Chief Financial Officer's (CFO) Report to the Board
III. Budget Results - Third Quarter 2018
Approved Budget Modifications
The 2018 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2018 FDIC Operating Budget. The following budget reallocations were approved during the third quarter in accordance with the authority delegated by the Board of Directors.
- In August, the Chief Information Officer (CIO) approved the reallocation of approximately $121,000 from the Outside Services – Personnel expense category to the Equipment expense category of the CIO Council budget to support the hosting and subscription costs for the Legal Division’s Advanced Legal Information System.
- In September, the CFO approved budget changes in the Salary and Compensation budgets for most divisions and offices, based upon a Division of Finance review of corporate-wide spending in that expense category through August 2018. In the Ongoing Operations budget component, these reallocations resulted in reductions totaling approximately $18.1 million in the Salaries and Compensation budgets of individual divisions and offices to reflect unused spending through August. The funding was reallocated to the Corporate Unassigned contingency reserve. There were no changes within the Salary and Compensation expense category for the Receivership Funding budget component.
Following these budget modifications, the balances in the Corporate Unassigned contingency reserves as of September 30, 2018, were $20,634,877 in the Ongoing Operations budget component and $23,908,578 in the Receivership Funding budget component.
Approved Staffing Modificatons
The 2018 Budget Resolution delegated to the CFO the authority to modify approved 2018 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2018 FDIC Operating Budget.
- In September, the Chairman announced a restructuring of the Executive Offices. This restructuring included the following changes:
- Re-establishment of the position of Deputy to the Chairman for External Affairs.
- Re-establishment of the position of Deputy to the Chairman for Policy.
- Consolidation of the responsibilities of the Deputy to the Chairman and Chief Operating Officer (COO) and the Director, Division of Administration (DOA), into a single position.
- Realignment of the Internal Ombudsman function and associated staff from the Office of the COO to DOA.
- Realignment of one secretarial position from the Office of the COO to the Office of the Chairman
- The restructuring resulted in a reduction of three authorized permanent positions (from 35 to 32) in the Executive Offices and an increase of five authorized permanent positions (from 372 to 377) in DOA.
Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the nine months ending September 30, 2018, are defined as those that either (1) exceed the YTD budget by more than $1 million and represent more than two 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 budget by an amount that exceeds $7 million and represents more than seven percent of the major expense category or total division/office budget.
Significant Spending Variances by Major Expense CategoryOngoing Operations
There were significant spending variances in three major expense categories of the Ongoing Operations budget component at the end of the third quarter:
Outside Services – Personnel expenditures were $18.7 million, or 10 percent, below budget. This was the result of under-spending by several organizations:
- The Division of Information Technology (DIT) spent $4.3 million less than budgeted due to delays in spending for contractor services related to migration to the new backup data center and reduced contractor expenses for infrastructure services.
- DOA spent $3.9 million less than budgeted due mostly to a lower-than-expected level of contractor support for human resources functions, underspending for guard services due to delays in on-boarding of new contractors, fewer-than-anticipated background investigations, and reduced expenses for the new Student Residence Center contract.
- The Office of Chief Information Security Officer (OCISO) spent $3.2 million less than budgeted due to deferred spending on multiple contracts, including those supporting the backup data center project.
- The CIO Council spent $2.2 million less than budgeted due to delays in starting development and enhancement projects and lower-than-projected expenses for systems maintenance and operations.
Equipment expenditures were $15.4 million, or 17%, under budget, mostly due to delays in equipment purchases for the backup data center and technology refreshment in DIT and OCISO.
Buildings expenditures were $12.3 million, or 16%, under budget due to procurement delays for four Headquarters building projects. Building improvement projects for the San Francisco Regional Office were also deferred, and reimbursements from the construction contractor for expenses related to a San Francisco Regional Office project were credited to the Buildings/Miscellaneous Operating account, which decreased total net expenses incurred for the year.
The Receivership Funding component of the 2018 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.
There was a significant spending variance in one major expense category of the Receivership Funding budget component at the end of the third quarter. Spending for Outside Services - Personnel was $21 million, or 17%, below budget. This variance was mainly attributable to underspending for pre-closing and closing activities by the Division of Resolutions and Receiverships (DRR) because there have been no bank failures in 2018. Lower-than-anticipated expenses in the Legal Division for outside legal counsel services for receivership and resolution activities also contributed to this variance.
Office of Inspector General
There were no significant spending variances through the third quarter in any major expense category of the Office of Inspector General budget component.
Significant Spending Variances by Division/Office 1
Five organizations had a significant spending variance through the end of the third quarter.
- DRR spent $25 million, or 14%, less than budgeted, due mostly to lower than expected spending in the Outside Services – Personnel expense category of the Receivership Funding budget component. As noted above, this under-spending was attributable to the lack of institution failures this year.
- DOA spent $23 million, or 11%, less than budgeted, due largely to contract procurement delays in major building improvement projects at Headquarters buildings, deferred spending for building improvement projects at the San Francisco Regional Office, and fewer-than-anticipated interior improvements and construction projects at various other offices. DOA also contracted for fewer-than-expected background investigations and spent less for guard services due to delays in on-boarding of new contractors.
- DIT spent $16 million, or 9 percent, less than budgeted, mostly due to delays in the acquisition of equipment and contractual services for the backup data center, the replacement of obsolete equipment from the technology refreshment allowance, and spending for equipment maintenance and subscriptions. It also had lower-than-expected expenses for salaries due to vacancies in budgeted positions and for contracted infrastructure support services.
- Legal spent $14 million, or 10 percent, less than budgeted, due mainly to unfilled vacancies in budgeted positions and underspending for outside counsel services.
- OCISO spent $8 million, or 22 percent, less than budgeted, due mainly to delays in planned spending for equipment and services related to the backup data center project, lower-than-expected spending for other contractual services, and delays in the purchase of equipment from the technology refreshment allowance.