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

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III. Budget Results - Fourth Quarter 2010

Approved Budget Modifications

The 2010 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2010 Corporate Operating Budget.  The following budget reallocations were made during the fourth quarter in accordance with the authority delegated by the Board of Directors. (None of these modifications changed the total 2010 Corporate Operating Budget approved by the Board in December 2009.)

  • In October 2010, the CFO approved a $1,000,000 reallocation in the Outside Services – Personnel expense category of the Ongoing Operations budget to the Office of Enterprise Risk Management (OERM) from the Corporate Unassigned budget.  The purpose of this budget authority reallocation was to assist the Risk Steering Committee in preparing a Board case that included the organization structure options and operating model choices for the risk management organization, and initial view of the organizational design, staffing level and their costs for the proposed Office of the Corporate Risk Management.
  • In October 2010, the CFO approved the reallocation of existing budget authority within the Salaries & Compensation expense category of the Ongoing Operations and Receivership Funding components of the 2010 Corporate Operating Budget to reflect updated salary and benefit expense estimates for several divisions and offices.  This reallocation was based upon an analysis of actual spending for salaries, bonuses, and fringe benefits through September 30, 2010.  In conjunction with these reallocations, the Corporate Unassigned budgets were increased by $8,357,797 and $13,816,111 in the Ongoing Operations and Receivership Funding budget components, respectively.
  • In October 2010, the CFO approved the reallocation of budget authority within the Salaries & Compensation expense category of the Ongoing Operations and Receivership Funding components of the Corporate Unassigned budget to fund the change in the awards policy for Corporate Managers (CMs).  The realignment increased budget authority in several divisions and offices and decreased the Corporate Unassigned budget for Ongoing Operations and Receivership Funding by $627,063 and $137,866, respectively.
  • In December 2010, the CFO approved the reallocation of $655,000 in budget authority in the Ongoing Operations component from the Corporate Unassigned budget to the Outside Services – Personnel budget of the Office of Diversity and Economic Opportunity (ODEO) in support of efforts to fund the expanded Corporate Outreach and asset purchaser efforts as well as to fund the use of sign language interpreters.
  • In December 2010, the CFO approved the reallocation of existing budget authority within the Salaries & Compensation expense category of the Ongoing Operations component of the 2010 Corporate Operating Budget from the Corporate Unassigned budget (-$6,350,751) to the budgets of the Division of Supervision and Consumer Protection (+$5,976,672), Division of Resolutions and Receiverships (+$237,286), Executive Offices (+$90,000), Office of the Ombudsman (+$24,206), and Office of International Affairs (+$22,587).  This reallocation was based upon an analysis of actual spending for salaries, bonuses, and fringe benefits through November 30, 2010, and on-board staffing estimates through year-end.
  • In December 2010, the CFO approved the reallocation of $1,050 in existing budget authority in the Executive Offices from the Travel expense category to the Outside Services – Other expense category of the Ongoing Operations component of the 2010 Corporate Operating Budget. 

Following these budget reallocations, the amounts remaining available within the Corporate Unassigned budgets for the Ongoing Operations and Receivership Funding budget components were $9,524,119 and $197,191,989, respectively.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below.  Significant spending variances for the year ending December 31, 2010, are defined as those that either (a) exceed the annual budget for a major expense category or total division/office budget, or (b) are under the annual budget for a major expense category or division/office by an amount that exceeds $1 million and represents more than 3 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 six major expense categories for the year in the Ongoing Operations component of the 2010 Corporate Operating Budget:

