SUPPLEMENTARY INFORMATION:

The following itemized list details the sections in this Notice made available for public review:

I. Introduction

II. NCUA's Budget in Brief

III. Key Themes of the Proposed 2027-2028 Budget

IV. Operating Budget

V. Capital Budget

VI. Share Insurance Fund Administrative Budget

VII. Financing NCUA's Programs

VIII. Appendix: Supplemental Budget Information

Section 212 of the Economic Growth, Regulatory Relief, and Consumer Protection Act amended 12 U.S.C. 1789(b)(1)(A) to require the NCUA Board (Board) to “on an annual basis and prior to the submission of the detailed business-type budget make publicly available and publish in the Federal Register a draft of the detailed business-type budget.” Although 12 U.S.C. 1789(b)(1)(A) requires publication of a “business-type budget” only for the agency operations arising under the Federal Credit Union Act's subchapter on insurance activities, in the interest of transparency the Board is providing NCUA's entire draft budget for 2027-2028 in this Notice.

The draft budget details the resources required to support NCUA's mission. The draft budget includes personnel and dollar estimates for three major budget components: (1) the Operating Budget; (2) the Capital Budget; and (3) the Share Insurance Fund Administrative Budget. The resources proposed in the draft budget are to carry out the agency's operations in 2027 and 2028. This document is a draft, staff-level budget proposal made available to the NCUA Board and the public for their consideration and comment. The NCUA Board directed NCUA's Executive Director to develop the draft budget under delegated authority. The draft budget may change based on public comments, Board decisions, and staff's ongoing consideration of estimates and programs that impact the budget.

NCUA's Chief Financial Officer will present the draft budget at a hearing open to the public on Tuesday, November 17, 2026, at 10:00 a.m. Eastern at NCUA's headquarters, 1775 Duke Street, Alexandria, Virginia 22314. Interested parties unable to attend in person may visit the agency's homepage ( www.ncua.gov/​) to access the provided webcast link.

If you wish to participate in the hearing and deliver a statement, you must email a request to BudgetHearing@ncua.gov by November 6, 2026. Your request must include your name, title, affiliation, mailing address, email address, and telephone number. Statements must be delivered in person at the hearing. NCUA will work to accommodate as many public statements as possible. The Board Secretary will inform you if you have been approved to make a presentation and you will be allotted five minutes during the budget hearing to deliver your remarks. A written copy of your statement must be delivered to the Board Secretary by email by 12 noon Eastern, November 12, 2026. In addition to delivering their remarks at the budget hearing, registered presenters will be provided the opportunity to ask questions of NCUA staff about the draft budget. The initial round of questions will be limited to five minutes per presenter, and one subsequent round of questions, limited to five minutes per ( printed page 67863) presenter, may be permitted by the Chairman if time allows.

Written comments on the draft budget will be accepted by November 30, 2026, through the Federal eRulemaking Portal: www.regulations.gov. The docket number is NCUA-2026-2146. Commenters should follow the portal instructions for submitting comments.

All comments should provide specific, actionable recommendations about the draft budget rather than general remarks. NCUA's Board will review and consider any comments from the public before approving NCUA's 2027-2028 budget.

I. Introduction

About the National Credit Union Administration

Created by the U.S. Congress in 1970, the National Credit Union Administration (NCUA) is the federal agency that insures deposits at federally insured credit unions, protects the members who own credit unions, and charters and regulates federal credit unions.

NCUA's mission is to enable access to financial services by facilitating safe, sound, and resilient credit unions.

The agency operates its headquarters in Alexandria, Virginia; its Asset Management and Assistance Center (AMAC) in Austin, Texas, which liquidates credit unions and recovers assets; and three regional offices, which carry out the agency's supervision and examination program.

Backed by the full faith and credit of the United States, the National Credit Union Share Insurance Fund (Share Insurance Fund) provides up to $250,000 of federal share insurance to millions of account holders in all federal credit unions and most state-chartered credit unions.

