Title: PROPOSED RULE--Assessments and Apportionment of Administrative Expenses; General Provisions--12 CFR Parts 607 and 618
Issue Date: 04/02/1991
Agency: FCA
Federal Register Cite: 56 FR 13424
___________________________________________________________________________
FARM CREDIT ADMINISTRATION

12 CFR Parts 607 and 618

RIN 3052-AB19

Assessments and Apportionment of Administrative Expenses; General Provisions


ACTION: Proposed rule.

SUMMARY: The Farm Credit Administration (FCA) proposes new regulations at 12 CFR part 607, which would prescribe the method by which the assessments that are required to pay the FCA's annual administrative expenses are apportioned among and paid by the Farm Credit System (System) institutions and other entities that are required to pay such expenses.

The proposed regulations would provide an assessment basis for banks and associations that is different from the assessment basis provided for other System entities due to the functional differences between these types of institutions. Banks and associations would be assessed on the basis of average assets. Other System entities would be assessed on the basis of estimated direct expenses plus an allocated portion of indirect expenses. Non-System entities for which the FCA has statutory examination authority would be billed on a reimbursement basis for actual direct expenses incurred for examination plus an allocated portion of indirect expenses.

DATES: Written comments must be received on or before May 2, 1991.

ADDRESSES: Comments must be submitted in writing, in triplicate, to Nancy E. Lynch, Acting General Counsel, Farm Credit Administration, McLean, Virginia 22102-5090. Copies of all communications received will be available for examination by interested parties in the Office of General Counsel, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Robert J. Taylor, Chief, Fiscal Operations Branch, Fiscal Resources Division, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4122, TDD (703) 833-4444,
or
Joy E. Strickland, Attorney, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: Section 5.15 (12 U.S.C. 2250) of the Farm Credit Act of 1971, as amended, (1971 Act) requires that prior to the first day of each fiscal year, the Farm Credit Administration (FCA) shall determine the cost of administering the 1971 Act for the subsequent fiscal year, the amount of assessments required to pay such administrative expenses, and provide for a necessary reserve. The 1971 Act further requires that such assessments be apportioned among the Farm Credit System (System) institutions on an equitable basis as determined by the FCA. Such apportioned amounts are to be assessed and collected from time to time during the fiscal year as determined necessary by the FCA. In addition, section 5.15 of the 1971 Act requires the FCA to determine the amount of assessments needed to pay the costs of supervising and examining the Federal Agricultural Mortgage Corporation (Farmer Mac) and to assess and collect such amount from Farmer Mac from time to time during the fiscal year.

The Agricultural Credit Act of 1987, Public Law 100-233, (1987 Act) amended the 1971 Act by, among other things, providing for the restructuring of the System. Under the 1987 Act, the Federal land banks (FLBs) and Federal intermediate credit banks (FICBs) were required to merge to form Farm Credit Banks (FCBs). In addition, 10 of the 12 banks for cooperatives (BCs) and the Central Bank for Cooperatives merged to become the National Bank for Cooperatives. Other significant changes resulting from the 1987 Act are the mergers of some Federal land bank associations (FLBAs) and production credit associations (PCAs) into agricultural credit associations (ACAs), the creation of Federal land credit associations (FLCAs), and the establishment of Farmer Mac and the Farm Credit System Financial Assistance Corporation. In addition, the 1987 Act increased the complexity of and the requirements applicable to the regulatory, supervisory and examination functions of the FCA.