  • Outside Services – Personnel expenditures were $32.5 million, or 14 percent, less than budgeted. The largest components of this variance include the following. The Division of Administration (DOA) spent $6.3 million less than budgeted, largely due to lower-than-anticipated costs for background investigations; delays in the hiring of Human Resources support contractors; lower-than-expected spending on records retention and destruction; and, significant savings from developing the Human Capital plan internally.  The CIO Council’s spending for systems development and discretionary small enhancements was $5.7 million less than budgeted.  Department of Justice expenses for the goodwill litigation were $4.9 million lower than budgeted through the fourth quarter.   The Division of Resolutions & Receiverships (DRR) spent $3.6 million less than budgeted due to the diversion of resources to train and assimilate new staff, thus delaying the issuance of a Blanket Ordering Agreement solicitation.  The Office of Inspector General (OIG) spent $3.0 million less than budgeted due to the delay in awarding new contracts due to operating under a Continuing Resolution.  The Division of Information Technology’s (DIT) spending for internal operations was nearly $2.2 million less than budgeted and the Office of Complex Financial Institutions (OCFI) spent $1.0 million less than budgeted, as no OCFI staff was on-board to initiate outside contractor work in 2010.
  • Travel expenditures were $0.1 million, or less than 1 percent, greater than budgeted, due to an increase in the number of examinations conducted and an increase in the number of examination staff.  Those examination costs were largely, but not fully offset by the lower-than-projected travel for Corporate Employee Program (CEP) and Corporate University personnel, and lower than anticipated investigative and audit workload in the OIG.
  • Buildings expenditures were $0.2 million, or less than 1 percent, greater than budgeted, largely due to slightly greater-than-estimated expenses associated with implementation of the 2010 Headquarters Space Realignment Plan.
  • Equipment expenditures were approximately $5.2 million, or 6 percent, greater than budgeted.  DIT spent $1.8 million more than budgeted as funds were re-prioritized to purchase security software to facilitate compliance with GAO audit findings, and the CIO Council spent $1.8 million more than budgeted largely on hardware and software purchases at year end.  In addition, DOA spent $1.5 million more than budgeted due to unanticipated expenses related to furnishing an additional floor at the Courthouse building, unanticipated carpet replacement expenses at Virginia Square, and un-accrued expenses from 2009 that were paid in 2010.
  • Outside Services – Other expenditures were $4.8 million, or 22 percent, less than budgeted.  DOA spent $2.4 million less than budgeted, largely due to lower unit shipping costs resulting from the decision to incorporate General Services Administration’s (GSA) Strategic Source Initiative; significant savings from establishing ground service as the default for express mail services; and, lower-than-budgeted spending for insurance.  In addition, the Office of Public Affairs (OPA) spent $1.9 million less than budgeted for its advertising and media campaigns due to the office’s need to redirect its attention to more urgent matters relating to the implementation of Dodd-Frank legislation.
  • Other Expenses expenditures were $3.6 million, or 24 percent, less than budgeted.  The Division of Supervision and Consumer Protection (DSC) spent $2.4 million less than budgeted due to lower PLA participation as a result of workload demands, unused funds related to the cancellation of the Economic Inclusion Conference, and lower-than-projected expenses for the Interagency Accounting, Assistant Regional Director (ARD) and National Field Supervisor (FS) conferences.

Receivership Funding

The Receivership Funding component of the 2010 Corporate Operating Budget includes funding for expenses that are incurred in conjunction with insured 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 all of the seven major expense categories through the fourth quarter in the Receivership Funding component of the 2010 Corporate Operating Budget:

  • Salaries & Compensation ($68.8 million, or 22 percent, less than budgeted).
  • Outside Services-Personnel ($427.9, million or 26 percent, less than budgeted).
  • Travel ($18.0 million, or 30 percent, less than budgeted).
  • Buildings ($47.3 million, or 19 percent, less than budgeted).
  • Equipment ($10.9 million, or 24 percent, less than budgeted).
  • Outside Services-Other ($40.2 million, or 149 percent, more than budgeted).
  • Other Expenses ($30.0 million, or 16 percent, more than budgeted).

