Federal Deposit
Insurance Corporation

III. Budget Results - Fourth Quarter 2014

Approved Budget Modifications

The 2014 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to reallocate funds within the 2014 Corporate Operating Budget, provided that such reallocations did not increase the total amount approved for either the Ongoing Operations or Receivership Funding budget components.  The following budget reallocations were approved during the fourth quarter in accordance with the authority delegated by the Board of Directors.  None of these modifications changed the 2014 Ongoing Operations or Receivership Funding budgets or the total 2014 Corporate Operating Budget approved by the Board in December 2013.:

• In November, the CFO approved the reallocation of $3,160,000 in budget authority within the Ongoing Operations budget component from the Corporate Unassigned budget to the Division of Information Technology (DIT) budget to provide additional funding in the Equipment category (+$1,800,000) to support higher hardware and software maintenance costs and the transfer of responsibility for copiers to DIT from the Division of Administration (DOA); and in the Outside Services-Personnel category (net increase of +$1,360,000) to fund the expenses incurred in the transition to a new infrastructure services contractor and higher administrative overhead costs on task orders awarded under the new ITAS contracts.

• In November, the CFO approved a reallocation of $1,000,000 in budget authority within the Receivership Funding budget component from the Legal Division to the Division of Resolutions and Receiverships (DRR) to cover a gradual increase in the average grade and pay of DRR employees that has occurred as non-permanent DRR employees have left FDIC employment.

• In November, the CFO approved a $471,161 increase in the Ongoing Operations budget component and a decrease of $698,520 in the Receivership Funding budget component of the Information Security and Privacy Staff (ISPS). These adjustments were made in conjunction with a reclassification of 2014 ISPS expenses from the Receivership Funding to the Ongoing Operations budget component because the expenses were not related to failed bank or receivership management activity.  The Corporate Unassigned budget authority for both the Ongoing Operations and Receivership Funding budget components was adjusted by like amounts to fund these realignments within the Equipment and Outside Services-Personnel expense categories in the Ongoing Operations budget component and the Outside Services-Personnel expense category in the Receivership Funding budget component.

• In December, budget authority was realigned among major expense categories in the DOA budget.  Budget authority was transferred from the Outside Services – Personnel (-$3,800,000) and Equipment (-$3,296,062) categories to the Buildings category (+$7,096,062), within the Ongoing Operations budget component to cover a one-time accounting adjustment to comply with a change in the treatment of lease expenses.

Following these budget reallocations, the unused amounts remaining within the Corporate Unassigned contingency reserves for the Ongoing Operations and the Receivership Funding budget components were $25,211,649, and $3,440,829, respectively.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below.  Significant spending variances for the year ending December 31, 2014, are defined as those that either (a) exceed the annual budget for a major expense category or total division/office budget by any amount, or (b) are under the annual budget for a major expense category or division/office by an amount that exceeds $1 million and represents more than three 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 all major expense categories in the Ongoing Operations component of the 2014 Corporate Operating Budget.

• Salaries and Compensation expenditures were approximately $77 million, or 6 percent, less than budgeted.  The Division of Risk Management Supervision (RMS) ($23 million), the Legal Division ($10 million), DRR ($6 million), DIT ($6 million), the Division of Insurance and Research (DIR) ($5 million), the Division of Depositor and Consumer Protection (DCP) ($4 million), and DOA ($4 million) all spent less than budgeted in this expense category, primarily due to higher-than-projected vacancies in budgeted positions during the year.  Most of the variances were related to authorized non-permanent positions.

