Detailed Information on the
Regulation of Federal Credit Unions Assessment

Continue to work with Federal financial regulators on identifying comparable outcome goals with which to allow greater comparison of program performance and to ensure best practices are shared.

Measure: Percentage of Adequately and Well-Capitalized Federally-Insured Credit Unions (FICUs) to all FICUs

Explanation:This is a leading indicator of safety and soundess for the credit union industry via capital adequacy.

Measure: Percentage of Federally-Insured Credit Unions (FICUs) with CAMEL rating of 1,2, and 3 compared to all FICUs

Explanation:Leading indicator of safety and soundness for the credit union industry based on risk assessments. CAMEL rating range from 1 to 5.

Measure: Percentage Increase in Federally-insured Credit Union membership.

Explanation:Indicates increased access to financial services through membership growth.

Measure: Percentage Increase in Federally-Insured Credit Union Assets

Explanation:Indicates increased access to financial services through asset growth.

Measure: Percentage of Total NCUA Operating Expenses to Total Assets of Federally-Insured Credit Unions

Explanation:This is a strategic level measure of overall agency efficiency.

Measure: Percentage of the credit union industry's market share of consumer credit

Explanation:Indicates a flexible regulatory scheme that allows credit unions to successfully compete in the market with other financial institutions.

Measure: Percentage of Federally-Insured Credit Unions with CAMEL Ratings of 4 or 5 resolved within 12 months.

Explanation:Indicates the prompt resolution of risks threatening safety and soundess.

Measure: Increase in Federally-Insured Credit Unions' Average Share Balance

Explanation:Indicates investment in the community through improved savings rates.

Measure: NCUA FTE Hours per million Federally-Insured Credit Union Assets Examined

Explanation:Operational level measure of overall regulatory and supervision efficiency

Measure: Total shares of Federally-insured Credit Unions Rated an overall CAMEL score of 1, 2, or 3 per total number of NCUA FTE (in millions)

Explanation:Tactical level measure of field level staffing efficiency.

Measure: Percentage of Federally-Insured Credit Unions with Low or Moderate Risk Ratings in Institutional-Related Risk Areas

Explanation:Indicates assets at normal institutional risk levels. Target based on a composit measure of reputation, strategic, transaction, and compliance risk.

Measure: Growth of Low-Income Designated Credit Union Assets

Explanation:Indicates increased service to members and communities of lesser means.

Measure: Growth of Low-Income Designated Credit Union Membership

Explanation:Indicates service to members and communities of lesser means. (High level of growth in 2004 resulted from a peak in low-income designations assigned.)

Measure: Percentage of Federally-insured Credit Union Assets with a CAMEL "Management" rating of 1, 2, or 3.

Explanation:Shows the effective management of risks.

Measure: Percentage of credit unions involved in real estate lending

Explanation:Indicates flexibility through credit unions' ability to compete in the mortgage market.

Is the program purpose clear?

Explanation: The NCUA was created to ensure the safety and soundness of federally-insured credit unions and enhance the viability of the federal credit union system.

Evidence: "Federal Credit Union Act, Sections §1751, §1752, §1752(a), §1766, §1781(a). NCUA 2004 Annual Report, Mission Statement (foldout to front cover), Page 5. National Credit Union Administration - About NCUA. NCUA Strategic Plan 2003-2008. NCUA Examiners Guide, June 2002 with revisions"

Does the program address a specific and existing problem, interest, or need?

Explanation: Credit unions have a unique, cooperative structure and intended purpose (to extend financial services to those of modest means) with member ownership, equal representation of all members, volunteer officials, and equitable service of membership representing all economic strata.

Evidence: "Federal Credit Union Act, Sections §1752, §1752(a), §1756, §1766, §1781(a) NCUA Strategic Plan 2003-2008"

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: While the cooperative structure and intended purpose of the credit union system as well as the NCUA structure are unique, other agencies perform similar types of regulatory functions in the banking industry. OCC is the primary regulator of national banks, FDIC performs limited supervision of national banks, OTS regulates thrifts, and the Federal Reserve Board regulates Federal Reserve banks. FDIC both regulates some banks and supervises an insurance fund like NCUA with credit unions.