The variances in the Outside Services – Personnel expense category were attributable to fewer-than-anticipated resolutions through the fourth quarter of 2010.  The variance in the Salaries & Compensation category was attributable to slower than projected hiring of non-permanent staff.  Lower-than-budgeted spending occurred in the Buildings and Other Expense categories as a result of shorter than expected operations at receivership locations and the fewer-than-anticipated number of field sites in operation.  The variance in the Travel category was also due to the lower-than-anticipated number of resolutions through the fourth quarter of 2010.  The variance in the Equipment category was primarily attributable to lower laptop prices and lower-than-anticipated costs for the Midwest Temporary Satellite Office (MWTSO).  The variance in the Outside Services – Other expense category reflected approximately $43.3 million in unbudgeted guarantee fee costs that were incurred in conjunction with a Limited Liability Company (LLC) transaction.  The variance in the Other Expense category was attributable to the extensive time required to facilitate the transfer of banking operations and the disposition of the failed bank assets.

Significant Spending Variances by Division/Office1

Twelve organizational units had significant spending variances through the end of the fourth quarter:

  • DRR spent $279.5 million, or 13 percent, less than budgeted, mostly due to less-than-budgeted spending for resolution and receivership workload activities for the reasons identified above.   This was slightly offset by the payment of a large, unbudgeted guarantee fee and greater-than-budgeted expenses in the Other Expense category in connection with disposition of failed bank assets.
  • DIT spent $20.9 million, or 8 percent, less than budgeted. The majority of this variance was in the Receivership Funding budget component and was largely attributable to less-than-projected bank closing activities and associated contractor support; and lower-than-anticipated expenses for the MWTSO facility and laptops.  Vacancies in budgeted positions significantly contributed to the $2.8 million variance in the Ongoing Operations budget component, where excluding the Salaries & Compensation expense category, the net variance for internal operations was only $0.5 million.
  • The Legal Division spent $12.3 million, or 4 percent, less than budgeted.  This variance included approximately $8.5 million in under spending for Salaries & Compensation due to slower-than-projected hiring to fill budgeted positions.
  • OIG spent $6.5 million, or 17 percent, less than budgeted.  The OIG was operating under a continuing resolution for the first quarter of fiscal year 2010, which delayed spending during the following quarter.  The OIG again operated under a continuing resolution in the first quarter of the fiscal year 2011, which effectively froze OIG spending at its fiscal year 2010 appropriated level.  These funding limitations precluded the OIG from filling vacant authorized positions and executing certain procurement actions, thus resulting in less-than-anticipated expenditures in the fourth quarter.
  • Government Litigation was $4.9 million, or 74 percent, less than budgeted.  This variance was attributable to lower than expected expense payments to the Department of Justice for litigation expenses on the goodwill cases.
  • Executive Support Offices spent $4.2 million, or 11 percent, less than budgeted.  This variance was mostly attributable to lower-than-budgeted expenses for advertising and media campaign costs in the Office of Public Affairs due to the office’s need to redirect its attention to more urgent matters relating to the implementation of Dodd-Frank legislation. 
  • The CIO Council spent $3.9 million, or 6 percent, less than budgeted.  This variance was primarily attributable to under-spending of discretionary funds by divisions and offices for small enhancements.
  • The Division of Finance (DOF) spent $3.9 million, or 10 percent, less than budgeted.  This variance was attributable to lower-than-expected requirements for contractor services for temporary DOF accounting and auditing work, and slower-than-expected hiring. 
  • CU – Corporate spent $3.9 million, or 16 percent, less than budgeted.  This variance is primarily due to unanticipated schedule adjustments for several major initiatives within the College of Corporate Business.
  • The OCFI spent $2.4 million, or 100 percent, less than budgeted.  This variance was due to delays in officially staffing this new office in 2010. 
  • CU – CEP spent $2.2 million, or 9 percent, less than budgeted.  This variance included spending approximately $1.6 million less than budgeted for travel expenses and approximately $0.5 million less than budgeted for Salaries & Compensation expenses for Financial Institution Specialists due to a slightly adjusted average class size.
  • The Corporate Unassigned budget of $206.7 million lapsed unused on December 31, 2010.  This source of funds was established to provide an unallocated contingency reserve to meet unanticipated or unbudgeted resource requirements.

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





Last Updated 12/14/2010 dofbusinesscenter@fdic.gov

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