III. Budget Results - Second Quarter 2011

Approved Budget Modifications

The 2011 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to reallocate funds within the 2011 Corporate Operating Budget, provided that such reallocations do not increase the total amount approved for either the Ongoing Operations or Receivership Funding budget components.  The following budget reallocations were approved during the second quarter in accordance with the authority delegated by the Board of Directors.  None of these modifications changed the total 2011 Corporate Operating Budget as approved by the Board in December 2010 (and amended by the Board in January 2011):

• In May 2011, the CFO approved modifications to the Salaries and Compensation budget authority of divisions and offices within the Ongoing Operations budget component based on an analysis of spending for salaries, bonuses, and fringe benefits during the first quarter.  That reallocation adjusted budget authority for most divisions and offices while increasing the Corporate Unassigned budget by $4,297,545.

• In May 2011, the CFO approved the reallocation of $1,089,261 within the Ongoing Operations budget component from the Risk Management Supervision (RMS) and Corporate Unassigned budgets (-$651,411 and -$437,850, respectively) to the Depositor and Consumer Protection (DCP) budget to support the transfer of six positions from RMS to DCP and an increase of four new authorized positions in DCP (these staffing changes are explained in more detail below). 

• In May 2011, in anticipation of the FDIC assuming regulatory responsibility for state-chartered thrift institutions under the provisions of the DFA, the CFO approved the reallocation of $2,459,123 in budget authority within the Ongoing Operations budget component from the Corporate Unassigned budget to the budgets of RMS and DCP.  This adjustment increased budget authority for the Salaries and Compensation (+$2,175,477), Travel (+$272,301), and Other Expenses (+$11,345) expense categories in those budgets to provide funding for expenses projected to be incurred by Office of Thrift Supervision (OTS) employees following their transfer to the FDIC.

• In May 2011, the CFO approved the reallocation of $141,000 within the Ongoing Operations budget component from the Corporate Unassigned budget to the Salaries and Compensation budget of the Office of Minority and Women Inclusion (OMWI) to provide funding for expenses associated with seven newly-authorized positions in OMWI.

Following these budget reallocations, the amounts remaining available within the Corporate Unassigned budgets for the Ongoing Operations and the Receivership Funding budget components were $17,401,532 and $16,350,002, respectively.

Approved Staffing Modifications

The 2011 Budget Resolution delegated to the CFO the authority to modify approved 2011 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2011 Corporate Operating Budget.  The following changes were approved by the CFO in accordance with the authority delegated to him by the Board of Directors:

• In May 2011, the CFO approved the transfer of six positions from RMS to DCP and the establishment of four newly-authorized positions in DCP.  When the Board approved the establishment of DCP in August 2010, it delegated to the CFO the responsibility for determining staffing requirements for certain administrative management functions in DCP and determining whether these staffing requirements should be met by the transfer of positions from RMS or the establishment of new positions in DCP.  After consultation with RMS and DCP,  the CFO approved the transfer to DCP of two positions from RMS’s Internal Control Section and four positions from RMS’s Applied Technology Section; and the establishment of four newly-authorized positions in DCP (two each in the Administrative Operations Branch and the Operations and Technology Systems Section).

• In May 2011, the CFO approved an increase of 24 authorized positions in RMS and six authorized positions in DCP in anticipation of the FDIC assuming regulatory responsibility for state chartered thrift institutions under DFA.  Most of the new positions are examiner positions to be filled by transferees from the OTS.  The number of new examiner positions was determined using the Examiner Staffing Model.

• In May 2011, the CFO approved an increase of seven authorized positions in OMWI.  These positions will be used to develop standards for equal employment opportunity for the Corporation’s workforce, increase the participation of minority- and women-owned businesses in the Corporation’s programs and contracts, and develop a new program to assess the diversity policies and practices of entities regulated by the FDIC, in accordance with the requirements of DFA.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below.   Significant spending variances for the six months ended June 30, 2011, are defined as those that either (1) exceed the YTD budget by $2 million and represent more than three percent of 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 five percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were significant spending variances in two of the seven major expense categories during the second quarter in the Ongoing Operations component of the 2011 Corporate Operating Budget:

• Outside Services – Personnel expenditures were $16.1 million, or 14 percent, less than budgeted.  The Office of Complex Financial Institutions (CFI) spent $8.0 million less than budgeted, largely due to the office's initial focus on filling its authorized FDIC positions, which caused delays in defining contract support requirements.  The Division of Resolutions and Receiverships (DRR) spent $4.9 million less than budgeted due to lower than anticipated expenses for business process improvements, financial advisory services for a recovery and resolution project, and an internal review project.  In addition, the Office of Inspector General (OIG) spent $4.4 million less than budgeted for material loss reviews (MLRs) due to an increase included in DFA in the threshold at which MLRs are required.

• Outside Services – Other expenditures were approximately $3.3 million, or 29 percent, less than budgeted.  The Office of Public Affairs (OPA) spent $2.0 million less than budgeted, largely due to delays in its public education campaign on overdraft programs.

Receivership Funding

The Receivership Funding component of the 2011 Corporate Operating Budget includes funding for expenses incurred in conjunction with institution failures and the management and disposition of the assets and liabilities of the ensuing receiverships, except for salaries and benefits and related expenses for permanent employees assigned to the receivership management function.

There were significant spending variances in six of the seven major expense categories during the second quarter in the Receivership Funding component of the 2011 Corporate Operating Budget:

• Outside Services - Personnel ($232.8 million, or 35 percent, less than budgeted).
• Travel ($7.5 million, or 31 percent, less than budgeted).
• Buildings ($71.5 million, or 58 percent, less than budgeted).
• Equipment ($4.5 million, or 45 percent, less than budgeted).
• Outside Services - Other ($4.0 million, or 32 percent, less than budgeted).
• Other Expenses ($58.0 million, or 63 percent, less than budgeted).

All of these variances were attributable to the fact that there were fewer insured institution failures during the first six months of the year than budgeted in the Receivership Funding budget.

Significant Spending Variances by Division/Office¹

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

• DRR spent $374.8 million, or 38 percent, less than budgeted, mostly due to less-than-budgeted spending for resolution and receivership activities, as explained above.

• DIT spent $9.3 million, or 7 percent, less than budgeted.   The majority of the variance ($6.0 million) occurred in DIT’s Receivership Funding budget and was primarily due to lower-than-budgeted resolutions activity.  The variance in DIT’s Ongoing Operations budget was largely attributable to delays in planned major software maintenance purchases.

• OIG spent $7.3 million, or 33 percent, less than budgeted.  This variance included approximately $4.4 million in under spending for Outside Services – Personnel due to the MLR threshold change included in DFA, which significantly reduced the number of MLRs that OIG is required to conduct.

• CFI spent $7.2 million, or 46 percent, less than budgeted.  This variance was attributable to lower-than-budgeted spending for contract services, as explained above.

• The CIO Council spent $5.8 million, or 22 percent, more than budgeted.  This variance reflected expenses for unbudgeted projects to support implementation of the new orderly liquidation authority given to the FDIC under DFA and several other unfunded projects.  The overspending occurred after the CFO agreed to allocate additional funds to the CIO Council during the mid-year budget review.

• The Executive Support Offices spent approximately $3.2 million, or 19 percent, less than budgeted.  This variance was largely due to delays in a public education campaign on overdraft programs by OPA.

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