State of the Budget

NCUA Budget Briefing and Public Forum November 1, 2001 Agenda • Overview of 2002 budget • Historical trends (10 years) • Budget formulation – Budget development process & issues – Current trends & comparisons • Funding of budget • Questions & Answers • Statements/written comments from the public *Preliminary recommendations November 1, 2001 NCUA Budget Briefing 2 NCUA Board Vision Strategic Vision: • Streamline business processes • Increase efficiencies • More effective examination product • Reduce FTE & budget growth Board Actions to Achieve: • Risk focused examination • AIM study • More flexible rules & regulations • Increased efficiencies from technology NCUA Budget Briefing 3 November 1, 2001 Budget Development Process • Workload & program needs from regions & field staff • • • • • • • • assessed by E&I (Jul/Aug) Budgets formulated by offices based on safety & soundness program, historical actual expenditures (Aug) Review & analysis by OCFO (Sep/Oct) Budget briefings with office directors (Oct) Adjustments by OCFO (Oct) Board member briefings (Nov) Public briefing (Nov) Final adjustments (Nov) Board meeting (Nov) November 1, 2001 NCUA Budget Briefing 4 Overview of 2002 Budget (Percent Change) 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% November 1, 2001 NCUA Budget Briefing 6.2% 5.0% 7.1% 4.6% 0.4% Pay Ben Trv RCU Adm -0.7% Con Tot FTE -3.3% -10.2% 5 Overview of 2002 Budget ($) (Change in Millions) $7 $6 $5 $4 $3 $2 $1 $0 -$1 -$2 Pay Ben Trv $1.05 $0.87 $0.02 RCU -$0.09 Adm Con -$0.67 Tot $5.22 $6.40 November 1, 2001 NCUA Budget Briefing 6 HISTORICAL TRENDS Budget 1992-2003 160 140 120 Millions 100 80 60 40 20 0 5% 3% 1% 4% 3% 4% 85 9% 89 92 93 97 100 109 9% 122 135 12% 11% 141 14% 12% 10% 8% 6% 4% 2% 0% Millions Percent Percent 8 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 November 1, 2001 NCUA Budget Briefing Budget 1992-2003 160 140 120 Millions 100 80 60 40 20 0 5% 3% 1% 4% 3% 4% 5% 85 9% 89 92 93 97 100 109 9% 122 135 12% 11% 141 147 14% 12% 10% 8% 6% 4% 2% 0% Millions Percent Percent 9 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 November 1, 2001 NCUA Budget Briefing Budget 1992-2003 160 140 120 Millions 100 80 60 40 20 0 5% 3% 1% 4% 3% 4% 5% 85 9% 89 92 93 97 100 109 9% 122 135 12% 11% 141 147 145 14% 12% 10% 8% 6% 4% Percent 10 -1% 2% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Millions Percent November 1, 2001 NCUA Budget Briefing Major Expense Categories 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1997 1998 1999 2000 2001 2002 Contracted 4-5% Admin 8-10% RCU 3-4% Travel 9-11% Pay/Ben 71-75% November 1, 2001 NCUA Budget Briefing 11 Major Expense Categories 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1997 1998 1999 2000 2001 2002 Contracted 4-5% Admin 8-10% RCU 3-4% Travel 9-11% Pay/Ben 71-75% November 1, 2001 NCUA Budget Briefing 12 Contribution to Budget Growth Note: CPI inflation same period = 2.93% Pay/Ben 14% 12% 10% 8% 6% 4% 2% 0% -2% -0.24% 1999 2000 -0.01% 2001 2002 11.81% 6.73% 4.18% 3.91% 0.09% 4.46% Non-Payroll November 1, 2001 NCUA Budget Briefing 13 Distribution of Budget Growth 1999-2002 Non-Payroll 11% Pay & Benefits 89% November 1, 2001 NCUA Budget Briefing 14 FICU Asset Growth vs. NCUA Budget Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% 9% 6% 4% 5% 3% 4% 3% 4% 6% 7% 7% 9% 11% 12% 6% 11% 7% 8.1% 15% 13% 6.1% 1% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 FICU Assets Budget Avg November 1, 2001 NCUA Budget Briefing 15 Change in Total