2022 Annual Performance Plan

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2022 AnnualPerformance PlanMarch 2022

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About this 2022 Annual Performance PlanThe National Credit Union Administration’s (NCUA) Annual Performance Plan, inconcert with the agency’s budget, outlines the resources and strategies the NCUA willuse to set priorities and improve performance. This plan is guided by the NCUA’s2022–2026 Strategic Plan, which includes the following strategic goals:1. Ensure a safe, sound, and viable system of cooperative credit that protectsconsumers;2. Improve the financial well-being of individuals and communities through accessto affordable and equitable financial products and services; and3. Maximize organizational performance to enable mission success.The Annual Performance Plan sets out performance measures and targets in support ofthe goals in the Strategic Plan. The NCUA’s Annual Performance Plan has fivecomponents: (1) strategic goals; (2) strategic objectives; (3) performance goals;(4) performance measures and associated targets; and (5) means and strategies toaccomplish the strategic objectives.This Annual Performance Plan strives to provide all interested stakeholders, includingthe NCUA’s employees, credit unions, credit union members, other federal and stateregulatory agencies, and Congress, with transparency and understanding of the NCUA’sperformance objectives. This plan sets out performance indicators and associatedtargets in support of the goals outlined in the agency’s Strategic Plan and draws a clearline from the agency’s mission to the strategic goals, strategic objectives, performancegoals, and performance indicators and targets.This plan also describes the means, strategies, and specific actions the agency hasresourced and intends to undertake to achieve each strategic objective. The prioritiesand performance indicators in this plan comply with the Government Performance andResults Modernization Act of 2010.Global events with significant impact on the economy, such as Russia’s invasion ofUkraine and the COVID-19 pandemic, remain a consideration for the agency’spriorities in 2022. This plan outlines how the agency will continue to effectivelysupervise and insure a growing and evolving credit union system, particularly duringperiods of economic uncertainty. As financial services and the credit union sectorcontinue to change, the NCUA must adapt to meet the evolving challenges anddevelopments.ii2022 Annual Performance Plan

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Table of ContentsAbout this 2022 Annual Performance Plan . iiTable of Contents . ivMessage from Chairman Todd M. Harper . vMission and Values . 1Organizational Structure. 1Major Agency Programs . 4Stakeholder Engagement . 6Cross-Agency Collaboration. 6Summary of Strategic Goals and Objectives . 7Strategic Goals, Objectives and Performance Goals . 9Strategic Goal 1 . 9Strategic Goal 2 . 21Strategic Goal 3 . 26Management Review . 34Program Evaluation and Research . 34Data Management and Reliability. 34Enterprise Risk Management . 35Hyperlinks . 36Appendix A – Budgetary Requirements by Strategic Goal. 37Appendix B – Performance Management Programs Process . 38Appendix C – External Factors 2022 . 39iv2022 Annual Performance Plan

Message from Chairman Todd M. HarperEvery year, the National Credit Union Administration Board issues an AnnualPerformance Plan, which describes the Board’s goals and priorities for the coming year.This year’s 2022 Annual Performance Plan sets out performance measures and alignsthem with the agency’s 2022–2026 Strategic Plan, which is being issued concurrently.Each day, the NCUA strives to ensure a safe and sound credit union system wherecredit union members are protected and confidence in the national system ofcooperative credit is promoted.The NCUA Board’s main priority in 2022 continues to be to ensure the credit unionsystem and the National Credit Union Share Insurance Fund can adapt to the evolvingnature of the COVID-19 pandemic and its financial and economic disruptions. TheNCUA’s supervisory priorities in 2022 reflect that need by focusing on the areas of thegreatest risk to credit unions, members, and the broader system. The agency’s prioritiesinclude credit risk, information security, capital adequacy, Bank Secrecy Act and antimoney laundering compliance, payment systems, and consumer financial protection,among other areas.With the geopolitical crisis unfolding in Ukraine, the NCUA team will continue toprioritize cybersecurity as well as guiding the system through the economic uncertaintyrelated to inflation, rising energy prices, and continued supply chain disruptions.Additionally, in 2022, the NCUA will continue its efforts to evolve the examinationprogram and operations, expand access to safe and affordable financial services,provide consumers with financial education, and close the racial wealth gap.I am proud and honored to serve as Chairman of the NCUA and to work alongside theenormously talented and dedicated employees of the NCUA. I look forward to workingalongside my fellow Board members in support of these endeavors throughout the year.SincerelyTodd M. HarperChairmanv2022 Annual Performance Plan

