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Chief Financial Officer's (CFO) Report to the Board

301 Moved Permanently

301 Moved Permanently


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III. Budget Results - Fourth Quarter 2011

Approved Budget Modifications

The 2011 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to reallocate funds within the 2011 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 2011 Ongoing Operations or Receivership Funding budgets or the total 2011 Corporate Operating Budget approved by the Board.

  • In November 2011, the CFO approved the reallocation of $250,000 in budget authority from the Corporate Unassigned budget to the CIO Council’s Ongoing Operations budget.  These funds were needed to make system changes and enhancements in connection with implementation of new assessment regulations required under the Dodd-Frank Act (DFA) and to enhance datamarts used by the new Office of Complex Financial Institutions (CFI) to monitor systemically-important financial institutions in conjunction with the Corporation’s new orderly liquidation responsibilities under DFA.  (The CIO Council was ultimately unable to utilize all of the additional funds before the end of the year).
  • In December 2011, the CFO approved the reallocation of $235,000 in budget authority from the Corporate Unassigned budget to the Outside Services – Personnel budget of the Chief Financial Officer to pay higher-than-projected expenses associated with the 2010 audit conducted by the Government Accountability Office.   In addition, the CFO approved the reallocation of $5,600 in budget authority within the Ongoing Operations budget of the Executive Offices to provide additional travel funds for the Chief Risk Officer and to address other minor funding needs within the Executive Offices.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below.  Significant spending variances for the year ending December 31, 2011, are defined as those that either (a) exceed the annual budget for a major expense category or total division/office budget, 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 from the annual budget in all major expense categories in the Ongoing Operations component of the 2011 Corporate Operating Budget:

  • Salaries and Compensation expenditures were $63 million, or 6 percent, less than budgeted.  The Division of Risk Management Supervision (RMS) spent $18 million less than budgeted, primarily due to the large number of authorized vacancies that were unfilled during the first eight months of the year.  RMS did not fill these vacancies because its risk management supervisory workload was substantially lower at the beginning of 2011 than had been projected during the 2011 planning and budget process.  After monitoring its workload during the first half of the year, it requested at mid-year that its authorized staffing (and associated budget) be reduced by over 200 positions.  In addition, the Legal Division ($8 million), the Division of Resolutions and Receivership (DRR) ($7 million), and CFI ($5 million) all spent less than budgeted in this expense category, largely due to vacancies and delays in hiring.
  • Outside Services-Personnel expenditures were $39 million, or 15 percent, less than budgeted.  Approximately $8 million of this variance was attributable to under spending by DRR on several planned projects that were delayed or did not occur in 2011.  CFI spent $8 million less than budgeted mainly due to slower-than-projected hiring which caused delays in defining contract support requirements.  In addition, the Legal Division spent substantially less than budgeted for the ongoing Goodwill litigation (reimbursed to the Department of Justice) and for outside counsel services to support the division’s open bank activities. The Office of Inspector General (OIG) spent $4 million less than budgeted because it was operating under a continuing resolution for much of the quarter and because fewer Material Loss Reviews (MLRs) were conducted than planned because of an increase in the minimum MLR threshold enacted in DFA.
  • Travel expenditures were $7 million, or 7 percent, less than budgeted.  Corporate University (CU) spent $3 million less than budgeted due to less travel than originally planned by Financial Institution Specialists Corporate Employee Program (CEP) as the result of the cancellation of one scheduled class and changes in CEP rotational assignments.  OIG spent $2 million less than budgeted due to a lower-than-budgeted on-board staffing level throughout the year that resulted in less regular duty and relocation travel expenses during the year.  DOA spent approximately $1 million less than budgeted due to significant savings realized by identifying alternatives to travel, including increased video conferencing and online communications.
  • Buildings expenditures were $3 million, or 4 percent, less than budgeted, largely due to postponement of renovations in the Student Residence Center, lower than anticipated expenses for the Headquarters (HQ) space realignment, lower than anticipated facilities maintenance and repair expenses, a reduction in energy consumption, and tenant improvement allowance savings in the Kansas Regional Office, Cincinnati Field Office, and Chicago Regional Office.
  • Equipment expenditures were approximately $2 million, or 2 percent, greater than budgeted, primarily due to equipment purchases made to support CIO Council and IT Security projects for which the required funds were budgeted in the Outside Services-Personnel expense category.
  • Outside Services-Other expenditures were $8 million, or 34 percent, less than budgeted.   The Office of Public Affairs (OPA) spent $5 million less than budgeted after a decision to redirect the office’s attention from the overdraft awareness campaign to newer initiatives.  In addition, DOA spent $3 million less than budgeted due to lower per unit shipping costs realized by using the General Services Administration’s (GSA) Strategic Source initiative, significant savings from obtaining flexible parcel insurance to cover all FDIC freight shipments, and delays in printing projects related to deposit insurance and Money Smart.
  • Other Expenses were $5 million, or 23 percent, less than budgeted.   The variance was mostly due to significant underutilization of Professional Learning Account funds by individual employees throughout the Corporation.

