III. Budget Results - Third Quarter 2005

Note: Significant spending variances for the nine months ending September 30, 2005, are defined as those that exceed the YTD budget by $1 million and represent more than two percent of a budget category or the total budget for a division/office, or those that are under the YTD budget by more than $2 million and represent more than four percent of a budget category or the total budget for a division/office.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were three Major Expense Categories in which a significant spending variance occurred through the third quarter in the Ongoing Operations component of the Corporate Operating Budget:

• Outside Services-Personnel expenditures were $7 million, or seven percent, less than budgeted, primarily due to lower-than-anticipated general services required for the resolution and receivership program, delays in spending for new training courses that were planned for development, and reduced maintenance costs for the Central Data Repository due to a delay in the originally planned implementation date.

• Equipment expenditures were $7 million, or 24 percent, less than budgeted, primarily due to a delay in the purchase of a mainframe processor and related software and telecommunications equipment.

• Outside Services-Other expenditures were $2 million, or 22 percent, less than budgeted, primarily due to personal property insurance costs that will not be paid until later in the year. In addition, payments for telecommunications services are being delayed due to discrepancies found in billings.
  

Receivership Funding

There were three Major Expense Categories in which a significant spending variance occurred through the third quarter in the Receivership Funding component of the Corporate Operating Budget:

• Salaries expenditures were $3 million, or nearly 100 percent, less than budgeted, because there was almost no overtime work performed due to the low resolution activity through the third quarter.

• Outside Services-Personnel expenditures were $40 million, or 86 percent, less than budgeted, because there was less resolution activity than budgeted through the third quarter.

• Travel expenditures were $3 million, or 82 percent, less than budgeted, because there was less resolution activity than budgeted through the third quarter.

Significant Spending Variances by Division/Office¹

There were six organizations that had Significant Spending Variances through the third quarter:

• The Division of Resolutions and Receiverships spent $44 million, or 43 percent, less than budgeted. This was largely because expenses for resolution activities were substantially lower than budgeted for contractual services, travel, and overtime through the third quarter.
  
• The Legal Division spent $11 million, or 15 percent, less than budgeted. This was primarily because outside counsel services were about $10 million lower than budgeted through the third quarter in the Receivership Funding portion of the Legal Division’s budget due to less-than-budgeted resolution and receivership management workload.
  
• The Division of Information Technology (DIT) spent $9 million, or 7 percent, less than budgeted through the third quarter in its combined Corporate Operating ($3.1 million or 3 percent under) and Investment ($5.9 million or 38 percent under) Budgets. In the Corporate Operating Budget, DIT spent $6.4 million less than budgeted in the equipment category, primarily due the delays in purchasing mainframe and IT communication items. This was largely offset by overspending in Outside Services – Personnel category due to the early startup of contract consolidation that was not funded in the current year. The Investment Budget spending variance was due to lower-than-estimated spending to date for the Infrastructure Modernization and New Financial Environment projects. A detailed quarterly report on the status of those projects is provided separately to the Board by the Capital Investment Review Committee.

• The Division of Administration spent $8 million, or 5 percent, less than budgeted. The under spending variances were $5.4 million, $1.5 million, and $1.5 million for the Ongoing Operations component, Receivership Funding component, and Investment projects, respectively. The spending variance in Ongoing Operations was primarily due to a delay in the payment of personal property insurance costs (they will be paid later in the year), planned contracted services that were delayed and are now expected to be incurred and paid in the fourth quarter, and field office build-outs that were completed at significantly lower than projected costs.

• The Division of Insurance and Research spent $3 million, or 10 percent, less than budgeted. This was largely due to reduced maintenance costs for the Central Data Repository due to a delay in the originally planned implementation date.

• The Corporate University spent $2 million, or 23 percent, less than budgeted. This was largely because of delays in spending for new training courses that were planned for development.
  

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