760—Loans In Areas Having Special Flood Hazards 87.

.1—Authority, Purpose and Scope .................. ........................ ........................ This section deals with the requirement for 

flood insurance where required. The obtaining of flood insurance, and proper determination of the requirement for flood insurance, protects the member’s property and 

the credit unions collateral. 

.2—Definitions.

.3—Requirement to purchase flood insurance 

where available.

........................ X 

.4—Exemptions ............................................... ........................ X 

.5 –Escrow Requirement ................................. ........................ X 

.6—Required use of standard flood hazard 

determination form.

........................ X 

.7—Forced placement of flood insurance ....... ........................ X 

.8—Determination fees .................................... ........................ X 

.9—Notice of special flood hazards and availability of Federal disaster relief assistance......................... X 

.10—Notice of servicer’s identity ..................... ........................ X 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
4832 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

66Part 701 deals with the organization of FCUs. 

Portions of Part 701 deal with safety and soundness 

and are classified as Insurance Regulatory Related, 

other sections are Non-Insurance or Consumer 

Regulatory Related. Certain sections are classified 

as Insurance Regulatory Related not because the 

section authorizes the activity; but rather, the 

section establishes limitations and other criteria to 

ensure the activity is done safely and soundly. 

67Aids in meeting the necessary net worth levels 

under Prompt Corrective Action. 

68Part 702 defines the various statutory levels of 

net worth for all federally insured credit unions and 

the actions required when credit unions fall below 

well capitalized per the FCU Act. The entire Part 

protects the NCUSIF and is Insurance Regulatory 

Related. 

69Part 703 is designed to provide reasonable 

controls to ensure FCUs conduct investing safely 

and soundly. The entire Part protects the NCUSIF 

and is Insurance Regulatory Related. 

70Part 704 governs the organization and 

operations of corporate credit unions. Corporate 

credit unions do not have direct consumer 

operations and are systemically critical to the FICU 

system. The entire Part protects the NCUSIF and is 

Insurance Regulatory Related. This section has been 

updated since the PricewaterhouseCoopers 2013 

report to reflect changes in Part 704. 

71Recently Rescinded. Part 706 deals with FCU 

credit practices. Portions of 706 are designed to 

protect consumers from unfair credit practice while 

other parts are designed to ensure FCUs establish 

appropriate credit exposure limits in relation to 

their net worth. The consumer related portions of 

this Part are classified as Non-Insurance or 

Consumer Regulatory Related while those dealing 

with FCU safety and soundness are classified as 

Insurance Regulatory Related. 

72Part 707 is designed to protect FICU members 

from unfair or deceptive practices by requiring 

adequate consumer disclosures. The entire Part is 

classified as Non-Insurance or Consumer Regulatory 

Related. 

73Part 712 deals with CUSOs. The rule sets 

requirements for the legal structures and approved 

and prohibited activities. Since a poorly organized 

or operationally unsound CUSO can have a negative 

impact on a FICUs’ net worth, the entire Part 

protects the NCUSIF and is classified as Insurance 

Regulatory Related. 

74Part 713 governs establishes the requirements 

for credit union bond and insurance coverage. Bond 

and insurance coverage protects credit unions from 

losses. The entire rule is classified as Insurance 

Regulatory Related. 

75Part 714 governs FCU authority to enter into 

lease agreements and sets requirements designed to 

protect FCUs from losses associated with leasing 

activities. The entire Part is classified as Insurance 

Regulatory Related. 

76Part 715 establishes the roles and 

responsibilities of the Supervisory Committee. 

Since the Supervisory Committee performs an 

oversight and control function related to safety and 

soundness, the entire Part is classified as Insurance 

Regulatory Related. 

77Part 716 deals exclusively with the 

safeguarding of member information and the entire 

Part is classified as Non-Insurance and Consumer 

Regulatory Related. 

78Part 717 deals exclusively with the Fair Credit 

Reporting Act which is designed to protect 

members from unfair or deceptive reporting 

practices. The entire Part is classified as NonInsurance and Consumer Regulatory Related. 

79Part 722 establishes requirements for obtaining 

appraisals securing financial obligations of 

members. Sufficiently valued collateral can mitigate 

losses associated with secured loans and protects 

the credit union and thereby the NCUSIF from 

losses. The entire Part is categorized as Insurance 

Regulatory Related. 

80Part 723 establishes the requirements and 

restrictions for FICU member business lending. This 

section is designed to promote safe and sound 

underwriting of business loans and establish 

reasonable concentration risk limits. This entire 

Part protects FICUs and the NCUSIF from losses 

and is classified as Insurance Regulatory Related. 

