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

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

   •  Summary Trends and Results
I. Corporate Fund Financial Results

   •  DIF Balance Sheet
   •  DIF Income Statement
   •  DIF Statements of Cash Flows
   •  FRF Statements of Cash Flows
II. Investments Results & Prospective Strategies

   •  Deposit Insurance Fund Portfolio Summary
   •  Approved Investment Strategy
III. Budget Results

   •  Budget & Expenditures by Major Expense Categories
   •  Budget & Expenditures by Budget Component, Division & Office
Printable Version

III. Budget Results - Third Quarter 2007

Approved Budget Modifications

All divisions and offices completed a mid-year review of their 2007 operating budgets in July, including assessments of YTD spending and projected funding requirements for the remainder of the year. Based on that review, the Chief Financial Officer (CFO) approved reallocations among the operating budgets of several divisions and offices, in accordance with the authority delegated by the Board of Directors in the 2007 Budget Resolution. In addition, funds were realigned internally within the operating budgets of several organizations. None of these realignments changed the total 2007 Corporate Operating Budget, but they did result in changes in the amounts budgeted for most major expense categories:

  • At the corporate level, the budgets for the Travel and Other Expense categories were increased, the budget for the Buildings category was unchanged, and the budgets for the remaining expense categories were decreased. Funding for the approved budget increases was made available from excess funding in the Salary and Compensation budgets of the Legal Division, the Division of Information Technology (DIT), the Division of Insurance and Research (DIR), and the Division of Resolutions and Receiverships (DRR).
  • The Corporate University (CU) budget was increased by over $4.4 million to pay for salaries, travel, and other expenses for Corporate Employee Program (CEP) participants and detailees from other FDIC organizations. Funding for the salaries and benefits of detailees was originally budgeted in their home organizations. Funding had to be increased for the CEP because a decision was made in early 2007 to hire more employees than originally budgeted in order to fill examiner vacancies in the Division of Supervision and Consumer Protection (DSC) more quickly. The funding for this increase was also made available from excess funding in the Salary and Compensation budgets of the other organizations referenced above.
  • Most of the funds included in the DSC budget for the interagency Shared National Credit (SNC) Modernization Project were realigned from the Outside Services-Personnel category to the Travel category to cover higher-than-expected travel costs for the examination program. These funds were available for reallocation because the start of the SNC Modernization Project was postponed until 2008.
  • The budgets for the Outside Services-Personnel and Equipment categories within the internal operations portion of DIT’s budget were increased, while the budget for the Outside Services-Other category was reduced. Within the systems development, operations, and maintenance portion of the DIT budget, the budgets for the Outside Services-Personnel and Outside Services-Other categories were increased, while the budget for the Equipment category was reduced. The latter changes were made in accordance with recommendations from the CIO Council.

The 2007 spending estimates for several multi-year Investment Budget projects were also updated during the third quarter. In addition, the DIT Director in September approved the reallocation of funds among several approved IT projects funded from DIT’s 2007 operating budget to reflect changes in estimated project costs and schedules, in accordance with recommendations of the CIO Council. These reallocations provided funding for the early start of three projects originally planned to begin in 2008, but did not change the total amount of the DIT budget.

The CFO approved two changes in authorized staffing during the third quarter, in accordance with authority delegated by the Board:

  • DIT’s authorized year-end 2007 staffing target was increased by two positions to correct an error made in the Board case requesting approval of the 2007 budget in December 2006. As a result of the change, DIT’s year-end 2007 staffing target is now consistent with its authorized staffing throughout 2007. There was no impact on DIT’s 2007 operating budget.
  • A request from the Office of the Inspector General to transfer one authorized 2007 position to CU was approved. There was no impact on CU’s 2007 operating budget.

Status of Spending for the Implementation of Deposit Insurance Reform

The 2007 Corporate Operating Budget approved by the Board of Directors in December 2006 included funding for the continued implementation of Deposit Insurance Reform. Excluding internal Salaries and Compensation expenses, $4.9 million was spent for this purpose in 2006 on system changes, and $1.8 million was spent on printing and distribution costs. Through the third quarter of 2007, an additional $3.9 million (excluding internal salaries and compensation expenses) was spent as follows:

  • Approximately $3.4 million was spent for system development and enhancement activities. It is anticipated that an additional $1.2 million will be spent in 2007 to complete modifications to the Assessment Information Management System (AIMS) and the Risk Related Premium System (RRPS). A total of $4.8 million is budgeted in 2007 for systems work related to deposit insurance reform implementation.
  • Approximately $525,000 was spent for printing and distribution of updated deposit insurance brochures through the third quarter of 2007. It is anticipated that up to an additional $100,000 will be spent revising the English versions of Insuring Your Deposit and Your Insured Deposit during 2007.

