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Identify the data processing system(s) the credit union will use. Discuss why the system(s) was selected and the cost of the system(s). Draft copies of the proposed hardware and software purchase or lease agreements, maintenance contracts, and vendor estimates of other ongoing costs should be reviewed by an attorney representing the PFCU’s interest. Include the documents and reviews in your application package. The NCUA will also evaluate if any limitation on the terms of any draft contract would be necessary.1 Incorporate the associated costs (including fixed assets, amortization, depreciated expense, and others) into the pro forma balance sheets and income statements.
Table 1 provides an example of a fixed asset listing and depreciation schedule.
Table 1: Sample Fixed Asset and Depreciation Schedule
| Furniture, Fixtures & Equipment | Estimated Cost | Life of Asset2 | Monthly Depreciation |
|---|---|---|---|
| Computer Hardware | $48,000 | 48 months | $1,000 |
| Computer Software | $6,000 | 40 months | $150 |
| Audio Response System | $4,800 | 96 months | $50 |
| 5 Desks and 5 Chairs | $2,650 | 48 months | $55 |
| Copy Machine | $1,200 | 24-months | $50 |
| Total | $62,650 | N/A | $1,305 |
The pro forma balance sheet would reflect the Furniture, Fixtures & Equipment (FF&E) Account at $62,650 and the Accumulated FF&E Depreciation Account (contra-asset account) at the end of the first 12 months at $15,660 ($1,305 x 12 months). The pro forma income statement would reflect depreciation expenses of $1,305 per month.
Footnotes
1 The NCUA may also request draft contracts with terms greater than one year contain the following language: “The credit union or its successor shall have the option to terminate this contract/agreement without any liability (other than for services already rendered) or penalty whatsoever to the vendor effective upon the NCUA’s carrying out its Prompt Corrective Action responsibilities against the credit union pursuant to Part 702 of the NCUA’s Regulations, resulting in the merger, conservatorship, or liquidation of the credit union.”
2 To determine the life of an asset, consult a Certified Public Accountant for the generally accepted accounting guidelines.