81Part 740 establishes the requirement for 

federally insured credit unions to properly disclose 

that deposits are federally insured. This entire Part 

is classified as Insurance Regulatory Related. 

82Part 741 establishes the requirements for 

obtaining and keeping NCUSIF insurance coverage. 

Certain sections of this Part are designed to promote 

safety and soundness and are categorized as 

Insurance Regulatory Related while other sections 

deal with requirements for the benefit of members 

and are categorized as Non-Insurance and 

Consumer Regulatory Related. 

83 In practice, section 741.211 is classified as 

Insurance Regulatory Related since it both invokes 

Part 740, which itself is Insurance Regulatory 

Related, and it relates to requirements for FISCUs. 

Previous ETS instructions contained a clerical error 

classifying section 741.211 as Non-Insurance and 

Consumer Regulatory Related. However, since 

section 741.211 is applicable only to FISCUs and 

the ETS only samples FCUs, the results of the ETS 

and OTR were not affected. The classification of 

section 741.211 has been updated here and will be 

reflected this way during the next ETS instruction. 

84Part 745 defines insurance coverage by account 

type and establishes priority during payout. In 

practice, Part 745 is classified as Insurance 

Regulatory Related as it relates to the insurability 

of accounts. Previous ETS instructions contained a 

clerical error classifying Part 745 as Non-Insurance 

and Consumer Regulatory Related. AMAC and OCP 

primarily execute Part 745 as it relates to NCUA’s 

payout function and consumer inquiries regarding 

insurance coverage. Part 745 is captured in the 

Financial Budget section of the OTR calculation 

through AMAC’s and OCP’s financial budgets, with 

100 percent and 17.7 percent of the respective 

budgets allocated to insurance-related activities. 

Thus, the actual OTR calculation was not affected 

by the clerical error in the instructions. The 

classification of Part 745 has been updated here and 

will be reflected this way during the next ETS 

instruction. 

85Part 748 deals with required regulatory 

reporting designed to protect members. The entire 

Part is categorized as Non-insurance and Consumer 

Regulatory Related. 

86Part 749 deals with the preservation of vital 

FICU records necessary for ongoing operations. 

Failure to properly protect records could jeopardize 

the viability of an insured credit union and the 

insurance coverage of member accounts. This entire 

Part is categorized as Insurance Regulatory Related. 

87Part 760 is designed to protect member’s 

property and the entire section is categorized as 

Non-Insurance and Consumer Regulatory Related. 

VII. Appendix B—Examination Time 

Survey Instructions 

NCUA issues instructions to participants in 

the ETS prior to the start of each ETS cycle. 

Training for participants is also provided to 

ensure time spent on insurance and noninsurance related activities is captured 

accurately and consistently. Below is the 

version of instructions distributed to 

participants prior to the June 1, 2015 through 

May 31, 2016 ETS cycle. 

Examination Time Survey 

I. General Definitions 

A. Rules and Regs Classification 

II. Specific Instructions About Individual 

Scope Categories 

A. Planning/Scope Development 

B. Call Report Review 

C. Supervisory Committee Review 

D. Financial Analysis 

E. Loan Analysis 

F. Investment Analysis 

G. Liquidity Analysis 

H. Asset Liability Management 

I. Compliance 

J. Information Systems Technology 

K. Management Analysis 

L. Contact Report/Joint Conference/FollowUp Procedures 

I. General Definitions 

Insurance Related Examination Procedures 

Insurance Related examination or 

supervision contact procedures address 

safety and soundness issues. On the time 

survey forms, respondents should classify the 

time used to evaluate safety and soundness 

as ‘‘insurance related.’’ ‘‘Insurance Related’’ 

time includes: 

• Evaluating financial trends and Call Report 

data 

• Determining the credit union’s solvency 

position 

• Evaluating risks, and potential costs, the 

credit union presents to the NCUSIF (when 

appropriate) 

• Assessing management’s efforts to protect 

earnings and net worth by identifying, 

evaluating, controlling, and monitoring 

internal and external risks 

• Assessing management’s abilities to 

develop strong policies and a reliable 

internal control structure 

Insurance Regulatory Related Examination 

Procedures 

Insurance Regulatory related examination 

or supervision contact procedures address 

regulations that are not designed to protect 

consumers directly. This includes assessing 

compliance with all regulations outside of 

consumer oriented regulations—see listing of 

consumer regulations in the following 

section—Consumer Regulatory examination 

procedures. 

