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III.
Budget Results - Second Quarter 2014
Approved
Budget Modifications
The 2014 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2014 Corporate Operating Budget. The following budget reallocations were made during the second quarter in accordance with the authority delegated by the Board of Directors. None of these modifications changed the total 2014 Corporate Operating Budget as approved by the Board in December 2013.
- In May 2014, the CFO approved modifications to the Salaries and Compensation budgets of divisions and offices within both the Ongoing Operations and the Receivership Funding budget components based on an analysis of year-to-date spending for salaries, bonuses/lump-sum payments, and fringe benefits. That reallocation realigned existing budget authority among most divisions and offices, but resulted in no change to the total corporate budget for either the Ongoing Operations or Receivership Funding budget components.
- During the second quarter of 2014, the Acting Chief Information Officer (CIO) approved the realignment of existing budget authority among expense categories within the CIO Council’s Ongoing Operations budget, consistent with ongoing reviews of the status of individual projects. These modifications resulted in a net decrease to the budget for the Outside Services - Personnel expense category (-$35,251) and increases to the budgets for the Travel (+$5,000) and Equipment (+$30,251) expense categories. That realignment resulted in no change to the total CIO Council budget.
- In July 2014, the CFO approved a reallocation within the Ongoing Operations component of the 2014 Corporate Operating Budget following the mid-year reassessment of actual and projected spending for the year. The budgets for all major expense categories and most divisions and offices were adjusted. The most significant increase was to the budget of the Division of Information Technology (DIT), which received a net budget increase of over $3 million in its Ongoing Operations budget, largely to support the transition to newly-awarded contracts. The most significant reductions were to the budgets of the Office of Complex Financial Institutions (OCFI) ($2 million) due to contracts that have been indefinitely deferred, and the Division of Insurance and Research ($1 million) due to changes in the timing of enhancements to the Central Data Repository (CDR) project and the Small Business Lending Survey. This reallocation was made effective in June 2014.
- The mid-year budget reallocation reduced the Corporate Unassigned contingency reserve by nearly $2 million in the Ongoing Operations budget. Following that reallocation, the unused amounts remaining within the Corporate Unassigned budgets for the Ongoing Operations and the Receivership Funding budget components were $29,010,938 and $2,742,619, respectively.
Staffing Modifications
The 2014 Budget Resolution also delegated to the CFO the authority to modify approved 2014 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2014 Corporate Operating Budget. The following changes were approved by the CFO in accordance with the authority delegated to him by the Board of Directors:
- In May, the CFO approved an increase of one authorized permanent position in the Information Security and Privacy Staff (ISPS) within the CIO organization to accommodate the addition of a Senior Intelligence Officer.
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, 2014, are defined as those that either (1) exceed the YTD budget by $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 $3 million and represents more than five percent of the major expense category or total division/office budget.
Significant
Spending Variances by Major Expense Category
Ongoing
Operations
There was a significant spending variance in three major expense categories during the second quarter in the Ongoing Operations component of the 2014 Corporate Operating Budget:
- Outside Services - Personnel expenditures were $11 million, or 10 percent, less than budgeted. The Division of Resolutions and Receiverships (DRR) spent $3 million less than budgeted for planning related to the possible orderly liquidation of a systemically important financial institution (SIFI). The Legal Division spent $2 million less than budgeted, largely due to lower-than-projected expenses related to FOIA and Privacy Act requests, defensive litigation, and other legal fees The Division of Administration (DOA) spent $1 million less than budgeted due to a delay in the nationwide implementation of the Identity, Credential and Access Management (ICAM) initiative and lower-than-anticipated contract costs resulting from high turnover among contractor employees and delays in completing background investigations of replacement employees. In addition, OCFI spent $1 million less than budgeted for contractual support, although it expects contract spending to increase in the third and fourth quarters of 2014.
- Travel expenditures were approximately $6 million, or 12 percent, less than budgeted. This variance was largely due to vacancies in non-permanent field examination positions in the Division of Risk Management Supervision and Division of Depositor and Consumer Protection that resulted in lower regular duty and relocation travel expenses, and less travel than planned for Financial Institution Specialists in the Corporate Employee Program (CEP) in Corporate University.
- Equipment expenditures were approximately $13 million, or 39 percent, less than budgeted. DIT spent $10 million less than budgeted, largely due to delays in planned equipment purchases.
Receivership
Funding
The Receivership Funding component of the 2014 Corporate 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 significant spending variances in one of the seven major expense categories through the second quarter in the Receivership Funding component of the 2014 Corporate Operating Budget:
- Outside Services-Personnel expenditures were $23 million, or 12 percent, less than budgeted. This variance was attributable to lower-than-budgeted contract expenses due to (a) less costly resolutions, and (b) lower-than-anticipated asset management and marketing costs for contracts supporting Owned Real Estate, Valuations, Securitizations, Due Diligence, Shared Loss, Receivership Assistance Contracts, and Structured Sales.
Significant
Spending Variances by Division/Office1
Four organizations had significant spending variances through the end of the second quarter:
- DRR spent $28 million, or 11 percent, less than budgeted, mostly due to less-than-budgeted spending for resolution and receivership management activities. Over recent quarters, the size of financial institution failures has been below levels anticipated during the 2014 budget formulation process.
- DIT spent $13 million, or 12 percent, less than budgeted. This variance was largely due to delays in planned equipment purchases.
- The Legal Division spent $11 million, or 8 percent, less than budgeted. This variance was due to under-spending of approximately $7 million in the Outside Services – Personnel category, largely due to lower-than-projected outside counsel expenses for receivership-related litigation, and $4 million in the Salaries and Compensation category ($2 million in the Ongoing Operations budget component and $2 million in the Receivership Funding budget component), mostly due to vacancies in budgeted, non-permanent positions and slower-than-projected hiring to fill those vacancies.
- DOA spent $9 million, or 7 percent, less than budgeted. This variance was largely attributable to lower-than-projected spending for online information services; delays in planned furniture purchases; lower-than-expected contract expenses due to delays in the nationwide implementation of the ICAM initiative; under-spending related to contracting delays for the Student Residence Center pipe replacement project; and significant savings realized in connection with field office lease renewals.
Other Matters
An analysis of 2014 funding requirements for employee pay and benefits was completed in accordance with the 2014 Budget Resolution. The analysis determined that those costs had been over-estimated during the preparation of the 2014 Corporate Operating Budget by approximately $7 million in the Salaries and Compensation expense category. This variance was primarily due to a greater-than-anticipated reduction in actual fringe benefit costs. Because the differences were not material relative to the total 2014 Corporate Operating Budget approved by the Board, the CFO elected not to exercise his delegated authority to adjust the 2014 Corporate Operating Budget.
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1Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.
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