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III.
Budget Results -
Third Quarter 2008
Approved
Budget and Staffing Modifications
Four modifications were made to the 2008 Corporate Operating Budget
and authorized staffing during the quarter, in accordance with the
authority delegated by the Board of Directors in the 2008 Budget Resolution:
- On
July 31, 2008, the Deputy to the Chairman and Chief Financial
Officer (CFO) approved mid-year adjustments to the Ongoing
Operations component of the 2008 Corporate Operating Budget.
Budget authority was realigned among most divisions/offices
and major expense categories. The most significant modifications
were made to the budgets of the Office of Public Affairs,
which was increased by $9.3 million to pay for contractual
services for the FDIC’s 75th Anniversary Deposit Insurance
Public Education campaign; and the Division of Supervision
and Consumer Protection (DSC), which was increased by over
$9 million to pay for salaries and benefits and travel costs
for additional staff. This increase in DSC was partially
offset by a $2.6 million reduction in Outside Services -
Personnel. The mid-year adjustments included changes to the
authorized staffing for eight divisions or offices. Authorized
staffing for DSC was increased by 127 positions, primarily
non-permanent loan review specialist positions to assist
with elevated examination workload. Authorized staffing for
the Division of Resolutions and Receiverships (DRR) and the
Legal Division were increased by 125 and 25 positions, respectively,
to address the increase in resolutions activity. Board members
were briefed on these planned staffing increases prior to
their approval.
- In August 2008, the CFO approved a requested increase
of seven non-permanent positions to provide the Division of
Information Technology (DIT) with additional technical resources
to meet DRR needs related to the increase in failure activity.
- In August 2008, the CFO also approved an increase
of 30 non-permanent positions in DRR and 3 non-permanent positions
in the Corporate University (CU). The DRR increase will provide
additional staff in the Dallas office to perform deposit insurance
claims determinations in connection with the projected increase
in bank failures, and the CU increase will provide resources
to train the large number of new employees in the Dallas office
of DRR.
- In September 2008, the CFO approved requested increases
of 339 non-permanent positions in DRR, 25 non-permanent positions
in the Legal Division, and 10 non-permanent positions in the
Division of Administration (DOA). These increases followed
the Board’s approval earlier in the month of an increase
in the Receivership Funding component of the 2008 Corporate
Operating Budget from $75 million to $150 million. The DRR
positions will be used to staff a new temporary West Coast
satellite office. The authorized Legal Division staffing increase
will permit the re-employment of retired attorneys and other
staff to provide on-site legal assistance at failed institutions.
The increase in authorized DOA staffing will provide additional
resources to handle the increased facilities management, security,
and human resources workload that have accompanied staffing
increases in DRR and DSC.
Significant Spending
Variances
Significant spending variances by major expense category and
division/office are discussed below. Significant spending variances
for the nine months ending September 30, 2008, are defined as
those that either 1) exceed the YTD budget by $1 million and
represent more than 2 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 more
than $2 million and represent more than 4 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 three major expense
categories through the third quarter in the Ongoing Operations
component of the 2008 Corporate Operating Budget:
- Outside Services-Personnel
expenditures were approximately $21 million, or 16 percent,
less than budgeted. The variance
was largely due to lower-than-anticipated litigation expenses
reimbursed to the U.S. Department of Justice for the Goodwill
cases, lower contract spending by DIT for discretionary system
development projects due to the unavailability of subject matter
experts for system testing; and lower net costs for the Student
Residence Center and other administrative contracts in DOA.
- Travel expenditures
were approximately $3 million, or 7 percent, less than budgeted.
The variance was attributable
to budgeted travel costs for conferences that have been deferred
until 2009 and lower-than-expected travel expenses in the supervision
area as staff have been diverted to assist with resolutions activities
(expensed against the Receivership Funding component).
- Equipment
expenditures were approximately $3 million, or 10 percent,
more than budgeted. The variance was largely due
to a change in the timing of planned spending for the IT Technical
Refresh program as several components were acquired earlier than
budgeted. The maintenance costs for IBM software licenses were
budgeted in the fourth quarter at $1.4 million; however, the
billing for this software has been occurring on a monthly basis
throughout the year. Similarly several PC/LAN hardware maintenance
items were budgeted in the fourth quarter but expensed by the
end of September.
