Chief Financial Officer's (CFO) Report to the Board
III. Budget Results - First Quarter 2016
Approved Budget Modifications
The 2016 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2016 FDIC Operating Budget. The following budget reallocations were approved during the first quarter in accordance with the authority delegated by the Board of Directors.
- In January 2016, the organizations under the Chief Information Officer (CIO), the Office of Minority and Women Inclusion, the Division of Risk Management Supervision (RMS), and the Office of the Ombudsman made minor reallocations of budget authority among major expense categories within their approved budgets. The largest reallocations were made by the CIO organizations (the Division of Information Technology (DIT), CIO Council, and Information Security and Privacy Staff), although those reallocations totaled only 0.4 percent of their combined 2016 Ongoing Operations budgets. The CIO organizations reprogrammed about $1.2 million in budget authority between the Equipment and Outside Services-Personnel expense categories of their budgets to better align budget authority with planned information technology (IT) and IT security related activities for the year. None of the budget realignments increased or decreased the total Board-approved budget or the Ongoing Operations or Receivership Funding components of their division/office budgets.
- In March 2016, in conjunction with a reduction in authorized staffing (see below), the CFO approved the realignment of $320,054 from the RMS Salaries and Compensation budget to the Corporate Unassigned contingency reserve to reflect the reduction of RMS’s 2016 staffing authorization. Following this budget reallocation, the amounts remaining available within the Corporate Unassigned budgets for the Ongoing Operations and the Receivership Funding budget components were $18,320,054 and $27,407,582, respectively.
Approved Staffing Modifications
The 2016 Budget Resolution delegated to the CFO the authority to modify approved 2016 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2016 FDIC Operating Budget. The following change was approved by the CFO in accordance with the authority delegated to him by the Board of Directors:
- In February 2016, the CFO approved a reduction of 49 authorized non-permanent field examination positions and one non-permanent Supervisory Examiner position in RMS to reflect the projected reduction in examination workload resulting from a statutory change in early December 2015 and the Board’s subsequent adoption of a rule implementing extended examination cycles for highly-rated institutions with $500 million to $1.0 billion in assets. This reduction in authorized non-permanent examination staffing was partially offset by the addition of seven non-permanent non-examination positions in RMS’s Washington office to provide for an orderly transition of work from non-permanent to permanent staff during 2016.
Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the three months ending March 31, 2016, are defined as those that either (1) exceed the YTD budget by more than $3 million and represent more than five 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 by an amount that exceeds $5 million and represents more than ten percent of the major expense category or total division/office budget.
Significant Spending Variances by Major Expense Category
There was a significant spending during the first quarter in two major expense categories of the Ongoing Operations component of the 2016 FDIC Operating Budget:
- Outside Services-Personnel expenditures were $6 million, or 12 percent, less-than-budgeted. Most of this underspending occurred in the Division of Administration (DOA), the Division of Depositor and Consumer Protection (DCP), and the Division of Resolutions and Receiverships (DRR). DOA spent $3 million less than budgeted for contractual support in the first quarter, largely due to lower-than-expected expenses for administrative services due to weather-related closures and vacant contractor positions; delays in completing the salary structure review and related pay, performance, and competency modeling projects; and slower-than-budgeted spending on security related initiatives. DCP spent $1 million less-than-budgeted, primarily due to delays in beginning work on several enhancements to Money Smart products and to delays in interagency billing for the FDIC’s share of the costs for an interagency project to upgrade the Home Mortgage Disclosure Act (HMDA) data collection infrastructure and for 2016 HMDA data collection services. DRR spent $1 million less-than-budgeted, due largely to continuing delays in contracting for advisory services in support of DRR’s Title I and Title II resolution planning responsibilities and lower-than-projected spending for IT systems development and support.
- Equipment expenditures were $5 million, or 30 percent, less-than-budgeted. DIT spent $4 million less-than-budgeted, primarily because hardware purchases from its technical refresh allowance were not made as quickly as anticipated.
The Receivership Funding component of the 2016 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 only one of the seven major expense categories during the first quarter in the Receivership Funding component of the 2016 FDIC Operating Budget:
- Outside Services-Personnel expenditures were $25 million, or 37 percent, less-than-budgeted. This variance was primarily attributable to DRR, which spent $21 million less-than-budgeted. This reflected the fact that there was only one small bank closing that required less contractual support than was budgeted for first-quarter resolutions, and only minimal expenses were incurred for loan servicing and asset management for the 439 active receiverships.
Significant Spending Variances by Division/Office1
Only two organizations had significant spending variances through the end of the first quarter:
- DRR spent $26 million, or 29 percent, less-than-budgeted, mostly due to less-than-budgeted spending for resolutions and receivership workload for the reasons described above.
- The Legal Division spent $6 million, or 11 percent, less-than-budgeted. Approximately $5 million of this variance was in the Receivership Funding budget component due largely to lower-than-projected outside counsel expenses for receivership-related litigation. It also had a $1 million variance in its Ongoing Operations budget component due to slower-than-projected hiring to fill vacant positions.