Insurance Regulatory related regulations 

include those regulations that address safety 

and soundness issues. Examples include (this 

is not all inclusive): 

• 701.21—Loans to Members and Lines of 

Credit to Members 

Æ Includes total loan limit to one 

individual, limitation on maturity, rate 

of interest, and security. 

• 702—Prompt Corrective Action 

Æ Establishes net worth categories and 

mandatory and discretionary supervisory 

actions 

• 703—Investments and Deposit Activities 

Æ Establishes permissible investments and 

requires credit analysis prior to purchase 

and requires ongoing monitoring of 

securities 

• 712—Credit Union Service Organizations 

Æ Establishes investment and loan limits 

as well as outlines permissible activities 

• 713—Fidelity Bond and Insurance 

Coverage 

Æ Requires minimum bond coverage 

• 715—Supervisory Committee Audits and 


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Verifications 

• 722—Appraisals 

Æ Establishes minimum appraisal 

standards based on loan size 

• 723—Member Business Loans 

Æ Establishes prohibited activities, 

requires specific policies and sets overall 

loan limits as well as limits to one 

member or group of associated members 

Consumer Regulatory Related Examination 

Procedures 

Consumer Regulatory Related examination 

or supervision contact procedures address 

compliance with consumer regulations. The 

regulations include: 

• Reg. B—Equal Credit Opportunity Act 

• BSA—Bank Secrecy Act 

• Reg. C—Home Mortgage Disclosure Act 

• Reg. CC—Expedited Funds Availability 

• COPPA—Children’s Online Privacy 

Protection Act 

• Reg. D—Reserve Requirements 

• Reg. E—Electronic Funds Transfer Act 

• FACTA—Fair and Accurate Credit 

Transactions Act 

• FCPR—Fair Credit Practice Rule 

• FCRA—Fair Credit Reporting Act 

• FDCPA—Fair Debt Collections Practices 

Act 

• FDPA—Flood Disaster Protection Act 

• FHA—Fair Housing Act 

• GLBA—Gramm-Leach Bliley Act 

• HOEPA—Home Ownership and Equity 

Protection Act 

• HOPA—Home Owner’s Protection Act 

• Reg. M—Consumer Leasing 

• OFAC—Office of Foreign Asset Control 

• PCFI—Privacy of Consumer Financial 

Information 

• RFPA—Right to Financial Privacy Act 

• SCRA—Service Members Civil Relief Act 

• Reg.—X Real Estate Settlement Procedures 

Act 

• Credit Card Act 

• Unlawful Internet Gaming Enforcement 

Act 

• SAFE Act—Secure and Fair Enforcement 

for Mortgage Licensing Act 

• Reg.—Z Truth in Lending 

• Rules and Regulations Part 706—Credit 

Practices 

• Rules and Regulations Part 707—Truth in 

Savings 

• Rules and Regulations Part 717—Fair 

Credit Reporting 

The chart below will help you determine 

the appropriate regulatory category 

(Insurance Regulatory or Non-Insurance and 

Consumer Regulatory) for all regulations. 

[The chart normally embedded here is shown 

as Appendix A in this document]. 

II. Specific Instructions about Individual 

Scope Categories 

Note: The procedures referenced within 

each time category of the survey are not all 

encompassing. These guidelines merely 

provide examples respondents should 

consider when estimating the allocation of 

their time. 

A. Planning/Scope Development 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Reviewing prior contact reports to 

identify historical safety and soundness 

concerns; 

Æ Reviewing scope workbook to become 

familiar with potential safety and soundness 

concerns; 

Æ Reviewing correspondence between 

contacts that address safety and soundness 

issues; 

Æ Reviewing recent financial trends; 

Æ Evaluating changes to the credit union’s 

product and service mix that could present 

new safety and soundness concerns; 

Æ Determining whether a Subject Matter 

Examiner could assist during the supervision 

process in addressing safety and soundness 

concerns; 

Æ Considering whether additional 

resources (i.e., grants, technical assistance, 

low-income designation) are available to 

assist management in addressing safety and 

soundness concerns; 

Æ Evaluating prevailing economic 

conditions; 

Æ Reviewing risk management reports; 

Æ Interviewing key officials to learn status 

of action taken to correct previously 

identified safety and soundness concerns; 

Æ Developing on-site procedures for 

evaluating safety and soundness concerns; 

