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NCUA Vice Chairman Kyle S. Hauptman Statement on the Request for Comment, NCUA Overhead Transfer Rate Methodology

December 2023
NCUA Vice Chairman Kyle S. Hauptman Statement on the Request for Comment, NCUA Overhead Transfer Rate Methodology
Kyle S. Hauptman

NCUA Vice Chairman Kyle S. Hauptman during a meeting of the NCUA Board.

As Prepared for Delivery on December 14, 2023

The Board is requesting comment on the method used to determine the Overhead Transfer Rate (OTR). The OTR is applied to the NCUA’s operating budget to determine the portion of the budget that will be funded by the National Credit Union Share Insurance Fund. Over the years, the Board has worked to increase the transparency of the OTR methodology. Although there have been improvements, today the Board is providing additional details on the OTR methodology to improve clarity and understanding.

One reason we’re here today is because shortly after the Share Insurance Fund was established in 1970, a Government Accountability Office audit recommended the NCUA adopt a method of allocating costs between the operating fund and the Share Insurance Fund. Starting in 1973, a variety of methods were used to determine the allocation of costs. A comprehensive methodology for calculating the OTR was adopted by the Board in 2003. That methodology remained in place until 2017.

After seeking comment in 2016 and 2017, the current OTR methodology was adopted in November 2017. Despite greater transparency, there is still some confusion regarding the OTR methodology.

There has been much concern regarding the cost distribution of the overhead transfer rate. When considering both the operating fee and the OTR, for the 2023 budget year, federal credit unions account for 69 percent of the NCUA’s budget, and federally insured, state-chartered credit unions account for 31 percent of the NCUA budget. State-chartered credit unions are not responsible for paying the full amount of the OTR, which is where some of the confusion may lie.

This request for comment is intended to address industry interest regarding transparency and understanding of the allocation of insurance-related expenses among charter types. I encourage stakeholders to take the opportunity to provide input on the added detail and clarifying statements. We welcome comments on all aspects of the OTR methodology, including the frequency of dedicated notices requesting comment. We are also interested in suggested alternatives.

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