As of June 30, 2026, NCUA regulates and supervises 4,214 federally insured credit unions, which have approximately 146 million members and $2.5 trillion in assets.^[1]

Statutory Authority

Pursuant to the Federal Credit Union Act (FCU Act), the NCUA Board (the Board) determines the resources needed for carrying out NCUA's responsibilities under the Act.^[2] The Board is authorized to expend such funds and perform such other functions or acts as it deems necessary or appropriate, according to the rules, regulations, or policies it establishes.^[3]

The FCU Act authorizes two primary sources to fund NCUA: (1) Requisitions from the Share Insurance Fund “for such administrative and other expenses incurred in carrying out the purposes of [Title II of the Act] as [the Board] may determine to be proper” and (2) “fees and assessments (including income earned on insurance deposits) levied on insured credit unions under [the Act].”.^[4]

Pursuant to its authority to use the Share Insurance Fund to carry out its insurance-related responsibilities, the Board approved an Overhead Transfer Rate (OTR) methodology and authorized the Office of the Chief Financial Officer to transfer resources from the Share Insurance Fund to the Operating Fund to account for insurance-related expenses.^[5]

In December 2023, the Board approved and published in the Federal Register the current federal credit union annual operating fee methodology, which is the basis for how the operating fee is calculated.^[6] The Board delegated authority to the Chief Financial Officer to calculate the annual operating fee for federal credit unions and to set the fee schedule as calculated using the approved method.

Pursuant to the FCU Act, NCUA deposits fees collected in the agency's Operating Fund at the Treasury of the United States, and NCUA uses those fees to defray the cost of carrying out the agency's operations, including examining and supervising federal credit unions.^[7]

NCUA's Annual Budget Process

The FCU Act requires NCUA to publish an annual draft budget in the Federal Register for public comment and hold a public hearing on the budget.^[8] NCUA stands out as the only Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) agency that releases a detailed draft budget and solicits public comments on it.

NCUA develops a two-year draft budget by identifying the necessary resources, including supporting justifications, to achieve the agency's mission, goals, requirements, and objectives. This effort includes a field-level review of every federally insured credit union to estimate the workload to examine and supervise the credit union in the forthcoming year, which is translated into the cost of the staff and associated expenses for such functions. In addition to this workload analysis, each NCUA office reviews its fixed and recurring expenses, including:

• Employee travel.
• Rental payments for leased property.
• Operations and maintenance for owned facilities or equipment.
• Supplies.
• Telecommunications services.
• Major capital investments.
• Other administrative and contracted services costs.

Before arriving at the final budget, the NCUA Board reviews any comments from the public and evaluates other considerations. Once the budget is approved, the OTR and federal credit union annual operating fee rates are set for the first year of the two-year budget.

II. NCUA's Budget in Brief

Proposed 2027 and 2028 Budgets

NCUA's 2027-2028 draft budget includes three separate budgets: the Operating Budget, the Capital Budget, and the Share Insurance Fund Administrative Expenses Budget.^[9]

( printed page 67864)

Combined, these three proposed 2027 budgets total $325.4 million, an increase of 2.9 percent compared to the 2026 Board-approved budget, and consistent with the 2027 funding level approved by the NCUA Board as part of the 2026-2027 budget.

There are three main factors contributing to the draft 2027 budget growth compared to 2026:

• Growth in employee compensation budgets, reflecting the pay raise terms in the agency's compensation agreement with its employee union, inflationary adjustments for employee benefits, and five proposed additional positions required to meet emerging needs related to new legislation as well as the Administration's priorities.
• An increase in contracted services budgets, resulting from inflationary cost increases, cybersecurity investments, and because the agency projects $10.0 million less in offsetting, prior-year surpluses than 2026.
• An increase in the Share Insurance Fund Administrative Expenses Budget. NCUA used the proceeds from the sale of its Austin office building to offset the 2026 budget, which was a one-time offset.

These increases are partially offset by a comparative decrease to NCUA's Capital Budget for 2027. The 2026 Capital Budget included $16 million for reorganization-related investments in systems and process improvements that align with government efficiency goals and other Administration priorities. The 2027 Capital Budget does not include any additional funding for reorganization-related investments or projects.

Proposed 2028 Budget: $344.2 Million

The 2028 combined total for the three proposed budgets is $344.2 million, which is 5.8 percent higher than the proposed 2027 combined total.

For planning purposes, the 2028 draft budget projects the same rate of compensation growth as in 2027, and 3.0 percent budgetary growth in all non-compensation spending categories plus certain discrete adjustments in cases where project cost growth is expected to exceed 3.0 percent. The remaining growth results from a lower estimate of prior-year surpluses offsetting the 2028 budget compared to the surplus used in 2027.