Æ Completing portions of scope workbook 

that pertain to safety and soundness 

concerns; and 

Æ Updating scope workbook to document 

new information about safety and soundness 

issues. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

Insurance Regulatory compliance such as: 

Æ Reviewing prior contact reports for 

previously cited noncompliance and 

regulatory violations related to Insurance 

Regulatory issues; 

Æ Reviewing correspondence between 

contacts that addresses Insurance Regulatory 

concerns; 

Æ Determining the potential applicability 

of new Insurance Regulatory requirements; 

Æ Considering whether additional 

resources (i.e., grants, technical assistance, 

low-income designation) are available to 

assist management in addressing Insurance 

Regulatory compliance concerns; 

Æ Interviewing key officials to determine 

management’s level of expertise regarding, 

and attitude toward, Insurance Regulatory 

compliance; 

Æ Developing on-site procedures for 

evaluating Insurance Regulatory concerns; 

Æ Completing portions of scope workbook 

that pertain to Insurance Regulatory 

concerns; and 

Æ Updating scope workbook to document 

new information about Insurance Regulatory 

issues. 

3. Time related to Consumer Regulatory 

Issues includes the time for tasks related to 

consumer regulations such as: 

Æ Reviewing prior contact reports for 

previously cited noncompliance issues and 

regulatory violations related to Consumer 

Regulatory issues; 

Æ Reviewing scope workbook to become 

familiar with potential Consumer Regulatory 

concerns; 

Æ Reviewing correspondence between 

contacts that addresses Consumer Regulatory 

concerns; 

Æ Determining the potential applicability 

of new Consumer Regulatory requirements; 

Æ Determining whether a Subject Matter 

Examiner could assist during the supervision 

process in addressing Consumer Regulatory 

compliance concerns; 

Æ Considering whether additional 

resources (i.e., grants, technical assistance, 

low-income designation) are available to 

assist management in addressing Consumer 

Regulatory compliance concerns; 

Æ Evaluating changes to the credit union’s 

product and service mix that could require 

an expanded review of Consumer Regulatory 

compliance; 

Æ Interviewing key officials to determine 

management’s level of expertise regarding, 

and attitude toward, Consumer Regulatory 

compliance; 

Æ Developing on-site procedures for 

evaluating Consumer Regulatory concerns; 

Æ Completing portions of scope workbook 

that pertain to Consumer Regulatory 

concerns; and 

Æ Updating scope workbook to document 

new information about Consumer Regulatory 

issues. 

B. Call Report Review 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Determining if factors causing 

inaccuracies in Call Reports are symptoms of 

internal control weaknesses; 

Æ Reviewing Call Report trends for 

potential risk indicators; 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

Insurance Regulatory compliance such as: 

Æ Verifying the accuracy and timeliness of 

Call Reports filed by management. 

3. Time related to Consumer Regulatory 

Issues while reviewing the Call Report is not 

applicable considering no consumer 

regulations are addressed in the Call Report. 

C. Supervisory Committee Review 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Reviewing general internal controls and 

segregation of duties; 

Æ Evaluating if the supervisory committee 

serves as a legitimate ‘‘check’’ upon 

management activity; and 

Æ Determining whether supervisory 

committee is effective in correcting identified 

internal control weaknesses. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

Insurance Regulatory compliance such as: 

Æ Ensuring the supervisory committee is 

carrying out its fiduciary responsibility to 

ensure member account verifications and 

annual audits are complete and timely and 

meeting the supervisory committee’s 

regulatory requirements. 

Æ Reviewing the actual documentation 

from the supervisory committee audit and 

member account verification. 

3. Time related to Consumer Regulatory 

Issues includes the time for tasks such as: 

Æ Review of follow-up actions related to 

Consumer Regulatory violations. 


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D. Financial Analysis 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Reviewing the current financial trends; 

and 

Æ Determining whether management has 

adequate controls and risk management 

systems in place. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks such as: 

Æ Reviewing general accounting 

procedures to ensure compliance with the 

Accounting Manual for Federal Credit 

Unions; 

Æ Verifying that current financial 

statements reflect the balances in the general 

ledger; 

Æ Determining that management is 

maintaining adequate subsidiary ledgers; and 

Æ Testing the validity of delinquency 

computation and income accrual procedures. 

3. Time related to Non-Insurance Issues is 

not applicable considering no consumer 

regulations are addressed during the review 

of this area. 

E. Loan Analysis 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Reviewing loan underwriting 

procedures; 

Æ Determining the risk associated with the 

product mix; 

Æ Evaluating loan policies to determine if 

sound practices exist; 

Æ Reviewing collection efforts for 

timeliness; 

Æ Evaluating whether the level of the 

credit union’s reserves is consistent with the 

loan products offered by the credit union. 