Based on the substantial structural and statutory changes to the System as a result of the 1987 Act, the agency determined that it was necessary to review and modify, as necessary, the procedures for assessment of institutions. The agency's review of the existing procedures suggested that they were no longer reliable or valid ways to levy assessments and could result in inequities for certain institutions. The current method of FCA assessment is based on a formula originally developed to apply to System banks and associations in existence prior to the 1987 Act. This formula allocated the annual assessments to the banks and associations in each Farm Credit district using a complex algorithm incorporating comparisons of the average share of System loans outstanding and loans made for a 13-month period preceding the issuance of the assessments for the institutions in each district. The annual assessments were then allocated to banks and associations within each district with 43.8 percent of the total assessment allocated to the associations within a district and 56.2 percent allocated to the banks within each district. Both the FLBs and the FICBs were allocated 40 percent of the banks' allocation in each district, while the BCs were allocated 20 percent. The allocation to the associations was divided equally between the PCAs and FLBAs. Although the assessment method allocated a percentage of the assessments on the basis of the associations' share of loans made and loans outstanding, the FCA did not assess associations. The full amount of annual assessments were apportioned among the FLBs FICBs, and the BCs.

Due to the mergers and other changes in the System as a result of the 1987 Act, the FCA determined that it was not equitable calculate the annual assessments based on the preceding formula. Beginning with the assessments for fiscal year 1990, the annual assessments were based on the percentages of loans made and loans outstanding that were calculated to determine the fiscal year 1989 assessments. The annual assessments are now apportioned among the FCBs, the BCs, and the FICB of Jackson. FCA has continued to allocate a percentage of the assessments to associations but has not assessed associations. However, the FCBs are provided with the percentage of the districts' assessments that are allocated to the associations. Some FCBs obtain funds from their affiliated associations to cover a portion of the FCBs' assessments according to their own formulas.

Inconsistencies among the FCBs as to whether and how they collect reimbursements from associations for the assessments they pay suggested that there was a need for direct assessment of all System institutions including associations. In addition, since 1986, there has been substantial interest expressed by some System institutions that the FCA should review and revise the assessment formula to eliminate perceived inequities. In response to these concerns, the FCA is proposing revised assessment procedures in new part 607 and is also proposing to delete 12 CFR 618.8230 which provides in general terms for FCA's current assessment procedures.

I. Proposed Assessment Procedures for System Institutions

The proposed regulations provide that the assessment for FCA's annual administrative expenses would be based on the amount of the FCA's budget for each fiscal year plus a necessary reserve as provided for in section 5.15 of the 1971 Act. In order to determine if any reserves are necessary and the amount of any such reserves, the FCA would consider the possibility of a sizable receivership, a major lawsuit, or other expenses or activities which could result in an extra-ordinary increase in its annual expenses. Annual assessments would then be equitably apportioned among the System institutions in accordance with section 5.15.

In order to apportion each assessment equitably, the FCA has considered a variety of factors and criteria. First, the FCA analyzed the amount of the agency's resources that are devoted to the various System institutions based on factors such as organization size and function, the frequency of statutorily required examinations, examination scope, and FCA regulatory and supervisory responsibilities. Based on this analysis, the agency determined that it would not be equitable to establish a fixed proportional assessment based on the consumption of FCA resources. For example, small entities and/or entities under economic and financial stress may claim a disproportionate share of the FCA's resources at a given time. In contrast, larger and/or healthier entities which may require fewer FCA resources, will often have a larger capacity for absorbing such costs. The FCA determined that it would be most equitable if these sometimes competing considerations were balanced. Finally, in considering how to arrive at an equitable apportionment, the FCA took into consideration the functional and structural differences between banks and associations as compared with the other System institutions. This analysis indicated that it was necessary to use different assessment methods for these types of institutions.

A. Assessment of Banks and Associations

Based on the foregoing considerations, the FCA proposes in 607.3 that the assessments for FCA's annual expenses would be apportioned among banks and associations on the basis of average assets within a tiered structure establishing asset-size ranges. The same rate of assessment would be applied to all assets within each range, and the rate of assessment would decrease as asset size increases. Thus, all banks and associations would pay the same amount on assets up to a prescribed level, but larger institutions with a larger asset base would pay a lower rate on assets above the prescribed amount.

