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III.
Budget Results - First Quarter 2009
Approved
Budget and Staffing Modifications
The 2009 Budget Resolution
delegated to the Chief Financial Officer (CFO) and selected other
officials the authority to make certain modifications to the 2009 Corporate
Operating
Budget. The following budget reallocations were made during the
first quarter in accordance with the authority delegated by the Board
of Directors.
These reallocations did not change the total 2009 Corporate Operating
Budget approved by the Board:
- In
January 2009, the Division of Supervision and Consumer Protection
(DSC) and the Division of Information Technology (DIT) reallocated
budget authority among major expense categories within their
approved budgets. DSC reallocated funds within the Ongoing Operations
budget component among four major expense categories to better
reflect projected expenses by reducing Travel by $1,296,183,
increasing Outside Services – Personnel by $1,081,431,
increasing Outside Services – Other by $143,406, and increasing
Other Expenses $71,346. DIT reallocated $196,198 in budget authority
from the Equipment expense category to the Outside Services – Other
expense category within the Receivership Funding budget component
to correct the misclassification of budget authority for cell
phones.
- In
February 2009, the CFO approved the reallocation of budget authority
within the Salaries and Compensation expense category to ensure
that the awards budget in all divisions and offices, except for
the Office of Inspector General, was consistent with established
corporate practices. Excess funds totaling $1,749,368 were reallocated
to the Corporate Unassigned budget and will be available to meet
new budget requirements that emerge during the year.
- In February 2009,
the CFO approved the reallocation of budget authority to provide
funding for an increase in authorized
staffing for DSC. Funds totaling $1,919,037 were transferred from
the Corporate Unassigned budget in the Ongoing Operations component
to DSC’s Salaries and Compensation budget to provide funding
for the additional staff.
- In
February 2009, the CFO approved the reallocation of $91,456 in
budget authority within the Ongoing Operations component of the
2009 Corporate Operating Budget from the Division of Finance
to the Office of the Ombudsman to realign funding for approved
staffing modifications.
- In March 2009, the
CFO approved the reallocation of $10,131,882 in budget authority
within the Receivership Funding component of
the 2009 Corporate Operating Budget from the Corporate Unassigned
budget to the DIT budget to support the establishment of the temporary
West Coast Satellite Office. Funding was provided for additional
contractor support as well as laptops and other equipment required
in connection with the projected increase in failure workload.
DIT’s Receivership Funding budget was increased by $9,321,939
in Equipment, $512,867 in Outside Services – Personnel, and
$297,076 in Outside Services – Other.
The 2009 Budget
Resolution delegated to the CFO the authority to modify Authorized
2009 Staffing for divisions and offices, as long as those modifications
did not increase the total approved 2009 Corporate Operating
Budget. The following changes were approved by the CFO in accordance
with the
authority delegated to him by the Board of Directors:
- In February 2009,
the CFO approved an increase of 26 positions (16 permanent, 10 non-permanent)
in DSC’s authorized 2009 staffing.
Ten non-permanent positions were approved to address the increasing
workload associated with the Troubled Asset Relief Program (TARP),
the TLGP, and
the increasing number of problem institutions. Fifteen permanent
positions were approved to provide increased oversight of “systemically
important” institutions
and holding companies. The final permanent position was approved
for an Examination Specialist to perform liaison responsibilities
with the
Departments of Justice and Homeland Security on critical infrastructure
protection matters. A budget adjustment was made in conjunction
with this approval.
- In February
2009, the CFO approved a reduction of one authorized position
in the Division of Finance (DOF) based on a
determination that the position was no longer essential to DOF
operations. A budget adjustment was made in conjunction with this
approval.
- In February
2009, the CFO approved the increase of one authorized position
in the Office of the Ombudsman (OO). The additional
position will allow OO to perform critical duties that it was
unable to accomplish with its current authorized staff. A budget
adjustment
was made in conjunction with this approval.
- In March 2009,
the CFO approved an increase of one authorized staff position
in the Office of the Chairman for a Senior Advisor.
A budget adjustment will be made in April in conjunction with
this approval.
