[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88131-88135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28000]


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NATIONAL CREDIT UNION ADMINISTRATION

[NCUA-2023-0142]


Request for Comment Regarding Overhead Transfer Rate Methodology

AGENCY:  National Credit Union Administration (NCUA).

ACTION:  Request for comment.

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SUMMARY:  The NCUA Board (Board) is inviting comment on the methodology 
used to determine the Overhead Transfer Rate (OTR). The Board applies 
the OTR to the NCUA's operating budget to determine the portion of the 
budget that will be funded from the National Credit Union Share 
Insurance Fund (Share Insurance Fund). In response to industry 
recommendations, the Board has provided more detail, clarity, and 
transparency so the public can better understand the OTR methodology.

DATES: Comments must be received on or before February 20, 2024.

ADDRESSES: You may submit written comments, identified by Docket ID 
NCUA-2023-0142, by any of the following methods (Please send comments 
by one method only):
    Federal eRulemaking Portal: https://www.regulations.gov. Follow the 
instructions for submitting comments for Docket ID NCUA-2023-0142.
    Mail: Address to Melane Conyers-Ausbrooks, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
    Hand Delivery/Courier: Same as mailing address.
    Public Inspection: You may view all submitted public comments on 
the Federal eRulemaking Portal at https://www.regulations.gov except 
for those we cannot post for technical reasons. The NCUA will not edit 
or remove any identifying or contact information from the public 
comments submitted. If you cannot access public comments on the 
internet, you may contact the NCUA for alternative access by calling 
(703) 518-6360 or emailing [email protected].

FOR FURTHER INFORMATION CONTACT: Amy Ward or Sarah Savoie, Risk 
Officers, Office of Examination and Insurance at (703) 819-1770 or 
(571) 451-7204; or by mail at National Credit Union Administration, 
1775 Duke Street, Alexandria, VA 22314-3428.

SUPPLEMENTARY INFORMATION: The Board is inviting comment on the NCUA's 
methodology to determine the OTR. The Board applies the OTR to the 
NCUA's operating budget to determine the portion of the NCUA's budget 
that will be funded from the Share Insurance Fund. In response to 
industry recommendations, this request for comment provides added 
detail, clarity, and transparency to help the public better understand 
the NCUA's methodology to calculate the OTR. No changes to the existing 
OTR methodology are being proposed as part of this request for comment. 
The added transparency and clarity do not constitute a change in 
methodology.

I. Background

    The NCUA charters, regulates, and insures deposits in federal 
credit unions (FCUs) and insures deposits in federally insured state-
chartered credit unions (FISCUs) that have their shares insured through 
the Share Insurance Fund. To cover the NCUA's task-related expenses, 
the Board approves a two-year budget and revisits the budget each year. 
The FCU Act provides two primary sources to fund the budget: (1) 
requisitions from the Share Insurance Fund, referred to as the OTR; \1\ 
and (2) operating fees charged against FCUs.\2\
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    \1\ See, e.g., 12 U.S.C. 1783(a) (making the Share Insurance 
Fund available ``for such administrative and other expenses incurred 
in carrying out the purpose of [Subchapter II of the FCU Act] as 
[the Board] may determine to be proper.'').
    \2\ 12 U.S.C. 1755(a) (``In accordance with rules prescribed by 
the Board, each Federal credit union shall pay to the Administration 
an annual operating fee which may be composed of one or more charges 
identified as to the function or functions for which assessed.'').
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    The first budget funding source listed above, the OTR, represents 
the formula the NCUA uses to allocate insurance-related expenses to the 
Share Insurance Fund under Title II of the FCU Act. There are two 
statutory provisions that outline the Board's discretion regarding the 
OTR. First, expenses funded from the Share Insurance Fund must carry 
out Title II's purposes, which relate to share insurance.\3\ Second, 
the NCUA may not fund its entire budget through charges to the Share 
Insurance Fund.\4\ The NCUA has not imposed regulatory limitations in 
its discretion for determining the OTR.
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    \3\ 12 U.S.C. 1783(a) (``Money in the fund shall be available 
upon requisition by the Board, without fiscal year limitation, for 
making payments of insurance under section 1787 of this title, for 
providing assistance and making expenditures under section 1788 of 
this title in connection with the liquidation or threatened 
liquidation of insured credit unions, and for such administrative 
and other expenses incurred in carrying out the purposes of this 
subchapter as it may determine to be proper.'').
    \4\ 12 U.S.C. 1755.
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    The second budget funding source is operating fees assessed to 
FCUs. Operating fees are required for FCUs under 12 U.S.C. 1755 ``and 
may be expended by the Board to defray the expenses incurred in 
carrying out the provisions of the FCU Act, including the examination 
and supervision of FCUs.'' \5\ The Board uses the following OTR 
methodology to determine an appropriate division of expenses between 
the operating fee and the OTR.
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    \5\ 12 U.S.C. 1755(d).
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II. Historical Practice in Determining the Overhead Transfer Rate