A sample annual assessment based on the table in proposed 607.3 would be as follows:
Average asset size range (in millions)
Assessment rate
Total amount assessed
Over
To
$0.....................................................................
$25
X 1X 1
25.....................................................................
50
X 2X 1 +X 2
50.....................................................................
100
X 3X 1 +X 2 +X 3
100 ....................................................................
500
X 4X 1 +X 2 +X 3 +X 4
500....................................................................
1000
X 5X 1 +X 2 +X 3 +X 4 +X 5
1000..................................................................
7000
X 6X 1 +X 2 +X 3 +X 4 +X 5 +X 6
7000.................................................................................................X 7X 1 +X 2 +X 3 +X 4 +X 5 +X 6 +X 7

Example: XYZ bank has average assets of $500.4 million.
X 1 =.000813 therefore $25,000,000 X .000813=$20,325.00
X 2 =.000788 therefore $25,000,000 X .000788=$19,700.00
X 3 =.000710 therefore $50,000,000 X .000710=$35,500.00
X 4 =.000633 therefore $400,000,000 X .000633=$253,200.00
X 5 =.000491 therefore $400,000 X .000491=$196.00
Total Assessment=$328,921.00

This asset-based approach, using a sliding scale, would be a fair and equitable approach in allocating the Farm Credit Administration's annual expenses for the following reasons. The asset-based assessment is an approach that recognizes economies of scale through a reduced assessment rate for institutions with greater total assets. It is a flexible approach capable of changing according to structural changes within the System. The asset-based assessment is simple and straightforward and does not involve a complicated formula or significant administrative costs. The FCA also notes that the proposed asset-based assessment is similar to the assessment formulas used by the Office of the Comptroller of the Currency and the National Credit Union Administration.

FCA considered other assessment procedures including an assessment formula based on actual costs incurred in examining an institution and a formula based on the financial condition of an institution. However, FCA considered these assessment methods to be less equitable and administratively unsuitable for the following reasons. A true direct-cost assessment would have to be a retroactive assessment determined only after the completion of examination activity for the assessment year. However, section 5.15 requires FCA to determine the annual assessment prior to the beginning of each fiscal year.

Further, a direct-cost assessment based on hourly examiner time could result in inequities based on the time required to conduct a thorough examination and the different qualification levels of FCA examiners. The FCA also considered the effect of a direct-cost assessment procedure could have on an institution experiencing financial difficulty. A financially troubled institution may require additional examination and supervisory time which could result in an assessment which could have a severe adverse impact on the already weak institution.

Another option the FCA considered was a risk-based assessment which could be computed by adding to an asset-based annual assessment an additional charge for an institution's credit quality or a charge for institutions operating under enforcement or supervisory actions. However, the FCA determined that the potential adverse impact of an assessment based on financial or operating condition could result in serious inequities. For example, a weak institution or an institution operating under an enforcement action may or may not require more FCA resources than an institution in good financial condition or one not operating under an enforcement action. Also, a weak institution or one operating under an enforcement action may be unable to pay a substantially higher assessment.

Under the proposed asset-based procedure, assessments of banks and associations would be based on the average assets of each institution. Average assets would be the sum of the average daily assets as of the last day of the quarter as reported on Call Report Schedule RC-G for each of the four quarters immediately preceding the last fiscal quarter of each fiscal year, divided by four. For example, banks and associations would be assessed for fiscal year 1992 on the basis of average daily assets reported for the quarters ending September 30, 1990, December 31, 1990, March 31, 1991, and June 30, 1991. Because a bank or association in receivership continues as an institution chartered under the 1971 Act until such time as the liquidation is complete and the charter of the bank or association is canceled (see 12 CFR 611.1169, 611.1176), such institutions would be assessed in the same manner as banks and associations not in receivership.

