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III.
Budget Results - Second Quarter 2010
Approved
Budget Modifications
The 2010 Budget Resolution delegated to the Chief Financial Officer (CFO)
and selected other officials the authority to make certain modifications
to the 2010 Corporate Operating Budget. One budget reallocation was made
during the second quarter by the CFO in accordance with this authority.
In May 2010, the CFO approved the reallocation of budget authority within
the Salaries and Compensation expense category of the Ongoing Operations
and Receivership Funding components of the 2010 Corporate Operating Budget
to reflect updated salary and benefit expense estimates for all divisions
and offices, except for the Office of Inspector General. This reallocation
did not change the total 2010 Corporate Operating Budget approved by the
Board.
This reallocation followed a comprehensive analysis of the approved
authority for salaries, bonuses, and fringe benefits through March
31, 2010. The large number of vacancies in budgeted positions and
lower-than-estimated locality pay adjustments negotiated for 2010
were major factors causing excess budget authority. Some of this
excess was reallocated to provide necessary funding for authorized
staffing increases in the Division of Supervision and Consumer
Protection, the Office of Legislative Affairs, and the Office of
the Ombudsman that were reported in the First Quarter CFO Report
to the Board. Remaining excess funds totaling $13 million in the
Ongoing Operations and $18 million in the Receivership Funding
budget components were realigned, thereby increasing the Ongoing
Operations Corporate Unassigned budget from $13 million to $25
million, and the Receivership Funding Corporate Unassigned budget
from $176 million to $194 million. These Corporate Unassigned budgets
will be available to meet new budget requirements that may emerge
during the remainder of the year.
Approved
Staffing Modifications
The 2010 Budget Resolution
delegated to the CFO the authority to modify 2010 Authorized Staffing
for divisions and offices, as long as those modifications did not increase
the total approved 2010 Corporate Operating Budget. In June 2010, in
accordance with the authority delegated to him by the Board of Directors,
the CFO approved an increase of two authorized permanent positions in
the Office of Enterprise Risk Management to support its rapidly growing
risk assessment workload associated with the increase in the Corporation’s
business activities and workload. The CFO determined that sufficient
funding would be available for these positions for the balance of 2010
in the Ongoing Operations budget component through the reallocation of
surplus budget authority during the mid-year budget review process.
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, 2010, are defined as those that either (1) exceed the YTD
budget by $2 million and represent 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 was a significant
spending variance in two major expense
category during the second quarter in the
Ongoing Operations component of the
2010 Corporate Operating Budget:
- Outside
Services – Personnel expenditures were $13.2 million, or
12 percent, less than budgeted. The variance was largely due
to under-spending in the CIO Council and Division of Information
Technology (DIT) budgets. Approximately $6 million of this variance
was attributable to under-spending for systems development and
discretionary small enhancements overseen by the CIO Council,
and almost $5 million was attributable to under-spending by DIT
for internal operations due to delays in starting some internal
initiatives. In addition, DRR spent $3 million less than budgeted
due to postponement of training for new employees in Asset Management
and in the use of the new Claims Administration System (CAS)
as well as lower than anticipated spending for business support
services, IT security services, and financial advisory services.
- Equipment expenditures were
$6.9 million, or 19 percent, less than budgeted. The variance was largely
attributable to delays
in the purchase of “technical refresh” equipment and software
and delayed billing for software maintenance, including license
renewal fees
for 30 disparate software packages. The invoicing was delayed because
the contractor who makes the purchases for the FDIC had to wait
to bill the FDIC until after the invoice was received from the
software reseller.
In the future, DIT will accrue for these license renewal fees.
Receivership
Funding
The Receivership Funding component of the 2010 Corporate Operating Budget
includes funding for expenses that are incurred in conjunction with institution
failures and the management and disposition of the assets and liabilities
of the ensuing receiverships, except for salary and benefits expenses for
permanent employees assigned to the receivership management function.
Significant spending
variances occurred during the second quarter in all seven major
expense categories of the Receivership Funding component of the 2010
Corporate
Operating Budget:
- Salaries
and Compensation ($21.7 million, or 19 percent, less than budgeted).
- Outside
Services – Personnel ($126.8 million, or 17 percent, less
than budgeted).
- Travel
($9.4 million, or 32 percent, less than budgeted).
- Buildings
($27.9 million, or 37 percent, more than budgeted).
- Equipment
($3.9 million, or 21 percent, less than budgeted).
- Outside
Services – Other ($41.3 million, or 337 percent, more than
budgeted).
- Other
Expenses ($103.1 million, or 331 percent, more than budgeted).
The variances in the Outside
Services – Personnel and Travel expense
categories were attributable to fewer-than-anticipated resolutions through
the second quarter of 2010. The variance in the Salaries and Compensation
category was attributable to delays in the hiring of non-permanent staff.
Greater-than-budgeted spending occurred in the Buildings and Other Expenses
categories as a result of longer than expected receivership operations
at the sites of failed institutions and the greater number of field sites
in operation. In addition, approximately $43.6 million in unbudgeted
guarantee fee costs incurred in conjunction with a Limited Liability
Company (LLC) transaction were recorded to the Outside Services – Other
expense category. A variance in the Equipment category was primarily
attributable to lower-than-anticipated costs for the Midwest Temporary
Satellite Office (MWTSO) and the purchase of fewer laptops than
were budgeted for during the first half of 2010.
Significant
Spending Variances by Division/Office1
Three organizations
had significant spending variances through
the end of the second quarter:
- The
Division of Information Technology spent $26.3 million, or 21
percent, less than budgeted. This variance was largely attributable
to lower-than-budgeted hardware/software maintenance costs and
deferrals in equipment purchases, lower-than-anticipated facility
costs at the MWTSO, and delays in starting some internal DIT
initiatives.
- The Legal Division spent $7.4 million, or 7 percent,
more than budgeted. This variance was due to the need for more
outside counsel assistance for litigation and other legal work
than was anticipated through the second quarter. A budget modification
was requested in the mid-year budget process.
- The CIO
Council spent $5.6 million, or 17 percent, less than budgeted.
This variance was
primarily attributable to the timing of spending
for development projects to which funds were allocated by the CIO
Council and for discretionary funds allocated to divisions/offices
for small
enhancements.
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1Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.
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