Expenses FICU & NCUA FICU 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1995 1996 1997 1998 1999 2000 Avg NCUA 9.52% 6.92% November 1, 2001 NCUA Budget Briefing 16 NCUA Total Expenses Actual Expenses per $1,000 FICU Assets 600 500 400 300 200 100 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* 0.316 0.35 0.28 0.277 FICU Assets (Billions of Dollars) 0.259 389 0.279 411 493 0.274 0.3 0.25 0.2 0.15 0.1 0.05 0 438 261 277 289 306 328 351 Assets Expenses *2001 Projected 17 November 1, 2001 NCUA Budget Briefing Operating Expenses (per $1,000 FICU Assets) 0.303 0.296 0.288 0.301 FULL-TIME EQUIVALENT (FTE) Full-Time Equivalent (FTE) 1060 1040 1020 1000 980 960 940 920 900 880 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1013 996 996 978 944 951 953 1042 1049 1029 November 1, 2001 NCUA Budget Briefing 19 Full-Time Equivalent (FTE) 1060 1040 1020 1000 980 960 940 920 900 880 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1013 996 996 978 944 951 953 995 1042 1049 1029 November 1, 2001 NCUA Budget Briefing 20 FIRREA: FTE Source: 2000 actual data in the President’s Budget FY 2002 Appendix 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 NCUA OCC FDIC FRB OTS Office Field November 1, 2001 NCUA Budget Briefing 21 FIRREA: % Field FTE Source: 2000 actual data in the President’s Budget FY 2002 Appendix 70% 60% 50% 40% 30% 20% 10% 0% NCUA OCC FDIC FRB OTS 20% 64% 66% 66% 62% November 1, 2001 NCUA Budget Briefing 22 FTE Reductions 2002 • • • • -18.30 Examiners -3.00 Supervisory Examiners -2.17 Regional Office staff -10.08 Central Office staff Total -33.55 November 1, 2001 NCUA Budget Briefing 23 Budget Formulation Externally Mandated Budgetary Requirements 2002 • FIRREA pay comparability • OPM health benefits • GISRA (Govt Information Security Reform Act) • Section 508/Rehabilitation Act • GPRA (Govt Performance Results Act) November 1, 2001 NCUA Budget Briefing 25 Pay & Benefits • Program hours – Drive FTE – Determines pay – Determines benefits Hol 4% Trav 6% Trng Mtg 6% 3% Detail 3% PC 1%Ofc 7% SCUP 5% 5300 2% Exam & Supv 52% Lv 11% • Benefits determined by OPM • Accounts for 75% of the budget November 1, 2001 NCUA Budget Briefing 26 Pay & Benefits “Easy” Math • Pay = Authorized FTE x Pay x Merit • Benefits mandated by OPM (% of pay) – – – – – – – Civil Service Retirement System = 8.51% Federal Employees Retirement Service = 11.4% Old Age Survivors & Disability Insurance = 6.2% Medicare = 1.45% Group Life Insurance = 0.26% Thrift Savings Plan = matching up to 5% Health Benefits cost = Average $3,375/year plus 15% increase for 2002 per OPM (gvmt portion $3.8 million 2002 vs. $3.5 million 2001) NCUA Budget Briefing 27 November 1, 2001 CSRS vs. FERS CSRS • Hired pre 1984 • Benefits 15% of pay • 1983 FTE = 100% • 2001 FTE = 28% • Includes: CSRS, HBI, GLI, Medicare • Not included: FERS, OASDI, TSP November 1, 2001 FERS • Hired post 1983 • Benefits 28% of pay • 1983 FTE = 0% • 2001 FTE = 72% + • Includes: FERS, HBI, GLI, Medicare, plus OASDI, TSP • Not included: CSRS 28 NCUA Budget Briefing Retirement Eligible (Agency Wide FTE) Now 5% 1-5 Yrs 12% 6-10 Yrs 18% >10 Yrs 65% November 1, 2001 NCUA Budget Briefing 29 GISRA/Security 2002 • Audits $140,000 • Software & licenses $43,000 • Capital acquisitions $177,000 Total expenses & capital costs $360,000 November 1, 2001 NCUA Budget Briefing 30 Section 508 (2002 Expenses) • Rehabilitation Act (Accessibility) amended in 1998 • Focusing on Internet & Intranet accessibility for disabilities • Audit, consulting, training $21,000 November 1, 2001 NCUA Budget Briefing 31 GPRA 2002 • Strategic planning • FTE = 4.00 • Budget = $613,000 November 1, 2001 NCUA Budget Briefing 32 Non-Payroll • • • • • Total = 25% of total budget Travel Rent, communications, & utilities Adm Administrative RCU 9% Contracted services 3% Trv 9% Con 4% Pay 75% 33 November 1, 2001 NCUA Budget Briefing Travel • Travel $13.2 million • Regional conferences $1.3 million • Historically $14 million during regional conference years Auto Air 3% 21% Other 5% POV 19% PD/Lod 52% November 1, 2001 NCUA Budget Briefing 34 Budget 2002 Summary • Total 27 offices • FTE 13 offices (all • • • • November 1, 2001 others neutral) Budget 10 offices (before pay adjustment) Budget 2.71% before pay & benefits adjustment Pay adjustment 4.5% (Congress 4.6%) Budget less than 5% after pay & benefits adjustment 35 NCUA Budget Briefing FUNDING OF BUDGET Funding of Budget FY 2001 By Fund Op Fees 33.28% NCUSIF 66.72% November 1, 2001 NCUA Budget Briefing 37 Funding of Budget FY 2001 By Fund Effect By CU Charter Op Fees 33.28% FISCU 29.40% FCU 70.60% NCUSIF 66.72% November 1, 2001 NCUSIF split based on insured shares of FCU (56.13%) & FISCU (43.87%) as of December 31, 2000 NCUA Budget Briefing 38 Paying Bills & Invoices • Pay on monthly basis • Only actual expenses charged to the NCUSIF & Operating Fund November 1, 2001 NCUA Budget Briefing 39 Operating Fee 2002 • • • • • Current overhead transfer rate 66.72% FCU asset growth estimated 12.5% Budget growth less than 5% To collect = About $47.2 million Operating fee rate scale - approximate decrease 9% November 1, 2001 NCUA Budget Briefing 40 FCU Operating Fee Change Using Various Overhead Transfer Rates 10% 10% 7% 5% 2% 60% -5% -10% -15% -20% 61% 62% 63% -1% 64% 65% -4% -7% -10% -12% -15% -18% 66% 67% 68% 69% 70% Resulting Operating Fee 5% 0% Overhead Transfer Rate November 1, 2001 NCUA Budget Briefing 41 FCU Operating Fee Change Using Various Overhead Transfer Rates 200% 180% 159% Resulting Operating Fee 150% 100% 50% 0% -50% -100% -150% 0% $10M / 8% 50% 100% 38% -103% Overhead Transfer Rate November 1, 2001 NCUA Budget Briefing 42 NCUSIF Dividend Yield Using Various Overhead Transfer Rates Based on December 2000 actual expenses & insured shares 2.50% 2.00% Dividend Yield 1.50% 1.00% 0.50% 0.00% 60% 61% 62% 63% 64% 65% 66% 67% 68% 69% 70% 2.38% 2.34% 2.29% 2.25% 2.21% 2.16% 2.12% 2.08% 2.04% 2.00% 1.96% Overhead Transfer Rate November 1, 2001 NCUA Budget Briefing 43 Difference in Dividend Amount Using an Overhead Transfer Rate of 61% vs. 66% $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 $1,100 $110 $5 $50 $100 $500 $2,200 $11,000 FICU Insured Shares in Millions November 1, 2001 NCUA Budget Briefing 44 FIRREA: Number of Institutions as of December 31, 2000 12,000 10,000 8,000 6,000 4,000 2,000 0 NCUA OCC FDIC 9,905 6,336 2,231 991 FRB 1,067 OTS 3,980 November 1, 2001 NCUA Budget Briefing 45 FIRREA: Budget per Institution December 31, 2000 $250,000 $200,000 $150,000 $111,055 $100,000 $50,000 $13,626 $0 NCUA OCC FDIC OTS FRB $185,119 $152,109 $198,885 November 1, 2001 NCUA Budget Briefing 46 Operating Expenses Per Million Insured Deposits FDIC/BIF $2,500 $2,000 $1,500 $1,000 $500 $0 Op Exp Insured Deposits $773 M $2.3 T (12/31/2000) NCUA/NCUSIF (at 66.72%) $400 $350 $300 $250 $200 $150 $100 $50 $0 Op Exp Insured Deposits $85 M $355B $336 November 1, 2001 NCUA Budget Briefing $240 47 END OF BUDGET BRIEFING Questions Answers November 1, 2001 NCUA Budget Briefing 48