Document:

2009 Audit Executive Incentive Plan

 EXHIBIT 10.4 
 FHLBank San Francisco 
 2009 AUDIT EXECUTIVE
INCENTIVE PLAN 
 PLAN PURPOSE 
 To optimize individual and Internal Audit Department performance in accomplishing Audit Committee-approved goals and objectives. 
 PLAN OBJECTIVES 
 To motivate the Bank’s Internal Audit Department senior
executive to exceed individual and Internal Audit Department goals that support the overall internal audit plan. To attract and retain an outstanding executive by providing a competitive total compensation program, including an annual incentive
award opportunity. 
 ELIGIBILITY 
 The participant is a Bank senior executive whose performance has a major impact on the Internal Audit Department’s success. The 2009 participant is the incumbent in the Internal Audit
Department’s senior executive position: 
 Senior Vice President, Enterprise Risk Management & Director of Internal Audit 

 The participant must be employed by the Bank through December 31st to be eligible for an incentive award under the 2009 plan. A participant hired, promoted, or who has a
leave of absence during the plan year is eligible to participate on a pro-rata basis. A participant hired or promoted on or after October 1st will not be eligible to participate during the current plan year. 
 INCENTIVE GOALS AND MEASURES 
 Incentive Goals 
 There are individual goals and Internal Audit Department goals, which are weighted. The
individual goals support the Internal Audit Department goals and objectives and are assessed by the Audit Committee. 
 The Internal Audit
Department senior executive goals for 2009 are: 
  

	1.	Complete the 2009 Internal Audit Plan. 

  

	2.	Enhance the Internal Audit Standards Manual. 

 An outline of the Internal Audit Department and individual goal weights and measures are attached as Exhibit A. 
 Incentive
Goal Achievement Measures 
 The plan rewards levels of goal achievement, as follows: 
  

			
	Achievement Level	 	Measure Definition
		
	200% of target	 	The most optimistic achievement level that far exceeds levels forecasted from expected business.
	150% of target	 	An optimistic achievement level that exceeds levels forecasted from expected business.
	Target (100%)	 	Performance that is expected under the Bank’s Plan.
	Threshold (75% of target)	 	Minimum level of performance that must be achieved for awards to be paid.

 The percentages above represent aggregated achievement levels, not percentages of base pay. 

 INCENTIVE AWARD POOL 
 The Board approves an incentive award pool for the Bank’s senior executives at the beginning of the annual plan period, which includes the Bank’s Internal Audit Department senior executive. Portions of this pool may be allocated
by the Audit Committee to the plan participant at the end of the plan period based upon the overall goal achievement levels. The Audit Committee and the Board of Directors have full discretion to modify any and all incentive payments. 

 AWARD DETERMINATION 
 Awards will be based on success in achieving individual and Internal Audit Department goals. At yearend, accomplishments will be assessed, and a percentage of achievement will be determined for each goal.
Any award determination will be at the discretion of the Audit Committee and Board of Directors. 
  

						
	Percentage of Achievement Scale	  	Achievement Levels	 	 	  
	0% - 200%	  	200	% 	 	= Far Exceeds Target
		  	150	% 	 	= Exceeds Target
		  	100	% 	 	= Target
		  	75-99	% 	 	= Threshold

 For each goal, the percentage of achievement will be multiplied by the applicable goal weights. Each
weighted achievement will then be added to determine the total weighted achievement. The basis for award opportunity is total weighted achievement. Performance from 75-99% (threshold level) is below the target achievement level and, therefore, may
result in an award less than one granted for achieving target. Performance below the threshold achievement level normally will not result in an incentive award. The Audit Committee and Board of Directors have full discretion to modify any and all
incentive payments. 
 APPROVAL OF INCENTIVE AWARDS 
 All incentive awards must be approved by the Audit Committee and Board of Directors prior to payment. The Audit Committee and Board of Directors have the discretion to approve awards for achievement below
75% total weighted achievement. Award recommendations will be considered by the Audit Committee and Board of Directors at the January 2010 Board meeting, or as soon thereafter as reasonably practicable. 
 PLAN ADMINISTRATION AND IMPLEMENTATION 
 The Audit Committee is responsible for overseeing the administration and interpretation of the Plan. 
 Payments under this plan are subject to approval by the Audit Committee and Board of Directors. Any awards will be distributed as soon as administratively possible following the effective date of Audit Committee and Board approval. All
compensation and incentive plans are subject to review and revision at the Bank’s discretion. Such plans are reviewed regularly to ensure they are competitive and equitable. Internal Audit Department Executive Officer compensation and benefit
programs are subject to Federal Housing Finance Agency review and oversight, and payments made under such programs may be subject to the Agency’s approval under applicable laws and regulations in effect from time to time. 

