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2006 Annual Report

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I. Management's Discussion and Analysis - The Year in Review

Effective Management of Strategic Resources

The FDIC recognizes that it must effectively manage its human, financial, and technological resources in order to successfully carry out its mission and meet the performance goals and targets set forth in its annual performance plan. The Corporation must align these strategic resources with its mission and goals and deploy them where they are most needed in order to enhance its operational effectiveness and minimize potential financial risks to the DIF. Major accomplishments in improving the Corporation's operational efficiency and effectiveness during 2006 are described on the following pages.

Human Capital Management

The FDIC's employees are its most important resource. The intellectual capital supplied by FDIC employees is the single most important contributor to achieving the Corporation's mission of maintaining public confidence in our nation's financial system. As such, the FDIC strives to be the best employer within the financial regulatory community and pursues human capital programs and strategies that will enable it to attract, develop and retain a highly skilled, diverse, and results-oriented workforce.

The FDIC has a human capital framework that guides its human capital activities. Using this framework as a guide, the Corporation continues to develop and maintain a workforce that is highly functional and cross-trained in multiple disciplines and stands ready to redirect its attention and efforts in response to changes in the banking industry or changes in workload priorities.

During 2006, the FDIC completed the last of its currently-planned workforce restructuring activities. Through the strategic use of voluntary early retirement authority and voluntary separation incentive payments, most of the remaining restructuring was accomplished voluntarily. The Corporation also completed a very successful internal placement process that reassigned remaining surplus staff to vacancies in other FDIC organizations.

Corporate Employee Program

Development and implementation of the new Corporate Employee Program (CEP) continued in 2006. The program emphasizes cross-training of employees at all levels to provide greater flexibility to be able to respond to changes in workload as well as unexpected external events. During the past year, the primary focus was on the implementation of a new recruiting strategy for entry-level employees and refinement of the first-year training program under which new employees are exposed to each of the Corporation's three major business lines. By the end of 2006, almost 200 employees had begun the three-year career internship and training program that is the core component of the CEP and will in the future constitute the primary source of new employees for the Corporation's business divisions.

Employee Learning and Growth

The Corporation emphasizes continuous employee learning and growth. During 2006, the Corporation finalized plans for the 2007 implementation of the new Professional Learning Account program that will give employees a greater role in planning their career development and provide substantially increased funding for external training. The Corporation also began to increase its emphasis on industry-recognized professional certifications and completed pilot tests of two new internally-developed certificate programs covering Bank Secrecy Act/Anti-Money Laundering, and Resolutions and Receivership Claims. A career path for large complex bank specialists will be explored, and training requirements for this specialty will be evaluated. As these and other programs are implemented, a database of FDIC employee skills will track and monitor the availability of specialized human capital resources.

Corporate University expanded its support of external certificate programs to provide staff the opportunity to build skills as well as earn professional credentials. The FDIC now pays exam fees and preparation class fees for eligible students pursuing the following external certificate programs:

  • Certified Anti-Money Laundering Specialist (CAMS);
  • Certified Fraud Examiner (CFE);
  • Certified Information Systems Auditor®(CISA®);
  • Certified Regulatory Compliance Manager (CRCM);
  • Chartered Financial Analyst® (CFA®); and
  • Financial Risk Manager® (FRM®).

Succession Management

The FDIC will have the opportunity over the next decade to substantially reshape its workforce in conjunction with the projected retirements of a large number of employees from the "baby boom" generation. To proactively plan for and address these projected retirements, the FDIC developed two succession management programs in 2006: the Executive Talent Review and the Corporate Executive Development Program. These programs were designed to assess executive leadership strength, identify potential skill set shortages or gaps and then institute strategies for closing these gaps, including rigorous leadership development programs. In late 2006, the FDIC's senior leadership conducted an initial "talent review" of all of its executive managers to determine where there may be gaps in the availability and skills of qualified successors for key executive positions. This process identified a number of "at risk" positions – those in which the incumbents were likely to leave in the near future with no or few obvious internal candidates available to replace them. In 2007, the Corporation will develop strategies to fill these potential succession gaps for positions with a high risk of loss in the near term. The talent review process will also be extended to assess potential succession in management gaps for supervisory and managerial positions as well as senior technical professionals.

Pay-for-Performance

In January 2006, the FDIC began implementation of the new 2006-2009 Compensation Agreement that had been negotiated with its employee union during 2005. This included a revised pay-for-performance (PFP) system that provides for graduated base pay increases and potential lump sum bonuses based exclusively on assessments of total employee performance. The PFP system is entirely performance-based; only those employees who meet all of their performance standards are eligible for pay increases.

Employee Engagement

The FDIC's human capital programs and strategies are continually evaluated to ensure that the FDIC remains an employer of choice and that all employees feel engaged and aligned with the Corporation's mission critical functions. To help assess workload alignment and employee engagement, all FDIC employees were encouraged to participate in the 2006 Federal Human Capital Survey administered by the Office of Personnel Management. This survey provides relative measures of employee satisfaction and engagement on a number of dimensions. In 2007, the FDIC will analyze the results and implement action plans to address any potential issues that employees identify as inhibitors to strong employee engagement.