• Outside Services – Personnel expenditures were approximately $50 million, or 19 percent, less than budgeted.  Approximately $15 million of this variance was attributable to unused budget authority in the Corporate Unassigned contingency reserve.  The CIO Council spent $7 million less than budgeted, largely due to lower-than-planned spending on discretionary system development projects, delays in contract awards under the ITAS II contract, a temporary freeze in discretionary systems development activity during the transition to the new ITAS contracts, and planned systems projects being withdrawn, cancelled, or de-scoped.  DIT spent $6 million less than budgeted due to lower than anticipated spending for the infrastructure services contract transition, the backup data center, telecommunications support services, and special projects.  DRR spent $5 million less than budgeted, primarily due to slower-than-projected starts on several support contracts in its Complex Financial Institutions Branch.  The Legal Division spent $3 million less than budgeted, largely due to lower-than-projected expenses related to FOIA and Privacy Act requests, defensive litigation, and legal fees.  Corporate University (CU–Corporate) spent $2 million less than budgeted, primarily due to use of internal resources rather than contractors for the development of some training for DRR.  In addition, DOA spent $2 million less than budgeted due to delays in the nationwide rollout of the Identity, Credentials and Access Management (ICAM) initiative and lower-than-projected expenses related to service contracts for the operation of the Student Residence Center; background investigations; records management; administrative services; and acquisition support.

• Travel expenditures were approximately $17 million, or 16 percent, less than budgeted.  RMS spent $7 million less than budgeted and DCP spent $3 million less than budgeted, primarily due to vacancies in non-permanent field examination positions that resulted in lower regular duty and relocation travel expenses.  In addition, approximately $3 million of the variance was due to unused budget authority in the Corporate Unassigned contingency reserve.

• Building expenditures were approximately $6 million, or 6 percent, less than budgeted.  This variance was largely due to unanticipated contractor delays in the Student Residence Center pipe replacement project, successful lease negotiations with landlords to reduce costs for field office build-outs and architecture and engineering expenses, and lower-than-estimated remodeling expenses in regional and field offices.

• Equipment expenditures were approximately $4 million, or 4 percent, less than budgeted.  DOA spent $3 million less than budgeted due to lower-than-expected expenses for proprietary database usage, delays in the installation of equipment associated with the nationwide rollout of ICAM, and reduced printing costs due to the use of an electronic bulletin board instead of relying on the graphics design and printing unit.

• Outside Services – Other expenditures were approximately $2 million, or 12 percent, less than budgeted.  This variance was due to lower-than-expected expenses for insurance premiums, mail-related services, and catering expenses for meetings and conferences.

• Other Expenses were approximately $5 million, or 31 percent, less than budgeted.  This variance reflected substantial underutilization by employees of the funds budgeted for Professional Learning Accounts and lower-than-projected expenses for the purchase of corporate office supplies by DOA.

Receivership Funding

The Receivership Funding component of the 2014 Corporate Operating Budget includes funding for expenses that are incurred in conjunction with insured depository institution failures and the management and disposition of the assets and liabilities of the ensuing receiverships, except for salaries, benefits, and related expenses for permanent employees assigned to the receivership management function.

There were significant spending variances in all major expense categories in the Receivership Funding component of the 2014 Corporate Operating Budget.

• Salaries and Compensation ($8 million, or 6 percent, less than budgeted).  This variance was attributable to vacancies in budgeted non-permanent positions.

• Outside Services-Personnel ($61 million, or 15 percent, less than budgeted).  This variance was attributable to lower-than-budgeted costs for contractual support for owned real estate management, valuations, receivership assistance, due diligence, review of shared-loss agreements and securitizations/structured sales.

• Travel ($3 million, or 33 percent, less than budgeted).  This variance was due to lower-than-anticipated travel expenses relating to closings and fewer trips needed for oversight of risk share and loan management agreements.

• Buildings ($10 million, or 35 percent, less than budgeted).  This variance occurred as a result of shorter-than-expected operations at the site of failed banks.

• Equipment ($4 million, or 53 percent, less than budgeted).  This variance was due to lower-than-anticipated costs for hardware and software maintenance attributable to resolutions and receivership management functions.

• Outside Services-Other ($2 million, or 34 percent, less than budgeted). This variance was due to lower-than-anticipated costs for insurance, advertising, mail, and bank service fees.

• Other Expenses ($4 million, or 18 percent, more than budgeted).  This variance was due to $10 million paid in conjunction with receivership litigation judgments

 Significant Spending Variances by Division/Office

Fifteen organizations had significant spending variances from their 2014 budgets.