Any method of assessment of banks and associations must be flexible enough to apply in situations where new institutions are chartered. The FCA believes that the proposed asset-based assessment procedure provides the needed flexibility to be applicable in these situations. Assessments of new banks and associations created through mergers, consolidations or transfers of direct lending authority would be based on the assets of each constituent institution up to the time the new institution is chartered. From the time the new institution is chartered, the assessment would be based on the assets of the new institution. The assets of the constituent institutions and the new institution would be averaged over the four quarters immediately preceding the last fiscal quarter of the fiscal year in which the new institution was chartered. For example, an existing FLBA receives direct lending authority from an FCB, and the resultant FLCA is chartered in April of fiscal year 1991. The assessment for fiscal year 1992 would be based on the sum of the average daily assets of the FLBA as reported on Call Report Schedule RC-G filed for the quarters ending September 30, 1990, December 31, 1990, and March 31, 1991, and the average daily assets of the FLCA as reported for the quarter ending June 30, 1991, divided by four.

Assessment of new banks and associations that were not formed as a result of a merger, consolidation, or transfer of direct lending authority, but were formed prior to July 1 of the fiscal year, would be assessed based on the assets of the new institution averaged over the number of quarters of its existence through the quarter ending June 30. Therefore, an FLCA chartered in January of fiscal year 1991 would be assessed for fiscal year 1991 on the basis of the sum of its average daily assets reported for the quarters ending March 31, 1991, and June 30, 1991, divided by two. Assessment of banks and associations formed during the period July 1 through September 30 of a fiscal year that were not formed as a result of merger, consolidation, or transfer of direct lending authority would be based on the assets of the new institution for the quarter ending September 30. For example, an FLCA chartered in September of fiscal year 1991 would be assessed for fiscal year 1992 on the basis of the average daily assets reported on Schedule RC-G for the quarter ending September 30, 1991.

B. Assessment of the Federal Agricultural Mortgage Corporation

Section 5.15 of the 1971 Act requires the FCA to determine the amount of assessments that will be required to pay the costs of supervising and examining Farmer Mac and collect such assessment from Farmer Mac from time to time during the fiscal year. The proposed regulations provide that Farmer Mac would be assessed on the basis of estimated direct expenses of examination plus a proportionate share of indirect expenses.

In order to determine the cost of supervising and examining Farmer Mac for a fiscal year, the proposed regulations provide that direct expenses for the most recent full scope examination preceding each September 15 would be adjusted to reflect expected increases or decreases in FCA activity related to Farmer Mac for the next year. A full scope examination is an examination of all operational areas of an institution. This would yield the estimated direct expenses for the examination of Farmer Mac for the ensuing fiscal year. Direct expenses are examination expenses which can be identified and attributed to an FCA function regarding a specific institution, such as Farmer Mac. Thus, the direct expenses for FCA examination activity that can be identified as having been incurred solely in the conduct of Farmer Mac activities would form the basis for the annual assessment of Farmer Mac.

FCA's indirect expenses for supervising and examining Farmer Mac would be determined on the basis of the estimated direct expenses for examining Farmer Mac as a percentage of FCA's total budgeted expenses for examination. Indirect expenses include supervisory expenses and FCA's overhead and other expenses that cannot be broken down into amounts that directly correlate to FCA's examination activity with respect to a specific institution, such as Farmer Mac. Therefore, the proposed regulation provides that the indirect costs for examining and supervising Farmer Mac would be a function of its direct expenses for examination. The combination of estimated direct expenses and indirect expenses would reflect the total estimated cost of supervising and examining Farmer Mac for a fiscal year.

Estimated direct expenses are used as the basis for the calculation of the assessment of Farmer Mac based on the continuing nature of FCA's supervisory and examination responsibility and FCA's statutory authority in section 5.15 to collect the assessment from Farmer Mac from time to time during the fiscal year. Section 8.11 of the 1971 Act provides that FCA shall examine Farmer Mac at such time as the FCA Board may determine, but not less than once each year. Therefore, FCA will incur direct and indirect examination and supervision expenses relating to Farmer Mac at least once each year. The level of such expenses will vary according to the frequency of examinations required, the complexity of those examinations and the level of supervision required. By using the direct expenses from the previous examination to estimate the cost necessary to supervise and examine Farmer Mac throughout the fiscal year, FCA can determine its assessment of Farmer Mac at the beginning of each fiscal year and collect such amount in equal quarterly installments. This proposed method of assessment would ensure that FCA is able to maintain the resources necessary to enable it to fulfill its statutory responsibilities of examination and supervision of Farmer Mac.