Evidence: "Federal Credit Union Act, Sections §1756. §1782a, §1786a, §1789 NCUA Strategic Plan 2003-2008 The Future of Banking in America, FDIC Banking Review 2004, Volume 16, No. 1, page 17"

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The agency's credit union oversight program was developed to have flexibility to act and react to trends within the credit union system; with local oversight of individual credit unions by examiners reporting directly to the credit unions they are assigned. The oversight by examiners incorporates on-site -- where examination reports are released directly to officials upon completion of examinations -- and off-site monitoring through the quarterly, or monthly in the case of Corporate credit unions, call-reporting system. For credit union failures that result in a cost the National Credit Union Share Insurance Fund, post mortems are conducted -- either by the regional office or central office based on size of loss -- to assess systemic issues and address needed deficiencies within the examination program. Training of staff is provided locally, regionally, and nationally to ensure timely, and appropriate skill sets are learned. Appropriate tools, incorporating IT exam and supervision software platforms and hardware, are revised incorporating feedback from field staff and from the credit union system. Routinely the NCUA has revised the guidance and regulations provided to encourage innovation within the financial industry while ensuring an appropriate level of supervisory oversight through technological improvements in analysis, hardware, and software. The program also operates under a risk-based approach to more efficiently target credit unions needing more resources.

Evidence: "National Credit Union Administration - About NCUA Federal Credit Union Act, Sections §1756, §1766, §1781, §1782(a), §1784 NCUA Examiner's Guide Web Page, Chapters 1, 2, 2a, 3, 22 NCUA's Corporate Credit Union Examiner's Guide Web Page, Chapters 101, 102, 103 NCUA 2004 Annual Report pages 15-18 NCUA Compliance Self-Assessment Guide HMDA Reporting Guide Supervisory Committee Guide"

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Resources are focused on the effective oversight of the federal credit unions by means of a risk-focused examination program. The program tailors supervision for every credit union based on its risk profile. This allows the agency to focus resources on credit unions exhibiting weaknesses, displaying adverse trends, or other emerging issues (e.g. sub-prime lending and Bank Secrecy Act) The risk-focused exam program has four required review areas to ensure NCUA meets its regulatory responsibilities and ensure consistency. The standard review areas are: Supervisory Committee Audit; 5300 Call Report validation; Bank Secrecy Act, and Flood Disaster Protection Act. The agency complements this with a quality control system to ensure the examinations meet standards. Also, over 70 percent of the agency's budget is for salary and benefits, with the majority of those funds provided to the field examiners who conduct direct and on-site oversight of individual credit unions. The resources are utilized to support the efforts of the field staff, ensure the quality of the examination process, and develop and implement regulations that ensure the continued viability of the credit union financial system.

Evidence: "NCUA Examiner's Guide Web Page, Forward, Chapter 1, 2, 2a, 3. 22 NCUA's Corporate Credit Union Examiner's Guide Web Page, Chapters 101, 102, 103 NCUA Budget Briefing Web Page NCUA 2005 Annual Performance Budget"

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: NCUA has long-term measurements of success for each of its three strategic goals for the program. Each strategic goal contains one or more long-term, strategic level performance measures and targets. They are as follows: (1) A safe, sound and healthy credit union industry. Long term measures cover the key indicators of a healthy credit union industry - capital/net worth levels and the ratings assigned by NCUA. (2) Access to cooperative financial services for all people throughout the United States. The long-term measure tracks four key credit union growth areas - membership, assets, shares and loans which indicate increased access to financial services for people throughout the United States. (3) A prudent, flexible and efficient regulatory environment for all federally insured credit unions. The long-term measure tracks the percentage of the credit union industry's market share of federally insured assets and the credit union industry's market share of consumer credit - improvements in these areas are indicative of a flexible regulatory environment without unnecessary restrictions.

