The NCUA Staff Draft 2019-2020 Budget Justification, 49692-49768 [2018-21282]

Download as PDF 49692 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices supplementary-materials.aspx. Printed copies will be available at the October 17, 2018 budget briefing. FOR FURTHER INFORMATION CONTACT: Rendell Jones, Chief Financial Officer, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314–3428 or telephone: (703) 518– 6571. NATIONAL CREDIT UNION ADMINISTRATION The NCUA Staff Draft 2019–2020 Budget Justification National Credit Union Administration (NCUA). ACTION: Notice. AGENCY: The NCUA draft detailed business-type budget is being made available for public review as required by federal statute. The proposed resources will support the agency’s annual operations and continue implementation of the agency’s reorganization plan. The briefing schedule and comment instructions are included in the supplementary information section. DATES: Requests to deliver a statement at the budget briefing must be received on or before Tuesday, October 9, 2018. Written statements and presentations for those scheduled to appear at the budget briefing must be received on or before Monday, October 15, 2018. Written comments without public presentation at the budget briefing may be submitted by Friday, October 26, 2018. SUMMARY: You may submit comments by any of the following methods (Please send comments by one method only): • Presentation at public budget briefing: Submit requests to deliver a statement at the briefing to BudgetBriefing@ncua.gov by Tuesday, October 9, 2018. Include your name, title, affiliation, mailing address, email address, and telephone number. Copies of your presentation must be submitted to the same email address by Monday, October 15, 2018. • Written comments: Submit comments to BudgetComments@ ncua.gov by Friday, October 26, 2018. Include your name and the following subject line ‘‘Comments on the NCUA Draft 2019–2020 Budget Justification.’’ Public Inspection: Copies of the NCUA Draft 2019–2020 Budget Justification and associated materials are also available on the NCUA website at https://www.ncua.gov/About/Pages/ budget-strategic-planning/ amozie on DSK3GDR082PROD with NOTICES2 ADDRESSES: VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 SUPPLEMENTARY INFORMATION: I. The NCUA Budget in Brief II. Introduction and Strategic Context III. Forecast and Enterprise Challenges IV. Key Themes of the 2019–2020 Budget V. Operating Budget VI. Capital Budget VII. Share Insurance Fund Administrative Budget VIII. Financing the NCUA Budget IX. Appendix A: Supplemental Budget Information X: Appendix B: Capital Projects Section 212 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Pub. L. 115–174) amended 12 U.S.C. 1789(b)(1)(A) to require the NCUA Board (Board) to ‘‘make publicly available and publish in the Federal Register a draft of the detailed business-type budget.’’ Although 12 U.S.C. 1789(b)(1)(A) requires publication of a ‘‘business-type budget’’ only for the agency operations arising under the Federal Credit Union Act’s subchapter on insurance activities, in the interest of transparency the Board is providing the agency’s entire staff draft 2019–2020 Budget Justification (budget) in this Notice. The draft budget details the resources required to support NCUA’s mission as outlined in its 2018–2022 Strategic Plan. The draft budget includes personnel and dollar estimates for three major budget components: (1) The Operating Budget; (2) the Capital Budget; and (3) the Share Insurance Fund Administrative Budget. The resources proposed in the draft budget will be used to carry out the agency’s annual operations and to continue implementation of the agency’s reorganization plan. The NCUA staff will present its draft budget to the Board at a budget briefing open to the public and scheduled for Wednesday, October 17, 2018 at 10 a.m. PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 Eastern. The budget briefing will be held in the NCUA Board meeting room and run for approximately two hours. A livestream of the briefing also will be available through a link on ncua.gov. If you wish to attend the briefing and deliver a statement, you must email a request to BudgetBriefing@ncua.gov by Tuesday, October 9, 2018. Your request must include your name, title, affiliation, mailing address, email address, and telephone number. The NCUA will work to accommodate as many public statements as possible at the October 17, 2018 budget briefing. The Board Secretary will inform you if you have been approved to make a presentation and how much time you will be allotted. A written copy of your presentation must be delivered to the Board Secretary via email at BudgetBriefing@ncua.gov by Monday, October 15, 2018. Written comments on the draft budget will also be accepted by email at BudgetComments@ncua.gov until Friday, October 26, 2018. Include your name and the following subject line with your comments: ‘‘Comments on the NCUA Draft 2019–2020 Budget Justification.’’ All comments should provide specific, actionable recommendations rather than general remarks. The Board will review and consider any comments from the public prior to approving the budget. I. The NCUA Budget in Brief Proposed 2019 and 2020 Budgets The goals and objectives set forth in the National Credit Union Administration’s (NCUA) Strategic Plan 2018–2022 (https://www.ncua.gov/ About/Documents/AgendaItems/AG2 0160721Item2b.pdf) form the basis for determining agency resource needs and allocations. The annual budget provides the resources to execute the strategic plan, to implement the agency reorganization, and to undertake the NCUA’s major programs: Examination and supervision, insurance, credit union development, consumer financial protection, and asset management. E:\FR\FM\02OCN2.SGM 02OCN2 The NCUA’s 2019–2020 budget justification consists of three separate budgets: The Operating Budget, the Capital Budget, and the Share Insurance Fund Administrative Budget. Combined, these three budgets total $334.8 million for 2019, which is 1.1 percent more than the 2019 funding level approved by the NCUA Board (the Board) in November 2017, and 4.3 percent more than the comparable 2018 Board Approved Budget. Personnel levels for 2019 and 2020 reflect the agency’s expected staffing after completing implementation of its reorganization plan, and are lower than the 2018 levels by 10 positions. The following chart presents the major categories of spending supported by the 2019 budget, while specific adjustments to the 2018 Board Operating Budget the 2018 Board Approved Budget. In nominal dollars, the 2019 Budget increases by $6.3 million, or 2.1 percent, over the 2018 Board Approved Budget of $298.1 million. The Operating Budget estimate for 2020 is $316.2 million and reflects no change to authorized positions. The following chart shows recent year-on-year trends for the NCUA Operating Budget, in both nominal (green line) and real dollar (blue line, inflation-adjusted) terms: Approved Budget are discussed in further detail, below: EN02OC18.005</GPH> The proposed 2019 Operating Budget is $304.4 million. Personnel levels decrease by ten full-time equivalents (FTE) compared to the 2018 Board Approved Budget. The 2019 Operating Budget, when adjusted for inflation, represents a real dollar decrease of approximately $624,000, or 0.2 percent, compared to 49693 VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4703 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.004</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Staffing. The budget supports 1,178 FTE in 2019, a decrease of ten FTEs from 2018. For 2019, the reorganization plan eliminated 15 positions in the NCUA’s regional offices, and the budget proposes five new positions in the Offices of Examination and Insurance, the Chief Economist, and the General Counsel. Three positions focused on Business Innovation will be filled by reallocating vacancies. As shown in the chart below, the NCUA staffing has decreased in recent years despite significant credit union asset growth. Pay and Benefits. Pay and benefits increase by $2.1 million in 2019, or one percent, for a budget of $222.8 million. This increase supports the merit and locality pay adjustments required by the NCUA’s current collective bargaining agreement, the new positions described above, anticipated staff promotions, position changes, and increased costs for other mandatory employer contributions such as health insurance and retirement contributions. The 2020 pay and benefits budget is estimated at $233.6 million, which reflects increases associated with merit and locality pay inflation, the full cost of new positions added in 2019, and an increase in required retirement fund payments to the Office of Personnel Management (OPM), which manages government employees’ retirement programs for nearly all federal agencies. The Federal Employees Retirement System (FERS) covers most NCUA employees and includes a defined pension benefit, which is funded by both employee and employer contributions. OPM will charge the NCUA a mandatory employer contribution of 13.7 percent of total FERS employee salaries in 2019, which will increase to 16 percent in 2020, a change of 230 basis points. This increase will require the NCUA to pay OPM approximately $3.5 million more in retirement contributions in 2020. Excluding additional employer contributions from the 2020 budget, total personnel compensation growth would be 3.3 percent instead of 4.8 percent, and total Operating Budget growth would be 2.7 percent instead of 3.9 percent. Travel. The travel budget increases by $326,000 in 2019, or one percent, for a VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.007</GPH> Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices EN02OC18.006</GPH> amozie on DSK3GDR082PROD with NOTICES2 49694 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES2 budget of $26.8 million. The NCUA has constrained the growth of travel costs by continuing to expand offsite examination work and use technologydriven training. Government-wide per diem rates published by the General Services Administration (GSA) are expected to increase by almost eight percent in 2019, accounting for a significant share of the travel budget growth. The NCUA plans to hold a national program examination training event in 2020 that will coincide with full deployment of the new Examination and Supervision Solution system. Rent, Communications, and Utilities. Rent, communications, and utilities will decrease by $445,000 in 2019, or five percent, for a budget of $8.0 million. This funding pays for essential telecommunications services, data capacity contracts, and information technology network support. The decrease is primarily due to a reduction in leased office space as a result of regional consolidation. Administrative Expenses. Administrative expenses increase by $1.2 million in 2019, or 16 percent, for a total budget of $8.7 million. Increases are attributable to recurring cost items such as shared Federal Financial Institutions Examination Council fees, relocation expenses, and software licenses. Contracted Services. Contracted services expenses increase by $3.1 million in 2019, or nine percent, for a total budget of $38.1 million. This funding pays for products and services acquired in the commercial marketplace, and includes critical mission support services such as information technology hardware and software support, accounting and VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 auditing services, and specialized subject matter expertise. The increase of information technology operations and maintenance, and mandatory accounting system service provider costs are the primary drivers of the increase. Capital Budget The proposed 2019 Capital Budget is $22.0 million. The 2019 Capital Budget is $0.9 million more than the 2019 funding level approved by the Board in November 2017, and $6.6 million more than the 2018 Board Approved Budget. The Capital Budget pays for continued investments in technology and infrastructure projects, as well as several new initiatives that will start in 2019, including a replacement of the agency’s antiquated AIRES examination software, which is used by both federal and state examiners in almost all credit union examinations. The NCUA’s Information Technology Prioritization Council recommended $17.1 million for IT software development projects that continue to replace the NCUA’s decades-old and functionally obsolete information technology systems, and $4 million in other IT investments for 2019. The NCUA facilities require $0.9 million in capital investments. Share Insurance Fund Administrative Expenses The proposed 2019 Share Insurance Fund Administrative budget is $8.4 million. The 2019 Share Insurance Fund Administrative Budget is $0.9 million more than the 2019 funding level approved by the Board in November, 2017, and $0.3 million more than the PO 00000 Frm 00005 Fmt 4701 Sfmt 4703 49695 2018 Board Approved Budget. The increase is primarily attributed to increased use of consultants and contractor support for credit union stress testing. Direct charges within this budget include administration of the NCUA Guaranteed Note (NGN) program, state examiner training and laptop leases, as well as financial audit support. Budget Trends Since 2017, inflation has matched or outpaced the growth of the NCUA budget. While the NCUA’s annual Operating Budget is projected to increase 2.1 percent from 2018 to 2019, inflation is forecast to be 2.3 percent. Therefore, in real dollar terms, the NCUA Operating Budget is 0.2 percent lower in 2019 than in 2018 (i.e., 2.1 percent budgetary growth less 2.3 percent inflation). Likewise, the projected 2.7 percent total budget growth between 2019 and 2020 represents an inflation-adjusted increase of only 0.4 percent, based on the assumption that 2020 economic inflation remains constant at 2.3 percent (i.e., 2.7 percent budgetary growth less 2.3 percent inflation). In addition, as shown in the chart below, the relative size of the NCUA budget (red line) continues to decline when compared to balance sheets at federally-insured credit unions (gray line). This trend illustrates the greater operating efficiencies the NCUA has attained in the last several years. Additionally, the NCUA has improved its operating efficiencies more aggressively than other financial industry regulators (red line compared to blue line). E:\FR\FM\02OCN2.SGM 02OCN2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES2 It is also notable that the NCUA’s operations have become more efficient relative to the size of the credit union system because consolidation in the industry has led to growth in the number of large credit unions, specifically those with more than $10 billion in assets. This results in additional complexity in the balance VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 sheets of such credit unions, and a corresponding increase in the supervisory review required to ensure the safety and soundness of such large institutions. The NCUA has responded to this increasing complexity through several initiatives: Creation of the specialized Office of National Examination and Supervision (ONES), PO 00000 Frm 00006 Fmt 4701 Sfmt 4703 development of an improved analytic model for large credit unions’ financial condition, and improved quality of examination reports through enhanced quality review processes. 2019 Budget in Brief: Summary Table BILLING CODE 7535–01–P E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.008</GPH> 49696 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49697 2019 Budget in Brief: Summary Table The 2019 budget provides the resources required to execute the priorities outlined in the NCUA's Strategic Plan (2018-2022). 1,178.0 l 10 -0.8% The 2019 FIE level decreases by a net change of ten positions from 1,188 authorized in 2018. The pay and benefits adjustment covers merit and locality pay changes required by the Collective Bargaining Agreement. The increase also funds mandatory employer contributions for health insurance and retirement, and new FTEs. $26.8 i $0.3 +1.2% The travel budget increases by $326,000. Travel requirements align with program examination workload. GSA 2019 per diem increases also account for the growth in estimated travel. $8.0 l $0.4 -5.2% Rent, communications, and utilities budget maintains essential telecommunications, data capacity, and network support. $8.7 i $1.2 +16.0% Administration expenses primarily support operational requirements, FFIEC fees, relocation expenses, and employee supplies. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 i $3.1 Frm 00007 +8.9°/0 Fmt 4701 Contracted services reflect costs incurred when products and services are acquired in the commercial marketplace and include critical mission support services such as information technology hardware and software development support, accounting and auditing services, and specialized subject matter expertise. Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.009</GPH> amozie on DSK3GDR082PROD with NOTICES2 $38.1 49698 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices II. Introduction and Strategic Context amozie on DSK3GDR082PROD with NOTICES2 History For more than 100 years, credit unions have provided financial services to their members in the United States. Credit unions are unique depository institutions created not for profit, but to serve their members as credit cooperatives. The NCUA is the independent federal agency created by the U.S. Congress to regulate, charter, and supervise federal credit unions. With the backing of the full faith and credit of the U.S. Government, the NCUA operates and manages the National Credit Union Share Insurance Fund (NCUSIF), insuring the deposits of the account holders in all federal credit unions and VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 the vast majority of state-chartered credit unions. The NCUA, through its predecessors, was created in 1934 with the passage of the Federal Credit Union Act. As the products and services provided to members of credit unions changed over the years, the NCUA’s supervision and regulation evolved as well. In 1970, Congress created the NCUSIF to protect deposits by providing the backing of the full faith and credit of the U.S. Government to credit union accounts. No credit union member has ever lost a penny of deposits insured by the NCUSIF. The NCUA is responsible for the regulation and supervision of 5,480 federally insured credit unions 1 with 1 Source: The NCUA quarterly call report data, Q2 2018. PO 00000 Frm 00008 Fmt 4701 Sfmt 4703 approximately 114.1 million members 1 and more than $1.4 trillion 1 in assets across all states and U.S. territories. Authority Pursuant to the Federal Credit Union Act, authority for management of the NCUA is vested in the NCUA Board (the Board). It is the Board’s responsibility to determine the resources necessary to carry out the NCUA’s responsibilities under the Act.2 The Board is authorized to expend such funds and perform such other functions or acts as it deems necessary or appropriate in accordance with the rules, regulations, or policies it establishes.3 Upon determination of the budgeted annual expenses for the agency’s 2 See 3 See E:\FR\FM\02OCN2.SGM 12 U.S.C. 1752a(a). 12 U.S.C. 1766(i)(2). 02OCN2 EN02OC18.010</GPH> BILLING CODE 7535–01–C Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices operations, the Board determines a fee schedule to assess federal credit unions. The Board gives consideration to the ability of federal credit unions to pay such a fee, and the necessity of the expenses the NCUA will incur in carrying out its responsibilities in connection with federal credit unions.4 Pursuant to the law, fees collected are deposited in the agency’s Operating Fund at the Treasury of the United States, and those fees are expended by the Board to defray the cost of carrying out the agency’s operations, including the examination and supervision of federal credit unions.5 In accordance with its authority to use the NCUSIF to carry out a portion of its responsibilities, the Board approves an annual Overhead Transfer Rate and transfers resources from the Share Insurance Fund to the Operating Fund on a monthly basis to account for insurance-related expenses.6 Mission, Goals, and Strategy amozie on DSK3GDR082PROD with NOTICES2 The NCUA’s 2019–2020 Budget Submission supports the agency’s second year implementing its 2018– 2022 Strategic Plan (https:// www.ncua.gov/About/Documents/ AgendaItems/AG20160721Item2b.pdf) to achieve its priorities and improve program performance. Throughout 2019 and 2020, the NCUA will continue fulfilling its mission to ‘‘provide, through regulation and supervision, a safe and sound credit union system which promotes confidence in the national system of cooperative credit,’’ and its vision to ensure that the ‘‘NCUA protects credit unions and consumers who own them through effective supervision, regulation and insurance.’’ This budget commits the resources necessary to implement the NCUA’s plans to identify key challenges facing the credit union industry and leverage agency strengths to help credit unions address those challenges. The budget supports the NCUA’s programs, which are focused on achieving the agency’s three strategic goals: D Ensure a safe and sound credit union system; D Provide a regulatory framework that is transparent, efficient, and improves consumer access; and 4 See 12 U.S.C. 1755(a)–(b). 12 U.S.C. 1755(d). 6 See 12 U.S.C. 1783(a). 5 See VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 D Maximize organizational performance to enable mission success. Additional information about alignment of the budget to the NCUA’s strategic goals is in Appendix A. In support of its first strategic goal— ensure a safe and sound credit union system—the NCUA will continue to supervise federally insured credit unions effectively while insuring a growing and evolving credit union system. As highlighted in the Strategic Plan, the credit union system faces several key risks, including: • How credit unions respond to a changing economic environment, • technological changes in how consumers interact with financial institutions, in addition to more general technological advances, • increasing competition and consolidation within the financial services industry, • demographic shifts, such as aging credit union membership, • forecasts that the U.S. population will become more diverse, implying changes in the services needed by credit union members, and • generational shifts in consumer preferences. Each risk requires continual monitoring and, where prudent, riskmitigation strategies to protect the overall credit union system from preventable losses or failures. The NCUA staff of credit union examiners are the agency’s most important assets for identifying and addressing risks before they threaten members’ deposits. To do their jobs effectively in this complex and dynamic financial environment, the NCUA staff require the advanced skills, training, and tools supported by the budget. To fulfill the NCUA’s second strategic goal—provide a regulatory framework that is transparent, efficient, and improves customer access—the agency strives to issue balanced, clear, and straightforward regulations while addressing emerging adverse trends in a timely manner. The NCUA also seeks to improve consumer access and ensure consumer compliance, financial protection, and consumer education. The budget allocates resources to agency programs that keep regulations up to date and consistent with current law, assist existing and prospective credit unions with expansion and new chartering activities, and promote PO 00000 Frm 00009 Fmt 4701 Sfmt 4703 49699 consumer awareness of sound financial practices. Accomplishing the third strategic goal—maximize organizational performance to enable mission success—ensures the NCUA employees achieve the agency’s mission by supporting them through efficient and effective business processes, modern and secure technology, and suitable tools and workspaces necessary to perform their duties. The budget makes investments in better process management and internal controls, improved tools and facilities for the NCUA staff, and technological enhancements including new systems that will improve operational effectiveness and efficiency. Organization, Major Agency Programs, and Workforce The NCUA employs regional offices to perform all the tasks in the agency’s major program areas and support functions, a central office to administer and oversee its programs, and an Asset Management and Assistance Center (AMAC) to liquidate failed credit unions and recover assets. Effective January 2019, the NCUA plans to consolidate its five regional offices into three—Eastern, Southern, and Western—as part of its on-going effort to strengthen agency operations while increasing efficiency. Reporting to these regional offices, the NCUA has credit union examiners responsible for a portfolio of credit unions covering all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. One-time costs associated with the NCUA reorganization are being funded by reprioritizing unspent balances from 2017 and 2018 budgets. These costs include: Salaries and benefits for current employees whose positions will be eliminated after their separation from the agency, leased office space in Albany, New York and Atlanta, Georgia that will be vacated at the end of 2018, central office renovation costs necessary to consolidate the former Region II office staff into the NCUA-owned central office building, and other miscellaneous one-time relocation, separation, and other contractual payments. The NCUA organizational chart below reflects the new regional structure, and the map shows the new regions’ geographical alignment: BILLING CODE 7535–01–P E:\FR\FM\02OCN2.SGM 02OCN2 VerDate Sep<11>2014 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.011</GPH> amozie on DSK3GDR082PROD with NOTICES2 49700 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices The NCUA’s new regional office structure will carry out the agency’s 2019 examination workload. Based on second quarter statistics from call reports, the number of credit unions, members, and assets shows a rough estimate of the how the workload will be divided among the new regional offices: • Eastern Region: 2,055 credit unions with 30.6 million members and $386 billion in assets. • Southern Region: 1,668 credit unions with 31.2 million members and $340 billion in assets. • Western Region: 1,751 credit unions with 37.4 million members and $504 billion in assets. In addition, the Office of National Examination and Supervision (ONES) will continue to examine credit unions with assets that total over $10 billion and that are located throughout the United States. Based on 2018 second quarter call report statistics, there are currently six such credit unions with 14.8 million members, accounting for $200 billion in credit union assets. In 2019 and 2020, the agency’s workforce will undertake tasks in all of the NCUA’s major programs: • Supervision: The NCUA supervises federally insured credit unions through examinations and regulatory enforcement including providing guidance through various publications, VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 taking administrative actions and conserving, liquidating, or merging severely troubled institutions as necessary to manage risk. • Insurance: The NCUA manages the $16 billion NCUSIF, which provides insurance for deposits up to $250,000 that are held at federally insured credit unions. The fund is capitalized by credit unions and through retained earnings. • Credit Union Development: The NCUA charters new federal credit unions, as well as approves modifications to existing charters and fields of membership. Through training, partnerships and resource assistance, the NCUA fosters credit union development, particularly the expansion of services to eligible members provided by small, minority, newly chartered, and low-income designated credit unions. • Consumer Financial Protection: The NCUA protects consumers’ rights through effective enforcement of federal consumer financial protection laws, regulations, and requirements. The NCUA also develops and promotes financial education programs for credit unions to assist members in making smarter financial decisions. • Asset Management: The NCUA conducts credit union liquidations and performs management and recovery of assets through the AMAC. The new Southern Region includes AMAC. PO 00000 Frm 00011 Fmt 4701 Sfmt 4703 • Stakeholder Outreach: In order to clearly understand the needs of the credit union system, the NCUA seeks input from all of its stakeholders, including Congress, State Supervisory Authorities, credit union members, credit unions and their associations. • Cross-Agency Collaboration: The NCUA is involved in numerous crossagency initiatives by collaborating with the other financial regulatory agencies including through participation in several councils. Significant councils include the Financial Stability Oversight Council (FSOC), the Federal Financial Institutions Examination Council (FFIEC), and the Financial and Banking Information Infrastructure Committee (FBIIC). Budget Process—Strategy to Budget The NCUA’s budget process starts with a review of the agency’s goals and objectives set forth in the Strategic Plan (https://www.ncua.gov/About/ Documents/AgendaItems/AG20160721 Item2b.pdf). The Strategic Plan is a framework that sets the agency’s direction and guides resource requests, so that the agency’s resources and workforce are allocated and aligned to agency priorities and initiatives. Each regional and central office director at the NCUA develops an initial budget request identifying the resources for their office to support the NCUA’s E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.012</GPH> amozie on DSK3GDR082PROD with NOTICES2 BILLING CODE 7535–01–C 49701 amozie on DSK3GDR082PROD with NOTICES2 49702 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices mission, strategic goals, and strategic objectives. These budgets are developed to ensure each office’s requirements are individually justified and remain consistent with the agency’s overall Strategic Plan. For regional offices, one of the primary inputs in the development process is a comprehensive workload analysis that estimates the amount of time necessary to conduct examinations and to supervise federally insured credit unions in order to carry out the NCUA’s dual mission as insurer and regulator. This analysis starts with a field-level review of every federally insured credit union to estimate the number of workload hours needed for the current year. The workload estimates are then refined by regional managers and submitted to the NCUA central office for the annual budget proposal. The workload analysis accounts for the efforts of nearly seventy percent of the NCUA workforce and is the foundation for budget requests from regional offices and the Office of National Examinations and Supervision (ONES). In addition to the workload analysis, from which central office budget staff derive related personnel and travel cost estimates, each of the NCUA offices submit estimates for fixed and recurring expenses, such as rental payments for leased property, operations and maintenance for owned facilities or equipment, supplies, telecommunications services, major capital investments, and other administrative and contracted services costs. Because information technology investments impact all offices within the agency, the NCUA has established an Information Technology Prioritization Council (ITPC). The ITPC meets several times each year to consider, analyze, and prioritize major information technology investments to ensure they are aligned with the NCUA’s Strategic Plan. These focused reviews result in a mutually agreedupon budget recommendation to support the NCUA’s top short-term and long-term information technology needs and investment priorities. Once compiled for the entire agency, all office budget submissions undergo thorough reviews by the responsible regional and central office directors, the Chief Financial Officer, and the NCUA executive leadership. Through a series of presentations and briefings by the relevant office executives, the NCUA Executive Director formulates an agency-wide budget recommendation for approval by the Board. In recent years, the Board has emphasized the need for increased VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 transparency of the NCUA’s finances and its budgeting processes. In response, the Office of the Chief Financial Officer has made draft budgets available for public comment via the NCUA’s website, and solicited public comments before presenting final budget recommendations for the Board’s approval. Furthermore, the Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115–174, enacted May 24, 2018, requires in Section 212 that the NCUA ‘‘make publicly available and publish in the Federal Register a draft of the detailed business-type budget.’’ To fulfill this requirement, the Board delegated to the Executive Director the authority to publish the draft budget before submitting it for Board review. This budget justification document includes comparisons to the Board approved budget for 2018—2019. As in the 2018 budget, this document includes a summary description of the major spending items in each budget category to provide transparency and understanding of the use of budgeted resources. Estimates are provided by major budget category, office, and cost element. The NCUA also posts supporting documentation for its budget request on the NCUA website (https:// www.ncua.gov/About/Pages/budgetstrategic-planning/supplementarymaterials.aspx) to assist the public in understanding its budget development process. The budget request for 2019 represents the NCUA’s projections of operating and capital costs for the year, and is subject to approval by the Board. Commitment to Financial Stewardship The NCUA funds its activities through operating fees levied on all federal credit unions and through reimbursements from the Share Insurance Fund, funded by both federal credit unions and federally insured state-chartered credit unions. The Overhead Transfer Rate (OTR) calculation determines the annual amount that the Share Insurance Fund reimburses the Operating Fund to pay for the NCUA’s insurance-related activities. At the end of each calendar year, the NCUA’s financial transactions are subject to audit in accordance with Generally Accepted Accounting Principles.7 Since nearly all of the revenue to finance the NCUA’s programs comes from non-profit credit unions, the Board and the agency are committed to providing sound financial stewardship. In recent years, the NCUA Chief 7 See PO 00000 12 U.S.C. 1783(b) and 1789(b). Frm 00012 Fmt 4701 Sfmt 4703 Financial Officer, with support and direction from the Executive Director and Board, has worked to improve the NCUA’s financial management, financial reporting, and budget processes. In addition, through prudent management of the Corporate System Resolution Program, in July 2018 the NCUA paid nearly $736 million in dividends to over 5,700 credit unions— an amount larger than the cumulative total of all previous cash distributions made since the agency’s Share Insurance Fund was created. In the 2018 budget, the NCUA revised its financial presentations to conform to Federal budgetary concepts and increase transparency of the agency’s planned financial activity. The 2019 budget continues this presentation. The NCUA is the only Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) agency that publishes a detailed, draft budget and solicits public comments on it at a meeting with its Board or other agency leadership. The NCUA works diligently to strengthen its internal controls for financial transactions, in accordance with sound financial management policies and practices. Based on the results of the NCUA’s assessments conducted through the course of 2017, the agency provided an unmodified Statement of Assurance (signed 2/15/ 2018) that its management had established and maintained effective controls to achieve the objectives of the Federal Managers Financial Integrity Act (FMFIA) and Office of Management and Budget (OMB) Circular A–123. Specifically, the NCUA supports the internal control objectives of reporting, operations, and compliance, as well as its integration with overarching risk management activities. Within the Office of the Chief Financial Officer, the Internal Controls Assessment Team (ICAT) continues to mature the agencywide internal control program and continues to strengthen the overall system of internal control, further promote the importance of identifying risk, and ensure that the agency has identified appropriate responses to mitigate identified risks, in accordance with the Government Accountability Office (GAO) Standards for Internal Controls in Federal Government (Green Book) requirements. III. Forecast and Enterprise Challenges Economic Outlook The NCUA’s mission is to provide, through regulation and supervision, a safe and sound credit union system, which promotes confidence in the national system of cooperative credit. E:\FR\FM\02OCN2.SGM 02OCN2 49703 The challenges that the NCUA faces, and the resources the NCUA requires to fulfill its mission, depend on a variety of factors that directly or indirectly affect the health of the credit union system. The NCUA must anticipate, to the extent possible, developments that will affect the system, develop strategies, plans and processes to meet both the current and anticipated needs, and assemble the resources, including staff, necessary to ensure a safe and sound system. One key determinant of credit union performance is the underlying economic environment in which they must operate. In general, for the past few years, the economy has supported solid financial system performance. The economy performed well in the first half of 2018. Real GDP grew at a relatively strong 3.2 percent annual rate, and the unemployment rate dipped below 4.0 percent—near or below the fullemployment rate. Inflation edged higher, moving closer to the Federal Reserve’s 2-percent inflation target, and Federal Reserve policymakers raised short-term interest rates. Longer-term rates also increased but a variety of factors have kept them from moving in lock-step with shorter-term rates. With the support of a solid economic foundation, credit union lending, membership growth, and credit quality remained strong through the second quarter of 2018. Federally insured credit unions added 4.8 million members over the year, boosting credit union membership to 114.1 million in the second quarter of 2018. Credit union shares and deposits rose 5.4 percent over the year to $1.2 trillion. Total loans outstanding at federally insured credit unions increased 9.8 percent to $1.0 trillion, and the system-wide loan delinquency rate fell to 67 basis points, down from 75 basis points a year earlier. The credit union system’s return on average assets rose to 90 basis points, and the system’s net worth ratio increased to just over 11 percent in the second quarter. The consensus of forecasters suggests the economic environment will continue to be a solid support to credit union performance over the 2019–2020 budget horizon. Forecasts for the next two years call for somewhat slower economic growth. Employment is projected to continue to rise and the unemployment rate—already below the level associated with full employment— is expected to remain low. Tight labor market conditions are projected to keep inflation near the Federal Reserve’s 2.0 percent target. Solid economic conditions should remain a positive force for credit union lending, membership growth, and credit quality over the budget horizon. However, analysts caution that the tight labor market conditions and higher inflation could be associated with higher interest rates. Federal Reserve policymakers indicate that the federal funds rate could move higher over the next three years to fulfill their dual mandate of maintaining maximum employment and low inflation. Analysts are projecting that short term interest rates—which largely determine interest payments credit unions make—could rise relative to longer term interest rates, which largely determine the interest payments credit unions receive. In the consensus projected economic environment, credit unions’ ability to manage and mitigate interest rate risk will become increasingly important to their success. On the liability side, rising deposit rates, if realized, could force credit unions to adapt more quickly than in the past, since many members have a number of financial institution alternatives and can move funds quickly between institutions. On the asset side, the low interest rate environment of the past decade has led some credit unions to lengthen the term of investments to boost their portfolio’s earnings or to lock in relatively low rates on long-term loans like mortgages. For affected credit unions, higher deposit rates will push up against low loan rates, which would compress net interest margins. While the overall forecast appears largely supportive of credit unions, forecasts of the economic environment are far from perfect. Some analysts are suggesting the long expansion could end during the NCUA 2019–2020 budget period; a recession would pose significant challenges to the system in terms of rising delinquencies, reduced loan demand, and, potentially, an increase in shares as consumers move funds from riskier investments into safer, insured credit union deposits. The NCUA, like the credit unions themselves, needs to plan and prepare for a range of economic outcomes that could affect credit union performance and determine resource needs. In addition to risks associated with movements in the general economy, the NCUA and credit unions will need to understand their increasing exposure to, and address risks associated with, the technological and structural changes facing the system. Over the longer-term, increased concentration of loan portfolios, development of alternative loan and deposit products, technologydriven changes in the financial landscape, continued industry VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4703 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.013</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES2 49704 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices consolidation, and ongoing demographic changes will continue to shape the environment facing credit unions and will determine the resource needs of the NCUA. Cybersecurity: Credit unions’ increasing use of technology is making the credit union system more vulnerable to cyber-attacks. The prevalence of malware, ransomware, distributed denial of service (DDOS) attacks, and other forms of cyber intrusion are creating challenges at credit unions of all sizes, and will require ongoing measures for