Chief Financial Officer's (CFO) Report to the Board
III. Budget Results - Second Quarter 2020
Approved Budget Modifications
The 2020 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2020 FDIC Operating Budget. The following budget reallocations were approved during the second quarter in accordance with the authority delegated by the Board of Directors:
- In June, the CFO approved the following mid-year adjustments to 2020 Ongoing Operations budgets:
- Adjustments to the Salaries and Compensation budgets of several organizations to address projected variances in that expense category, including an increase of $2.1 million in Corporate University (CU) to provide funding for the salaries and benefits of long-term detailees from other organizations, a net increase of $1.5 million in the budgets of various Executive Offices to cover the costs of detailees, and a decrease of $3.8 million in the Legal Division budget to reflect the large number of unfilled vacancies. These adjustments did not change the total corporate budget for Salaries and Compensation.
- A net increase of $4.6 million for one-time initiatives in the combined budgets of the organizations reporting to the Chief Information Officer (CIOO), bringing the total 2020 budget for one-time initiatives up to $34.6 million. This increase includes additional funding of $2.2 million for two projects, one to improve resolution information tracking and another to automate purchase and assumption settlement processes; $2.6 million for infrastructure support; and various increases and decreases to reflect updated project estimates for previously-approved initiatives.
- A net increase of $5.8 million for continuing operations expenses in the combined budgets of the CIOO, representing an increase of about 2.5% in the CIOO’s non-salaries budget. This included increases in the Outside Services-Personnel category of $5 million for the Division of Information Technology (DIT) and $1 million for the Office of Chief Information Security Officer (OCISO) to address projected higher-than-budgeted full-year operational expenses across multiple functions. These increases were partially offset by decreases in the Equipment and Travel budgets totaling $1.8 million.
- A net increase of $3.1 million in the DRR budget, including an increase of $3.5 million in the Outside Services-Personnel expense category and a decrease of $427,000 in the Travel expense category. The increase in the Outside Services-Personnel expense category will support enhancements to DRR’s policies, procedures and ability to quickly respond to failure activity.
- A net increase of $160,000 in the Division of Finance budget, including an increase of $260,000 in Outside Services-Personnel and a decrease of $100,000 in Travel. The increased budget will be used to respond to OIG audit recommendations related to crisis readiness and provide additional support for the Model Risk Management Program.
- A decrease of $795,605 in the Travel budget of Division of Insurance and Research to reflect funds not expected to be used in 2020.
- Realignments among major expense categories in the budgets of the Division of Administration and the Office of Minority and Women Inclusion, with no net change to the total budgets of each organization.
- The CFO also approved in June a $6.9 million net decrease in the Receivership Funding budget component for the Legal Division. This included decreases of $7.25 million in the Outside Services-Personnel expense category and $65,000 in the Travel expense category to reflect lower projected litigation-related expenses due to pre-trial settlements, bringing professional liability investigations work in-house, and pandemic-related delays. These decreases were partially offset by an increase of $0.4 million in the Salaries and Compensation budget to cover the unbudgeted salaries of a small number of term employees whose appointments expired during the first half of the year.
Following these second quarter budget modifications, the balances in the Corporate Unassigned contingency reserves were $17,203,552 in the Ongoing Operations budget component and $18,917,515 in the Receivership Funding budget component.
Approved Staffing Modificatons
The 2020 Budget Resolution delegated to the CFO the authority to modify approved 2020 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2020 FDIC Operating Budget.
- In April, the CFO approved the realignment of two positions from OCISO to DIT in conjunction with the transfer of operational management responsibility for certain information security functions.
- In April, the CFO approved a decrease of two authorized permanent positions in the Division of Depositor and Consumer Protection (DCP) in conjunction with a field territory restructuring and DCP’s annual realignment of field supervisory positions to ensure appropriate field supervisory spans-of-control. In the same month, the CFO approved an increase of two additional examiner positions for large bank supervision, resulting in a net zero impact on total authorized staffing.
- In April, the CFO approved an increase of eight authorized permanent positions in the Division of Risk Management Supervision (RMS), including six additional examiner positions for large bank supervision and two Supervisory Examiner positions in conjunction with RMS’s annual realignment of field supervisory positions to ensure appropriate field supervisory spans-of-control.
- In May, the CFO approved an increase of two permanent authorized positions in OCISO to help accelerate its workforce transformation in conjunction with the IT Modernization program.
- In June, the CFO approved an increase of seven permanent authorized positions in DRR, including two positions transferred from the Division of Complex Institution Supervision and Resolution (CISR) and five new positions, in conjunction with the transfer of responsibility for ensuring compliance with Part 360.9 requirements.
Following these changes, authorized staffing totaled 5,770 for the Corporation (comprised of 5,765 permanent and 5 non-permanent positions).
Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the quarter ending June 30, 2020, are defined as those that either (1) exceeded the YTD budget for a major expense category or division/office by more than $2 million and represented more than three percent of the major expense category or total division/office budget; or (2) were under the YTD budget for a major expense category or division/office by more than $10 million and represented more than 10 percent of the major expense category or total division/office budget.
Significant Spending Variances by Major Expense Category
There was a significant spending variance through the second quarter in the Travel expense category of the Ongoing Operations budget component. Spending in the Travel expense category was under the YTD budget by $21.5 million, or 55 percent. The variance in the Travel expense category was primarily attributable to FDIC’s travel restrictions and mandatory telework in response to the COVID-19 pandemic in the second quarter of 2020, which restricted most business travel including those related to onsite examination, regulatory meetings, and in-person training. The variance primarily reflects underspending by RMS ($13.8 million, or 54 percent of its 2020 YTD budget), DCP ($3.9 million, or 59 percent of its 2020 YTD budget), CU ($1.5 million, or 57 percent of its 2020 YTD budget), and CISR ($1.2 million, or 75 percent of its 2020 YTD budget).
Significant Spending Variances by Division/Office 1
Only one organization had significant spending variances through the second quarter. The Legal Division underspent its YTD budget by $10.9 million or 13.4 percent. The variance was primarily attributable to $1.8 million in underspending in the Salaries and Compensation category in the Ongoing Operations component due to vacancies in budgeted positions and $9.0 million in underspending in the Outside Services – Personnel category in the Receivership Funding component due to settlements, a decision to perform new professional liability investigations with FDIC staff, and delays in pending litigation due to the COVID-19 pandemic.