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III.
Budget Results - Third Quarter 2011
Approved
Budget Modifications
The 2011 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2011 Corporate Operating Budget. In accordance with the authority delegated by the Board of Directors, the CFO in July 2011 approved the reallocation of existing budget authority within the Ongoing Operations and Receivership Funding components of the 2011 Corporate Operating Budget following the mid-year reassessment of actual and projected spending and the second quarter analysis of spending for salaries, bonuses, and fringe benefits. The budgets for all major expense categories and most divisions and offices were adjusted. As a result of these adjustments, the Corporate Unassigned contingency reserve was reduced by $15 million, to $2 million, in the Ongoing Operations component and increased by $94 million, to $111 million in the Receivership Funding component. None of these modifications changed the total 2011 Corporate Operating Budget as approved by the Board in December 2010 (and amended by the Board in January 2011).
Approved
Staffing Modifications
The 2011 Budget Resolution delegated to the CFO the authority to modify approved 2011 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2011 Corporate Operating Budget. Changes approved by the CFO in accordance with the authority delegated to him by the Board of Directors are shown on page 12.
Spending Variances
Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the nine months ending September 30, 2011, are defined as those that either (1) exceed the YTD budget by $1 million and represent more than 2 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 $2 million and represents more than 4 percent of the major expense category or total division/office budget.
Significant
Spending Variances by Major Expense Category
Ongoing
Operations
There were significant spending variances in four of the seven major expense categories in the Ongoing Operations component of the 2011 Corporate Operating Budget through the third quarter.
- Outside Services – Personnel expenditures were $33 million, or 17 percent, less than budgeted. The Office of Complex Financial Institutions (CFI) spent $8 million less than budgeted, which was largely due to delays in defining contract requirements while CFI focused on filling its authorized FDIC positions. The Division of Resolutions and Receiverships (DRR) spent $6 million less than budgeted which was due to lower than anticipated expenses for business process improvements, financial advisory services for a recovery and resolution project, and miscellaneous web, IT, and data management projects. In addition, funds originally anticipated for an internal review will not be used. Also, $5 million budgeted in September for reimbursement to the Department of Justice (DOJ) for goodwill litigation expenses was not used; DOJ has determined that it will not require additional funding in FY 2011. The Division of Information Technology (DIT) spent $4 million less than budgeted, which was largely due to contractor staff not being brought on-board as quickly as anticipated.
- Equipment expenditures were approximately $6 million, or 9 percent, less than budgeted. DIT spent $4 less than budgeted primarily due to delays in software procurements. The variance will diminish once invoices for these contracts are received and paid. In addition, the Division of Administration (DOA) spent $2 million less than budgeted which was due to lower-than-anticipated online library information services; postponement of equipment purchases for the disaster recovery site in Richmond; and delays in purchasing furniture, fixture and equipment (FF&E) until later in the year.
- Outside Services – Other expenditures were approximately $6 million, or 33 percent, less than budgeted. The Office of Public Affairs (OPA) spent $3 million less than budgeted, which was largely due to a decision to redirect the office’s attention from the overdraft awareness campaign to newer initiatives such as the unbanked/underbanked survey and resolution authority for systemically important financial institutions. DOA spent $3 million less than budgeted because of lower than expected mail-related services, significant savings from extending the performance period for the express mail services contract, and lower negotiated insurance rates.
- Other Expenses were $4 million, or 27 percent, less than budgeted. The variance was mostly due to significant underutilization of the Professional Learning Accounts by employees in order to focus on meeting their ongoing workload priorities.
Receivership
Funding
The Receivership Funding component of the 2011 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 and related expenses for permanent employees assigned to the receivership management function.
There were significant spending variances in all major expense categories through the third quarter in the Receivership Funding component of the 2011 Corporate Operating Budget:
- Salaries and Compensation ($20 million, or 8 percent, less than budgeted).
- Outside
Services - Personnel ($358 million, or 37 percent, less than
budgeted).
- Travel ($13 million, or 34 percent, less than budgeted).
- Buildings
($101 million, or 59 percent, less than budgeted).
- Equipment ($5 million, or 36 percent, less than budgeted).
- Outside Services - Other ($11 million, or 55 percent, less than budgeted).
- Other
Expenses ($79 million, or 64 percent, less than budgeted).
All of these variances were attributable to the fact that there were fewer insured institution failures during the first nine months of the year than anticipated when the 2011 Receivership Funding budget was developed.
Significant
Spending Variances by Division/Office1
Ten organizations had significant spending variances through the end of the third quarter:
- DRR spent $571 million, or 40 percent, less than budgeted, which was mostly due to less-than-budgeted spending for resolution and receivership activities, as explained above.
- DOA spent $17 million, or 8 percent, less than budgeted. This variance was largely attributable to fewer-than-expected bank closings and the smaller average size of the failing banks; a decrease in background investigations resulting from reduced on-site contract staff; a decrease in records management services; reduced mail costs which was due to lower than expected mail related services; significant savings from extending the performance period for the express mail services; significant savings from lower negotiated insurance rates; and lower than budgeted expenses for online library information services.
- DIT spent $16 million, or 8 percent, less than budgeted. This variance was largely attributable to lower support for failed financial institutions and delays in planned software procurements by DIT.
- The Legal Division spent $12, or 5 percent, less than budgeted. This variance included approximately $8 million in under spending for Salaries & Compensation ($3 million in Ongoing Operations and $5 million in Receivership Funding) due to attrition and slower-than-projected hiring to fill budgeted positions.
- CFI spent $9 million, or 36 percent, less than budgeted. This variance was attributable to lower-than-budgeted spending for contract services, as explained above.
- The Corporation’s Executive Support Offices spent approximately $7 million, or 25 percent, less than budgeted. This variance was mostly attributable to lower-than-budgeted expenses in OPA for the overdraft awareness campaign, as explained above.
- The OIG spent $63 million, or 22 percent, less than budgeted, because it has been operating under a continuing resolution since the fourth quarter of last year, which precluded the OIG from filling vacant positions and executing certain procurement actions as originally planned.
- None of the $5 million budgeted for Government litigation was spent, because DOJ determined that it had sufficient FDIC funds remaining from FY 2011 to pay for all projected FY 2012 expenses associated with defensive goodwill litigation.
- The Executive Offices spent $3 million, or 44 percent, less than budgeted. This variance included approximately $2 million in under spending for Outside Services-Personnel due to the fact that we had not yet been billed by GAO for 2010 audit work.
- The Division of Finance (DOF) spent $3 million, or 11 percent, less than budgeted. This variance was attributable to lower than expected requirements for contractor services for temporary DOF accounting and auditing work.
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1Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.
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