While the agency presents a two-year draft budget for planning purposes, the Board's practice has been to revisit each year's budget before that budget year begins.

III. Key Themes of the Proposed 2027-2028 Budget

NCUA Reorganization

Since the start of its Voluntary Separation Program in 2025, which resulted in a 23 percent reduction to its staffing, NCUA has been developing reorganization plans to build more productive, efficient agency operations. Throughout 2025 and 2026, NCUA has increased its operational efficiency and improved service delivery. The agency has been removing unnecessary and burdensome regulations, streamlining its business processes, and identifying technological improvements, and will continue to do so in 2027 and 2028.

The draft 2027-2028 budget supports NCUA's strategic restructuring plans. The agency's reorganization process is actively underway and targeted for completion by December 2027. The agency's reorganization efforts focus on prioritizing NCUA's statutory authorities and its most critical work, reducing and consolidating business units with like functions, achieving a higher supervisor to employee ratio, and leveraging technology to increase staff efficiency.

Technology Modernization: Enhanced Cybersecurity and SI/AI Strategy

NCUA must continue investing in modern information technology to keep pace with innovation while defending against evolving threats that could impact its ability to supervise America's credit unions. By integrating its cybersecurity framework with a forward-looking super intelligence/artificial intelligence (SI/AI) strategy, NCUA seeks to optimize business operations, harden agency systems against evolving digital threats, and foster a secure environment that supports responsible innovation across the credit union landscape.

The draft 2027-2028 budget includes resources to expand the agency's zero-trust cybersecurity strategy, with investments in advanced threat protection to address evolving digital risks and fulfill new federal requirements. To comply fully with federal directives, NCUA must acquire enhanced cybersecurity capabilities. The draft budget's investments will reduce reliance on manual processes, reinforce the organization's IT infrastructure, and ensure that NCUA can continue innovating by integrating SI/AI tools into its operations.

When combined with a portion of the agency's 2026 reorganization and innovation funding, the draft budget provides funding to continue deploying SI/AI and advanced analytic tools across the agency. NCUA's SI/AI strategy aligns with the Administration's direction and will both enhance examination and supervision capabilities and deliver operational efficiencies. ( printed page 67865)

Deregulation, Examination Priorities, and Workforce

The draft 2027-2028 budget includes resources to reduce regulatory burden on credit unions and focus NCUA's examination program on material risks.

NCUA's Deregulation Project is a multi-year initiative to review, streamline, and modernize the agency's regulatory framework. The Deregulation Project will continue in 2027, and will address more complex regulations with broader policy and operational implications. The draft budget supports this project and other rulemaking and related implementation efforts associated with new legislation and the Administration's priorities, such as the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) for Permitted Payment Stablecoin Issuers.

NCUA continues to invest in its efforts to:

• Focus examination attention on areas posing material risk.
• Streamline examination practices to increase efficiency
• Adopt advanced capabilities to improve risk and problem identification
• Train, develop, and resource staff to ensure the agency has the necessary expertise to supervise complex and new activities
• Facilitate responsible innovation by credit unions

IV. Operating Budget: $312.4 Million

Overview

The proposed 2027 Operating Budget is $312.4 million, which provides the resources required for the agency to conduct activities prescribed by the FCU Act. These mandates include but are not limited to:

• Chartering new federal credit unions
• Approving field of membership applications of federal credit unions
• Promulgating regulations and providing guidance
• Performing examinations, supervision, and enforcement

NCUA also implements requirements of other statutes and Executive Orders including those related to the Bank Secrecy Act, various consumer financial protection laws, and various requirements for federal agencies.

Operating Budget Categories

This section explains how the Operating Budget funds NCUA's major expense categories, as summarized in the following chart.

( printed page 67866)

Pay and Benefits. Pay and benefits make up approximately 80 percent of the proposed 2027 NCUA Operating Budget. The proposed 2027 budget for pay and benefits increases by 4.2 percent compared to 2026, for a total of $250.5 million. There are three primary drivers of increased costs in 2027 for the pay and benefits category:

• Merit and locality pay increases for NCUA's employees, which are paid according to the terms of the agency's compensation agreement with its employee union and its merit-based pay system.^[10]
• Contributions for employee health insurance, which are set by OPM and cannot be changed by NCUA.
• Costs associated with other mandatory employer contributions such as Social Security, Medicare, transportation subsidies, unemployment insurance, and workers' compensation, which are set by other agencies and cannot be changed by NCUA.
• The proposed 2028 budget for pay and benefits is estimated at $260.3 million, a 3.9 percent increase from the proposed 2027 level.

