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

III. Budget Results - Second Quarter 2018

Approved Budget Modifications

The 2018 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2018 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 2018, after the Division of Finance conducted a review of spending in the salary and compensation accounts during the first quarter, the CFO approved budget reallocations in all divisions and offices, except the Executive Offices. In the Ongoing Operations budget components, reductions totaling approximately $12.3 million were made in the Salaries and Compensation accounts of most organizations to reflect unused spending during the first quarter.  The Salaries and Compensation accounts of Corporate University - Corporate were increased by $4.9 million to provide adequate budget resources for employees detailed during the year, and the remaining $7.4 million was reallocated to the Corporate Unassigned contingency reserve.  In the Receivership Funding budget component, small reductions totaling $57,707 were made in the Salaries and Compensation accounts of three divisions and the funds reallocated to the Corporate Unassigned contingency reserve.
• In April 2018, the Board of Directors approved a reallocation of $28 million from the Corporate Unassigned contingency reserve to Division of Information Technology (DIT), Office of Chief Information Security Officer (OCISO), and the CIO Council in the Ongoing Operations budget component. The funds are to support the Backup Data Center project and are mostly in the Equipment, $17.2 million, and Outside Services – Personnel, $10.1 million, expense categories. The remaining funds were reallocated to DIT in the Travel and Buildings expense categories.

• In May 2018, the CFO approved a $3.1 million budget increase to the Ongoing Operations budget component of OCISO.  Additional funding of $1.7 million was provided in the Equipment expense category to augment the annual allowance for Hardware Technology Refreshment, and $1.4 million was added to the Outside Services – Personnel expense category to support a variety of security initiatives to address FISMA findings, establish metrics and reporting systems, and enhance incident response capabilities.  Funding was provided by reallocating almost $200,000 from the Outside Services – Personnel expense category of the DIT and $2.9 million from the Corporate Unassigned contingency reserve to OCISO.

• In June 2018, the CFO approved mid-year budget adjustments that reallocated budget authority among several divisions and the Corporate Unassigned contingency reserve, as well as among expense categories within the divisions.  In the Ongoing Operations budget component, budgets were reduced for two organizations and increased for two others: the Division of Administration or DOA (decreased by $2.3 million), the Office of Complex Financial Institutions or OCFI (decreased by $1.0 million), DIT (increased by $1.2 million), and OCISO (increased by $200,000).  The reduction in the DOA budget primarily reflected lower-than-expected costs for electrical equipment replacement and construction delays for the F Street HVAC Retrofit Project.  The reduction in the OCFI budget was due to the postponement of advisory services for a securities-for-claims exchange project.  DIT received additional Equipment funding to meet its Technology Refreshment requirements, and OCISO received additional Outside Services – Personnel funds to initiate a privacy continuous monitoring program. The Corporate Unassigned contingency reserve was increased by $1.9 million as a result of these adjustments. In the Receivership Funding budget component, a reallocation of $2.3 million was made from the Salary and Compensation expense category to the Outside Services – Personnel expense category within the Division of Resolutions and Receiverships. This reallocation reflected decreased estimates of overtime and larger-than-projected costs for contracts that support bank closings. This adjustment resulted in no change to the Receivership Funding Corporate Unassigned contingency reserve.

Following these budget modifications, the balances in the Corporate Unassigned contingency reserves as of June 30, 2018, were $2,486,270 in the Ongoing Operations budget component and $23,908,578 in the Receivership Funding budget component.

Approved Staffing Modificatons

The 2018 Budget Resolution delegated to the CFO the authority to modify approved 2018 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2018 FDIC Operating Budget.

• In April, following consultation with the Chairman, the CFO approved an increase of five permanent authorized positions in the Office of the Chief Information Officer (CIO) to support the establishment of an enterprise IT strategy function within that office.

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, 2018, 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 CategoryOngoing Operations

Ongoing Operations

There were two significant spending variances through the second quarter in major expense categories of the Ongoing Operations budget component of the 2018 FDIC Operating Budget:

Outside Services – Personnel expenditures were $14.4 million, or 12 percent, below budget. This was the result of under-spending by several organizations:

• DIT spent $3.8 million less than budgeted due to delays in beginning several initiatives, a delay in paying award fees for the infrastructure services contract, and under-accrual of expenses on certain contracts.

• The CIO Council spent $2.8 million less than budgeted due to delays in starting application remediation activities for the Backup Data Center project and lower-than-projected expenses for systems maintenance and operations.

• DOA spent $2.6 million less than budgeted for background investigations.

• The Division of Depositor and Consumer Protection deferred spending on several contracts until the second half of the year.

Equipment expenditures were $18.5 million under budget, mostly due to delays in equipment purchases for the backup data center and technology refreshment.

Receivership Funding

The Receivership Funding component of the 2018 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 were no significant spending variances through the second quarter in any major expense category of the Receivership Funding budget component of the 2018 FDIC Operating Budget.

Office of Inspector General

There were no significant spending variances during the second quarter in any major expense category of OIG budget component of the 2018 FDIC Operating Budget.

Significant Spending Variances by Division/Office ¹

One organization had a significant spending variance through the end of the second quarter.

DIT had a significant spending variance of $21 million, or 17 percent, through the end of the second quarter, mostly due to delays in the acquisition of equipment and contractual services for the backup data center, the acquisition of equipment from the technology refreshment allowance, and a delay in the payment of contract award fees for the infrastructure services contract.

 

¹Information on division/office variances reflects variances in the FDIC Operating Budget.