    The Share Insurance Fund was established under Title II of the FCU 
Act on October 19, 1970.\6\ Section 1783(a) of the FCU Act authorizes 
the Board to use the Share Insurance Fund to pay for such 
administrative and other expenses incurred in carrying out this title's 
purposes as it deems proper.
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    \6\ Public Law 91-468; 12 U.S.C. 1783.
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    In 1973, a Government Accountability Office audit recommended the 
NCUA adopt a method of allocating costs between the operating fund and 
the newly formed Share Insurance Fund.\7\ Between 1973 and 1980, 
various cost allocation methods were employed, including direct charges 
to the Share Insurance Fund for insurance expenses such as costs to 
liquidate or merge credit unions and examiner time spent conducting 
safety and soundness examinations. Starting in 1981, the OTR ranged 
between 30 and 34 percent and stayed in that range through 1984.
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    \7\ General Accounting Office, Examination of Financial 
Statements of the Nat'l Credit Union Admin. (Sept. 18, 1973), 
https://www.gao.gov/assets/b-164031%284%29-096067.pdf.
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    From 1985 through 1994, the NCUA conducted annual examiner time 
surveys (ETS) to determine an appropriate factor for apportioning the 
agency's total operating expenses. The survey results supported a 
transfer rate between 50.1 percent and 60.4 percent for insurance-
related activities; however, the Board maintained the OTR at 50 
percent.
    After the 1994 survey, the Board approved surveys that were 
conducted every three years. Three-year surveys covered fiscal years 
1995 through 1997 and fiscal years 1998 through 2000. During that time, 
the OTR was kept at 50 percent. The Board voted to resume the annual 
ETS in 2000 and expanded the survey to include more examiners. The 2000 
survey results supported an

[[Page 88132]]