The proposed 2027 and 2028 Operating Budgets support a total agency staffing level of 972 positions.^[11] This is an increase of five positions (0.5 percent) compared to the agency's 2026 approved position level. NCUA's Strategic Hiring Committee will allocate these new positions to address emerging needs related to new legislation, such as the GENIUS Act and the 21st Century Road to Housing Act, as well as for other emerging Administration and agency priorities, such as SI/AI implementation and cybersecurity enhancements.

Approximately 63 percent, or 609 proposed positions, would conduct NCUA's examination and supervision functions, while the remaining 37 percent, or 363 proposed positions, would perform other necessary functions, including legal services, policy development and analysis, and agency administration.

The following chart illustrates NCUA's approved position levels in recent years.

( printed page 67867)

Travel. The proposed travel budget decreases by $2.7 million (13.6 percent) compared to 2026, for a total of $17.4 million. The travel cost category includes expenses for employees' airfare, lodging, meals, auto rentals, reimbursements for privately owned vehicle usage, and other travel-related expenses. These are necessary expenses for onsite work in credit unions and other assignments involving travel.

The proposed 2028 budget for travel is estimated at $18.9 million, an 8.7 percent increase compared to the 2027 level. This budget level reflects travel-related cost inflation in 2028 and an agency-wide training event.

Rent, Communications, and Utilities. The proposed budget for rent, communications, and utilities increases by $2.1 million in 2027 (43.5 percent) compared to 2026, for a budget of $7.0 million. The 2026 rent, communications, and utilities budget was reduced by a one-time offset of $1.7 million from the sale of the Austin, TX office building.^[12] Excluding this change in the offset, the 2027 increase is $0.4 million.

Funding within this budget category pays for facilities-related costs, telecommunications services, data storage, and information technology network support. Telecommunications charges include leased data lines and data service subscriptions, Voice over Internet Protocol and mobile telephony, and other network charges. Facilities-related budgets pay for the cost of the leased offices and disaster recovery and continuity of operations sites, utilities, meeting space rental for offsite events, and postage.

The proposed 2028 budget for the rent, communications, and utilities category is a 3.0 percent increase compared to 2027.

Administrative. The draft budget proposes a $0.8 million increase in administrative expenses for 2027 (21.1 percent) compared to 2026, for a budget of $4.6 million. Recurring costs in the administrative expenses category include employee relocation expenses, recruitment expenses, shipping, printing, subscriptions, examiner training and meeting supplies, office furniture, legal settlements, and employee supplies and materials. NCUA pays relocation costs to employees who are competitively selected for a promotion or new job within the agency in a different geographic area than where they live.

The proposed 2028 budget for administrative expenses is $4.8 million, an increase of 3.4 percent compared to the level proposed for 2027.

Contracted Services. The proposed budget for contracted services increases by $13.5 million in 2027 (69.8 percent) compared to 2026, for a budget of $32.9 million. The substantial percentage increase in the contracted services budget is driven largely by a reduction in the amount of prior-year unspent budget surpluses used to offset the 2027 budget.^[13] The proposed 2027 budget for contracted services assumes an offset of $39.3 million from prior-year unspent budget balances. Excluding the offset, the 2027 proposed budget assumes total contracted services expenditures of $72.2 million, compared to $68.7 million in 2026, a 5.1 percent increase.

NCUA uses contracted services because acquiring specific expertise or services from contract providers is often the most viable and cost-effective way for NCUA to accomplish its mission. ( printed page 67868) Contracted services include critical mission support such as information technology equipment and software development, accounting and auditing services, and specialized subject matter expertise that enable staff to focus on executing core mission requirements. The contracted services category supports NCUA's supervision framework, core NCUA systems such as accounting and payroll processing, and various recurring costs as described in the following seven major categories:

1. Information Technology Operations and Maintenance (50.7 Percent of Contracted Services)

• IT network support services and help desk support
• Contractor program and web support and network and equipment maintenance services
• Administration of software products and audio-visual services

2. Administrative Support and Other Services (16.4 Percent of Contracted Services)

• Examination and supervision program support
• Technical support for examination and cybersecurity training programs
• Equipment maintenance services
• Legal services and other expert consulting support
• FFIEC reimbursements

