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III.
Budget Results -
Second Quarter 2007
Approved
Budget Modifications
During the second quarter of 2007, two modifications were made to
the 2007 Corporate Operating Budget and/or authorized staffing, in
accordance with the authority delegated by the Board of Directors
in the 2007 Budget Resolution:
- The
Division of Information Technology (DIT) made numerous reallocations
of its existing operating budget among the major expense
categories in accordance with Board- delegated authority.
However, the net budget change was less than $1 million to
any major expense category. The budget reallocation involved
multiple Information Technology (IT) projects in accordance
with CIO Council recommendations or internal DIT operations
requirements. The budget for midrange software computer support
was increased by $2.2 million (including $972,800 for the
JAVA Unix environment). These reallocations resulted in no
net change to the total approved DIT budget.
- A
reallocation was made to the operating budgets of all divisions
and most offices to properly classify the funds projected
to be needed for tuition, fees, and travel associated with
the new Professional Learning Accounts (PLA) program. This
reallocation will allow us to monitor PLA program utilization
and it did not increase or decrease the budgeted amounts
for the program or the overall ongoing operations budget
for any division or office.
Status
of Spending for the Implementation of Deposit Insurance
Reform
The 2007 Corporate Operating Budget approved by the Board of
Directors included funding for the continued implementation of
Deposit Insurance Reform. Excluding internal salaries and compensation
expenses, $4.9 million was spent on system changes and $1.8 million
was spent on printing and distribution costs in 2006. Through
the second quarter of 2007, an additional $3.0 million (excluding
internal salaries and compensation expenses) was spent as follows:
- Approximately
$2.5 million was spent for system development and enhancement
activities. In addition, about $0.6 million
was approved by the Change Control Board for additional work
that will be undertaken later in the year. A total of $4.7
million is budgeted in 2007 for systems work related to deposit
insurance reform implementation.
- Approximately $525 thousand was spent for printing
and distribution of updated deposit insurance brochures during
the first half of 2007. It is anticipated that up to an additional
$675 thousand will be spent revising the Spanish, Korean, and
Chinese versions of Insuring Your Deposits and Your Insured
Deposits brochures during 2007.
No funds have yet been spent in 2006 or through June 30, 2007
for the additional staff in the Division of Insurance and Research
(DIR) that the Board authorized to support deposit insurance
pricing. DIR has selected two new employees for these positions
who will start in July.
Spending
Variances Significant
spending variances by major expense category and division/office
are discussed below. Significant spending variances for the
six months ending June 30, 2007, are defined as those that
either (1) exceed the YTD budget by $2 million and represent
more than three percent of the major expense category or
total division/office budget; or (2) are under the YTD budget
by $3 million and represent more than five percent of the
major expense category or total division/office budget.
Significant
Spending Variances by Major Expense Category
Ongoing
Operations
- Outside
Services-Personnel expenditures were $10 million, or 14
percent, less than budgeted. A large portion of this variance
was due to lower-than-anticipated spending by DIT on system
operations, development, and maintenance through the first
half of the year. However, current plans to expedite development
activities and increase contractual services, along with
a 7 percent Information Technology Applications Services
(ITAS) labor rate increase that became effective in May,
are expected to absorb the DIT variance by year-end. Other
factors that contributed to the variance included lower-than-budgeted
spending for government litigation being handled by the
Department of Justice, delays in initiating the Identity
Theft consumer education campaign, and postponement of
the Shared National Credit Modernization initiative until
2008.
Receivership
Funding The Receivership
Funding component of the Corporate Operating Budget includes
budgeted funding for non-personnel expenses that are incurred
in conjunction with an institution failure and the management
and disposition of the assets and liabilities of the ensuing
receivership. There was one major expense category in which
a significant spending variance occurred through the second
quarter in the Receivership Funding component of the Corporate
Operating Budget:
- Outside Services-Personnel expenditures were $28 million,
or 91 percent, less than budgeted, primarily due to the limited
receivership and resolution activity that occurred through
the second quarter.
Significant
Spending Variances by Division/Office1
There were three divisions that had a significant spending
variance through the second quarter of 2007:
- The
Division of Resolutions and Receiverships (DRR) spent $27
million, or 54 percent, less than budgeted. This variance
was fully attributable to under spending in the Receivership
Funding component of DRR’s operating budget due to
the limited receivership and resolution activity that occurred
through the second quarter.
- The
DIT spent $11 million, or 11 percent, less than budgeted.
Approximately $4.4 million of the variance occurred in
the Ongoing Operations component of the Corporate Operating
Budget and reflected lower-than-budgeted expenses during
the first six months of the year for contractor services
related to systems operations, development, and maintenance
as well as the inability to fill personnel vacancies as
planned. These budget variances were partially offset by
Microsoft maintenance costs realized in June but budgeted
in July. DIT’s spending from the Investment Budget
was $6.5 million less than anticipated, largely because
a major software purchase planned for the Claims Administration
System (CAS) investment project was delayed.
- The
Legal Division spent nearly $10 million, or 21 percent,
less
than budgeted. This variance was largely
attributable to under spending in the Receivership Funding
component of its operating budget, primarily due to the limited
receivership and resolution activity that occurred through
the second quarter.
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1Information
on division/office variances reflects variances in both the
Corporate Operating and Investment Budgets.
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