C. Assessment of Other System Entities

System institutions other than banks and associations are also subject to assessment of an equitable portion of FCA's annual administrative expenses and necessary reserves in accordance with section 5.15 of the 1971 Act. These System institutions would be defined as "other System entities" which would include service corporations chartered under section 4.25 of the 1971 Act, the Farm Credit System financial Assistance Corporation, and any other entities statutorily designated as Farm Credit System institutions. Farmer Mac has been included within the general definition, "other System entities", because the method of assessment proposed for these institutions is the same as the method proposed for the assessment of Farmer Mac.

Because the other System entities are few in number, have a different asset base, and often have a wide ranging impact, they require a different form of regulatory oversight than that required for banks and associations. Consequently, it is not practical to assess these entities on the basis of average assets. Therefore, the proposed regulations provide that other System entities would be assessed on the basis of estimated direct expenses plus an allocable portion of indirect expenses. Direct and indirect expenses for these institutions would be calculated in the same manner as that proposed for Farmer Mac. That is, the direct expenses for the most recent full scope examination prior to September 15 would be adjusted to reflect expected changes in FCA activity regarding an institution for the upcoming fiscal year. This would yield FCA's estimated direct expenses for examination of the institution.

In addition, a proportionate share of FCA's indirect expenses would be allocated to each institution based upon that institution's estimated direct expenses as a percentage of FCA's total budgeted expenses for examinations. Thus, the indirect expenses would include expenses of examination activity which cannot directly be identified to a specific institution and supervisory and regulatory expenses which also cannot be identified to a particular institution.

II. Notification and Payment of Assessments

Under the proposed regulations, the FCA would provide each System institution with a notice of assessment specifying the total amount of the annual assessment, the fiscal year covered by the assessment, the amounts of the installment payments and the dates on which such payments are due. For banks and associations, the notice of assessment would also include the assessment table. The notice of assessment would be the only billing from FCA.

The total annual assessment would become an obligation of the assessed entity on October 1 of each fiscal year. However, based on the flexibility provided in section 5.15 to collect annual assessments from time to time during the fiscal year, the total annual assessment would be payable in four equal quarterly installments on October 1, January 1, April 1, and July 1.

The assessment for banks and associations chartered during the period July 1 through September 30 that were not formed as a result of mergers, consolidations, or transfers of direct lending authority would be determined by the FCA prior to December 15. Such assessment would become an obligation of the institution on January 1 and would be payable in three equal installments on January 1, April 1, and July 1.

For any System institution whose charter is to be canceled, all remaining installment payments on the institution's total assessment for a fiscal year become due and payable and must be provided for prior to the cancellation of the institution's charter. The proposed regulations also provide for the payment of interest, penalties, and expenses of collection on all assessments that are determined to be delinquent.

III. Reimbursement of Other Examination Expenses

Pursuant to 12 U.S.C. 3025, the FCA is authorized and directed to examine and audit the National Consumer Cooperative Bank, doing business as the National Cooperative Bank (NCB), and receive reimbursement from the NCB for such examinations and audits. Due to the close structural relationship between the NCB and the NCB Development Corporation (NCBDC) provided for in 12 U.S.C. 3051, the FCA also examines the NCBDC as part of its examination of the NCB. The FCA has separately billed the NCBDC for the expenses associated with its examination by the FCA.

The proposed regulations define the NCB and the NCBDC as "non-System entities". Proposed 607.8 provides that reimbursable billings for FCA examination on non-System entities would be based on actual direct expenses incurred for the examinations plus a portion of indirect expenses allocated on the basis of direct expenses incurred as a percentage of total examination expenses of the FCA.