Management of Financial Resources

The FDIC's operational expenses are largely paid from the DIF, and the Corporation seeks to operate in a consistently efficient and cost effective manner in order to fulfill its fiduciary responsibilities. To that end, the Corporation engages annually in a rigorous planning and budgeting process that is designed to ensure that budgeted resources are properly aligned with projected workload and business priorities. In 2006, the FDIC continued to enhance the cost management information available to managers in conjunction with the implementation of the New Financial Environment, its new accounting system. In 2007, the FDIC will continue to explore how best to utilize this enhanced cost management data to promote good stewardship of the Corporation's resources.

Managing Facility-Related Costs

In the first quarter of 2006, the Corporation completed construction of its Virginia Square Phase II facility in Arlington, VA. The project was completed on time and under budget. Approximately 800 employees in three leased facilities in Washington, DC, were relocated to the expanded facility in Arlington. Successful completion of this initiative to build and relocate staff to owned space will save the Corporation an estimated $89 million (net present value) over 20 years, compared to the projected cost of extending the previous leasing agreements.

Information Technology Management

Information technology (IT) resources are one of the most valuable assets available to the FDIC in fulfilling its corporate mission. The FDIC operates a nationwide computing network and maintains approximately 270 application systems through which employees perform their duties.

IT Transformation

For the past several years, the Corporation has been engaged in a major effort to transform and improve its IT program. In 2006, the IT program continued to evolve as it continued to implement key elements of its transformation plan:

  • The organization fully adopted the Rational Unified Process® as its new system development life cycle methodology and customized it to meet the FDIC's unique IT project environment.
  • The Division of Information Technology (DIT) adopted a new internal control framework based upon the international standard known as CobiT (Control Objectives for Information and Related Technology).
  • DIT continued implementing a new sourcing strategy in which it partnered with the private sector and other federal agencies to provide IT support services using performance-based, results-driven contracts.

E-Exam Programs

In 2006, the FDIC also implemented an e-Exam Policy, including related security procedures, for use in conducting examination activities at institutions utilizing an electronic exchange of documents/data with the FDIC. A significant component of the e-Exam Policy involves the flexibility to increase the amount of examination work conducted off-site. Factors considered in the decision to utilize this program include the type and extent of the information available, the institution's risk profile, and management's willingness to transfer examination documents electronically.

E-Government

The FDIC continued to collect quality and timely information in 2006 with the use of FDICconnect, the secure Web site that facilitates electronic communication with FDIC-insured institutions. In 2006, over 400,000 transactions were completed by financial institutions using FDICconnect.

Central Data Repository

The Federal Financial Institutions Examination Council (FFIEC), which includes the FDIC, won a 2006 award from Government Computer News for outstanding and innovative use of IT in government for the successful launch of the new Central Data Repository (CDR) to collect Call Report data using XBRL (eXtensible Business Reporting Language). The CDR project was also awarded the Chief Information Officer's Top 100 award for its outstanding work using XBRL for financial reporting.

Enhanced Information Security Program

The FDIC's information security program seeks to proactively assure the integrity, confidentiality and availability of corporate information requiring an ongoing commitment by employees throughout the organization. In 2006, the information security program continued its ongoing cycle for assessing risks, developing and implementing effective security procedures and monitoring the effectiveness of those procedures.

Corporate Privacy Program

The FDIC continued to enhance its IT Privacy Program in 2006 with an emphasis on protecting personally identifiable information (PII) from unauthorized use, access, disclosure or sharing, and protecting associated information systems from unauthorized access, modification, disruption or destruction. Initiatives undertaken during the year included the following:

  • Developing an overarching privacy directive.
  • Developing a strategy for the protection of PII processed, stored, transmitted or accessed by FDIC contractors, and ensuring appropriate assessment of the security of data.
  • Continuing the review and remediation of PII in FDIC application systems.
  • Identifying all contracts that process or use PII or other sensitive information, ensuring that updated privacy and nondisclosure clauses are included.
  • Continuing to participate in the Office of Management and Budget Privacy Work Group.

Emergency Preparedness Program

During 2006, the FDIC continued work on its Emergency Preparedness Program, and made improvements to the Emergency Response Plan (ERP) and Business Continuity Plan (BCP). Completed initiatives included the development of a computer-based instruction module on emergency preparedness for all FDIC personnel to be activated in early 2007; expansion and improvement of FDIC alternate site facilities; expansion of FDIC emergency notification systems to all regional and area offices; revision of both the ERP and BCP; and participation in the Federal government's Forward Challenge simulation exercise. Other accomplishments included the conduct of additional classroom training on emergency preparedness for employees, contractors and floor marshals; shelter-in-place and evacuation drills; and tabletop exercises at all headquarters and regional office locations. Disaster recovery testing of FDIC's key information technology resources was also performed.



Last Updated 04/04/2007 communications@fdic.gov