Evidence: Draft NCUA Strategic Plan 2006-2011 and NCUA Annual Performance Budget 2005. 2004 Annual Report.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Each of NCUA's long-term measures includes targets based on quantifiable data. The long-term targets are set using historical data as a baseline; then using actual economic conditions to modify as required. In addition to the long-term measures discussed in 2.1, NCUA has 3 long-term efficiency measures which are monitored annually.

Evidence: Draft NCUA Strategic Plan 2006-2011 and NCUA Annual Performance Budget 2005

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: Strategic Goal 1 is supported by three outcome goals - (1) Institutional risks are effectively managed, (2) Balance sheets are optimally structured and (3) Credit risks are identified and resolved timely. Supporting annual goals are based on credit union performance as measured by NCUA's Risk Rating System and CAMEL Rating System in the areas of (a) management of institutional risks, (b) balance sheet performance and (c) credit quality. Strategic Goal 2 is supported by one outcome goal - Optimal financial access to all. Supporting annual performance goals are based on (a) financial access opportunities for people of lesser means - measured through key low income designated credit union growth rates and (b) community investment measured through improved savings rates, homeownership and small business opportunities offered by federally chartered credit unions. Strategic Goal 3 is supported by one outcome goal - Credit union growth and development through regulatory measures. Supporting annual performance goals are based on (a) increased product and service offerings - measured through the percentage of credit unions involved in various products and services and (b) improved operating efficiency - measured through credit union operating expenses to assets.

Evidence: NCUA Annual Performance Budget 2005.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Each outcome goal has measurements specifically linked to achieving the Annual Performance Budget in the short-term and the Strategic Plan in the long-term. The targets and their baselines are established through historic performance. The measurements are reflective of prevention, identification, and/or timely resolution of safety and soundness issues.

Evidence: NCUA Annual Performance Budget 2005 page 7 enumerates the specific outcomes used to identify progress toward program completion. Pages 10-13 enumerates the specific measures and targets used to measure progress toward the desired outcomes.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: NCUA and the other financial regulatory agencies share the same short and long-term goal of safe and sound operations of their respective financial institutions. All are inextricably linked through the reputation risk associated with their respective and collective financial institutions. As a result, the entities work together through numerous working groups and alliances to collective further our shared goal through the sharing of ideas, best practices, economic information, etc. NCUA and its efforts are inextricably linked through the reputation risk associated with the State Chartered Credit Unions. Therefore, NCUA works cooperatively with all the State Supervisory Authorities to achieve their shared goals.

Evidence: The Federal Financial Institutions Examination Council was established on March 10, 1979. In 1989, title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 established The Appraisal Subcommittee within FFIEC to prescribe uniform principles, standards, and report forms of the member agencies and to make recommendations to promote uniformity in the supervision of financial institutions. www.ffiec.gov. See the Federal Credit Union Act and Document of Cooperation (with NASCUS) for specifics on cooperation between SSAs and NCUA toward achieving their collective short and long-term goal of credit union industry safety and soundness.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Evaluations of the program are conducted routinely by the GAO, IG, CPAs, as well as internal evaluations of the quality of individual examinations performed by supervisors, regional assessments, and through surveys sent to recently examined credit unions requesting feedback on the quality of the examination contact.

Evidence: GAO-04-91, October 2003, Credit Unions; GAO-040977 September 2004, Corporate Credit Unions;NCUA Examiner's Survey Results; NCUA OIG, July 2005, Process for Reviewing Federally Ensured State Chartered Credit Unions; NCUA OIG Semi-Annual Report to Congress; NCUA Quality Control Review Process; NCUA Examination Surveys; NCUA Operating Fund and Share Insurance Fund Audits.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: NCUA directly ties its budget development to its short and long-term performance goals through the integration of its Planning/Budgeting Processes. NCUA first develops its Initial Annual Performance Plan. The Initial Annual Performance Plan is approved by the NCUA Board and it establishes the initial priorities for the planning year. It also provides estimated budgetary resources per goal using historical data for the planning year. This plan is provided to all Regional and Central Offices to be used as the baseline for their program development which they develop from the bottom up. Most notably the Resource Branch of the Office of Examination and Insurance works with each Regional Office to establish time to be spent by the examiners as they achieve NCUA's regulatory and supervision missions. Zero based budgets are developed by each Region and Office which are compared to the historical estimates. They are then reviewed and justified to the NCUA Senior Staff and NCUA Board. They updated proposed zero based Operating Budget and NCUA Annual Performance Budget are presented to the NCUA Board in a public meeting for approval.

