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

III. Budget Results - Fourth 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 fourth quarter in accordance with the authority delegated by the Board of Directors.

• In October 2017, the following budget realignments were approved:

• In conjunction with the Board’s decision to integrate the functions of the Office of Corporate Risk Management (OCRM) into a newly-constituted Risk Management and Internal Controls Branch (RMIC) within the Division of Finance (DOF), the CFO reallocated OCRM’s 4th quarter budget to DOF. A total of $874,155 in budget authority was realigned in the Salaries and Compensation, Outside Services - Personnel, Travel, and Other Expenses expense categories in the Ongoing Operations budget component.
• The CIO Council realigned $810,000 from its Outside Services – Personnel expense category to Equipment to acquire additional subscriptions for the Salesforce platform and support of the implementation of the Enterprise Public Inquiries and Complaints System.


• In November 2017, the CFO approved the following budget increases and realignments:

• An increase of $920,000 to the Equipment expense category of the Ongoing Operation budget of the Division of Information Technology (DIT) to replace equipment nearing the end of its useful life. This increase was funded from the funds earmarked for IT technology refreshment in the Corporate Unassigned contingency reserve.

• Based on a corporate-wide review of actual expenses in the Salaries and Compensation expense category through the end of the 3rd Quarter, there was an increase of $150,000 in the Salaries and Compensation budget of the Office of Communications (OCOM) and a realignment of Salaries and Compensation budget authority among organizational entities within the Executive Offices.  The additional budget authority for OCOM was realigned from the Corporate Unassigned contingency reserve in the Ongoing Operations budget component.


• In December 2017, the CFO approved separate increases of $455,033 and $560,000, respectively, in the Equipment expense category of DIT’s Ongoing Operations budget. The first increase was provided from the funds earmarked for IT technology refreshment in the Corporate Unassigned contingency reserve to replace obsolete equipment used for bank closings. The second was provided from the non-earmarked portion of the Corporate Unassigned contingency reserve to purchase additional Virtual Desktop licenses to enhance security and address the source of recent service outages.

Following all fourth quarter budget modifications, the balances in the Corporate Unassigned contingency reserves were $23,679,768 in the Ongoing Operations budget component (including $1,375,003 reserved for IT technology refreshment that was not spent) and $30,524,390 in the Receivership Funding budget component.

Approved Staffing Modificatons

The 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 October, the CFO approved the transfer of 11 authorized permanent positions from OCRM to DOF in conjunction with the integration of OCRM into DOF’s RMIC. After an assessment by DOF of the transferred risk management workload and the OCRM responsibilities being assumed by individual divisions, the CFO subsequently approved the transfer of six of those 11 authorized positions from DOF to other divisions as follows: two permanent positions to the Legal Division, two permanent positions to the Division of Resolutions and Receiverships (DRR), one permanent position to the Division of Risk Management Supervision (RMS), and one permanent position to the Division of Consumer Protection (DCP).

Spending Variances

Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the year ending December 31, 2017, are defined as those that either (1) exceed the YTD budget; or (2) are under the YTD budget for a major expense category or division/office by an amount that exceeds $5 million and represents more than five percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense CategoryOngoing Operations

Ongoing Operations

There were four significant spending variances in major expense categories in the Ongoing Operations budget component for 2017:

• Salaries and Compensation expenditures were $89 million, or 7 percent, less than budgeted. RMS ($32 million), the Legal Division ($11 million), and all other divisions (from $3 million to $6 million) each spent less than budgeted in the category. These budget variances were predominately due to vacancies in budgeted staff positions. In addition, the Corporate Unassigned contingency reserve had approximately $9 million in unused budget authority remaining at the end of the year in this expense category. That unused budget authority lapsed on December 31, 2017.

• Outside Services – Personnel expenditures were $29 million, or 11 percent, less than budgeted.

• The Division of Administration (DOA) spent $5 million less than budgeted, largely due to lower-than-budgeted spending for several security-related services, including background investigations.
• The CIO Council spent $3 million less than budgeted due to lower discretionary spending by divisions and lower-than-estimated maintenance costs for new investment applications.
• The Office of the Chief Information Security Officer spent nearly $3 million less than budgeted due to lower than anticipated expenses for credit monitoring services, reduced spending for security assessments, and delays in onboarding new contractors.
• DIT spent $2 million less than budgeted due to targeted reductions in spending during the year by organizational entities other than the Infrastructure Services Branch as well as lower-than-budgeted spending for several approved initiatives.
• The Corporate Unassigned contingency reserve had approximately $12 million in unused budget authority remaining at the end of the year in this expense category. That unused budget authority lapsed on December 31, 2017.