 EXHIBIT A 
 2009 Audit Executive Incentive Plan 
 Goal Weights and Measures

  

					
	 Senior Vice
President, Enterprise Risk Management & Director of Internal Audit
 Goal Weights

	  	 	 Internal Audit Department
 Goal
 Weights
	 	 Goal
Weight
 (includes individual
 goals)

	 Individual
	 	N/A	 	10%
	 Internal Audit Plan
	 	75%	 	67.5%
	 Internal Audit Standards
Manual
	 	25%	 	22.5%
	 TOTAL
	 	100%	 	100%

 Individual Goal (10%): Provide effective leadership and direction to the Bank’s
Internal Audit Department. 
 Goal Measure: Qualitative assessment by the Audit Committee. 
 Internal Audit Plan Goal (67.5%): Complete the 2009 Internal Audit Plan. 
 Goal Measure: Qualitative assessment by the Audit Committee. 
 Internal Audit Standards Manual (22.5%): Enhance the existing Internal Audit Standards Manual to include the following: 

	 	•	 	 Capture industry and internal audit professional “better practices”; and, 

	 	•	 	 Document the current role of team members, the Internal Audit methodology, the internal audit planning and risk assessment process, and the internal
audit project lifecycles. 

 Goal Measures: 
 Plan (Target): The current Internal Audit Standards Manual is 23 pages. This enhancement would expand on existing documented
standards and include a variety of new areas. When complete the Standards Manual would include approximately 60 pages. 
 Specific areas to enhance are: 

	 	a.	Roles and responsibilities of Internal Audit team members 

	 	b.	Job descriptions, by level, related to responsibilities 

	 	c.	Standards in audit practices referencing governance standards per the Institute of Internal Auditors, Committee of Sponsoring Organizations and Corporate Operating
Policies such as the Code of Ethics 

	 	d.	Summary description of the Internal Audit Methodology 

 Areas to add, but are not limited to, are the following: 

	 	a.	Specific guidance and considerations when executing Internal Audit Projects 

	 	i.	Assessing risks and controls 

	 	ii.	Completing Internal Audit Risk Assessment and Internal Audit Program 

	 	iii.	Internal audit techniques and better practices 

	 	iv.	Working paper techniques and review 

	 	b.	Process and activities related to managing a co-source relationship 

	 	c.	Quality Assurance Reviews 

 In
addition, an organized roll-out/training session would be required to help ensure change management and an appropriate level of communication. 
 Above Plan (Exceeds): Include specific guidance and considerations when executing Internal Audit Projects regarding: 

	 	a.	Aligning and enhancing the Internal Audit process documentation to include the financial reporting controls and assertions consistent with the Sarbanes-Oxley
documentation 

	 	b.	Assessing controls identified as key controls and the related assertions in the Sarbanes-Oxley documentation 

	 	c.	Including certain key Sarbanes-Oxley controls in the scope of audit testing 

	 	d.	Leveraging subject matter specialist to help identify risks and develop internal audit program 

 Stretch (Far Exceeds): Include specific guidance and considerations when executing Internal Audit Projects regarding: 

	 	a.	Design internal audit risk assessment template that addresses the range of enterprise risk management objectives2009 Audit Performance Unit Plan

 EXHIBIT 10.5 
 FHLBank San Francisco 
 2009 Audit Performance Unit
Plan 
 Summary Description 
 PLAN PURPOSE 
 To optimize the Internal Audit Department’s long-term
performance in accomplishing Audit Committee-approved goals. 
 PLAN OBJECTIVES 
 To motivate the Internal Audit Department senior executive to exceed goals on a long-term basis that directly support the annual audit plans and strategic
departmental objectives. To attract and retain an outstanding executive by providing a competitive total compensation program, including a cash-based long-term incentive reward opportunity tied to the performance of the Internal Audit Department
against specified performance measures. 
 PARTICIPANT 
 The participant is a key executive whose performance has a major impact on the Internal Audit Department’s success. The participant is an incumbent in the Internal Audit Department’s senior
executive position: 
 Senior Vice President, Enterprise Risk Management & Director of Internal Audit 
 PERFORMANCE PERIOD 
 The Audit
Performance Unit Plan (APUP) pays incentive awards related to the achievement of the Internal Audit Department performance over a three-year performance period. The 2009 Plan is effective January 1, 2009, and is based on performance from
January 1, 2009, through December 31, 2011. 
 PERFORMANCE METRICS 
 The target performance level reflects long-term Internal Audit Department performance expectations. Unlike the annual Audit Executive Incentive Plan (AEIP),
the participant does not have an individual goal. 
  