The amounts assessed other System entities and the reimbursements received from the non-System entities would be deducted from the total amount of assessments of banks and associations in order to ensure that banks and associations are not assessed for costs of FCA's activity with regard to these entities. The assessment of banks and associations net of amounts assessed other System entities is also necessary due to the separate assessment criteria for Farmer Mac set out in section 5.15.

List of Subjects in 12 CFR Parts 607 and 618

Accounting, Agriculture, Archives and records, Banks, banking, Claims, Credit, Finance, Government securities, Insurance, Reporting and recordkeeping requirements, Rural areas, Technical assistance.

For the reasons stated in the preamble, part 607 of chapter VI, title 12 of the Code of Federal Regulations is proposed to be added to read as follows:

PART 607 -- ASSESSMENTS AND APPORTIONMENT OF ADMINISTRATIVE EXPENSES

Sec.

607.1 Purpose and scope.

607.2 Definitions.

607.3 Assessment of banks and associations.

607.4 Assessment of other System entities.

607.5 Notice of assessment.

607.6 Payment of assessment.

607.7 Late-payment charges on assessments.

607.8 Reimbursements for services to non-System entities.

607.9 Reimbursable billings.

607.10 Overpayments to the Farm Credit Administration.

Authority: Secs. 5.15, 5.17; 12 U.S.C. 2250, 2252, 3025.

607.1 Purpose and scope.

The regulations in part 607 implement the provisions of section 5.15 of the Act relating to Farm Credit Administration assessments. The regulations prescribe the procedures for the equitable apportionment of Farm Credit Administration annual administrative expenses and necessary reserves among Farm Credit System institutions. In accordance with section 5.15 of the Act, the regulations provide for the assessment of the Farm Credit Administration's costs of supervising and examining the Federal Agricultural Mortgage Corporation. The regulations further provide for the reimbursement of expenses incurred in performing statutorily required examinations of nonfarm Credit System entities.

607.2 Definitions.

For the purpose of this part, the following definitions shall apply:

(a) Assessment means the annual amount to be paid by each System institution to the Farm Credit Administration in accordance with section 5.15 of the Act.

(b) Average asset balance means:

(1) For banks and associations with four quarters of assets as of June 30 of each year, the sum of the average daily assets as of the last day of the quarter as reported on each quarterly Call Report Schedule RC-G to the Farm Credit Administration for the most recent four quarters immediately preceding each September 15, divided by four;

(2) Except as provided in paragraphs (b) (3) and (4) of this section, for banks and associations without four quarters of assets as of June 30 of each year, the sum of the average daily assets as of the last day of the quarter reported on each quarterly Call Report Schedule RC-G to the Farm Credit Administration for the quarters in which it was in existence immediately preceding September 15, divided by the number of quarters for which the Call Report Schedule RC-G was received;

(3) For banks and associations without four quarters of assets as of June 30 that were formed through mergers, consolidations, or transfers of direct lending authority, the sum of the average daily assets as of the last day of the quarter for the most recent four quarters immediately preceding September 15 as reported on each quarterly Call Report Schedule RC-G filed by the newly chartered institution and the institutions that were merged or consolidated or that received direct lending authority, divided by four;

(4) For banks and associations chartered during the period July 1 through September 30 of each year that were not formed by the merger or consolidation of existing System institutions or the transfer of direct lending authority from another System institution, the total of the average daily assets as of the last day of the quarter as reported on Call Report Schedule RC-G for the quarter ending September 30.

(c) Direct expenses means the actual expenses incurred by the Farm Credit Administration which are identified to the performance of examinations.

(d) Indirect expenses means all Farm Credit Administration expenses that are not specifically identified as direct expenses of examination;

(e) Non-System entities means the National Cooperative Bank and the National Cooperative Bank Development Corporation.