Evidence: NCUA Instruction 9501 for planning process and NCUA Budget Instructions for budget process. NCUA Budget Instructions are published annually to initiate that aspect of the NCUA budget development process. See also NCUA Combined Annual Performance Report 2003 and Initial Annual Performance Plan 2005.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: NCUA Strategic plans are developed under the guidance and direction of its Strategic Management Council, which consists of senior officers of the agency, and coordinated by the Director of Planning. It meets bi-monthly and each year has Senior Leadership Summit which kicks off the annual planning process for the planning year and reviews the NCUA Strategic Plan and Annual Performance Budget for necessary revisions. Where necessary, NCUA Strategic Plan is updated with the Annual Performance Budget, but at a minimum every three years in accordance with GPRA requirements. Revisions when made are incorporated in the updated Strategic Plan when published. Annual Performance Budgets are developed by personnel from all major offices of the agency and vetted through each office prior to final adoption.

Evidence: NCUA Combined Annual Performance Report 2002 and Initial Annual Performance Plan 2004; NCUA Combined Annual Performance Report 2003 and Initial Annual Performance Plan 2005; NCUA Strategic Plan 2000-2005; NCUA Strategic Plan 2003-2006; and Draft NCUA Strategic Plan 2006-2011. The draft NCUA Strategic Plan 2006-2011 was developed using input from outside stateholders and representatives from all Regional and Central Offices. It incorporates the guidance and changes in the July 2004 OMB Circular A-11 and should be approved by the NCUA Board no later than November 2005. NCUA Annual Performance Budget 2006 and beyond will follow the approved NCUA Strategic Plan 2006 - 2011.

Are all regulations issued by the program/agency necessary to meet the stated goals of the program, and do all regulations clearly indicate how the rules contribute to achievement of the goals?

Explanation: The preamble of proposed and final regulations clearly stipulate the intent and objectives of ensuring the viability of the credit union system while remaining within the statutory authority. With the pertinence of all established regulations being reviewed triennially, the regulations continually evolve with advances and changes in the financial services industry. Further, the agency's regulatory flexibility program -- established in February 2002 -- exempts credit unions that maintain a sound net worth and operations from certain regulations that require prior agency approval.

Evidence: Rules and regulations issued follow the requirements laid out in the strategic plan -necessary, flexible and facilitative - at the same time meeting safety and soundness. For example, NCUA is in process of completing its transition to flexible risk-based scheduling process and risk-focused examination process. See NCUA Strategic Plan 2000-2005, pages 8-9 where the Risk-Based/Risk-Focused approach was first introduced. Additionally, the NCUA Board passed the Regulatory Flexibility or RegFlex initiative in response to Strategic Goal 3 in NCUA Strategic Plan 2000-2005, page 15 and the supporting strategy in Strategic Goal 1, page 9 of the same strategic plan. The RegFlex initiative recognizes the need to treat each credit union based on its ability to manage risk and sets guide lines for flexibility in specific regulations.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Credit unions provide quarterly financial and statistical reports to the agency with analysis conducted to determine any issue relating to individual credit unions, along with any systemic issues on regional and/or national basis. The information provided by credit unions in their financial and statistical reports is validated at the time of receipt through a system of flags and then again during on-site examinations. The agency conducts risk-focused examinations at natural person credit unions, with those troubled credit unions receiving more timely examinations and additional follow-up on-site contacts. Corporate credit unions, which provide a source of liquidity to natural person credit unions, provide monthly financial and statistical reports to the NCUA and are examined through a separate risk-focused examination program unique to the challenges within the Corporate credit union system. In addition, the NCUA receives examination reports from the State Supervisory Authorities for state-chartered credit unions where the reports are reviewed by field and office staff to assess potential regulatory or safety and soundness issues.

