Chief Financial Officer's (CFO) Report to the Board
III. Budget Results - Fourth Quarter 2019
Approved Budget Modifications
The 2019 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2019 FDIC Operating Budget. The following budget reallocations were approved during the fourth quarter in accordance with the authority delegated by the Board of Directors.
- In October, the CFO approved a budget realignment of $1.2 million in the Outside Services – Personnel budget of the Ongoing Operations budget component from the Office of CIO Management Services (OCMS) to the Division of Information Technology (DIT). This change corrected a misalignment of funds that occurred earlier in the year in connection with the reorganization that separated OCMS from DIT
- In December, the CFO approved an increase of $2.4 million in the CIO Council budget that was reallocated from the Corporate Unassigned contingency reserve. This increase addressed projected budget shortfalls related to the Control Totals Module Modernization and ALPHA-Rex projects, the Backup Data Center project, and other CIO Council projects.
- In early January 2020, the CFO approved budget realignments among several organizations in the Salaries and Expense category of the Ongoing Operations budget component to address projected funding shortfalls in certain organizations due to employee details and other factors. Small budget increases were also approved in the Travel expense category for the Office of the Ombudsman ($76,000) and the Office of Financial Institution Adjudication ($7,246) to cover unbudgeted fourth quarter travel expenses and in the Other expense category for the Office of Chief Information Security Officer ($15,616) to cover higher-than-budgeted expenses for employee Professional Learning Accounts. All of these increases were funded by reallocations from the Corporate Unassigned contingency reserve.
There were no changes to the Receivership Funding budgets for any organization.
Following these fourth quarter budget modifications, the balances in the Corporate Unassigned contingency reserves as of year-end 2019 were $7,756,292 in the Ongoing Operations budget component and $19,313,320 in the Receivership Funding budget component. This unused budget authority expired at the end of the year.
Approved Staffing Modificatons
The 2019 Budget Resolution delegated to the CFO the authority to modify approved 2019 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2019 FDIC Operating Budget. In October, the CFO approved an increase of four authorized permanent positions and the realignment of three authorized permanent positions within the Executive Offices. These realignments supported new Executive Office organizational structures approved by the Board of Directors in conjunction with amendments to the Bylaws of the Federal Deposit Insurance Corporation.
Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the year ending December 31, 2019, are defined as those that either (1) exceeded the YTD budget by any amount; or (2) were under the YTD budget for a major expense category or division/office by an amount that exceeded $5 million and represented more than five percent of the major expense category or total division/office budget.
Significant Spending Variances by Major Expense Category
There were significant spending variances through the fourth quarter in two major expense categories of the Ongoing Operations budget component. Spending in the Outside Services - Personnel expense category was under the YTD budget by $15.7 million, or 6 percent, and spending in the Travel expense category was under the YTD budget by $7.5 million, or 9 percent.
- The variance in the Outside Services – Personnel category was attributable to underspending by several offices and divisions: $4.2 million in Office of Chief Information Security Officer (OCISO) due to delays in on-boarding specialized IT security contract personnel and the acquisition of IT security tools that required the processing and approval of three interagency agreements; $1.5 million in Division of Complex Institution Supervision and Resolution (CISR) due to delays in or the re-evaluation of planned contract work to focus on the transition to the new CISR organizational structure; $1.6 million in the Division of Administration attributable to reduced work hours for contract career counselors, contracting vacancies that were not filled because of the difficulty of finding qualified candidates, reduced contractor support requirements for several projects, and reduced payroll support costs; and $1.4 million in the Legal Division due to lower-than-projected outside counsel support for litigation. The remainder of the Outside Services – Personnel variance was attributable to smaller underspending variances in other divisions and offices.
- The variance in the Travel expense category was primarily attributable to $4.3 million in underspending by Division of Risk Management Supervision and $1.9 million in underspending by the Division of Depositor and Consumer Protection for travel to bank examinations. This was attributable to the decline in the number of insured financial institutions, a corresponding reduction in the number of bank exams conducted, and efforts by both divisions to reduce on-site examination work. CISR also underspent its travel budget by $1.1 million due to lower-than-anticipated relocation expenses for legacy Office of Complex Financial Institutions staff as well as less-than-anticipated international and regular duty travel.
The Receivership Funding component of the 2019 FDIC Operating Budget included funding for expenses that were 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 and other expenses required to ensure readiness without regard to whether failures occurred.
There was a significant full-year spending variance in one major expense category of the Receivership Funding budget component in 2019. Outside Services – Personnel expenses were $90 million, or 57 percent, less than budgeted. This variance primarily reflected underspending by Division of Resolutions and Receiverships (DRR) ($39 million, or 51 percent of its 2019 budget) and the Legal Division ($31 million, or 55 percent of its 2019 budget). DRR underspending was attributable to the absence of insured institution failures for which funds had been budgeted. The variance for the Legal Division was attributable to lower-than-projected spending for outside counsel because cases were settled before going to trial or did not materialize. Almost all of the remaining variance ($19 million) was attributable to unused funding in the Corporate Unassigned contingency reserve.
Office of Inspector General
There were three significant spending variances in the 2019 Office of the Inspector General (OIG) budget component. The OIG’s Salaries and Compensation budget was underspent by $5 million, or 14 percent, primarily due to vacancies in authorized positions. OIG overspent its budgets for Outside Services – Personnel (over by $786,000, or 49 percent) primarily due to contracted support to assist with IT activities, and Travel (over by $462,000, or 38%) due to unanticipated relocation expenses.
Significant Spending Variances by Division/Office 1
Six organizations had significant spending variances through the end of the year.
- DRR spent $50.3 million, or 25 percent, less than budgeted, due to the small number of insured institution failures. The underspending was mostly in the Outside Services – Personnel expense category of the Receivership Funding budget component, but substantial underspending also occurred in the Travel, Buildings, and Other expense categories of the Receivership Funding budget component
- The Legal Division spent $39.0 million, or 20 percent, less than budgeted, mostly in the Outside Services – Personnel expense category in both the Ongoing Operations and Receivership Funding budget components due to lower-than-budgeted outside counsel expenses.
- CISR spent $6.7 million, or 17 percent, less than budgeted due primarily to underspending in the Salaries and Compensation, Outside Services – Personnel, and Travel expense categories of its Ongoing Operations budget.
- Corporate University spent $6 million, or 13 percent, less than budgeted due to small variances in several expense categories in both the Ongoing Operations and Receivership Funding budget components.
- OCISO underspent its budget by $5.8 million, or 12 percent, due to variances in the Outside Services – Personnel and Equipment expense categories of the Ongoing Operations budget component.
- OIG underspent its budget by $5.2 million, or 12 percent. This reflected the net effect of underspending of $6.5 million in the Salaries and Compensation and Equipment expense categories and combined overspending of $1.3 million in the Outside Services – Personnel and Travel expense categories.