	1.	Three-Year Average Annual AEIP Departmental Goal Achievements: Measured by the average of the actual departmental goal achievement levels under the 2009, 2010,
and 2011 AEIP (short-term incentive plan), determined at the end of the performance period. 

 APUP ACHIEVEMENT MEASURES

 The Internal Audit long-term incentive plan rewards four levels of performance achievement, as follows: 
  

			
	Achievement Level	  	Measure Definition
		
	200% of Target	  	The most optimistic achievement level that far exceeds levels forecasted from expected business.
		
	150% of Target	  	An optimistic achievement level that exceeds levels forecasted from expected business.
		
	Target (100%)	  	Performance that is expected under the Bank’s Plan.
		
	Threshold (75%)	  	Minimum level of performance that must be achieved for awards to be paid.

 AWARD DETERMINATION 
 An award is calculated and paid, in whole or part, at the end of the 2009 plan term (during the first quarter of 2012) based on achievement of a minimum
level of performance under the goals. Awards earned are based on the level at

 
which the three-year performance goals have been achieved. Final awards will be prorated for a participant promoted or hired into position during the performance period, and for a participant who
takes a leave of absence during the performance period. Target payout for the January 1, 2009, through December 31, 2011, performance period is presented in the table under the Award Opportunity section below. 
 Award payouts may be modified up or down at the Audit Committee’s discretion (+/- 25% of the dollar award derived from the table (Award Range Scale)
below to account for performance that is not captured in the performance metrics. Performance below the threshold achievement level for any measure will normally not result in an incentive award. 
 AWARD OPPORTUNITY 
 APUP targets for each three-year performance period are established annually for the participant at the beginning of each calendar year. Target award levels are stated below as a percentage of the February 1st base salary at the beginning of the three-year performance period.

 Award Range Scale (some % rounded) 
 2009 Plan Year – APUP Payout as % of 2009 Base Salary (as of February 1st) 
  

													
	Position Level	  	Threshold1	 	 	Target2	 	 	150% of Target3	 	 	200% of Target4	 
	Senior Vice President	  	18	% 	 	35	% 	 	52.5	% 	 	70	% 

 Notes: 
 1 – 50% of target payout; based on the average of the actual three-year annual AEIP’s departmental goal(s) performance during the plan period. 
 2 – 100% of target payout; based on the average of the actual three-year annual AEIP’s departmental goal(s) performance during the plan period.

 3 – 150% of target payout; based on the average of the actual three-year annual AEIP’s departmental goal(s) performance during the
plan period. 
 4 – 200% of target payout; based on the average of the actual three-year annual AEIP’s departmental goal(s) performance
during the plan period. 
 Awards will be considered by the Audit Committee and Board at the end of the three-year performance period. Cash
awards are paid to the participant at the end of the three-year performance period (during the first quarter of 2012). 
 Example of how award would be calculated for the Senior Vice President for 2009 APUP Plan Period 
  

													
	 (100% weight)
 3-year Average Annual
 AEIP Departmental Goal
 Levels Achieved: (160% of Target)
  
	 	  
 }
	 	 Percent of
 Target Payout:
 160%
  
	 	2009 Base Salary	 	Target APUP Payout (% of Base Salary)	 	 Payout % Based
 on Performance
	 	 APUP Payment
 paid Q1 2012

	 	 	 	 $290,000 X
  
	 	         35% X
  
	 	 160% =
  
	 	 $162,400
  

 Payments under this plan are subject to approval by the Audit Committee and the Board of
Directors. To be eligible for the Audit Performance Unit Plan payment, a participant must be employed with the Bank through the end of the three-year performance period, except in the case of a voluntary normal retirement, a qualified long-term
disability, or death. APUP awards will be prorated for a participant in the position less than a full plan term, including a participant who has a leave of absence greater than one month during the plan term. Any awards will be distributed as soon
as administratively possible following the effective date of Audit Committee and Board approval. All compensation and incentive plans are subject to review and revision at the Bank’s discretion. Such plans are reviewed regularly to ensure they
are competitive and equitable. Internal Audit Department Senior Executive compensation and benefit programs are subject to Federal Housing Finance Agency review and oversight, and payments made under such programs may be subject to the Agency’s
approval under applicable laws and regulations in effect from time to time.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]