Mission and ValuesThroughout 2022, the NCUA will implement initiatives to continue meeting its missionof:“Protecting the system of cooperative credit and its member-owners througheffective chartering, supervision, regulation, and insurance,”and its vision to:“Strengthen communities and protect consumers by ensuring equitable financialinclusion through a robust, safe, sound, and evolving credit union system.”Organizational StructureCreated by the U.S. Congress in 1970, the NCUA is an independent federal agency thatinsures deposits at federally insured credit unions, protects the members who own creditunions, charters and regulates federal credit unions, and promotes widespread financialeducation and consumer financial protection. The NCUA protects the safety andsoundness of the credit union system by identifying, monitoring, and managing risks tothe National Credit Union Share Insurance Fund. Backed by the full faith and credit ofthe United States, the Share Insurance Fund provides up to at least 250,000 of federalshare insurance to over 129 million members in all federal credit unions and most statechartered credit unions. No credit union member has ever lost a penny of shares insuredby the Share Insurance Fund.The NCUA is responsible for the regulation and supervision of 4,942 federally insuredcredit unions with more than 2 trillion in assets across all states and U.S. territories.1Pursuant to the Federal Credit Union Act, 2 the agency is “under the management of aNational Credit Union Administration Board.” The three member, presidentiallyappointed and Senate confirmed, Board oversees the NCUA’s operations by settingpolicy, approving budgets, and adopting rules.12Data as of December 31, 2021.12 U.S.C. 1752a(a).12022 Annual Performance Plan

In addition to the Share Insurance Fund, the NCUA operates three other funds: The NCUA Operating Fund, The Central Liquidity Facility, and The Community Development Revolving Loan Fund.The NCUA Operating Fund, in conjunction with the Share Insurance Fund, finances theagency’s operations. The NCUA Central Liquidity Facility is a contingent liquiditysource, administered by the NCUA Board, which serves as a liquidity lender to creditunions experiencing unusual or unexpected liquidity shortfalls. The NCUA CommunityDevelopment Revolving Loan Fund provides loans and grants to low-incomedesignated credit unions.Throughout the Annual Performance Plan’s period, the NCUA will rely upon itsemployees to perform activities in the NCUA’s major program areas and supportfunctions. The NCUA employs staff in a central office, an Asset Management andAssistance Center (AMAC) to manage the assets of failed credit unions, and threeregional offices. Reporting to each of its regional offices, the NCUA has supervisorygroups with examiners responsible for a portfolio of credit unions covering all 50 states,the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.The examination, supervision, and insurance programs are the central mission for theNCUA. These functions are the primary responsibility of the field program offices andthe Office of Examination and Insurance (E&I). Approximately two-thirds of theNCUA’s workforce is comprised of field staff who spend a significant part of their yearcarrying out the agency’s examination and supervision program. During the COVID-19pandemic, the agency and its employees successfully transitioned to an offsiteexamination posture, developing new procedures and processes to continue examinationand supervisory work. In 2022, the NCUA will continue evaluating how it can conductportions of its examinations remotely and offsite.The NCUA’s organizational structure and the operational changes that resulted from theCOVID-19 pandemic require creative methods to deliver the necessary administrativeand office support to all staff.The NCUA organizational chart follows. Additional information about the NCUA’sexecutive leadership is also available on the NCUA’s website.22022 Annual Performance Plan

