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III.
Budget Results -
Second Quarter 2008
Approved
Budget and Staffing Modifications
Two modifications were made to the 2008 Corporate Operating Budget
and/or authorized staffing, in accordance with the authority delegated
by the Board of Directors in the 2008 Budget Resolution:
Corporate
Operating Budget
- In
April 2008, the Deputy to the Chairman and Chief Financial
Officer (CFO) approved the reallocation of budget authority
within the Ongoing Operations component of the Corporate
Operating Budget to provide the Division of Resolutions and
Receiverships (DRR) with an additional $4,523,308 in Salaries
and Compensation for increases in permanent staff to be hired
in 2008. As reported last quarter, DRR’s 2008 staffing
authorization was increased by 39 permanent positions, and
DRR was given the authority to hire an additional 11 employees
in excess of its 2008 staffing authorization on a temporary
basis in anticipation of projected retirements through 2011
(“temporary overhires”). Funds of $5,455,408
were also reallocated from the Outside Services – Personnel
expense category to the Salaries and Compensation expense
category in the Receivership Funding component of DRR’s
2008 budget, in conjunction with an increase in DRR’s
2008 staffing authorization to hire an additional 69 non-permanent
employees. In addition, the CFO approved an increase of $665,850
for the Office of Public Affairs (OPA) to provide initial
funding for the 75th Anniversary Deposit Insurance Public
Education Campaign. Additional funding is expected to be
made available for this campaign later in the year. In order
to fund these new requirements, budget authority was reallocated
from the unused first quarter budgets for regular salaries
and benefits in the Division of Supervision and Consumer
Protection and the Legal Division in the amounts of $3,736,315
and $1,452,843, respectively.
- In May 2008, the
CFO approved the realignment of budget authority among divisions
and major expense categories
in the Receivership Funding component of the Corporate Operating
Budget. The budget adjustment provided funding for the Division
of Information Technology in the amount of $8,030,309 for equipment
purchases and contractor support in preparation for an expected
increase in receivership and resolution activities. The existing
Receivership Funding budget for the Division of Administration
increased by $2,469,691 to support additional facilities needs
associated with that same increased level of activity. These
increases were completely offset by a $5,250,000 reduction
in the Receivership Funding budgets for Outside Services – Personnel
of both the Legal Division and the Division of Receiverships
and Resolutions.
Investment Budget
The 2008 Investment
Budget spending projections for the 4C project and the Claims
Administration System were increased by $1,509,926
and $10,048,475, respectively, following the Board’s approval
to increase the investment budgets for those projects in June.
Spending Variances
Significant spending variances by major expense category and
division/office are discussed below. Significant spending variances
for the six months ending June 30, 2008, are defined as those
that either (1) exceed the YTD budget by $2 million and represents
more than 3 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 that exceeds $3 million and represents
more than 5 percent of the major expense category or total division/office
budget.
Significant
Spending Variances by Major Expense Category
Ongoing
Operations
There were three major expense categories that incurred a significant
spending variance through the second quarter in the Ongoing Operations
component of the 2008 Corporate Operating Budget:
- Outside
Services – Personnel
expenditures were approximately $16 million, or 19 percent,
less than budgeted.
The variance was largely due to delays in planned information
technology (IT) projects and lower-than-anticipated spending
for IT maintenance and operations. In addition, delays in spending
for consumer and community affairs education and outreach programs
contributed to the variance.
- Equipment
expenditures were approximately $3 million, or 14 percent,
less than budgeted. The variance was largely due
to a change in the timing of planned spending for the IT Technical
Refresh program. The budget for this program was initially spread
evenly throughout the year, but the acquisition plan for the
hardware and software purchases was subsequently revised to shift
those purchases to the second half of the year. Also contributing
to the variance was a temporary delay in purchasing of furniture,
fixtures, and equipment in both headquarters and the field.
- Outside
Services – Other expenditures were approximately
$2 million, or 30 percent, more than budgeted. The variance was
due to spending for the FDIC’s 75th Anniversary Public
Education Campaign that exceeded its current budget. As noted
above, the CFO plans to reallocate additional funds to this initiative
later in the year.
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 two major
expense categories in which a significant spending variance
occurred through the second quarter in the Receivership Funding
component of the 2008 Corporate Operating Budget:
- Outside Services – Personnel expenditures
were approximately $3 million, or 17 percent, less than budgeted, primarily
due to the limited
receivership and resolution activity that actually occurred through the
second quarter. With the increased resolution activity in the third quarter,
expenditures are expected to significantly increase in this category.
- Equipment
expenditures were $4 million, or 258 percent, greater than
budgeted, due to the expedited purchasing
of IT equipment in preparation for an anticipated increase
in receivership and resolution activity later in the year.
Budget was made available for this purpose through reallocation
of existing budget authority. These funds were budgeted for
later months during the year, resulting in a temporary budget
variance.
Significant
Spending Variances by Division/Office1
Five
organizations had significant spending variances through the
end of the second quarter:
- Overall,
the Division of Information Technology (DIT) spent approximately
$8 million, or 7 percent, less than budgeted. This was
comprised of $4.5 million in excess year-to-date spending
in DIT’s Receivership Funding component, which was
more than offset by $12.2 million less spending than budgeted
in the Ongoing Operations component of its budget and $0.3
million under spending for IT Investment projects.
Excess spending in the Receivership Funding area was necessary
to procure equipment necessary for an anticipated increase
in resolution activity. Under spending in Ongoing Operations
included $8.4 million in outside services personnel, which
primarily resulted from delays in development projects
due to client refocus on core mission responsibilities.
In addition, $2.5 million of equipment purchases are being
deferred until later in the year.
- The
Division of Administration (DOA) spent approximately $7
million, or 8 percent, less than budgeted. The variance
of $3.7 million in Ongoing Operations was 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.
The $3.1 million variance in the Receivership Funding component
of DOA’s operating budget reflected the addition of
nearly $2.5 million during the second quarter for facilities
and equipment related to an expected increase in receivership
and resolution activity (DOA projects that these funds will
be fully expensed by the end of the year).
- DRR
spent approximately $3.6 million, or 8 percent, less than
budgeted. The vast majority of this variance, $3.2 million,
relates to the Receivership Funding component of DRR’s
operating budget and is due to the limited resolution activity
that actually occurred through the second quarter. Of the
three institutions that failed in the first half of the
year, only one, ANB Financial, had assets greater than
$1 billion¬ at the time of failure. The combined assets
of the three failures totaled $2.2 billion. While spending
increases have been growing in the Receivership Funding
component through the second quarter, more significant
costs are expected in the third and fourth quarters as
new bank failures occur and resolution activities increase–three
institutions failed in July with assets totaling over $36
billion..
- The Division
of Insurance and Research spent approximately $3 million,
or 17 percent, less than budgeted. The majority
of this variance was due to vacant budgeted positions and
lower-than-budgeted spending for the Central Data Repository.
- The
Executive Support Offices spent approximately $2 million,
or 25 percent, more than budgeted. This variance
was due to spending for the FDIC’s 75th Anniversary
Public Education Campaign that exceeded OPA’s current
budget.
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1 Information
on division/office variances reflects variances in both the Corporate
Operating and Investment Budgets.
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