Receivership Funding The
Receivership Funding component of the 2008 Corporate Operating
Budget includes funding for non-personnel expenses that are incurred
in conjunction with institution failures and the management and
disposition of the assets and liabilities of the ensuing receiverships.
Receivership Funding also includes all salary and compensation
costs of employees hired on a non-permanent basis for actual
or anticipated increases in receivership and resolution activity.
There were four major expense categories in which a significant
spending variance occurred through the third quarter in the Receivership
Funding component of the 2008 Corporate Operating Budget:
- Salary and
Compensation expenditures were approximately $5 million, or 50 percent,
less than
budgeted, primarily due to a failure
to fill newly-authorized non-permanent positions in DRR as quickly as
planned. Support for DRR hiring efforts continues to be a major corporate
priority.
- Outside
Services-Personnel expenditures were approximately $5 million,
or 13 percent, greater than budgeted, primarily due to
the unanticipated increase in receivership and resolution
activity that occurred during the third quarter.
- Buildings
expenditures were approximately $2 million, or 39 percent,
less than budgeted. The budget for this category
was increased during the third quarter to provide space for
the additional staffing that was authorized in DRR and other
organizations but is now expected to be expensed in the fourth
quarter.
- Outside
Services-Other expenditures were approximately $1 million,
or 213 percent, greater than budgeted, primarily
due to the unanticipated increase in receivership and resolution
activity that occurred during the third quarter. These expenses
include telephone lines for call-in centers, real estate
and personal property taxes, filing and other court costs,
advertising costs, and bank service fees.
Significant
Spending Variances by Division/Office1
Seven
organizations had significant spending variances through the
end of the third quarter:
- The
Division of Administration (DOA) spent approximately $7
million, or 5 percent, less than budgeted. The variance
of $4.8 million in Ongoing Operations was primarily attributable
to lower net costs for the Student Residence Center (because
of increased proceeds derived from outside use of the facility)
and lower-than-budgeted spending for contractual services.
A $1.8 million variance in the Receivership Funding component
of DOA’s operating budget reflected the addition
of supplemental funding for facilities and equipment to
support increased staffing in DRR and other organizations
that is not expected to be spent until the fourth quarter.
- The Legal Division spent approximately $6 million,
or 9 percent, less than budgeted. The variance of
$4.5 million in the Receivership Funding component of
its operating
budget was largely attributable to less-than-anticipated
use of outside counsel in connection with resolutions
and receivership activities. Also, there was a variance
of
$1.5 million in the Ongoing Operations budget component
that was related to vacancies in budgeted positions.
- The
Division of Insurance and Research (DIR) spent approximately
$3
million, or 10 percent, less than budgeted.
The majority of this variance was due to vacancies in budgeted
positions and lower-than-budgeted spending for the Central
Data Repository.
- The
Executive Support Offices spent approximately $3 million,
or 14 percent, less than budgeted. This variance was largely
due to delayed execution of contracts for the FDIC’s
75th Anniversary Public Education campaign.
- The Division
of Resolutions and Receiverships (DRR) spent approximately
$3 million, or 4 percent, more than budgeted.
This variance was attributable to overspending in the Receivership
Funding component of its operating budget due to the unanticipated
increase in resolutions and receivership activity during
the third quarter.
- The Office
of Inspector General spent approximately $2 million, or
12 percent, less than budgeted. This variance
was due to vacancies in budgeted positions and later award
of audit contract task orders than was planned during budget
formulation.
- The
Division of Information Technology (DIT) spent approximately
$3
million, or 13 percent, less than the 2008
spending estimate for investment projects through the third
quarter. This was primarily attributable to $2.8 million
in underspending for the multiyear Claims Administration
System (CAS) investment project between January 1, 2008,
and September 30, 2008, due to delays by the contractor
in meeting project milestones. [Note: Unused CAS funding
is
carried over for use in future periods, but may be used
only for the CAS investment project.]
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1 Information
on division/office variances reflects variances in both the Corporate
Operating and Investment Budget.
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