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1998 Annual Report
Building on the groundwork laid in previous years,
the FDIC continued to focus on improving the operational efficiency and effectiveness of
the Corporation in 1998. A strong banking industry and the small number of institution
failures resulted in a continued decline in the FDICs resolutions and liquidation
workload. This led to more office closings and further staff reductions at the FDIC in
1998. At the same time, the Corporation allocated additional resources to ensure that
insured institutions were effectively addressing Year 2000 technology issues, and to
identify and analyze other potential emerging risks to the insurance funds. Here is an
overview of the most significant activities in these areas in 1998.
The FDIC Strategic Plan provides a framework for accomplishing the Corporations mission. The plan sets a course for the organization and guides decisions on the use of Corporation resources. In 1998, the FDIC revised its Strategic Plan to emphasize the results to be achieved and to realign the Corporations activities around three major program areas: insurance, supervision and receivership management. A section was added to address the FDICs management of its human, technological and information resources and internal controls.
The corporate-level strategic plan is augmented by three additional strategic plans that address information technology, corporate diversity and the activities of the Office of Inspector General (OIG). In accordance with the Government Performance and Results Act of 1993, the FDICs annual budget is linked to the FDIC Strategic Plan. Regular performance reports allow management to evaluate actual performance and to adjust strategic goals and the allocation of resources as needed. They also provide important information for future planning efforts.
The FDIC developed new tools during 1998 to integrate its planning activities with established management functions. For example, a new Business Planning System facilitates budget development, provides a link to the FDIC Strategic and Annual Plans, and enables improved cost management by furnishing FDIC managers with information not previously available. Another new tool, the Business Planning Information Application, enables quicker access to expense information, which allows the Corporation to make more timely, informed decisions that can help control costs.
The FDICs budget is the culmination of the Corporations annual planning process. The largest component of the annual budget is staffing-related costs. Staffing estimates are developed by each division and office, and are based on corporate-wide workload assumptions and division and office annual performance plans. Additional resource needs are also identified during the budget process.
In 1998, the FDIC continued to contain expenses and reduce costs. Actual expenditures for 1998 were $1.2 billion, or 12.7 percent less than 1997 spending and 12 percent below the approved 1998 budget. Actual 1998 spending was below budgeted levels primarily due to lower costs for asset liquidation-related contracting and the hiring of fewer Division of Supervision (DOS) examiners than initially planned.
The Corporation continued to reduce the size of its workforce in 1998 to levels consistent with its declining resolutions and liquidation workload. Total FDIC staffing decreased to 7,359 at year-end 1998, down 5.7 percent from year-end 1997. Staffing reductions were primarily due to further declines in the inventory of assets in liquidation and related workload. They were accomplished largely through the expiration of non-permanent appointments and by consolidating field operations.
In accordance with a 1996 plan for a phased consolidation of its field operations, the Division of Resolutions and Receiverships (DRR) in 1998 closed field offices in Irvine, CA; Jersey City, NJ; and Boston, MA; and consolidated the residual workload from those sites into the Dallas and Washington offices. Only the Hartford, CT, office remains to be closed under DRRs 1996 field consolidation plan. In December 1998, the FDIC Board of Directors delayed the Hartford offices projected closing date until June 30, 2000. This will allow the Corporation to retain a large number of experienced staff as part of a contingent workforce ready to respond to any unexpected increase in bank failures in early 2000 due to Y2K technical issues. The Division of Supervision also continued to streamline its field office structure in 1998 by closing small field offices in Bath, OH; Cincinnati, OH; Macon, GA; and Fort Wayne, IN.
Throughout 1998, the Corporation continued to provide job placement and training opportunities to employees affected by downsizing. Approximately 350 employees in closing offices (including 150 employees with permanent appointments) left the Corporation during the year, and another 150 permanent employees in these offices were placed in other positions within the Corporation. Many employees took advantage of the FDICs Career Transition and Outplacement Program, which provides job search assistance and resources to employees affected by downsizing. To further cushion the impact of downsizing, the Corporation also made new buyout and early retirement opportunities available to selected employees in overstaffed divisions and offices. The Corporation will continue many of these initiatives in 1999 as it continues to pursue further downsizing and realignment of the Corporations workforce.
The Corporation took steps in 1998 to ensure that it maintains a capable, productive, diverse and motivated workforce into the future.
The FDIC is strongly committed to maintaining a workplace that is fair and inclusive. An executive-level Diversity Steering Committee was created during the year to help ensure that the FDIC benefits from the dedication, experience and diversity of its employees. This committee will promote among employees an environment of mutual respect, an appreciation of differing perspectives and talents, and an opportunity to work cooperatively together to achieve their full potential pursuing the Corporations mission. The Steering Committee will unveil the Corporations first diversity strategic plan in 1999.