3. IT Security (16.9 Percent of Contracted Services)

• Secure data storage and operations
• Information security programs
• Security system assessment services

4. Accounting, Procurement, Payroll, and Human Resources Systems (4.6 Percent of Contracted Services)

• Accounting and procurement systems and support
• Human resources, payroll, and employee services
• Equal Employment Opportunity programs, as required by law

5. Building Operations, Maintenance, and Security (5.1 Percent of Contracted Services)

• Headquarters facility operations and maintenance
• Building security and continuity programs
• Personnel security and administrative programs

6. Audit and Financial Management Support (4.4 Percent of Contracted Services)

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

7. Training (1.9 Percent of Contracted Services)

• Technical and specialized training and professional development for staff

The following chart illustrates the breakout of the seven categories for the total proposed 2027 contracted services budget:

The proposed contracted services budget for 2028 is $39.7 million, which includes an assumption of $35.5 million in unspent balances as an offset. After adjusting for unspent prior-year budgets in both years, the 2028 budget level represents an increase of approximately $3.1 million, or 4.3 percent, over the proposed 2027 level.

V. Capital Budget: $7.9 Million

Overview

The proposed 2027 Capital Budget is $7.9 million, a decrease of $16.2 million (67.2 percent) compared to the 2026 Board-approved budget.

( printed page 67869)

The proposed Capital Budget for 2028 is $8.0 million, an increase of 1.0 percent compared to the 2027 level.

Summary of 2027 Capital Projects

Each year NCUA carries out an extensive review of the agency's needs for improvement, repair, or replacement of information technology, facilities, equipment, and other capital investments. The proposed 2027 Capital Budget supports continuing investments in the agency's highest priority needs as follows: ^[14]

Strengthening Agency Cybersecurity ($4.7 million). The 2027 Capital Budget invests in multiple projects that directly strengthen cybersecurity at NCUA. These investments reinforce the agency's focus systems that are secure, available, and protected against emerging technological risks. Key projects within this category include:

• Firewall Hardware Refresh—Strengthens network perimeter defenses and reduces outage risks, which are core requirements for safe operations.
• Network Access Control / Network Segmentation—Supports identity-based cybersecurity, mitigating threats that target user identity.
• Modernizing Network Internet Protocols—Ensures NCUA can communicate with the public and credit unions using the latest digital communications standards.
• Identity Verification and Data Interchange Security—Modernizes and improves personal and system security through an enhanced technologies aligned to prevailing government and industry standards.

Modernizing Agency Systems and Workflow Transformation ($1.7 million). The Capital Budget includes several investments to ensure the agency keeps pace with innovation across the credit union system. These projects adopt data-driven practices to expand access to financial services, support new credit unions, and strengthen the financial system. Key projects within this category include:

• Community Development Revolving Loan Fund (CDRLF) Grant & Loan Management System—Modernizes the agency's outdated system to reduce staff workload and ensure compliance with federal grant management requirements.
• Consumer Assistance Center / Relationship Management System—Modernizes customer relationship management infrastructure and supports interagency collaboration.
• New Charter System Improvements—Fully digitizes chartering workflows, reduces burden for new credit union applicants, and meets requirements of the 21st Century Road to Housing Act.
• eDiscovery Tool—Strengthens legal research capabilities and reduces manual discovery through a modern data-filtering and investigation engine.

Enhancing Engagement, Transparency, and Operational Reliability ($1.3 million). The Capital Budget strengthens technological readiness through investments that modernize communication with customers and enable compliance with evolving regulatory requirements. Key projects within this category include:

• Unified Communications and Collaboration Modernization—Improves hybrid meeting reliability for Board and public engagement functions.
• Technical Support for Board Priorities—Maintains flexibility to act on emerging regulatory changes that require system reengineering, such as the GENIUS Act and the 21st Century Road to Housing Act requirements.

Headquarters Building Minor Construction and Maintenance Projects ($0.3 million). The proposed 2027 Capital Budget supports NCUA's multi-year headquarters building improvement plan that identifies projects that can be completed incrementally, prioritizing the replacement of health and safety infrastructure. The ongoing multi-year approach recognizes the critical building management and maintenance needs while reducing the potential budgetary impact of such projects in a single budget year.