32022 Annual Performance Plan

Major Agency ProgramsSupervisionThe supervision program contributes to the safety and soundness of the credit unionsystem, thereby protecting the interests of all credit union stakeholders. The NCUA’ssupervision is driven by identifying and resolving risk in seven primary areas: interest rate risk, liquidity risk, credit risk, including asset concentration risk, reputation risk, transaction risk, compliance risk, and strategic risk, including operational risks such as cybersecurity and fraud.The NCUA supervises federally insured credit unions through examinations byrequiring compliance with regulations, taking administrative actions, and conserving orliquidating severely troubled institutions as necessary to manage risk.InsuranceThe NCUA manages the 20.7 billion3 Share Insurance Fund, which provides insuranceup to at least 250,000 per individual depositor for funds held at federally insured creditunions. The Share Insurance Fund is capitalized by credit unions and through retainedearnings. The equity ratio is the overall capitalization of the Share Insurance Fund toprotect against unexpected losses from the failure of credit unions. The normaloperating level is the desired equity level for the Share Insurance Fund. In accordancewith the Federal Credit Union Act, the NCUA Board sets the normal operating levelbetween 1.20 percent and 1.50 percent.Asset ManagementThe NCUA conducts liquidations of failed credit unions and performs management andrecovery of assets through the AMAC. The AMAC effectively manages and resolvesassets acquired from liquidated credit unions. The AMAC provides specializedresources to the NCUA regional offices with reviews of large, complex loan portfolios3As of December 31, 2021.42022 Annual Performance Plan

and actual or potential bond claims. It also participates in the operational phases ofconservatorships and records reconstruction. The purpose of the AMAC is to minimizecredit union failure costs to the Share Insurance Fund, credit union member-owners, andother stakeholders.Credit Union DevelopmentThrough chartering and field of membership services, training, and resource assistance,the NCUA fosters credit union development for small, minority, newly chartered, andlow-income designated credit unions. One source of assistance is the CommunityDevelopment Revolving Loan Fund, which provides loans and technical assistancegrants to credit unions serving low-income members. This support results in improvedaccess to financial services, an opportunity for increased member savings, andimproved employment opportunities in low-income communities.The NCUA charters new federal credit unions, as well as approves modifications toexisting charters and fields of membership.Consumer Financial ProtectionThe NCUA protects consumers through effective supervision and enforcement offederal consumer financial protection laws, regulations, and requirements. The NCUAalso develops financial literacy tools and information for consumers and promotesfinancial education programs for credit unions to assist members in making moreinformed financial decisions.NCUA’s consumer financial protection mission goes hand-in-hand with the agency’ssafety and soundness mission. The agency strives to balance the oversight needed toensure consumers are protected and the credit unions’ ability to provide affordable andequitable service to their member-owners. In addition, the NCUA’s ConsumerAssistance Center provides an avenue through which credit union members can reportand resolve concerns they may have about the products and services they have receivedfrom their credit unions.When it comes to overseeing credit unions, the NCUA’s goal is to facilitate their safeand sound operation while ensuring they fully comply with applicable laws, includingconsumer financial protection and fair lending laws. Toward that end, the agencyemphasizes a compliance approach over an enforcement approach, providing creditunions with clear guidelines to ensure they comply with consumer protection. When acompliance issue does arise, we strive to detect and resolve problems in credit unionsthrough supervision and examination procedures before they become insurmountableviolations.52022 Annual Performance Plan