containment. These trends are likely to continue, and even accelerate, over the next two years. Lending trends: Increasing concentrations in member business loans and private student loans, in addition to other new types of lending by credit unions, emphasize the need for long-term risk diversification and effective risk management tools and practices, along with expertise to properly manage increasing concentrations of risk. Financial Landscape and Technology: New financial products that mimic deposit and loan accounts, such as Apple Pay, Walmart pre-paid cards and peer-to-peer lending, are emerging. These new products pose a competitive challenge to credit unions and banks alike. Credit unions also face a range of challenges from financial technology (fintech) companies in the areas of lending and the provision of other services. For example, underwriting and lending may be automated at a cost below levels associated with more traditional financial institutions, but may not be subject to the same regulations and safeguards that credit unions and other traditional financial institutions face. The emergence and increasing importance of digital currencies may pose both risks and opportunities for credit unions. As these institutions and products gain popularity, credit unions may have to be more active in marketing and rethink their business models. Technological changes outside the financial sector may also lead to changes in consumer behavior that indirectly affect credit unions. For example, the increase in on-demand use of auto services and the potential for pay-as-you-go on-demand vehicle rental, could reduce purchases of consumer-owned vehicles. That could lead to a slowdown or reduction in the demand for vehicle loans, now slightly more than a third of the credit union system loan portfolio. Membership trends: While overall credit union membership continues to grow strongly, 50 percent of federally VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 insured credit unions had fewer members at the end of the second quarter of 2018 than a year earlier. Demographic and field of membership changes are likely to continue to result in declining membership at many credit unions. All credit unions need to consider whether their product mix is consistent with their members’ needs and demographic profile. For example, in some areas, to be effective, credit unions may need to explore how to meet the needs of an aging population or of a growing Hispanic population. Smaller credit unions’ challenges and industry consolidation: Small credit unions face challenges to their longterm viability for a variety of reasons, including weak earnings, declining membership, high loan delinquencies, and elevated non-interest expenses. If current consolidation trends persist, there will be fewer credit unions in operation and those that remain will be considerably larger and more complex. As of June 30, 2018, there were 542 federally insured credit unions with assets of at least $500 million, 28 percent more than just five years earlier. These 542 credit unions accounted for 71 percent of credit union members and 77 percent of credit union assets. Large credit unions tend offer more complex products, services and investments. Increasingly complex institutions will pose management challenges for the institutions themselves, as well as the NCUA; consolidation means the risks posed by individual institutions will become more significant to the Share Insurance Fund. Enterprise Risk Management In light of the strategic direction and the challenges and issues described above, the NCUA employs an Enterprise Risk Management (ERM) program. The ERM program is a means by which agency leadership evaluates the various factors (both internal to the agency and external in the industry) that can impact the agency’s performance relative to its mission, vision, and performance outcomes. Agency priority risks include both internal consideration such as the agency’s internal controls framework, to external factors such as credit union concentration risk. All of these risks can materially impact the agency’s ability to achieve its mission. The NCUA’s ERM Council provides oversight of the agency’s enterprise risk management activities. Through the ERM program, the agency is identifying and managing risks that could affect the achievement of its mission. The ERM program was established in 2015 to include an enterprise risk appetite statement and risk taxonomy. In 2018, PO 00000 Frm 00014 Fmt 4701 Sfmt 4703 the NCUA identified a number of enterprise risks that helped inform the agency’s planning and budget processes, and assigned roles and responsibilities for monitoring risks in several specific activities. Overall, the NCUA’s ERM program promotes effective internal controls, which, when combined with robust measurement and communication, are central to costeffective decision-making and risk optimization within the agency. In its 2018–2022 iteration of its Strategic Plan, the NCUA adopted its first agency enterprise risk appetite statement, which is: The NCUA is vigilant and has an overall judicious risk appetite. The NCUA’s primary goal is to ensure the safety and soundness of the credit union system and the agency recognizes it is not desirable or practical to avoid all risk. Acceptance of some risk is often necessary to foster innovation and agility. This risk appetite will guide the NCUA’s actions to achieve its strategic objectives in support of providing, through regulation and supervision, a safe and sound credit union system, which promotes confidence in the national system of cooperative credit. The agency’s risk appetite will help align risks with opportunities when making decisions and allocating resources to achieve the agency’s strategic goals and objectives. This enterprise risk appetite statement is part of the NCUA’s overall management approach and is supported by detailed appetite statements for individual risk areas. In practice, this means that the NCUA recognizes that risk is unavoidable and sometimes inherent in carrying out the agency’s mandate. The NCUA is positioned to accept greater risks in some areas than in others; however, when consolidated, the risk appetite should be within the boundaries established for the entire agency. Crosscollaboration across programs and functions is a fundamental piece of ensuring the agency stays within its risk appetite boundaries. The NCUA will identify, assess, prioritize, respond to and monitor risks to an acceptable level. This budget proposal for 2019/2020 incorporates the NCUA’s enterprise risk management program and agency risk appetite in recommending how best to allocate its resources. IV. Key Themes of the 2019–2020 Budget Overview The budget supports the priorities and goals outlined in the agency’s annual performance plan and the NCUA Strategic Plan 2018–2022 (https:// www.ncua.gov/About/Documents/ E:\FR\FM\02OCN2.SGM 02OCN2 amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices AgendaItems/AG20160721Item2b.pdf). The resources and new initiatives proposed in the budget support the NCUA’s mission to maintain a safe and sound credit union system. The 2019–2020 budget carries forward a number of key ongoing initiatives, which include: The Exam Flexibility Initiative; the increased use of off-site examinations work and data analytics; the modernization of information technology systems; regulatory reform initiatives; and efforts to implement organizational efficiencies. Over the course of the next five years, these efforts will result in a more effective and efficient organization. In the 2019–2020 budget, the NCUA continues to reduce its staffing, reflecting greater operational efficiency at the agency. The NCUA employees are the agency’s most valuable resource for achieving its mission, and the agency is committed to a workplace and a workforce with integrity, accountability, transparency, inclusivity, and proficiency. As the NCUA continues its efforts to curb expenses and reduce overhead costs, we will continue investing in the workforce through training and development, helping employees develop the tools they need to do their work effectively. At the same time, managing the size of the workforce is important from a budgetary standpoint, because employment-related costs are the single largest driver of the NCUA budget. As discussed in this document, the NCUA continues to use workload models to estimate the amount of time necessary to conduct examinations and supervise federally insured credit unions. This analysis results in an estimate of the staffing level required to carry out the NCUA’s dual mission as insurer and regulator. The NCUA continues to assess and balance its mission workload needs with the financial costs the agency imposes on the credit union system. Although the number of credit unions continues to decline nationwide, the NCUA must also consider the increasing complexity and growing asset base of the entire credit union system. The efficiency and effectiveness of the agency’s workforce is dependent upon the resiliency of the NCUA’s information technology infrastructure and availability of technological applications. The NCUA is committed to implementing new technology responsibly and delivering secure, reliable and innovative technological solutions to support its mission. This necessitates investments funded in the Capital Budget, to provide the analytical tools and technology the workforce needs to achieve the NCUA mission. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 Reorganization/Restructuring In July 2017, the NCUA’s executive leadership committed to a bold plan that would invest in the agency’s future, make critical organizational alignment changes, and reduce overall staffing of the agency. The Board approved a series of operational actions to improve the NCUA’s efficiency, effectiveness, and focus on its core mission responsibilities. The NCUA’s reform plan positioned the agency to meet the ongoing changes in the industry it regulates and insures. The U.S. financial sector is subject to continuing advancements and emerging risks, which necessitate changes in the way the NCUA conducts its business. Advancements in the type and quantity of data available also demands a fresh way of thinking about our business model. At the same time, the continuing reality of smaller credit unions merging with larger ones, while existing credit unions grow significantly in size and complexity, requires an even more strategic, nimble and innovative way to carry out our responsibilities as established in the Federal Credit Union Act. As a result of the NCUA’s on-going implementation of its reform plan: • The NCUA created an office focused exclusively on new charters and credit union expansion—the Credit Union Resources and Expansion (CURE) Office. • The NCUA is lowering the agency’s authorized staffing level from 1,247 positions in the 2016 approved budget, down to 1,178 in the 2019 budget, a reduction of 69 positions, or nearly 6 percent. • Leased office space is being reduced by 80 percent. • Examination reports are being improved through implementing enhanced quality measures. • Two regional offices will close in January 2019. • AMAC’s staffing has been reduced, and support functions are now carried out by the central office. The agency is on-track to meet the staffing reduction targets and other key outcomes identified in the reform plan. These actions are predicated on the understanding that the industry is consolidating and becoming more complex at the same time. The NCUA continues to examine how to best reshape its workforce to meet future needs, and to look for ways to contain operating costs to create a more efficient organization. Modernizing the Examinations Process In August 2018, the NCUA issued Letter to Credit Unions: 18–CU–01– PO 00000 Frm 00015 Fmt 4701 Sfmt 4703 49705 ‘‘Examination Modernization Initiatives.’’ This letter outlined five initiatives the NCUA Board approved to modernize the agency’s examinations processes. Some of the intended benefits of these initiatives are: • More efficient examinations and supervision • Reduced burden on credit unions • More consistent and accurate supervisory determinations • Greater ability to adapt to changes in the marketplace and credit union business models • Enhanced coordination with State Supervisory Authorities • Reduced travel costs • Improved quality of life for examiners • More secure, reliable, and flexible technology foundation able to support future expansion capabilities These five initiatives are interrelated and complement each other. As these initiatives support and build upon each other, they will ultimately result in a fully modernized examination and supervision program with various incremental improvements occurring along the way. Throughout this budget, the NCUA aligns its resources in support of these improvements. Below is a more in-depth discussion of each of the initiatives: Flexible Examination Program (FLEX). FLEX is a pilot program in the Southern Region. FLEX is evaluating conducting offsite certain existing exam procedures. The pilot was developed to assess examiners working remotely on elements of examinations of well-run credit unions that have the technology and platforms to provide electronic data securely. This program reflects the NCUA’s most immediate solution to the agency’s efforts to reduce, but not eliminate, onsite presence during exams. In 2017, the NCUA tested the pilot with five examiner groups in 28 credit unions located in a variety of geographical locations. The pilot was tested on credit unions as small as $4 million in assets to those as large as $9.4 billion in assets. Preliminary results from the pilot show cost savings to the NCUA, realized in part by reducing travel time and costs for examiners. In designated FLEX reviews, over 35 percent of the total exam hours were performed offsite. Credit union feedback has also been positive, with the majority of credit unions reporting positive experiences with the modified exam approach. However, the pilot identified the need for the NCUA to have a secure file transfer portal to support much of this offsite work efficiently. The secure file E:\FR\FM\02OCN2.SGM 02OCN2 amozie on DSK3GDR082PROD with NOTICES2 49706 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices transfer portal was fully deployed in July 2018. The agency is currently testing the portal and expects to move forward developing plans to increase agency use of offsite procedures. ONES Data-Driven Supervision. This initiative began in 2018 as an effort to move to a continuous supervision model for the large, natural-person credit unions supervised by the Office of National Examinations and Supervision. The continuous supervision model will use data-driven analytics to monitor and identify credit union risk while supporting the transition to credit union-driven stress testing. The data-driven supervision initiative may lead to analytical advancements that can be adapted for supervising some or all other insured credit unions. Shared NCUA-State Regulator Federally-Insured State Credit Unions (FISCU) Program. In 2017, the NCUA created the Joint NCUA-State Supervisor Working Group (working group), which is tasked with improving coordination and scheduling for joint exams, providing scheduling flexibility, and reducing redundancy where possible. The group’s goal is to minimize the burden on FISCUs resulting from having a separate financial regulator and insurer. In addition, the working group is evaluating the efficacy, appropriateness, and feasibility of adopting an alternating-year examination approach for FISCUs. A pilot program is under development and will allow the NCUA, state regulators, and stakeholders to evaluate the benefits and challenges of an alternate-year examination program. The pilot will need to run about three years in order to evaluate one full alternating-year exam cycle, and will provide valuable insight into the advantages and risks of such an approach prior to finalizing a decision about a permanent alternating-year exam cycle. For joint examinations of FISCUs, the working group is also exploring ways to minimize duplication and overlap through process improvements and greater use of technology. In addition, the working group is evaluating other areas of potential duplication that can be reduced or eliminated, such as loan participations, CUSO and third party vendor reviews, and other supervisory matters. The goal of these reviews is to better leverage the work of each regulatory party in examining and supervising FISCUs. Enterprise Solution Modernization (ESM). In November 2015, the NCUA Board authorized the ESM program. This effort will replace legacy VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 applications such as the examination system (AIRES) and the Call Report data collection tool (CU Online). ESM will also introduce emerging and secure technology that supports the NCUA’s examination, data collection, and reporting efforts. The result will be a flexible technology architecture that integrates modernized systems and tools across the agency. The new systems will streamline processes and procedures helping create a more effective, less burdensome process. ESM will also provide essential upgrades to the NCUA’s technology foundation that supports the FLEX and Virtual Exam efforts with: • More efficient ways to securely communicate with credit unions. • Updated tools such as workflow management, data integration, document management, and customer relationship management capabilities. • A flexible framework that will allow for integration of new solutions so the NCUA’s supervisory systems can evolve with changes to regulations, data and analytical needs, and activities credit unions engage in. The first of a series of technology upgrades from ESM are scheduled to begin in 2019. Throughout the multiyear implementation phase of this initiative, the NCUA will continue to provide updates and engage stakeholders. Virtual Examination Program. In 2017, the NCUA Board approved the project and associated resources to research methods to conduct offsite as many aspects of the examination and supervision processes as possible. The virtual exam project team is researching ways to harness new and emerging data, advancements in analytical techniques, innovative technology, and improvements in supervisory approaches. By identifying and adopting alternative methods to remotely analyze much of the financial and operational condition of a credit union, with equivalent or improved effectiveness relative to current examinations, it may be possible to significantly reduce the frequency and scope of onsite examinations. Onsite examination activities could potentially be limited to periodic data quality and governance reviews, interventions for material problems, and meetings or other examination activities that need to be handled in person. The virtual exam should lead to greater use of standardized interaction protocols, advanced analytical capabilities, and more-informed subject matter experts. This should result in more consistent and accurate PO 00000 Frm 00016 Fmt 4701 Sfmt 4703 supervisory determinations, provide greater clarity and consistency with respect to how the agency conducts supervisory oversight, and reduce coordination challenges between agency and institution staff. To be successful, it is likely examination staff will need to analyze more information about the credit union being examined and communicate more frequently with management at the credit union. However, it is not the agency’s intent to intervene in credit unions’ day-to-day operations or strategic planning. The virtual examination team will deliver to the NCUA board by the end of 2020 a report discussing alternative methods identified to remotely analyze aspects of the financial and operational condition of a credit union. For credit unions that are compatible with this approach, the agency’s goal is to transform the examination and supervision program into a predominately virtual one within the next five to ten years. The transformation is expected to occur through incremental adoption of the corresponding new techniques and approaches. Reducing Regulatory Burden The NCUA established a Regulatory Reform Task Force (Task Force) in March 2017 to oversee implementation of the agency’s regulatory reform agenda. This is consistent with the spirit of Executive Order 13777 and the Trump administration’s regulatory reform agenda. Although the NCUA, as an independent agency, is not required to comply with Executive Order 13777, the agency chose to review all of the NCUA’s regulations, consistent with the spirit of initiative and the public benefit of periodic regulatory review. The Task Force published and sought comment on its first report in August 2017. The NCUA has undertaken a series of regulatory changes as part of this effort, and continues to pursue a regulatory reform agenda, including matters such as advertising, field of membership, equity distribution, and securitization. The task force is in the process of preparing its second report, which should be issued in late 2018 or early 2019. V. Operating Budget Overview The NCUA Operating Budget is the annual resource plan for the NCUA to conduct activities prescribed by the Federal Credit Union Act of 1934. These activities include: (1) Chartering new Federal credit unions; (2) approving E:\FR\FM\02OCN2.SGM 02OCN2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES2 field of membership applications of Federal credit unions; (3) promulgating regulations and providing guidance; (4) performing regulatory compliance and safety and soundness examinations; (5) implementing and administering enforcement actions, such as prohibition orders, orders to cease and desist, orders of conservatorship and orders of liquidation; and (6) administering the National Credit Union Share Insurance Fund (NCUSIF or the Share Insurance Fund). The NCUA funds its activities through operating fees levied on all Federal credit unions and through reimbursements from the Share Insurance Fund, which is funded by both Federal credit unions and federally-insured state-chartered credit unions. As outlined in the NCUA Letter to Credit Unions 18–CU–01, dated August, 2018, there are several examination modernization initiatives in process to improve how the agency conducts examinations and supervision. The goals of these initiatives are to replace VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 outdated, end-of-life examination systems, streamline processes, adopt enhanced examination techniques, and leverage new technology and data to maintain high quality supervision of insured credit unions with less on site presence. Modernizing agency systems and processes will reduce the burden on the credit union community and increase the effectiveness of the NCUA. Staffing The staffing levels proposed for 2019 reflect the resource requirements for steady state operations at the NCUA as it implements the agency reform plan and modernizes the examination process. The estimated resource level will fund the appropriate workload balance that supports extended exam cycles and enhanced examinations. The new positions supported by the budget include a Business Data Lead, two Business Innovation Officers, a Bank Secrecy Act Specialist, a Financial Technology Analyst, two Enforcement and litigation attorneys, and one Regulations and Legislation attorney. PO 00000 Frm 00017 Fmt 4701 Sfmt 4703 49707 There will be a realignment of three regional office vacancies to offset three of the new positions. In 2019, the agency is also establishing the Office of Business Innovation to lead the Enterprise Solution Modernization (ESM) program, as well as other modernization and business enterprise initiatives outside the scope of ESM. This includes the agency’s initiative to modernize the member loan and share download, advance the information security program, and enhance analytics through data management. Previously, the employees assigned to Business Innovation were included in the Office of the Executive Director. By creating the new office structure, the budget will more clearly delineate these expenses and be more transparent to interested parties. The budget for 2019 supports a total agency staffing level of 1,178 personnel. This is a net decrease of ten positions from the Board-approved level for 2018, or a decrease of 0.8 percent. BILLING CODE 7535–01–P E:\FR\FM\02OCN2.SGM 02OCN2 49708 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Request for New Staff in 2019 amozie on DSK3GDR082PROD with NOTICES2 Business Data Lead (1 Position Reallocated From Regional Vacancies) The Office of Business Innovation requires one full-time position to serve as the Business Data leader who will drive implementation of an agency-wide analytic data strategy and governance framework. This work will include: (1) Chairing an enterprise analytic data council; (2) supervising three enterprise data stewards; (3) working with contract consultants to assist the council and data stewards; (4) piloting the enterprise data strategy and governance framework; (5) initiating the enterprise data office study; and (6) recommending and running a future state for enterprise data management. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 Business Innovation Officers (2 Positions Reallocated From Regional Vacancies) The Office of Business Innovation requires two Business Innovation Officers to conduct the daily work to support development of an agency-wide analytic data strategy and governance framework, including: (1) Creating and executing a data governance framework, (2) defining business requirements to ensure initial proper configuration of the NCUA’s analytic data repository, (3) researching data information to update the NCUA’s data dictionary and develop data lineage requirements, and (4) working with system owners and other stakeholders to resolve conflicts and facilitate acceptance into the data framework. PO 00000 Frm 00018 Fmt 4701 Sfmt 4703 Bank Secrecy Act Specialist (+1 New Position) The Office of Examination and Insurance requires a full-time position to support Bank Secrecy Act (BSA) policies and workload requirements. The BSA has consumed considerable attention within the NCUA and throughout the government’s regulatory responsibilities for the financial services industry. Interagency planning and policy development groups have already created significant new workload for the NCUA. This additional workload is expected to continue as the interagency groups develops new supervisory policies, coordinate BSA-related rulemaking, implement industry and supervisory guidance, and conduct industry outreach. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.014</GPH> BILLING CODE 7535–01–C Financial Technology Analyst (+1 New Position) The Office of the Chief Economist requires one new employee to research new financial technology innovations and organize and lead a working group to review these emerging technologies. This position will also expand the NCUA’s policy expertise in cryptocurrencies. supervisory offices’ formal enforcement actions are being considered and planned. These additional employees will help improve the NCUA’s overall enforcement process by focusing support and investigatory efforts more strategically and earlier in the enforcement process. Enforcement and Litigation Attorneys (+2 New Positions) The Office of General Counsel requires two additional attorneys in the Enforcement and Litigation Division to support the agency and enable attorneys to work more collaboratively as The Office of General Counsel requires an additional attorney for the Division of Regulations and Legislation. This attorney will focus on the review of legislation, provide technical drafting assistance for legislation when necessary, write responses to BILLING CODE 7535–01–C Salaries and Benefits The budget includes $222.8 million for employee salaries and benefits in 2019. This change is a $2.1 million, or 1.0 percent, increase from the 2018 Board Approved Budget. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 Regulations and Legislation Attorney (+1 New Position) Salaries and benefits make up 73 percent of the total budget. The primary driver of increased costs in the Salaries and Benefits category is merit and locality pay increases for the NCUA’s 1,173 personnel paid from the Operating Budget, in accordance with the agency’s current Collective Bargaining PO 00000 Frm 00019 Fmt 4701 Sfmt 4703 49709 Congressional and interagency inquiries, and assist in drafting both oral and written testimony for Congressional hearings. The new attorney will also coordinate legislative efforts with other public and Congressional Affairs staff at the NCUA. Budget Category Descriptions and Major Changes There are five major expenditure categories in the NCUA’s budget. This section explains how these expenditures support the NCUA’s operations, and presents a transparent and comprehensive accounting of the Operating Budget. BILLING CODE 7535–01–P Agreement (CBA) and its merit-based pay system. In 2019, the NCUA’s compensation levels will continue to ‘‘maintain comparability with other federal bank regulatory agencies,’’ as required by the Federal Credit Union E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.015</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES2 49710 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Act.8 The Salaries and Benefits category of the budget includes all employee pay raises for 2019, such as merit and locality increases, and those for promotions, reassignments, and other changes, as described below. Consistent with other federal pay systems, the NCUA’s compensation includes base pay and locality pay components. The NCUA staff will be eligible to receive an average meritbased increase of 3.0 percent, and an additional locality adjustment ranging from zero to 3.0 percent, depending on location. The average increase in locality pay is estimated to be 1.4 percent. Starting in 2019, the NCUA discontinued the annual, general pay scale increase of 1.25 percent in accordance with recent CBA negotiations. By merging the general pay scale increase into the annual meritbased pay increase, the NCUA expects to better reward employee performance while reducing future year payroll growth. The first-year cost of the new positions added in 2019 is estimated to be $1.0 million, or approximately half the annual salaries and benefits associated with the positions since these new employees will be hired throughout the year. The full-year salaries and benefits costs of these employees will approximately double in 2020. Specific increases to individual offices’ pay and benefits budgets will vary based on current pay levels, position changes, and promotions. Personnel compensation at the NCUA varies among every office and region depending on work experience, skills, years of service, supervisory or nonsupervisory responsibilities, and geographic locations. In general, more than 85 percent of the NCUA workforce has earned a bachelor’s degree or higher, compared to approximately 35 percent of the private-sector workforce. This high level of educational achievement ensures the NCUA workforce is able to fulfill its mission effectively and efficiently, and attracting a wellqualified workforce requires the agency to pay employees competitive salaries. Individual employees’ compensation varies, depending on the cost of living in the location where the employee is stationed. The federal government sets locality pay standards, which are managed by the President’s Pay Agent—a council established to make recommendations on federal pay. The 8 The Federal Credit Union Act states that, ‘‘In setting and adjusting the total amount of compensation and benefits for employees of the Board, the Board shall seek to maintain comparability with other [f]ederal bank regulatory agencies.’’ See 12 U.S.C. 1766(j)(2). VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 council uses data from the Occupational Employment Statistics program, collected by the Bureau of Labor Statistics, to compare salaries in over 30 metropolitan areas, and establishes recommendations for equitable adjustments to employee salaries to account for cost-of-living differences between localities. The Office of Personnel Management (OPM) economic assumptions for actuarial valuation of the Federal Employees Retirement System (FERS) remains unchanged in 2019, so all federal agencies are expected to contribute 13.7 percent of FERS employees’ salary to the OPM retirement system. This mandatary contribution is expected to increase to 16.0 percent, or +230 basis points, in 2020, consistent with published actuarial updates. This change will result in an estimated $3.5 million in additional, mandatory retirementrelated payments by the NCUA to OPM. The average health insurance costs for the Federal Employees Health Benefits program for 2019 are consistent with historical actual expenses. The employee pay and benefits category also includes costs associated with other mandatory employer contributions such as Social Security, Medicare, transportation subsidies, unemployment, and workers’ compensation. Notably, charges from the U.S. Department of Labor (DOL) for the NCUA’s workers’ compensation claims increased by nearly $250,000 between 2018 and 2019. DOL manages the workers’ compensation system for all federal agencies. The 2019 budget reflects a $4.0 million reduction, or the equivalent of a two percent vacancy rate (21 positions) during the year. This aligns with the NCUA’s most recent attrition rates and the recruitment and retention challenges the agency expects to face in the current, high-employment labor market. The effect of this adjustment lowers the NCUA budget and results in reduced fees collected from credit unions. The 2020 budget request for salaries and benefits is estimated at $233.6 million, a $10.8 million increase from the 2019 level, which accounts for merit and locality increases consistent with the CBA (approximately $6.3 million), the full-year cost impact of new positions (approximately $1 million), and the mandatory FERS retirement contributions to OPM (approximately $3.5 million). Travel The 2019 budget includes $26.8 million for Travel. This change is a PO 00000 Frm 00020 Fmt 4701 Sfmt 4703 $326,000, or 1.2 percent, increase to the 2018 Board Approved Budget. Travel comprises approximately nine percent of the overall 2019 budget. The cumulative reduction of the credit union examiner positions compared to past years, extended examination cycles, and increased use of offsite examinations all help contain the NCUA’s travel costs. However, the General Services Administration has announced an increase of nearly eight percent for per diem rates in 2019, which drives the growth of estimated travel expenses in 2019. The Travel cost category includes expenses for employees’ airfare, lodging, meals, auto rentals, reimbursements for privately owned vehicle usage, and other travel-related expenses. These are necessary expenses for examiners’ onsite work in credit unions. Close to two-thirds of the NCUA’s workforce is comprised of field staff who spend a significant part of their year traveling to conduct the examination and supervision program. The NCUA staff also travel for training, and there will be minor increases to training-related travel expenses to support field exams. For example, technical experts such as payment system, capital market, and lending specialists will assist field examiners with program examinations and training, while consumer access analysts will provide support on field consumer compliance issues and follow-up field assessments of business marketing plans for field-of-membership expansions. The 2020 budget request for travel is estimated at $27.8 million, a $1 million increase to the 2019 level, which accounts for a national program examination training event. This onetime training conference is anticipated to coincide with full deployment of the new Examination and Supervision Solution system. The NCUA plans to evaluate future cost avoidance for travel through continued expansion of offsite examination work. In addition, agency personnel will continue to utilize more virtual training options, where appropriate, to help minimize travel expenses. Rent, Communications, and Utilities The 2019 budget includes $8.0 million for Rent, Communications, and Utilities. This is a $445,000 reduction, or five percent less than the 2018 Board Approved Budget. The Rent, Communications, and Utilities category is the smallest component of the NCUA’s budget and funds the agency’s telecommunications and information E:\FR\FM\02OCN2.SGM 02OCN2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices technology network expenses, and facility rental costs. The agency telecommunications expense for 2019 is $3.2 million. Office building leases, meeting rentals, office utilities, and postage expenses are also included in this budget category. Facility costs total $2.6 million for 2019, which is $600,000 less than the prior year budget due to the closure of regional offices in Atlanta, Georgia and Albany, New York. Facility costs also include the NCUA’s annual payment of $1.3 million to the Share Insurance Fund for its central office note, which is scheduled to be fully repaid in 2023. The 2020 budget request for the Rent, Communications, and Utilities category is $8.0 million, and is unchanged from 2019. Additional savings from lease terminations are expected in 2021, once Eastern Region personnel are co-located in the NCUA-owned central office building. amozie on DSK3GDR082PROD with NOTICES2 Administrative Expenses The 2019 budget includes $8.7 million for Administrative Expenses. This is an increase of $1.2 million, or 16 percent, compared to the 2018 Board Approved Budget. Recurring costs in the Administrative Expenses category include the annual reimbursement to the Federal Financial Institutions Examination Council (FFIEC), employee relocation expenses, recruitment and advertising, shipping, printing, subscriptions, examiner training and meeting supplies, office furniture, and employee supplies and materials. Service contracts, maintenance fees, and end-user licensing for computer software and database management applications will cost $3.8 million in 2019. This includes annual software licenses and maintenance support fees for the call center managed by the Office of Consumer Financial Protection. This line item represents a $435,000 increase over the prior year budget to support purchases of critical financial and information services subscription services to manage risk. As part of the FFIEC, the NCUA shares in costs for joint actions and services that affect the financial services industry. These costs are largely outside of the NCUA’s control and are estimated at $1.4 million in 2019, which is $100,000 more than 2018. Employee relocation expenses are adjusted in 2019 to reflect the historical average annual expenditures of VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 $750,000. This is a $500,000 increase over the 2018 Board Approved Budget, which was lower than historical averages because of one-time agency reorganization funding set aside for relocations in 2018. Due to reformed business processes and improved financial controls, costs for printing. Meeting support costs are estimated to be $150,000 less than in 2018. Contracted Services The 2019 budget includes $38.1 million for Contracted Services. This is a $3.1 million, or nine percent, increase compared to the 2018 Board Approved Budget. The Contracted Services budget category includes costs incurred when products and services are acquired in the commercial marketplace. Acquiring specific expertise or services from contract providers is often the most cost-effective approach to fulfill the NCUA’s mission. Such services include critical mission support such as information technology hardware and software development, accounting and auditing services, and specialized subject matter expertise that enable staff to focus on core mission execution. The majority of funding in the Contracted Services category is related to the NCUA’s priority to implement a robust supervision framework by identifying and resolving traditional risk concerns such as interest rate risk, credit risk, and industry concentration risk, as well as by addressing new and evolving operational risks such as cybersecurity threats. Growth in the contracted services budget category results primarily from new operations and maintenance costs associated with ongoing capital investments, such as replacements for the Automated Integrated Regulatory Examination System (AIRES) and CU Online. Other costs include core agency business operation systems such as for payroll processing, and various recurring costs, as described in the seven major categories, below: D Information Technology Operations and Maintenance (47 percent of contracted services) —IT network support services and help desk support —Contractor program and web support and network and equipment maintenance services PO 00000 Frm 00021 Fmt 4701 Sfmt 4703 49711 —Administration of software products such as Microsoft Office, Share Point and audio visual services D Administrative Support and Other Services (14 percent of contracted services) —Examination and Supervision program support —Technical support for examination and cybersecurity training programs —Equipment maintenance services —Legal services and other expert consulting support —Other administrative mission support services for the NCUA central office D Accounting, Procurement, Payroll and Human Resources Systems (11 percent of contracted services) —Accounting and procurement systems and support —Human resources, payroll, and employee services —Equal employment opportunity and diversity programs D Building Operations, Maintenance, and Security (9 percent of contracted services) —Central office facility operations and maintenance —Building security and continuity programs —Personnel security and administrative programs D Information Technology Security (7 percent of contracted services) —Enhanced secure data storage and operations —Information security programs —Security system assessment services D Training (7 percent of contracted services) —Examiner staff technical and specialized training and development —Senior executive and mission support staff professional development D Audit and Financial Management Support (5 percent of contracted services) —Annual audit support services —Material loss reviews —Investigation support services —Financial management support services The following pie chart illustrates the breakout of the seven categories for the total contracted services budget of $38.1 million. E:\FR\FM\02OCN2.SGM 02OCN2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Major programs within the contracted services category include: D Training requirements