Receivership Funding

The Receivership Funding component of the 2011 Corporate Operating Budget includes funding for expenses that are incurred in conjunction with insured 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 were significant spending variances in all major expense categories through the fourth quarter in the Receivership Funding component of the 2011 Corporate Operating Budget:

  • Salaries and Compensation ($44 million, or 13 percent, less than budgeted).
  • Outside Services - Personnel ($608 million, or 43 percent, less than budgeted).
  • Travel ($19 million, or 39 percent, less than budgeted).
  • Buildings ($137 million, or 63 percent, less than budgeted).
  • Equipment ($6 million, or 27 percent, less than budgeted).
  • Outside Services - Other ($15 million, or 55 percent, less than budgeted).
  • Other Expenses ($101 million, or 65 percent, less than budgeted).

All of these variances were attributable to the fact that there were fewer insured institution failures during the year than anticipated when the 2011 Receivership Funding budget was developed.

Significant Spending Variances by Division/Office1

Thirteen organizational units had significant annual spending variances for 2011.

  • DRR spent $805 million, or 43 percent, less than budgeted, mostly due to less-than-budgeted spending for resolution and receivership management activities for the reasons identified above.  
  • RMS spent $23 million, or 4 percent, less than budgeted.  The variance was largely within the Salaries and Compensation expense category ($18 million), as explained above.  In addition, Other Expenses were under budget by $2 million due to underutilization of Professional Learning Accounts by RMS employees.
  • DOA spent $23 million, or 8 percent, less than budgeted.  Almost half ($10 million) of this variance was due to under spending in the Receivership Funding budget component to support the closing of failed financial institutions.  In addition, in the Ongoing Operations budget component, substantial savings were realized through lower per unit shipping costs; use of flexible parcel insurance for all FDIC freight shipments; lower negotiated insurance rates; postponement of renovations in the Student Residence Center; lower-than-anticipated expenses for HQ space realignments, lower facility maintenance and repair costs; and reductions in energy consumption and tenant improvement allowances in several regional and field offices.
  • The Legal Division spent $17 million, or 5 percent, less than budgeted.  This variance was largely due to under spending in the Salaries and Compensation expense category due to slower-than-projected hiring to fill budgeted positions. 
  • DIT spent $13 million, or 5 percent, less than budgeted. Approximately $8 million of this 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.  In addition, DIT spent $3 million less than budgeted for internal operations due to vacancies in budgeted positions.
  • CFI spent $12 million, or 30 percent, less than budgeted.  This variance was attributable to lower-than-budgeted spending for contracting services and slower-than-projected hiring to fill budgeted positions.
  • The Office of the Inspector General (OIG) spent $11 million, or 27 percent, less than budgeted.  The OIG was under a continuing resolution that restricted its spending authority during the first quarter of the Fiscal Year 2012 which effectively limited OIG spending to the level of the Fiscal Year 2011 appropriation.  This funding limitation caused delays in filling vacant authorized positions and executing certain procurement actions that resulted in lower-than-anticipated expenditures in the fourth quarter.
  • Executive Support Offices spent $10 million, or 27 percent, less than budgeted.  This variance was mostly attributable to lower-than-budgeted expenses in OPA for its overdraft awareness campaign as explained above, and delays in hiring within the Executive Support Offices.
  • The Division of Finance spent $5 million, or 12 percent, less than budgeted.  This variance was attributable to slower-than-expected hiring.
  • The Division of Insurance and Research spent $4 million, or 9 percent, less than budgeted.  This variance was attributable to unexpected attrition in economist positions and delays in establishing its flexible data environment. 
  • Corporate University spent $2 million, or 7 percent, less than budgeted in its overall organizational budget (CU-Corporate), primarily due to slower than projected hiring for budgeted positions.  It also spent $4 million, or 17%, less than budgeted in its Corporate Employee Program budget (CU-CEP).  This variance included under spending of approximately $2 million for travel expenses and approximately $1 million for Salaries and Compensation for new Financial Institution Specialists due to the cancellation of one planned CEP class, changes in rotational assignments in the program, and fewer bank failures than projected.
  • The CIO Council spent $3 million, or 4 percent, less than budgeted.  This variance was primarily attributable to less-than-anticipated spending on initiatives to support implementation of DFA (they were unable to spend the additional funds provided under the approved budget change referenced above) and late award of a contract for the Customer Communication and Tracking System (CCATS).
  • The Executive Offices spent $1 million, or 15 percent, less than budgeted.  This variance was attributable to slower-than-expected hiring.
  • The Corporate Unassigned budget of $112 million lapsed unused on December 31, 2011.  This source of funds was established to provide an unallocated contingency reserve to meet unanticipated or unbudgeted resource requirements.

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1Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.





Last Updated 12/06/2011 dofbusinesscenter@fdic.gov

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