[Federal Register Volume 82, Number 228 (Wednesday, November 29, 2017)]
[Rules and Regulations]
[Pages 56536-56539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25343]


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FARM CREDIT ADMINISTRATION

12 CFR Chapter VI


Farm Credit Administration Board Policy Statements

AGENCY: Farm Credit Administration.

ACTION: Notification of policy statements and index.

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SUMMARY: The Farm Credit Administration (FCA), as part of its annual 
public notification process, is publishing for notice an index of the 
18 Board policy statements currently in existence. Most of the policy 
statements remain unchanged since our last Federal Register document on 
October 14, 2016, except for a minor technical update to the policy 
statement on Equal Employment Opportunity and Diversity, and an update 
and modification to the policy statement on Farm Credit System Building 
Association Management Operations Policies and Practices.

DATES: November 29, 2017.

FOR FURTHER INFORMATION CONTACT: 
Dale L. Aultman, Secretary to Board, (703) 883-4009, TTY (703) 883-
4056, [email protected]; or

Mary Alice Donner, Senior Counsel, Office of General Counsel, (703) 
883-4020, TTY (703) 883-4020, [email protected].

SUPPLEMENTARY INFORMATION: A list of the 18 FCA Board policy statements 
is set forth below. FCA Board policy statements may be viewed online at 
www.fca.gov/handbook.nsf.
    On August 24, 2017, the FCA Board updated FCA-PS-62 on, ``Equal 
Employment Opportunity and Diversity.'' The policy was published in the 
Federal Register on August 30, 2017 (82 FR 41258). The policy had no 
changes other than a citation clarification.
    On July 27, 2017, the FCA Board updated FCA-PS-68 on, ``Farm Credit 
System Building Association Management Operations Policies and 
Practices.'' The updated policy increases the dollar amount on 
contracts the Farm Credit System Building Association is required to 
competitively bid, to reflect current economic conditions. It clarifies 
requirements for FCA Board approval of Farm Credit System Building 
Association contracts to reflect current FCA practices. The complete 
policy statement is published below.
    The FCA will continue to publish new or revised policy statements 
in their full text.

FCA Board Policy Statements

FCA-PS-34 Disclosure of the Issuance and Termination of Enforcement 
Documents
FCA-PS-37 Communications During Rulemaking
FCA-PS-41 Alternative Means of Dispute Resolution
FCA-PS-44 Travel
FCA-PS-53 Examination Philosophy
FCA-PS-59 Regulatory Philosophy
FCA-PS-62 Equal Employment Opportunity and Diversity
FCA-PS-64 Rules for the Transaction of Business of the Farm Credit 
Administration Board
FCA-PS-65 Release of Consolidated Reporting System Information
FCA-PS-67 Nondiscrimination on the Basis of Disability in Agency 
Programs and Activities
FCA-PS-68 FCS Building Association Management Operations Policies and 
Practices
FCA-PS-71 Disaster Relief Efforts by Farm Credit Institutions
FCA-PS-72 Financial Institution Rating System (FIRS)
FCA-PS-77 Borrower Privacy
FCA-PS-78 Official Names of Farm Credit Institutions
FCA-PS-79 Consideration and Referral of Supervisory Strategies and 
Enforcement Actions
FCA-PS-80 Cooperative Operating Philosophy--Serving the Members of Farm 
Credit System Institutions
FCA-PS-81 Ethics, Independence, Arm's-Length Role, Ex Parte 
Communications and Open Government

Farm Credit System Building Association Management Operations Policies 
and Practices

FCA-PS-68

    Effective Date: 27-JUL-17.
    Effect on Previous Action: Amends NV-95-40, FCA-PS-68-7-JUL-95; 
amended by NV-11-15 (08-JUL-11), NV-17-19 (27-JUL-17).
    Source of Authority: Farm Credit Act of 1971, as amended (Act), and 
the FCS Building Association (FCSBA) Articles of Association and 
Bylaws.
    The Farm Credit Administration (FCA) Board Hereby Adopts the 
Following Policy Statement:
    The FCSBA was established to provide the facilities and related 
services for the FCA and its field offices. The FCSBA is owned by the 
banks of the Farm Credit System (banks) and is funded by assessments, 
rental income from commercial tenants, and other income. The original 
ownership interest of each bank was based on the bank's assets as a 
percentage of total Farm Credit System (FCS) assets on June 30, 1981. 
The FCSBA owns and operates the FCA headquarters in McLean, Virginia, 
and holds the leases and provides certain services and furnishings for 
FCA field offices. The FCA Board has sole discretionary authority under 
section (1)5.16 of the Act to approve the plans and decisions for such 
building and facilities. In order to carry out this authority and to 
preserve the FCA's arms-length relationship with the banks, the 
Articles of Association and Bylaws of the FCSBA grant the FCA Board the 
responsibility to oversee the affairs of the FCSBA.
    The purpose of this policy statement is to outline general 
parameters and

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policies for various operational practices of the FCSBA that are 
supplementary to the FCSBA Bylaws.