OTR of 66.72 percent, and after 15 years of holding the OTR at 50 
percent, the Board increased the OTR to 66.72 percent for fiscal year 
2001.
    In 2001, the Board hired an independent audit and accounting firm 
to assess the OTR process. The independent audit and accounting firm 
issued its review of the OTR process on September 5, 2001, and included 
several recommendations to improve the OTR process.\8\ These 
recommendations were implemented in 2002.
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    \8\ Deloitte & Touche, Independent Accountant's Report on 
Applying Agreed Upon Procedures (Sept 5, 2001), https://www.ncua.gov/files/publications/budget/2001DeloitteReportonOTRProcess.pdf.
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    At the November 20, 2003, Board meeting, the Board adopted a 
revised, comprehensive methodology for calculating the OTR that 
remained in place until 2017.\9\ The methodology used the results of an 
automated annual ETS process. The following were also factored into the 
methodology:
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    \9\ The Board approved refinements to the methodology in 2013. 
See NCUA, ``Board Action Memorandum'' (Nov. 20, 2013), https://ncua.gov/files/agenda-items/AG20131121Item5a.pdf.
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     The value to the Share Insurance Fund of the insurance-
related work performed by state supervisory authorities or prudential 
regulator.
     The cost of the NCUA resources and programs with different 
allocation factors from the examination and supervision program.
     The distribution of insured shares between FCUs and 
FISCUs.
     The operational costs charged directly to the Share 
Insurance Fund.
    In 2016, the NCUA published in the Federal Register the OTR 
methodology used to calculate the OTR and requested comments from the 
public.\10\ Along with the 2016 Federal Register notice, the Board 
committed to periodically review the methodologies for calculating both 
the OTR and the operating fee and to propose changes to the 
methodologies that would result in more equitable alignment of fees to 
the resource levels required to supervise and regulate both FCUs and 
FISCUs.
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    \10\ 81 FR 4804 (Jan. 27, 2016).
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    In June 2017, the NCUA published a request for comment \11\ in the 
Federal Register regarding a revised OTR methodology based on the 
Board's internal assessment and comments received from the 2016 notice. 
At that time, the primary goal of the proposed changes to the OTR 
methodology was to simplify and streamline the OTR methodology and 
reduce the resources needed to administer the OTR. The simplified OTR 
methodology focused on assigning a percentage share of work to 
insurance costs in four categories of activities.
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    \11\ 82 FR 29935 (June 30, 2017).
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     50 percent insurance-related--Time spent examining and 
supervising FCUs.
     100 percent insurance-related--All time and costs the NCUA 
spends supervising or evaluating the risks posed by FISCUs or other 
entities the NCUA does not charter or regulate (e.g., third-party 
vendors and credit union service organizations).
     Zero percent insurance-related--Time and costs related to 
the NCUA's role granting federal charters and as enforcer of consumer 
protection and other non-insurance-based laws governing the operation 
of credit unions; for example, field of membership requirements.
     100 percent insurance-related--Time and costs related to 
the NCUA's role in administering federal share insurance and the Share 
Insurance Fund.
    The Board adopted the current OTR methodology in November 2017.\12\ 
At that time, the Board committed to subjecting the four general 
principles outlined in the paragraphs below to public comment every 
three years and when it proposes a change to the methodology.\13\
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    \12\ 82 FR 55644 (Nov. 22, 2017).
    \13\ 82 FR 55652.
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Clarification of the Four Principles 14
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    \14\ For additional information on the OTR and further 
discussion of the principles, please refer to https://ncua.gov/news/budget-supplementary-materials.
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    In response to industry recommendations, the NCUA Board is 
providing more information in this notice to ensure clear understanding 
of the four principles used in the OTR calculation and to provide added 
transparency.
    1. 50 percent insurance-related--The NCUA is the prudential 
regulator of FCUs and provides federal share insurance to both FCUs and 
FISCUs. Because the NCUA acts as both prudential regulator and insurer 
of FCUs, its oversight of these FCUs is equally focused on the 
statutory requirements applicable to FCUs under Title I of the FCU Act 
and minimizing losses to the Share Insurance Fund under Title II of the 
FCU Act.
    Historically, the NCUA has referred to its regulator and insurer 
responsibilities by comparing this dual role to the Federal Deposit 
Insurance Corporation's (FDIC) practice of alternating examinations 
with the state regulatory agencies overseeing banks.\15\ The NCUA's 
reference to this 50 percent allocation as ``mathematically'' emulating 
the alternating FDIC and state regulatory examinations has caused both 
concern and misunderstanding among industry stakeholders. This 
statement's intent was to reflect the NCUA's dual role on each 
examination (that of regulator and that of insurer), not to imply that 
the NCUA alternates examinations with the state regulatory agencies 
like the FDIC. For example, the NCUA evaluates the safety and soundness 
impact of FCU-operational decisions along with the FCUs' operating 
condition, assessing the impact of these decisions to the FCU 
individually as well as to the Share Insurance Fund. The NCUA's 
resource budget reflects the total hours needed to provide the 
oversight responsibility of both its regulator and insurer roles.\16\
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    \15\ See, e.g., 82 FR 55651 (``The 50 percent allocation 
mathematically emulates an examination and supervision program 
design where the NCUA would alternate examinations, 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 
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.'').
    \16\ The NCUA's annual resource budget is a comprehensive 
workload analysis that captures the amount of time budgeted to 
conduct examinations and supervision of FICUs and other programs 
necessary to execute the NCUA's dual mission as insurer and 
regulator. The annual resource budget estimates hours in three major 
categories. 1. Core Programs include the NCUA's FCU and FISCU 
examinations and on- and off-site supervision. 2. Special Programs 
includes the NCUA's specialized examination programs in the areas of 
capital markets, information systems, and lending; credit union 
service organization reviews; chartering and field of membership; 
and small credit union development. 3. Administrative includes NCUA 
field staff time related to training and staff development, leave, 
and travel.
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    2. 100 percent insurance-related--The NCUA oversight authority for 
FISCUs is principally related to insurance activities and the focus on 
these entities is as an insurer of federally insured credit unions 
(FICUs). The NCUA also lacks direct oversight authority for credit 
union service organizations (CUSOs) and third-party vendors. Because 
the NCUA does not have regulatory oversight of the FISCUs, CUSOs, and 
third-party vendors, the NCUA's resource budget reflects the hours 
necessary to provide this responsibility as insurer of FICUs and the 
risks these entities present to the Share Insurance Fund. The OTR 
methodology assigns a 100 percent insurance-related allocation factor 
to this budgeted time.
     CUSOs and third-party vendors provide various services to 
FICUs (third-party arrangements). Like any