(f) Notice of Assessment means a written notice to each System institution showing the total amount assessed and owing, the fiscal year covered by the assessment, the amounts of installment payments, and the due dates for such payments. For banks and associations, the Notice of Assessment will also include the assessment table.

(g) Other System entities means any service corporation chartered under section 4.25 of the Act, the Farm Credit System Financial Assistance Corporation, the Federal Agricultural Mortgage Corporation, the Farm Credit Finance Corporation of Puerto Rico, and any other entity statutorily designated as a Farm Credit System institution.

(h) System institutions means the banks, associations, and other System entities.

607.3 Assessment of banks and associations.

(a) Banks and associations will be assessed annually for funds to cover a portion of the Farm Credit Administration's administrative expenses and necessary reserves. The total amount of the annual assessment to banks and associations shall be based on the Farm Credit Administration budget for each fiscal year plus a necessary reserve amount, excluding amounts to be assessed against other System entities and reimbursements received from non-System entities.

(b) The assessment shall be apportioned among the banks and associations using the average asset balance for each bank and association. The average asset balance will be used to determine where an institution's level of assets falls within the following table. The same assessment rate will be applied to each dollar value of assets falling within each range.


Average asset size range (in millions)
Assessment rate
Total amount assessed
Over
To
$0.....................................................................
$25
X 1X 1
25.....................................................................
50
X 2X 1 +X 2
50.....................................................................
100
X 3X 1 +X 2 +X 3
100 ....................................................................
500
X 4X 1 +X 2 +X 3 +X 4
500....................................................................
1000
X 5X 1 +X 2 +X 3 +X 4 +X 5
1000..................................................................
7000
X 6X 1 +X 2 +X 3 +X 4 +X 5 +X 6
7000.................................................................................................X 7X 1 +X 2 +X 3 +X 4 +X 5 +X 6 +X 7


Example: XYZ bank has average assets of $500.4 million.

X 1 =.000813 therefore $25,000,000 X .000813 =$20,325.00
X 2 =.000788 therefore $25,000,000 X .000788 =19,700.00
X 3 =.000710 therefore $50,000,000 X .000710 =35,500.00
X 4 =.000633 therefore $400,000,000 X .000633 =253,200.00
X 5 =.000491 therefore $400,000 X .000491 =196.00
Total Assessment =$328,921.00

(c) Assessments will be adjusted annually to reflect changes in the Farm Credit Administration budget, necessary reserves, and average assets.

607.4 Assessment of other System entities.

Other System entities will be assessed for estimated direct expenses plus an allocated portion of Farm Credit Administration indirect expenses. The estimate for direct expenses shall be based on the actual direct expenses incurred in the most recent examination of each entity preceding each September 15. The actual direct expense may be adjusted to reflect expected increases or decreases in planned work, budgets, and reserves, as applicable, for each fiscal year. A proportional amount of Farm Credit Administration indirect expenses will be allocated to each entity based on the estimated direct expenses related to the particular entity as a percentage of the total budgeted direct expenses of the agency for the fiscal year covered by the assessment.

607.5 Notice of assessment.

(a) Except as provided in paragraph (b) of this section, prior to September 15 of each year, the Farm Credit Administration shall determine the amount of assessment to be collected from each System institution under 607.3 and 607.4 of this part and shall provide each System institution with a Notice of Assessment prior to October 1 of each fiscal year. The total amount assessed each System institution in the Notice of Assessment shall be an obligation of each institution on October 1 of each fiscal year. The total amount assessed each System institution shall be payable in equal quarterly installments on October 1, January 1, April 1, and July 1 of each fiscal year.

(b) For banks and associations chartered during the period July 1 through September 30 of each year, the Farm Credit Administration shall determine the amount of assessment to be collected from each such institution prior to December 15 and shall provide the institution with a Notice of Assessment prior to January 1. The total amount of the assessment becomes an obligation of the institution on January 1 and shall be payable in three equal installments on January 1, April 1, and July 1. This paragraph shall not apply to banks and associations formed by merger, consolidation, or transfer of direct lending authority.

