|
|
III.
Budget Results - Second Quarter 2013
Approved
Budget Modifications
The 2013 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2013 Corporate Operating Budget. The following budget reallocations were made during the second quarter in accordance with the authority delegated by the Board of Directors. None of these modifications changed the total 2013 Corporate Operating Budget as approved by the Board in December 2012.
- In May 2013, the CFO approved modifications to the Salaries and Compensation budget authority of divisions and offices within the Ongoing Operations and Receivership Funding budget components, based on an analysis of year-to-date spending for salaries, bonuses/lump-sum payments, and fringe benefits. That reallocation realigned existing budget authority among divisions and offices, but resulted in no change to the total corporate budget for either the Ongoing Operations or Receivership Funding budget component.
- In March 2013, the CFO approved the reallocation of $17,154,484 in budget authority within the Ongoing Operations budget component from the Office of Complex Financial Institutions (OCFI) to the Division of Risk Management Supervision (RMS) in conjunction with the transfer of the oversight and monitoring function from OCFI to RMS. A total of 99 authorized positions were also transferred from OCFI to RMS to effect that reorganization. In April 2013, an additional $85,502 in budget authority was reallocated within the Ongoing Operations budget component from OCFI to RMS to fund the transfer of an additional employee to RMS to provide administrative support to the field employees transferring. These reallocations were effective on May 1.
- In May 2013, the CFO approved a reallocation of $30,000 in budget authority within the Ongoing Operations component from the Corporate Unassigned budget to the Chairman’s Office for the travel and supplies associated with the Workplace Excellence (WE) program managed by the Internal Ombudsman.
- In May 2013, the CFO approved a reallocation of $2,200,000 in budget authority within the Ongoing Operations component to the CIO Council from the Corporate Unassigned budget. This reallocation provided additional budget authority to purchase enterprise software licenses for the Information Management and Compliance (IMAC) project. Funding for these licenses was originally budgeted in 2012, but that budget authority lapsed on December 31, 2012 as the funds were not spent.
- In June 2013, the CFO approved reallocations within the Ongoing Operations and Receivership Funding components based upon a comprehensive mid-year reassessment of actual and projected spending for the year by each division and office. The budgets for all major expense categories and most divisions and offices were adjusted in this reallocation. The Division of Information Technology (DIT) received over $7 million in additional funding in its Ongoing Operations budget, largely for recommended IT security enhancements. Offsetting budget reductions included $4 million from the Office of the Complex Financial Institutions (OCFI), $1 million from the Division of Administration (DOA), and $1 million from the Division of Insurance and Research (DIR) within the Ongoing Operations budget component.
Following that budget reallocation, the contingency reserves remaining within the Corporate Unassigned budgets for the Ongoing Operations and the Receivership Funding budget components were $25,839,393 and $14,343,746, respectively.
Approved Staffing Modifications
The 2013 Budget Resolution delegated to the CFO the authority to modify approved 2013 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2013 Corporate Operating Budget. The following changes were approved by the CFO in accordance with the authority delegated to him by the Board of Directors:
- As noted above, the CFO approved the transfer of 99 authorized permanent positions to RMS from OCFI to support the realignment of the oversight and monitoring function between the two organizations.
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, 2013, 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 was a significant spending variance in four major expense category during the second quarter in the Ongoing Operations component of the 2013 Corporate Operating Budget:
- Outside Services - Personnel expenditures were $14 million, or 11 percent, less than budgeted. The CIO Council spent $4 million less than budgeted due to adjusted time schedules for development projects and client discretionary enhancements. The Division of Resolutions and Receiverships (DRR) spent $3 million less than budgeted due to lower than anticipated expenses for business process improvements, IT Security, web business support services and data contracts. In addition, delays in starting projects in its Complex Financial Institutions (CFI) branch contributed to the variance. OCFI spent $3 million less than budgeted due to a project cancellation and the successful renegotiation of a contract’s monthly payment terms to a lower amount. Corporate University (CU) spent $1 million less than budgeted, largely due to lower-than-projected expenses for various training and development projects because selected tasks are now being performed by FDIC staff.
