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1997 Annual Report

Internal Operations

The FDIC continued to emphasize improving organizational and operational efficiency in 1997. Key functional areas were realigned and staff size further reduced as the banking industry remained strong and the FDIC’s projected workload continued to decline.

Focusing on Planning and Efficiency

The FDIC in 1997 updated its Strategic Plan for submission to Congress and the Office of Management and Budget, as required by the Government Performance and Results Act (GPRA). The plan, originally approved in 1995 by the Board of Directors as a foundation for the agency’s corporate planning process, provided a clear strategic vision for the FDIC and focuses on managing risk and minimizing the effect of institution failures.

  Division of Finance employees graphic
Division of Finance employees Joseph Malloy and Gisele Jones helped monitor the "buyout" used to shrink the FDIC workforce.

The GPRA also requires the FDIC to develop an Annual Performance Plan. This plan, which combines the agency’s corporate operating and business plans, defines what will be accomplished during the year to achieve strategic goals and objectives. The plan guides the allocation of FDIC resources to its three major programs–insurance; supervision; and policy, regulation and outreach–and identifies annual goals for measuring performance. A quarterly reporting mechanism was instituted during 1997 to provide senior FDIC management with regular feedback on the Corporation’s actual performance against the measurable performance targets contained in the Annual Performance Plan. The process allows management to evaluate performance and to adjust strategic goals and resource allocations as needed.

One of the major initiatives for 1998 is to develop an automated system that will assist the FDIC in linking its budget to the Strategic Plan and the Annual Performance Plan, in accordance with GPRA requirements.

Controlling Expenses and Reducing Costs

The FDIC's budget is the culmination of the Corporation's annual planning process. Budget and staffing levels are based upon the Annual Performance Plans for each division and office. In 1997, the FDIC continued to make considerable progress in controlling expenses and reducing costs. Actual expenses for 1997 were $1.38 billion– 22 percent less than 1996 spending and 15 percent below the approved 1997 budget. Actual 1997 spending was below budgeted levels primarily due to lower costs for asset liquidation-related contracting and a more rapid pace of staff downsizing.

Employee compensation and benefits were the largest budgeted expenses for 1997, constituting 54 percent of the budget. At the beginning of 1997, a total of 9,151 employees were on the payroll, and targeted staffing for year-end was 8,361. By December 31,1997, the workforce had shrunk substantially below the authorized level to 7,793, primarily due to the consolidation of field operations. As a result, spending for employee compensation and benefits totaled $752 million--17 percent below the $910 million spent for this purpose in 1996 and 13 percent below the approved 1997 budget of $868 million.

Outside services represented the second largest component of total expenses in 1997. Although the FDIC budgeted $429 million for this category, actual 1997 expenses were $330 million, which is 23 percent less than the budgeted amount and 43 percent below the $581 million spent in 1996.

The continued consolidation of field operations also contributed to reduced expenses for buildings and leased space. For 1997, $123 million was spent for buildings, down significantly from the $129 million spent in 1996.

Downsizing and Consolidation

As noted previously, the Corporation continued to shrink the size of its workforce in 1997 due to a decline in workload. Total FDIC staffing in 1997 fell by approximately 15 percent. Staffing for the Division of Resolutions and Receiverships (DRR), which liquidates the assets of failed institutions, fell by over 40 percent during the year.

DRR staffing reductions were accomplished primarily through the expiration of term and temporary appointments and by consolidating field liquidation operations. DRR operations and related Legal Division and other support activities in San Francisco, New York, Chicago, Atlanta, and Franklin, MA, were consolidated into other offices during the year. This was part of a phased, three-year consolidation plan announced the previous year. DRR field operations are expected to be fully consolidated into a single site in Dallas by year-end 1999. In addition, the Division of Finance's field financial activities were consolidated in Dallas in 1997, and three Division of Supervision (DOS) field offices and a Division of Compliance and Consumer Affairs (DCA) satellite office were closed.


Number of Officials and Employees of the FDIC 1996-1997 (year-end)

As a result of the buyout programs initiated in 1995 and 1996, a total of 379 employees left the Corporation during 1997. Another 87 permanent employees elected buyouts in 1997 in lieu of being reassigned to other areas of the country. In late 1997, the Corporation announced that new buyout and early retirement opportunities would be available during 1998 for selected employees in overstaffed divisions and offices.

To cushion the impact of the DRR field consolidation, the Corporation continued to provide job placement and training opportunities to affected employees, and was successful in placing many employees affected by downsizing in positions both inside and outside the Corporation. A total of 138 DRR and Legal Division employees accepted positions in the Dallas office, and more than 200 employees (mostly from DRR) were selected for DOS or DCA examiner positions and training. Many employees also took advantage of the FDIC's expanded Career Transition and Outplacement Program in 1997, which provides job search assistance and resources to employees affected by downsizing.

Compensation and Benefit Changes

Major changes to the Corporation's compensation and benefits program for 1997-1999 were negotiated with the National Treasury Employees Union. An agreement signed in February 1997 covered changes in pay, employee benefits, and reimbursement of travel and relocation expenses for bargaining-unit employees. The FDIC later applied these same changes to executives and other nonbargaining-unit employees.

A key program change is the new pay-for-performance system. Beginning in January 1998, the Corporation will move from a 19-step compensation program to an open range salary structure, with a salary minimum and maximum for each grade. In 1999, the Corporation will discontinue across-the-board salary increases and will link merit pay increases to employees' annual performance ratings.


Internal Controls

During 1997, the FDIC strengthened its internal control program for ongoing operations and management processes. Guidelines were issued to define the responsibilities of FDIC employees in audits, surveys and reviews conducted by the Office of Inspector General and the U.S. General Accounting Office (GAO). The FDIC&'s Office of Internal Control Management also conducted a conference on successful risk management and internal control programs to familiarize FDIC senior management and auditors with current best practices for managing risks in the private sector. Two major internal control activities were completed in 1997–coordination of the GAO audit of the Corporation’s

 

Kevin Glueckert (top) and Andre Galeano of the Division of Supervision graphic
Kevin Glueckert (top) and Andre Galeano of the Division of Supervision display some of the more than 300 applications they reviewed for the agency's "crossover" training program for examiner positions.

financial statements and preparation of the annual Chief Financial Officer’s Act Report, which focused on the operations and internal control programs within each FDIC division and office.

Year 2000 Computer Challenges

The FDIC is committed to ensuring that its computer hardware, software and communications infrastructure will continue to function properly in the Year 2000, when many computer systems will have trouble distinguishing the Year 2000 from 1900. To meet this goal, the FDIC is following a proposal by the GAO calling for rigorous program management and a structured approach.

In 1997, the FDIC distributed internal directives with policy and guidance on Year 2000 issues and conducted a number of awareness briefings for its staff. To identify specific areas needing change, the FDIC inventoried and assessed over 500 of its application systems during the year. The agency also undertook an extensive Year 2000 compliance review of commercial software and other products purchased from vendors. For information about the FDIC’s efforts to ensure Year 2000 compliance by banks (click here).

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Last Updated 02/18/1999 communications@fdic.gov