Evidence: NCUA Quarterly Credit Union Financial and Statistical Data Federal Credit Union Act, Sections §1756, §1766, §1782(2) NCUA Examiner's Guide -- Chapter 1 Risk Focused Program NCUA Examiner's Guide -- Chapter 2, Scope Development and Planning NCUA Examiner's Guide -- Chapter 3, Total Analysis Process NCUA - Corporate Credit Union Guide Web Page - Chapter 102 Corporate Credit Union Examination and Supervision Process NCUA Examiners Guide -- Chapter 26 Federally Insured State Chartered Credit Unions

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Responsibilities for conducting the program are clearly defined and continually reviewed to assess appropriateness. Senior staff are assessed and any salary increase based on a performance management system that measures Program Management, Leadership, and Resource Management. Management's effectiveness in achieving the regulatory program is assessed through the evaluation system based on achieving specific objectives. The evaluation of management's effectiveness correlates to the merit increase received based on a pay-for-performance system. Further, through formal agreement with the State Supervisory Authorities and their representative trade organization -- NASCUS -- the NCUA is coordinating examination and training programs and has provided the software and hardware platforms to the SSAs, improving the knowledge, skills, and consistency of regulatory oversight of the credit union system.

Evidence: NCUA - Corporate Credit Union Examination Web Page NCUA Examiners Guide Web Page NCUA Examiners Guide Chapter 22 - Examination Evaluation and Review Policy NCUA's Personnel Manual - Chapter 6 Performance Management Program AIM Study AIM 2 Study

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Internal controls (e.g., transaction authorization and monitoring) ensure that obligations and outlays are executed timely and in accordance with the approved budget (i.e., the intended purpose). Item 3.6, below, includes additional financial management practices. The program provides monthly financial statements for the Operating Fund and NCUSIF that reflect expenditures of the program. These financial statements are validated through annual independent financial audits. Seventy six percent of the operating budget provides for salary and benefits of the agency staff. Human resource needs are routinely assessed, with annual resource budgeting performed for field staff, accounting for 58 percent of total agency staff. This resource budgeting need is based on the identified problem institutions, number of credit unions and anticipated examination and supervision time based on historical information and current trends, planned initiatives, training, and other administrative needs. Such needs feed into the annual budget.

Evidence: NCUA 2005 Performance Plan NCUA Management Automated Resource System NCUA Board Action Bulletin -- 2005 Budget NCUA 2005 Budget Briefing

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: As mentioned above, the funding for the program is developed through a systematic approach of identifying needed time resources -- by field staff -- to accomplish the program, vetted through supervisors, then systemically analyzed through a review of historic, current, and anticipated data elements, which include the condition of the individual credit unions, average examination/supervision times, economic conditions, anticipated systemic compliance, economic and operational issues. As a result of these efforts, the average cost of conducting the program compares favorably with similar federal programs. Further, administrative costs have decreased while the asset size of the credit unions has grown. As a result of the demographic changes within the credit union system - where there has been a consolidation of credit unions while assets and membership have continued to increase - this provided the opportunity for the NCUA to further consolidate operations, with the recently completed initiative that resulted in reduction of regional offices, realignment of central office duties, and reduction of staff and an estimated savings of over $27 million over 10 years. Further, the NCUA has incorporated the Information Technology Strategic and Human Capital Management Plans integral for achieving the agency's Strategic Plan.

Evidence: NCUA 2005 Budget Briefing NCUA Management Automated Resource System - It provides both a Supervisory Examiner Management information system and an automated system for budget management and resource allocation. NCUA Examiner's Guide -- Chapter 2 Scope Development AIM Study AIM 2 Study Examination Survey

Does the program collaborate and coordinate effectively with related programs?