for the examiner workforce. The NCUA’s most important resource is its highly educated, experienced, and skilled workforce. It is important that staff have the proper knowledge, skills, and abilities to perform assigned duties and meet emerging needs. Each year, Credit Union Examiners attend several levels of training, including in core areas such as capital markets, consumer compliance, and specialized lending. The training deliverables for 2019 include classes offered by the Federal Financial Institutions Examination Council, new examiner classes, and subject matter expert training sessions for the NCUA examiners and state regulators. Contracted service providers will develop and design several subject matter expert training classes for examiners and conduct a triennial review of several modules of the NCUA’s core course curriculum. Additionally, regional and central office staff will conduct change management and teambuilding training exercises to help integrate new operations as a result of the Agency reorganization. D The NCUA’s information security program supports ongoing efforts to strengthen cybersecurity and ensure compliance with the Federal Information System Management Act. D Agency financial management services, human resources technology support, and payroll services. The NCUA contracts for these back-office VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 support services with the U.S. Department of Transportation’s Enterprise Service Center (DOT/ESC) and the General Services Administration. A new service provider offers the NCUA’s human resource system, HR Links, also adopted by many federal agencies, the shared solution automates routine human resource tasks and improves time and attendance functionality. D Audit. The NCUA Office of Inspector General contracts with an accounting firm to conduct the annual audit of the agency’s four permanent funds. The results of these audits are posted annually on the NCUA website and also included as part of the agency’s Annual Report. A significant share of the budget for the Contracted Services category finances on-going infrastructure support for the agency. For example, the NCUA relies on recurring contracted services to maintain a number of the agency’s systems including critical legacy systems such as AIRES and Credit Union Online. Several of the NCUA’s core information technology systems and processes require additional contract support in 2019, which result in increased budgets in the Contracted Services category, as described below. Within the budget for the Office of Chief Information Officer, an additional $3.2 million is required for various contractor support requirements in 2019, including: • Contract Realignment $1.5M. Costs include transition to new Operations & PO 00000 Frm 00022 Fmt 4701 Sfmt 4703 Maintenance contract, increase in support skill set to cover service gap. • New Capabilities & Modernization $1.0M. Costs include examination solution circuit’s maintenance & program rent cost, new security tools implementation, and true-up for service management system licenses. • Cost Inflation $0.5M. Costs include expected inflation for telecommunications, equipment repair and maintenance and contract services. • AMAC Support $0.2M. Costs include establishing on-site information technology support for AMAC. Within the budget for the Office of Chief Financial Officer, the annual fee paid to the Department of Transportation (DOT) for the NCUA’s financial management system will increase by nearly $800,000 over the 2018 level. This is because DOT revised its cost allocation model for all of its financial system customers. In 2018, the NCUA also replaced its legacy human resources and time and attendance systems with a more modern platform called HR Links, which better supports the agency’s workforce and personnel requirements. The 2019 cost for HR Links decreased from the 2018 level by $325,000 due to one-time start-up costs that were included in the 2018 Board Approved Budget. VI. Capital Budget Overview The NCUA uses a rigorous process to identify the investment needs for information technology, facility improvements and repairs, and other E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.016</GPH> amozie on DSK3GDR082PROD with NOTICES2 49712 amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices multi-year capital investments. The NCUA staff review the agency’s inventory of owned facilities, equipment, information technology systems, and information technology hardware to determine what requires repair, major renovation, or replacement. The staff then make recommendations for prioritized investments to the Executive Director and the NCUA Board. Routine repairs and lifecycle-driven property renovations are necessary to properly maintain the investments in the NCUA’s central office building in Alexandria, Virginia and the agency’s owned office building in Austin, Texas. The NCUA facility manager assesses the agency’s properties to determine the need for essential repairs, replacement of building systems that have reached the end of their engineered lives, or renovations required to support changes in the agency’s organizational structure or to address revisions to building standards and codes. Information technology (IT) systems and hardware are another significant capital expenditure for modern organizations. The 2019 budget includes significant investment in current and replacement IT systems. The NCUA Examination and Supervision Solution (ESS) project, for example, will replace the legacy Automated Integrated Regulatory Examination System (AIRES) system, and is the largest single capital investment in the 2019 budget. Other IT investments include ongoing enhancements and upgrades to decadesold legacy systems, incident and vulnerability management systems to enhance the agency’s cybersecurity posture, and various hardware investments to refresh agency networks and ensure staff have the tools necessary to maintain and increase their productivity. The NCUA’s 2019 capital budget is $22.0 million. The capital budget includes long-term investment projects. The Information Technology Prioritization Council recommended $17.1 million for IT software development projects and $4 million in other IT investments for 2019. The NCUA facilities require $0.9 million in capital investments. Detailed descriptions of all 2019 capital projects, including a discussion of how each project helps the agency achieve its strategic goals and objectives, are provided in Appendix C. Summary of Capital Projects Examination and Supervision Solution and Infrastructure Hosting (ESS&IH) ($8.4 million). The purpose of the ESS&IH project is to implement a VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 new, flexible, technical foundation to enable current and future NCUA business process modernization initiatives, and replace the NCUA’s legacy exam system, AIRES, with a new Commercial-Off-The-Shelf (COTS) solution. Data Collection Solution (DCS)/ Enterprise Content Management (ECM) Analysis of Alternatives Study ($0.2 million). The purpose of this project is to award and complete an Analysis of Alternatives (AoA) to study the operational effectiveness, suitability, risks and life-cycle costs of alternative ECM solutions to support the NCUA’s requirements for data collection, workflow, document management, customer relationship management and records management. An AoA needs to be completed to gather the requirements across these areas and to validate that the ECM solutions are the most effective and efficient way to meet the NCUA’s data collection, document management, and records management needs. Business Intelligence (BI) Tools and Capability Enhancement ($1.9 million). The purpose of this project is the collection, centralization, organization and storage of data collected by the Office of National Examination and Supervision (ONES) so that analysis is more accurate and efficient. This accessibility will integrate with BI tools to improve ONES’s overall reporting and data analysis capabilities. Enterprise Central Data Repository ($1.0 million). The Enterprise Central Data Repository (ECDR) project will implement a central data repository that will serve as the data integration point for Examination and Supervision Solution (ESS), ONES’s analytic tools, the NCUA’s legacy applications and the Data Collection Solution (DCS). The ECDR will become an enterprise solution for the NCUA allowing the agency to transition in a phased approach from the existing legacy databases to a cloud-based data repository serving the agency’s needs. Asset Management and Assistance Center (AMAC) Servicing System ($0.6 million). The purpose of this project is to enhance AMAC’s legacy content management and servicing systems. Phase I of the project resulted in an enhanced, secure content management solution. During Phase II of the project, the NCUA will identify, acquire, and implement replacement solutions for AMAC’s aging core data processor. The key project deliverables are the acquisition and deployment of a replacement core processing system. Enterprise Data Analytics, Governance and Reporting Services ($0.6 million). The purpose of this PO 00000 Frm 00023 Fmt 4701 Sfmt 4703 49713 project is the centralization, organization and storage of the NCUA data so analysis is more accurate, simple and easily distributed across the agency. This increased accessibility is combined with analytic tools to improve the NCUA’s overall reporting and data analysis capabilities. Asset and Liabilities Management Application ($3.2 million). The purpose of the Asset and Liabilities Management (ALM) application is for the NCUA to build internal analytical capabilities to run supervisory stress testing in house and to conduct regular quantitative risk assessments by procuring and configuring off-the-shelf analytical tools, models and software used commonly in stress testing and other risk management activities. This effort delivers a complete solution that will focus on modernizing the NCUA’s supervision tools and approaches, identifying material risks facing the covered credit unions, and tailoring resources to the material risks and risk focused exams. This effort will allow the NCUA to reduce the existing third party contractor’s role to only consultation. Enterprise Learning Management System Replacement ($0.6 million). The purpose of the Enterprise Learning Management System (LMS) Replacement project is to conduct market research, initiate an acquisition, create a project management plan, and execute the production and implementation of a cost-effective, cloud-based solution and training services that provides the NCUA with the full-range of eLearning functionality associated with a modern LMS. This will allow for enhanced examiner utilization and accessibility driven by quality content, ease of use and system reliability, role-based interface, ability to view personalized pages by role, centralized content, adherence to federally-mandated reporting requirements and records management adherence. Governance, Risk Management, and Compliance (GRC) tool for Managing Compliance Information ($0.3 million). The purpose of the GRC Tool for Managing Compliance Information project is to acquire and implement a software platform that provides a structured repository for all system security and privacy documentation; security risk assessments; risk scoring; Plan of Actions and Milestones (POAM) management; and authorization workflow. Financial Management Analysis of Alternatives ($0.35 million). The purpose of this project is to award and complete an Analysis of Alternatives E:\FR\FM\02OCN2.SGM 02OCN2 amozie on DSK3GDR082PROD with NOTICES2 49714 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices (AoA) for federal financial management system service providers. The NCUA’s current financial management system service provider—the Department of Transportation’s Enterprise Service Center (ESC)—will increase the fee it charges the NCUA in 2019 by approximately $800,000, or 40 percent more than the 2018 charge. As a result, the NCUA plans to review alternative service providers to determine whether it is possible to achieve similar or better financial management results in a costeffective manner. Enterprise Laptop Lease ($0.8 million). The purpose of the Enterprise Laptop Refresh project is to provide the NCUA with a more efficient, mobile friendly, and secure tool to help employees better perform their jobs at a reasonable cost. Information Technology Infrastructure, Platform and Security Refresh ($2.4 million). The purpose of the Information Technology (IT) Infrastructure, Platform and Security Refresh project is to refresh and/or replace routers, switches virtual servers, wireless, virtual private network, end of life and end of service components in order to ensure that the NCUA data is secure and operations are stable. Security Management Tool Upgrades ($0.7 million). The purpose of the Security Management Tool Upgrades (Security Event and Incident Management (SEIM)) project is to optimize event collection, monitoring, detection and response capabilities for information security and IT operations, which will enable data-driven proactive management of the agency’s cybersecurity programs. The purpose of the Security Management Tool Upgrade (Patch & Vulnerability Management) project is to comply with the Department of Homeland Security’s requirements for its Continuous Diagnostics and Mitigation (CDM) program, which sets standards for effective IT cybersecurity service management for Federal agencies. Refresh End of Life VOIP Phone System ($0.2 million). The purpose of the Refresh End of Life Voice over internet Protocol (VoIP) Phone System project is to replace the agency’s phone system infrastructure and endpoints, which is at end of its service life. The new system will ensure voice communications capabilities via a cloud solution that provides business continuity and stable operations. The NCUA Central Office Heating, Ventilation, and Air Conditioning (HVAC) System Replacement ($0.75 million). The NCUA central office HVAC system replacement project will VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 recapitalize the HVAC system in the agency’s central office building, including all cooling towers, air handlers, boilers and HVAC components. The current HVAC system is original to the facility, 24 years old and obsolete. The current system is at the end of its usable life and it is not working efficiently. The NCUA Austin, Texas Office Building Modernization ($0.15 million). In 2019, the NCUA plans to repair or replace several priority projects at the Austin, Texas office building. These capital improvements are required for the facility to continue routine and safe operations, and align with the life cycle replacement required for critical infrastructure. VII. Share Insurance Fund Administrative Budget Overview The Share Insurance Fund Administrative budget funds direct costs associated with authorized Share Insurance Fund activities. As in 2018, the 2019 budget has been developed to reflect the closure of the Temporary Corporate Credit Union Stabilization Fund into the Share Insurance Fund. The direct charges to the Share Insurance Fund are combined with the NGN program and administrative costs, and represent total estimated costs to the Share Insurance Fund.9 The cost of the NCUA Guaranteed Notes (NGN) program and the Corporate System Resolution Program, including costs associated with the administration of those programs, will be funded from the Share Insurance Fund Administrative Budget. These costs have no impact on the NCUA’s current and future Operating Fund budgets. The budget for the Share Insurance Fund also includes funding for expenditures previously authorized as direct expenses of the Share Insurance Fund for items such as state examiner computer leases and training. Other direct expenses include contract support for stress testing for certain large credit unions and financial audit support. The 2019 total Share Insurance Fund Administrative budget is estimated to be $8.4 million, $0.3 million, or 3.5 percent, more than 2018. The budget 9 Note these direct costs are exclusive of any costs that are shared with the Operating Fund through the Overhead Transfer Rate, and with payments available upon requisition by the Board, without fiscal year limitation, for insurance under section 1787 of this title, and for providing assistance and making expenditures under section 1788 of this title in connection with the liquidation or threatened liquidation of insured credit unions as it may determine to be proper. PO 00000 Frm 00024 Fmt 4701 Sfmt 4703 increase is primarily driven by increased support required for datadriven analytics on stress testing that large credit unions perform, partially offset by savings in other cost categories. The Share Insurance Fund Administrative budget also funds five positions that were formerly part of the Stabilization Fund budget. These costs will enable the NCUA to continue supporting the NGN program, which includes managing legacy assets within the NGN trusts. Legacy assets consist of over 1,000 investment securities that are secured by residential mortgages and other assets. The 2020 requested budget supports similar workload and resources; however, one additional stress test would be added and is estimated to cost $750 thousand. The total administrative budget estimate is estimated to be $9.1 million. Budget Category Descriptions and Major Changes Salaries and Benefits The employee pay and benefits expense category for the Share Insurance Fund Administrative budget is estimated to be $1.24 million, which represents a decrease of $22,000 compared to 2018. This decrease is due to aligning the budget to actual payroll costs for staff on board. Personnel compensation is 15 percent of the total budget. The financial analysts on the NGN team have specialized technical expertise to manage the remaining $7 billion of legacy assets. Personnel costs are estimated in a manner similar to the operating budget. Travel The estimated travel cost of $52,000 is less than one percent of the overall 2019 budget and decreases by 31 percent from last year’s budget estimate. These costs cover all of the travel expenses for the five staff that manage and support the NGN program. Two of the five staff are remote employees and are expected to travel periodically to the NCUA’s central office. Administrative Training Training expenses, which represent less than one percent of the budget, are estimated to be $27,000, a decrease of $3,000 from the 2018 budget based on updated projections of employee professional development plans and specialized training requirements. Support for the NGN Program (Contract Support) Contract costs to support the NGN program, which represent 35 percent of the budget, are estimated to be $2.9 E:\FR\FM\02OCN2.SGM 02OCN2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 • Valuation Services in the amount of $1.1 million to fund valuation support for the NGN legacy assets. As supported by the NGN Oversight Committee, resources are also needed to conduct special analyses, including valuations for determining reasonable market prices for securities to be sold by auction. • Software and Data Subscription Services in the amount of $0.8 million will support technical tools used to provide waterfall models, calculations, and metrics for the structured investment products underlying the NGN portfolio. The service provides coverage of all relevant asset classes, waterfall models that are seasoned and tested throughout the industry, and a broad array of calculations and metrics. Financial data analytics play a critical role in the surveillance, modeling, and pricing of the legacy assets that securitize the NGN Trusts, as well as supporting the management reviews that the NCUA performs on the cash flow projections. Now that some of the NCUA Guaranteed Notes have begun maturing, the NCUA has added data subscription services to provide PO 00000 Frm 00025 Fmt 4701 Sfmt 4725 additional valuation and has added support for the legacy asset disposition process. • Other annual subscriptions provide important services related to surveillance of the portfolio of corporate bonds and mortgage-related bonds. Independent credit research services include fundamental capital structure research, credit analyses for surveillance of corporate bond portfolio and monoline insurer exposure, and direct access to various industry experts for discussion on specific credits. Other Direct Expenses Other direct expenses of the Share Insurance Fund represent close to 50 percent of the budget, and are estimated to be $4.1 million. The estimated costs for state examiner computer leases and training in the amount of $1.2 million is slightly lower than prior years. This will allow the NCUA to analyze the stress testing that large credit unions perform. By 2020, additional credit unions are anticipated to be subject to stress testing. Financial audit support is also expected to remain the same as prior years. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.017</GPH> amozie on DSK3GDR082PROD with NOTICES2 million, an increase of $0.3 million from the 2018 level. Funding is needed to fulfill Corporate System Resolution Program requirements and includes outside professional services such as external valuation experts, financial specialists, and accountants. These experts are needed to assist the NCUA with the following types of services: • Consulting Services in the amount of $1.0 million will support two NCUA offices: Examination and Insurance and the Chief Financial Officer. Services will include quarterly management reviews of asset valuations, as well as analyses of emerging issues. Support for the annual financial audit process and improvements in internal controls will also be provided by contractors. Tasks include: Supporting complex accounting and financial requirements for settlements, sale of legacy assets, parity payments, changing valuation model assumptions, and other asset disposition activities. Additionally, professional services will be used to assist with accounting, tax, financial reporting, and systems support for the corporate Asset Management Estates. 49715 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices The NCUA website has a dedicated section that provides financial reports for the Share Insurance Fund,10 and a separate page that explains the NCUA Guaranteed Notes Program and provides comprehensive reporting and analysis on the legacy assets.11 VIII. Financing the NCUA Programs Overview As part of the annual budgetary process, the NCUA remains mindful that its operating funding comes directly from federal and state chartered credit unions. The agency strives to ensure that any allocation of these funds follows a thorough review of the necessity of the expenditures and whether programs are operating in an efficient, effective, transparent, and fully accountable manner. To achieve its statutory mission, the NCUA incurs various expenses, including those involved in examining and supervising federally insured credit unions. The NCUA Board adopts an Operating Budget, including the Capital Budget, in the fall of each year to fund the vast majority of the costs of operating the agency.12 The Federal Credit Union Act authorizes two primary sources to fund the Operating Budget: (1) Requisitions from the Share Insurance Fund ‘‘for such administrative and other expenses incurred in carrying out the purposes of [Title II of the Act] as [the Board] may determine to be proper’’; 13 and (2) ‘‘fees and assessments (including income earned on insurance deposits) levied on insured credit unions under [the Act].’’ 14 Among the fees levied under the Act are annual Operating Fees, which are required for federal credit unions 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 Act,] including the examination and supervision of [federal credit unions].’’ Taken together, these dual authorities effectively require the Board to determine which expenses are appropriately paid from each source while giving the Board broad discretion in allocating expenses. In 1972, the Government Accountability Office recommended the NCUA adopt a method for properly allocating Operating Budget costs—that is, the portion of the NCUA’s budget funded by requisitions from the Share Insurance Fund and the portion covered by Operating Fees paid by federal credit unions.15 The NCUA has since used an allocation methodology, known as the Overhead Transfer Rate (OTR), to determine how much of the Operating Budget to fund with a requisition from the Share Insurance Fund. To allocate agency expenses between these two primary funding sources, the NCUA uses the OTR methodology. The OTR is the formula the NCUA uses to allocate insurance-related expenses to the Share Insurance Fund under Title II. Almost all other operating expenses are collected through annual Operating Fees paid by federal credit unions.16 Two statutory provisions directly limit the Board’s discretion with respect to Share Insurance Fund requisitions for the NCUA’s Operating Budget and, hence, the OTR. First, expenses funded from the Share Insurance Fund must carry out the purposes of Title II of the Act, which relate to share insurance.17 Second, the NCUA may not fund its entire Operating Budget through charges to the Share Insurance Fund.18 The NCUA has not imposed additional policy or regulatory limitations on its discretion for determining the OTR. 10 See: https://www.ncua.gov/services/Pages/ share-insurance/reports.aspx. 11 See: https://www.ncua.gov/regulationsupervision/Pages/guaranteed-notes.aspx. 12 Some costs are directly charged to the Share Insurance Fund when appropriate to do so. For example, costs for training and equipment provided to State Supervisory Authorities are directly charged to the Share Insurance Fund. 13 12 U.S.C. 1783(a). 14 12 U.S.C. 1766(j)(3). Other sources of income for the Operating Budget have included interest income, funds from publication sales, parking fee income, and rental income. 15 http://www.gao.gov/assets/210/203181.pdf. 16 Annual Operating Fees must ‘‘be determined according to a schedule, or schedules, or other method determined by the NCUA Board to be appropriate, which gives due consideration to the expenses of the [NCUA] in carrying out its responsibilities under the [Act] and to the ability of [FCUs] to pay the fee.’’ 1755(b). 17 12 U.S.C. 1783(a). 18 The Act in 12 U.S.C. 1755(a) states, ‘‘[i]n accordance with rules prescribed by the Board, each [federal credit union] shall pay to the [NCUA] an annual operating fee which may be composed of one or more charges identified as to the function or functions for which assessed.’’ See also 12 U.S.C. 1766(j)(3). VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4703 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.018</GPH> amozie on DSK3GDR082PROD with NOTICES2 49716 49717 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Overhead Transfer Rate (OTR) Methodology The NCUA undertook a multi-year process to simplify and make more transparent its OTR methodology.19 The OTR is designed to cover the NCUA’s costs of examining and supervising the risk to the Share Insurance Fund posed by all federally insured credit unions, as well as the costs of administering the fund. The OTR represents the percentage of the agency’s operating budget paid for by a transfer from the Share Insurance Fund. Federally insured credit unions are not billed for, and do not have to remit, the OTR amount; instead, it is transferred directly to the Operating Fund from the Share Insurance Fund. This transfer, therefore, represents a cost to all federally insured credit unions. The NCUA Board approved the current methodology for calculating the OTR at its November 2017 open meeting. The current methodology is principles-based, simpler, more equitable and transparent, and will result in lower administrative costs. The OTR formula is based on the following underlying principles to allocate agency operating costs: 1. Time spent examining and supervising federal credit unions is allocated as 50 percent insurance related.20 2. All time and costs the NCUA spends supervising or evaluating the risks posed by federally insured statechartered credit unions or other entities the NCUA does not charter or regulate (for example, third-party vendors and CUSOs) is allocated as 100 percent insurance related.21 3. Time and costs related to the NCUA’s role as charterer and enforcer of consumer protection and other noninsurance based laws governing the operation of credit unions (like field of membership requirements) are allocated as 0 percent insurance related.22 Est. share of the operating budget covered by: Total ............................................................................................................................................ In terms of accounting for funds transferred from the Share Insurance FR 55644 (Nov. 22, 2017). 50 percent allocation mathematically emulates an examination and supervision program design where the NCUA would alternate examinations, and/or conduct joint examinations, between its insurance function and its prudential regulator function if they were separate units within the NCUA. It reflects an equal sharing of supervisory responsibilities between the NCUA’s dual roles as charterer/prudential regulator and insurer given both roles have a vested interest in the safety and soundness of federal credit unions. It is consistent with the alternating examinations FDIC and state regulators conduct for insured statechartered banks as mandated by Congress. Further, it reflects that the NCUA is responsible for managing risk to the Share Insurance Fund and therefore should not rely solely on examinations and supervision conducted by the prudential regulator. 21 The NCUA does not charter state-chartered credit unions nor serve as their prudential amozie on DSK3GDR082PROD with NOTICES2 20 The VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 These four principles are applied to the activities and costs of the agency, which results in the portion of the agency’s Operating Budget that is transferred from the Share Insurance Fund. Based on the Board-approved methodology, the OTR for 2019 is estimated to be 60.4 percent; thus, 60.4 percent of the total operating budget is estimated to be paid out of the Share Insurance Fund. The remaining 39.6 percent of the Operating Budget is estimated be paid for through the FCU Operating Fee. The explicit and implicit distribution of total Operating Budget costs for FCUs and federally insured, state-chartered credit unions (FISCUs) is as follows: FCUs FCU Operating Fee ............................................................................................................................ OTR × Percent of Insured Shares ..................................................................................................... 19 82 4. Time and costs related to the NCUA’s role in administering federal share insurance and the Share Insurance Fund are allocated as 100 percent insurance related.23 39.6% 31.0% (60.4% × 51.3%) 0.0% 29.4% (60.4% × 48.7%) 70.6% 29.4% Fund to the Operating Fund, the OTR is applied to actual expenses incurred each month. Therefore, the rate calculated by the OTR formula is multiplied by each month’s actual operating expenses and charged to the Share Insurance Fund. Because of this monthly reconciliation to actual operating expenditures, when the NCUA’s expenditures are less than budgeted, the amount charged to the Share Insurance Fund is also less—and those lower expenditures benefit both regulator. The NCUA’s role with respect to federally insured state-chartered credit unions is as insurer. Therefore, all examination and supervision work and other agency costs attributable to insured statechartered credit unions is allocated as 100 percent insurance related. PO 00000 Frm 00027 Fmt 4701 Sfmt 4703 FISCUs federally chartered and state charted credit unions. The following chart illustrates the share of the Operating Budget paid by Federally Insured Credit Unions (FCUs, 70.6%) and Federally Insured, StateChartered Credit Unions (FISCUs, 29.4%). 22 As the federal agency with the responsibility to charter federal credit unions and enforce noninsurance related laws governing how credit unions operate in the marketplace, the NCUA resources allocated to these functions are properly assigned to its role as charterer/prudential regulator. 23 The NCUA conducts liquidations of credit unions, insured share payouts, and other resolution activities in its role as insurer. Also, activities related to share insurance, such as answering consumer inquiries about insurance coverage, are a function of the NCUA’s role as insurer. E:\FR\FM\02OCN2.SGM 02OCN2 49718 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES2 The Board delegated authority to the Chief Financial Officer to administer the methodology approved by the Board for calculating the Operating Fees, and to set the fee schedule as calculated per the approved methodology outlined in this section. There is no change to the underlying approved Operating Fee methodology for 2019; the change in the assessments for 2019 are due to changes in the OTR rate and to indexing the fee schedule for projected asset growth. For 2019, based on the OTR methodology discussed above, the resulting share of the budget that is funded from the Operating Fee is $140.859 million. This equates to 0.0185 percent of the estimated federal credit union assets for December 2018. The overall increase for the operating fee is 2.2 percent over 2018. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 The Operating Fee will be assessed to federal credit unions based on estimated year-end assets. Credit unions with assets less than $1 million will not be assessed an Operating Fee. To set the assessment scale for 2019, federal credit union asset growth will be projected through December 31, 2018. Based on the June 30, 2018, Call Report data, annual growth is projected to be 6.2 percent at year end. The asset level dividing points will be increased by this same projected growth rate. Assets are indexed annually to preserve the same relative relationship of the scale to applicable asset base. To establish the rate applicable to each asset level, the factors outlined in the table below result in an average Operating Fee rate increase of 2.2 percent for natural person federal credit unions. The corporate federal credit PO 00000 Frm 00028 Fmt 4701 Sfmt 4703 union rate scale remains unchanged from prior years. To illustrate the rate impact for federal credit unions with assets under $1.5 billion, the fee increases from $264 per one million dollars of assets, to $270 per one million dollars of assets. This is an increase of $6 per million dollars of assets, or 2.2 percent. Federal credit union assets between $1.5 billion and $4.5 billion would be assessed at a rate of $78.69 per million, and assets above $4.5 billion would be assessed at $26.28 per million. As noted above, these tiers were indexed to the 6.2 percent projected asset growth, and the rates are increased by 2.2 percent. The following tables illustrate the methodology and calculations used to develop the Operating Fee. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.019</GPH> Operating Fee Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49719 PROPOSED 2019 OPERATING FEE SCALE 2018 Natuul Person Federal Credit Union Scale $0.00 $0.00 0.00026412 0.00007698 0.000025 7l X X over X total assets over 0.00026998 0.00007869 0.00002628 X assets over X assets over X total assets over 0.00019870 0.00001230 X total assets over X total assets over $100.000.000 2019 56 amozie on DSK3GDR082PROD with NOTICES2 and over VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.020</GPH> 6.2% 49720 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 2019 OPERATING FEE REQUIREMENTS AND OPERATING FEE METHODOLOGY Operating Fee Schedule explanation: Natural Person Federal Credit Union Operating Fee Calculation Factors and Explanation 1 2 Calculation Formula Proposed Annual Operating Fund Budget amount determines the baseline fee $ requirement. Remove King Street Station Note from Calculation, because the Share Insurance Fund cannot fund this expense since the building loan is from the Share Insurance Fund. 3 Operating Fund Budget to apply OTR 4 Share Insurance Fund, pursuant to the Board-approved methodology. This amount is 2019 ($000s) 304.398 Subtract arnmmt of KS S note payment $ Sum lines 1 -2 $ 303.058 OTR% x line 3 $ (183.047) $ (1.500) $ (0.772) (1.340) Overhead Transfer Rate determines the amount ofthe budget to be reimbursed by the subtracted from the proposed budget amount. 5 6 7 Interest Income projected for the year is estimated based on the latest financial statements, and is subtracted from the budget. Miscellaneous (rents, publication fees, FOIA fees) is estimated based on the latest financial statements, and is subtracted from the budget. Net Adjustment to Budget Sum lines 3 - 6 $ 117.739 $ 22.000 $ 1.340 $ 141.079 reduce cash collections 8 Reduction of any Operating Fund adjustment Removed non-cash items of depreciation and accrued annual leave previously adjusted since these non-cash line items are now excluded as vart of the bud<zet. increase cash collections 9 New investment projects requested in Capital Budget 10 Annual payment of King Street Station Note Payable (scheduled principal payments) Sum lines 7- 10 11 Budgeted Operating Fee/Capital Requirements 12 Corporate federal credit union fees are collected and subtracted from natural person credit union fee requirement (based on corporate credit union scale) 13 Natural Person Federal Credit Union Operating Fees Required $ Sum lines 11 - 12 (0.220) $ 140.859 $ (137.800) Estimated Fee collections for end of year (December 31). This projection uses the current operating fee scale with estimated asset growth from an internal NCUA economic forecasting 14 model . Based on the June 30 assets, the year end assets are projected using the estimated asset growth to calculate fee collection estimates for the following year. The operating fee assessment is applied against the year end credit union asset value. 15 Difference between estimated operating fee collections and projected collections based on estimated asset growth. 16 Average Rate Adjustment Indicated (line 15 divided by line 14) Difference between lines 13 and 14 Line 15 divided by 14 B: Operating Fee Scale explanation: Projected federal credit union asset growth= change in asset level dividing points. Every year, the asset level scale is adjusted by the same percentage as the estimated growth $ 3.059 2.22% Percent growth noted on line 14 rate. Operating fee rate change = Change in assessment rate percentage same as Line 16 CCUs and the collections continue to decrease to an immaterial amount. IX. Appendix A: Supplemental Budget Information VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4703 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.021</GPH> amozie on DSK3GDR082PROD with NOTICES2 The Corporate Credit Union scale remains unchanged from year to year as the number of 49721 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Operating Budget by Strategic Goal Goall: Ensure a safe and sound credit union system $206.1 942.2 Goal 2:Provide a regulatory framework that is ansparent, efficient and improves consumer access $29.0 116.8 Goal 3: Maximize organizational performance to enable mission success $69.3 119.0 VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.022</GPH> amozie on DSK3GDR082PROD with NOTICES2 Expenses for the Offices of the Board, Executive Director, Inspector General, Public and Congressional Affairs, nd Chief Financial Officer are allocated across all strategic goals. *NCUA's 2019/20 positions are funded by three different sources: the Central liquidity Facility funds 3 fullequivalents, and the Share Insurance Fund funds 5 full-time equivalents. NCUA's Operating Fund funds he remaining 1,173 full-time equivalents. 49722 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Office Budget Summary Office Requested 2018- 2019 Change Budget Eastern Region * Region* Region* i of National Examinations and Supervision 2020 Requested Budget Authorized Positions 2019-2020 Change 2018 59,006,000 n/a 61,525,000 2,519,000 4.3% 45,356,000 n/a 47,243,000 1,887,000 4.2% 49,363,000 n/a 51,405,000 2,042,000 4.1% 303 2019 2020 288 288 320 231 231 151 237 237 11,576,000 12,700,000 1,124,000 9.7% 13,224,000 524,000 4.1% 45 45 45 166,865,000 166,425,000 {440,000) -0.3% 173,397,000 6,972,000 4.2% 819 801 801 2,695,000 2,742,000 47,000 1.7% 2,868,000 126,000 4.6% 11 11 11 2,047,000 1,931,000 (116,000) -5.7% 2,013,000 82,000 4.2% 6 6 6 110,000 8.6% 1,390,000 1,193,000 66.9% 3,117,000 142,000 4.8% 12 12 -2.0% 4,404,000 133,000 3.1% 12 12 12 10 10 10 8 8 i of the Executive Director 1,280,000 1,390,000 i of Business Innovations 1,782,000 2,975,000 i of Continuity and Security Management 4,357,000 4,271,000 i of Minority and Women Inclusion 3,486,000 3,478,000 (8,000) -0.2% 3,596,000 118,000 3.4% i of the Chief Economist 1,997,000 2,282,000 285,000 14.3% 2,387,000 105,000 4.6% i of Consumer Financial Protection 4,970,000 5,252,000 282,000 5.7% 5,494,000 242,000 4.6% 24 24 24 i of the ChiefFinancial Officer 19,593,000 20,485,000 892,000 4.6% 21,008,000 523,000 2.6% 53 53 53 1,340,000 1,340,000 0.0% 1,340,000 (603,000) (1,420,000) (817,000) 135.5% 37,829,000 4,579,000 44 44 44 (86,000) 13.8% 0.0% 28.2% i of the Chief Information Officer 33,250,000 Union Resources and Expansion 10,366,000 8,459,000 i of Examination & Insurance** 12,664,000 13,611,000 947,000 7.5% 10,725,000 11,973,000 1,248,000 11.6% 12,565,000 3,720,000 3,776,000 56,000 1.5% 15,752,000 15,757,000 5,000 0.0% (1,907,000) -18.4% 0.0% 38,348,000 519,000 1.4% 8,840,000 381,000 4.5% 36 36 36 14,197,000 586,000 4.3% 53 54 54 592,000 4.9% 44 47 47 3,903,000 127,000 3.4% 10 10 10 17,193,000 1,436,000 9.1% 43 43 43 1,811,000 1,842,000 31,000 1.7% 1,924,000 82,000 4.5% Mission Support 131,232,000 137,973,000 6,741,000 5.1% 142,767,000 4,794,000 3.5% 369 377 377 Total* 298,097,000 $ 304,398,000 $6,301,000 2.1% 316,164,000 $ 11,766,000 3.9% 1,188 1,178 1,178 i of Public and Congressional Affairs *Regional budget comparisons from 2018 to 2019 are not comparable with agency reorganization. 2018 Board Approved Budget included $30.8 million for Region 1, $32.1 million for Region 2,$31.3 million for Region 3,$32.1 million for Region 4, and $33.7 million for Region 5. