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1996 Annual Report
Building on the groundwork laid in the previous year, the FDIC in 1996 continued to focus on organizational and operational efficiency, making significant strides in preparing for the Corporations future. A strong banking industry and the projected continued decline in the FDICs workload dictated a realignment of key functional areas and further staff reductions throughout the Corporation.
Focus on Planning and Efficiency
Over the past two years, the Corporation has established a comprehensive, corporate-wide planning process to guide its major decisions and activities. The Board of Directors in 1995 approved a five-year strategic planthe first in the Corporations historythat provides the foundation for this new corporate planning process. The plan provides a clear strategic vision for the FDIC, emphasizing its responsibility to identify and address potential problems within the financial industry that might cause losses to the insurance funds. An annual Corporate Operating Plan also was instituted in 1995 for senior management to define and monitor specific projects that contribute to the strategic plan. During the past two years, 189 Corporate Operating Plan projects were initiated (including 36 new projects in 1996), and 85 were completed. Among them were the design and implementation of new systems to increase the efficiency of the examination process (click here) and approval of a procedure to ensure that proposed regulations undergo a thorough cost-benefit analysis before they are issued (click here).
To complete the planning process, an annual Business Plan was initiated in April 1996. Together, the Business Plan and the Corporate Operating Plan provide the framework for the FDIC to carry out its mission, pursue its goals and objectives, and measure performance. A quarterly reporting mechanism will begin in 1997 to provide regular feedback to senior management on the Corporations performance against measurable performance indicators. During 1996, each FDIC division and office also developed annual plans for achieving division and office objectives, and the 1997 budget process for the first time was integrated with the business planning process.
Downsizing and Consolidation
On October 29, 1996, the Corporation announced plans for further downsizing, with a target of reducing total staffing to between 6,500 and 6,600 employees by December 31, 2000. This announcement was the culmination of a comprehensive six-month review that projected resolutions and asset liquidation workload will remain at historically low levels for at least the next several years. One related action was the Boards decision in December of 1996 to merge the Division of Depositor and Asset Services and the Division of Resolutions into a new Division of Resolutions and Receiverships (DRR), and to consolidate DRR field operations by the end of 1999. DRR and related legal and other support activities in nine regional and field offices will be consolidated into the FDICs Dallas office over the next three years. DRR staffing nationwide will be reduced from 1,819 at year-end 1996 to approximately 500 by December 31, 2000. Legal Division staffing is also expected to decline dramatically, from 1,306 at year-end 1996 to about 600 by December 31, 2000.
Also, a new buyout program was offered to about 2,500 employees in November 1996 to minimize the number of employees who would have to be involuntarily separated as a result of staffing reductions in DRR, the Legal Division, and other divisions and offices. The new buyout program was specifically targeted to those organizations, occupations, and locations within the Corporation that are projected to have excess staffing. (The buyout application period closed on February 28, 1997, and more than 400 participating employees are expected to leave the Corporation over the ensuing six months). For more information on downsizing, click here.
The Corporation also initiated in late 1996 a number of job placement and training initiatives designed to cushion the impact of the DRR field consolidations. For example, a training program was established to help employees become bank examiners in the Division of Supervision or compliance examiners in the Division of Compliance and Consumer Affairs. The Corporations Career Transition and Outplacement Program was also expanded to include individualized job search assistance to help eligible employees find employment outside of the FDIC.
Audits, Investigations and Reviews
The Office of Inspector General (OIG) continued to perform independent audits, investigations and other activities related to corporate and receivership programs and operations. The OIGs mission is to promote economy and efficiency and to detect and prevent fraud and abuse.
The FDICs first Presidentially appointed Inspector General, Gaston L. Gianni, Jr., took office in April 1996. The Inspector General Act, as amended by the RTC Completion Act of 1993, requires that the Inspector General be appointed by the President and confirmed by the Senate. The Inspector General keeps the FDIC Board of Directors and the Congress apprised of fraud and serious problems in corporate programs and operations.
For the 12-month period ending September 30, 1996 (the OIGs reporting period to Congress), the office issued 153 audit and evaluation reports with questioned costs totaling more than $59 million and with various recommendations to improve corporate programs and operations. OIG investigative activities nationwide resulted in nearly $10 million in fines, restitutions and recoveries. Indictments or criminal charges were brought against 51 individuals, while 29 individuals were convicted and 25 individuals or entities were sentenced.
The OIG continued its program of contractor reviewsa joint initiative with FDIC management to properly close out contracts in a timely manner. Under the Inspector General Act, as amended, the OIG also implemented procedures to review all draft corporate directives, policies and procedural manuals, and proposed legislation and regulations before they are issued.
In May, the FDIC established the Office of Internal Control Management (OICM) to focus more closely on internal controls and audit resolution activities. This initiative supports the strategic goal of maintaining a strong, effective internal control program. OICM works with each division and office to ensure that internal control matters receive appropriate attention at the corporate level. The office is the Corporations liaison with the U.S. General Accounting Office, the OIG, and a new Audit Committee, which the Board of Directors established in 1996 to assist with oversight of the Corporations financial reporting, internal control and audit processes.
Using Technology to Improve Communication
The Corporations commitment to using technology to improve communication inside and outside the agency was evidenced by the Internets widespread use during 1996. Customers of FDIC Internet offerings included bankers, regulators, financial analysts, journalists, stockbrokers, scholars, consumers and others who want quick and easy access to the FDICs public information. The range of FDIC publications accessible through the Internet (www.fdic.gov) expanded considerably during 1996 to include FDIC financial institution letters (notices to the industry about proposed or new rules and procedures), press releases, speeches by the FDIC Chairman, congressional testimony, manuals, descriptions of banking laws, lists of asset information, and banking statistics.
Following the sunset of the RTC at the end of 1995, the FDIC in 1996 absorbed the remaining assets and other workload of the RTC, and made substantial progress in these areas. The FDIC disposed of approximately $3.3 billion (book value) of the $7.7 billion (book value) in RTC assets that were transferred to the FDIC. Over 2,000 RTC employees were also successfully integrated into the FDIC workforce. In addition, the FDIC largely completed implementing 50 RTC best practices, 21 RTC management goals and reforms, and 49 RTC automated systems, as recommended by an FDIC/RTC Transition Task Force that identified operational differencies between the two agencies. The remaining recommendations will be implemented in 1997.
Also based on the recommendations of the Task Force, the Corporation completed the development of a new automated general ledger system, the Financial Information Management System. This new system, implemented on January 1,1997, consolidates the general ledgers of the FDIC and the RTC, and greatly improves the Corporations financial management and analysis capabilities.
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