As part of this diversity effort, a corporate-wide mentoring program was developed that will encourage senior managers to share their knowledge, skills and organizational insights with participating employees to help them realize their full potential. Another element of the diversity effort is the Corporations career management program, to be started on a pilot basis in 1999. It will provide career planning, counseling, reference tools and other resources to help employees better manage their careers.
The FDICs external recruitment efforts are designed to attract a well-qualified and diverse pool of applicants. In 1998, about 200 new examiners were hired from outside the Corporation for positions in DOS and the Division of Compliance and Consumer Affairs (DCA). While the Corporation had made substantial progress in downsizing its liquidation staff, it still had a large number of bank examiner vacancies in DOS and DCA at the beginning of the year. About 300 employees from other divisions undergoing downsizing had been retrained in recent years to fill examiner positions, but these transfers were not sufficient to fill the growing number of examiner vacancies. To ensure that the Corporation could adequately fulfill its supervisory responsibilities, the FDIC began in early 1998 to recruit new examiners from outside the Corporation for the first time in six years.
The FDICs compensation and benefits program underwent significant changes in 1998 as a result of a 1997 agreement between the FDIC and the National Treasury Employees Union.
Compensation changes included eliminating a 19-step pay system and replacing it with minimum and maximum salary ranges for each grade. Beginning in January 1999, FDIC employees will no longer receive automatic, across-the-board salary increases. Instead, pay raises will be based upon performance.
Special legislation was also passed in 1998 to convert health insurance coverage for FDIC employees and retirees to the Federal Employees Health Benefits (FEHB) program. Beginning in 1999, the FDIC will terminate its separate corporate-sponsored health insurance program. This will result in long-term savings for the Corporation.
The FDIC Office of Inspector General performed numerous independent audits, investigations and other reviews related to corporate programs and operations in 1998. The OIGs mission is to promote economy and efficiency and to detect and prevent fraud and abuse. The Inspector General keeps the FDIC Board of Directors and the Congress fully informed about possible problems and deficiencies in corporate activities.
For the 12-month period ending September 30, 1998 (the OIGs reporting period to the Congress), the office issued 103 audit and evaluation reports with questioned costs totaling nearly $22 million and recommendations for putting more than $1 million to better use. These reports also included 129 non-monetary recommendations to improve corporate programs and operations. OIG investigations resulted in nearly $30 million in fines, restitutions and recoveries. Indictments and criminal charges were brought against 26 individuals, two of whom were FDIC employees. Over the same period, 21 individuals were convicted, including one employee and one former employee.
During the year, the OIG assisted management in closing out over 400 former Resolution Trust Corporation (RTC) contracts that transitioned to the FDIC at year-end 1995. During the 12-month period, OIG efforts resulted in questioned costs of over $2.8 million for these RTC contracts. Since 1996, the FDIC has disallowed $94.6 million in contractor fees and expenses and agreed to seek recovery of an additional $28.8 million as a result of the OIGs work.
The OIG manages a hotline (1-800-964-FDIC) for employees, contractors and others to report incidents of fraud, waste, abuse and mismanagement that could threaten the effectiveness and efficiency of corporate programs and operations. The OIG continues to review all draft corporate policy and procedural directives, and proposed legislation and regulations before they are finalized.
For additional information about the OIGs activities, please refer to its two Semiannual Reports to the Congress dated April 30,1998, and October 30,1998.
During 1998, the FDIC significantly strengthened its internal controls program. The Office of Internal Control Management (OICM) developed a manual with guidance on corporate-wide internal control policies and risk-management procedures. OICM also issued an employee brochure to enhance employees understanding of risk management and how internal controls play an integral part in their daily on-the-job activities.
At internal conferences and workshops, OICM provided training to over 700 managers, supervisors and professional employees. In December 1998, OICM hosted a Best Practices Conference and apprised FDIC senior managers and internal review staff of new and innovative approaches to managing risk. OICM also participated in a number of internal control reviews to better understand the operations of selected divisions and offices.
The FDIC is committed to ensuring that its computer hardware, software and communications infrastructure will continue to function appropriately in the Year 2000, when many current computer systems may have difficulty distinguishing the numbers 2000 and 1900. The Corporation is adhering to timeframes established by the U.S. Office of Management and Budget and the U.S. General Accounting Office for completing each of the five stages of Year 2000 project management: awareness, assessment, renovation, validation and implementation. The FDIC completed the renovation stage in August 1998, and was on schedule at year-end to complete the validation and implementation stages within established timeframes. The FDICs rigorous, centralized strategy should result in a smooth transition of its automated systems in the Year 2000. For more information on the Year 2000 issue, (click here).
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