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Chief Financial Officer's (CFO) Report to the Board

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III. Budget Results - Fourth Quarter 2013

Approved Budget Modifications

The 2013 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to reallocate funds within the 2013 Corporate Operating Budget, provided that such reallocations did not increase the total amount approved for either the Ongoing Operations or Receivership Funding budget components.  The following budget reallocations were approved during the fourth quarter in accordance with the authority delegated by the Board of Directors.  None of these modifications changed total approved budgets for either the 2013 Ongoing Operations or Receivership Funding budget components or the overall 2013 Corporate Operating Budget approved by the Board.

  • In November 2013, the CFO approved a reallocation of $32,000,000 in budget authority within the Receivership Funding budget component from the Corporate Unassigned contingency reserve ($14,343,746) and the Division of Resolutions and Receiverships (DRR) budget ($17,656,254) to the Legal Division budget.  This reallocation increased the Outside Services – Personnel budget of the Legal Division from $118,984,773 to $150,984,773 to ensure that sufficient funds were available to cover outside counsel expenses resulting from the increased number of professional liability cases that are being presented to and approved by the Board (approximately $12.6 million of this amount was not spent by year-end).  In addition, the CFO approved the reallocation of $1,300,000 in budget authority within the Ongoing Operations component from the Corporate Unassigned contingency reserve to the Salary and Compensation budgets of the Division of Administration (DOA) ($600,000), Corporate University (CU) ($350,000), Information Security and Privacy Staff (ISPS) ($150,000), Office of Communication (OCOM) ($100,000), and the Office of the Chief Information Officer (CIO) ($100,000) for salary and fringe benefit costs that were greater than previously projected. 
  • In December 2013, the CFO approved the reallocation of $103,500 in budget authority within the Ongoing Operations budget of the Executive Offices to provide additional funds for the Chairman’s Office and the Office of the CIO travel budgets to cover regular duty travel expenses planned by those offices.

Following these budget reallocations, the unused amounts remaining within the Corporate Unassigned contingency reserve for the Ongoing Operations budget component was $24,406,393.  The November reallocation fully utilized the remaining Receivership Funding contingency reserve.

 Spending Variances

Significant spending variances by major expense category and division/office are discussed below.  Significant spending variances for the year ending December 31, 2013, are defined as those that either (a) exceed the annual budget for a major expense category or total division/office budget by any amount, or (b) are under the annual budget for a major expense category or division/office by an amount that exceeds $1 million and represents more than three 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 all major expense categories in the Ongoing Operations component of the 2013 Corporate Operating Budget.