Explanation: The agency coordinates regulatory oversight of the credit union system with State Supervisory Authorities (SSAs) and their representative trade organization -- National Association of State Credit Union Supervisors (NASCUS). This is accomplished through documents of cooperation with the SSAs and NASCUS, with the NCUA providing the examination software and hardware platform used by all except one SSA to ensure greater consistency of the examination product, and providing the training opportunities given to agency staff for state examination staff to further improve the skills and knowledge of all regulatory staff within the credit union system. Further, the agency -- through myriad of task forces and committees -- develops and coordinates regulatory processes with the other federal financial regulators as a member of the Federal Financial Institution Council (FFIEC).

Evidence: www.FFIEC.gov NASCUS Document of Cooperation NCUA Examiners' Guide -- Chapter 26 - Federally-Insured State Chartered Credit Unions

Does the program use strong financial management practices?

Explanation: The program has received unqualified audit opinions on its financial statements since 1983. Further, GAO and the IG office have scrutinized many aspects of the program without identifying any material deficiencies. Strong financial management practices for the revolving fund include: ?? Disclosing to the public each month its financial statements. ?? Preparing annual operating and capital budgets through zero based budgeting methods and in compliance with OMB Circular A-11, Preparation, Submission and Execution of the Budget. The budget formulation process includes a press conference to communicate the preliminary budget and seek public comments. ?? Executing the Board approved operating and capital budget with daily, monthly and quarterly monitoring activities. Monthly budget reports -- by office -- are reviewed for accuracy and validated. ?? Reprogramming of budget items is approved by the Executive Director or Board, based on dollar thresholds. The Board is notified of all reprogrammings. ?? Updating the current budget at mid-year by all offices with such being approved by the Board. ?? Submitting to Treasury of FACTS financial data and reconciling such to the annual Presidential Budget submission. ?? Integration of financial information into the agency's (GPRA) performance budget. ?? Evaluating and developing responses to items communicated by external and Inspector General auditors through their management letters and reports.

Evidence: www.ncua.gov/OIG/FinAudits.htm www.ncua.gov/OIG/OtherAudits.htm NCUA 2004 Annual Report, Pages 69-100

Has the program taken meaningful steps to address its management deficiencies?

Explanation: Changes needed to the program, to address any deficiencies, are initiated based, among other areas, on trend analysis, examination results, economic conditions, regulatory need, and postmortems on credit union cases. Management's effectiveness in achieving the regulatory program is assessed through the evaluation system based on achieving specific objectives. The evaluation of management's effectiveness correlates to the merit increase received based on a pay-for-performance system. To further address management development, Human Capital Strategic Goals have been incorporated into and aligned with the NCUA's Strategic Plan, to further integrate human capital policies with program; recruit, develop, and retain employees based on identified strategic competencies; inspire leadership to achieve the agency's mission, and develop and promote a high performing culture that strives for continuous learning.

Evidence: NCUA's 2004 Annual Report pages 15-18 GAO Study -- Corporate Credit Unions, Sept. 2004 GAO: Summary -- Credit Unions Financial Condition, October 2003 NCUA Strategic Plan 2003-2008 AIM Study AIM 2 Study

Did the program seek and take into account the views of all affected parties (e.g., consumers; large and small businesses; State, local and tribal governments; beneficiaries; and the general public) when developing significant regulations?

Explanation: The program is designed to comply with all appropriate regulations, with the NCUA Board establishing a process for all regulations to be reviewed triennially for appropriateness. After formulation of regulations based on economic trends, statutory requirements, operational, financial, and/or managerial issues, the agency encourages comment and provides easy access to the general public through the agency's web site. Draft final regulations awaiting approval by Board include assessment of comments received with any appropriate revision. Interim Final rules are limited in their use. Recent effort to revise the Federal Credit Union Act's section on Prompt Corrective Action is a prime example of the agency's outreach effort to solicit feedback from the credit union system and outside parties on significant rules. Recognizing the imposition of PCA in 1999 has caused many challenges within the industry, the agency initiated a task to propose a revision to the statute, allowing greater flexibility for the agency in imposing PCA requirements. After initial development presented the draft proposal to the impacted parties, discussing the draft and soliciting feedback prior to submitting the proposal for Congressional consideration, resulting in a more thorough understanding of the proposal while not undermining the agency's primary mission of ensuring the safe and sound operations of the credit union system.

