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

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

   •  Summary Trends and Results
I. Corporate Fund Financial Results

   •  DIF Balance Sheet
   •  DIF Income Statement
   •  DIF Statements of Cash Flows
   •  FRF Statements of Cash Flows
II. Investments Results & Prospective Strategies

   •  Deposit Insurance Fund Portfolio Summary
   •  Approved Investment Strategy
III. Budget Results

   •  Budget & Expenditures by Major Expense Categories
   •  Budget & Expenditures by Budget Component, Division & Office
Printable Version

III. Budget Results - First Quarter 2007

Modifications to Approved Budgets/Authorized Staffing

During the first quarter of 2007, three modifications were made to the 2007 Corporate Operating Budget and/or authorized staffing, in accordance with the authority delegated by the Board of Directors in the 2007 Budget Resolution:

  • The Chief Financial Officer approved the reallocation of $2,208,024 within the Ongoing Operations component of the approved 2007 Corporate Operating Budget from the Division of Resolutions and Receiverships (DRR) to the Division of Finance (DOF). The reallocation was made in conjunction with a reorganization that transferred the deposit insurance compliance function, along with the 13 authorized positions, from DRR to DOF.
  • Two divisions, the Division of Information Technology (DIT) and the Division of Supervision and Consumer Protection (DSC), made minor reallocations among the major expense categories of their respective operating budgets. The total of these adjustments increased Outside Services – Other by $642,868, Outside Services – Personnel by $398,881, and Other Expenses by $196,846. This was offset by decreasing Equipment by $709,997 and Travel by $528,598.

Status of Spending for the Implementation of Deposit Insurance Reform

The 2007 Corporate Operating Budget approved by the Board of Directors included funding for the continued implementation of Deposit Insurance Reform. Excluding internal salaries and compensation expenses, $4.9 million was spent on system changes and $1.8 million was spent on printing and distribution costs in 2006. During the first quarter of 2007, an additional $1.8 million (excluding internal salaries and compensation expenses) was spent as follows:

  • Approximately $1.4 million was spent for system development and enhancement activities. In addition, about $0.6 million was approved by the Change Control Board for additional work that will be undertaken later in the year. A total of $4.7 million is budgeted in 2007 for systems work related to deposit insurance reform implementation.
  • Approximately $1.8 million was spent through December 31, 2006, for printing and distribution of updated deposit insurance brochures. Additional funds to further update the brochures following the completion of all rulemaking for deposit insurance reform are included in the 2007 Corporate Operating Budget approved by the Board on December 5, 2006.
  • Approximately $0.4 million was spent for printing and distribution of updated deposit insurance brochures during the first quarter of 2007. Up to $0.8 million more will be spent revising the Spanish, Korean, and Chinese versions of Insuring Your Deposit and Your Insured Deposit later this year.

No funds have been spent in 2006 or 2007 for the additional staff in the Division of Insurance and Research (DIR) that the Board authorized to support deposit insurance pricing. DIR continues to defer hiring for those positions until final determinations are made about the new deposit insurance assessment system.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the three months ending March 31, 2007, are defined as those that either (1) exceed the YTD budget by $3 million and represent more than five percent for 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 $5 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 was only one major expense category in which a significant spending variance occurred during the first quarter in the Ongoing Operations component of the Corporate Operating Budget:Outside Services-Personnel expenditures were $7 million, or 18 percent, less than budgeted. Approximately half of this variance was due to information technology (IT) project schedule changes and a decision by DIT management during its ongoing review of corporate IT priorities to scale back selected DIT internal activities. This made approximately $1.6 million available for reallocation to support continued expansion of the new Unix operating environment for projects under development, bringing to $5.0 million the total funds now planned to be spent for this purpose in 2007. The Chief Information Officer determined in February 2006 that Unix would provide a more modern and cost effective technological environment and designated it as the target architecture for the Corporation’s IT infrastructure; initial purchases of equipment and software for the new environment were made during the fourth quarter of 2006, as previously reported to the Board. As additional funds are available, DIT plans to continue to expand the Unix environment to support new applications that can efficiently and effectively use this technology.
  • In addition to the variance in IT contract spending, lower-than-budgeted first quarter spending for government litigation being handled by the Department of Justice contributed $1 million to the first quarter variance in the Outside Services-Personnel category. Another $0.8 million of the variance was the result of a delay in the award of a contract for the Identity Theft Media Campaign and the fact that DSC inadvertently neglected to accrue for IT support received from the FFIEC to meet Home Mortgage Disclosure Act/Community Reinvestment Act reporting requirements.

Receivership Funding

The Receivership Funding component of the Corporate Operating Budget includes funds budgeted for non-personnel expenses that are incurred in conjunction with an institution failure and the management and disposition of the assets and liabilities of the ensuing receivership. There was one major expense category in the Receivership Funding component in which a significant spending variance occurred during the first quarter:

  • Outside Services-Personnel expenditures were $14 million, or 93 percent, less than budgeted, primarily due to the limited receivership and resolution activity that occurred during the quarter.

Significant Spending Variances by Division/Office1

There were two organizations that had a significant spending variances for the first quarter:

  • DRR spent $13 million, or 53 percent, less than budgeted. This variance was fully attributable to under spending in the Receivership Funding component of DRR’s operating budget primarily due to the limited receivership and resolution activity that occurred during the quarter.
  • DIT spent $6 million, or 12 percent, less than budgeted. This was due largely to IT project schedule changes and a decision by DIT management to scale back selected DIT internal activities in order to reallocate funds to continue expansion of the new Unix operating environment, as described above. In addition, within the Corporation’s Investment Budget, a major software purchase planned for the Claims Administration System investment project in March was delayed.

Other Matters

In accordance with the requirements of the 2007 Budget Resolution, an analysis of 2007 funding requirements for employee salaries and fringe benefits was completed after the close of the first quarter. The analysis determined that those costs had been over-estimated by approximately $2.6 million during the preparation of the 2007 Corporate Operating Budget. This represents only about four-tenths of one percent of the 2007 budget for Salaries and Compensation and could be affected by other factors during the remainder of the year, such as timing of actions to fill authorized vacancies. Accordingly, no action is being taken by the CFO to modify the 2007 budget for Salaries and Compensation that was approved by the Board in December 2006.

 

 

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



Last Updated 05/11/2007 dofbusinesscenter@fdic.gov