[[Page 88133]]

outsourced activity, these third-party arrangements present additional 
risk to the FICUs and the Share Insurance Fund.\17\
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    \17\ NCUA, Third Party Vendor Authority (March 2022), https://ncua.gov/files/publications/regulation-supervision/third-party-vendor-authority.pdf.
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    [cir] As per its regulator and insurer responsibilities under Title 
I and Title II of the FCU Act, the NCUA performs a limited review of 
the activities FICUs undertake with CUSOs and third-party vendors 
during its safety and soundness exams. These limited reviews are 
captured under Principle 1 for FCUs and Principle 2 for FISCUs, 
respectively, in the OTR calculation. The NCUA evaluates the FICU 
controls over the third-party arrangement and the functional and 
operational risks associated with these third-party arrangements based 
on the specific services provided to the FICUs (such as accounting, 
lending, or governance).
    [cir] The NCUA also budgets resource time to review the books, 
records, and internal controls of a sample of CUSOs.\18\ These reviews 
are captured under Principle 2 of the OTR calculation. The CUSO 
examination reports generated from these reviews serve as a resource to 
assist exam staff in conjunction with the normal examination process in 
their review of the CUSOs' functional impact on FICUs. These reports 
also alleviate redundant effort, resources, and time among exam staff 
to perform these reviews at safety and soundness exams.
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    \18\ 12 CFR part 712.
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     Because the NCUA does not charter FISCUs, the NCUA's role 
with these institutions in the budget process is as their insurer. The 
NCUA budgets resource time to fulfill its insurance responsibilities 
for these FISCUs under Title II of the FCU Act, captured under 
Principle 2 of the OTR methodology.
    The NCUA's top priority is to ensure a safe and sound credit union 
system. As the financial services industry and credit union risk 
landscape have evolved, the NCUA has improved the efficiency of its 
processes while maintaining a robust supervision program. One of the 
objectives of the NCUA's 2016 Exam Flexibility Initiative was to 
improve coordination with state supervisors in the examination of 
FISCUs.\19\ This initiative provided a higher degree of reliance on the 
respective state prudential regulator to perform the regulatory 
oversight function for FISCUs, similar to the functions under Title I 
that the NCUA performs for FCUs. The Exam Flexibility Initiative 
extended the frequency of the NCUA's onsite exam time to a 5-year 
interval for FISCUs that met the eligibility criteria. This initiative 
resulted in the NCUA budgeting reduced resource time for FISCUs as 
reflected in the following chart, with a progressive increase in time 
as FISCUs reached their 5-year interval.
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    \19\ NCUA, ``NCUA Exam Flexibility Initiative,'' https://ncua.gov/regulation-supervision/examination-modernization-initiatives/exam-flexibility-initiative.
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    The following chart also shows the resource-budgeted hours for 
FCUs, FISCUs, and CUSOs for the past nine years. The chart shows that 
the NCUA has budgeted at least twice as much time for FCU exams as it 
does for FISCU exams by virtue of its dual role as regulator and 
insurer of FCUs versus its singular responsibility as insurer of 
FISCUs.\20\ Principle 1 (50 percent allocation) and Principle 2 (100 
percent allocation) of the OTR calculation are then applied to this 
total resource time to determine how much total time in the chart is 
insurance related and, thus, fundable by a transfer from the Share 
Insurance Fund.
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    \20\ The industry has commented that there are twice as many 
FCUs as there are FISCUs. The time budgeted under the examination 
and supervision categories of the OTR methodology accounts for the 
varying aspects of the financial institutions (number of 
institutions; asset size; risk profile; staff resources, to include 
specialists and subject matter examiners; and frequency of onsite 
examinations and offsite supervision).
[GRAPHIC] [TIFF OMITTED] TN20DE23.008

