Chief Financial Officer's (CFO) Report to the Board
III. Budget Results - Fourth Quarter 2018
Approved Budget Modifications
The 2019 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2019 FDIC Operating Budget. The following budget reallocations were approved during the first quarter in accordance with the authority delegated by the Board of Directors..
- In January, the Chief Information Officer (CIO) Council, Corporate University, the Legal Division, the Division of Information Technology (DIT), and the Office of Chief Information Security Officer (OCISO) reallocated budget authority among major expense categories within their Ongoing Operations budgets.
- In March, following establishment of the FDiTech Lab, the CFO approved the reallocation of $792,752 from the Corporate Unassigned contingency reserve to create an initial 2019 Ongoing Operations budget for the new organization. The initial budget consists of $760,052 for Salaries and Compensation, $30,000 for Travel, and $2,700 for Other Expenses. This change was not reflected in budget totals until April
Following these first quarter budget modifications (including the FDiTech Lab budget implemented in April), the balances in the Corporate Unassigned contingency reserves were $11,707,248 in the Ongoing Operations budget component and $8,994,445 in the Receivership Funding budget component.
Approved Staffing Modificatons
The 2019 Budget Resolution delegated to the CFO the authority to modify approved 2019 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2019 FDIC Operating Budget.
- In March, the CFO approved a decrease of four authorized permanent Supervisory Examiner (SE) positions (revised in April to a decrease of five authorized permanent SE positions) and an increase of one authorized non-permanent SE position in RMS’s 2019 staffing authorization, based on an updated analysis of field office supervisory spans of control.
Also in March, the CFO approved an initial 2019 staffing authorization of two new authorized permanent positions for the FDiTech Lab. The new organization will be staffed this year primarily through the temporary detail of FDIC employees to the FDiTech Lab to work on specific projects.
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, 2019, are defined as those that either (1) exceed the YTD budget by more than $3 million and represent more than five percent of 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 $15 million and represents more than fifteen percent of the major expense category or total division/office budget.
Significant Spending Variances by Major Expense CategoryOngoing Operations
Ongoing Operations
There was a significant spending variance during the first quarter in one major expense category of the Ongoing Operations budget component.
Spending in the Equipment major expense category exceeded the YTD budget by $3.1 million, or 13 percent. The organizations reporting to the CIO (DIT, CIO Council, and OCISO) accounted for most of the variance, with a combined overspending of $2.7 million, or 21 percent of their total YTD budgets for Equipment. This variance was attributable principally to the delayed acquisition of security equipment for the Backup Data Center ($876,525 for purchases that were originally expected to occur in 2018), erroneous coding to the Equipment category ($800,823) and an unbudgeted subscription charge ($993,000). The accounting errors were caused by two year-end accruals that were incorrectly coded to the Equipment expense category (these errors have now been corrected).
Receivership Funding
The Receivership Funding component of the 2019 FDIC 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 and other expenses required to ensure readiness without regard to whether failures occur.
There was a significant spending variance during the first quarter in one major expense category of the Receivership Funding budget component.
Outside Services – Personnel expenses during the first quarter were $17.4 million, or 47 percent, less than budgeted. This variance was mostly attributable to under-spending by the Division of Resolutions and Receiverships (DRR) of $11.1 million, or 51 percent, of its YTD budget for contractual support for pre-closing, closing, and post-closing receivership operations; accounting services; asset marketing and management; and resolutions-related activities. This was largely attributable to the fact that there were no bank closings in the first quarter. In addition, the Legal Division spent $6.1 million, or 43 percent, less than budgeted because it did not accrue for unpaid invoices for outside counsel expenses.
Office of Inspector General
There were no significant spending variances during the first quarter in any major expense category of the Office of the Inspector General budget component.
Significant Spending Variances by Division/Office 1
DRR spent $15.3 million, or 29 percent, less than budgeted due to the lack of closing activity in the first quarter and a one-time credit of $317,000 for an insurance payment for hurricane damage to owned real estate.
1Information on division/office variances reflects variances in the FDIC Operating Budget.