  • Salaries and Compensation expenditures were approximately $70 million, or 6 percent, less than budgeted.  The Division of Risk Management Supervision (RMS) ($19 million), the Legal Division ($12 million), the Division of Consumer Protection (DCP) ($6 million), the Division of Insurance and Research (DIR) ($6 million), the Division of Information Technology (DIT) ($6 million), and DRR ($5 million) all spent less than budgeted in this expense category, primarily due to vacancies in budgeted positions.  Most of the variances were related to authorized non-permanent positions.
  • Outside Services – Personnel expenditures were approximately $57 million, or 20 percent, less than budgeted.  Approximately $16 million of this variance was attributable to unused budget authority in the Corporate Unassigned contingency reserve.  The CIO Council spent $12 million less than budgeted, largely due to lower-than-planned spending on discretionary systems development projects, and the Information Management and Compliance (IMAC) project.  The Office of Complex Financial Institutions (OCFI) spent $4 million less than budgeted due to the cancellation of one planned project and the termination of another existing project.  DOA spent $4 million less than budgeted, primarily due to significant savings from a new Acquisition Services contract with decreased hourly rates charged; lower-than-anticipated contract expenses for services associated with the Student Residence Center; a decline in administrative support requirements performed by the contractors; significant savings from using FDIC staff instead of contractors to prepare pre-retirement estimates and updates to the FDIC Human Capital plan; and the cancellation of training seminars due to low attendance.  In addition, DRR spent $3 million less than budgeted, primarily due to delays in initiating projects in its Complex Financial Institutions Branch, and DIT spent $3 million less than budgeted because expected expenses were not incurred for transition to new Information Technology Application Services (ITAS) contracts due to delays in awarding those contracts.
  • Travel expenditures were approximately $19 million, or 18 percent, less than budgeted.  RMS spent $7 million less than budgeted and DCP spent $2 million less than budgeted, primarily due to vacancies in field examination positions that resulted in lower regular duty and relocation travel expenses.  The Corporate Employee Program in Corporate University (CU-CEP) spent $2 million less than budgeted for regular travel for Financial Institution Specialists.  In addition, DRR spent $2 million less than anticipated for regular duty travel and relocation costs, and OCFI spent nearly $2 million less than budgeted for relocation costs during the year.
  • Building expenditures were approximately $11 million, or 11 percent, less than budgeted.  This variance was largely due to unanticipated contractor delays in the Student Residence Center pipe replacement project; delays in awarding a contract for the Building Management System (BMS) project in the San Francisco Regional Office; a change in approach to the design process for the 550 Building HVAC replacement project; lower-than-projected utilities consumption; and successful negotiations with landlords to pay for field office build-outs and architecture and engineering (A&E) expenses as part of the lease agreement.
  • Equipment expenditures were approximately $6 million, or 7 percent, less than budgeted.  DOA spent $5 million less than budgeted due to delays in the deployment of the new Personal Identification Verification (PIV) Card access control system; decisions to repair and refurbish existing furniture, fixture and equipment (FF&E), whenever possible, rather than replace it; and reduced lease costs due to the conversion of a large number of copiers from lease to purchase.
  • Outside Services – Other expenditures were approximately $3 million, or 15 percent, less than budgeted because of lower-than-expected mail-related services; a reduction in catering expenses for meetings and conferences; increased use of in-house printing services; and successful efforts to reduce the quantities of printed materials ordered.
  • Other Expenses were approximately $4 million, or 27 percent, less than budgeted.  The variance reflected substantial underutilization by employees of the funds budgeted for Professional Learning Accounts and lower-than-projected expenses for the purchase of corporate office supplies by DOA.

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 salaries, benefits, and related expenses for permanent employees assigned to the receivership management function.

There were significant spending variances in all major expense categories in the Receivership Funding component of the 2013 Corporate Operating Budget:

  • Salaries and Compensation ($19 million, or 10 percent, less than budgeted).  This variance was attributable to vacancies in budgeted non-permanent positions, primarily in the temporary satellite offices. 
  • Outside Services-Personnel ($160 million, or 27 percent, less than budgeted).  This variance was attributable to less costly resolutions and lower-than-anticipated expenses for asset management and marketing costs under Receivership Assistance Contracts (RACs), contractual support for the review of loss share agreements, and due diligence, owned real estate (ORE), loan servicing, and securitization services. 
  • Travel ($13 million, or 57 percent, less than budgeted).  The variance in the Travel category was due to fewer closings than anticipated and fewer trips needed for loss share agreement oversight and FDIC-managed loans.
  • Buildings ($8 million, or 22 percent, less than budgeted).  This variance occurred as a result of shorter-than-expected operations at the site of failed banks.
  • Equipment ($5 million, or 45 percent, less than budgeted).  This variance was due to lower-than-anticipated costs for online information services, software purchases, and software maintenance costs.   
  • Outside Services – Other ($2 million, or 25 percent, less than budgeted). The variance in the Outside Service – Other category was due to lower than anticipated costs for insurance, advertising, mail, and bank service fees.
  • Other Expenses ($21 million, or 51 percent, less than budgeted).  The variance in the Other Expenses category was attributable to the disposition of failed bank assets and the transfer of banking operations to DRR’s Dallas office faster than expected at many failed bank sites.