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.023</GPH> amozie on DSK3GDR082PROD with NOTICES2 "Budget includes 8 FTE related to other NCUA funds; 3 FTE are paid for by the Central Liquidity Facility and 5 FTE are paid for by the Share Insurance Fund. 49723 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Board Budgets OFFICE OF THE CHAIRMAN: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Approved Budget Budget Change FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Util Administrative .. Contracted Services $ Total - Change 2020 Requested Percent 3.0 705,859 525,303 .180,557 70,000 150 10,000 42,000 713,780 529,408 184,372 60,000 250 10,000 27,000 7,920 4,105 3,815 {10,000) 100 (15,000) 1.1% 0.8% 2.1% -14.3% 66.7% 0.0% -35.7% 811,030 $ {16,980) -2.1% 828,009 $ - Change Change Percent Budget - 3.0 2019-2020 - 3.0 750,243 554,440 195,804 60,000 250 10,000 27,000 $ 847,493 36,464 25,032 11,431 - - $ 36,464 5.1% 4.7% 6.2% 0.0% 0.0% 0.0% 0.0";6 4.5% BOARD MEMBER A: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Approved Budget Budget Change FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Util Administrative Contracted Services I Total $ 3.0 3.0 661,980 489,288 172,691 45,000 500 6,000 14,000 670,559 494,397 176,162 40,000 500 9,000 28,000 748,059 727,480 $ Change 2020 Requested Percent - - 8,579 5,109 3,471 {5,000) 3,000 14,000 1.3% 1.0% 2.0% -11.1% 0:0% 50.0% 100.0% $ 20,579 2.8% - 2019-2020 Change Change Percent Budget - 3.0 704,611 517,774 186,838 40,000 500 9,000 28,000 $ 782,111 34,052 23,377 10,6.76 34,052 4.6% - - $ 5.1% 4.7% 6.1% 0.0% 0.0% 0.0% 0.0% BOARD MEMBER B: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Approved Budget Budget Change FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Util Administrative Contracted Services . I Total $ 3.0 3.0 629,999 460,000 170,000 40,000 500 6,000 40,000 670,559 494,397 176,162 40,000 500 9,000 28,000 748,059 716,499 $ Change 2020 Requested Percent - - 40,560 34,397 6,162 3,000 {12,000) 6.4% 7.5% 3.6% 0.0% 0.0% 50.0% -30.0% $ 31,560 4.4% - - 2019-2020 Change Change Percent Budget - 3.0 704,611 517,774 186,838 40,000 500 9,000 28,000 $ 782,111 34,052 23,377 10,676 - - $ 34,052 5.1% 4.7% 6.1% 0.0% 0.0";6 0.0% 0.0% 4.6% VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.024</GPH> amozie on DSK3GDR082PROD with NOTICES2 Note: minor rounding differences may occur in totals. 49724 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Office Budgets EASTERN* REGION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget" Budget Change Percent Budget Change Percent FTE - 288.0 N/A N/A 288.0 Employee Compensation 51,030,573 N/A N/A 53,549,835 2,519,261 Salaries Benefits Travel 36,576,732 14,453,841 6,800,000 726,163 252,080 197,450 N/A N/A N/A N/A N/A N/A 1,729,460 789,801 N/A N/A N/A N/A N/A 38,306,192 15,243,643 6,800,000 726,163 252,080 197,450 Rent /Comm/Utll Administrative Contracted Services Total $ N/A N/A 59,006,266 N/A $ 61,525,528 4.9% 4.7% - 5.5%1 o.o%1 - O.O"A,I - o.o%1 o.o%1 - $ 2,519,261 4.3%i SOUTHERN* REGION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget" Budget Change Percent Budget Change Percent FTE - - 231.0 N/A N/A 231.0 Employee Compensation 38,519,296 N/A N/A 40,406,555 1,887,259 4.9% Salaries Benefits Travel 27,420,801 11,098,495 6,100,000 178,738 193,075 364,500 N/A N/A N/A N/A N/A N/A N/A 28,716,394 11,690,160 6,100,000 178',738 193,075 364,500 1,295,594 591,665 4.7% 5.3%1 o.o%1 o.o%1 o.o%1 o.o%1 Rent /Comm/Util Administrative Contracted Services Total $ 45,355,609 N/A N/A N/A N/A N/A N/A N/A $ 47,242,868 - - $ 1,887,259 4.2%i WESTERN* REGION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget" Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Util Administrative Contracted Services Total $ - - 237.0 N/A N/A 237.0 41,693,060 N/A N/A 43,735,573 2,042,513 4.9% 29,680,900 12,012,160 6,550,000 625,000 290,000 205,000 N/A N/A N/A N/A 1,402,174 640,338 4.7% N/A N/A N/A N/A N/A 31,083,075 12,652,498 6,550,000 625,000 290,000 205,000 49,363,060 N/A N/A N/A N/A N/A $ 51,405,573 - - $ 2,042,513 5.3%1 0.0%] o.o%1 o.o%1 o.o%1 4.1%i *See above for a discussion ofworkload at Regional Offices. Note that Southern Region includes AMAC operations. 1\ See above for explanation ofRegional Office budgets in Note: minor rounding differences may occur in totals. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.025</GPH> amozie on DSK3GDR082PROD with NOTICES2 2018 49725 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices OFFICE OF THE EXECUTIVE DIRECTOR: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE 6.0 Employee Compensation Salaries Benefits Travel .·. Rent /Comm/Util Administrative ED Core FFIEC Contracted Services Total $ 3,326,709 - 6.0 1,746,709 1,317,470 429;239 35,000 20,500 1,305,000 25,000 1,280,000 219,500 (125,249) (123,408) (1,841) 10,000 (250) 110,000 1,621,460 1,194,062 427,398 45,000 20,250 1,415,000 25,000 1,390,000 219,500 $ 3,321,210 (5,499) -0.2% 110,000 $ -7.2% -9.4% 0.0% 28.6% -1.2% 8.4% 0.0% 8.6% 0.0% - 6.0 1,703,702 1,250,521 453,181 45,000 20,250 1,415,000 25,000 1,390,000 219,500 $ 3,403,452 82,242 56,459 25,783 - - $ 82,242 5.1% 4.7%1 o.o%1 o.o%1 o.oo1ol o.o%1 o.o%1 o.o%1 o.o%1 2.5%1 OFFICE OF BUSINESS INNOVATION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel 12.0 3.0 33% 12.0 2,767, 775 2,071,694 696,081 180,500 2,400 2,000 22,000 1,085,775 839,694 246,081 95,500 2,400 2,000 7,000 64.6% 68.2% 54.7% 112.4% 0.0% 0.0% 0.0% 2,910,465 2,169,650 740,815 180,500 2,400 2,000 22,000 2,974,675 $ 1,192,675 66.9% - Rent/Comm/Util Administrative Contracted Services 15,000 $ Total 9.0 1,682,000 1,232,000 450,000 85,000 1,782,000 $ $ 3,117,365 142,690 97,956 44,734 - - $ 142,690 5.2% 4.7%1 6.4%1 o.o%1 o.o%1 o.o%1 o.o%1 4.8%1 OFFICE OF CONTINUITY AND SECURITY MANAGEMENT: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Util Administrative contracted Services Total 12.0 12.0 2,492,727 1,840,595 652,132 39,800 2,602,123 1,920,838 681,285 34,000 35,000 30,000 1,570,353 30,000 1,794,642 $ 4,357,169 $ 4,271,476 109,396 80,243 29,153 (5,800) (224,289) (85,693) -2.0% 35,000 - $ 4.4% 4.4% 4.5% -14.6% O.Oo/c 0.0% -12.5% - 12.0 2,734,423 2,011,661 722,762 34,000 35,000 30,000 1,570,353 $ 4,403,776 132,300 90,823 41,477 - - $ 132,300 5.1% 4.7%1 6.1%1 o.o%1 o:o%1 o.o%1 0.0%1 3.1%1 VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.026</GPH> amozie on DSK3GDR082PROD with NOTICES2 Note: minor rounding differences may occur in totals 49726 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices OFFICE OF MINORITY AND WOMEN INCLUSION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Util Administrative Contracted Services Total $ - 10.0 10.0 2,159,801 2,300,654 140,853 1,604,302 1,707,197 555,499 593,457 74,399 75,000 - - 10.0 - 6.5% 2,418,238.9 117,585 5.1% 102~894 6.4% 1,787,918 80,721 4.7%1 37,959 6.8% 630,321 36,864 6.2%1 601 0.8% 75,000 - o.o%1 - o.o%1 5,500 7,600 2,100 38.2% 7,600 115,650 141,658 26,008 22.5% 141,658 - o.o%1 1,130,663 953,500 (177,163) ~15.7% .953,500 - o.o%1 (7,601) -0.2% 3,486,013 $ 3,478,412 $ $ 3,595,997 $ 117,585 3.4%i OFFICE OF THE CHIEF ECONOMIST: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent /C:omm/Util Administrative Contracted Services Total $ - - 7.0 8.0 1.0 14% 8.0 1,748,956 2,035,603 286,647 16.4% 2,140,391 1,310,090 1,521,399 211,309 16.1% 1,593,335 71,936 4.7%1 438,866 514,204 75,338 17.2% 547,056 32,852 6.4%1 28,000 27,000 (1,000) -3.6% 27,000 - o.o%1 500 500 - 0.0% 500 - O.D%1 215,839 215,839 0.0% 215,839 3,375 3,000 -1Ll% 3,000 1,996,670 $ 2,281,942 - (375) $ 285,272 14.3% $ 2,386,730 104,788 $ 5.1% - o.o%1 - 0.0",61 104,788 4.6%i OFFICE OF CONSUMER FINANCIAL PROTECTION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent - - FTE Employee Compensation Salaries Benefits 4,602,243 4,809,476 207,233 4.5% 5,051,502 242,026 5.0% 3,361,813 3,513,939 152,126 4.5% 3,680,089 166,150 4.7%1 1,240,431 1,295,537 55,107 4.4% 1,371,413 75,876 5.9%1 269,073 340,946 71,873 26.7% 340,946 - o.o%1 24,245 38,250 14,005 57.8% - o.o%1 - o.o%1 - o:o%1 Rent /Comm/Uti I 24.0 - 24.0 Travel Administrative 26,403 31,293 4,890 18.5% 38,250 31,293 Contracted Services Total 48,572 32,004 (16,568) -34.1% 32,004 $ - 24.0 4,970,537 $ 5,251,969 $ 281,433 5.7% $ 5,493,996 $ 242,026 4.6%i VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.027</GPH> amozie on DSK3GDR082PROD with NOTICES2 Note: minor rounding differences may occur in totals 49727 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices OFFICE OF THE CHIEF FINANCIAL OFFICER: 2018-2019 BUDGET SUMMARY 2018-2019 2018 Board 2019 Requested Change 2020 FTE Employee Compensation Salaries Benefits Travel Rent /Comm/Uttl OCFO King Station Note Administrative Contracted Services Crosscutting Total $ 53.0 10,160,644 7,457,474 2,703,171 65,000 2;045,500 705,500 1,340,000 1,112,850 7,549,000 (603;000) 20,329,994 - 53.0 10,394,574 7,606,963 2,787,611 74,000 2,048,000 $ 708,000 1,340,000 1,050,000 8,25MOO (1,420,000) 20,404,574 233,930 149,489 84,440 9,000 2,500 2,500 2.3% 2.0% 3.1% 13.8% 0.1% - $ (62,850) 709,000 .{817,000) 74,580 -5.6% 9.4% 135.5% 0.4% 2019-2020 - 53.0 10,917,587 7,966,243 2,951,343 74,000 2,048,000 708,000 1,340,000 1,050,000 8,258,000 523,013 359,280 163,732. 20,527,587 5.0% 4.7%1 - 5.9%1 o.o%1 - 0:0%1 I I - - - o.o%1 o.oo1ol - (1,820~000) $ Change $ 123,013 I 0.6%j OFFICE OF THE CHIEF INFORMATION OFFICER: 2018-2019 BUDGET SUMMARY CHECK 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits $ - - 44.0 - 44.0 10,204,039 841,045 6,934,509 7,572,503 637,995 9.2% 7,929,136 356,633 4.7%1 2,428,486 2,631,536 203,050 8.4% 2,794,401 W2,865 6.2%1 9.0% 10,723,537 519,498 5.1% 161,950 165,000 3,050 1.9% 165,000 - o.o%1 3,907,000 4,015,008 108,008 2.8% 4,015,008 - o.o%1 2,563,870 2,978,445 414,575 16.2% 2,978,445 - o.o%1 17,253,940 20,466,221 3,212,281 18.6% 20,466,221 - o.o%1 4,578,959 13.8% Travel Rent /Comm/Util Administrative Contracted Services Total - 44.0 9,362,994 33,249,754 $ 37,828,713 $ $ 38,348,211 $ 519,498 1.4%1 OFFICE OF NATIONAL EXAMINATIONS AND SUPERVISION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent - - FTE 45.0 45.0 9,094,944 10,402,148 1,307,204 14.4% Employee Compensation Salaries Benefits 6,567,606 7,607,351 1,039,746 2,527,339 2,794,797 267,458 Travel 1,808,189 1,600,000 (208,189) Rent /Comm/Util Administrative Contracted Services Total $ - 45.0 - 10,926,113 523,964 5.0% 15.8% 7,967,050 359,699 4.7%1 lo.6% 2,959,062 164,266 -11.5% 1,600,000 - o.o%1 o.o%1 5.9%1 16,805 21,012 4,207 25.0% 21,012 - 61,057 52,201 (8,856) -14.5% 52,201 - o.o%1 594,965 624,455 29,490 5.0% 624,455 - O.O"!ol 1,123,856 9.7% 11,575,960 $ 12,699,816 $ $ 13,223,781 $ 523,964 4.1%i VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.028</GPH> amozie on DSK3GDR082PROD with NOTICES2 Note: minor rounding differences may occur in totals 49728 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices OFFICE OF CREDIT UNION RESOURCE AND EXPANSION: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change 2020 Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent /Cornrn/Util. Administrative contracted Services Total - - 36.0 36.0 9,522,877 7,010,978 2,511,898 538,000 17,750 23,250 264,400 7,536,322 5,533,197 2,003,125 620,000 14,750 30,750 257,000 (1,986,554) (1,477,781) (508,773) 82,000 {3,000) 7,500 (7,4(}0) -20.9% -21.1% -20.3% 15.2% -16.9% 32.3% -2.8% 7,917,083 5,794,587 2,122,495 620,000 14,750 30,750 257,000 10,366,277 8,458,822 (1,907,454) -18.4% 8,839,583 - 36.0 380,760 261,390 119,370 - - $ 380,760 5.1% 4.7%1 6.o%1 o.o%1 o.o%1 o.o%1 o.o%1 4.5%j OFFICE OF EXAMINATION AND INSURANCE: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change 2020 Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent/Comm/Util Administrative Contracted Services Total $ 53.0 54.0 1.0 1.9% 54.0 10,931,964 8,124,044 2,807,919 1,001,643 14,200 267,216 448,500 11,464,514 8,509,711 2,954,803 995,000 17,320 621,500 513,000 532,550 385,667 146,883 (6,643) 3;120 354,284 64,500 4.9% 4.7% 5.2% -0.7% 22.0% 132.6% 14.4% 12,050,629 8,912,077 3,138,553 995,000 17,320 621,500 513,000 12,663,523 $ 13,611,334 $ 947,811 7.5% $ 14,197,449 586,115 402,365 183,750 - - $ 586,115 5.1% 4.7% 6.2%1 o.o%1 o.o%1 o.o%1 o.o%1 4.3%1 OFFICE OF GENERAL COUNSEL: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change 2020 Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE Employee Compensation Salaries Benefits Travel Rent/Comm/Util Administrative Contracted Services Total 44.0 47.0 3.0 6.8% 47.0 10,226,711 7,644,274 2,582,437 156,000 11,496,869 8,584,634 2,912,235 150,000 1,270,158 940,361 329,797 (6,000) 12.4% 12.3% 12.8% -3.8% 12,088,145 8,990,542 3,097,q03 150,000 - - 1,500 325,000 (4,500) (ll,OOO) -75.0% -3.3% 11,973,369 $ 1,248,658 11.6% - 6,000 336,000 $ 10,724,711 $ 591,276 405,908 185,368 - - - 1,500 325,000 $ 12,564,645 - - $ 591,276 5.1% 4.7% 6.4%1 o.o%1 o.o%1 o.o%1 0:0%1 4.9%i VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.029</GPH> amozie on DSK3GDR082PROD with NOTICES2 Note: minor rounding differences may occur in totals 49729 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices OFFICE OF HUMAN RESOURCES: 2019-2020 BUDGET SUMMARYY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE 43.0 43.0 Employee Compensation 9,079,982 9,621,702 Salaries Benefits Travel 6,171,019 6,359,464 2,908,963 3,262,238 2,826,615 2,834,765 294,180 290,900 532,601 454,677 3;018,943 2,554,787 Rent /Comm/Util Administrative Contracted Services Total $ 15,752,321 $ 15,756,831 541,721 $ - - 43.0 10,057,995 188,445 3.1% 6,658,977 299,513 4.7% 353,275 12.1% 3,399,018 136,780 8,150 0.3% 3,834,765 1,000,000 0%1 35.3%1 (3,280) -1.1% 290,900 - o.o%1 (77,924) -14.6% 454,677 - o.o%1 (464,156) -15.4% 4,511 0.0% 2,554!787 17,193,124 $ 436,293 - 6.0% $ 1,436,293 4.5% o.o%1 9.1%i OFFICE OF PUBLIC AND CONGRESSIONAL AFFAIRS: 2019-2020 BUDGET SUMMARY 2018 Board 2019 Requested 2018-2019 Change Requested 2019-2020 Change Approved Budget Budget Change Percent Budget Change Percent FTE 7.0 7.0 Employee Compensation 1,545,155 1,613,383 Salaries Benefits Travel 1,146,826 398,329 12,300 Rent /Comm/Util Administrative Contracted Services Total 1$ - - 7.0 - 4.4% 1,695,830 82,447 5.1% 1,197,036 50,210 4.4% 1,253,635 56,600 4.7% 416,348 18,018 4.5% 442;195 25,848 6.2%1 12,000 (300) -2.4% 12,000 - o.o%1 500 o.o%1 0.0% -7.6% - 39,036 500 (3,200) 500 42,236 39,036 - o.o%1 210,97.5 176,975 {34,000) -16.1% 176,975 - o.o%1 I 68,228 1,810,666 $ 1,841,894 $ 31,228 1.7% $ 1,924,341 $ 82,447 4.5%1 X. Appendix B: Capital Projects VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4703 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.030</GPH> amozie on DSK3GDR082PROD with NOTICES2 Note: minor rounding differences may occur in totals Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Information technology software development investments Examination and Supervision Solution $ $ 8,414,000 $ 8,414,000 $ Data Collection Sol uti on $ $ Business Intelligence Tools and Capability Enhancement $ 1,920,000 $ 1,920,000 $ 1,920,000 $ Enterprise Central Data Repository $ AMAC Servicing System Solution $ 2,100,000 $ Enterprise Data Analytics, Governance and Reporting Services $ 600,000 $ Asset and Liabilities Management Application $ 433,000 $ 3,167,000 $ 3,167,000 $ 3,600,000 Human Resource Business Solution $ 350,000 $ Enterprise Learning Management System Replacement $ 250,000 GRC Tool: Managing Compliance Information $ Financial Management System Analysis of Alternatives $ 200,000 $ 2,400,000 $ 990,000 $ 1,096,000 600,000 $ 600,000 $ 600,000 600,000 $ 600,000 $ 450,000 $ $ $ $ 550,000 $ $ $ 325,000 $ $ $ $ 350,000 $ Disaster Recovery Capabilities Enhancement $ $ $ $ Anticipated additional software development investments $ $ $ $ 7,500,000 $ 350,000 112,000 $ 9,000,000 $ 5,495,000 $ 3,989,000 $ 1,800,000 Other Information technology investments amozie on DSK3GDR082PROD with NOTICES2 $ 5,653,000 $ 15,051,000 $ 17,116,000 $ 15,758,000 Enterprise Laptop Lease $ 1,850,000 $ 1,000,000 $ 800,000 $ IT Infrastructure, Platform and Security refresh $ 3,700,000 $ 1,700,000 $ 2,350,000 $ Agency Modernization Infrastructure Support $ 1,250,000 $ $ $ Agency Web Design and Platform modernization $ 1,200,000 $ $ $ Home Mortgage Disclosure Act System Development (cost sharing) $ 750,000 $ $ $ Credit and Deposit Analytic Solution $ 250,000 $ $ $ Security management tool upgrades (Patch and Vulnerability) $ $ Security management tool upgrades (Security Event/Incident Management) $ Refresh End of Life VoiP Phone System 800,000 $ 342,000 $ $ $ 327,000 $ $ $ $ 170,000 $ Enterpise Video Conference Collaboration Services and Upgrades $ $ 2,125,000 $ $ Anticipated additional other information technology investments $ $ $ 1,000,000 VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4725 670,000 E:\FR\FM\02OCN2.SGM $ 02OCN2 EN02OC18.031</GPH> 49730 49731 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name EXAMINATION AND SUPERVISION SOLUTION AND INFRASTRUCTURE HOSTING (ESS&IH) (2019.007) Project sponsor Business Innovation Director and Chief Information Officer Customers/ beneficiaries Internal: E&I, All Field Program Offices, OCIO, and OCFP External: Credit Unions, State Supervisory Authorities (SSAs) Budget $ in thousands Acquisition Operations and Maintenance Link to the NCUA strategic goals 2018 $0 2019 $8,414 2020 TBD TBD 2021 TBD $4,500 2022 $3,600 Goal 1: Ensure a Safe and Sound Credit Union S~stem. ESS will enable credit union examiners to fulfill the NCUA strategic objective 1.2, "provide high-quality and efficient supervision," by providing a more effective and secure examination tool. Goal 3: Maximize organizational,gerformance to enable mission success. ESS will enable credit union examiners to perform their work more efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation." Project Performance Performance measure %of Exam and Supervision Contact Types by Program Transitioned to ESS Development Sprint completion: Estimate versus Actual Testing Pass Rate:% of User Stories that Pass User Acceptance Testing on First attempt Production System Availability 2018 2019 2020 2021 28% 52% 100% Release 1* Within +/- 20% Release 2** Within +/- 20% Release 3*** Within+/20% 90% 90% 90% 99.9% 99.9% 99.9% 2022 99.9% * Release 1 includes ESM Iterations 1-3: ONES Credit Union (CU) Exam Program (Contact Type 10,11, 22,23, 26,27,28) VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.032</GPH> amozie on DSK3GDR082PROD with NOTICES2 including 2 SSAs. 49732 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices * Release 1 includes ESM Iterations 1-3: ONES Credit Union (CU) Exam Program (Contact Type 10,11, 22,23, 26,27,28) including 2 SSAs. ** Release 2 includes ESM Iteration 4: All natural Person CU risk focused exam (10,11), Small CU (10), Corporate CU Exam (12,13), and Customer Complaints (32). ***Release 3 includes (ESM Iteration 5): Fair lending exam (3); Onsite Fair lending exam; NFICU OnsitejOffsite (15), Vendor Review (24), CUSO Review (29); On/Offsite Super Fraud (90,91 ); Consumer Compliance f96, 97); Liquidatio~ (new); Bank Purchase (new); Conservatorship (50,5i) The ESS&IH projects will put access to the key examination and supervision capabilities into a streamlined toolset allowing Examiners and Supervisors to be more efficient, consistent and effective. The overarching ESS&IH project scope is to implement a new, flexible, technical foundation to enable current and future the NCUA business process modernization initiatives, and replace the NCUA's legacy exam system, AIRES, with a new Commercial-Off-The-Shelf (COTS) solution. This project represents the first five iterations of the ESM Program. This project includes the implementation of a central user interface (CUI), which will serve as a common point of access for future ESM applications and support secure transfer of data between the NCUA and third parties. Key project deliverables include a new COTS examination solution to replace the legacy system, AIRES, deployment of a CUI and establishment of the technical foundation. Investment objectives include: " Process Efficiency and Scalability- To enable the NCUA staff to effectively oversee all credit unions, from the smallest to the largest, with various types of examinations from a single platform; " Process Flexibility and Adaptability- To adjust to new regulatory processes, demands, and priorities rapidly to an increasingly sophisticated credit union industry; " Improved Analytics- To enhance the ability to identify and evaluate risk in credit unions effectively through deep, detailed, "vertical" and "horizontal" analysis of credit unions using various analytical techniques and tools; " Robust and Flexible Data Collection- To securely collect and share financial and non-financial data with flexible workflows to automate manual processes and efficiently route work assignments; and, " Risk-based Examination Approach- To focus examiner resources on credit unions and asset portfolios that pose the most risk to the credit union industry. " Modern IT Infrastructure - To enable current and future business process modernization including a single point of entry to related IT services. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.033</GPH> amozie on DSK3GDR082PROD with NOTICES2 Time Management System (TMS), Management Automated Resource System (MARS), and National Supervision Policy Manual (NSPM) tools are not in scope of this project Replacement of these legacy systems will be included in future procurement efforts under the ESM Program. Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices March/2019 June/2019 September /2019 December /2019 amozie on DSK3GDR082PROD with NOTICES2 Project Risks and Mitigation Strategies VerDate Sep<11>2014 20:22 Oct 01, 2018 Stand-up, new ESS&IH "cloud" based infrastructure/technical platform and attain authority to operate (Enterprise Solutions Modernization (ESM) (Iteration 1) Complete User Acceptance Testing of the first Release of the Central User Interface [CUI) and new examination tool Deploy first release of the CUI and new examination tool to Small User Group (i.e., ONES) and complete training (ESM Iteration 23) Complete discovery and requirements gathering for modernization of examination process for majority of users (ESM Iteration 4) Risk If changes continue to be made to legacy tools/applications, then the ESS configuration timelines may be impacted due to changing requirements. If the central data repository is not funded and stood up timely, the implementation timeline for ESS may be delayed. If during discovery our vendor's initial assumptions (e.g., Secure File Transfer) were incorrect and additional software or services are required, then costs could increase and additional funding would be required. Jkt 247001 PO 00000 Frm 00043 Fmt 4701 Mitigation Maintain regular monthly communications with E&I and the CRM team on the status, planned activities, and estimated timeline. ECDR integration will minimize impacts to ESS&IH. Parallel development and focus on the ONES data. Obligate minimum amounts required for effective program execution in order to preserve management reserve (e.g., MTIPS, PMO, and Lease). Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.034</GPH> Quarterly project schedule and deliverables 49733 49734 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name DATA COLLECTION SOLUTION (DCS) / ENTERPRISE CONTENT MANAGEMENT (ECM) ANALYSIS OF ALTERNATIVES (AOA) STUDY (2019.008) Project sponsor OCIO and the Office of Business Innovation (OBI) Customers/ beneficiaries Internal: OCIO and OBI External: Nj A Budget $ in thousands Acquisition Operations and Maintenance Link to the NCUA strategic goals 2018 $0 2019 $200 2020 $2,400 2021 2022 TBD TBD Goal 1: Ensure a Safe and Sound Credit Union S~stem. The Data Collection Solution (DCS) will enable credit union examiners to fulfill the NCUA strategic objective 1.2, "provide high-quality and efficient supervision," 1.2 by implementing an enterprise content management (ECM) platform that ingests data simply and with improved performance. Goal 3: Maximize organizational,gerformance to enable mission success. The Data Collection Solution (DCS) will assist credit union examiners to perform their work more efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by implementing an enterprise content management (ECM) platform that will support the NCUA's requirements for data collection, workflow, document management, customer relationship management and records management thereby improving the NCUA's records management compliance. (note: ...f indicates achievement of performance measure in year) amozie on DSK3GDR082PROD with NOTICES2 Detailed project description VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Complete AoA Study Provide 3-4 ECM Alternative Solutions Complete ECM Solicitation Package Award ECM Solution Contract Implement ECM Solution 2018 2019 y y 2020 2021 2022 TBD TBD TBD In addition to its data collection needs, which the NCUA plans to address through the Data Collection Solution (DCS) project, the agency requires document management, records management, customer relationship management and workflow solutions. Initial research indicates that Enterprise Content Jkt 247001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.035</GPH> Project Performance Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Detailed project description 49735 In addition to its data collection needs, which the NCUA plans to address through the Data Collection Solution (DCS) project, the agency requires document management, records management, customer relationship management and workflow solutions. Initial research indicates that Enterprise Content Management (ECM) platforms may provide the capability to address these broad range of needs. A study is required to validate whether ECM solutions can meet the NCUA's data collection as well as records/document/customer management needs and to produce 3-4 viable alternative solutions. The purpose of this pre-planning project phase is to award and complete an Analysis of Alternatives (AoA) to study the operational effectiveness, suitability, risks and life-cycle costs of alternative ECM solutions to support the NCUA's requirements for data collection, workflow, document management, customer relationship management and records management. An AoA needs to be completed to gather the requirements across these areas and to validate that the ECM solutions are the most effective and efficient way to meet the NCUA's data collection, document management, records management needs. Additionally, the project will provide a roadmap for acquiring and implementing an ECM platform and will be followed by a subsequent project to solicit and implement the solution. The scope of this project in 2019 is an AoA ofECM platforms and identification of 3-4 viable alternative solutions to address the following requirements: • Data Collection Solution (DCS) • Call Report • CU Profile • cuso VerDate Sep<11>2014 Quarterly project schedule and deliverables March/2019 Complete AoA Study june/2019 September /2 019 Identify and scope 3-4 viable ECM alternative solutions Project Risks and Mitigation Strategies Risk If the scope of the DCS AoA study is not properly defined, then the study may not yield suitable alternatives for the NCUA's data collection, records management, document management and workflow requirements. 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00045 Fmt 4701 Sfmt 4725 Mitigation Project sponsor will ensure early collaboration with OCIO and OBI leadership to define the scope of the AoA study. Additionally, the project sponsor will be prepared to spin off a second AoA study to address unrelated requirements. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.036</GPH> amozie on DSK3GDR082PROD with NOTICES2 • GENISIS/FOMIA • Grants & Loans • Regional (e.g. Correspondence) • Customer Assistance Center • Workflow • Logging • GENISIS • CRM • Records Management Enterprise Document Management The results of the AoA will aid the agency's decision making on major IT investments and the suitability of ECM as a viable solution. 49736 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name BUSINESS INTELLIGENCE (BI) TOOLS AND CAPABILITY ENHANCEMENT (2019.009) Project sponsor Office of National Examination and Supervision [ONES) Customers/ beneficiaries Internal: ONES External: Large and Corporate Credit Unions Budget $in thousands Acquisition Operations and Maintenance 2018 $1,920 2019 $1,920 --- --- 2020 TBD $1,375 2021 2022 --- --- $1,375 $1,375 Goal1: Ensure a Safe and Sound Credit Union S~stem. The BI Tool and Capability Enhancement project will enable credit union examiners to fulfill the NCUA strategic objective 1.2, "provide high-quality and efficient supervision," by consolidating the historic and on-going information collected by ONES in a central, standardized data warehouse. ONES will acquire and analyze risk data sets independent of the risk reporting provided by the credit unions themselves, enhancing both the quality and depth of ONES assessment of the safety and soundness of covered credit unions. Link to the NCUA strategic goals Goal 3: Maximize oq;:anizational,gerformance to enable mission success. The BI Tool and Capability Enhancement project will enable credit union examiners perform their work more efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by providing a centralized source of information team to implement Data Driven Supervision which will improve overall understanding of, and quantification of, material risks, provide the ability to conduct regular and adhoc sensitivity testing, reverse stress testing, and focused risk testing. amozie on DSK3GDR082PROD with NOTICES2 (note: ...f indicates achievement of performance measure in year) VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Continue to ingest quarterly data from the CUs Cleanse quarterly data for ingestion into the warehouse Modify template(s) for data ingestion in accordance with approved business rules Jkt 247001 PO 00000 Frm 00046 2018 2019 2020 2021 2022 ...j ...j ...j ...j ...j ...j ...j Fmt 4701 y Sfmt 4725 y y E:\FR\FM\02OCN2.SGM y y ...j 02OCN2 EN02OC18.037</GPH> Project Performance 49737 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Create new templates for additional data collection Develop business user dashboards and reports Percentage of data successfully ingested Amount of data received rquarterly) ~ ~ ~ ~ ~ ~ ~ ~ Baseline established Baseline established TBD TBD TBD TBD TBD TBD The purpose of this project is the collection, centralization, organization and storage of ONES data so that analysis is more accurate and efficient. This accessibility will integrate with BI tools to improve ONES's overall reporting and data analysis capabilities. The primary goal for this project is an organized and governed data warehouse that hosts clean and accurate data from legacy, enhanced and new systems in a manner that allows for timely, distributed reporting (BI tools) and can adapt to fluctuating market conditions. The continued buildout of the data warehouse will allow the ONES financial analysts to perform data driven assessments and challenge of capital analysis and supervisory stress tests developed by its covered credit unions, and provide a more informed assessment of credit union capital needs relative to overall risk profile. The data warehouse buildout also enhances management reporting and supports the ability of ONES National Lending Specialists (NLS) to prepare for and conduct risk-based examination of credit risk exposures and management practices in ONES covered credit unions. These new functions will improve management's supervision of ONES activities as well as all ONES staffs' ability to prepare in advance for exams and quickly identify and quantify areas of risk September/2019 December/2019 Buildout of the BI data warehouse architecture Enhancements and buildout of the BI data warehouse environment Refinement and new reporting functionality; Refinement and new dashboards Delivery of data warehouse and for ONES staff Risk If the credit unions do not provide data in the correct format each quarter, then portfolio information for the credit unions will be inaccurate or incomplete. Mitigation Provide clear updated instructions for each template that include acceptable lists of values for each field where possible. amozie on DSK3GDR082PROD with NOTICES2 If credit union data is inaccurate or incomplete, then processing of quarterly credit union data will be delayed due to time to analyze and correct input data issues. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4725 Continue to develop additional statistical routines that will quickly identify data file quality issues; this will improve the data issue identification and speed up the process of addressing data quality issues. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.038</GPH> March/2019 June/2019 49738 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name ENTERPRISE CENTRAL DATA REPOSITORY (ECDR) (2019.012) Project sponsor aero Customers/ beneficiaries Internal: All Offices at the NCUA External: Credit Unions, Credit Union members and the public will indirectly benefit from this project. Budget $ in thousands Acquisition Operations and Maintenance 2018 $0 2019 $990 2020 $1,096 $1,129 2021 2022 $2,709 $2,933 Goal1: Ensure a Safe and Sound Credit Union S~stem. The Enterprise Central Data Repository (ECDR) project will enable credit union examiners to fulfill strategic objective 1.2, "provide high-quality and efficient supervision," by providing a data platform that will enable the NCUA to more accurately and cost-effectively assess risks to the credit union system that will enable the NCUA to better identify and evaluate credit union risk more efficiently to conduct its mission through data analytics. Link to NCUA strategic goals Goal 3: Maximize organizational,gerformance to enable mission success. The Enterprise Central Data Repository (ECDR) project will enable credit union examiners to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by providing the central data repository on which the agency's enterprise data analytics and Enterprise Solutions Modernization (ESM) initiative will rely that will improve the integrity, security and business value of the NCUA's data. amozie on DSK3GDR082PROD with NOTICES2 (note: ...f indicates achievement of performance measure in year) VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Expand infrastructure to support legacy data required for ESS Continue to ingest ONES quarterly loan data Eliminate duplicate data tables Accurately categorize data (enterprise, analytics, etc.) Number of data source consolidated into ECDR Jkt 247001 PO 00000 Frm 00048 2018 2019 2020 2021 2022 ...j ...j ...j ...j ...j y y TBD TBD TBD Fmt 4701 y y ...j Baseline established Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.039</GPH> Project Performance Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49739 Detailed project The Enterprise Central Data Repository (ECDR) project will implement a central data repository that will serve as the data integration point for ESS, ONES's analytic description tools, the NCUA's legacy applications and the Data Collection Solution (DCS). The ECDR will become an enterprise solution for the NCUA allowing the organization to transition in a phased approach the from the existing legacy databases to a cloudbased data repository serving the agency's needs. December/2018 March/2019 June/2019 September/2019 December/2019 Project Risks and Mitigation Strategies Signed ATO for ECDR, not including ISA/MOU's Phase 0/1: ECDR Infrastructure+ Support for ESS Iterations 2 & 3 (ONES Examination Data and Institutional Financial Data) integrated in Test environment. Phase 0/1: ECDR Infrastructure+ Support for ESS Iterations 2 & 3 (ONES Examination Data and Institutional Financial Data) in Production Phase 1: Support for ESS Iteration 4 (Examination Data & Institutional Financial Data for Remaining Credit Unions) Risk If resources assigned to this project are needed to support high priority tasks, then there may be impacts to this project. If requirement changes are needed, then there may be impact to the schedule. amozie on DSK3GDR082PROD with NOTICES2 If there are schedule delays with the cloud environment, then additional storage may be required on premise. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4725 Mitigation Continuous communication with OCIO Management on task prioritization and/or resource conflicts. Hold regular status meetings with project team to keep requirements delivery on schedule. Escalate any requirements changes or expansion of requirements immediately to determine the impact of such changes. Continue to communicate with the ESS team. Prepare for possible delays in moving to cloud be creating CR to increase storage by the time solution is scheduled to migrate to Test. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.040</GPH> Quarterly project schedule and deliverables 49740 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name AMAC SERVICING SYSTEM SOLUTION (2019.015) Project sponsor Asset Management and Assistance Center [AMAC) Customers/ beneficiaries Internal: Asset Management and Assistance Center (AMAC) External: All Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 $2,100 2019 $600 2020 $600 2021 TBD TBD 2022 TBD Link to the NCUA Goal 1: Ensure a Safe and Sound Credit Union S~stem. A new AMAC Servicing System Solution will help the NCUA achieve strategic objective 1.1, "maintain a strategic goals strong Share Insurance Fund," by enhancing AMAC's legacy content management and servicing systems. This will improve management of credit union liquidations while increasing asset recovery, thereby minimizing costs to the Share Insurance Fund and credit union members. Goal 3: Maximize organizational,gerformance to enable mission success. A new AMAC Servicing System Solution will assist AMAC staff to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation." The new system will enhance AMAC's legacy content management and servicing systems, which will enable AMAC to perform its loan and member servicing duties more effectively, while continuing to fulfill its regulatory reporting responsibilities. (note: .J indicates achievement of performance measure in year) amozie on DSK3GDR082PROD with NOTICES2 Detailed project description VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Initiate and plan the acquisition of a new core processor Acquire a modern, scalable and cloud-based core processor replacement Integrate, configure and provide AMAC personnel with access to a new core processor solution 2018 2019 2020 2021 2022 .; .; .; The purpose of this project is to enhance AMAC's legacy content management and servicing systems. Phase I of the project resulted in an enhanced, secure content Jkt 247001 PO 00000 Frm 00050 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.041</GPH> Project Performance Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49741 The purpose of this project is to enhance AMAC's legacy content management and servicing systems. Phase I of the project resulted in an enhanced, secure content management solution. During Phase II of the project, the NCUA will identify, acquire, and implement replacement solutions for AMAC's aging core data processor. The key project deliverables are the acquisition and deployment of a replacement core processing system. June/2019 September/2019 December/2019 Award contracts for the core processor replacement solution and implementation services. Complete solution configuration and data migration. Complete testing. Deploy new solution. amozie on DSK3GDR082PROD with NOTICES2 Risk The agency's existing core processor will go endof-life (EoL) in 2019 If a FedRAMP-compliant (or SOC 2, Type II audit compliant) solution is not acquired, then an Authority to Operate (ATO) may be difficult or impossible to obtain If data migration issues are encountered, the project's budget and/or schedule would likely be negatively impacted VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00051 Fmt 4701 Mitigation Identify, acquire and implement a replacement solution in 2019 Conduct thorough market research to identify vendors that offer either FedRAMP or SOC 2, Type II compliant solutions Assess data migration tools and data/database compatibility during market research and use this as qualifying factor Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.042</GPH> March/2019 49742 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name ENTERPRISE DATA ANALYTICS, GOVERNANCE AND REPORTING SERVICES (2019.010) Project sponsor Office of Business Innovation Division (OBI) Customers/ beneficiaries Internal: All Offices at the NCUA External: N/A Budget $ in thousands Acquisition Operations and Maintenance 2018 $600 2019 $600 2020 $450 2021 2022 $150 $150 Goal1: Ensure a Safe and Sound Credit Union S~stem. The Enterprise Data Analytics, Governance and Reporting Services project will enable credit union examiners to fulfill the NCUA strategic objective 1.2, "provide high-quality and efficient supervision," by facilitating the centralization, organization and storage of the NCUA data so analysis is more accurate, simple and easily distributed across the agency to improve the NCUA's overall reporting and data analysis capabilities. Link to the NCUA strategic goals Goal 3: Maximize organizational,gerformance to enable mission success. The Enterprise Data Analytics, Governance and Reporting Services project will enable credit union examiners to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation," by establishing an enterprise repository for reporting purposes that will allow for consistent, centralized reporting and eliminating the duplicative reporting responsibilities for numerous staff. amozie on DSK3GDR082PROD with NOTICES2 (note: .J indicates achievement of performance measure in year) VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Create draft templates for governance body to identify enterprise data Provide training sessions for Data Stewards Develop draft charter for review by Enterprise Data Council Establish and Operate the Enterprise Data Council Create Enterprise Data Instruction Jkt 247001 PO 00000 Frm 00052 2018 Fmt 4701 .; 2019 2020 2021 2022 y .; .; y Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.043</GPH> Project Performance 49743 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices ~ Validate Data Governance Framework Conduct Critical Data Element Inventory for Exam and Institutional Data Domains Conduct Meta data Gap Assessment for Exam and Institutional Data Domains Provide Data Governance training sessions for the Enterprise Data Council members Implement data governance for additional data domains Number of data elements consolidated across enterprise domains ~ ~ ~ Baseline established ~ ~ ~ TBD TBD TBD VerDate Sep<11>2014 March/2019 • • • • June/2019 • • • September/2019 • • 20:22 Oct 01, 2018 Jkt 247001 Provide training sessions for Data Stewards Develop draft charter for review by Enterprise Data Council Validate Data Governance Framework with Data Stewards Conduct Critical Data Element Inventory for Exam and Institutional Data Domains Create Enterprise Data Instruction Establish and Operate the Enterprise Data Council Provide Data Governance training sessions for the Enterprise Data Council members Formalize Data Governance Framework with the Enterprise Data Council Conduct Metadata Gap Assessment for Exam and Institutional Data Domains PO 00000 Frm 00053 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.044</GPH> amozie on DSK3GDR082PROD with NOTICES2 The purpose of this project is project is to establish a data governance program comprised of a policy, a central data governing body, and data steward teams. The primary goal for this project is organized and governed data including clean and accurate data from legacy, enhanced, and new systems. This data will allow for timely, distributed reporting (BI tools) and can adapt to fluctuating market conditions. This project will facilitate the centralization, organization and storage of the NCUA data so analysis is more accurate, simple and easily distributed across the agency. This increased accessibility will combine with analytic tools to improve the NCUA's overall reporting and data analysis capabilities. Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices September /2019 • • December/2019 • • amozie on DSK3GDR082PROD with NOTICES2 Project Risks and Mitigation Strategies VerDate Sep<11>2014 20:22 Oct 01, 2018 Formalize Data Governance Framework with the Enterprise Data Council Conduct Metadata Gap Assessment for Exam and Institutional Data Domains Begin Critical Data Element Inventory for Member Financial Data Domains Begin Meta data Gap Assessment for Member Financial Data Domains Risk If the business does not actively provide input to the Analytic Strategy for Data, then the scope of Analytic services, roles, and responsibilities may not be clearly defined and understood by all stakeholders. If the scope of the Enterprise Analytic Data Council is not appropriately defined in the Instruction, then the authority and effectiveness of the Council may be compromised. Additionally, support may wain from offices whose data domains and priorities are not part of the programs near term scope. Jkt 247001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4725 Mitigation 1. Work to integrate with other ESM work streams in order to leverage business resources. 2. Work with OBI to provide input 1. Work with OBI, OCIO and other stakeholders to right-size the Council's scope, ensuring that the scope is not too narrow to limit its effectiveness, and not too broad to paralyze its decisionmaking ability. 2. Work with OBI and OCIO to build a roadmap to take on additional scope as the framework matures and resources allow E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.045</GPH> 49744 49745 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name ASSET & LIABILITIES MANAGEMENT (ALM) APPLICATION (2019.011) Project sponsor Office of National Examination and Supervision [ONES) Customers/ beneficiaries Internal: Office of National Examination and Supervision External: Large and Corporate Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 $433 2019 $3,167 2020 $3,600 2021 TBD $3,600 2022 $3,600 Goal 1: Ensure a Safe and Sound Credit Union S~stem. The Asset & Liabilities Management (ALM) Application will enable credit union examiners to fulfill their responsibility to achieve strategic objective 1.2, "provide high-quality and efficient supervision," by building an internal analytical capabilities to run supervisory stress testing in house and to conduct regular quantitative risk assessments. Link to the NCUA strategic goals Goal 3: Maximize oq;:anizational,gerformance to enable mission success. The Asset & Liabilities Management (ALM) Application will enable credit union examiners to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation," by modernizing the NCUA's supervision tools and approaches, identifying material risks facing the covered credit unions, and tailoring resources to the material risks and risk focused exams. amozie on DSK3GDR082PROD with NOTICES2 (note:~ indicates achievement of performance measure in year) VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Procure ALM tool for Stress Testing Complete software development lifecycle deployment into production Perform data extraction and integration Identify remaining software tools Procure remaining tools Perform stress testing and validate Continue to perform internal stress testing Jkt 247001 PO 00000 Frm 00055 2018 Fmt 4701 2019 2020 2021 2022 ~ ~ ~ ~ ~ ~ ~ ~ Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.046</GPH> Project Performance 49746 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Number of Credit Unions that ALM tools are used to conduct supervisory stress testing Baseline established TBD TBD TBD Detailed project This project will allow the NCUA to build internal analytical capabilities to run description supervisory stress testing in house and to conduct regular quantitative risk assessments by procuring and configuring off-the-shelf analytical tools, models, and software used commonly in financial industry stress testing and other risk management activities. VerDate Sep<11>2014 Quarterly project schedule and deliverables March/2019 june/2019 September /2 019 December /2019 Project Risks and Mitigation Strategies Risk If the ALM Tool does not configure easily, then the NCUA will be contractually bound to a solution that does not meet the needs. If the ALM Tool provides results that are inaccurate, then the NCUA will need identify other tools for consideration. 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Pilot of ALM Application Complete Refine configuration of ALM Application Complete supervisory stress testing using ALM Application Determine if reliance on third party vendor can be eliminated Frm 00056 Fmt 4701 Sfmt 4725 Mitigation Structure contract with pilot period and additional options to enable the NCUA to exit contract with minimal financial exposure. Allow adequate time to validate results against existing third party vendor's findings. Continue utilizing existing third party vendor contract to perform supervisory stress testing. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.047</GPH> amozie on DSK3GDR082PROD with NOTICES2 This effort delivers a complete solution that will focus on modernizing the NCUA's supervision tools and approaches, identifying material risks facing the covered credit unions, and tailoring resources to the material risks and risk focused exams. This effort will allow the NCUA to reduce the existing third party contractor's role to only consultation. 49747 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name ENTERPRISE LEARNING MANAGEMENT SYSTEM (LMS) REPLACEMENT (2019.016) Project sponsor Office of Human Resources (OHR) Customers/ beneficiaries Internal: All Offices at the NCUA External: Nj A Budget $ in thousands Acquisition Operations and Maintenance $550 2020 2021 2022 $112 $112 $112 Goal 3: Maximize organizational,gerformance to enable mission success. The Enterprise Learning Management System (LMS) Replacement project will assist all the NCUA employees perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.1, "attract, engage and retain highly-skilled, diverse workforce and cultivate an inclusive environment." The new LMS will be the NCUA's primary system for hosting and delivering eLearning courses and will allow for increased access to training and eLearning. Project Performance Performance measure Initiate and plan the acquisition of a new LMS Acquire a modern, costefficient cloud-based LMS that meets agency requirements Prepare and provide access to a new LMS and a full array of! earning services to -2,500 end users 20:22 Oct 01, 2018 2018 .; 2019 2020 2021 2022 .; .; The purpose of the Enterprise Learning Management System (LMS) Replacement project is to conduct market research, initiate an acquisition, create a project management plan, and execute production implementation a cost-effective, cloudbased solution and training services that provides the NCUA with the full-range of eLearning functionality associated with a modern LMS. This will allow for enhanced examiner utilization and accessibility driven by quality content, ease of use and system reliability, role-based interface: ability to view personalized pages by role, centralized content, adherence to federally-mandated reporting requirements and records management adherence. Jkt 247001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.048</GPH> Detailed project description amozie on DSK3GDR082PROD with NOTICES2 2019 $250 Link to the NCUA strategic goals (note: .J indicates achievement of performance measure in year) VerDate Sep<11>2014 2018 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Quarterly project schedule and deliverables amozie on DSK3GDR082PROD with NOTICES2 Project Risks and Mitigation Strategies VerDate Sep<11>2014 20:22 Oct 01, 2018 March/2019 June/2019 September /2 019 December/2019 Complete capturing requirements, market research, and request for proposals Award contract Complete testing and implementation Deploy Risk If HTML 5 is not enabled in the agency's web browser to support Adobe Flash content in the current LMS, then the existing training system will not work. Support for Adobe Flash is scheduled to be discontinued in 2020. If technical issues arise during the data migration process, it could result in the loss of training records, content or other data. Jkt 247001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4725 Mitigation Procure learning content constructed using modern web standards and that is compatible with the latest version of the agency web browser. Assess data compatibility during market research and use compatibility as a qualifYing factor. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.049</GPH> 49748 49749 VerDate Sep<11>2014 Project name GOVERNANCE, RISK MANAGEMENT, AND COMPLIANCE (GRC) TOOL FOR MANAGING COMPLIANCE INFORMATION (2019.005) Project sponsor Office of the Chieflnformation Officer (OCIO), Office of the Chief Financial Officer (OCFO), Office of the General Council (OGC) Customers/ beneficiaries Internal: All Offices at the NCUA External: All Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 2019 $0 $325 2020 2021 2022 $60 $60 $60 Link to the NCUA strategic goals Goal3: Maximize organizational,gerformance to enable mission success. The GRC Tool project will help the NCUA achieve strategic objective 3.3, "ensure sound corporate governance" by acquiring and implementing a GRC tool that provides a structured repository for all system security and privacy documentation; security risk assessments; risk scoring; Plan of Actions and Milestones (POAM) management; and authorization workflow information. Project Performance Performance measure 2018 Reduce manual compilation of security info and event reports by: implementing an aggregated repository, utilizing a standard near real-time reporting capability, and leveraging integration with incident management and reporting dashboards. Baseline under development 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00059 Fmt 4701 Sfmt 4725 2019 2020 E:\FR\FM\02OCN2.SGM 02OCN2 2021 2022 EN02OC18.050</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49750 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Improve performance through enhanced capabilities resulting in visibility into security posture for all levels of NCUA and automated reporting to both internal and external stakeholders. Detailed project description Baseline under development The purpose of this project is to acquire and implement a single, structured repository for compliance-related records for the NCUA's information technology, financial management, and legal processes .. Once implemented, the GRC tool will enhance the NCUA risk management and its internal control environment while improving business continuity. Implement GRC Tool for managing compliance information March/2019 june/2019 September/2019 December /2019 Project Risks and Mitigation Strategies Risk If the acquisition timeframe is extended, then the implementation schedule will be delayed. amozie on DSK3GDR082PROD with NOTICES2 If resources are assigned to other assignments, then the implementation schedule will be delayed. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4725 Mitigation Provide all required procurement artifacts well in advance of deadlines and manage all activities closely with clear escalation paths for higher level issue resolution. Create integrated master schedule with clear process for resource prioritization and scheduling E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.051</GPH> Quarterly project schedule and deliverables 49751 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name FINANI CAL MANAGEMENT SYSTEM ANALYSIS OF ALTERNATIVES (AOA) (2019.018) Project sponsor Office of the Chief Financial Officer Customers/ beneficiaries Internal: OCFO External: All Credit Unions and All Vendors Doing Business with the NCUA Budget $ in thousands Acquisition Operations and Maintenance 2020 2021 2022 TBD TBD TBD Goal 3: Maximize organizational,gerformance to enable mission success. The Financial Management Analysis of Alternatives will help the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by ensuring the agency is using the most cost-effective Financial Management System (FMS) solution. Project Performance Performance measure Complete AoA Study Provide FMS Alternative Solutions 20:22 Oct 01, 2018 2018 2019 ~ ~ 2020 2021 2022 The NCUA is seeking a fully integrated, vendor supported, and upgradeable software system. This system is necessary for the NCUA to properly manage its finances, and will require fund-accounting based solutions that support governmental accounting and are fully compliant with appropriate governmental accounting standards. The NCUA requires a system that includes modules and functionalities common with Federal Agencies, such as: General Ledger and US Standard General Ledger (USSGL) Charts of Accounts, Accounts Payable, Accounts Receivable, Vendor File Maintenance & Management, Purchase Orders and Requisitions, Contracts and Solicitations, Project and Grants Accounting, Invoicing and Billing Management, Inventory Management and Accountable Property, Travel Management, Cost Accounting, Budget Preparation and Management, Budget Accounting, Execution, and Funds Control, Fund Accounting, Capital and Fixed Assets, Financial Reporting, Human Resources/Payroll Interface, Business Intelligence and Ad hoc Reporting, Federal Financial Reporting Requirements Jkt 247001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.052</GPH> Detailed project description amozie on DSK3GDR082PROD with NOTICES2 2019 $350 Link to the NCUA strategic goals (note:~ indicates achievement of performance measure in year) VerDate Sep<11>2014 2018 $0 VerDate Sep<11>2014 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Detailed project description The NCUA is seeking a fully integrated, vendor supported, and upgradeable software system. This system is necessary for the NCUA to properly manage its finances, and will require fund-accounting based solutions that support governmental accounting and are fully compliant with appropriate governmental accounting standards. The NCUA requires a system that includes modules and functionalities common with Federal Agencies, such as: General Ledger and US Standard General Ledger (USSGL) Charts of Accounts, Accounts Payable, Accounts Receivable, Vendor File Maintenance & Management, Purchase Orders and Requisitions, Contracts and Solicitations, Project and Grants Accounting, Invoicing and Billing Management, Inventory Management and Accountable Property, Travel Management, Cost Accounting, Budget Preparation and Management, Budget Accounting, Execution, and Funds Control, Fund Accounting, Capital and Fixed Assets, Financial Reporting, Human Resources/Payroll Interface, Business Intelligence and Ad hoc Reporting, Federal Financial Reporting Requirements (OMB A-136), Travel Expense Report and Reimbursement, GSA SmartPay® 3 Charge Card Interface, and System Generated Financial Statements. Quarterly project schedule and deliverables March/2019 June/2019 September /2 019 December/2019 Project Risks and Mitigation Strategies Risk If the scope of the FMS AoA study is not properly defined, then the study may not yield suitable alternatives for the NCUA's financial management requirements. 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Complete AoA Study Identify and scope viable FMS alternative solutions Frm 00062 Fmt 4701 Sfmt 4725 Mitigation OCFO will ensure early collaboration with aero leadership to define the scope of the AoA study. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.053</GPH> amozie on DSK3GDR082PROD with NOTICES2 49752 49753 VerDate Sep<11>2014 Project name DISASTER RECOVERY (2019.006) Project sponsor Office of the Chieflnformation Officer Customers/ beneficiaries Internal: All Offices at the NCUA External: All Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 $1,200 2019 $0 $0 2020 2021 2022 $360 $360 $360 Link to NCUA strategic goals Goal 3: Maximize oq;:anizational,gerformance to enable mission success. The Disaster Recovery project will help NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by enabling infrastructure and platform to alignment with the Data Center for continuity of operations and backup and recovery capabilities for Mission Essential Functions (MEFs) and Essential Supporting Activities (ESAs ). Project Performance Performance measure Reduce administrative burden by: eliminating ad hoc support for End of Life (EOL) equipment, updating more robust platforms with enhanced troubleshooting and management consoles, and reducing maintenance requirements. Enhance capabilities resulting in: lower support costs, greater integration from modernize interfaces and software, and 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00063 2018 Baseline under development 2019 2020 2021 2022 Baseline under development Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.054</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Enhance capabilities resulting in: lower support costs, greater integration from modernize interfaces and software, and predictable upgrade and vulnerability management paths Baseline under development Detailed project description The purpose of the Disaster Recovery project is to enable infrastructure and platform to alignment with the NCUA data center for continuity of operations and backup and recovery capabilities for MEFs and ESAs in order to ensure that the NCUA operations are stable. Quarterly project schedule and deliverables March/2019 june/2019 September /2019 December/2019 Project Risks and Mitigation Strategies Risk If the acquisition timeframe is extended, then the implementation schedule will be delayed. Enable disaster recovery capabilities. Close out. amozie on DSK3GDR082PROD with NOTICES2 If resources are assigned to other assignments, then the implementation schedule will be delayed. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4725 Mitigation Provide all required procurement artifacts well in advance of deadlines and manage all activities closely with clear escalation paths for higher level issue resolution. Create integrated master schedule with clear process for resource prioritization and scheduling E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.055</GPH> 49754 49755 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name ENTERPRISE LAPTOP LEASE (2019.017) Project sponsor Office of the Chieflnformation Officer [OCIO) Customers/ beneficiaries Internal: All Offices at the NCUA External: State Supervisory Authority [SSA) Budget $ in thousands Acquisition Operations and Maintenance 2018 $2,501 * 2019 $800 2020 $800 2021 $2,035* 2022 $800 • Compatibility and infrastructure issues delayed the project in 2018, and required $651,000 in repurposed funding, which was approved by the NCUA board through a budget reprogramming. " The laptop refresh budget assumes the devices will be acquired by way of a 3-year lease. Consequently, the refresh cycle is anticipated to be2in a2ain in 2021. Link to the NCUA Goal 3: Maximize organizational,gerformance to enable mission success. The strategic goals Enterprise Laptop Lease project will assist all employees to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation." New hardware for the NCUA's employees provides staff with new functionality and the NCUA improved security features that enhance user productivity, increased mobile functionality, and lower IT administrative costs due to a decreased need for support services. amozie on DSK3GDR082PROD with NOTICES2 (note: .J indicates achievement of performance measure in year) VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Upgrade IT infrastructure to support the Windows 10 platform Ensure operability of critical, legacy business applications on the Windows 10 platform Deploy new Windows 10based laptops to all eligible NCUA employees, contractors, and SSAs Enhance centralized management of agency laptops and applications during the O&M phase Jkt 247001 PO 00000 Frm 00065 Fmt 4701 2018 2019 2020 2021 2022 .; .; .; .; Sfmt 4725 .; E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.056</GPH> Project Performance 49756 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Detailed project description The purpose of the Enterprise Laptop Lease project is to provide the NCUA with a more efficient, mobile friendly, and secure tool to help better perform their jobs at a reasonable cost. The project scope includes: (1) the selection of new, standard laptop configurations; (2) image and compatibility testing; (3) device acquisition; and (4) the managed deployment of the new devices to end users. Out year costs are associated with the required lease payments. All stakeholders who use the NCUAprovided and supported laptops to perform their work will receive the new laptops. By including hardware and OS support into the lease agreement contract, and following a three-year replacement lifecycle, the NCUA will be able to keep pace with changes in workstation and OS technology in a cost effective manner. September /2 018 December /2018 March/2019 June/2019 amozie on DSK3GDR082PROD with NOTICES2 Project Risks and Mitigation Strategies VerDate Sep<11>2014 20:22 Oct 01, 2018 -1,500 laptops deployed to all eligible NCUA employees, contractors, and SSAs Project closed and transitioned to Operations & Maintenance ro&M) O&M of this capital lease O&M of this capital lease Risk Unforeseen shipping delays (weather, traffic, etc.) could result in field and remote staff not receiving laptops and peripherals on their scheduled arrival date Failure of the automated virtual private network (VPN) connection process could result in field and remote staff not being able to access the NCUA's network without additional support Jkt 247001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4725 Mitigation Agency staff and contractor partners collaborated to create a logistics and shipping plan that focused on ensuring timely product delivery, traceability and redirect capability for recipients Agency staff worked closely with the VPN vendor to ensure the automated network connectivity solution was viable, robust and secure. Internal technical staff as well as business staff tested the solution under real-world working conditions to ensure it would meet agency requirements E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.057</GPH> Quarterly project schedule and deliverables 49757 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name INFORMATION TECHNOLOGY (IT) INFRASTRUCTURE, PLATFORM AND SECURITY REFRESH (2019.001) Project sponsor Office of the Chief Information Officer Customers/ beneficiaries Internal: All Offices at the NCUA External: All Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 $0 2019 $2,350 2020 2021 2022 $620 $620 $620 Link to the Goal 3: Maximize organizational,gerformance to enable mission success. Information NCUA strategic Technology (IT) Infrastructure, Platform and Security Refresh project will enable goals credit union examiners to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by refreshing and/or replacing COLO and Regional routers, switches virtual servers, wireless, virtual private network, end of life and end of service components which ensure business continuity. VerDate Sep<11>2014 20:22 Oct 01, 2018 Performance measure Reduce administrative burden by: eliminating ad hoc support for End of Life (EOL) equipment, updating more robust platforms with enhanced troubleshooting and management consoles, and Jkt 247001 PO 00000 Frm 00067 2018 Baseline under development Fmt 4701 Sfmt 4725 2019 2020 E:\FR\FM\02OCN2.SGM 02OCN2 2021 2022 EN02OC18.058</GPH> amozie on DSK3GDR082PROD with NOTICES2 Project Performance Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Improve performance through: enhanced capabilities resulting in lower support costs, greater integration from modernize interfaces and software, and predictable upgrade and vulnerability management paths Baseline under development Detailed project description The purpose of the Information Technology (IT) Infrastructure, Platform and Security Refresh project is to ensure that the NCUA data is secure and operations are stable by refreshing and/or replacing COLO and Regional routers, switches virtual servers, wireless, virtual private network, and other network end-of-life and end-ofservice components. Quarterly project schedule and deliverables March/2019 Project Risks and Mitigation Strategies June/2019 September /2 019 December /2019 Complete refresh and/or replace of COLO and Regional IT appliances. Close out. Risk If the acquisition timeframe is extended, then the implementation schedule will be delayed. amozie on DSK3GDR082PROD with NOTICES2 If resources are assigned to other assignments, then the implementation schedule will be delayed. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4725 Mitigation Provide all required procurement artifacts well in advance of deadlines and manage all activities closely with clear escalation paths for higher level issue resolution. Create integrated master schedule with clear process for resource prioritization and scheduling. E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.059</GPH> 49758 49759 VerDate Sep<11>2014 Project name SECURITY MANAGEMENT TOOL UPGRADE (PATCH & VULNERABILITY MANAGEMENT) (2019.004) Project sponsor Office of the Chieflnformation Officer Customers/ beneficiaries Internal: All Offices at the NCUA External: All Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 $0 2019 $342 2020 2021 2022 $60 $60 $60 Link to the NCUA strategic goals Goal 3: Maximize organizational,gerformance to enable mission success. The Security Management Tool Upgrade (Patch & Vulnerability Management) project will help the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by upgrading the NCUA information technology systems to ensure business continuity and comply with the DHS Continuous Diagnostics and Mitigation (CDM) Federal requirements for effective IT service management. Project Performance Performance measure Enhance security posture through centralized system patch and vulnerability management resulting in: • efficiencies by creating a single technology and repository for patch vulnerability management for all systems and software, • reduce learning curve around multiple solutions, • standardizing reports and audit responses, and 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00069 2018 Baseline under development Fmt 4701 Sfmt 4725 2019 2020 E:\FR\FM\02OCN2.SGM 02OCN2 2021 2022 EN02OC18.060</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49760 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Enhance security posture through centralized system patch and vulnerability management resulting in: • efficiencies by creating a single technology and repository for patch vulnerability management for all systems and software, • reduce learning curve around multiple solutions, • standardizing reports and audit responses, and • Automating reporting to both internal and external stakeholders. Detailed project description Baseline under development The purpose of the Security Management Tool Upgrade (Patch & Vulnerability Management) project is to comply with the DHS Continuous Diagnostics and Mitigation (CDM) Federal requirements for effective IT service management. This will enhance the NCUA security posture and establish the convergence of operational risk and resilience management via operational and technical controls/solutions that ensure business continuity. In addition to ensuring the existing business continuity, these activities ensure the appropriate preparation for future modernization and organizational changes. Quarterly project schedule and deliverables March/2019 June/2019 September/2019 Implement Security Management Tool Upgrade (Patch & Vulnerability Management) December/2019 VerDate Sep<11>2014 20:22 Oct 01, 2018 Risk If the acquisition timeframe is extended, then the implementation schedule will be delayed. Jkt 247001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4725 Mitigation Provide all required procurement artifacts well in advance of deadlines and manage all activities closely with E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.061</GPH> amozie on DSK3GDR082PROD with NOTICES2 Project Risks and Mitigation Strategies 49761 VerDate Sep<11>2014 Project name SECURITY MANAGEMENT TOOL UPGRADES (SECURITY INFORMATION AND EVENT MANAGEMENT (SIEM)) (2019.003) Project sponsor Office of the Chief Information Officer Customers/ beneficiaries Internal: All Offices at the NCUA External: All Credit Unions Budget $ in thousands Acquisition Operations and Maintenance 2018 $0 2019 $327 2020 2021 2022 $60 $60 $60 Link to the NCUA strategic goals Goal3: Maximize organizational,gerformance to enable mission success. The Security Management Tool Upgrades (Security Information and Event Management (SIEM)) project will help the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by optimizing event collection, monitoring, detection and response capabilities for InfoSec and IT Operations which ensure business continuity. Project Performance Performance measure Improve performance by: reducing manual compilation of security info and event reports by implementing an aggregated repository utilizing a standard near real-time reporting capability, and leveraging integration with incident management and reporting dashboards. 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00071 2018 Baseline under development Fmt 4701 Sfmt 4725 2019 2020 E:\FR\FM\02OCN2.SGM 02OCN2 2021 2022 EN02OC18.062</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Improve effectiveness through: enhanced capabilities resulting in visibility into security posture for all levels of the NCUA, Automated reporting to both internal and external stakeholders, and Monitoring capabilities for all IT functions eliminating redundant acquisitions. Baseline under development Detailed project description The purpose of the Security Management Tool Upgrades (Security Event and Incident Management (SEIM)) project is to optimize collection, monitoring, detection and response capabilities for security incidents on the NCUA networks, which will improve business processes by enabling data-driven and proactive management. Quarterly project schedule and deliverables March/2019 June/2019 Project Risks and Mitigation Strategies Risk If the acquisition timeframe is extended, then the implementation schedule will be delayed. Acquisition Award Implement Security Management Tool Upgrades (Security Event and Incident Management [SEIM). September/2019 December /2019 amozie on DSK3GDR082PROD with NOTICES2 If resources are assigned to other assignments, then the implementation schedule will be delayed. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4725 Mitigation Provide all required procurement artifacts well in advance of deadlines and manage all activities closely with clear escalation paths for higher level issue resolution. Create integrated master schedule with clear process for resource prioritization and scheduling E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.063</GPH> 49762 49763 VerDate Sep<11>2014 Project name REFRESH END OF LIFE VOICE OVER INTERNET PROTOCOL (VOIP) PHONE SYSTEM (2019.002) Project sponsor Office of the Chief Information Officer Customers/ beneficiaries Internal: All Offices at the NCUA External: General public contacting the NCUA by telephone Budget $ in thousands Acquisition Operations and Maintenance 2018 $800 2019 $170 2020 2021 2022 $240 $240 $240 Link to the NCUA strategic goals Goal 3: Maximize organizational,gerformance to enable mission success. Refresh End of Life Voice over Internet Protocol (VoiP) Phone System project will enable credit union examiners to perform their work more effectively and efficiently, helping the NCUA achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation" by fully replacing the end of life infrastructure, platform and endpoints to ensure voice communications capabilities which ensure business continuity. Project Performance Performance measure Reduce administrative burden by: eliminating ad hoc support for End of Life (EOL) equipment, updating more robust platforms with enhanced troubleshooting and management consoles, and reducing maintenance requirements. Improve performance through: enhanced capabilities resulting in lower support costs, greater integration from modernize 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00073 2018 Baseline under development 2019 2020 2021 2022 Baseline under development Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.064</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49764 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Improve performance through: enhanced capabilities resulting in lower support costs, greater integration from modernize interfaces and software, and predictable upgrade and vulnerability management paths. Detailed project description Baseline under development The purpose of the Refresh End of Life Voice over Internet Protocol (VoiP) Phone System project is to fully replace the NCUA's end-of-life telephone system (infrastructure, platform, and endpoints) to ensure voice communications capabilities in order to ensure that business continuity and operations are stable. Once installed, the new phone system will help ensure business continuity, since the current system is no longer supported by the manufacturer, presenting a high risk of permanent, unanticipated failure. Quarterly project schedule and deliverables March/2019 June/2019 September/2019 December /2019 Project Risks and Mitigation Strategies Risk If the acquisition timeframe is extended, then the implementation schedule will be delayed. Acquisition Award Begin replacement ofVoiP appliances. Complete VoiP replacement of all appliances. Close out. VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.065</GPH> amozie on DSK3GDR082PROD with NOTICES2 If resources are assigned to other assignments, then the implementation schedule will be delayed. Mitigation Provide all required procurement artifacts well in advance of deadlines and manage all activities closely with clear escalation paths for higher level issue resolution. Create integrated master schedule with clear process for resource prioritization and scheduling 49765 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Project name CENTRAL OFFICE HVAC SYSTEM REPLACEMENT PROJECT (2019.019) Project sponsor Office of the Chief Financial Officer Customers/ beneficiaries Internal: All Central Office Building Occupants External: All Central Office Building Visitors Budget $ in thousands Acquisition 2018 650 2019 750 2020 750 2021 2022 --- --- Link to the NCUA Goal 3: Maximize organizational ,Qerformance to enable mission success. The NCUA strategic goals central office Heating, Ventilation, and Air Conditioning (HVAC) system replacement project will improve the operations of the agency's largest building while lowering energy consumption by installing more energy-efficient systems, helping achieve strategic objective 3.2, "deliver an efficient organizational design supported by improved business processes and innovation." The current HVAC system is 24 years old, and by replacing it the NCUA will ensure its infrastructure meets all current codes for life safety, accessibility, and security. The new system will result increased energy and operational efficiency and lower maintenance costs. Performance measure 2018 Energy Consumption* 1.9SK (kWh/ degree days) 40+ System Outages unscheduled repair visits) Customer Complaints <80 (temp-related service calls) *Estimate based on 18,000 annual degree performance. r amozie on DSK3GDR082PROD with NOTICES2 Detailed project description VerDate Sep<11>2014 20:22 Oct 01, 2018 2019 2020 2021 2022 1.8K 1.6K =<l.SSK =<l.SSK <30 <20 <10 <10 <50 <30 =<25 =<25 days. Will be updated with actual This project will replace all HVAC systems in the NCUA central office building to include all cooling towers, air handlers, boilers and HVAC components. The current HVAC system is original to the facility, 24 years old and obsolete. HVAC systems are the biggest users of electricity in a facility, and the anticipated life span of these systems' major components is approximately 20-25 years. The current system is at the end of its usable life and it is not working efficiently. Additionally the maintenance and operating costs have increased considerably and system components are failing more frequently, which are clear signs of decreased re lia b iii ty. Jkt 247001 PO 00000 Frm 00075 Fmt 4701 Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.066</GPH> Project Performance 49766 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices Detailed project description This project will replace all HVAC systems in the NCUA central office building to include all cooling towers, air handlers, boilers and HVAC components. The current HVAC system is original to the facility, 24 years old and obsolete. HVAC systems are the biggest users of electricity in a facility, and the anticipated life span of these systems' major components is approximately 20-25 years. The current system is at the end of its usable life and it is not working efficiently. Additionally the maintenance and operating costs have increased considerably and system components are failing more frequently, which are clear signs of decreased re lia b iii ty. In the last 23 years, technology and codes governing HVAC systems have dramatically changed. A modern, reliable HVAC system will not only increase energy and operational efficiency, but will allow better comfort and more efficient temperature control. A new HVAC system will: 1) be better for the environment, 2) reduce the NCUA downtime from emergency replacements, 3) maintain a more comfortable environment for building occupants, 4) keep the RoofTop Units (RTU) technologically current with more efficient units, and 5) follow the federal mandate for more environmentally friendly refrigerants. This is a capital improvement that is required in order for the facility to continue normal HVAC operation and it is consistent with the life cycle replacement required for critical infrastructure. Due to the age of the equipment, there are opportunities for significant gains to energy efficiency and reliability simply because of the technological advancements that have taken place since the original installation. Aging equipment is a large contributor to less sustainable facilities and higher operating cost. Modernized equipment will bring considerable savings and ensure another 15-20 years of high reliability HVAC operation. March/2019 Design Complete full design, permits and construction schedule. November /2019 System components - updates all thermostats and obsolete Variable Airflow Boxes First Chiller Plant- Replacement of first cooling tower for the facility Second Chiller Plant- Replacement of the Second Cooling tower for the facility March/2020 March/2021 amozie on DSK3GDR082PROD with NOTICES2 Project Risks and Mitigation Strategies VerDate Sep<11>2014 20:22 Oct 01, 2018 Risk Schedule. Central office renovation work will affect all floors and will be ongoing through 2019. Jkt 247001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4725 Mitigation Project managers have developed an integrated master schedule for Central Office Renovation and HVAC System E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.067</GPH> Quarterly project schedule and deliverables 49767 VerDate Sep<11>2014 Project name THE NCUA FACILITY REPAIRS, AUSTIN TEXAS OFFICE BUILDING (2019.020) Project sponsor Office of the Chief Financial Officer Customers/ beneficiaries AMAC/Central Region staff Budget $ in thousands Acquisition Link to the NCUA strategic goals Goal 3: Maximize organizational,gerformance to enable mission success. Repairs to NCUA's Austin, Texas office building will improve operations at the facility and help enable the agency to meet its strategic objective 3.3 "ensure sound corporate governance." Many of the systems and building elements in the Austin office building have not been adequately maintained, and this investment will ensure that facility infrastructure meets current building codes for life safety, accessibility, and security. Once the investments have been completed, replaced equipment and better management of maintenance schedules will result in increased energy and operational efficiency. Project Performance Performance measure Cost Of Ownership (building O&Mjemployee) Detailed project description The NCUA assessed the condition of its office building in Austin, Texas in 2018 and identified over $750,000 in high priority improvements, such as replacing the fire alarm system, repairing and replacing doors and sensors, and installing fire-proof roofing. The 2019 investment of $150,000 will support fixing/replacing all priority items. These capital improvements are required in order for the facility to continue routine and safe operations, and align with the life cycle replacement required for critical infrastructure. Future year budgets will fund additional major repair or replacement projects in a priority order. Quarterly project schedule and deliverables 2nd Quarter/2019 20:22 Oct 01, 2018 Jkt 247001 PO 00000 2018 $100 2018 $3,500 Critical Items: Frm 00077 Fmt 4701 2019 $150 2019 $3,200 2020 $300 2020 $2,900 2021 $230 2021 $2,900 2022 $200 2022 $2,900 Roof Repairs Fire Proofing Garage Ventilation Louver Repair Electrical Repairs (Code Deficiency) Fire Alarm System Repairs Sfmt 4725 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.068</GPH> amozie on DSK3GDR082PROD with NOTICES2 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices 49768 Federal Register / Vol. 83, No. 191 / Tuesday, October 2, 2018 / Notices By the National Credit Union Administration Board on September 26, 2018. Gerard S. Poliquin, Secretary of the Board. [FR Doc. 2018–21282 Filed 10–1–18; 8:45 am] VerDate Sep<11>2014 20:22 Oct 01, 2018 Jkt 247001 PO 00000 Frm 00078 Fmt 4701 Sfmt 9990 E:\FR\FM\02OCN2.SGM 02OCN2 EN02OC18.069</GPH> amozie on DSK3GDR082PROD with NOTICES2 BILLING CODE 7535–01–P