    3. Zero percent insurance-related--The NCUA's Office of Credit 
Union Resources and Expansion (CURE) and Office of Consumer Financial 
Protection (OCFP) receive a zero percent insurance-related allocation 
as a starting point in the OTR methodology because the primary function 
of these offices is not insurance-related.
     CURE supports credit union growth and development; 
provides support to low-income, minority, and any FICU seeking 
assistance with chartering; and processes charter conversion 
applications, bylaw amendments, and field of membership expansions.
     OCFP's primary function includes establishing consumer 
compliance

[[Page 88134]]

policies, programs, and rulemaking; serving as interagency liaison on 
consumer protection and compliance issues; conducting fair lending 
examinations; staffing the agency's consumer call center; and providing 
financial literacy and outreach programs.
    Because the primary mission of both offices is not insurance-
related, the OTR methodology assigns a zero percent insurance-related 
allocation for these offices as a starting point. However, a segment of 
each office's responsibilities is related to insurance. For instance, 
applications for charter expansions involve risk to both FICUs and the 
Share Insurance Fund and drive a slightly higher allocation than the 
initial zero percent. OCFP responds to insurance-related inquiries from 
credit union members and the public and this, in turn, drives a 
slightly higher allocation than the initial zero percent. Thus, each 
office tracks its insurance-related time and adjusts the zero percent 
allocation factor accordingly.
    It is important to distinguish between setting policy and programs 
for consumer compliance rules and regulations (performed by OCFP) and 
assessing a FICU's compliance with consumer protection laws and 
regulations. The NCUA performs the latter along with the normal 
examination process, and the time for these reviews is factored into 
the 50 percent allocation for FCUs and 100 percent allocation for 
FISCUs as per Principles 1 and 2. The former, as discussed, is 
accounted for as per Principle 3.
    4. 100 percent insurance-related--The sole function of the NCUA's 
Asset Management Assistance Center (AMAC) is insurance related. AMAC 
manages liquidation payouts and assets acquired from liquidations on 
behalf of the Share Insurance Fund, so its OTR allocation factor is 100 
percent insurance related.
    The Board welcomes all comments regarding all aspects of the OTR 
methodology, but specifically invites comments on the four principles 
used to calculate the OTR discussed in the preceding paragraphs.