• DRR spent $62 million, or 12 percent, less than budgeted.  Approximately $50 million of this under spending was in the Receivership Funding budget component due to lower-than-anticipated resolutions and receivership workload.  Also, within the Ongoing Operations component, DRR spent $6 million less than budgeted in the Salaries and Compensation category due to vacancies in budgeted positions and $5 million less than budgeted in the Outside Services – Personnel category (see explanation above).

• The Legal Division spent $32 million, or 11 percent, less than budgeted.  This variance was due to under spending of approximately $17 million in the Outside Services – Personnel category, largely due to lower-than-projected expenses for outside counsel for receivership-related litigation and $14 million in the Salaries and Compensation expense category ($10 million in the Ongoing Operations budget component and $4 million in the Receivership Funding budget component) due largely to vacancies in budgeted non-permanent positions and slower-than-projected hiring to fill those vacancies.

• RMS spent $32 million, or 6 percent, less than budgeted.  This variance was largely attributable to vacancies in budgeted non-permanent examination positions and lower-than-budgeted examination travel expenses resulting from those vacancies.

• DIT spent $21 million, or 9 percent, less than budgeted.  Approximately $9 million of the variance was in the Receivership Funding budget component and was largely attributable to lower-than-projected expenses for bank closing activities and associated contractor support.  The remainder of this variance was in the Ongoing Operations budget component and was attributable to a larger number of vacancies in budgeted positions than expected and lower-than-expected spending for special projects, IT contract transitions, the backup data center, and telecommunications support services.

• DOA spent $21 million, or 8 percent, less than budgeted.  This variance was largely attributable to lower-than-budgeted spending for facilities expenses, vacancies in budgeted positions, equipment, and contractor support in its Ongoing Operations budget.

• DCP spent $8 million, or 5 percent, less than budgeted.  This variance was primarily attributable to vacancies in budgeted non-permanent examination positions and lower-than-budgeted examination travel expenses resulting from those vacancies.

• DIR spent $7 million, or 16 percent, less than budgeted.  This variance was primarily attributable to vacancies in budgeted positions and slower-than-projected hiring to fill those vacancies.

• The CIO Council spent $7 million, or 12 percent, less than budgeted.  This variance was largely due to lower-than-expected spending on discretionary system development projects, delays in contract awards under the ITAS II contract, a temporary freeze on discretionary systems development activity during the transition to new ITAS contracts, and planned systems projects being withdrawn, cancelled, or de-scoped.

• OCFI spent $6 million, or 26 percent, less than budgeted.  This variance was attributable to vacancies in budgeted positions and lower-than-expected spending for relocation expenses.

• The combined Executive Support Offices spent approximately $5 million, or 17 percent, less than budgeted.  This variance was mostly attributable to vacancies in budgeted positions and slower-than-projected hiring to fill budgeted positions in the Office of Minority and Women Inclusion and the Office of the Ombudsman.

• The OIG spent $4 million, or 13 percent, less than budgeted because of vacancies in budgeted positions and lower-than-projected contracting expenses.

• The Division of Finance spent $4 million, or 9 percent, less than budgeted.  This variance was attributable to vacancies in budgeted positions, slower-than-projected hiring to fill those vacancies, and lower-than-budgeted spending for contractor accounting and auditing services.

• CU-Corporate spent $3 million, or 13 percent, less than budgeted in its regular organizational budget.  This variance was primarily due to lower-than-projected expenditures for budgeted projects in the Dallas Learning Center, the School of Supervision, and Corporate Operations, as well as lower-than-projected expenditures for travel.

• The Executive Offices spent $2 million, or 19 percent, less than budgeted.  This variance is attributable to under spending for Outside Services-Personnel because GAO audit-related expenses were less than projected.

• The Corporate Unassigned contingency reserve had $29 million in unused budget authority remaining at the end of the year.  That unused budget authority lapsed on December 31, 2014.