A. FCA Board Responsibilities

    Board Responsibilities. As outlined further in this policy 
statement, the FCA Board is responsible for items including, but not 
limited to, approval of all budgets and subsequent changes in object 
class limitations, signature authorities for financial expenditures, 
and long-term investment decisions. The FCA Board concurs in the 
development of performance standards, goals and pay scales for the 
FCSBA President as provided by the FCA Chairman and Chief Executive 
Officer (Chairman). Contracts that cover the selection of outside 
auditors, property management services or the commission of special 
studies with a cost in excess of $25,000 that were not approved during 
the annual budget process require the approval of the FCA Board. All 
other contracts in excess of $150,000 per year not approved during the 
annual budget process require approval of the FCA Board. FCA Board 
approval for contracts of $250,000 or less may be obtained by oral 
briefing of the FCA Board by the Chief Operating Officer (COO). FCA 
Board approval for contracts in excess of $250,000 may be obtained by 
FCA Board action as set forth in Article II of FCA-PS-64, Rules for the 
Transaction of Business of the Farm Credit Administration Board.
    Chairman's Responsibilities. The Chairman shall be responsible for 
coordinating the FCA Board's involvement in, and responsibilities for, 
the operation of the FCSBA, including: (1) Developing performance 
standards and pay scales for the President of the FCSBA and appraising 
the President's performance with the concurrence of other FCA Board 
Members, (2) reviewing periodic financial and operating reports, (3) 
providing procedures as necessary concerning the FCA staff's 
relationship with the FCSBA, and (4) reviewing such other matters as 
the Chairman may deem advisable for the purpose of bringing such 
matters to the attention of the FCA Board. The Chairman may delegate 
these responsibilities to one or more FCA staff, as he or she deems 
advisable, except those responsibilities related to pay and 
performance.

B. FCSBA President

    General Signature Authority. As required by Article V, Section 2 of 
the FCSBA Bylaws, in addition to member certificates, the FCA Board 
authorizes the FCSBA President to sign general correspondence and 
contracts deemed necessary for the administration of FCSBA activities. 
The FCSBA President must get Board approval before changing the 
signatory authority for checks and before changing any banks with which 
the FCSBA does business.
    Duties. The FCSBA President reports to the FCA Board and is 
generally responsible within the context of governing policies for all 
activities necessary to: (1) Manage FCSBA support to FCA, (2) manage 
the assets of the FCSBA, and (3) understand and consider the interests 
of the banks. Specific responsibilities include budget preparation and 
execution; planning; financial reporting and control; preparation of 
quarterly cash flow reports; supervision of inventory and supporting 
schedules for all fixed assets (furniture, fixtures and equipment); 
maintenance of management objectives schedules; supervision of the 
telecommunications system; the purchase and contracting for all 
supplies and services; records management; necessary correspondence; 
public relations activities in consultation with the FCA Office of 
Congressional and Public Affairs; personnel supervision and evaluation; 
the leasing and management of all space in the Farm Credit Building; 
site selection and lease negotiation for all FCA Field Offices; 
investment management; preparation and administration of all policies 
and operating procedures; engineering oversight; construction 
management; and preparation of all monthly, quarterly and annual 
reports required by the FCA Board. The FCSBA President shall coordinate 
these activities with the FCA Liaison as appropriate or required.
    Standard Operating Procedures. In addition to those duties outlined 
under Article V, Section 2, of the FCSBA Bylaws and this Policy 
Statement, the FCSBA President is authorized to issue Standard 
Operating Procedures (SOPs), as he or she deems appropriate, in an 
effort to carry out the mission of the FCSBA provided that each SOP is 
reviewed by the FCA Board in advance. The President shall maintain all 
SOPs in a manner that reflects current policies and practices. SOPs 
will be filed with the Secretary to the Board, the FCSBA and others as 
requested.
    Periodic Reports. The FCSBA President shall submit such periodic 
reports and proposals to the FCA Board and Liaison as may be necessary 
to facilitate budgets, assessments, audits, finances, plans, 
investments, reserve policy and accounting procedures that support the 
needs of the FCA Board and the banks as owners of the FCSBA. The FCSBA 
President shall normally report to the FCA Board at least quarterly. At 
a minimum, the report shall include:
    1. A cash statement of operations, an explanation of budget 
variances, and month-to-date cash reconciliation report. This report 
will include specific notations of any expected reallocations of funds 
requiring Board approval.
    2. A status of all projects/building improvements that are planned, 
including current accounting of actual costs of each project.
    3. A summary of the status of reserve accounts and investments 
including documentation as available demonstrating compliance with 
investment policies.
    4. A comprehensive Management Objectives tracking report outlining 
the status of issues and projects resulting from a combination of one 
or more sources such as audit and examination recommendations, FCA 
Board directives, as well as management initiatives.
    5. Other matters such as insurance, leasing and contract 
performance issues that may be timely for the particular reporting 
period.
    Annual Report. The FCSBA President shall prepare an annual report 
on the operations of the FCSBA. The draft of the report shall be 
provided to the FCA Board for its review within approximately 30 days 
of receiving the final report from the independent auditors. After FCA 
Board review, the report shall be provided to the banks and may be 
provided to others who have an interest in FCSBA affairs. Although 
other reports to the banks may be warranted from time to time, the 
Annual Report shall serve as the primary report to the FCS. The report 
shall include:
    1. A discussion of significant issues and accomplishments.
    2. Audited financial statements and reportable conditions.
    3. A discussion of the previous year's and current year's budget.
    4. A discussion of basic and supplemental services provided to FCA 
by the FCSBA including an estimate of market and actual values of those 
services.
    5. A discussion of non-budgeted expenditures, that have been 
reimbursed by the FCA.

