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

III. Budget Results - Second Quarter 2019

Approved Budget Modifications

The 2019 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2019 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, the CFO approved the realignment of $13.1 million in budget authority from Division of Information Technology (DIT) to the new Office of CIO Management Services (OCMS) to implement a reorganization approved in March 2019 that separated the Business Administration Branch from DIT to establish OCMS as a separate office reporting to the Chief Information Officer (CIO).  The budget adjustment involved the realignment of funding in four major expense categories in the Ongoing Operations budget component: Salaries and Compensation, $7.5 million; Outside Services – Personnel, $5.6 million; Travel, $25,259; and Other Expenses, $29,115.
• In April, the CFO also approved a budget realignment of $2.5 million in the Ongoing Operations budget component from the Office of Chief Information Security Officer (OCISO) to DIT, including $1.9 million in the Outside Services – Personnel expense category and $625,568 in the Equipment expense category.  This realignment provided funding to DIT for access management activities that are largely managed by DIT and performance of the firewall management function that is shared by DIT and OCISO.  Both functions were previously budgeted only in OCISO.
• In May 2019, the CFO approved budget reallocations in the Salaries and Compensation expense category of the Ongoing Operations budgets of all divisions and offices, except OCISO.  Net reductions totaling approximately $13.5 million were approved in the Salaries and Compensation budgets of most of the affected organizations based on unused first quarter spending authority.  The Salaries and Compensation budgets of several organizations were increased to reflect projected spending in excess of budget authority, including an increase of $3.4 million in Corporate University-Corporate (CU-Corp) due to its heavy use of employees on long-term detail assignments.  The net result of these salary adjustments was an $8.1 million reallocation to the Corporate Unassigned contingency reserve.
• In June, the CFO approved the transfer of approximately $208,000 in the Salaries and Compensation expense category of the Ongoing Operations budget component from Office of Chief Information Officer (OCIO) to OCMS to support the transfer of one authorized permanent position from OCIO to OCMS.
• In June, the CFO approved the following mid-year adjustments to 2019 Ongoing Operations budgets.
  • An increase of $4.5 million in the Outside Services – Personnel budget of the Legal Division for a substantial projected increase in expenses associated with ongoing litigation.
  • An increase of $550,000 in the Outside Services – Personnel budget of the Division of Risk Management Supervision (RMS) to provide funding for an interagency agreement to improve the analysis and sharing of cybersecurity threat information with financial institutions.
  • A net increase of $4.9 million in the combined budgets of the CIO organizations. This included an increase of $5.6 million in various expense categories for completion of the migration to a new Backup Data Center and an increase of $730,000 in the Equipment budget of the CIO Council for additional licensing costs.  These increases were partially offset by reductions elsewhere across the CIO organization budgets.
  • A decrease of $200,000 in the Division of Insurance and Research’s Outside Services – Personnel budget to reflect funds not expected to be used in 2019.
  • Realignments among expenses categories in the budgets of the Division of Administration, Corporate University, and the Division of Depositor and Consumer Protection, with no net change to the total budgets of each organization.There were no changes to the Receivership Funding budgets for any organization.

There were no changes to the Receivership Funding budgets for any organization.

Following these second quarter budget modifications, the balances in the Corporate Unassigned contingency reserves were $4,089,141 in the Ongoing Operations budget component and $14,894,445 in the Receivership Funding budget component.

Approved Staffing Modificatons

The 2019 Budget Resolution delegated to the CFO the authority to modify approved 2019 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2019 FDIC Operating Budget.  

• In April, the CFO approved the realignment of 45 positions from DIT to OCMS in conjunction with a reorganization creating OCMS.
• In April, the CFO approved a decrease of one authorized permanent RMS Supervisory Examiner position (a revision to the staffing authorization approved in March 2019).
• In June, the CFO approved the transfer of one permanent authorized Senior Advisor position from OCIO to OCMS.

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, 2019, 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 was a significant spending variance through the second quarter in one major expense category of the Ongoing Operations budget component.

Spending in the Equipment expense category was under the YTD budget by $14.4 million, or 23 percent.  This variance was attributable primarily to underspending by DIT of $15.9 million, or 39 percent, of its YTD budget for Equipment.  This included $6 million of underspending for technology refreshment purchases.  In addition, equipment purchases were delayed for several projects including the mainframe replacement, a virtual desktops pilot project, and redesign of the wide-area network.

The application segmentation project was cancelled, and budgeted funds for equipment purchases related to that project will not be used.

Receivership Funding

The Receivership Funding component of the 2019 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 and other expenses required to ensure readiness without regard to whether failures occur. 

There was a significant spending variance through the second quarter in one major expense category of the Receivership Funding budget component.  Outside Services – Personnel expenses through the second quarter were $35 million, or 50 percent, less than budgeted. This variance primarily reflected underspending by the Division of Resolutions and Receiverships (DRR) ($20.9 million, or 52 percent of its YTD budget) and the Legal Division ($13.7 million, or 48% of its YTD budget). DRR underspending was attributable to the absence of insured institution failures for which funds had been budgeted.  The variance for the Legal Division was attributable to lower-than-projected spending for outside counsel because cases were settled before going to trial and more work has been done by FDIC attorneys.

Office of Inspector General

There were no significant spending variances through the second quarter in any major expense category of the Office of the Inspector General budget component.

Significant Spending Variances by Division/Office ¹

• DRR spent $26.1 million, or 25 percent, less than budgeted, mostly in the Outside Services – Personnel expense category of the Receivership Funding budget component, due to the absence of expenses for insured institution failures.
• The Legal Division spent $17.6 million, or 18%, less than budgeted, mostly in the Outside Services – Personnel expense category of the Receivership Funding budget component, due to lower-than-budgeted outside counsel expenses.
• DIT spent $14.9 million, or 12%, less than budgeted due primarily to underspending of its Equipment budget.

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