III. Budget Results - Fourth Quarter 2005

Note: Significant spending variances for the twelve months ending December 31, 2005, are defined as those that either: (1) exceed by any amount the authorized annual budget for a major expense category or the total budget for a division/office; or (2) are under the authorized annual budget for a major expense category or division/office by an amount that exceeds $1 million and represents more than 3 percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were six major expense categories in which a significant spending variance occurred for the full year in the Ongoing Operations component of the Corporate Operating Budget:

• Salary & Compensation expenditures were approximately $30 million, or 4 percent, less than budgeted, primarily due to positions that were budgeted but subsequently abolished as a result of buyout separations.

• Outside Services-Personnel expenditures were approximately $13 million, or 9 percent, less than budgeted, primarily due to lower-than-budgeted payments to the Department of Justice for litigation services, limited spending for general services in support of the resolution and receivership program, miscoded $1.5 million in costs to the Outside Services-Other expense category, and delayed spending for new training courses that were planned for development.

• Buildings expenditures were $3 million, or 3 percent, greater than budgeted, primarily due to unanticipated building improvement needs, energy cost increases, and higher property taxes on owned buildings.
  

• Equipment expenditures were $5 million, or 12 percent, less than budgeted, primarily due to a delay in the purchase of a mainframe processor and related software.

• Outside Services-Other expenditures were $0.1 million, or 1 percent, greater than budgeted, primarily due to an increase in the number of hand-held devices and phone lines, higher-than-projected usage of data lines for examinations, and the miscoding of $1.5 million in services to this expense category. These overages were partially offset by printing and postage cost savings and reduced cost from the temporary closure of the cafeteria at Virginia Square.

• Other Expenses expenditures were $2 million, or 18 percent, less than budgeted, primarily due to the Division of Supervision and Consumer Protection not accruing for conferences held in late 2005 and the shift to in-house training.

Receivership Funding

There were four major expense categories in which a significant spending variance occurred through the fourth quarter in the Receivership Funding component of the Corporate Operating Budget. All of these variances were attributable to the limited receivership and resolution activity that occurred during the year. The major expense categories were:

• Salary & Compensation¹ ($3 million, or 99 percent, less than budgeted),

• Outside Services-Personnel ($53 million, or 86 percent, less than budgeted),

• Travel ($4 million, or 81 percent, less than budgeted), and

• Buildings ($2 million, or 91 percent, less than budgeted).

Significant Spending Variances by Division/Office²

There were six organizations that had a significant spending variance through the fourth quarter:

• The Division of Resolutions and Receiverships spent $63 million, or 47 percent, less than budgeted. This was largely because expenses for contractual services, travel, and overtime were lower than budgeted during the year due to the low level of resolution and receivership management workload.

• The Division of Administration spent $17 million, or 7 percent, less than budgeted, including under spending of $7 million for Ongoing Operations, $2 million for Receivership Funding, and $8 million for approved Investment projects. The spending variance in Ongoing Operations was primarily due to buyout separations, delays in filling authorized vacancies, and printing and postage savings. Expenses for the Virginia Square – Phase II project were lower than estimated for the calendar year 2005, although this unused budget authority will continue to be available for use in future years, if necessary.

• The Legal Division spent $17 million, or 17 percent, less than budgeted. This was primarily because outside counsel services were about $13 million lower than budgeted during the year in the Receivership Funding portion of the Legal Division’s budget due to the low level of resolution and receivership management workload.

• The Division of Insurance and Research spent $4 million, or 11 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 Office of Inspector General spent $3 million, or 9 percent, less than budgeted. This was largely attributed to less reliance on contractors than had been initially anticipated for audit work and the decision not to fill 27 authorized positions.

• The Division of Finance (DOF) spent slightly more than budgeted ($4 thousand) during 2005 due to spending more than estimated on the Asset Servicing Technology Enhancement Project (ASTEP). However, DOF spending on ASTEP did not cause the overall ASTEP project to exceed its 2005 spending estimate, nor was the DOF overspending a true variance. The resolution approving the ASTEP investment project budget permitted the project manager to shift authorized funds among divisions and years, and it is not anticipated at this time that the ASTEP project will exceed its total authorized multi-year budget. A detailed quarterly report on the status of IT Investment projects, including the ASTEP project, is provided separately to the Board by the Capital Investment Review Committee.
  

___________________________________________________
¹Overtime is the only account in the Salary & Compensation expense category of Receivership Funding in 2005. All staff salaries are budgeted and expensed in the Ongoing Operations budget component.

²Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.