C. FCA Liaison

    Duties. The FCA Chief Executive Officer appoints the Liaison to the 
FCS Building Association. The FCA Liaison facilitates and coordinates 
the FCA's needs with the FCSBA in such areas as office renovations, 
internal moves, telecommunications services, field office support, and 
matters concerning

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building security and Emergency Preparedness. The FCA Liaison provides 
an internal control function through the countersigning of certain 
categories of checks as designated by the FCA Board. Additionally, the 
FCA Liaison reviews FCSBA proposals that come before the FCA Board, and 
provides counsel regarding issues on which the FCA Board must decide or 
provide direction. The FCA Liaison is also responsible for assuring 
that FCA operations, as appropriate, comply with FCSBA policies and 
practices as well as FCA guidance relating to the FCSBA. Finally, the 
FCA Liaison shall review monthly cash reconciliation reports as 
provided by the FCSBA President and report irregularities, as 
appropriate.

D. Annual Audit and Management Controls

    Annual Audit and Management Controls Review. As provided by Article 
IV, Section 9, of the FCSBA Bylaws, the FCSBA shall produce audited 
financial statements on an annual basis. A review of material internal 
control procedures shall be included in the audit process on a periodic 
basis.

E. Financial Management

    Budget Philosophy. It is FCA Board policy to ensure that every 
effort is made to minimize operating expenses without jeopardizing the 
banks' investment in the assets that are managed. Approved budgets are 
planned and implemented in consideration of a series of policy 
objectives as outlined in this statement and always in an effort to 
balance income and expenses.
    Budget Development Time Frames. FCSBA budgets are prepared on a 
calendar year basis. Each November 1, the FCSBA President shall provide 
the proposed budget for the next calendar year to the FCA Board for its 
review and comment. With FCA Board concurrence, the proposed budget may 
be made available to the banks for further comment.
    Operating Revenues. The FCSBA receives annual operating revenues 
from (1) bank assessments, (2) office rental income from private 
commercial tenants, (3) other income from operating balances, and (4) 
reserve account transfers as necessary.
    Operating Expenses. Operating expenses are budgeted using the 
appropriate object classifications as follows, which may be modified 
with FCA Board approval:

FCA Field Office Rent
Taxes and Contract Services
Maintenance and Repair
Utilities
Salaries and Benefits
Professional and Consulting Fees
Property Management Fees
Other Expenses