Overhead Transfer Rate Methodology

    To calculate the OTR, the four principles outlined previously are 
applied to the activities and costs of the agency to arrive at the 
portion of the agency's budget to be charged to the Share Insurance 
Fund.
Step 1--Workload Program
    Annually, the NCUA develops a workload budget based on the NCUA's 
examination and supervision program to execute the agency's core 
mission. The workload budget reflects the needed time to examine and 
supervise FICUs, along with other related activities and, thus, the 
level of field staff needed to implement the exam program. Applying 
Principles 1, 2, and 3 (those relevant to the workload budget) to the 
applicable elements of the workload budget results in a composite rate 
that reflects the portion of the agency's overall insurance-related 
mission program activities.
Step 2--Annual Budget
    The annual budget represents the costs of the activities associated 
with achieving the strategic goals and objectives set forth in the 
NCUA's Strategic Plan. The annual budget is based on agency priorities 
and initiatives that drive resulting resource needs and allocations. 
Information related to the NCUA's budget process, including details on 
the Board-approved budgets, is available on the agency's website.\21\
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    \21\ NCUA, ``NCUA Budget and Supplementary Materials,'' https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx.
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    The agency achieves its primary mission through the examination and 
supervision program. The percentage of insurance-related workload hours 
derived from Step 1 represents the main allocation factor used in Step 
2 and is applied to the budgets for the examination and supervision 
programs to calculate the insurance-related costs of the offices 
conducting field work (currently the NCUA's three regional offices and 
the Office of National Examinations and Supervision, or ONES). As 
discussed in the Clarification of the Four Principles section earlier, 
a few agency offices (OCFP and CURE) have roles distinct enough to 
warrant their own allocation factors, which are developed by applying 
the four principles described previously to their respective 
activities. Each of these offices tracks its activities annually to 
determine their respective factors. These factors are then applied to 
the respective offices' budgets to determine their insurance-related 
costs.
    A weighted average allocation factor, calculated by dividing the 
aggregate insurance-related costs for the regional offices and ONES 
conducting the examination and supervision program and the other agency 
offices with their own unique allocation factors by their aggregate 
total budgets, is applied to the remaining offices that design and 
oversee the examination and supervision program or support the agency's 
overall operations. This factor is then applied to the aggregate 
budgets for the remaining offices (all other NCUA offices). As such, 
the proportion of insurance-related activities for the offices is based 
on a weighted factor of the other offices. The NCUA's total insurance-
related costs are calculated by summing the insurance cost calculated 
for the field offices, the offices with unique allocation factors, and 
the insurance cost for all other NCUA offices.
Step 3--Calculate the OTR
    The OTR represents the percentage of the NCUA budget funded by a 
transfer from the Share Insurance Fund.\22\ The OTR is calculated by 
dividing the total insurance-related costs determined in Step 2 by the 
NCUA's total annual budget.
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    \22\ This means the percentage of actual expenses funded by the 
Share Insurance Fund as they are incurred each month.
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    The chart below reflects the most recent NCUA Board-approved OTR 
used to fund a portion of the 2023 budget.
Table 1

                             OTR Calculation
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Operating Costs to be Borne by the Share Insurance Fund.          $221.9
/ Total Operating Budget................................          $355.4
= OTR...................................................           62.4%
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Table 2