- Travel expenditures were approximately $8 million, or 15 percent, less than budgeted. This variance was largely due to vacancies in non-permanent field examination positions in RMS and DCP that resulted in lower regular duty and relocation travel expenses, and less travel than planned for Financial Institution Specialists in the Corporate Employee Program (CEP) in CU.
- Building expenditures were approximately $3 million, or 8 percent, less than budgeted. This variance was largely due to budgeted capital improvement projects for which significant work has not yet been completed and lower-than-anticipated costs for the build-out of space leased at the NY Avenue building in conjunction with the 550 HVAC Retrofit project.
- Equipment expenditures were approximately $18 million, or 46 percent, less than budgeted. DIT spent $16 million less than budgeted, largely due to the delay of some Technical Refresh program purchases to the second half of the year and a delay in receiving from a corrected invoice from a vendor for expenses associated with a large software maintenance contract.
Receivership
Funding
The Receivership Funding component of the 2013 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.
There were significant spending variances in two of the seven major expense categories during the first quarter in the Receivership Funding component of the 2013 Corporate Operating Budget:
- Salaries and Compensation ($7 million, or 8 percent, less than
budgeted).
- Outside Services-Personnel ($96 million or 33 percent, less than budgeted).
- Travel ($6 million or 51 percent, less than budgeted).
- Buildings ($3 million or 16 percent, less than budgeted).
- Other Expenses ($9 million or 44 percent, less than budgeted).
The variance in the Outside Services – Personnel expense category was attributable to less costly resolutions expenses and lower-than-anticipated asset management and marketing costs incurred under Receivership Assistance Contracts (RAC) and contracts for Due Diligence, Owned Real Estate (ORE), Loan Servicing, Loss Share, Securitization and Valuations. The variance in the Other Expenses Category was attributable to lower-than-projected time required to transfer the banking operations of failed financial institutions to purchasing institutions and to record post-closing expenses following the settlement process with assuming institutions. The variance in the Salaries and Compensation category was attributable to vacancies in budgeted non-permanent positions. The variance in the Travel category was due to lower-than-anticipated travel expenses because of fewer closings and less time spent at closings than budgeted. The variance in the Buildings expense category occurred as a result of shorter-than-expected operations at the site of failed banks.
Significant
Spending Variances by Division/Office1
Five organizations had a significant spending variance through the end of the second quarter:
- DRR spent $119 million, or 31 percent, less than budgeted, mostly due to less-than-budgeted spending for resolution and receivership management activities. Over recent quarters, the size of financial institution failures has been below levels anticipated during the 2013 budget formulation process.
- DIT spent $17 million, or 13 percent, less than budgeted, largely due to the timing of some equipment purchases. DIT anticipates fully spending its equipment budget by the end of the year.
- CIO Council spent $6 million, or 17 percent, less than budgeted due to adjusted time schedules for certain development project and changes in planned OCFI development projects.
- DCP spent $5 million, or 6 percent, less than budgeted. This variance was largely attributable to vacancies in budgeted non-permanent field examination positions and lower-than-budgeted examination travel expenses resulting from those vacancies.
- OCFI spent $4 million, or 19 percent, less than budgeted. This variance was attributable to lower-than-budgeted spending for contractual services and slower-than-projected hiring to fill budgeted positions.
Other Matters
An analysis of 2013 funding requirements for employee pay and benefits was completed in accordance with the 2013 Budget Resolution. The analysis determined that those costs had been over-estimated during the preparation of the 2013 Corporate Operating Budget by approximately $9 million in the regular salaries account of the Ongoing Operations budget component (largely offset by an under-estimate of $8 million in fringe benefits in that budget component) and $1 million in the Receivership Funding budget component. Because the differences were relatively inconsequential, the CFO elected not to exercise his delegated authority to adjust the 2013 Corporate Operating Budget.
___________________________________________________
1Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.
|