ACCESS: Advancing Communities through Credit,Education, Stability, and SupportThe NCUA identified a need to foster financial inclusion because of the financialdisparities experienced by minority, underserved, and unbanked populations. ACCESSconsiders trends in industry data, economic and socioeconomic challenges experiencedby consumers, and how NCUA may assist credit unions in addressing them. ThroughACCESS, the NCUA will provide resources to assist credit unions with their outreachstrategies. Resources will include educational webinars and the identification of grantsand other financial sources to support the development and implementation of financialproducts and services to assist members experiencing financial hardship. The NCUAwill also evaluate ways to refresh and modernize regulations, policies, and programs insupport of greater financial inclusion within the credit union system.Stakeholder EngagementTo clearly understand the needs of the credit union system, the NCUA seeks input fromits stakeholders, including Congress, State Supervisory Authorities, credit unionmembers, credit unions, and their associations. Input is sought through the examinationand supervision process, surveys, public webinars, working groups, rulemakings,requests for information, and public and congressional dialogue. The views and inputare assessed and properly considered during the developmental process. For this plan,this collective input may directly or indirectly influence the goals or objectives, theselection of measures of success, and the performance targets.Cross-Agency CollaborationThe NCUA is involved in numerous cross-agency initiatives by collaborating with otherfinancial regulatory agencies bilaterally and through several interagency councils.Significant councils include the Financial Stability Oversight Council (FSOC), theFederal Financial Institutions Examination Council (FFIEC), and the Financial andBanking Information Infrastructure Committee. These councils and their manyassociated taskforces and working groups contribute to the success of the NCUA’smission by providing the agency with access to critical financial and market informationand opportunities to share information on critical issues and threats to the nation’sfinancial infrastructure, among other benefits.62022 Annual Performance Plan

Summary of Strategic Goals and ObjectivesThe chart below summarizes the NCUA’s 2022–2026 strategic goals and objectives.The objectives support and complement the strategic goals. Each strategic objective hasperformance goals and associated, measurable indicators and targets. Performanceindicators use available data to provide a way to evaluate whether the NCUA is meetingthe goals and objectives in the proposed period. Targets establish a level ofperformance the NCUA strives to achieve. The NCUA reviews performance indicatorsand targets to assess the effectiveness of programs and takes into account how risks andopportunities affect our ability to achieve strategic goals and objectives. Thisassessment allows the agency to make adjustments to improve performance throughouteach year and during the five-year strategic plan timeframe.Strategic GoalsStrategic Objectives1.1 Maintain a financially sound Share Insurance Fund.1.2 Provide effective and efficient supervision.Goal 1: Ensure a safe,sound, and viable system ofcooperative credit thatprotects consumers.1.3 Ensure compliance with and enforcement of consumerfinancial protection laws and regulations at federal creditunions.1.4 Ensure NCUA-insured credit unions can appropriately manageemerging opportunities and risks, including cybersecurity andclimate-related financial risk.1.5 Ensure NCUA policies and regulations appropriatelyaddress emerging and innovative financial technologies,including digital assets.Goal 2: Improve thefinancial well-being ofindividuals andcommunities throughaccess to affordable andequitable financial productsand services.2.1 Enhance consumer access to affordable, fair, and federallyinsured financial products and services.2.2 Support and foster small, minority, low-income, and newcredit unions.72022 Annual Performance Plan

Strategic GoalsGoal 3: Maximizeorganizational performanceto enable mission success.Strategic Objectives3.1 Attract, develop, and retain an engaged, high-performing,diverse workforce within an inclusive, professionalenvironment.3.2 Deliver improved business processes supported by secure,innovative, and reliable technology solutions and data.3.3 Ensure sound organizational governance.82022 Annual Performance Plan

Strategic Goals, Objectives andPerformance GoalsStrategic Goal 1: Ensure a Safe, Sound, and Viable System ofCooperative Credit That Protects ConsumersStrategic Objectives1.1 Maintain a financiallysound Share InsuranceFund.1.2 Provide effective andefficient supervision.Performance Goals1.1.1 Prudently manage the Share Insurance Fund.1.1.2 Assess risks and key trends in the credit union industry andthe economy that could impact the Share Insurance Fund.1.2.1 Execute the requirements of the agency’s examination andsupervision program and regulations.1.2.2 Improve examination quality by incorporating relevantfeedback from internal and external stakeholders.1.3 Ensure compliancewith, and enforcement of,federal consumer financialprotection laws andregulations at creditunions.1.3.1 Conduct targeted consumer compliance reviews and fairlending examinations.1.4 Ensure NCUA-insuredcredit unions canappropriately manageemerging opportunitiesand risks, includingcybersecurity and climaterelated financial risk.1.4.1 Promote and evaluate effective cybersecurity practices incredit unions.1.5 Ensure NCUApolicies and regulationsappropriately addressemerging and innovativefinancial technologies,including digital assets.1.3.2 Improve compliance with consumer protection laws andregulations through effective guidance to the credit unionsystem.1.4.2 Identify and work with affected credit unions and appropriatestate regulators to understand and mitigate asset concentrationand other risks.1.5.1 Evaluate and address barriers to credit union adoption ofemerging financial technology, including digital assets.92022 Annual Performance Plan