 Significant Spending Variances by Division/Office1

All divisions and offices had significant spending variances from their 2013 budgets.

  • DRR spent $197 million, or 26 percent, less than budgeted.  Approximately $186 million of this under spending was in the Receivership Funding budget component due to lower-than-anticipated resolutions and receivership workload.
  • The Legal Division spent $38 million, or 12 percent, less than budgeted.  Approximately half of this variance ($19 million) was due to under spending in the Salaries and Compensation expense category ($12 million in the Ongoing Operations budget component and $7 million in the Receivership Funding budget component), largely due to vacancies in budgeted non-permanent positions and slower-than-projected hiring to fill those vacancies.  Most of the remainder of the variance reflected under spending for outside legal services in the Receivership Funding budget component.
  • RMS spent $29 million, or 5 percent, less than budgeted.  This variance was largely attributable to vacancies in budgeted non-permanent examination positions and lower-than-budgeted examination travel expenses resulting from those vacancies.
  • DOA spent $27 million, or 10 percent, less than budgeted.  In its Ongoing Operations budget, this variance was largely attributable to lower-than-budgeted spending for facilities expenses, equipment, and contractor support.  In its Receivership Funding budget, the variance was attributable to lower-than-projected contract expenses to support bank closings and related activities.
  • DIT spent $27 million, or 10 percent, less than budgeted.  This variance was largely attributable to lower-than-projected expenses to support failed bank closings and vacancies in budgeted positions.
  • The CIO Council spent $10 million, or 14 percent, less than budgeted.  This variance was largely due to lower-than-expected spending on discretionary systems development projects and the IMAC project.
  • DCP spent $9 million, or 5 percent, less than budgeted.  This variance was primarily attributable to vacancies in budgeted non-permanent examination positions and lower-than-budgeted examination travel expenses resulting from those vacancies.
  • OCFI spent $8 million, or 21 percent, less than budgeted.  This variance was attributable to lower-than-budgeted spending for contractor services, vacancies in budgeted positions and lower-than-expected spending for relocation expenses.
  • DIR spent $7 million, or 15 percent, less than budgeted, primarily attributable to vacancies in budgeted positions and slower-than-projected hiring to fill those vacancies.
  • CU spent $6 million, or 14 percent, less than budgeted, including under spending of $4 million in its CEP budget (CU-CEP) and $2 million in its regular organizational budget (CU-Corporate).  The CU-CEP variance was primarily due to lower-than-budgeted travel expenses for FISs in the CEP and the cancellation of one scheduled CEP class that reduced spending for both Salaries and Compensation (including overtime) and Travel.  The CU-Corporate variance was primarily due to lower-than-projected expenditures for budgeted projects in the Dallas Learning Center and the Schools of Supervision, Insurance, Leadership Development, and Corporate Operations.
  • The combined Executive Support Offices spent approximately $6 million, or 14 percent, less than budgeted.  This variance was mostly attributable to lower-than-budgeted spending for contract services by the Office of Corporate Risk Management and the Office of Minority and Women Inclusion and slower-than-projected hiring to fill budgeted positions.
  • The Division of Finance (DOF) spent $5 million, or 12 percent, less than budgeted.  This variance was attributable to vacancies in budgeted positions, slower-than-projected hiring to fill those vacancies, and lower-than-budgeted spending for contractor accounting and auditing services.
  • The Office of Inspector General spent $4 million, or 11 percent, less than budgeted because of vacancies in budgeted positions and lower-than-projected travel expenses.
  • The Executive Offices spent $1 million, or 9 percent, less than budgeted due largely to lower-than-projected hiring to fill vacant authorized positions.
  • The Corporate Unassigned contingency reserve had $24 million in unused budget authority remaining at the end of the year.  That unused budget authority lapsed on December 31, 2013.

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





Last Updated 03/31/2014 dofbusinesscenter@fdic.gov

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