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

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

   •  Summary Trends and Results
I. Corporate Fund Financial Results

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

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

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

III. Budget Results - Second Quarter 2008

Approved Budget and Staffing Modifications

Two modifications were made to the 2008 Corporate Operating Budget and/or authorized staffing, in accordance with the authority delegated by the Board of Directors in the 2008 Budget Resolution:

Corporate Operating Budget

  • In April 2008, the Deputy to the Chairman and Chief Financial Officer (CFO) approved the reallocation of budget authority within the Ongoing Operations component of the Corporate Operating Budget to provide the Division of Resolutions and Receiverships (DRR) with an additional $4,523,308 in Salaries and Compensation for increases in permanent staff to be hired in 2008. As reported last quarter, DRR’s 2008 staffing authorization was increased by 39 permanent positions, and DRR was given the authority to hire an additional 11 employees in excess of its 2008 staffing authorization on a temporary basis in anticipation of projected retirements through 2011 (“temporary overhires”). Funds of $5,455,408 were also reallocated from the Outside Services – Personnel expense category to the Salaries and Compensation expense category in the Receivership Funding component of DRR’s 2008 budget, in conjunction with an increase in DRR’s 2008 staffing authorization to hire an additional 69 non-permanent employees. In addition, the CFO approved an increase of $665,850 for the Office of Public Affairs (OPA) to provide initial funding for the 75th Anniversary Deposit Insurance Public Education Campaign. Additional funding is expected to be made available for this campaign later in the year. In order to fund these new requirements, budget authority was reallocated from the unused first quarter budgets for regular salaries and benefits in the Division of Supervision and Consumer Protection and the Legal Division in the amounts of $3,736,315 and $1,452,843, respectively.
  • In May 2008, the CFO approved the realignment of budget authority among divisions and major expense categories in the Receivership Funding component of the Corporate Operating Budget. The budget adjustment provided funding for the Division of Information Technology in the amount of $8,030,309 for equipment purchases and contractor support in preparation for an expected increase in receivership and resolution activities. The existing Receivership Funding budget for the Division of Administration increased by $2,469,691 to support additional facilities needs associated with that same increased level of activity. These increases were completely offset by a $5,250,000 reduction in the Receivership Funding budgets for Outside Services – Personnel of both the Legal Division and the Division of Receiverships and Resolutions.

Investment Budget

The 2008 Investment Budget spending projections for the 4C project and the Claims Administration System were increased by $1,509,926 and $10,048,475, respectively, following the Board’s approval to increase the investment budgets for those projects in June.

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, 2008, are defined as those that either (1) exceed the YTD budget by $2 million and represents more than 3 percent for a major expense category or total division/office budget; or (2) are under the YTD budget for a major expense category or division/office by an amount that exceeds $3 million and represents more than 5 percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were three major expense categories that incurred a significant spending variance through the second quarter in the Ongoing Operations component of the 2008 Corporate Operating Budget:

  • Outside Services – Personnel expenditures were approximately $16 million, or 19 percent, less than budgeted. The variance was largely due to delays in planned information technology (IT) projects and lower-than-anticipated spending for IT maintenance and operations. In addition, delays in spending for consumer and community affairs education and outreach programs contributed to the variance.
  • Equipment expenditures were approximately $3 million, or 14 percent, less than budgeted. The variance was largely due to a change in the timing of planned spending for the IT Technical Refresh program. The budget for this program was initially spread evenly throughout the year, but the acquisition plan for the hardware and software purchases was subsequently revised to shift those purchases to the second half of the year. Also contributing to the variance was a temporary delay in purchasing of furniture, fixtures, and equipment in both headquarters and the field.
  • Outside Services – Other expenditures were approximately $2 million, or 30 percent, more than budgeted. The variance was due to spending for the FDIC’s 75th Anniversary Public Education Campaign that exceeded its current budget. As noted above, the CFO plans to reallocate additional funds to this initiative later in the year.

Receivership Funding

The Receivership Funding component of the 2008 Corporate Operating Budget includes funding for non-personnel expenses that are incurred in conjunction with institution failures and the management and disposition of the assets and liabilities of the ensuing receiverships. Receivership Funding also includes all salary and compensation costs of employees hired on a non-permanent basis for actual or anticipated increases in receivership and resolution activity.

There were two major expense categories in which a significant spending variance occurred through the second quarter in the Receivership Funding component of the 2008 Corporate Operating Budget:

  • Outside Services – Personnel expenditures were approximately $3 million, or 17 percent, less than budgeted, primarily due to the limited receivership and resolution activity that actually occurred through the second quarter. With the increased resolution activity in the third quarter, expenditures are expected to significantly increase in this category.
  • Equipment expenditures were $4 million, or 258 percent, greater than budgeted, due to the expedited purchasing of IT equipment in preparation for an anticipated increase in receivership and resolution activity later in the year. Budget was made available for this purpose through reallocation of existing budget authority. These funds were budgeted for later months during the year, resulting in a temporary budget variance.

Significant Spending Variances by Division/Office1

Five organizations had significant spending variances through the end of the second quarter:

  • Overall, the Division of Information Technology (DIT) spent approximately $8 million, or 7 percent, less than budgeted. This was comprised of $4.5 million in excess year-to-date spending in DIT’s Receivership Funding component, which was more than offset by $12.2 million less spending than budgeted in the Ongoing Operations component of its budget and $0.3 million under spending for IT Investment projects.

    Excess spending in the Receivership Funding area was necessary to procure equipment necessary for an anticipated increase in resolution activity. Under spending in Ongoing Operations included $8.4 million in outside services personnel, which primarily resulted from delays in development projects due to client refocus on core mission responsibilities. In addition, $2.5 million of equipment purchases are being deferred until later in the year.
  • The Division of Administration (DOA) spent approximately $7 million, or 8 percent, less than budgeted. The variance of $3.7 million in Ongoing Operations was attributable to lower net costs for the Student Residence Center (because of increased proceeds derived from outside use of the facility) and lower-than-budgeted spending for contractual services. The $3.1 million variance in the Receivership Funding component of DOA’s operating budget reflected the addition of nearly $2.5 million during the second quarter for facilities and equipment related to an expected increase in receivership and resolution activity (DOA projects that these funds will be fully expensed by the end of the year).
  • DRR spent approximately $3.6 million, or 8 percent, less than budgeted. The vast majority of this variance, $3.2 million, relates to the Receivership Funding component of DRR’s operating budget and is due to the limited resolution activity that actually occurred through the second quarter. Of the three institutions that failed in the first half of the year, only one, ANB Financial, had assets greater than $1 billion¬ at the time of failure. The combined assets of the three failures totaled $2.2 billion. While spending increases have been growing in the Receivership Funding component through the second quarter, more significant costs are expected in the third and fourth quarters as new bank failures occur and resolution activities increase–three institutions failed in July with assets totaling over $36 billion..
  • The Division of Insurance and Research spent approximately $3 million, or 17 percent, less than budgeted. The majority of this variance was due to vacant budgeted positions and lower-than-budgeted spending for the Central Data Repository.
  • The Executive Support Offices spent approximately $2 million, or 25 percent, more than budgeted. This variance was due to spending for the FDIC’s 75th Anniversary Public Education Campaign that exceeded OPA’s current budget.

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



Last Updated 09/15/2008 dofbusinesscenter@fdic.gov