Reorganization and Technology Investment Fund. The 2026 Capital Budget included a $16.0 million reorganization and technology investment fund—available over multiple years—to make appropriate information technology and process improvement investments that aid in the agency's reorganization. To ensure that NCUA can fully leverage SI/AI, the agency plans to allocate $4.3 million of these funds to develop a structured strategy that harnesses SI/AI-powered tools essential for future supervision, analytics, and fraud detection. Through September 2026, the agency also spent approximately $1 million on efficiency-related technology investments, business process analysis, and reorganization planning support.

VI. Share Insurance Fund Administrative Expenses Budget: $5.1 Million

Overview

The proposed 2027 Share Insurance Fund Administrative Expenses Budget is $5.1 million, which is $1.7 million, or 52.6 percent, higher than the 2026 Board-approved budget. The 2026 Share Insurance Fund Administrative Expenses Budget was reduced by a one-time offset of $1.7 million from the sale of the Austin, TX office building.^[15] Excluding this change in the offset, the proposed 2027 increase is $0.04 million.

The Share Insurance Fund Administrative Expenses Budget funds direct costs associated with authorized Share Insurance Fund activities, including the following for 2027: ^[16]

• $2.7 million for operating and maintenance costs of the internal analytical capabilities to conduct supervisory stress testing analyses and ( printed page 67870) to perform other quantitative risk assessments of large credit unions.
• $0.8 million for state examiner travel to NCUA-sponsored training classes and $0.2 million to ensure that state supervisory authorities can securely and efficiently access NCUA applications and NCUA's MERIT system for state examination and supervision activities.
• $0.8 million for financial reporting, including the Share Insurance Fund's annual financial audit and support to ensure effective internal controls for the fund.
• $0.4 million for certain insurance-related activities and AMAC expenses related to liquidations and conservatorships and for staff travel for consultation on complex or problem cases.
• $64.0 thousand for corporate resolution program legacy asset valuation models, analytic support, and data.
• $0.1 million in capital funding to modernize AMAC's liquidation support tracking tool. AMAC currently uses an end-of-life software platform to track various legal and financial claims during liquidation case management. In 2027, AMAC will deploy a modernized application to replace its current tool.

( printed page 67871)

The proposed 2028 Share Insurance Fund Administrative Expenses budget is $5.2 million, an increase of 2.0 percent compared to the proposed 2027 budget.

VII. Financing NCUA's Programs

Overview

NCUA incurs various expenses to satisfy its statutory requirements, including those involved in examining and supervising federally insured credit unions. The NCUA Board adopts an Operating Budget, a Capital Budget, and a Share Insurance Fund Administrative Expenses Budget each year to fund most of the costs to operate the agency.^[17] When formulating the annual budget, NCUA is mindful that its funding comes from credit unions and strives to operate in an efficient, effective, transparent, and fully accountable manner.

The FCU Act authorizes two primary sources to fund the Operating and Capital Budgets:

(1) Requisitions from the Share Insurance Fund “for such administrative and other expenses incurred in carrying out the purposes of [Title II of the Act] as [the Board] may determine to be proper,” ^[18] and.

(2) “[F]ees and assessments (including income earned on insurance deposits) levied on insured credit unions under [the Act].” ^[19] Among the fees levied under the Act are annual Operating Fees, which are required for federal credit unions under 12 U.S.C. 1755 “and may be expended by the Board to defray the expenses incurred in carrying out the provisions of [the Act,] including the examination and supervision of [federal credit unions].”

Taken together, these authorities effectively require the Board to determine which expenses are appropriately paid from each source while giving the Board broad discretion in allocating expenses.

In 1973, the U.S. Government Accountability Office recommended NCUA adopt a method for allocating Operating Budget costs—that is, the portion of NCUA's budget funded by requisitions from the Share Insurance Fund and the portion covered by operating fees paid by federal credit unions.^[20] NCUA has since used an allocation methodology known as the OTR to determine how much of the Operating and Capital Budgets to fund with a requisition from the Share Insurance Fund.