Agencies

[Federal Register Volume 83, Number 191 (Tuesday, October 2, 2018)]
[Notices]
[Pages 49692-49768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21282]



[[Page 49691]]

Vol. 83

Tuesday,

No. 191

October 2, 2018

Part III





National Credit Union Administration





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The NCUA Staff Draft 2019-2020 Budget Justification; Notice

Federal Register / Vol. 83 , No. 191 / Tuesday, October 2, 2018 / 
Notices

[[Page 49692]]


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NATIONAL CREDIT UNION ADMINISTRATION


The NCUA Staff Draft 2019-2020 Budget Justification

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice.

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SUMMARY: The NCUA draft detailed business-type budget is being made 
available for public review as required by federal statute. The 
proposed resources will support the agency's annual operations and 
continue implementation of the agency's reorganization plan. The 
briefing schedule and comment instructions are included in the 
supplementary information section.

DATES: Requests to deliver a statement at the budget briefing must be 
received on or before Tuesday, October 9, 2018. Written statements and 
presentations for those scheduled to appear at the budget briefing must 
be received on or before Monday, October 15, 2018.
    Written comments without public presentation at the budget briefing 
may be submitted by Friday, October 26, 2018.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Presentation at public budget briefing: Submit requests to 
deliver a statement at the briefing to ncua.gov">[email protected]ncua.gov by 
Tuesday, October 9, 2018. Include your name, title, affiliation, 
mailing address, email address, and telephone number. Copies of your 
presentation must be submitted to the same email address by Monday, 
October 15, 2018.
     Written comments: Submit comments to 
ncua.gov">[email protected]ncua.gov by Friday, October 26, 2018. Include your name 
and the following subject line ``Comments on the NCUA Draft 2019-2020 
Budget Justification.''
    Public Inspection: Copies of the NCUA Draft 2019-2020 Budget 
Justification and associated materials are also available on the NCUA 
website at https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx. Printed copies will be available at the 
October 17, 2018 budget briefing.

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

SUPPLEMENTARY INFORMATION: 

I. The NCUA Budget in Brief
II. Introduction and Strategic Context
III. Forecast and Enterprise Challenges
IV. Key Themes of the 2019-2020 Budget
V. Operating Budget
VI. Capital Budget
VII. Share Insurance Fund Administrative Budget
VIII. Financing the NCUA Budget
IX. Appendix A: Supplemental Budget Information
X: Appendix B: Capital Projects

    Section 212 of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act (Pub. L. 115-174) amended 12 U.S.C. 1789(b)(1)(A) to 
require the NCUA Board (Board) to ``make publicly available and publish 
in the Federal Register a draft of the detailed business-type budget.'' 
Although 12 U.S.C. 1789(b)(1)(A) requires publication of a ``business-
type budget'' only for the agency operations arising under the Federal 
Credit Union Act's subchapter on insurance activities, in the interest 
of transparency the Board is providing the agency's entire staff draft 
2019-2020 Budget Justification (budget) in this Notice.
    The draft budget details the resources required to support NCUA's 
mission as outlined in its 2018-2022 Strategic Plan. The draft budget 
includes personnel and dollar estimates for three major budget 
components: (1) The Operating Budget; (2) the Capital Budget; and (3) 
the Share Insurance Fund Administrative Budget. The resources proposed 
in the draft budget will be used to carry out the agency's annual 
operations and to continue implementation of the agency's 
reorganization plan.
    The NCUA staff will present its draft budget to the Board at a 
budget briefing open to the public and scheduled for Wednesday, October 
17, 2018 at 10 a.m. Eastern. The budget briefing will be held in the 
NCUA Board meeting room and run for approximately two hours. A 
livestream of the briefing also will be available through a link on 
ncua.gov.
    If you wish to attend the briefing and deliver a statement, you 
must email a request to ncua.gov">[email protected]ncua.gov by Tuesday, October 9, 
2018. Your request must include your name, title, affiliation, mailing 
address, email address, and telephone number. The NCUA will work to 
accommodate as many public statements as possible at the October 17, 
2018 budget briefing. The Board Secretary will inform you if you have 
been approved to make a presentation and how much time you will be 
allotted. A written copy of your presentation must be delivered to the 
Board Secretary via email at ncua.gov">[email protected]ncua.gov by Monday, October 
15, 2018.
    Written comments on the draft budget will also be accepted by email 
at ncua.gov">[email protected]ncua.gov until Friday, October 26, 2018. Include your 
name and the following subject line with your comments: ``Comments on 
the NCUA Draft 2019-2020 Budget Justification.''
    All comments should provide specific, actionable recommendations 
rather than general remarks. The Board will review and consider any 
comments from the public prior to approving the budget.

I. The NCUA Budget in Brief

Proposed 2019 and 2020 Budgets

    The goals and objectives set forth in the National Credit Union 
Administration's (NCUA) Strategic Plan 2018-2022 (https://www.ncua.gov/About/Documents/AgendaItems/AG20160721Item2b.pdf) form the basis for 
determining agency resource needs and allocations. The annual budget 
provides the resources to execute the strategic plan, to implement the 
agency reorganization, and to undertake the NCUA's major programs: 
Examination and supervision, insurance, credit union development, 
consumer financial protection, and asset management.

[[Page 49693]]

[GRAPHIC] [TIFF OMITTED] TN02OC18.004

    The NCUA's 2019-2020 budget justification consists of three 
separate budgets: The Operating Budget, the Capital Budget, and the 
Share Insurance Fund Administrative Budget. Combined, these three 
budgets total $334.8 million for 2019, which is 1.1 percent more than 
the 2019 funding level approved by the NCUA Board (the Board) in 
November 2017, and 4.3 percent more than the comparable 2018 Board 
Approved Budget. Personnel levels for 2019 and 2020 reflect the 
agency's expected staffing after completing implementation of its 
reorganization plan, and are lower than the 2018 levels by 10 
positions.
Operating Budget
    The proposed 2019 Operating Budget is $304.4 million. Personnel 
levels decrease by ten full-time equivalents (FTE) compared to the 2018 
Board Approved Budget.
    The 2019 Operating Budget, when adjusted for inflation, represents 
a real dollar decrease of approximately $624,000, or 0.2 percent, 
compared to the 2018 Board Approved Budget. In nominal dollars, the 
2019 Budget increases by $6.3 million, or 2.1 percent, over the 2018 
Board Approved Budget of $298.1 million.
    The Operating Budget estimate for 2020 is $316.2 million and 
reflects no change to authorized positions.
    The following chart shows recent year-on-year trends for the NCUA 
Operating Budget, in both nominal (green line) and real dollar (blue 
line, inflation-adjusted) terms:
[GRAPHIC] [TIFF OMITTED] TN02OC18.005

    The following chart presents the major categories of spending 
supported by the 2019 budget, while specific adjustments to the 2018 
Board Approved Budget are discussed in further detail, below:

[[Page 49694]]

[GRAPHIC] [TIFF OMITTED] TN02OC18.006

    Staffing. The budget supports 1,178 FTE in 2019, a decrease of ten 
FTEs from 2018. For 2019, the reorganization plan eliminated 15 
positions in the NCUA's regional offices, and the budget proposes five 
new positions in the Offices of Examination and Insurance, the Chief 
Economist, and the General Counsel. Three positions focused on Business 
Innovation will be filled by reallocating vacancies. As shown in the 
chart below, the NCUA staffing has decreased in recent years despite 
significant credit union asset growth.
[GRAPHIC] [TIFF OMITTED] TN02OC18.007

    Pay and Benefits. Pay and benefits increase by $2.1 million in 
2019, or one percent, for a budget of $222.8 million. This increase 
supports the merit and locality pay adjustments required by the NCUA's 
current collective bargaining agreement, the new positions described 
above, anticipated staff promotions, position changes, and increased 
costs for other mandatory employer contributions such as health 
insurance and retirement contributions. The 2020 pay and benefits 
budget is estimated at $233.6 million, which reflects increases 
associated with merit and locality pay inflation, the full cost of new 
positions added in 2019, and an increase in required retirement fund 
payments to the Office of Personnel Management (OPM), which manages 
government employees' retirement programs for nearly all federal 
agencies.
    The Federal Employees Retirement System (FERS) covers most NCUA 
employees and includes a defined pension benefit, which is funded by 
both employee and employer contributions. OPM will charge the NCUA a 
mandatory employer contribution of 13.7 percent of total FERS employee 
salaries in 2019, which will increase to 16 percent in 2020, a change 
of 230 basis points. This increase will require the NCUA to pay OPM 
approximately $3.5 million more in retirement contributions in 2020. 
Excluding additional employer contributions from the 2020 budget, total 
personnel compensation growth would be 3.3 percent instead of 4.8 
percent, and total Operating Budget growth would be 2.7 percent instead 
of 3.9 percent.
    Travel. The travel budget increases by $326,000 in 2019, or one 
percent, for a

[[Page 49695]]

budget of $26.8 million. The NCUA has constrained the growth of travel 
costs by continuing to expand offsite examination work and use 
technology-driven training. Government-wide per diem rates published by 
the General Services Administration (GSA) are expected to increase by 
almost eight percent in 2019, accounting for a significant share of the 
travel budget growth. The NCUA plans to hold a national program 
examination training event in 2020 that will coincide with full 
deployment of the new Examination and Supervision Solution system.
    Rent, Communications, and Utilities. Rent, communications, and 
utilities will decrease by $445,000 in 2019, or five percent, for a 
budget of $8.0 million. This funding pays for essential 
telecommunications services, data capacity contracts, and information 
technology network support. The decrease is primarily due to a 
reduction in leased office space as a result of regional consolidation.
    Administrative Expenses. Administrative expenses increase by $1.2 
million in 2019, or 16 percent, for a total budget of $8.7 million. 
Increases are attributable to recurring cost items such as shared 
Federal Financial Institutions Examination Council fees, relocation 
expenses, and software licenses.
    Contracted Services. Contracted services expenses increase by $3.1 
million in 2019, or nine percent, for a total budget of $38.1 million. 
This funding pays for products and services acquired in the commercial 
marketplace, and includes critical mission support services such as 
information technology hardware and software support, accounting and 
auditing services, and specialized subject matter expertise. The 
increase of information technology operations and maintenance, and 
mandatory accounting system service provider costs are the primary 
drivers of the increase.
Capital Budget
    The proposed 2019 Capital Budget is $22.0 million.
    The 2019 Capital Budget is $0.9 million more than the 2019 funding 
level approved by the Board in November 2017, and $6.6 million more 
than the 2018 Board Approved Budget.
    The Capital Budget pays for continued investments in technology and 
infrastructure projects, as well as several new initiatives that will 
start in 2019, including a replacement of the agency's antiquated AIRES 
examination software, which is used by both federal and state examiners 
in almost all credit union examinations. The NCUA's Information 
Technology Prioritization Council recommended $17.1 million for IT 
software development projects that continue to replace the NCUA's 
decades-old and functionally obsolete information technology systems, 
and $4 million in other IT investments for 2019. The NCUA facilities 
require $0.9 million in capital investments.
Share Insurance Fund Administrative Expenses
    The proposed 2019 Share Insurance Fund Administrative budget is 
$8.4 million.
    The 2019 Share Insurance Fund Administrative Budget is $0.9 million 
more than the 2019 funding level approved by the Board in November, 
2017, and $0.3 million more than the 2018 Board Approved Budget. The 
increase is primarily attributed to increased use of consultants and 
contractor support for credit union stress testing. Direct charges 
within this budget include administration of the NCUA Guaranteed Note 
(NGN) program, state examiner training and laptop leases, as well as 
financial audit support.
Budget Trends
    Since 2017, inflation has matched or outpaced the growth of the 
NCUA budget. While the NCUA's annual Operating Budget is projected to 
increase 2.1 percent from 2018 to 2019, inflation is forecast to be 2.3 
percent. Therefore, in real dollar terms, the NCUA Operating Budget is 
0.2 percent lower in 2019 than in 2018 (i.e., 2.1 percent budgetary 
growth less 2.3 percent inflation). Likewise, the projected 2.7 percent 
total budget growth between 2019 and 2020 represents an inflation-
adjusted increase of only 0.4 percent, based on the assumption that 
2020 economic inflation remains constant at 2.3 percent (i.e., 2.7 
percent budgetary growth less 2.3 percent inflation).
    In addition, as shown in the chart below, the relative size of the 
NCUA budget (red line) continues to decline when compared to balance 
sheets at federally-insured credit unions (gray line). This trend 
illustrates the greater operating efficiencies the NCUA has attained in 
the last several years. Additionally, the NCUA has improved its 
operating efficiencies more aggressively than other financial industry 
regulators (red line compared to blue line).

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    It is also notable that the NCUA's operations have become more 
efficient relative to the size of the credit union system because 
consolidation in the industry has led to growth in the number of large 
credit unions, specifically those with more than $10 billion in assets. 
This results in additional complexity in the balance sheets of such 
credit unions, and a corresponding increase in the supervisory review 
required to ensure the safety and soundness of such large institutions. 
The NCUA has responded to this increasing complexity through several 
initiatives: Creation of the specialized Office of National Examination 
and Supervision (ONES), development of an improved analytic model for 
large credit unions' financial condition, and improved quality of 
examination reports through enhanced quality review processes.
2019 Budget in Brief: Summary Table
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II. Introduction and Strategic Context

History

    For more than 100 years, credit unions have provided financial 
services to their members in the United States. Credit unions are 
unique depository institutions created not for profit, but to serve 
their members as credit cooperatives.
    The NCUA is the independent federal agency created by the U.S. 
Congress to regulate, charter, and supervise federal credit unions. 
With the backing of the full faith and credit of the U.S. Government, 
the NCUA operates and manages the National Credit Union Share Insurance 
Fund (NCUSIF), insuring the deposits of the account holders in all 
federal credit unions and the vast majority of state-chartered credit 
unions.
    The NCUA, through its predecessors, was created in 1934 with the 
passage of the Federal Credit Union Act. As the products and services 
provided to members of credit unions changed over the years, the NCUA's 
supervision and regulation evolved as well. In 1970, Congress created 
the NCUSIF to protect deposits by providing the backing of the full 
faith and credit of the U.S. Government to credit union accounts. No 
credit union member has ever lost a penny of deposits insured by the 
NCUSIF.
    The NCUA is responsible for the regulation and supervision of 5,480 
federally insured credit unions \1\ with approximately 114.1 million 
members \1\ and more than $1.4 trillion \1\ in assets across all states 
and U.S. territories.
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    \1\ Source: The NCUA quarterly call report data, Q2 2018.
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Authority
    Pursuant to the Federal Credit Union Act, authority for management 
of the NCUA is vested in the NCUA Board (the Board). It is the Board's 
responsibility to determine the resources necessary to carry out the 
NCUA's responsibilities under the Act.\2\ The Board is authorized to 
expend such funds and perform such other functions or acts as it deems 
necessary or appropriate in accordance with the rules, regulations, or 
policies it establishes.\3\
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    \2\ See 12 U.S.C. 1752a(a).
    \3\ See 12 U.S.C. 1766(i)(2).
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    Upon determination of the budgeted annual expenses for the agency's

[[Page 49699]]

operations, the Board determines a fee schedule to assess federal 
credit unions. The Board gives consideration to the ability of federal 
credit unions to pay such a fee, and the necessity of the expenses the 
NCUA will incur in carrying out its responsibilities in connection with 
federal credit unions.\4\ Pursuant to the law, fees collected are 
deposited in the agency's Operating Fund at the Treasury of the United 
States, and those fees are expended by the Board to defray the cost of 
carrying out the agency's operations, including the examination and 
supervision of federal credit unions.\5\ In accordance with its 
authority to use the NCUSIF to carry out a portion of its 
responsibilities, the Board approves an annual Overhead Transfer Rate 
and transfers resources from the Share Insurance Fund to the Operating 
Fund on a monthly basis to account for insurance-related expenses.\6\
---------------------------------------------------------------------------

    \4\ See 12 U.S.C. 1755(a)-(b).
    \5\ See 12 U.S.C. 1755(d).
    \6\ See 12 U.S.C. 1783(a).
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Mission, Goals, and Strategy
    The NCUA's 2019-2020 Budget Submission supports the agency's second 
year implementing its 2018-2022 Strategic Plan (https://www.ncua.gov/About/Documents/AgendaItems/AG20160721Item2b.pdf) to achieve its 
priorities and improve program performance.
    Throughout 2019 and 2020, the NCUA will continue fulfilling its 
mission to ``provide, through regulation and supervision, a safe and 
sound credit union system which promotes confidence in the national 
system of cooperative credit,'' and its vision to ensure that the 
``NCUA protects credit unions and consumers who own them through 
effective supervision, regulation and insurance.'' This budget commits 
the resources necessary to implement the NCUA's plans to identify key 
challenges facing the credit union industry and leverage agency 
strengths to help credit unions address those challenges.
    The budget supports the NCUA's programs, which are focused on 
achieving the agency's three strategic goals:
    [ssquf] Ensure a safe and sound credit union system;
    [ssquf] Provide a regulatory framework that is transparent, 
efficient, and improves consumer access; and
    [ssquf] Maximize organizational performance to enable mission 
success.
    Additional information about alignment of the budget to the NCUA's 
strategic goals is in Appendix A.
    In support of its first strategic goal--ensure a safe and sound 
credit union system--the NCUA will continue to supervise federally 
insured credit unions effectively while insuring a growing and evolving 
credit union system. As highlighted in the Strategic Plan, the credit 
union system faces several key risks, including:
     How credit unions respond to a changing economic 
environment,
     technological changes in how consumers interact with 
financial institutions, in addition to more general technological 
advances,
     increasing competition and consolidation within the 
financial services industry,
     demographic shifts, such as aging credit union membership,
     forecasts that the U.S. population will become more 
diverse, implying changes in the services needed by credit union 
members, and
     generational shifts in consumer preferences.
    Each risk requires continual monitoring and, where prudent, risk-
mitigation strategies to protect the overall credit union system from 
preventable losses or failures. The NCUA staff of credit union 
examiners are the agency's most important assets for identifying and 
addressing risks before they threaten members' deposits. To do their 
jobs effectively in this complex and dynamic financial environment, the 
NCUA staff require the advanced skills, training, and tools supported 
by the budget.
    To fulfill the NCUA's second strategic goal--provide a regulatory 
framework that is transparent, efficient, and improves customer 
access--the agency strives to issue balanced, clear, and 
straightforward regulations while addressing emerging adverse trends in 
a timely manner. The NCUA also seeks to improve consumer access and 
ensure consumer compliance, financial protection, and consumer 
education. The budget allocates resources to agency programs that keep 
regulations up to date and consistent with current law, assist existing 
and prospective credit unions with expansion and new chartering 
activities, and promote consumer awareness of sound financial 
practices.
    Accomplishing the third strategic goal--maximize organizational 
performance to enable mission success--ensures the NCUA employees 
achieve the agency's mission by supporting them through efficient and 
effective business processes, modern and secure technology, and 
suitable tools and workspaces necessary to perform their duties. The 
budget makes investments in better process management and internal 
controls, improved tools and facilities for the NCUA staff, and 
technological enhancements including new systems that will improve 
operational effectiveness and efficiency.
Organization, Major Agency Programs, and Workforce
    The NCUA employs regional offices to perform all the tasks in the 
agency's major program areas and support functions, a central office to 
administer and oversee its programs, and an Asset Management and 
Assistance Center (AMAC) to liquidate failed credit unions and recover 
assets.
    Effective January 2019, the NCUA plans to consolidate its five 
regional offices into three--Eastern, Southern, and Western--as part of 
its on-going effort to strengthen agency operations while increasing 
efficiency. Reporting to these regional offices, the NCUA has credit 
union examiners responsible for a portfolio of credit unions covering 
all 50 states, the District of Columbia, Guam, Puerto Rico, and the 
U.S. Virgin Islands. One-time costs associated with the NCUA 
reorganization are being funded by reprioritizing unspent balances from 
2017 and 2018 budgets. These costs include: Salaries and benefits for 
current employees whose positions will be eliminated after their 
separation from the agency, leased office space in Albany, New York and 
Atlanta, Georgia that will be vacated at the end of 2018, central 
office renovation costs necessary to consolidate the former Region II 
office staff into the NCUA-owned central office building, and other 
miscellaneous one-time relocation, separation, and other contractual 
payments.
    The NCUA organizational chart below reflects the new regional 
structure, and the map shows the new regions' geographical alignment:
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[[Page 49701]]


[GRAPHIC] [TIFF OMITTED] TN02OC18.012

BILLING CODE 7535-01-C
    The NCUA's new regional office structure will carry out the 
agency's 2019 examination workload. Based on second quarter statistics 
from call reports, the number of credit unions, members, and assets 
shows a rough estimate of the how the workload will be divided among 
the new regional offices:
     Eastern Region: 2,055 credit unions with 30.6 million 
members and $386 billion in assets.
     Southern Region: 1,668 credit unions with 31.2 million 
members and $340 billion in assets.
     Western Region: 1,751 credit unions with 37.4 million 
members and $504 billion in assets.
    In addition, the Office of National Examination and Supervision 
(ONES) will continue to examine credit unions with assets that total 
over $10 billion and that are located throughout the United States. 
Based on 2018 second quarter call report statistics, there are 
currently six such credit unions with 14.8 million members, accounting 
for $200 billion in credit union assets.
    In 2019 and 2020, the agency's workforce will undertake tasks in 
all of the NCUA's major programs:
     Supervision: The NCUA supervises federally insured credit 
unions through examinations and regulatory enforcement including 
providing guidance through various publications, taking administrative 
actions and conserving, liquidating, or merging severely troubled 
institutions as necessary to manage risk.
     Insurance: The NCUA manages the $16 billion NCUSIF, which 
provides insurance for deposits up to $250,000 that are held at 
federally insured credit unions. The fund is capitalized by credit 
unions and through retained earnings.
     Credit Union Development: The NCUA charters new federal 
credit unions, as well as approves modifications to existing charters 
and fields of membership. Through training, partnerships and resource 
assistance, the NCUA fosters credit union development, particularly the 
expansion of services to eligible members provided by small, minority, 
newly chartered, and low-income designated credit unions.
     Consumer Financial Protection: The NCUA protects 
consumers' rights through effective enforcement of federal consumer 
financial protection laws, regulations, and requirements. The NCUA also 
develops and promotes financial education programs for credit unions to 
assist members in making smarter financial decisions.
     Asset Management: The NCUA conducts credit union 
liquidations and performs management and recovery of assets through the 
AMAC. The new Southern Region includes AMAC.
     Stakeholder Outreach: In order to clearly understand the 
needs of the credit union system, the NCUA seeks input from all of its 
stakeholders, including Congress, State Supervisory Authorities, credit 
union members, credit unions and their associations.
     Cross-Agency Collaboration: The NCUA is involved in 
numerous cross-agency initiatives by collaborating with the other 
financial regulatory agencies including through participation in 
several councils. Significant councils include the Financial Stability 
Oversight Council (FSOC), the Federal Financial Institutions 
Examination Council (FFIEC), and the Financial and Banking Information 
Infrastructure Committee (FBIIC).
Budget Process--Strategy to Budget
    The NCUA's budget process starts with a review of the agency's 
goals and objectives set forth in the Strategic Plan (https://www.ncua.gov/About/Documents/AgendaItems/AG20160721Item2b.pdf). The 
Strategic Plan is a framework that sets the agency's direction and 
guides resource requests, so that the agency's resources and workforce 
are allocated and aligned to agency priorities and initiatives.
    Each regional and central office director at the NCUA develops an 
initial budget request identifying the resources for their office to 
support the NCUA's

[[Page 49702]]

mission, strategic goals, and strategic objectives. These budgets are 
developed to ensure each office's requirements are individually 
justified and remain consistent with the agency's overall Strategic 
Plan.
    For regional offices, one of the primary inputs in the development 
process is a comprehensive workload analysis that estimates the amount 
of time necessary to conduct examinations and to supervise federally 
insured credit unions in order to carry out the NCUA's dual mission as 
insurer and regulator. This analysis starts with a field-level review 
of every federally insured credit union to estimate the number of 
workload hours needed for the current year. The workload estimates are 
then refined by regional managers and submitted to the NCUA central 
office for the annual budget proposal. The workload analysis accounts 
for the efforts of nearly seventy percent of the NCUA workforce and is 
the foundation for budget requests from regional offices and the Office 
of National Examinations and Supervision (ONES).
    In addition to the workload analysis, from which central office 
budget staff derive related personnel and travel cost estimates, each 
of the NCUA offices submit estimates for fixed and recurring expenses, 
such as rental payments for leased property, operations and maintenance 
for owned facilities or equipment, supplies, telecommunications 
services, major capital investments, and other administrative and 
contracted services costs.
    Because information technology investments impact all offices 
within the agency, the NCUA has established an Information Technology 
Prioritization Council (ITPC). The ITPC meets several times each year 
to consider, analyze, and prioritize major information technology 
investments to ensure they are aligned with the NCUA's Strategic Plan. 
These focused reviews result in a mutually agreed-upon budget 
recommendation to support the NCUA's top short-term and long-term 
information technology needs and investment priorities.
    Once compiled for the entire agency, all office budget submissions 
undergo thorough reviews by the responsible regional and central office 
directors, the Chief Financial Officer, and the NCUA executive 
leadership. Through a series of presentations and briefings by the 
relevant office executives, the NCUA Executive Director formulates an 
agency-wide budget recommendation for approval by the Board.
    In recent years, the Board has emphasized the need for increased 
transparency of the NCUA's finances and its budgeting processes. In 
response, the Office of the Chief Financial Officer has made draft 
budgets available for public comment via the NCUA's website, and 
solicited public comments before presenting final budget 
recommendations for the Board's approval. Furthermore, the Economic 
Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115-
174, enacted May 24, 2018, requires in Section 212 that the NCUA ``make 
publicly available and publish in the Federal Register a draft of the 
detailed business-type budget.'' To fulfill this requirement, the Board 
delegated to the Executive Director the authority to publish the draft 
budget before submitting it for Board review.
    This budget justification document includes comparisons to the 
Board approved budget for 2018--2019. As in the 2018 budget, this 
document includes a summary description of the major spending items in 
each budget category to provide transparency and understanding of the 
use of budgeted resources. Estimates are provided by major budget 
category, office, and cost element.
    The NCUA also posts supporting documentation for its budget request 
on the NCUA website (https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx) to assist the public in 
understanding its budget development process. The budget request for 
2019 represents the NCUA's projections of operating and capital costs 
for the year, and is subject to approval by the Board.
Commitment to Financial Stewardship
    The NCUA funds its activities through operating fees levied on all 
federal credit unions and through reimbursements from the Share 
Insurance Fund, funded by both federal credit unions and federally 
insured state-chartered credit unions. The Overhead Transfer Rate (OTR) 
calculation determines the annual amount that the Share Insurance Fund 
reimburses the Operating Fund to pay for the NCUA's insurance-related 
activities. At the end of each calendar year, the NCUA's financial 
transactions are subject to audit in accordance with Generally Accepted 
Accounting Principles.\7\
---------------------------------------------------------------------------

    \7\ See 12 U.S.C. 1783(b) and 1789(b).
---------------------------------------------------------------------------

    Since nearly all of the revenue to finance the NCUA's programs 
comes from non-profit credit unions, the Board and the agency are 
committed to providing sound financial stewardship. In recent years, 
the NCUA Chief Financial Officer, with support and direction from the 
Executive Director and Board, has worked to improve the NCUA's 
financial management, financial reporting, and budget processes. In 
addition, through prudent management of the Corporate System Resolution 
Program, in July 2018 the NCUA paid nearly $736 million in dividends to 
over 5,700 credit unions--an amount larger than the cumulative total of 
all previous cash distributions made since the agency's Share Insurance 
Fund was created.
    In the 2018 budget, the NCUA revised its financial presentations to 
conform to Federal budgetary concepts and increase transparency of the 
agency's planned financial activity. The 2019 budget continues this 
presentation. The NCUA is the only Financial Institutions Reform, 
Recovery, and Enforcement Act (FIRREA) agency that publishes a 
detailed, draft budget and solicits public comments on it at a meeting 
with its Board or other agency leadership.
    The NCUA works diligently to strengthen its internal controls for 
financial transactions, in accordance with sound financial management 
policies and practices. Based on the results of the NCUA's assessments 
conducted through the course of 2017, the agency provided an unmodified 
Statement of Assurance (signed 2/15/2018) that its management had 
established and maintained effective controls to achieve the objectives 
of the Federal Managers Financial Integrity Act (FMFIA) and Office of 
Management and Budget (OMB) Circular A-123. Specifically, the NCUA 
supports the internal control objectives of reporting, operations, and 
compliance, as well as its integration with overarching risk management 
activities. Within the Office of the Chief Financial Officer, the 
Internal Controls Assessment Team (ICAT) continues to mature the 
agency-wide internal control program and continues to strengthen the 
overall system of internal control, further promote the importance of 
identifying risk, and ensure that the agency has identified appropriate 
responses to mitigate identified risks, in accordance with the 
Government Accountability Office (GAO) Standards for Internal Controls 
in Federal Government (Green Book) requirements.

III. Forecast and Enterprise Challenges

Economic Outlook

    The NCUA's mission is to provide, through regulation and 
supervision, a safe and sound credit union system, which promotes 
confidence in the national system of cooperative credit.