    As a part of the draft budget proposal to the FCA Board on or 
before November 1st every year, the FCSBA President shall provide an 
individual expense breakdown for each item within the object class. 
This breakdown shall include the actual expense from the previous year, 
the estimated expense for the current year, and the projected expense 
for the proposed year. Unanticipated and emergency expenses during the 
course of the year as well as expenditures beyond amounts approved for 
object classes may be funded out of the operating reserve subject to 
FCA Board approval.
    Capital expenditures funded by transfers from the component reserve 
account should be shown separately with a breakdown of individual 
expenditures.
    Operating Reserves. In consideration of liquidity needs as well as 
unanticipated expenses, each approved budget shall include the sum 
equivalent to 15 percent of the annual operating expense as operating 
reserves.
    Component Reserve Account. To reserve for capital replacement items 
and repairs to the McLean facility, the FCSBA shall maintain a 
component reserve account which is separate from operating funds and 
reserves. The funding for this account shall be initially based on the 
Capital Reserve Study of June 1, 2005, which is then to be updated 
every 10 years by an independent engineering assessment. The policy 
objective is to ensure adequate funding, on a net present value basis, 
to cover up to a 10-year capital repair and replacement program to be 
updated, as necessary, with each approved budget.
    Assessments. To ensure the maintenance of minimum ``cash on hand,'' 
FCSBA assessments are based on bank assets as of June 30, and issued 
quarterly consistent with the FCSBA Bylaws. After taking interest, 
rental, and other revenue into consideration, budgeted annual 
assessments must be sufficient to fund the operations of the FCSBA, 
including the ability to hold operating reserves equal to 15 percent of 
expenses as well as component reserves consistent with FCSBA policy.
    Adjustments to assessments can occur subject to FCA Board approval 
when total year end ``cash and cash equivalents'' exceed or are below 
operating and component reserve requirements. Adjustments are normally 
considered for third quarter assessments and are based upon the 
previous year's audited financial statements. Earnings, if any, are 
distributed through this process in lieu of direct payment.
    Investments. The FCSBA invests its funds in an effort to achieve 
maximum yield consistent with liquidity needs and investment safety. 
For short-term accessibility, operating reserves and other operating 
``cash on hand'' may be invested in short-term money market accounts, 
certificates of deposits of federally insured institutions, and short-
term instruments of the U.S. Government or commercial paper rated P-1 
or A-1 by Moody's and Standard and Poor's, respectively. Operating 
reserves investment decisions are made by the FCSBA President 
consistent with this policy.
    With the goal of achieving the best long-term returns while 
minimizing risk, component reserves are invested solely in instruments 
backed by the U.S. Government and agencies of the U.S. Government. The 
maturities and amounts of component reserve investments shall be 
generally consistent with the anticipated liquidity needs of the FCSBA 
capital replacement and repair program. Component reserve investment 
decisions require FCA Board approval.
    Budgeting for Reimbursable Expenses. The FCA regularly reimburses 
the FCSBA for telecommunications and other expenditures on a cost 
recovery basis. Because there is no positive or negative financial 
impact on the FCSBA, these transactions are handled on a ``net'' basis 
and thus not included in the budget.
    Budget Execution. The FCSBA President shall administer the annual 
budget as approved by the FCA Board. Expenditures during the course of 
the year that would exceed the object class budget require prior FCA 
Board approval. Exceptions to this policy are made in the event of 
emergency or the funding of accrued employee benefits. Expenditures in 
these cases will be brought to the FCA Board in the form of an 
Executive Summary for approval within 10 business days of occurrence. 
In considering its approval, the FCA Board has the option of either 
adjusting other object classes, utilizing the operating reserve, or 
taking other action, as it deems appropriate.

F. Contract Management

    General. In accordance with Article IV of the FCSBA Bylaws, it is 
the policy of the FCA Board that all contracts issued by or on behalf 
of the FCSBA be:
    1. Competitively bid with a minimum of three bids, when in excess 
of $25,000.

[[Page 56539]]

    2. Obtained with a minimum of three price quotes, when less than 
$25,000, and more than $10,000.
    3. Generally awarded to the lowest bidder meeting contract 
specifications except in those instances where the differences in cost 
are considered negligible relative to a particular benefit offered by a 
higher bid.
    4. Reviewed and approved by the FCA Board when in excess of 
$150,000 unless for outside auditors, property managers, or special 
studies. Contracts approved as part of the Budget do not need separate 
approval.
    5. Reviewed and approved by the FCA Board when in excess of $25,000 
if for outside auditors, property managers, or special studies. 
Contracts approved as part of the Budget do not need separate approval.
    6. Retained in file a minimum of 3 years.
    7. When possible, bid in conjunction with the budget year.
    Exceptions. Notwithstanding the above requirements, the FCA Board 
has the authority to make exceptions, as it deems appropriate to the 
circumstances. These exceptions shall be evidenced by the COO's written 
memorandum documenting FCA Board briefing and approval for exceptions 
involving expenditures of $250,000 or less, and Notational Vote or 
other FCA Board action for exceptions involving expenditures in excess 
of $250,000. Additionally, competitive bidding is not required if the 
circumstances warrant immediate resolution or are vendor specific to 
equipment, in which case the FCSBA President will, within 10 business 
days, provide the FCA Board with a detailed report of the surrounding 
circumstances, with a copy to the COO and the FCA Liaison.
    Contract Timeframes. Recurring contracts are normally for annual 
terms; however, when deemed cost effective, the FCSBA may allow terms 
up to 3 years. Obtaining best and final offers from bidders is 
encouraged.
    Approval Authorization. The FCSBA President is authorized to 
approve contracts consistent with these guidelines and the FCSBA SOP. 
The FCSBA President may re-delegate up to $50,000 of contracting 
authority to the building property manager.
    Contract Performance. The FCSBA President shall insure that 
adequate systems are in place to measure, administer, and report on the 
performance of FCSBA contracts.