• Travel expenditures were $10 million, or 11 percent, under budget. This was mostly due to underspending of $7 million by RMS for regional and field office regular duty and reassignment travel. DCP spent almost $2 million less than budgeted due to the conduct of fewer examinations than in 2016 and less-than-anticipated travel for conferences and meetings.


• Buildings and Leased Space spending was $11 million, or 11 percent, under budget, mostly due to underspending by the DOA. DOA spent $10 million less than budgeted due to the extension of some project timelines beyond 2017, work cancellations, delays in building improvement projects, and lower building services expenses than in prior years.

Receivership Funding

The Receivership Funding component 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 significant spending variances in five of the seven major expense categories in the Receivership Funding component of the 2017 FDIC Operating Budget:

• Salaries and Compensation expenditures were $9 million, or 25 percent, less than budgeted. This variance was mostly attributable to vacancies in budgeted non-permanent positions in DRR and the Legal Division.
• Outside Services-Personnel expenditures were $62 million, or 27 percent, less than budgeted. This variance was largely attributable to lower-than-budgeted spending for outside counsel services by the Legal Division ($27 million, or 32 percent, less than budgeted), because a significant amount of litigation was on hold awaiting court rulings on motions. In addition, the Corporate Unassigned contingency reserve had approximately $30 million in unused budget authority remaining at the end of the year in this expense category. That unused budget authority lapsed on December 31, 2017.
• Travel expenditures were approximately $768,000, or 23 percent, more than budgeted. This variance resulted from the deployment of more staff and longer travel durations than planned for bank closings during 2017.
• Buildings expenditures were $8 million, or 44 percent, less than budgeted. This was primarily attributable to lower-than-projected environmental remediation costs and lower residual facility expenses from liquidation activities.
• Outside Service – Other expenditures were approximately $56,000, or 4 percent, more than budgeted. This was due to higher than planned filing and court costs and insurance expenses associated with closings.

Office of Inspector General

The Office of Inspector General (OIG) budget component had a significant spending variance in only one of the seven major expense categories. Equipment expenditures were approximately $742,000, or 152 percent, more than budgeted. This variance was due to the purchase of storage, server, and other equipment and services in connection with an initiative to expand and upgrade the OIG’s Electronic Crimes Unit’s laboratory (which also contributed to an increase in the OIG’s 2018 operating budget).

Significant Spending Variances by Division/Office ¹

Five organizations had significant spending variances through the end of the fourth quarter:

• The Legal Division spent $41 million, or 17 percent, less than budgeted, due to vacancies in budgeted positions in the Ongoing Operations budget component and slower-than-projected hiring to fill those vacancies. It also had a significant variance in the Outside Services – Personnel expense category in the Receivership Funding budget component, where expenditures were less than budgeted for outside counsel because significant litigation was on hold waiting for a court to rule on motions.
• RMS spent $40 million, or 7 percent, less than budgeted due to vacancies in budgeted positions and underspending for regular duty and reassignment travel in the Ongoing Operations budget component.
• DOA spent $25 million, or 9 percent, less than budgeted, due to vacancies in budgeted positions; lower-than-budgeted spending for security services, including background checks; lower-than-budgeted spending on building operating costs, maintenance and repairs; delays in or deferral of planned construction projects; and lower-than-budgeted spending for human resources contract support services.
• DRR spent $20 million, or 8 percent, less than budgeted, largely due to lower-than-budgeted Salaries and Compensation expenses in both the Ongoing Operations and Receivership Funding budget components due to vacancies in budgeted positions and less-than-anticipated spending in the Buildings expense category of the Receivership Funding budget component.
• The Corporate Unassigned contingency reserve had approximately $54 million in unused budget authority remaining at the end of the year. That unused budget authority lapsed on December 31, 2017.

¹Information on division/office variances reflects variances in the total FDIC Operating Budget (both the ongoing operations and receivership funding budget components).