NCUA uses the OTR methodology to allocate agency expenses between these two primary funding sources. Specifically, the OTR is the formula NCUA uses to allocate insurance-related expenses to the Share Insurance Fund under Title II of the FCU Act. Almost all other operating expenses are funded by collecting annual operating fees from federal credit unions.^[21]

Two statutory provisions directly limit the Board's discretion with respect to Share Insurance Fund requisitions for NCUA's Operating Budget and the OTR. First, expenses funded from the Share Insurance Fund must carry out the purposes of Title II of the FCU Act, which relates to share insurance.^[22] Second, NCUA may not fund its entire Operating Budget through charges to the Share Insurance Fund.^[23]

Overhead Transfer Rate

The OTR represents the percentage of the agency's operating budget paid for by a transfer from the Share Insurance Fund. The OTR is designed to cover NCUA's costs of examining and supervising the risk to the Share Insurance Fund posed by all federally insured credit unions, as well as the costs of administering the Share Insurance Fund.

Federally insured credit unions are not billed for and do not have to remit the OTR amount; instead, it is transferred directly to the Operating Fund from the Share Insurance Fund. This transfer, therefore, represents an indirect cost to all federally insured credit unions.

The NCUA Board approved the current methodology for calculating the OTR at its November 2017 open meeting.^[24] In 2023, the Board published a request for comment in the Federal Register regarding the OTR methodology but did not propose or adopt any changes to the current methodology.^[25]

The minor variations in the OTR since 2018 are the result of routine, small fluctuations in the variables that affect the OTR, including normal variations in the workload budget from one calendar year to the next.

NCUA conducts a comprehensive workload analysis annually. This analysis estimates the amount of time necessary to conduct examinations and supervise federally insured credit unions to carry out NCUA's dual mission as insurer and regulator. This analysis starts with a field-level review of every federally insured credit union to estimate the number of workload hours needed for the year. These estimates are informed by the overall parameters of NCUA's examination program, including workload estimates that are refined by regional managers and submitted to NCUA headquarters for the annual budget proposal. The OTR methodology excludes state regulator costs, including state examiner hours.

Based on the Board-approved methodology and the proposed budget, the OTR for 2027 is estimated to be 62.0 percent, which is an increase of 20 basis points from 2026. Thus, 62.0 percent of the proposed 2027 Operating Budget is estimated to be paid out of the Share Insurance Fund. The remaining 38.0 percent of the proposed 2027 Operating Budget is estimated to be paid for by operating fees collected from federal credit unions. The explicit and implicit distribution of total Operating Budget costs for federal credit unions and federally insured, state-chartered credit unions is shown in the table below:

( printed page 67872)

The following chart illustrates the share of the proposed 2027 Operating Budget that would be paid by federal credit unions (70.4 percent) and federally insured, state-chartered credit unions (29.6 percent).

Operating Fee

The Board delegated authority to the Chief Financial Officer to calculate the annual operating fee for federal credit unions and to set the fee schedule as calculated using the approved methodology. In December 2023, the Board approved and published in the Federal Register the current operating fee methodology, which forms the basis for how the operating fee is calculated.^[26]

Under the current methodology to determine the annual operating fee assessed on natural person federal credit unions, NCUA first calculates the average of total assets reported in the preceding four calendar quarters available at the time of the calculation, net of any reported Paycheck Protection Program loans.^[27] Natural person federal credit unions with assets less than approximately $2.3 million are not assessed an operating fee and their assets are therefore excluded from this calculation.^[28] Corporate federal credit unions also pay an annual operating fee based on a different scale.

Based on the Board-approved operating fee methodology, as shown in the following tables, the share of the proposed 2027 budget funded by the operating fee is $116.9 million. The calculated operating fee rate for 2027 decreases by 49 basis points compared to the rate in 2026. ( printed page 67873)

As part of the Board-approved operating fee methodology, NCUA analyzes the agency's future cash flow requirements compared to available balances. Any projected surplus cash from past years' fee collections that is not required to finance agency operations can be used to lower the operating fee share of the proposed budget. Because these cash surpluses result from past years' operating fee collections, they do not offset the portion of the budget funded by the OTR. As the final 2027-2028 budget is prepared for consideration by the NCUA Board, the Chief Financial Officer will evaluate the agency's cash position and make a recommendation about any surplus cash that can be credited to the operating fee.

Operating Fee Scale

To illustrate the rate for each asset tier for which operating fees are charged, the table below shows the effect of the average 49 basis point decrease in the estimated 2027 annual operating fee for natural person federal credit unions, using a $2.3 million exemption threshold.

( printed page 67874)

VIII. Appendix: Supplemental Budget Information

Office Budgets ^[29 30]

( printed page 67875)

Capital Projects

91 FR 67862