G. Asset Management

    Personal Property. The FCSBA President shall insure that adequate 
methodologies and systems are in place to ensure that FCSBA property is 
effectively accounted for on a periodic basis.

H. The FCSBA as a System Institution

    Examination. The FCSBA is examined as provided by the Act. The 
scope of examination shall be generally consistent with the level of 
risk deemed associated with the operating practices of FCSBA 
management.
    Assessments for Examination. The FCSBA will be charged annually for 
assessments consistent with FCA regulation found in 12 CFR (2)607.4, 
``Assessment of other System entities.''
    Liquidation by System Request. Should the Boards of the banks 
adopt, pursuant to Article IX of the FCSBA Articles of Association, a 
resolution to dissolve and liquidate the FCSBA, the dissolution and 
liquidation will be subject to, and conducted in accordance with, the 
Act and the regulations promulgated thereunder.

I. FCSBA Services to the FCA

    Basic Services. The FCSBA provides space to the FCA headquarters in 
McLean, Virginia, and leases space on behalf of FCA for its field 
offices. Basic services provided to the FCA are similar to what is 
typical of rented office space and include, but are not limited to, 
such items as utilities, janitorial service, repairs for normal wear 
and tear, parking and appropriate landscaping as well as amenities 
which are available to all tenants and have the effect of maintaining 
property values and/or enhancing rental income.
    Supplemental Services. In addition to providing basic services, the 
FCSBA will, on a case-by-case basis, provide certain supplemental 
support services related to FCA's housing needs under the following 
kinds of circumstances:
    1. The FCSBA can provide the service on better terms than the FCA.
    2. The service, if not provided by the FCSBA, could potentially 
adversely affect the aesthetic or other value of property, systems, 
building infrastructure, the health and safety of occupants, or the 
occupancy level of commercial tenants.
    3. The capacity exists for the FCSBA to provide the service within 
the context of its employee expertise and/or its overall 
responsibilities to all tenants.
    4. By providing the service, an advantage inures to the benefit of 
the FCS that would not otherwise occur.
    5. An FCA Board determination that the service will be of 
particular benefit to the FCA, the FCS or the public. In the event of 
such a determination, no further FCA Board approval under Section A or 
Section F of this Policy Statement is necessary.
    These supplemental services must be documented, and approved by the 
COO for services valued at $25,000 or less and approved by the FCA 
Board if valued in excess of $25,000. If the FCA Board approves a 
supplemental service, no further FCA Board authority under this Policy 
Statement is necessary. As deemed necessary, the FCSBA President shall 
issue SOPs prescribing operational or other details of FCSBA services 
provided to the FCA.
    Non-Reimbursable and Reimbursable Services. Whether or not the FCA 
will reimburse the FCSBA for a supplemental service will generally be 
determined as follows:
    1. Reimbursement is not required for support provided by the FCSBA 
when resources are available within FCA Board approved budgets for the 
FCSBA and one or more of the criteria for supplemental services 
expenditures outlined above have been met.
    2. Unless otherwise determined by an FCA Board action, supplemental 
support services requiring resources beyond that available within the 
FCSBA budget will require reimbursement.
    3. Reimbursement that is not required is permitted at the 
discretion of the FCA Board.
    Reimbursements in excess of $10,000 that occur on an ongoing basis 
will require a written Memorandum of Understanding between the FCA and 
the FCSBA outlining the terms and conditions of the services provided 
and reimbursement. One time or minor recurring reimbursements may be 
handled by purchase orders. Reimbursable expenses shall be determined 
on an actual cost basis or a recognized methodology to achieve the goal 
of fully reimbursing the FCSBA on the transaction.

    Dated this 27th day of July 2017.

    By order of the board.
Mary Alice Donner,
Acting Secretary to the Board.
    Dated: November 17, 2017.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2017-25343 Filed 11-28-17; 8:45 am]
BILLING CODE 6705-01-P