Chief Financial Officer's (CFO) Report to the Board
[an error occurred while processing the directive]III. Budget Results - Second Quarter 2017
Approved Budget Modifications
The 2017 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2017 FDIC Operating Budget. The following budget reallocations were approved during the second quarter in accordance with the authority delegated by the Board of Directors.
- In April 2017, the CFO approved the following budget increases and realignments, primarily through the realignment of funds from the Corporate Unassigned contingency reserve:
- An increase of $2,718,112 to the Outside Services-Personnel expense category of the Ongoing Operations budget of the Division of Information Technology (DIT). This increase provided funding for a technical inventory of IT assets at the FDIC’s primary and back-up data centers ($1,200,000), acquisition support to replace the current backup data center ($500,000), and contract support to enhance the existing enterprise architecture ($481,378) and program management ($536,734) functions.
- An increase of $3,872,639 to the Buildings and Leased Space expense category of the Ongoing Operations budget of the Division of Administration (DOA) to provide funding for the Virginia Square Loading Dock project ($2,172,639), the Garage Barriers project ($1,300,000), and a lighting upgrade at the San Francisco Regional Office ($400,000). This increase was substantially offset by the subsequent return by DOA in June of approximately $3.2 million in unused budget authority (see below).
- Increases of $1,644,845 in the Outside Services-Personnel category and $3,409,328 in the Equipment category of DIT’s Ongoing Operations budget and $565,580 in the Equipment category of the Ongoing Operations budget of the Information Security and Privacy Staff (ISPS) to provide funding for second quarter equipment and software upgrades as part of DIT’s and ISPS’s ongoing technology refreshment programs.
- Realignment of $447,620 from the Outside Services-Personnel category to the Equipment category of DIT’s Ongoing Operations budget for software purchases related to DIT’s IT asset inventory project.
- Increases of $1,841,375 to the Outside Services-Personnel category and $461,440 to the Equipment category of DIT’s Ongoing Operations Budget to provide additional funding for the Office 365 initiative to migrate e-mail and SharePoint capabilities to the cloud.
- In May 2017, the CFO approved increases of $3,116,205 to the Outside Services-Personnel category and $1,525,320 to the Equipment category of ISPS’s Ongoing Operations budget to address identified shortfalls in its operating budget and to fund several high-priority security initiatives.
- In June 2017, the CFO approved the following budget increases and realignments, primarily through the realignment of funds to and from the Corporate Unassigned contingency reserve:
- Realignment of $199,680 from the Outside Services-Personnel category to the Equipment category of ISPS’s Ongoing Operations budget to provide funding for software subscription purchases.
- An increase of $127,544 to the Outside Services-Personnel category of DIT’s Ongoing Operations budget to identify options for the migration of e-mail to the cloud for the Office of Inspector General.
- Reallocations among the Salaries and Compensation categories of both the Ongoing Operations and Receivership Funding budget components of various divisions and offices to better reflect projected 2017 funding requirements, based upon an analysis by the Division of Finance of year-to-date salaries and fringe benefits expenses. Due to the large number of vacancies in budgeted positions resulting from the early 2017 hiring freeze, these reallocations resulted in net reductions of $8,995,218 in the Ongoing Operations Salaries and Compensation budget and $166,358 in the Receivership Funding Salaries and Compensation budget. In each budget component, these projected surplus funds were realigned to the Corporate Unassigned contingency reserve.
- Increases of $880,678 in the Outside Services-Personnel category and $11,080,000 in the Equipment category of DIT’s Ongoing Operations budget to provide funding for third and fourth quarter equipment and software upgrades as part of DIT’s ongoing technology refreshment program.
- The transfer of $851,512 from the Outside Services – Personnel budget of DIT to the same budget category in the Office of Communications (OCOM) in conjunction with the transfer of responsibility for internet services and web content operations from DIT to OCOM.
- An increase of $473,468 to the Outside Services-Personnel category of DIT's Ongoing Operations budget to provide funding for an EndPoint Hardening planning project and a short-term solution to address an audit finding on IT security.
- A net reallocation of $5,706,725 was made to the Corporate Unassigned contingency reserve within the Ongoing Operations budget component, largely due to the reduced contract spending requirements in the Outside Services-Personnel category of the Division of Resolutions and Receiverships, DOA, and the Office of Complex Financial Institutions. The reallocation also included other realignments among various expense categories and divisions and offices. In the Receivership Funding budget component, a small realignment of DOA’s budget was made between expense categories.
Following all second quarter budget modifications, the balances in the Corporate Unassigned contingency reserves were $26,414,590 in the Ongoing Operations budget component and $30,524,390 in the Receivership Funding budget component.
Approved Staffing ModificatonsThe 2017 Budget Resolution delegated to the CFO the authority to modify approved 2017 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2017 FDIC Operating Budget. In the second quarter, there were no approved staffing modifications.
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, 2017, are defined as those that either (1) exceed the YTD budget by more than $2 million and represent more than three 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 $10 million and represents more than ten percent of the major expense category or total division/office budget.
Significant Spending Variances by Major Expense Category
Ongoing Operations
There were no significant spending variances during the Second quarter in any major expense category of the Ongoing Operations budget component of the 2017 FDIC Operating Budget.
Receivership Funding
The Receivership Funding component of the 2017 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 second quarter in the Receivership Funding budget component:
- Outside Services-Personnel expenditures were $20 million, or 20 percent, less than budgeted. This variance was mostly attributable to the Legal Division, which spent $16 million, or 16 percent, less than budgeted, primarily due to the lower-than-anticipated use of outside legal counsel.
Office of Inspector General
There were no significant spending variances during the second quarter in any major expense category of the Office of Inspector General budget component of the 2017 FDIC Operating Budget.
Significant Spending Variances by Division/Office 1
The Legal Division was the only division or office that had a significant spending variance through June 30, 2017. It spent $17 million, or 15%, less than budgeted largely due to a lower than anticipated use of outside legal counsel.
Other Matters
An analysis of 2017 funding requirements for employee pay and benefits was completed in June, in accordance with the 2017 Budget Resolution. The analysis determined that the costs related to fringe benefits had been overestimated during the preparation of the 2017 FDIC Operating Budget by approximately $2.5 million in the Salaries and Compensation expense category. This variance was primarily due to the inclusion of a small general fringe benefit cost increase that had only partially materialized as of May 31st. The CFO elected not to exercise his delegated authority to adjust the 2017 FDIC Operating Budget to address this variance, since the net projected budget overage is not material relative to the total budget.
1Information on division/office variances reflects variances in the total FDIC Operating Budget (both the ongoing operations and receivership funding budget components).
Last Updated 09/19/2017