(c) In the event of the proposed cancellation of the charter of a System institution, the unpaid installments of the total amount of the institution's assessment shall be provided for prior to the cancellation of the charter.

607.6 Payment of assessment.

(a) System institutions shall pay the amounts due as scheduled in the Farm Credit Administration Notice of Assessment. Payment shall be made either by electronic funds transfer (EFT) for credit to the Farm Credit Administration's account 78 X 4131 in the Department of the Treasury or by check to the Farm Credit Administration for deposit.

(b) Payments made by EFT that are not received by the close of business on the due date shall be considered delinquent in accordance with 607.7 of this part.

(c) Payments made by check that are not received by the Farm Credit Administration before the close of business on the third workday preceding the due date shall be considered delinquent in accordance with 607.7 of this part.

607.7 Late-payment charges on assessments.

(a) Failure to timely pay any portion of the scheduled installment amount due of an institution's total assessment shall result in the full installment amount due being considered delinquent. Failure to timely pay any reimbursement amount shall result in such amount being considered delinquent.

(b) Delinquent amounts shall be charged late-payment interest at the United States Treasury Department's current value of funds rate published in the Federal Register. Application of the rate shall be on a simple interest basis using a 360-day year starting on the due date of the delinquent amount and continuing through the date of receipt by the Farm Credit Administration.

(c) The Farm Credit Administration shall waive the collection of interest on the delinquent amounts if such amounts are paid within 30 days of the date interest begins to accrue. The Farm Credit Administration may waive interest due on delinquent amounts upon finding no fault with the performance of the remitter.

(d) The Farm Credit Administration shall charge an amount necessary to cover the administrative costs incurred as a result of collection of any delinquent amount.

(e) The Farm Credit Administration shall charge a penalty of 6 percent on any portion of a delinquent amount that is more than 90 days past due. Such penalty shall accrue from the date the amount became delinquent.

607.8 Reimbursements for services to non-System entities.

Non-System entities will be assessed for direct expenses for examination plus an allocated portion of Farm Credit Administration indirect expenses. The Farm Credit Administration shall record the direct expenses incurred in the performance of an examination of a non-System entity and the rendering of required reports of examination. The Farm Credit Administration shall add a portion of its indirect expenses to the direct expenses for an examination. Indirect expenses shall be allocated based on the ratio of actual direct expenses incurred for each such examination to the total budgeted examination expenses of the Farm Credit Administration.

607.9 Reimbursable billings.

The Farm Credit Administration shall bill the amounts due for services to non-System entities each year subsequent to the issuance of their respective Reports of Examination. Amounts billed are due in full within 30 days from the date billed. If the billed amount or any portion thereof remains unpaid at close of business on the due date, the entire amount billed shall be considered delinquent in accordance with 607.7 of this part.

607.10 Overpayments to the Farm Credit Administration.

Any amounts paid to the Farm Credit Administration in excess of the total annual assessment or amounts billed for reimbursement under this part 607 shall be refunded in principal amount only.

PART 618 -- GENERAL PROVISIONS

1. The authority citation for part 618 continues to read as follows:

Authority: Secs. 1.5, 1.11, 1.12, 2.2, 2.4, 2.5, 2.12, 3.1, 3.7, 4.12, 4.13A, 4.25, 4.29, 5.9, 5.10, 5.17; 12 U.S.C. 2013, 2019, 2020, 2073, 2075, 2076, 2093, 2122, 2128, 2183, 2200, 2211, 2218, 2243, 2244, 2252.

Subpart F -- Miscellaneous Provisions

618.8230 [Removed and Reserved].

2. Subpart F is amended by removing and reserving 618.8230.

Dated: March 27, 1991.

Curtis M. Anderson,
Secretary, Farm Credit Administration Board.

[FR Doc. 91-7617 Filed 4-1-91; 8:45 am]
BILLING CODE 6705-01-M