The Federal Credit Union Act authorizes the NCUA Board to administer and managethe Share Insurance Fund, ensure the safety and soundness of insured credit unions, andenforce laws and regulations that protect credit union member-owners. The NCUA’sprimary function is to identify and assess credit union system risks, threats, andvulnerabilities, determine the magnitude of such risks, and mitigate unacceptable levelsof risk through its examination, supervision, and enforcement programs.Strategic Objective 1.1Maintain a Financially Sound Share Insurance Fund.The Share Insurance Fund is a cooperative insurance fund comprised of a one percentcapitalization deposit from insured credit unions, income from prudent investmentstrategies, and premium assessments, when needed. The NCUA must maintain afinancially sound Share Insurance Fund to protect credit union member-owners againstunexpected losses from failed credit unions and to maintain public confidence in federalshare insurance. Sound management of the Share Insurance Fund also requires theagency to timely identify, assess, and respond to current and emerging risks, includingthrough robust modeling of future Fund performance and effective execution of theexamination program.Future risks to credit unions include escalating cybersecurity threats, interest rate andliquidity challenges, real estate and member business loan concentrations, andtechnology-driven changes in the financial landscape. Each risk requires continualmonitoring and, where prudent, risk-mitigation strategies to protect the overall creditunion system from preventable losses or failures.The NCUA will maintain a financially sound Share Insurance Fund through thefollowing strategies and initiatives: Continue to make prudent investment decisions for the Share Insurance Fund toensure the NCUA investment objectives are met and comply with the Boardapproved investment policy. Monitor emerging challenges and risks potentially impacting the credit unionsystem and the Share Insurance Fund and take action as appropriate. Resolve safety and soundness concerns through prompt and effectivesupervisory and resolution actions, as warranted. Within three business days of a credit union failure, ensure payments are issuedto members for the balance of their verified insured funds or members haveaccess to their funds.102022 Annual Performance Plan

Identify merger or purchase and assumption partners for credit union failures, toprovide continued service to credit union members, increase efficiency, andreduce costs. Manage and recover assets in credit union liquidations to minimize failure costsand expenses to the Share Insurance Fund, credit union member-owners, andother creditors.Performance Goal 1.1.1Prudently manage the Share Insurance Fund.Indicators1. Maintain two percent or less of credit union system assets in CAMELScomposite 4 and 5 rated credit unions.2. Strive to minimize costs to the Share Insurance Fund for credit union failures bykeeping straight liquidations to 15 percent or less of institution failures.3. Maintain the Share Insurance Fund’s equity ratio above the minimum statutorylevel and at or below the Normal Operating Level. 44. Continue to manage the Share Insurance Fund investment portfolio to meetsafety, liquidity and yield objectives consistent with Board-approved policy.5. Make public the Normal Operating Level calculation to ensure transparency andunderstanding by stakeholders by December 31, 2022.Performance Goal 1.1.2Assess risks and key trends in the credit union industry and the economy that couldimpact the Share Insurance Fund.Indicators1. Perform quarterly supervisory reviews for 98 percent of high-risk credit unions.2. Review and assess all capital plans for credit unions with assets greater than 10billion within timelines outlined in regulation.3. Assess credit union driven stress testing on all Tier II and Tier III credit unions,as defined by NCUA Regulations Part 702, by Q3 2022.4The equity ratio is the ratio of Share Insurance Fund equity to the amount of insured shares.112022 Annual Performance Plan

