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Chief Financial Officer's (CFO) Report to the Board

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Executive Summary

   •  Summary Trends and Results
I. Corporate Fund Financial Results

   •  DIF Balance Sheet
   •  DIF Income Statement
   •  DIF Statements of Cash Flows
   •  FRF Statements of Cash Flows
II. Investments Results & Prospective Strategies

   •  Deposit Insurance Fund Portfolio Summary
   •  Approved Investment Strategy
III. Budget Results

   •  Budget & Expenditures by Major Expense Categories
   •  Budget & Expenditures by Budget Component, Division & Office
Printable Version

III. Budget Results - Second Quarter 2007

Approved Budget Modifications

During the second quarter of 2007, two modifications were made to the 2007 Corporate Operating Budget and/or authorized staffing, in accordance with the authority delegated by the Board of Directors in the 2007 Budget Resolution:

  • The Division of Information Technology (DIT) made numerous reallocations of its existing operating budget among the major expense categories in accordance with Board- delegated authority. However, the net budget change was less than $1 million to any major expense category. The budget reallocation involved multiple Information Technology (IT) projects in accordance with CIO Council recommendations or internal DIT operations requirements. The budget for midrange software computer support was increased by $2.2 million (including $972,800 for the JAVA Unix environment). These reallocations resulted in no net change to the total approved DIT budget.
  • A reallocation was made to the operating budgets of all divisions and most offices to properly classify the funds projected to be needed for tuition, fees, and travel associated with the new Professional Learning Accounts (PLA) program. This reallocation will allow us to monitor PLA program utilization and it did not increase or decrease the budgeted amounts for the program or the overall ongoing operations budget for any division or office.

Status of Spending for the Implementation of Deposit Insurance Reform

The 2007 Corporate Operating Budget approved by the Board of Directors included funding for the continued implementation of Deposit Insurance Reform. Excluding internal salaries and compensation expenses, $4.9 million was spent on system changes and $1.8 million was spent on printing and distribution costs in 2006. Through the second quarter of 2007, an additional $3.0 million (excluding internal salaries and compensation expenses) was spent as follows:

  • Approximately $2.5 million was spent for system development and enhancement activities. In addition, about $0.6 million was approved by the Change Control Board for additional work that will be undertaken later in the year. A total of $4.7 million is budgeted in 2007 for systems work related to deposit insurance reform implementation.
  • Approximately $525 thousand was spent for printing and distribution of updated deposit insurance brochures during the first half of 2007. It is anticipated that up to an additional $675 thousand will be spent revising the Spanish, Korean, and Chinese versions of Insuring Your Deposits and Your Insured Deposits brochures during 2007.

No funds have yet been spent in 2006 or through June 30, 2007 for the additional staff in the Division of Insurance and Research (DIR) that the Board authorized to support deposit insurance pricing. DIR has selected two new employees for these positions who will start in July.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the six months ending June 30, 2007, are defined as those that either (1) exceed the YTD budget by $2 million and represent more than three percent of the major expense category or total division/office budget; or (2) are under the YTD budget by $3 million and represent more than five percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

  • Outside Services-Personnel expenditures were $10 million, or 14 percent, less than budgeted. A large portion of this variance was due to lower-than-anticipated spending by DIT on system operations, development, and maintenance through the first half of the year. However, current plans to expedite development activities and increase contractual services, along with a 7 percent Information Technology Applications Services (ITAS) labor rate increase that became effective in May, are expected to absorb the DIT variance by year-end. Other factors that contributed to the variance included lower-than-budgeted spending for government litigation being handled by the Department of Justice, delays in initiating the Identity Theft consumer education campaign, and postponement of the Shared National Credit Modernization initiative until 2008.

Receivership Funding

The Receivership Funding component of the Corporate Operating Budget includes budgeted funding for non-personnel expenses that are incurred in conjunction with an institution failure and the management and disposition of the assets and liabilities of the ensuing receivership. There was one major expense category in which a significant spending variance occurred through the second quarter in the Receivership Funding component of the Corporate Operating Budget:

  • Outside Services-Personnel expenditures were $28 million, or 91 percent, less than budgeted, primarily due to the limited receivership and resolution activity that occurred through the second quarter.

Significant Spending Variances by Division/Office1

There were three divisions that had a significant spending variance through the second quarter of 2007:

  • The Division of Resolutions and Receiverships (DRR) spent $27 million, or 54 percent, less than budgeted. This variance was fully attributable to under spending in the Receivership Funding component of DRR’s operating budget due to the limited receivership and resolution activity that occurred through the second quarter.
  • The DIT spent $11 million, or 11 percent, less than budgeted. Approximately $4.4 million of the variance occurred in the Ongoing Operations component of the Corporate Operating Budget and reflected lower-than-budgeted expenses during the first six months of the year for contractor services related to systems operations, development, and maintenance as well as the inability to fill personnel vacancies as planned. These budget variances were partially offset by Microsoft maintenance costs realized in June but budgeted in July. DIT’s spending from the Investment Budget was $6.5 million less than anticipated, largely because a major software purchase planned for the Claims Administration System (CAS) investment project was delayed.
  • The Legal Division spent nearly $10 million, or 21 percent, less than budgeted. This variance was largely attributable to under spending in the Receivership Funding component of its operating budget, primarily due to the limited receivership and resolution activity that occurred through the second quarter.

 

 

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1Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.



Last Updated 08/20/2007 dofbusinesscenter@fdic.gov