Æ Assessing the controls management has 

over loan losses. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following regulations: 

Æ 701.21—Loans to Members and Lines of 

Credit to Members Assessing 

Æ 702.22—Loan participation 

Æ 722—Appraisals 

Æ 723—Member Business Loans 

3. Time related to Consumer Regulatory 

Issues includes the time for tasks such as: 

Æ Evaluating compliance with consumer 

and mortgage compliance laws and 

regulations—Refer to listing under General 

Definitions; and 

Æ Ensuring the written policies comply 

with all applicable lending regulations. 

F. Investment Analysis 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Reviewing appropriateness of the 

investment portfolio and overall practices; 

Æ Determining the adequacy of the internal 

controls related to investments; 

Æ Assessing investment trends; 

Æ Ensuring adequate safekeeping 

procedures are in place; and 

Æ Evaluating management’s effectiveness 

in addressing investment risks. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following regulations: 

Æ Reviewing the permissibility of the 

investments included in the portfolio—703— 

Investments and Deposit Activities; and 

Æ Reviewing the written investment policy 

to ensure the policy includes all elements 

discussed in the regulations. 

3. Time related to Consumer Regulatory 

Issues is not applicable considering no 

consumer regulations are addressed in the 

review of investments. 

G. Liquidity Analysis 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Determining whether the credit union 

has sufficient liquidity to cash needs for loan 

and share transactions; and 

Æ Evaluating whether management has 

sound contingency plans for addressing 

unanticipated liquidity needs. 

Æ Ensuring risk management processes 

(measuring, monitoring, controlling, and 

reporting) are appropriate for credit union. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following: 

Æ Ensuring management is complying with 

statutory borrowing limitations. 

3. Time related to Consumer Regulatory 

Issues is not applicable considering no 

consumer regulations are addressed in the 

review of liquidity. 

H. Asset Liability Management 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Determining if management has 

adequate controls in place and assigns clear 

responsibilities to address the credit union’s 

overall exposure to interest rate risk; 

Æ Reviewing the adequacy of the credit 

union’s modeling and risk monitoring 

procedures; and 

Æ Ensuring that management initiates 

corrective action when internal analysis 

identifies concerns relative to interest rate 

risk. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following: 

Æ Ensuring written asset liability 

management policies do not contain 

provisions that are inconsistent with 

regulations that apply to loans, investments, 

or shares. 

3. Time related to Consumer Regulatory 

Issues is not applicable considering no 

consumer regulations are addressed in the 

review of asset liability management. 

I. Compliance 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Determining whether any identified 

regulatory violations could cause the credit 

union to have financial risk exposure. 

2. Time related to Insurance Regulatory 

Issues includes the time reviewing 

compliance with the following regulations: 

Æ 701.21—Loans to Members and Lines of 

Credit to Members 

Æ 701—Prompt Corrective Action 

Æ 703—Investments and Deposit Activities 

Æ 712—Credit Union Service 

Organizations 

Æ 713—Fidelity Bond and Insurance 

Coverage 

Æ 715—Supervisory Committee Audits and 

Verifications 

Æ 722—Appraisals 

Æ 723—Member Business Loans 

3. Time related to Consumer Regulatory 

Issues includes Assessing management’s 

compliance with the consumer and mortgage 

compliance laws and regulations. This 

includes: 