Spending Variances
Significant spending
variances by major expense category and division/office are discussed
below. Significant spending variances for the three months ending
March 31, 2009, are defined as those that either (1) exceed the YTD budget
by $3.0 million and represent more than 5 percent for a major expense
category or total division/office budget; or (2) are under the
YTD budget
for a major expense category or division/office by an amount that
exceeds $5 million and represent more than 10 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 two major expense
categories during the first
quarter in
the Ongoing Operations component of the 2009 Corporate Operating
Budget:
- Outside Services – Personnel
expenditures were $5.5 million, or 15 percent, more than budgeted.
The variance was
largely due to higher-than-projected system maintenance expenses
in DIT during the first quarter. This included unbudgeted expenses
associated with systems supporting the TLGP. The CIO Council will
reprioritize funding for overall IT projects during the remainder
of the year to stay within the IT systems development and maintenance
allocation in the DIT budget. In addition, higher-than-projected
expenses were incurred for IT security monitoring during the first
quarter; these expenses are expected to be lower than budgeted
for the rest of the year. Unbudgeted expenses were also incurred
for data center costs related to the Document Management System
contract. Outside counsel litigation expenses incurred by the Legal
Division were slightly above budget in the first quarter.
- Equipment
expenditures were $3.8 million, or 34 percent, more than budgeted.
The variance was largely due to accelerated Technical Refresh
purchases (budgeted to occur later in the year) and the procurement
of software for laptops for new FDIC staff and contractors. Additional
budget authority may be requested to cover these unbudgeted laptop
software expenses.
Receivership
Funding
The Receivership Funding component of the 2009 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 salary and benefits expenses for
permanent employees assigned to the receivership management function.
There were significant spending variances in all seven major expense categories
during the first quarter in the Receivership Funding component of the 2009
Corporate Operating Budget:
- Salaries
& Compensation ($13.7 million, or 57 percent, less than budgeted).
- Outside
Services - Personnel ($77.6 million, or 50 percent, less than
budgeted).
- Travel ($10.8 million,
or 73 percent, less than budgeted).
- Buildings
($5.5 million, or 37 percent, less than budgeted).
- Equipment
($6.2 million, or 49 percent, less than
budgeted).
- Outside
Services - Other ($5.9 million, or 84 percent, less than budgeted).
- Other
Expenses ($10.2 million, or 80 percent,
less than budgeted).
In all cases, these variances occurred because the Receivership Funding
budget authority was generally spread evenly throughout the year, although
actual expenses are expected to increase each quarter as the cumulative
number of failures and the inventory of assets under management grows.
Budget authority in the Receivership Funding component will be reallocated
in April to more accurately reflect quarterly expense projections. Significant
Spending Variances by Division/Office1
Three organizations
had significant spending variances through the
end of the first quarter:
- The
Division of Resolution and Receiverships spent $94.7 million,
or 46 percent, less than budgeted. This variance was attributable
to under spending in the Receivership Funding component of its
operating budget for the reasons identified above.
- The Legal
Division spent $20.7 million, or 43 percent, less than budgeted.
Approximately $19.7 million of this variance was due to under
spending in the Receivership Funding component of the division’s
operating budget for the reasons identified above.
- The Division
of Administration spent $11.0 million, or 20 percent, less than
budgeted. This variance was largely attributable to delays in
building out the Boston Area Office and in relocating the New
York Regional Office, delays in improvements and more favorable
landlord concessions at the temporary West Coast Satellite Office,
lower-than-projected expenses for bank closing security services,
temporary delays in planned capital improvement projects at the
Student Residence Center, and temporary delays in purchasing
Furniture, Fixtures and Equipment.
Other
Matters
- In accordance with the requirements of the 2009 Budget Resolution,
an analysis of 2009 funding requirements for employee salaries
and compensation was completed after the close of the first quarter.
The analysis determined that those costs had been over-estimated
by approximately $3.1 million during the preparation of the 2009
Corporate Operating Budget. This represents only about three-tenths
of 1 percent of the 2009 Salaries and Compensation budget. Because
projected supervisory and resolutions workload has risen substantially
since the 2009 Corporate Operating Budget was formulated, the CFO
decided not to exercise the authority delegated to him in the 2009
Board Resolution to modify the 2009 Corporate Operating Budget.
The projected surplus funding will be reserved for reallocation
to meet new budget requirements that emerge during 2009. Increased
funding in the Salaries and Compensation expense category is expected
to be needed later in the year as staff is added to address increases
in supervisory and resolutions workload.
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1 Information
on division/office variances reflects variances in both the Corporate
Operating and Investment Budgets.
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