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            Portion of Operating Budget Covered by:                       FCUs                    FISCUs
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FCU Operating Fee.............................................                    37.6%                     0.0%
OTR x Percent of Insured Shares...............................    31.1% (62.4% x 49.9%)    31.3% (62.4% x 50.1%)
                                                               -------------------------------------------------
    Total.....................................................                    68.7%                    31.3%
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    Table 1 reflects the NCUA's annual budget of $355.4 million for the 
2023 budget year. The FCU Act authorizes a portion of the NCUA's budget 
to be funded through a requisition from the Share Insurance Fund (OTR 
62.4 percent), while the remaining 37.6 percent will be charged to FCUs 
as an operating fee in 2023.
    The industry has voiced concern about the NCUA's presentation of 
the OTR in the annual budget posted to the agency's website because it 
believes the current footnoted reference to the regulatory fees that 
FISCUs pay their respective prudential regulator is insufficient.\23\ 
The NCUA's intention in presenting the distribution of the operating 
budget costs in this request for comment is to clarify how the NCUA 
funds its annual operations between (1) requisition from the Share 
Insurance Fund and (2) operating fees paid by FCUs.
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    \23\ NCUA, Staff Draft 2023-2024 Budget Justification 50 (Sept. 
29, 2022), https://ncua.gov/files/publications/budget/budget-justification-proposed-2023-2024.pdf.
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    The NCUA does not intend to discount the fact that FISCUs also pay 
a regulatory fee to their respective regulators. In presenting this 
information, the agency welcomes the industry's feedback on the current 
method.
    Commenters also noted that the current cost distribution table 
(Table 2) uses insured shares to reflect the distribution of the OTR 
among FCUs versus FISCUs, and while total insured shares are relatively 
equal among charter type, there are fewer FISCUs than there are FCUs.
    First, the NCUA would like to clarify the requisition from the 
Share Insurance Fund is not allocated based on charter type. The 
current cost distribution table is for informational purposes only and 
is used to show how the portion of the NCUA's budget funded by the 
Share Insurance Fund would be broken down among charter types. The NCUA 
shows this breakdown using insured shares to reflect that FICUs' 
economic interest in the insurance fund is pro-rata based on insured 
shares.
    The NCUA Board welcomes comment on alternative ways to present this 
information publicly.

Request for Comment on the OTR Methodology

    The principles-based OTR methodology has streamlined the OTR 
calculation process and has reduced the needed resources to gather the 
cost-center time allocation used in the calculation.\24\ It has also 
made the OTR easier for stakeholders to understand. The methodology 
additionally has led to reduced variability in the calculated OTR each 
year.
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    \24\ The NCUA included reference to this estimated cost savings 
in the Notice and Request for Comment dated June 30, 2017. ``Based 
on the most recent Examination Time Survey results, field staff time 
would be reduced by approximately 200 hours annually. Central office 
and regional office staff time devoted to operating, maintaining, 
and administering the Examination Time Survey and related processes 
would be reduced by approximately 150 hours annually.'' 82 FR 29943 
(June 30, 2017).
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    The added detail, transparency, and clarifying statements in this 
request for comment aim to address the industry interest regarding 
transparency and improved understanding of the allocation of insurance-
related expenses among charter types. The Board welcomes comment on all 
aspects of the OTR methodology--including on the four principles, added 
detail, and clarifying statements discussed in this request for 
comment--as well as any suggested alternatives.
    The Board is also particularly interested in comments on whether it 
should continue to publish a dedicated notice requesting comment on the 
OTR methodology every 3 years. Alternatively, in circumstances when the 
Board does not intend to make changes to the OTR methodology, the NCUA 
could ask for comments on the OTR methodology triennially along with 
its long-standing one-third regulatory review process; rely on the 
public's opportunity to request action under 12 CFR 790.3 or petition 
the Board for changes under Sec.  791.8(c); or a combination of these 
opportunities. The Board also now annually publishes, requests comments 
on, and holds a public hearing on its budget. These comments and 
hearing, in turn, provide further opportunity for individuals to 
comment on the OTR methodology as part of the budgeting process. While 
the specific triennial process dedicated to the OTR has served well 
over the last number of years, the Board requests input on whether 
another process may prove more efficient and save resources for both 
credit unions and the NCUA while still maintaining transparency on the 
OTR methodology. Whenever the Board considers any changes to the OTR 
methodology, it would continue to seek comment through a Federal 
Register notice specific to the OTR.

    By the National Credit Union Administration Board on December 
14, 2023.
Melane Conyers-Ausbrooks,
Secretary of the Board.
[FR Doc. 2023-28000 Filed 12-19-23; 8:45 am]
BILLING CODE 7535-01-P