Evidence: Interpretive Ruling and Policy Statement 87-2 "Developing and Reviewing Government Regulations" NCUA Regulatory Review Plans -- 2005 Change 3 NCUA Rules and Regulations -- June 2005 --Preamble to Change 3 of the NCUA Rules and Regulations -- Reprinted from the Federal Register Vol. 70, No. 14, January 24, 2005, 12 C.F.R. Part 708b

Did the program prepare adequate regulatory impact analyses if required by Executive Order 12866, regulatory flexibility analyses if required by the Regulatory Flexibility Act and SBREFA, and cost-benefit analyses if required under the Unfunded Mandates Reform Act; and did those analyses comply with OMB guidelines?

Explanation: With the diversity of asset size and complexity of operations for credit unions, efforts are made to develop regulations that are flexible in their application. The regulatory impact on credit unions is included in all regulations developed and included within the preamble for the proposed regulation prior to final consideration by the NCUA Board. Recent revisions to Part 703 of the NCUA Rules and Regulations - which addresses Investments by credit unions -- and Part 742 - which provides for Regulatory Flexibility by credit unions meeting certain criteria - are recent examples of the agency's efforts to design and implement regulations that provide for the safe and sound operations while recognizing differences in complexity of operations, management capabilities and performance, financial and operational strength of a credit unions.

Evidence: Interpretive Ruling and Policy Statement 87-2 "Developing and Reviewing Government Regulations" Change 3 NCUA Rules and Regulations -- June 2005 --Preamble to Change 3 of the NCUA Rules and Regulations -- Reprinted from the Federal Register Vol. 70, No. 14, January 24, 2005, 12 C.F.R. Part 708b NCUA Rules and Regulations Part 703 - Part 703.4 NCUA Rules and Regulations Part 742

Does the program systematically review its current regulations to ensure consistency among all regulations in accomplishing program goals?

Explanation: All regulations are reviewed triennially for appropriateness. Comments for revisions are elicited from organizations within the credit union system along with the general public on those regulations under review.

Evidence: Interpretive Ruling and Policy Statement 87-2 "Developing and Reviewing Government Regulations" NCUA Regulatory Review Plans -- 2005

Are the regulations designed to achieve program goals, to the extent practicable, by maximizing the net benefits of its regulatory activity?

Explanation: As mentioned above, the agency has pursued efforts to craft regulations -- such as Parts 703 and 742 of the NCUA Rules and Regulations that recognize the diversity of the credit unions regulated. Regulations have been designed to provide flexibility to credit unions based on financial, managerial, and operational conditions of the institutions, along with complexities present within the credit unions' balance sheets.

Evidence: NCUA Rules and Regulations Part 703 - Part 703.4 NCUA Rules and Regulations Part 742 Interpretive Ruling and Policy Statement 87-2 "Developing and Reviewing Government Regulations"

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: NCUA Regulatory/Supervision long-term performance progress is measured through Strategic Goals 1 - 3. NCUA has achieved most of the associated goals annually and has demonstrated good progress in meeting its long-term goals. NCUA reports its goal achievement in NCUA Combined Annual Performance Report and Initial Annual Performance Plan.

Evidence: NCUA Combined Annual Performance Report 2000 and Initial Annual Performance Plan 2002; NCUA Combined Annual Performance Report 2001and Initial Annual Performance Plan 2003; NCUA Combined Annual Performance Report 2002 and Initial Annual Performance Plan 2004; NCUA 2004 Annual Report; and NCUA Annual Performance Budget 2005. Five years of data is provided in each Combined document if the data is available and the goal/measure/target existed for the reporting period.

Does the program (including program partners) achieve its annual performance goals?

Explanation: NCUA Regulatory/Supervision short-term annual performance progress is measured through the outcome goals supporting Strategic Goals 1 - 3. NCUA has achieved most of the associated goals annually. NCUA reports its goal achievement in NCUA Combined Annual Performance Report and Initial Annual Performance Plan.