In addition, two new employees were hired in July by DIR to support deposit insurance pricing, as authorized by the Board. The additional cost for these employees through September 30, 2007, was about $85,000.

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, 2007, are defined as those that either (1) exceed the YTD budget by $1 million and represent more than two percent of the major expense category or total division/office budget; or (2) are under the YTD budget by $2 million and represent more than four percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were four major expense categories in which a significant spending variance occurred through the third quarter in the Ongoing Operations component of the 2007 Corporate Operating Budget:

  • Outside Services-Personnel expenditures were $28 million, or 21 percent, less than budgeted. The variance was largely due to lower-than-budgeted payments to the Department of Justice for litigation services, delays in starting several IT projects, lower net costs for the Student Residence Center (because of increased proceeds derived from outside use of the facility), and lower-than-budgeted spending on human resource contractual services.
  • Travel expenditures were $3 million, or 8 percent, less than budgeted. Overall corporate travel costs were lower because staff from DRR participated in fewer compliance examinations than projected and Dallas rotations for some CEP participants were rescheduled to later in the year. In addition, lower-than-projected travel costs were incurred for supervision, field oversight and litigation in the Legal Division.
  • Equipment expenditures were almost $3 million, or 9 percent, less than budgeted. A large portion of this variance was because furniture, fixtures, and equipment purchases and security equipment and software acquisitions originally budgeted in the first three quarters of 2007 were rescheduled to the fourth quarter.
  • Other Expenses were $3 million, or 35 percent, less than budgeted. This variance was largely due to the lack of spending by employees from their new Professional Learning Accounts and the charging of a portion of the expenses for off-site conferences to the Travel category rather than the Other Expenses category.

Receivership Funding

The Receivership Funding component of the Corporate Operating Budget includes budgeted funding for overtime and non-personnel expenses that are incurred in conjunction with an institution failure and the management and disposition of the assets and liabilities of the ensuing receivership. There were three major expense categories in which a significant spending variance occurred for the first nine months of the year in the Receivership Funding component of the Corporate Operating Budget. All of these variances were attributable to the limited receivership and resolution activity that occurred during the year. The major expense categories were:

  • Salary and Compensation 2($2 million, or 86 percent, less than budgeted).
  • Outside Services-Personnel ($42 million, or 91 percent, less than budgeted).
  • Travel ($3 million, or 73 percent, less than budgeted).

Significant Spending Variances by Division/Office3

There were six organizations that had a significant spending variance through the third quarter:

  • DRR spent $40 million, or 55 percent, less than budgeted. This variance was fully attributable to under spending in the Receivership Funding component of DRR’s operating budget due to the limited receivership and resolution activity that occurred through the third quarter.
  • The Legal Division spent nearly $14 million, or 21 percent, less than budgeted. This variance was largely attributable to under spending in the Receivership Funding component of its operating budget, primarily due to the limited receivership and resolution activity that occurred through the third quarter.
  • DIT spent $12 million, or 8 percent, less than budgeted. Approximately one-half of the variance occurred in the Outside Services-Personnel category of the Ongoing Operations component of the Corporate Operating Budget and was caused by delays in systems development, operations, and maintenance efforts. In addition, DIT had a larger-than-anticipated number of personnel vacancies and filled its vacancies more slowly than expected. Security equipment and software purchases were also rescheduled to the fourth quarter.
  • The Division of Administration spent nearly $7 million, or 6 percent, less than budgeted. This variance was largely attributable to (a) lower-than-anticipated net costs for the Student Residence Center as a result of higher-than-projected proceeds received in connection with use of the facility by outside parties, and (b) reduced spending for compensation and consulting services on human resource matters.
  • DIR spent nearly $3 million, or 10 percent, less than budgeted. This variance was attributable to the large number of budgeted positions that remain vacant and a significant reduction in the FDIC’s share of the costs for enhancements to the Central Deposit Repository under the cost sharing agreement with the other bank regulatory agencies.
  • CU spent $2 million, or 9 percent, less than budgeted. This variance was attributable to delays in both the IT training and DRR commission initiatives and the re-scheduling of Dallas rotations for some CEP participants to later in the year.

 

 

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2Overtime is the only account budgeted in the Salary and Compensation expense category of the Receivership Funding component of the Corporate Operating Budget in 2007. All staff salaries are budgeted and expensed in the Ongoing Operations budget component.
3Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.



Last Updated 11/26/2007 dofbusinesscenter@fdic.gov