Æ Reg. B—Equal Credit Opportunity Act 

Æ BSA—Bank Secrecy Act 

Æ Reg. C—Home Mortgage Disclosure Act 

Æ Reg. CC—Expedited Funds Availability 

Æ COPPA—Children’s Online Privacy 

Protection Act 

Æ Reg. D—Reserve Requirements 

Æ Reg. E—Electronic Funds Transfer Act 

Æ FACTA—Fair and Accurate Credit 

Transactions Act 

Æ FCPR—Fair Credit Practice Rule 

Æ FCRA—Fair Credit Reporting Act 

Æ FDCPA—Fair Debt Collections Practices 

Act 

Æ FDPA—Flood Disaster Protection Act 

Æ FHA—Fair Housing Act 

Æ GLBA—Gramm-Leach Bliley Act 

Æ HOEPA—Home Ownership and Equity 

Protection Act 

Æ HOPA—Home Owner’s Protection Act 

Æ Reg. M—Consumer Leasing 

Æ OFAC—Office of Foreign Asset Control 

Æ PCFI—Privacy of Consumer Financial 

Information 

Æ RFPA—Right to Financial Privacy Act 

Æ SCRA—Service Members Civil Relief 

Act 

Æ Reg.—X Real Estate Settlement 

Procedures Act 

Æ Credit Card Act 

Æ Unlawful Internet Gaming Enforcement 

Act 

Æ SAFE Act—Secure and Fair Enforcement 

for Mortgage Licensing Act 

Æ Reg.—Z Truth in Lending 

Æ Rules and Regulations Part 706—Credit 

Practices 

Æ Rules and Regulations Part 707—Truth 

in Savings 

Æ Rules and Regulations Part 717—Fair 

Credit Reporting 

J. Information Systems Technology 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Ensuring that the credit union’s written 

policies contribute toward the establishment 

and maintenance of a system of sound 

internal controls; and 

Æ Determining if weakness in the control 

structure presents any exposure to financial 

risks. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following: 

Æ Ensuring that all agreements with 

outside parties meet applicable legal 

requirements. 

3. Time related to Consumer Regulatory 

Issues includes Assessing management’s 

compliance with the following consumer 

regulations: 

Æ Children’s Online Privacy Protection Act 

(COPPA) 

Æ Gramm-Leach-Bliley Act (GLBA) related 

to guidance on identity theft. 

K. Management Analysis 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 


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Æ Reviewing planning and general 

business practices for overall soundness; 

Æ Reviewing income/expense budget 

process and controls; and 

Æ Assessing management’s capabilities in 

implementing strategies to address risks. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following: 

Æ Reviewing compliance with Federal 

Credit Union Bylaws; 

Æ Reviewing Board minutes to ensure 

meetings take place in accordance with the 

Federal Credit Union Act and Bylaws; and 

Æ Ensuring that all written policies are 

consistent with applicable Insurance 

Regulatory laws and regulations. 

3. Time related to Consumer Regulatory 

Issues includes the time for tasks such as: 

Æ Ensuring that all consumer and mortgage 

written policies are consistent with 

applicable laws and regulations. 

Æ Review of compliance with 

implementing corrective action related to 

regulatory violations associated with 

consumer and mortgage loans 

Æ Ensuring that all written policies are 

consistent with applicable Consumer 

compliance laws and regulations. 

L. Contact Report/Joint Conference/FollowUp Procedures 

1. Time related to Insurance Issues 

includes the time required for tasks such as: 

Æ Communicating safety and soundness or 

risk management issues to credit union 

officials and employees during the exit 

interview process; 

Æ Documenting supervision plans for 

monitoring safety and soundness concerns 

noted during an on-site contact; 

Æ Discussing safety and soundness or risk 

management concerns with management 

during the joint conference; 

Æ Preparing written reports that provide 

guidelines for correcting safety and 

soundness concerns; 

Æ Drafting correspondence for the Regional 

Director’s signature that discuss safety and 

soundness concerns; 

Æ Preparing internal monitoring reports 

that assess management’s progress in 

addressing safety and soundness or risk 

management issues; and 

Æ Implementing administrative remedies 

designed to correct safety and soundness or 

risk management concerns. 

2. Time related to Insurance Regulatory 

Issues includes the time for tasks related to 

compliance with the following: 

Æ Communicating regulatory violations 

related to Insurance Regulatory issues; 

Æ Documenting supervision plans for 

monitoring for Insurance Regulatory 

violations noted during an on-site contact; 

Æ Discussing Insurance Regulatory 

concerns with management during the joint 

conference; 

Æ Preparing written reports that provide 

guidelines for complying with Insurance 

Regulatory issues; and 

Æ Drafting correspondence for the Regional 

Director’s signature that discuss Insurance 

Regulatory concerns. 

3. Time related to Consumer Regulatory 

Issues includes the time for tasks such as: 

Æ Communicating regulatory violations 

related to consumer and mortgage loans 

Æ Documenting supervision plans for 

monitoring Consumer Regulatory violations 

noted during an on-site contact; 

Æ Discussing Consumer Regulatory 

concerns with management during the joint 

conference; 

Æ Preparing written reports that provide 

guidelines for complying with consumer 

regulations that do not specifically pertain to 

insurance-related concerns; and 

Æ Drafting correspondence for the Regional 

Director’s signature that discuss Consumer 

Regulatory concerns. 

[FR Doc. 2016–01626 Filed 1–26–16; 8:45 am] 

BILLING CODE 7535–01–P 


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