Evidence: NCUA Combined Annual Performance Report 2000 and Initial Annual Performance Plan 2002; NCUA Combined Annual Performance Report 2001and Initial Annual Performance Plan 2003; NCUA Combined Annual Performance Report 2002 and Initial Annual Performance Plan 2004; NCUA 2004 Annual Report; and NCUA Annual Performance Budget 2005. Five years of data is provided in each Combined document if the data is available and the goal/measure/target existed for the reporting period.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: NCUA reports its goal achievement in NCUA Combined Annual Performance Report and Initial Annual Performance Plan up through 2003 and in the NCUA Annual Report (PAR) for 2004. NCUA has reduced its operating budget ($98.4M down to $97.8M) and FTE for these goals each year since 2000 (from 767 to 658 rounded to nearest FTE).

Evidence: NCUA Combined Annual Performance Report 2000 and Initial Annual Performance Plan 2002; NCUA Combined Annual Performance Report 2001and Initial Annual Performance Plan 2003; NCUA Combined Annual Performance Report 2002 and Initial Annual Performance Plan 2004; NCUA Annual Performance Budget 2005; and NCUA Annual Report 2004 (PAR). Five years of data is provided in each document if the data is available and the goal/measure/target existed for the reporting period.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: While it is difficult to compare program performance between the financial regulatory agencies becomes of different outcome measures and differences in regulated entities, when comparing NCUA's costs and FTEs relative to other FFIEC agencies, NCUA demonstrates cost efficiencies.

Evidence: GAO-04-91, October 2003, Credit Unions; NCUA OIG, July 2005, Process for Reviewing Federally Ensured State Chartered Credit Unions; Department of Treasury Study, January 2001, Comparing Credit Unions with Other Depository Institutions; GAO-05-412, May 2005, USA Patriot Act - Additional Guidance could Improve Implementation of Regulations Related to customer Identification and Information Sharing Procedures.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Numerous evaluations conducted by the GAO, IG, Department of the Treasury, and external auditors have been completed and determined the agency is achieving its overall mission to ensure the viability of the credit union system. These evaluations have included assessments on the financial performance, consumer compliance, regulatory responsibilities, and examination performance.

Evidence: GAO-04-91, October 2003, Credit Unions; NCUA OIG, July 2005, Process for Reviewing Federally Ensured State Chartered Credit Unions; Department of Treasury Study, January 2001, Comparing Credit Unions with Other Depository Institutions; GAO-05-412, May 2005, USA Patriot Act - Additional Guidance could Improve Implementation of Regulations Related to customer Identification and Information Sharing Procedures.

Were programmatic goals (and benefits) achieved at the least incremental societal cost and did the program maximize net benefits?

Explanation: NCUA regulatory/supervision goals are designed to ensure that the credit union industry is safe and sound and is balanced by a regulatory environment that is flexible and facilitative to encourage credit union growth and innovation. NCUA Annual Performance Reports show the programmatic goals have been accomplished each year. NCUA views its operating costs as a societal cost as it is funded by the credit unions themselves. These funds could be otherwise used to make loans and/or pay dividends to the members. NCUA costs have remained relatively flat even though membership and assets have increased. Net benefits to society are viewed as providing cooperative financial access to members and the increase in wealth for them and current members. NCUA has ensured a safe and sound credit union industry while providing a flexible, facilitative environment where membership, assets and savings accounts have increased with every year.

Evidence: NCUA Annual Report 2004 (PAR), pages 51-67. NCUA budget for regulatory goals was $98.4M, $101.5M, $100.7M, $98.7M and $97.8M in years 2000, 2001, 2002, 2003 and 2004 respectively. Credit union assets for the years 2000 - 2004 respectively; $438B, $501.5B, $557.2B, $610.1B and $646.9B. Credit union membership for the years 2000-2004 respectively; $77.6M, $79.3M, $80.9M, $82.4M and $83.6M. Total credit union savings accounts for the years 2000-2004 respectively; $131.5M, $136.2M, $139.1M, $142.3M and $145.2M.