Strategic Objective 1.2Provide Effective and Efficient Supervision.To remain effective, the NCUA’s examination and supervision program must continueto evolve with a growing and changing credit union system while recognizing thefundamental differences that define financial cooperatives. The NCUA must actefficiently, properly allocating examination resources to credit unions of highest riskand expanding its offsite monitoring capabilities. Important components of an effectiveand efficient examination and supervision program include highly skilled examiners,risk- and compliance-based examination policies, robust quarterly data collection andanalyses, reliable technological tools, and a strong quality assurance program.NCUA Letter to Credit Unions 22-CU-02, 2022 Supervisory Priorities outlines theagency’s supervisory priorities and other aspects of the NCUA’s examination programfor 2022. The NCUA remains committed to focusing its examination activities on theareas that pose the highest risk to credit unions, credit union members, and the ShareInsurance Fund.Examinations of credit unions that qualify for the extended examination cycle under theagency’s flexible examination scheduling policy will be scheduled accordingly. Mostfederal credit unions with assets under 50 million will continue to receiveexaminations conducted based on the Small Credit Union Exam Program. For all othercredit unions, NCUA examiners will use the agency’s risk-focused examinationprocedures to conduct the examination. More information about the agency’sExamination Flexibility Initiative, including which credit unions are eligible for anextended examination cycle, can be found on the Examination Flexibility Initiativewebpage.The NCUA will provide effective and efficient supervision through the followingstrategies and initiatives: Manage the examination program effectively and efficiently by: Allocating NCUA resources to credit unions and credit union activitiesposing the greatest risk. Following up with CAMELS composite 3, 4, and 5 credit unions. Resolving regulatory violations and safety and soundness concernspromptly. Taking prompt and effective supervisory and resolution actions, ifwarranted.122022 Annual Performance Plan

Ensuring examinations and supervision contacts are scheduled andcompleted in accordance with agency policy. Produce robust modeling and risk-identification tools that provide economicinformation on emerging microeconomic and macroeconomic risks andextrapolate to identify the potential risks in credit unions. Identify changing risks early in large credit unions through a data-drivensupervision approach. Work closely with state regulators to ensure necessary action to mitigate riskwithin the federally insured, state-chartered credit union program, while alsominimizing the burden on state-chartered credit unions that results from havinga separate prudential financial regulator and insurer. Ensure the quality and consistency of examinations and examination reportsthrough rigorous quality assurance processes including by normalizing qualityassurance tools such as feedback surveys and the use of recordings during exitmeetings and joint conferences. Hold townhalls with the credit union industry and other stakeholders to facilitategreater dialogue with stakeholders. Establish and staff a Regional Electronic Payments Specialist program usingreallocated and new positions and continue to assess and realign positionsamong the other regional specialist disciplines.Performance Goal 1.2.1Execute the requirements of the agency’s examination and supervision program andregulations.Indicators1. Start 95 percent of federal credit union examinations within 12 months of priorexam completion for annual examinations and within 20 months of prior examcompletion for extended examinations.2. Start 95 percent of federally insured, state-chartered credit union examinationswithin 14 months of prior exam completion for those on an annual examinationschedule.3. Review one-third of NCUA regulations and provide stakeholders with theopportunity to comment on specific areas of focus including safety andsoundness, clarity, and consumer protections. Identify and prioritize for reviewregulations that may be in conflict with each other, such as those related toparticipation loans.132022 Annual Performance Plan

4. Resolve troubled credit unions5 within an average of 26

This Annual Performance Planstrives to provide all interested stakeholders, including the NCUA's employees, credit unions, credit union members, other federal and state regulatory agencies, and Congress, with transparency and understanding of the NCUA's performance objectives. This plan sets out performance indicators and associated

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