|
|
III.
Budget Results - Second Quarter 2015
Approved
Budget Modifications
The 2015 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2015 Corporate Operating Budget. The following budget reallocations were made during the second quarter in accordance with the authority delegated by the Board of Directors. None of these modifications changed the total 2015 Corporate Operating Budget as approved by the Board in December 2014.
- In May 2015, the CFO approved modifications to the Salaries and Compensation budgets of divisions and offices within the Ongoing Operations component based on an analysis of year-to-date spending for salaries, bonuses/lump-sum payments, and fringe benefits. That reallocation realigned existing budget authority among most divisions and offices, but resulted in no change to the total corporate budget for either the Ongoing Operations or Receivership Funding budget components. The Corporate Unassigned contingency reserve in the Ongoing Operations budget component was increased by $6 million as a result of these reallocations.
- In June 2015, the CFO approved the net reallocation of $22,756 between accounts in the Salaries and Compensation category of the Ongoing Operation component of the budget for the Office of the Inspector General (OIG). This reallocation resulted in no change to the total Ongoing Operations budget approved for the OIG.
- In June 2015, the CFO approved a reallocation within the Ongoing Operations and Receivership Funding components of the 2015 Corporate Operating Budget following corporate-wide mid-year reassessment of actual and projected spending for the first half of the year. The budgets for all major expense categories and most divisions and offices were adjusted in both budget components, with increases and decreases totaling $3 million and $1 million, respectively, in the Ongoing Operations component and $1 million and $26 million in the Receivership Funding component.
The most significant increase in the Ongoing Operations budget component was a net increase of over $2 million to the budget of the CIO Council to support transition costs associated with the award of new Information Technology Application Services contracts for IT systems development and maintenance. The most significant reduction within that component was a decrease of $800,000 in the budget of the Information Security and Privacy Staff due to contract re-negotiations and savings from the temporary elimination of a security subscription.
The most significant increase in the Receivership Funding budget component was to the budget of the Division of Information Technology (DIT), which received an increase of over $1 million to cover unbudgeted equipment purchases to support a major bank closing. The Legal Division had the largest Receivership Funding budget reduction ($26 million) as a result of an unexpected decrease in professional liability program expenses.
The mid-year budget reallocation reduced the Corporate Unassigned contingency reserve by nearly $2 million in the Ongoing Operations budget and increased it by $24 million in the Receivership Funding budget component. The unused amounts remaining within the Corporate Unassigned budgets for the Ongoing Operations and the Receivership Funding budget components were $23,519,593 and $47,008,947, respectively, as of June 30, 2015.
Approved Staffing Modifications
The 2015 Budget Resolution delegated to the CFO the authority to modify approved 2015 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2015 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 March 2015, the CFO approved an increase of three authorized permanent positions within the Capital Market Branch of RMS. This increase to the 2015 Authorized Staffing was determined necessary to address increases in the permanent workload within the branch, including the increased volume of work associated with the implementation of the Volcker Rule.
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, 2015, are defined as those that either (1) exceed the YTD budget by $2 million and represent more than three 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 $3 million and represents more than five percent of the major expense category or total division/office budget.
Significant
Spending Variances by Major Expense Category
Ongoing
Operations
There was a significant spending variance in two major expense categories during the second quarter in the Ongoing Operations component of the 2015 Corporate Operating Budget:
Outside Services - Personnel expenditures were $8 million, or 7 percent, less than budgeted. The Division of Resolutions and Receiverships (DRR) spent $2 million less than budgeted, primarily due to delays in initiating projects in its Complex Financial Institutions and Planning and Resource Management Branches. The Division of Administration (DOA) spent $1 million less than budgeted, largely due to delays in the pay, performance, and competency modeling components of the Workforce Development Initiative. DIT spent $1 million less than budgeted, primarily due to underspending on the infrastructure services support contract. The Executive Offices spent nearly $700,000 less than budgeted because actual audit expenses were lower than projected. Corporate University also spent nearly $700,000 less than budgeted, largely due to lower-than-projected expenses for development of the new Resolutions and Receivership training curriculum.
Equipment expenditures were approximately $8 million, or 24 percent, less than budgeted. DIT spent $6 million less than budgeted, largely due to delays in planned purchases and the processing of hardware and software maintenance contracts. In addition, DOA spent $2 million less than budgeted due to delays in the Identity, Credential, and Access Management (ICAM) project and the realization of furniture, fixtures and equipment (FF&E) cost savings through the redeployment of excess FF&E that became available as a result of the exercise of leased space contraction rights in the Dallas Regional Office.
Receivership
Funding
The Receivership Funding component of the 2015 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 two of the seven major expense categories through the second quarter in the Receivership Funding component of the 2015 Corporate Operating Budget:
- Outside Services-Personnel expenditures were $29 million, or 18 percent, less than budgeted. This variance was attributable to a decline in resolutions, asset management and marketing costs at a faster rate than projected. This resulted in lower-than-budgeted expenses for contracts supporting owned real estate, loan servicing, environmental services, asset valuation, failed bank data, and capital markets.
- Other Expenses were $3 million, or 31 percent, less than budgeted. This variance was attributable to the transfer of banking operations and the disposition of failed banks’ assets more quickly than expected.
Significant
Spending Variances by Division/Office
Four organizations had significant spending variances through the end of the second quarter:
- DRR spent $32 million, or 14 percent, less than budgeted, mostly due to less-than-budgeted spending for resolution and receivership workload for the reasons described above.
- DIT spent $10 million, or 10 percent, less than budgeted. This variance was largely attributable to less than anticipated spending on the infrastructure services support contract, delays in planned equipment purchases, and delays in the processing of hardware and software maintenance contracts.
- DOA spent $8 million, or 6 percent, less than budgeted. This variance was largely attributable to lower-than budgeted spending in its Ongoing Operations budget component for equipment ($2 million) for the ICAM initiative and FF&E; salaries and compensation ($1 million) due to vacancies in budgeted positions; buildings ($1 million) due to delays in the Student Residence Center plumbing project; and contractual support ($1 million) due to delays in the pay, performance and competency modeling components of the Workforce Development Initiative. In addition, DOA spent approximately $2 million less than budgeted in the Receivership Funding budget component to support bank closings.
- The Legal Division spent $8 million, or 6 percent, less than budgeted. This variance was largely due to under-spending of approximately $5 million in the Outside Services – Personnel expense category due to lower-than-projected outside counsel expenses for receivership-related litigation, and $2 million in the Salaries and Compensation expense category due to vacancies in budgeted non-permanent positions and slower-than-projected hiring to fill those vacancies.
Other Matters
An analysis of 2015 funding requirements for employee pay and benefits was completed in May in accordance with the 2015 Budget Resolution. The analysis determined that those costs had been underestimated during the preparation of the 2015 Corporate Operating Budget by approximately $6 million in the Salaries and Compensation expense category, primarily due to an unbudgeted increase in the FDIC’s contribution rate for most employees under the Federal Employees Retirement System that became effective late in 2014. The CFO elected not to exercise his delegated authority to adjust the 2015 Corporate Operating Budget to address this shortfall, since the net projected budget shortfall is not material relative to the total 2015 Corporate Operating Budget, and there is excess budget authority available to cover the shortfall in other accounts within the Salaries and Compensation expense category.
|