[[Page 49703]]

The challenges that the NCUA faces, and the resources the NCUA requires 
to fulfill its mission, depend on a variety of factors that directly or 
indirectly affect the health of the credit union system. The NCUA must 
anticipate, to the extent possible, developments that will affect the 
system, develop strategies, plans and processes to meet both the 
current and anticipated needs, and assemble the resources, including 
staff, necessary to ensure a safe and sound system.
    One key determinant of credit union performance is the underlying 
economic environment in which they must operate. In general, for the 
past few years, the economy has supported solid financial system 
performance. The economy performed well in the first half of 2018. Real 
GDP grew at a relatively strong 3.2 percent annual rate, and the 
unemployment rate dipped below 4.0 percent--near or below the full-
employment rate. Inflation edged higher, moving closer to the Federal 
Reserve's 2-percent inflation target, and Federal Reserve policymakers 
raised short-term interest rates. Longer-term rates also increased but 
a variety of factors have kept them from moving in lock-step with 
shorter-term rates.
    With the support of a solid economic foundation, credit union 
lending, membership growth, and credit quality remained strong through 
the second quarter of 2018. Federally insured credit unions added 4.8 
million members over the year, boosting credit union membership to 
114.1 million in the second quarter of 2018. Credit union shares and 
deposits rose 5.4 percent over the year to $1.2 trillion. Total loans 
outstanding at federally insured credit unions increased 9.8 percent to 
$1.0 trillion, and the system-wide loan delinquency rate fell to 67 
basis points, down from 75 basis points a year earlier. The credit 
union system's return on average assets rose to 90 basis points, and 
the system's net worth ratio increased to just over 11 percent in the 
second quarter.
    The consensus of forecasters suggests the economic environment will 
continue to be a solid support to credit union performance over the 
2019-2020 budget horizon. Forecasts for the next two years call for 
somewhat slower economic growth. Employment is projected to continue to 
rise and the unemployment rate--already below the level associated with 
full employment--is expected to remain low. Tight labor market 
conditions are projected to keep inflation near the Federal Reserve's 
2.0 percent target. Solid economic conditions should remain a positive 
force for credit union lending, membership growth, and credit quality 
over the budget horizon.
    However, analysts caution that the tight labor market conditions 
and higher inflation could be associated with higher interest rates. 
Federal Reserve policymakers indicate that the federal funds rate could 
move higher over the next three years to fulfill their dual mandate of 
maintaining maximum employment and low inflation. Analysts are 
projecting that short term interest rates--which largely determine 
interest payments credit unions make--could rise relative to longer 
term interest rates, which largely determine the interest payments 
credit unions receive.
[GRAPHIC] [TIFF OMITTED] TN02OC18.013

    In the consensus projected economic environment, credit unions' 
ability to manage and mitigate interest rate risk will become 
increasingly important to their success. On the liability side, rising 
deposit rates, if realized, could force credit unions to adapt more 
quickly than in the past, since many members have a number of financial 
institution alternatives and can move funds quickly between 
institutions.
    On the asset side, the low interest rate environment of the past 
decade has led some credit unions to lengthen the term of investments 
to boost their portfolio's earnings or to lock in relatively low rates 
on long-term loans like mortgages. For affected credit unions, higher 
deposit rates will push up against low loan rates, which would compress 
net interest margins.
    While the overall forecast appears largely supportive of credit 
unions, forecasts of the economic environment are far from perfect. 
Some analysts are suggesting the long expansion could end during the 
NCUA 2019-2020 budget period; a recession would pose significant 
challenges to the system in terms of rising delinquencies, reduced loan 
demand, and, potentially, an increase in shares as consumers move funds 
from riskier investments into safer, insured credit union deposits. The 
NCUA, like the credit unions themselves, needs to plan and prepare for 
a range of economic outcomes that could affect credit union performance 
and determine resource needs.
    In addition to risks associated with movements in the general 
economy, the NCUA and credit unions will need to understand their 
increasing exposure to, and address risks associated with, the 
technological and structural changes facing the system. Over the 
longer-term, increased concentration of loan portfolios, development of 
alternative loan and deposit products, technology-driven changes in the 
financial landscape, continued industry

[[Page 49704]]

consolidation, and ongoing demographic changes will continue to shape 
the environment facing credit unions and will determine the resource 
needs of the NCUA.
    Cybersecurity: Credit unions' increasing use of technology is 
making the credit union system more vulnerable to cyber-attacks. The 
prevalence of malware, ransomware, distributed denial of service (DDOS) 
attacks, and other forms of cyber intrusion are creating challenges at 
credit unions of all sizes, and will require ongoing measures for 
containment. These trends are likely to continue, and even accelerate, 
over the next two years.
    Lending trends: Increasing concentrations in member business loans 
and private student loans, in addition to other new types of lending by 
credit unions, emphasize the need for long-term risk diversification 
and effective risk management tools and practices, along with expertise 
to properly manage increasing concentrations of risk.
    Financial Landscape and Technology: New financial products that 
mimic deposit and loan accounts, such as Apple Pay, Walmart pre-paid 
cards and peer-to-peer lending, are emerging. These new products pose a 
competitive challenge to credit unions and banks alike. Credit unions 
also face a range of challenges from financial technology (fintech) 
companies in the areas of lending and the provision of other services. 
For example, underwriting and lending may be automated at a cost below 
levels associated with more traditional financial institutions, but may 
not be subject to the same regulations and safeguards that credit 
unions and other traditional financial institutions face. The emergence 
and increasing importance of digital currencies may pose both risks and 
opportunities for credit unions. As these institutions and products 
gain popularity, credit unions may have to be more active in marketing 
and rethink their business models.
    Technological changes outside the financial sector may also lead to 
changes in consumer behavior that indirectly affect credit unions. For 
example, the increase in on-demand use of auto services and the 
potential for pay-as-you-go on-demand vehicle rental, could reduce 
purchases of consumer-owned vehicles. That could lead to a slowdown or 
reduction in the demand for vehicle loans, now slightly more than a 
third of the credit union system loan portfolio.
    Membership trends: While overall credit union membership continues 
to grow strongly, 50 percent of federally insured credit unions had 
fewer members at the end of the second quarter of 2018 than a year 
earlier. Demographic and field of membership changes are likely to 
continue to result in declining membership at many credit unions. All 
credit unions need to consider whether their product mix is consistent 
with their members' needs and demographic profile. For example, in some 
areas, to be effective, credit unions may need to explore how to meet 
the needs of an aging population or of a growing Hispanic population.
    Smaller credit unions' challenges and industry consolidation: Small 
credit unions face challenges to their long-term viability for a 
variety of reasons, including weak earnings, declining membership, high 
loan delinquencies, and elevated non-interest expenses. If current 
consolidation trends persist, there will be fewer credit unions in 
operation and those that remain will be considerably larger and more 
complex. As of June 30, 2018, there were 542 federally insured credit 
unions with assets of at least $500 million, 28 percent more than just 
five years earlier. These 542 credit unions accounted for 71 percent of 
credit union members and 77 percent of credit union assets. Large 
credit unions tend offer more complex products, services and 
investments. Increasingly complex institutions will pose management 
challenges for the institutions themselves, as well as the NCUA; 
consolidation means the risks posed by individual institutions will 
become more significant to the Share Insurance Fund.
Enterprise Risk Management
    In light of the strategic direction and the challenges and issues 
described above, the NCUA employs an Enterprise Risk Management (ERM) 
program. The ERM program is a means by which agency leadership 
evaluates the various factors (both internal to the agency and external 
in the industry) that can impact the agency's performance relative to 
its mission, vision, and performance outcomes. Agency priority risks 
include both internal consideration such as the agency's internal 
controls framework, to external factors such as credit union 
concentration risk. All of these risks can materially impact the 
agency's ability to achieve its mission.
    The NCUA's ERM Council provides oversight of the agency's 
enterprise risk management activities. Through the ERM program, the 
agency is identifying and managing risks that could affect the 
achievement of its mission. The ERM program was established in 2015 to 
include an enterprise risk appetite statement and risk taxonomy. In 
2018, the NCUA identified a number of enterprise risks that helped 
inform the agency's planning and budget processes, and assigned roles 
and responsibilities for monitoring risks in several specific 
activities. Overall, the NCUA's ERM program promotes effective internal 
controls, which, when combined with robust measurement and 
communication, are central to cost-effective decision-making and risk 
optimization within the agency.
    In its 2018-2022 iteration of its Strategic Plan, the NCUA adopted 
its first agency enterprise risk appetite statement, which is:

    The NCUA is vigilant and has an overall judicious risk appetite. 
The NCUA's primary goal is to ensure the safety and soundness of the 
credit union system and the agency recognizes it is not desirable or 
practical to avoid all risk. Acceptance of some risk is often 
necessary to foster innovation and agility. This risk appetite will 
guide the NCUA's actions to achieve its strategic objectives in 
support of providing, through regulation and supervision, a safe and 
sound credit union system, which promotes confidence in the national 
system of cooperative credit.

The agency's risk appetite will help align risks with opportunities 
when making decisions and allocating resources to achieve the agency's 
strategic goals and objectives. This enterprise risk appetite statement 
is part of the NCUA's overall management approach and is supported by 
detailed appetite statements for individual risk areas.
    In practice, this means that the NCUA recognizes that risk is 
unavoidable and sometimes inherent in carrying out the agency's 
mandate. The NCUA is positioned to accept greater risks in some areas 
than in others; however, when consolidated, the risk appetite should be 
within the boundaries established for the entire agency. Cross-
collaboration across programs and functions is a fundamental piece of 
ensuring the agency stays within its risk appetite boundaries. The NCUA 
will identify, assess, prioritize, respond to and monitor risks to an 
acceptable level. This budget proposal for 2019/2020 incorporates the 
NCUA's enterprise risk management program and agency risk appetite in 
recommending how best to allocate its resources.

IV. Key Themes of the 2019-2020 Budget

Overview

    The budget supports the priorities and goals outlined in the 
agency's annual performance plan and the NCUA Strategic Plan 2018-2022 
(https://www.ncua.gov/About/Documents/

[[Page 49705]]

AgendaItems/AG20160721Item2b.pdf). The resources and new initiatives 
proposed in the budget support the NCUA's mission to maintain a safe 
and sound credit union system.
    The 2019-2020 budget carries forward a number of key ongoing 
initiatives, which include: The Exam Flexibility Initiative; the 
increased use of off-site examinations work and data analytics; the 
modernization of information technology systems; regulatory reform 
initiatives; and efforts to implement organizational efficiencies. Over 
the course of the next five years, these efforts will result in a more 
effective and efficient organization.
    In the 2019-2020 budget, the NCUA continues to reduce its staffing, 
reflecting greater operational efficiency at the agency. The NCUA 
employees are the agency's most valuable resource for achieving its 
mission, and the agency is committed to a workplace and a workforce 
with integrity, accountability, transparency, inclusivity, and 
proficiency. As the NCUA continues its efforts to curb expenses and 
reduce overhead costs, we will continue investing in the workforce 
through training and development, helping employees develop the tools 
they need to do their work effectively.
    At the same time, managing the size of the workforce is important 
from a budgetary standpoint, because employment-related costs are the 
single largest driver of the NCUA budget. As discussed in this 
document, the NCUA continues to use workload models to estimate the 
amount of time necessary to conduct examinations and supervise 
federally insured credit unions. This analysis results in an estimate 
of the staffing level required to carry out the NCUA's dual mission as 
insurer and regulator. The NCUA continues to assess and balance its 
mission workload needs with the financial costs the agency imposes on 
the credit union system. Although the number of credit unions continues 
to decline nationwide, the NCUA must also consider the increasing 
complexity and growing asset base of the entire credit union system.
    The efficiency and effectiveness of the agency's workforce is 
dependent upon the resiliency of the NCUA's information technology 
infrastructure and availability of technological applications. The NCUA 
is committed to implementing new technology responsibly and delivering 
secure, reliable and innovative technological solutions to support its 
mission. This necessitates investments funded in the Capital Budget, to 
provide the analytical tools and technology the workforce needs to 
achieve the NCUA mission.
Reorganization/Restructuring
    In July 2017, the NCUA's executive leadership committed to a bold 
plan that would invest in the agency's future, make critical 
organizational alignment changes, and reduce overall staffing of the 
agency. The Board approved a series of operational actions to improve 
the NCUA's efficiency, effectiveness, and focus on its core mission 
responsibilities.
    The NCUA's reform plan positioned the agency to meet the ongoing 
changes in the industry it regulates and insures. The U.S. financial 
sector is subject to continuing advancements and emerging risks, which 
necessitate changes in the way the NCUA conducts its business. 
Advancements in the type and quantity of data available also demands a 
fresh way of thinking about our business model. At the same time, the 
continuing reality of smaller credit unions merging with larger ones, 
while existing credit unions grow significantly in size and complexity, 
requires an even more strategic, nimble and innovative way to carry out 
our responsibilities as established in the Federal Credit Union Act.
    As a result of the NCUA's on-going implementation of its reform 
plan:
     The NCUA created an office focused exclusively on new 
charters and credit union expansion--the Credit Union Resources and 
Expansion (CURE) Office.
     The NCUA is lowering the agency's authorized staffing 
level from 1,247 positions in the 2016 approved budget, down to 1,178 
in the 2019 budget, a reduction of 69 positions, or nearly 6 percent.
     Leased office space is being reduced by 80 percent.
     Examination reports are being improved through 
implementing enhanced quality measures.
     Two regional offices will close in January 2019.
     AMAC's staffing has been reduced, and support functions 
are now carried out by the central office.
    The agency is on-track to meet the staffing reduction targets and 
other key outcomes identified in the reform plan. These actions are 
predicated on the understanding that the industry is consolidating and 
becoming more complex at the same time. The NCUA continues to examine 
how to best reshape its workforce to meet future needs, and to look for 
ways to contain operating costs to create a more efficient 
organization.
Modernizing the Examinations Process
    In August 2018, the NCUA issued Letter to Credit Unions: 18-CU-01- 
``Examination Modernization Initiatives.'' This letter outlined five 
initiatives the NCUA Board approved to modernize the agency's 
examinations processes. Some of the intended benefits of these 
initiatives are:

 More efficient examinations and supervision
 Reduced burden on credit unions
 More consistent and accurate supervisory determinations
 Greater ability to adapt to changes in the marketplace and 
credit union business models
 Enhanced coordination with State Supervisory Authorities
 Reduced travel costs
 Improved quality of life for examiners
 More secure, reliable, and flexible technology foundation able 
to support future expansion capabilities

    These five initiatives are interrelated and complement each other. 
As these initiatives support and build upon each other, they will 
ultimately result in a fully modernized examination and supervision 
program with various incremental improvements occurring along the way. 
Throughout this budget, the NCUA aligns its resources in support of 
these improvements. Below is a more in-depth discussion of each of the 
initiatives:
    Flexible Examination Program (FLEX). FLEX is a pilot program in the 
Southern Region. FLEX is evaluating conducting offsite certain existing 
exam procedures. The pilot was developed to assess examiners working 
remotely on elements of examinations of well-run credit unions that 
have the technology and platforms to provide electronic data securely. 
This program reflects the NCUA's most immediate solution to the 
agency's efforts to reduce, but not eliminate, onsite presence during 
exams.
    In 2017, the NCUA tested the pilot with five examiner groups in 28 
credit unions located in a variety of geographical locations. The pilot 
was tested on credit unions as small as $4 million in assets to those 
as large as $9.4 billion in assets.
    Preliminary results from the pilot show cost savings to the NCUA, 
realized in part by reducing travel time and costs for examiners. In 
designated FLEX reviews, over 35 percent of the total exam hours were 
performed offsite. Credit union feedback has also been positive, with 
the majority of credit unions reporting positive experiences with the 
modified exam approach.
    However, the pilot identified the need for the NCUA to have a 
secure file transfer portal to support much of this offsite work 
efficiently. The secure file

[[Page 49706]]

transfer portal was fully deployed in July 2018. The agency is 
currently testing the portal and expects to move forward developing 
plans to increase agency use of offsite procedures.
    ONES Data-Driven Supervision. This initiative began in 2018 as an 
effort to move to a continuous supervision model for the large, 
natural-person credit unions supervised by the Office of National 
Examinations and Supervision. The continuous supervision model will use 
data-driven analytics to monitor and identify credit union risk while 
supporting the transition to credit union-driven stress testing. The 
data-driven supervision initiative may lead to analytical advancements 
that can be adapted for supervising some or all other insured credit 
unions.
    Shared NCUA-State Regulator Federally-Insured State Credit Unions 
(FISCU) Program. In 2017, the NCUA created the Joint NCUA-State 
Supervisor Working Group (working group), which is tasked with 
improving coordination and scheduling for joint exams, providing 
scheduling flexibility, and reducing redundancy where possible. The 
group's goal is to minimize the burden on FISCUs resulting from having 
a separate financial regulator and insurer.
    In addition, the working group is evaluating the efficacy, 
appropriateness, and feasibility of adopting an alternating-year 
examination approach for FISCUs. A pilot program is under development 
and will allow the NCUA, state regulators, and stakeholders to evaluate 
the benefits and challenges of an alternate-year examination program. 
The pilot will need to run about three years in order to evaluate one 
full alternating-year exam cycle, and will provide valuable insight 
into the advantages and risks of such an approach prior to finalizing a 
decision about a permanent alternating-year exam cycle.
    For joint examinations of FISCUs, the working group is also 
exploring ways to minimize duplication and overlap through process 
improvements and greater use of technology. In addition, the working 
group is evaluating other areas of potential duplication that can be 
reduced or eliminated, such as loan participations, CUSO and third 
party vendor reviews, and other supervisory matters. The goal of these 
reviews is to better leverage the work of each regulatory party in 
examining and supervising FISCUs.
    Enterprise Solution Modernization (ESM). In November 2015, the NCUA 
Board authorized the ESM program. This effort will replace legacy 
applications such as the examination system (AIRES) and the Call Report 
data collection tool (CU Online). ESM will also introduce emerging and 
secure technology that supports the NCUA's examination, data 
collection, and reporting efforts. The result will be a flexible 
technology architecture that integrates modernized systems and tools 
across the agency. The new systems will streamline processes and 
procedures helping create a more effective, less burdensome process.
    ESM will also provide essential upgrades to the NCUA's technology 
foundation that supports the FLEX and Virtual Exam efforts with:
     More efficient ways to securely communicate with credit 
unions.
     Updated tools such as workflow management, data 
integration, document management, and customer relationship management 
capabilities.
     A flexible framework that will allow for integration of 
new solutions so the NCUA's supervisory systems can evolve with changes 
to regulations, data and analytical needs, and activities credit unions 
engage in.
    The first of a series of technology upgrades from ESM are scheduled 
to begin in 2019. Throughout the multi-year implementation phase of 
this initiative, the NCUA will continue to provide updates and engage 
stakeholders.
    Virtual Examination Program. In 2017, the NCUA Board approved the 
project and associated resources to research methods to conduct offsite 
as many aspects of the examination and supervision processes as 
possible. The virtual exam project team is researching ways to harness 
new and emerging data, advancements in analytical techniques, 
innovative technology, and improvements in supervisory approaches.
    By identifying and adopting alternative methods to remotely analyze 
much of the financial and operational condition of a credit union, with 
equivalent or improved effectiveness relative to current examinations, 
it may be possible to significantly reduce the frequency and scope of 
onsite examinations. Onsite examination activities could potentially be 
limited to periodic data quality and governance reviews, interventions 
for material problems, and meetings or other examination activities 
that need to be handled in person.
    The virtual exam should lead to greater use of standardized 
interaction protocols, advanced analytical capabilities, and more-
informed subject matter experts. This should result in more consistent 
and accurate supervisory determinations, provide greater clarity and 
consistency with respect to how the agency conducts supervisory 
oversight, and reduce coordination challenges between agency and 
institution staff.
    To be successful, it is likely examination staff will need to 
analyze more information about the credit union being examined and 
communicate more frequently with management at the credit union. 
However, it is not the agency's intent to intervene in credit unions' 
day-to-day operations or strategic planning.
    The virtual examination team will deliver to the NCUA board by the 
end of 2020 a report discussing alternative methods identified to 
remotely analyze aspects of the financial and operational condition of 
a credit union. For credit unions that are compatible with this 
approach, the agency's goal is to transform the examination and 
supervision program into a predominately virtual one within the next 
five to ten years. The transformation is expected to occur through 
incremental adoption of the corresponding new techniques and 
approaches.
Reducing Regulatory Burden
    The NCUA established a Regulatory Reform Task Force (Task Force) in 
March 2017 to oversee implementation of the agency's regulatory reform 
agenda. This is consistent with the spirit of Executive Order 13777 and 
the Trump administration's regulatory reform agenda. Although the NCUA, 
as an independent agency, is not required to comply with Executive 
Order 13777, the agency chose to review all of the NCUA's regulations, 
consistent with the spirit of initiative and the public benefit of 
periodic regulatory review. The Task Force published and sought comment 
on its first report in August 2017.
    The NCUA has undertaken a series of regulatory changes as part of 
this effort, and continues to pursue a regulatory reform agenda, 
including matters such as advertising, field of membership, equity 
distribution, and securitization. The task force is in the process of 
preparing its second report, which should be issued in late 2018 or 
early 2019.

V. Operating Budget

Overview

    The NCUA Operating Budget is the annual resource plan for the NCUA 
to conduct activities prescribed by the Federal Credit Union Act of 
1934. These activities include: (1) Chartering new Federal credit 
unions; (2) approving

[[Page 49707]]

field of membership applications of Federal credit unions; (3) 
promulgating regulations and providing guidance; (4) performing 
regulatory compliance and safety and soundness examinations; (5) 
implementing and administering enforcement actions, such as prohibition 
orders, orders to cease and desist, orders of conservatorship and 
orders of liquidation; and (6) administering the National Credit Union 
Share Insurance Fund (NCUSIF or the Share Insurance Fund).
    The NCUA funds its activities through operating fees levied on all 
Federal credit unions and through reimbursements from the Share 
Insurance Fund, which is funded by both Federal credit unions and 
federally-insured state-chartered credit unions.
    As outlined in the NCUA Letter to Credit Unions 18-CU-01, dated 
August, 2018, there are several examination modernization initiatives 
in process to improve how the agency conducts examinations and 
supervision. The goals of these initiatives are to replace outdated, 
end-of-life examination systems, streamline processes, adopt enhanced 
examination techniques, and leverage new technology and data to 
maintain high quality supervision of insured credit unions with less on 
site presence. Modernizing agency systems and processes will reduce the 
burden on the credit union community and increase the effectiveness of 
the NCUA.
Staffing
    The staffing levels proposed for 2019 reflect the resource 
requirements for steady state operations at the NCUA as it implements 
the agency reform plan and modernizes the examination process. The 
estimated resource level will fund the appropriate workload balance 
that supports extended exam cycles and enhanced examinations. The new 
positions supported by the budget include a Business Data Lead, two 
Business Innovation Officers, a Bank Secrecy Act Specialist, a 
Financial Technology Analyst, two Enforcement and litigation attorneys, 
and one Regulations and Legislation attorney. There will be a 
realignment of three regional office vacancies to offset three of the 
new positions.
    In 2019, the agency is also establishing the Office of Business 
Innovation to lead the Enterprise Solution Modernization (ESM) program, 
as well as other modernization and business enterprise initiatives 
outside the scope of ESM. This includes the agency's initiative to 
modernize the member loan and share download, advance the information 
security program, and enhance analytics through data management. 
Previously, the employees assigned to Business Innovation were included 
in the Office of the Executive Director. By creating the new office 
structure, the budget will more clearly delineate these expenses and be 
more transparent to interested parties.
    The budget for 2019 supports a total agency staffing level of 1,178 
personnel. This is a net decrease of ten positions from the Board-
approved level for 2018, or a decrease of 0.8 percent.
BILLING CODE 7535-01-P

[[Page 49708]]

[GRAPHIC] [TIFF OMITTED] TN02OC18.014

BILLING CODE 7535-01-C
Request for New Staff in 2019
Business Data Lead (1 Position Reallocated From Regional Vacancies)
    The Office of Business Innovation requires one full-time position 
to serve as the Business Data leader who will drive implementation of 
an agency-wide analytic data strategy and governance framework. This 
work will include: (1) Chairing an enterprise analytic data council; 
(2) supervising three enterprise data stewards; (3) working with 
contract consultants to assist the council and data stewards; (4) 
piloting the enterprise data strategy and governance framework; (5) 
initiating the enterprise data office study; and (6) recommending and 
running a future state for enterprise data management.
Business Innovation Officers (2 Positions Reallocated From Regional 
Vacancies)
    The Office of Business Innovation requires two Business Innovation 
Officers to conduct the daily work to support development of an agency-
wide analytic data strategy and governance framework, including: (1) 
Creating and executing a data governance framework, (2) defining 
business requirements to ensure initial proper configuration of the 
NCUA's analytic data repository, (3) researching data information to 
update the NCUA's data dictionary and develop data lineage 
requirements, and (4) working with system owners and other stakeholders 
to resolve conflicts and facilitate acceptance into the data framework.
Bank Secrecy Act Specialist (+1 New Position)
    The Office of Examination and Insurance requires a full-time 
position to support Bank Secrecy Act (BSA) policies and workload 
requirements. The BSA has consumed considerable attention within the 
NCUA and throughout the government's regulatory responsibilities for 
the financial services industry. Interagency planning and policy 
development groups have already created significant new workload for 
the NCUA. This additional workload is expected to continue as the 
interagency groups develops new supervisory policies, coordinate BSA-
related rulemaking, implement industry and supervisory guidance, and 
conduct industry outreach.

[[Page 49709]]

Financial Technology Analyst (+1 New Position)
    The Office of the Chief Economist requires one new employee to 
research new financial technology innovations and organize and lead a 
working group to review these emerging technologies. This position will 
also expand the NCUA's policy expertise in cryptocurrencies.
Enforcement and Litigation Attorneys (+2 New Positions)
    The Office of General Counsel requires two additional attorneys in 
the Enforcement and Litigation Division to support the agency and 
enable attorneys to work more collaboratively as supervisory offices' 
formal enforcement actions are being considered and planned. These 
additional employees will help improve the NCUA's overall enforcement 
process by focusing support and investigatory efforts more 
strategically and earlier in the enforcement process.
Regulations and Legislation Attorney (+1 New Position)
    The Office of General Counsel requires an additional attorney for 
the Division of Regulations and Legislation. This attorney will focus 
on the review of legislation, provide technical drafting assistance for 
legislation when necessary, write responses to Congressional and 
interagency inquiries, and assist in drafting both oral and written 
testimony for Congressional hearings. The new attorney will also 
coordinate legislative efforts with other public and Congressional 
Affairs staff at the NCUA.
Budget Category Descriptions and Major Changes
    There are five major expenditure categories in the NCUA's budget. 
This section explains how these expenditures support the NCUA's 
operations, and presents a transparent and comprehensive accounting of 
the Operating Budget.
BILLING CODE 7535-01-P
[GRAPHIC] [TIFF OMITTED] TN02OC18.015

BILLING CODE 7535-01-C
Salaries and Benefits
    The budget includes $222.8 million for employee salaries and 
benefits in 2019. This change is a $2.1 million, or 1.0 percent, 
increase from the 2018 Board Approved Budget.
    Salaries and benefits make up 73 percent of the total budget. The 
primary driver of increased costs in the Salaries and Benefits category 
is merit and locality pay increases for the NCUA's 1,173 personnel paid 
from the Operating Budget, in accordance with the agency's current 
Collective Bargaining Agreement (CBA) and its merit-based pay system. 
In 2019, the NCUA's compensation levels will continue to ``maintain 
comparability with other federal bank regulatory agencies,'' as 
required by the Federal Credit Union

[[Page 49710]]

Act.\8\ The Salaries and Benefits category of the budget includes all 
employee pay raises for 2019, such as merit and locality increases, and 
those for promotions, reassignments, and other changes, as described 
below.
---------------------------------------------------------------------------

    \8\ The Federal Credit Union Act states that, ``In setting and 
adjusting the total amount of compensation and benefits for 
employees of the Board, the Board shall seek to maintain 
comparability with other [f]ederal bank regulatory agencies.'' See 
12 U.S.C. 1766(j)(2).
---------------------------------------------------------------------------

    Consistent with other federal pay systems, the NCUA's compensation 
includes base pay and locality pay components. The NCUA staff will be 
eligible to receive an average merit-based increase of 3.0 percent, and 
an additional locality adjustment ranging from zero to 3.0 percent, 
depending on location. The average increase in locality pay is 
estimated to be 1.4 percent. Starting in 2019, the NCUA discontinued 
the annual, general pay scale increase of 1.25 percent in accordance 
with recent CBA negotiations. By merging the general pay scale increase 
into the annual merit-based pay increase, the NCUA expects to better 
reward employee performance while reducing future year payroll growth.
    The first-year cost of the new positions added in 2019 is estimated 
to be $1.0 million, or approximately half the annual salaries and 
benefits associated with the positions since these new employees will 
be hired throughout the year. The full-year salaries and benefits costs 
of these employees will approximately double in 2020. Specific 
increases to individual offices' pay and benefits budgets will vary 
based on current pay levels, position changes, and promotions.
    Personnel compensation at the NCUA varies among every office and 
region depending on work experience, skills, years of service, 
supervisory or non-supervisory responsibilities, and geographic 
locations. In general, more than 85 percent of the NCUA workforce has 
earned a bachelor's degree or higher, compared to approximately 35 
percent of the private-sector workforce. This high level of educational 
achievement ensures the NCUA workforce is able to fulfill its mission 
effectively and efficiently, and attracting a well-qualified workforce 
requires the agency to pay employees competitive salaries.
    Individual employees' compensation varies, depending on the cost of 
living in the location where the employee is stationed. The federal 
government sets locality pay standards, which are managed by the 
President's Pay Agent--a council established to make recommendations on 
federal pay. The council uses data from the Occupational Employment 
Statistics program, collected by the Bureau of Labor Statistics, to 
compare salaries in over 30 metropolitan areas, and establishes 
recommendations for equitable adjustments to employee salaries to 
account for cost-of-living differences between localities.
    The Office of Personnel Management (OPM) economic assumptions for 
actuarial valuation of the Federal Employees Retirement System (FERS) 
remains unchanged in 2019, so all federal agencies are expected to 
contribute 13.7 percent of FERS employees' salary to the OPM retirement 
system. This mandatary contribution is expected to increase to 16.0 
percent, or +230 basis points, in 2020, consistent with published 
actuarial updates. This change will result in an estimated $3.5 million 
in additional, mandatory retirement-related payments by the NCUA to 
OPM.
    The average health insurance costs for the Federal Employees Health 
Benefits program for 2019 are consistent with historical actual 
expenses. The employee pay and benefits category also includes costs 
associated with other mandatory employer contributions such as Social 
Security, Medicare, transportation subsidies, unemployment, and 
workers' compensation. Notably, charges from the U.S. Department of 
Labor (DOL) for the NCUA's workers' compensation claims increased by 
nearly $250,000 between 2018 and 2019. DOL manages the workers' 
compensation system for all federal agencies.
    The 2019 budget reflects a $4.0 million reduction, or the 
equivalent of a two percent vacancy rate (21 positions) during the 
year. This aligns with the NCUA's most recent attrition rates and the 
recruitment and retention challenges the agency expects to face in the 
current, high-employment labor market. The effect of this adjustment 
lowers the NCUA budget and results in reduced fees collected from 
credit unions.
    The 2020 budget request for salaries and benefits is estimated at 
$233.6 million, a $10.8 million increase from the 2019 level, which 
accounts for merit and locality increases consistent with the CBA 
(approximately $6.3 million), the full-year cost impact of new 
positions (approximately $1 million), and the mandatory FERS retirement 
contributions to OPM (approximately $3.5 million).
Travel
    The 2019 budget includes $26.8 million for Travel. This change is a 
$326,000, or 1.2 percent, increase to the 2018 Board Approved Budget. 
Travel comprises approximately nine percent of the overall 2019 budget. 
The cumulative reduction of the credit union examiner positions 
compared to past years, extended examination cycles, and increased use 
of offsite examinations all help contain the NCUA's travel costs. 
However, the General Services Administration has announced an increase 
of nearly eight percent for per diem rates in 2019, which drives the 
growth of estimated travel expenses in 2019.
    The Travel cost category includes expenses for employees' airfare, 
lodging, meals, auto rentals, reimbursements for privately owned 
vehicle usage, and other travel-related expenses. These are necessary 
expenses for examiners' onsite work in credit unions. Close to two-
thirds of the NCUA's workforce is comprised of field staff who spend a 
significant part of their year traveling to conduct the examination and 
supervision program.
    The NCUA staff also travel for training, and there will be minor 
increases to training-related travel expenses to support field exams. 
For example, technical experts such as payment system, capital market, 
and lending specialists will assist field examiners with program 
examinations and training, while consumer access analysts will provide 
support on field consumer compliance issues and follow-up field 
assessments of business marketing plans for field-of-membership 
expansions.
    The 2020 budget request for travel is estimated at $27.8 million, a 
$1 million increase to the 2019 level, which accounts for a national 
program examination training event. This one-time training conference 
is anticipated to coincide with full deployment of the new Examination 
and Supervision Solution system.
    The NCUA plans to evaluate future cost avoidance for travel through 
continued expansion of offsite examination work. In addition, agency 
personnel will continue to utilize more virtual training options, where 
appropriate, to help minimize travel expenses.
Rent, Communications, and Utilities
    The 2019 budget includes $8.0 million for Rent, Communications, and 
Utilities. This is a $445,000 reduction, or five percent less than the 
2018 Board Approved Budget. The Rent, Communications, and Utilities 
category is the smallest component of the NCUA's budget and funds the 
agency's telecommunications and information

[[Page 49711]]

technology network expenses, and facility rental costs. The agency 
telecommunications expense for 2019 is $3.2 million. Office building 
leases, meeting rentals, office utilities, and postage expenses are 
also included in this budget category. Facility costs total $2.6 
million for 2019, which is $600,000 less than the prior year budget due 
to the closure of regional offices in Atlanta, Georgia and Albany, New 
York. Facility costs also include the NCUA's annual payment of $1.3 
million to the Share Insurance Fund for its central office note, which 
is scheduled to be fully repaid in 2023.
    The 2020 budget request for the Rent, Communications, and Utilities 
category is $8.0 million, and is unchanged from 2019. Additional 
savings from lease terminations are expected in 2021, once Eastern 
Region personnel are co-located in the NCUA-owned central office 
building.
Administrative Expenses
    The 2019 budget includes $8.7 million for Administrative Expenses. 
This is an increase of $1.2 million, or 16 percent, compared to the 
2018 Board Approved Budget. Recurring costs in the Administrative 
Expenses category include the annual reimbursement to the Federal 
Financial Institutions Examination Council (FFIEC), employee relocation 
expenses, recruitment and advertising, shipping, printing, 
subscriptions, examiner training and meeting supplies, office 
furniture, and employee supplies and materials.
    Service contracts, maintenance fees, and end-user licensing for 
computer software and database management applications will cost $3.8 
million in 2019. This includes annual software licenses and maintenance 
support fees for the call center managed by the Office of Consumer 
Financial Protection. This line item represents a $435,000 increase 
over the prior year budget to support purchases of critical financial 
and information services subscription services to manage risk.
    As part of the FFIEC, the NCUA shares in costs for joint actions 
and services that affect the financial services industry. These costs 
are largely outside of the NCUA's control and are estimated at $1.4 
million in 2019, which is $100,000 more than 2018.
    Employee relocation expenses are adjusted in 2019 to reflect the 
historical average annual expenditures of $750,000. This is a $500,000 
increase over the 2018 Board Approved Budget, which was lower than 
historical averages because of one-time agency reorganization funding 
set aside for relocations in 2018.
    Due to reformed business processes and improved financial controls, 
costs for printing. Meeting support costs are estimated to be $150,000 
less than in 2018.
Contracted Services
    The 2019 budget includes $38.1 million for Contracted Services. 
This is a $3.1 million, or nine percent, increase compared to the 2018 
Board Approved Budget.
    The Contracted Services budget category includes costs incurred 
when products and services are acquired in the commercial marketplace. 
Acquiring specific expertise or services from contract providers is 
often the most cost-effective approach to fulfill the NCUA's mission. 
Such services include critical mission support such as information 
technology hardware and software development, accounting and auditing 
services, and specialized subject matter expertise that enable staff to 
focus on core mission execution.
    The majority of funding in the Contracted Services category is 
related to the NCUA's priority to implement a robust supervision 
framework by identifying and resolving traditional risk concerns such 
as interest rate risk, credit risk, and industry concentration risk, as 
well as by addressing new and evolving operational risks such as 
cybersecurity threats. Growth in the contracted services budget 
category results primarily from new operations and maintenance costs 
associated with ongoing capital investments, such as replacements for 
the Automated Integrated Regulatory Examination System (AIRES) and CU 
Online. Other costs include core agency business operation systems such 
as for payroll processing, and various recurring costs, as described in 
the seven major categories, below:
    [ssquf] Information Technology Operations and Maintenance (47 
percent of contracted services)

--IT network support services and help desk support
--Contractor program and web support and network and equipment 
maintenance services
--Administration of software products such as Microsoft Office, Share 
Point and audio visual services

    [ssquf] Administrative Support and Other Services (14 percent of 
contracted services)

--Examination and Supervision program support
--Technical support for examination and cybersecurity training programs
--Equipment maintenance services
--Legal services and other expert consulting support
--Other administrative mission support services for the NCUA central 
office

    [ssquf] Accounting, Procurement, Payroll and Human Resources 
Systems (11 percent of contracted services)

--Accounting and procurement systems and support
--Human resources, payroll, and employee services
--Equal employment opportunity and diversity programs

    [ssquf] Building Operations, Maintenance, and Security (9 percent 
of contracted services)

--Central office facility operations and maintenance
--Building security and continuity programs
--Personnel security and administrative programs

    [ssquf] Information Technology Security (7 percent of contracted 
services)

--Enhanced secure data storage and operations
--Information security programs
--Security system assessment services

    [ssquf] Training (7 percent of contracted services)

--Examiner staff technical and specialized training and development
--Senior executive and mission support staff professional development

    [ssquf] Audit and Financial Management Support (5 percent of 
contracted services)

--Annual audit support services
--Material loss reviews
--Investigation support services
--Financial management support services

    The following pie chart illustrates the breakout of the seven 
categories for the total contracted services budget of $38.1 million.

[[Page 49712]]

[GRAPHIC] [TIFF OMITTED] TN02OC18.016

    Major programs within the contracted services category include:
    [ssquf] Training requirements for the examiner workforce. The 
NCUA's most important resource is its highly educated, experienced, and 
skilled workforce. It is important that staff have the proper 
knowledge, skills, and abilities to perform assigned duties and meet 
emerging needs. Each year, Credit Union Examiners attend several levels 
of training, including in core areas such as capital markets, consumer 
compliance, and specialized lending. The training deliverables for 2019 
include classes offered by the Federal Financial Institutions 
Examination Council, new examiner classes, and subject matter expert 
training sessions for the NCUA examiners and state regulators.
    Contracted service providers will develop and design several 
subject matter expert training classes for examiners and conduct a 
triennial review of several modules of the NCUA's core course 
curriculum. Additionally, regional and central office staff will 
conduct change management and teambuilding training exercises to help 
integrate new operations as a result of the Agency reorganization.
    [ssquf] The NCUA's information security program supports ongoing 
efforts to strengthen cybersecurity and ensure compliance with the 
Federal Information System Management Act.
    [ssquf] Agency financial management services, human resources 
technology support, and payroll services. The NCUA contracts for these 
back-office support services with the U.S. Department of 
Transportation's Enterprise Service Center (DOT/ESC) and the General 
Services Administration. A new service provider offers the NCUA's human 
resource system, HR Links, also adopted by many federal agencies, the 
shared solution automates routine human resource tasks and improves 
time and attendance functionality.
    [ssquf] Audit. The NCUA Office of Inspector General contracts with 
an accounting firm to conduct the annual audit of the agency's four 
permanent funds. The results of these audits are posted annually on the 
NCUA website and also included as part of the agency's Annual Report.
    A significant share of the budget for the Contracted Services 
category finances on-going infrastructure support for the agency. For 
example, the NCUA relies on recurring contracted services to maintain a 
number of the agency's systems including critical legacy systems such 
as AIRES and Credit Union Online. Several of the NCUA's core 
information technology systems and processes require additional 
contract support in 2019, which result in increased budgets in the 
Contracted Services category, as described below.
    Within the budget for the Office of Chief Information Officer, an 
additional $3.2 million is required for various contractor support 
requirements in 2019, including:
     Contract Realignment $1.5M. Costs include transition to 
new Operations & Maintenance contract, increase in support skill set to 
cover service gap.
     New Capabilities & Modernization $1.0M. Costs include 
examination solution circuit's maintenance & program rent cost, new 
security tools implementation, and true-up for service management 
system licenses.
     Cost Inflation $0.5M. Costs include expected inflation for 
telecommunications, equipment repair and maintenance and contract 
services.
     AMAC Support $0.2M. Costs include establishing on-site 
information technology support for AMAC.
    Within the budget for the Office of Chief Financial Officer, the 
annual fee paid to the Department of Transportation (DOT) for the 
NCUA's financial management system will increase by nearly $800,000 
over the 2018 level. This is because DOT revised its cost allocation 
model for all of its financial system customers. In 2018, the NCUA also 
replaced its legacy human resources and time and attendance systems 
with a more modern platform called HR Links, which better supports the 
agency's workforce and personnel requirements. The 2019 cost for HR 
Links decreased from the 2018 level by $325,000 due to one-time start-
up costs that were included in the 2018 Board Approved Budget.

VI. Capital Budget

Overview

    The NCUA uses a rigorous process to identify the investment needs 
for information technology, facility improvements and repairs, and 
other

[[Page 49713]]

multi-year capital investments. The NCUA staff review the agency's 
inventory of owned facilities, equipment, information technology 
systems, and information technology hardware to determine what requires 
repair, major renovation, or replacement. The staff then make 
recommendations for prioritized investments to the Executive Director 
and the NCUA Board.
    Routine repairs and lifecycle-driven property renovations are 
necessary to properly maintain the investments in the NCUA's central 
office building in Alexandria, Virginia and the agency's owned office 
building in Austin, Texas. The NCUA facility manager assesses the 
agency's properties to determine the need for essential repairs, 
replacement of building systems that have reached the end of their 
engineered lives, or renovations required to support changes in the 
agency's organizational structure or to address revisions to building 
standards and codes.
    Information technology (IT) systems and hardware are another 
significant capital expenditure for modern organizations. The 2019 
budget includes significant investment in current and replacement IT 
systems. The NCUA Examination and Supervision Solution (ESS) project, 
for example, will replace the legacy Automated Integrated Regulatory 
Examination System (AIRES) system, and is the largest single capital 
investment in the 2019 budget. Other IT investments include ongoing 
enhancements and upgrades to decades-old legacy systems, incident and 
vulnerability management systems to enhance the agency's cybersecurity 
posture, and various hardware investments to refresh agency networks 
and ensure staff have the tools necessary to maintain and increase 
their productivity.
    The NCUA's 2019 capital budget is $22.0 million. The capital budget 
includes long-term investment projects. The Information Technology 
Prioritization Council recommended $17.1 million for IT software 
development projects and $4 million in other IT investments for 2019. 
The NCUA facilities require $0.9 million in capital investments. 
Detailed descriptions of all 2019 capital projects, including a 
discussion of how each project helps the agency achieve its strategic 
goals and objectives, are provided in Appendix C.
Summary of Capital Projects
    Examination and Supervision Solution and Infrastructure Hosting 
(ESS&IH) ($8.4 million). The purpose of the ESS&IH project is to 
implement a new, flexible, technical foundation to enable current and 
future NCUA business process modernization initiatives, and replace the 
NCUA's legacy exam system, AIRES, with a new Commercial-Off-The-Shelf 
(COTS) solution.
    Data Collection Solution (DCS)/Enterprise Content Management (ECM) 
Analysis of Alternatives Study ($0.2 million). The purpose of this 
project is to award and complete an Analysis of Alternatives (AoA) to 
study the operational effectiveness, suitability, risks and life-cycle 
costs of alternative ECM solutions to support the NCUA's requirements 
for data collection, workflow, document management, customer 
relationship management and records management. An AoA needs to be 
completed to gather the requirements across these areas and to validate 
that the ECM solutions are the most effective and efficient way to meet 
the NCUA's data collection, document management, and records management 
needs.
    Business Intelligence (BI) Tools and Capability Enhancement ($1.9 
million). The purpose of this project is the collection, 
centralization, organization and storage of data collected by the 
Office of National Examination and Supervision (ONES) so that analysis 
is more accurate and efficient. This accessibility will integrate with 
BI tools to improve ONES's overall reporting and data analysis 
capabilities.
    Enterprise Central Data Repository ($1.0 million). The Enterprise 
Central Data Repository (ECDR) project will implement a central data 
repository that will serve as the data integration point for 
Examination and Supervision Solution (ESS), ONES's analytic tools, the 
NCUA's legacy applications and the Data Collection Solution (DCS). The 
ECDR will become an enterprise solution for the NCUA allowing the 
agency to transition in a phased approach from the existing legacy 
databases to a cloud-based data repository serving the agency's needs.
    Asset Management and Assistance Center (AMAC) Servicing System 
($0.6 million). The purpose of this project is to enhance AMAC's legacy 
content management and servicing systems. Phase I of the project 
resulted in an enhanced, secure content management solution. During 
Phase II of the project, the NCUA will identify, acquire, and implement 
replacement solutions for AMAC's aging core data processor. The key 
project deliverables are the acquisition and deployment of a 
replacement core processing system.
    Enterprise Data Analytics, Governance and Reporting Services ($0.6 
million). The purpose of this project is the centralization, 
organization and storage of the NCUA data so analysis is more accurate, 
simple and easily distributed across the agency. This increased 
accessibility is combined with analytic tools to improve the NCUA's 
overall reporting and data analysis capabilities.
    Asset and Liabilities Management Application ($3.2 million). The 
purpose of the Asset and Liabilities Management (ALM) application is 
for the NCUA to build internal analytical capabilities to run 
supervisory stress testing in house and to conduct regular quantitative 
risk assessments by procuring and configuring off-the-shelf analytical 
tools, models and software used commonly in stress testing and other 
risk management activities.
    This effort delivers a complete solution that will focus on 
modernizing the NCUA's supervision tools and approaches, identifying 
material risks facing the covered credit unions, and tailoring 
resources to the material risks and risk focused exams. This effort 
will allow the NCUA to reduce the existing third party contractor's 
role to only consultation.
    Enterprise Learning Management System Replacement ($0.6 million). 
The purpose of the Enterprise Learning Management System (LMS) 
Replacement project is to conduct market research, initiate an 
acquisition, create a project management plan, and execute the 
production and implementation of a cost-effective, cloud-based solution 
and training services that provides the NCUA with the full-range of 
eLearning functionality associated with a modern LMS. This will allow 
for enhanced examiner utilization and accessibility driven by quality 
content, ease of use and system reliability, role-based interface, 
ability to view personalized pages by role, centralized content, 
adherence to federally-mandated reporting requirements and records 
management adherence.
    Governance, Risk Management, and Compliance (GRC) tool for Managing 
Compliance Information ($0.3 million). The purpose of the GRC Tool for 
Managing Compliance Information project is to acquire and implement a 
software platform that provides a structured repository for all system 
security and privacy documentation; security risk assessments; risk 
scoring; Plan of Actions and Milestones (POAM) management; and 
authorization workflow.
    Financial Management Analysis of Alternatives ($0.35 million). The 
purpose of this project is to award and complete an Analysis of 
Alternatives

[[Page 49714]]

(AoA) for federal financial management system service providers. The 
NCUA's current financial management system service provider--the 
Department of Transportation's Enterprise Service Center (ESC)--will 
increase the fee it charges the NCUA in 2019 by approximately $800,000, 
or 40 percent more than the 2018 charge. As a result, the NCUA plans to 
review alternative service providers to determine whether it is 
possible to achieve similar or better financial management results in a 
cost-effective manner.
    Enterprise Laptop Lease ($0.8 million). The purpose of the 
Enterprise Laptop Refresh project is to provide the NCUA with a more 
efficient, mobile friendly, and secure tool to help employees better 
perform their jobs at a reasonable cost.
    Information Technology Infrastructure, Platform and Security 
Refresh ($2.4 million). The purpose of the Information Technology (IT) 
Infrastructure, Platform and Security Refresh project is to refresh 
and/or replace routers, switches virtual servers, wireless, virtual 
private network, end of life and end of service components in order to 
ensure that the NCUA data is secure and operations are stable.
    Security Management Tool Upgrades ($0.7 million). The purpose of 
the Security Management Tool Upgrades (Security Event and Incident 
Management (SEIM)) project is to optimize event collection, monitoring, 
detection and response capabilities for information security and IT 
operations, which will enable data-driven proactive management of the 
agency's cybersecurity programs.
    The purpose of the Security Management Tool Upgrade (Patch & 
Vulnerability Management) project is to comply with the Department of 
Homeland Security's requirements for its Continuous Diagnostics and 
Mitigation (CDM) program, which sets standards for effective IT 
cybersecurity service management for Federal agencies.
    Refresh End of Life VOIP Phone System ($0.2 million). The purpose 
of the Refresh End of Life Voice over internet Protocol (VoIP) Phone 
System project is to replace the agency's phone system infrastructure 
and endpoints, which is at end of its service life. The new system will 
ensure voice communications capabilities via a cloud solution that 
provides business continuity and stable operations.
    The NCUA Central Office Heating, Ventilation, and Air Conditioning 
(HVAC) System Replacement ($0.75 million). The NCUA central office HVAC 
system replacement project will recapitalize the HVAC system in the 
agency's central office building, including all cooling towers, air 
handlers, boilers and HVAC components. The current HVAC system is 
original to the facility, 24 years old and obsolete. The current system 
is at the end of its usable life and it is not working efficiently.
    The NCUA Austin, Texas Office Building Modernization ($0.15 
million). In 2019, the NCUA plans to repair or replace several priority 
projects at the Austin, Texas office building. These capital 
improvements are required for the facility to continue routine and safe 
operations, and align with the life cycle replacement required for 
critical infrastructure.

VII. Share Insurance Fund Administrative Budget

Overview

    The Share Insurance Fund Administrative budget funds direct costs 
associated with authorized Share Insurance Fund activities. As in 2018, 
the 2019 budget has been developed to reflect the closure of the 
Temporary Corporate Credit Union Stabilization Fund into the Share 
Insurance Fund. The direct charges to the Share Insurance Fund are 
combined with the NGN program and administrative costs, and represent 
total estimated costs to the Share Insurance Fund.\9\
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    \9\ Note these direct costs are exclusive of any costs that are 
shared with the Operating Fund through the Overhead Transfer Rate, 
and with payments available upon requisition by the Board, without 
fiscal year limitation, for insurance under section 1787 of this 
title, and for providing assistance and making expenditures under 
section 1788 of this title in connection with the liquidation or 
threatened liquidation of insured credit unions as it may determine 
to be proper.
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    The cost of the NCUA Guaranteed Notes (NGN) program and the 
Corporate System Resolution Program, including costs associated with 
the administration of those programs, will be funded from the Share 
Insurance Fund Administrative Budget. These costs have no impact on the 
NCUA's current and future Operating Fund budgets. The budget for the 
Share Insurance Fund also includes funding for expenditures previously 
authorized as direct expenses of the Share Insurance Fund for items 
such as state examiner computer leases and training. Other direct 
expenses include contract support for stress testing for certain large 
credit unions and financial audit support.
    The 2019 total Share Insurance Fund Administrative budget is 
estimated to be $8.4 million, $0.3 million, or 3.5 percent, more than 
2018. The budget increase is primarily driven by increased support 
required for data-driven analytics on stress testing that large credit 
unions perform, partially offset by savings in other cost categories. 
The Share Insurance Fund Administrative budget also funds five 
positions that were formerly part of the Stabilization Fund budget. 
These costs will enable the NCUA to continue supporting the NGN 
program, which includes managing legacy assets within the NGN trusts. 
Legacy assets consist of over 1,000 investment securities that are 
secured by residential mortgages and other assets.
    The 2020 requested budget supports similar workload and resources; 
however, one additional stress test would be added and is estimated to 
cost $750 thousand. The total administrative budget estimate is 
estimated to be $9.1 million.
Budget Category Descriptions and Major Changes
Salaries and Benefits
    The employee pay and benefits expense category for the Share 
Insurance Fund Administrative budget is estimated to be $1.24 million, 
which represents a decrease of $22,000 compared to 2018. This decrease 
is due to aligning the budget to actual payroll costs for staff on 
board. Personnel compensation is 15 percent of the total budget. The 
financial analysts on the NGN team have specialized technical expertise 
to manage the remaining $7 billion of legacy assets. Personnel costs 
are estimated in a manner similar to the operating budget.
Travel
    The estimated travel cost of $52,000 is less than one percent of 
the overall 2019 budget and decreases by 31 percent from last year's 
budget estimate. These costs cover all of the travel expenses for the 
five staff that manage and support the NGN program. Two of the five 
staff are remote employees and are expected to travel periodically to 
the NCUA's central office.
Administrative Training
    Training expenses, which represent less than one percent of the 
budget, are estimated to be $27,000, a decrease of $3,000 from the 2018 
budget based on updated projections of employee professional 
development plans and specialized training requirements.
Support for the NGN Program (Contract Support)
    Contract costs to support the NGN program, which represent 35 
percent of the budget, are estimated to be $2.9

[[Page 49715]]

million, an increase of $0.3 million from the 2018 level. Funding is 
needed to fulfill Corporate System Resolution Program requirements and 
includes outside professional services such as external valuation 
experts, financial specialists, and accountants.
    These experts are needed to assist the NCUA with the following 
types of services:
     Consulting Services in the amount of $1.0 million will 
support two NCUA offices: Examination and Insurance and the Chief 
Financial Officer. Services will include quarterly management reviews 
of asset valuations, as well as analyses of emerging issues. Support 
for the annual financial audit process and improvements in internal 
controls will also be provided by contractors. Tasks include: 
Supporting complex accounting and financial requirements for 
settlements, sale of legacy assets, parity payments, changing valuation 
model assumptions, and other asset disposition activities. 
Additionally, professional services will be used to assist with 
accounting, tax, financial reporting, and systems support for the 
corporate Asset Management Estates.
     Valuation Services in the amount of $1.1 million to fund 
valuation support for the NGN legacy assets. As supported by the NGN 
Oversight Committee, resources are also needed to conduct special 
analyses, including valuations for determining reasonable market prices 
for securities to be sold by auction.
     Software and Data Subscription Services in the amount of 
$0.8 million will support technical tools used to provide waterfall 
models, calculations, and metrics for the structured investment 
products underlying the NGN portfolio. The service provides coverage of 
all relevant asset classes, waterfall models that are seasoned and 
tested throughout the industry, and a broad array of calculations and 
metrics. Financial data analytics play a critical role in the 
surveillance, modeling, and pricing of the legacy assets that 
securitize the NGN Trusts, as well as supporting the management reviews 
that the NCUA performs on the cash flow projections. Now that some of 
the NCUA Guaranteed Notes have begun maturing, the NCUA has added data 
subscription services to provide additional valuation and has added 
support for the legacy asset disposition process.
     Other annual subscriptions provide important services 
related to surveillance of the portfolio of corporate bonds and 
mortgage-related bonds. Independent credit research services include 
fundamental capital structure research, credit analyses for 
surveillance of corporate bond portfolio and monoline insurer exposure, 
and direct access to various industry experts for discussion on 
specific credits.
Other Direct Expenses
    Other direct expenses of the Share Insurance Fund represent close 
to 50 percent of the budget, and are estimated to be $4.1 million. The 
estimated costs for state examiner computer leases and training in the 
amount of $1.2 million is slightly lower than prior years. This will 
allow the NCUA to analyze the stress testing that large credit unions 
perform. By 2020, additional credit unions are anticipated to be 
subject to stress testing. Financial audit support is also expected to 
remain the same as prior years.
[GRAPHIC] [TIFF OMITTED] TN02OC18.017


[[Page 49716]]


    The NCUA website has a dedicated section that provides financial 
reports for the Share Insurance Fund,\10\ and a separate page that 
explains the NCUA Guaranteed Notes Program and provides comprehensive 
reporting and analysis on the legacy assets.\11\
---------------------------------------------------------------------------

    \10\ See: https://www.ncua.gov/services/Pages/share-insurance/reports.aspx.
    \11\ See: https://www.ncua.gov/regulation-supervision/Pages/guaranteed-notes.aspx.
[GRAPHIC] [TIFF OMITTED] TN02OC18.018

VIII. Financing the NCUA Programs

Overview

    As part of the annual budgetary process, the NCUA remains mindful 
that its operating funding comes directly from federal and state 
chartered credit unions. The agency strives to ensure that any 
allocation of these funds follows a thorough review of the necessity of 
the expenditures and whether programs are operating in an efficient, 
effective, transparent, and fully accountable manner.
    To achieve its statutory mission, the NCUA incurs various expenses, 
including those involved in examining and supervising federally insured 
credit unions. The NCUA Board adopts an Operating Budget, including the 
Capital Budget, in the fall of each year to fund the vast majority of 
the costs of operating the agency.\12\ The Federal Credit Union Act 
authorizes two primary sources to fund the Operating Budget:
---------------------------------------------------------------------------

    \12\ Some costs are directly charged to the Share Insurance Fund 
when appropriate to do so. For example, costs for training and 
equipment provided to State Supervisory Authorities are directly 
charged to the Share Insurance Fund.
---------------------------------------------------------------------------

    (1) Requisitions from the Share Insurance Fund ``for such 
administrative and other expenses incurred in carrying out the purposes 
of [Title II of the Act] as [the Board] may determine to be proper''; 
\13\ and
---------------------------------------------------------------------------

    \13\ 12 U.S.C. 1783(a).
---------------------------------------------------------------------------

    (2) ``fees and assessments (including income earned on insurance 
deposits) levied on insured credit unions under [the Act].'' \14\ Among 
the fees levied under the Act are annual Operating Fees, which are 
required for federal credit unions 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 Act,] including the examination and supervision 
of [federal credit unions].''
---------------------------------------------------------------------------

    \14\ 12 U.S.C. 1766(j)(3). Other sources of income for the 
Operating Budget have included interest income, funds from 
publication sales, parking fee income, and rental income.
---------------------------------------------------------------------------

    Taken together, these dual authorities effectively require the 
Board to determine which expenses are appropriately paid from each 
source while giving the Board broad discretion in allocating expenses.
    In 1972, the Government Accountability Office recommended the NCUA 
adopt a method for properly allocating Operating Budget costs--that is, 
the portion of the NCUA's budget funded by requisitions from the Share 
Insurance Fund and the portion covered by Operating Fees paid by 
federal credit unions.\15\ The NCUA has since used an allocation 
methodology, known as the Overhead Transfer Rate (OTR), to determine 
how much of the Operating Budget to fund with a requisition from the 
Share Insurance Fund.
---------------------------------------------------------------------------

    \15\ http://www.gao.gov/assets/210/203181.pdf.
---------------------------------------------------------------------------

    To allocate agency expenses between these two primary funding 
sources, the NCUA uses the OTR methodology. The OTR is the formula the 
NCUA uses to allocate insurance-related expenses to the Share Insurance 
Fund under Title II. Almost all other operating expenses are collected 
through annual Operating Fees paid by federal credit unions.\16\
---------------------------------------------------------------------------

    \16\ Annual Operating Fees must ``be determined according to a 
schedule, or schedules, or other method determined by the NCUA Board 
to be appropriate, which gives due consideration to the expenses of 
the [NCUA] in carrying out its responsibilities under the [Act] and 
to the ability of [FCUs] to pay the fee.'' 1755(b).
---------------------------------------------------------------------------

    Two statutory provisions directly limit the Board's discretion with 
respect to Share Insurance Fund requisitions for the NCUA's Operating 
Budget and, hence, the OTR. First, expenses funded from the Share 
Insurance Fund must carry out the purposes of Title II of the Act, 
which relate to share insurance.\17\ Second, the NCUA may not fund its 
entire Operating Budget through charges to the Share Insurance 
Fund.\18\ The NCUA has not imposed additional policy or regulatory 
limitations on its discretion for determining the OTR.
---------------------------------------------------------------------------

    \17\ 12 U.S.C. 1783(a).
    \18\ The Act in 12 U.S.C. 1755(a) states, ``[i]n accordance with 
rules prescribed by the Board, each [federal credit union] shall pay 
to the [NCUA] an annual operating fee which may be composed of one 
or more charges identified as to the function or functions for which 
assessed.'' See also 12 U.S.C. 1766(j)(3).

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[[Page 49717]]

Overhead Transfer Rate (OTR) Methodology

    The NCUA undertook a multi-year process to simplify and make more 
transparent its OTR methodology.\19\ The OTR is designed to cover the 
NCUA's costs of examining and supervising the risk to the Share 
Insurance Fund posed by all federally insured credit unions, as well as 
the costs of administering the fund. The OTR represents the percentage 
of the agency's operating budget paid for by a transfer from the Share 
Insurance Fund. Federally insured credit unions are not billed for, and 
do not have to remit, the OTR amount; instead, it is transferred 
directly to the Operating Fund from the Share Insurance Fund. This 
transfer, therefore, represents a cost to all federally insured credit 
unions.
    The NCUA Board approved the current methodology for calculating the 
OTR at its November 2017 open meeting. The current methodology is 
principles-based, simpler, more equitable and transparent, and will 
result in lower administrative costs.
    The OTR formula is based on the following underlying principles to 
allocate agency operating costs:
    1. Time spent examining and supervising federal credit unions is 
allocated as 50 percent insurance related.\20\
    2. All time and costs the NCUA spends supervising or evaluating the 
risks posed by federally insured state-chartered credit unions or other 
entities the NCUA does not charter or regulate (for example, third-
party vendors and CUSOs) is allocated as 100 percent insurance 
related.\21\
    3. Time and costs related to the NCUA's role as charterer and 
enforcer of consumer protection and other non-insurance based laws 
governing the operation of credit unions (like field of membership 
requirements) are allocated as 0 percent insurance related.\22\
    4. Time and costs related to the NCUA's role in administering 
federal share insurance and the Share Insurance Fund are allocated as 
100 percent insurance related.\23\
    These four principles are applied to the activities and costs of 
the agency, which results in the portion of the agency's Operating 
Budget that is transferred from the Share Insurance Fund. Based on the 
Board-approved methodology, the OTR for 2019 is estimated to be 60.4 
percent; thus, 60.4 percent of the total operating budget is estimated 
to be paid out of the Share Insurance Fund. The remaining 39.6 percent 
of the Operating Budget is estimated be paid for through the FCU 
Operating Fee. The explicit and implicit distribution of total 
Operating Budget costs for FCUs and federally insured, state-chartered 
credit unions (FISCUs) is as follows:


----------------------------------------------------------------------------------------------------------------
   Est. share of the operating
        budget covered by:                          FCUs                                   FISCUs
----------------------------------------------------------------------------------------------------------------
FCU Operating Fee................  39.6%                                   0.0%
OTR x Percent of Insured Shares..  31.0% (60.4% x 51.3%)                   29.4% (60.4% x 48.7%)
----------------------------------------------------------------------------------------------------------------
    Total........................  70.6%                                   29.4%
----------------------------------------------------------------------------------------------------------------

    In terms of accounting for funds transferred from the Share 
Insurance Fund to the Operating Fund, the OTR is applied to actual 
expenses incurred each month. Therefore, the rate calculated by the OTR 
formula is multiplied by each month's actual operating expenses and 
charged to the Share Insurance Fund. Because of this monthly 
reconciliation to actual operating expenditures, when the NCUA's 
expenditures are less than budgeted, the amount charged to the Share 
Insurance Fund is also less--and those lower expenditures benefit both 
federally chartered and state charted credit unions.
---------------------------------------------------------------------------

    \19\ 82 FR 55644 (Nov. 22, 2017).
    \20\ The 50 percent allocation mathematically emulates an 
examination and supervision program design where the NCUA would 
alternate examinations, and/or conduct joint examinations, between 
its insurance function and its prudential regulator function if they 
were separate units within the NCUA. It reflects an equal sharing of 
supervisory responsibilities between the NCUA's dual roles as 
charterer/prudential regulator and insurer given both roles have a 
vested interest in the safety and soundness of federal credit 
unions. It is consistent with the alternating examinations FDIC and 
state regulators conduct for insured state-chartered banks as 
mandated by Congress. Further, it reflects that the NCUA is 
responsible for managing risk to the Share Insurance Fund and 
therefore should not rely solely on examinations and supervision 
conducted by the prudential regulator.
    \21\ The NCUA does not charter state-chartered credit unions nor 
serve as their prudential regulator. The NCUA's role with respect to 
federally insured state-chartered credit unions is as insurer. 
Therefore, all examination and supervision work and other agency 
costs attributable to insured state-chartered credit unions is 
allocated as 100 percent insurance related.
---------------------------------------------------------------------------

    The following chart illustrates the share of the Operating Budget 
paid by Federally Insured Credit Unions (FCUs, 70.6%) and Federally 
Insured, State-Chartered Credit Unions (FISCUs, 29.4%).
---------------------------------------------------------------------------

    \22\ As the federal agency with the responsibility to charter 
federal credit unions and enforce non-insurance related laws 
governing how credit unions operate in the marketplace, the NCUA 
resources allocated to these functions are properly assigned to its 
role as charterer/prudential regulator.
    \23\ The NCUA conducts liquidations of credit unions, insured 
share payouts, and other resolution activities in its role as 
insurer. Also, activities related to share insurance, such as 
answering consumer inquiries about insurance coverage, are a 
function of the NCUA's role as insurer.

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[[Page 49718]]

[GRAPHIC] [TIFF OMITTED] TN02OC18.019

Operating Fee

    The Board delegated authority to the Chief Financial Officer to 
administer the methodology approved by the Board for calculating the 
Operating Fees, and to set the fee schedule as calculated per the 
approved methodology outlined in this section. There is no change to 
the underlying approved Operating Fee methodology for 2019; the change 
in the assessments for 2019 are due to changes in the OTR rate and to 
indexing the fee schedule for projected asset growth.
    For 2019, based on the OTR methodology discussed above, the 
resulting share of the budget that is funded from the Operating Fee is 
$140.859 million. This equates to 0.0185 percent of the estimated 
federal credit union assets for December 2018. The overall increase for 
the operating fee is 2.2 percent over 2018.
    The Operating Fee will be assessed to federal credit unions based 
on estimated year-end assets. Credit unions with assets less than $1 
million will not be assessed an Operating Fee. To set the assessment 
scale for 2019, federal credit union asset growth will be projected 
through December 31, 2018. Based on the June 30, 2018, Call Report 
data, annual growth is projected to be 6.2 percent at year end. The 
asset level dividing points will be increased by this same projected 
growth rate. Assets are indexed annually to preserve the same relative 
relationship of the scale to applicable asset base.
    To establish the rate applicable to each asset level, the factors 
outlined in the table below result in an average Operating Fee rate 
increase of 2.2 percent for natural person federal credit unions. The 
corporate federal credit union rate scale remains unchanged from prior 
years.
    To illustrate the rate impact for federal credit unions with assets 
under $1.5 billion, the fee increases from $264 per one million dollars 
of assets, to $270 per one million dollars of assets. This is an 
increase of $6 per million dollars of assets, or 2.2 percent.
    Federal credit union assets between $1.5 billion and $4.5 billion 
would be assessed at a rate of $78.69 per million, and assets above 
$4.5 billion would be assessed at $26.28 per million. As noted above, 
these tiers were indexed to the 6.2 percent projected asset growth, and 
the rates are increased by 2.2 percent.
    The following tables illustrate the methodology and calculations 
used to develop the Operating Fee.

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IX. Appendix A: Supplemental Budget Information

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X. Appendix B: Capital Projects

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    By the National Credit Union Administration Board on September 
26, 2018.
Gerard S. Poliquin,
Secretary of the Board.
[FR Doc. 2018-21282 Filed 10-1-18; 8:45 am]
 BILLING CODE 7535-01-P