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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
   •  Selected Financial Data
II. Investments Results & Prospective Strategies

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

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

III. Budget Results - Third Quarter 2008

Approved Budget and Staffing Modifications

Four modifications were made to the 2008 Corporate Operating Budget and authorized staffing during the quarter, in accordance with the authority delegated by the Board of Directors in the 2008 Budget Resolution:

  • On July 31, 2008, the Deputy to the Chairman and Chief Financial Officer (CFO) approved mid-year adjustments to the Ongoing Operations component of the 2008 Corporate Operating Budget. Budget authority was realigned among most divisions/offices and major expense categories. The most significant modifications were made to the budgets of the Office of Public Affairs, which was increased by $9.3 million to pay for contractual services for the FDIC’s 75th Anniversary Deposit Insurance Public Education campaign; and the Division of Supervision and Consumer Protection (DSC), which was increased by over $9 million to pay for salaries and benefits and travel costs for additional staff. This increase in DSC was partially offset by a $2.6 million reduction in Outside Services - Personnel. The mid-year adjustments included changes to the authorized staffing for eight divisions or offices. Authorized staffing for DSC was increased by 127 positions, primarily non-permanent loan review specialist positions to assist with elevated examination workload. Authorized staffing for the Division of Resolutions and Receiverships (DRR) and the Legal Division were increased by 125 and 25 positions, respectively, to address the increase in resolutions activity. Board members were briefed on these planned staffing increases prior to their approval.
  • In August 2008, the CFO approved a requested increase of seven non-permanent positions to provide the Division of Information Technology (DIT) with additional technical resources to meet DRR needs related to the increase in failure activity.
  • In August 2008, the CFO also approved an increase of 30 non-permanent positions in DRR and 3 non-permanent positions in the Corporate University (CU). The DRR increase will provide additional staff in the Dallas office to perform deposit insurance claims determinations in connection with the projected increase in bank failures, and the CU increase will provide resources to train the large number of new employees in the Dallas office of DRR.
  • In September 2008, the CFO approved requested increases of 339 non-permanent positions in DRR, 25 non-permanent positions in the Legal Division, and 10 non-permanent positions in the Division of Administration (DOA). These increases followed the Board’s approval earlier in the month of an increase in the Receivership Funding component of the 2008 Corporate Operating Budget from $75 million to $150 million. The DRR positions will be used to staff a new temporary West Coast satellite office. The authorized Legal Division staffing increase will permit the re-employment of retired attorneys and other staff to provide on-site legal assistance at failed institutions. The increase in authorized DOA staffing will provide additional resources to handle the increased facilities management, security, and human resources workload that have accompanied staffing increases in DRR and DSC.

Significant 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, 2008, are defined as those that either 1) exceed the YTD budget by $1 million and represent more than 2 percent for 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 more than $2 million and represent 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 three major expense categories through the third quarter in the Ongoing Operations component of the 2008 Corporate Operating Budget:

  • Outside Services-Personnel expenditures were approximately $21 million, or 16 percent, less than budgeted. The variance was largely due to lower-than-anticipated litigation expenses reimbursed to the U.S. Department of Justice for the Goodwill cases, lower contract spending by DIT for discretionary system development projects due to the unavailability of subject matter experts for system testing; and lower net costs for the Student Residence Center and other administrative contracts in DOA.
  • Travel expenditures were approximately $3 million, or 7 percent, less than budgeted. The variance was attributable to budgeted travel costs for conferences that have been deferred until 2009 and lower-than-expected travel expenses in the supervision area as staff have been diverted to assist with resolutions activities (expensed against the Receivership Funding component).
  • Equipment expenditures were approximately $3 million, or 10 percent, more than budgeted. The variance was largely due to a change in the timing of planned spending for the IT Technical Refresh program as several components were acquired earlier than budgeted. The maintenance costs for IBM software licenses were budgeted in the fourth quarter at $1.4 million; however, the billing for this software has been occurring on a monthly basis throughout the year. Similarly several PC/LAN hardware maintenance items were budgeted in the fourth quarter but expensed by the end of September.

Receivership Funding

The Receivership Funding component of the 2008 Corporate Operating Budget includes funding for non-personnel expenses that are incurred in conjunction with institution failures and the management and disposition of the assets and liabilities of the ensuing receiverships. Receivership Funding also includes all salary and compensation costs of employees hired on a non-permanent basis for actual or anticipated increases in receivership and resolution activity.

There were four major expense categories in which a significant spending variance occurred through the third quarter in the Receivership Funding component of the 2008 Corporate Operating Budget:

  • Salary and Compensation expenditures were approximately $5 million, or 50 percent, less than budgeted, primarily due to a failure to fill newly-authorized non-permanent positions in DRR as quickly as planned. Support for DRR hiring efforts continues to be a major corporate priority.
  • Outside Services-Personnel expenditures were approximately $5 million, or 13 percent, greater than budgeted, primarily due to the unanticipated increase in receivership and resolution activity that occurred during the third quarter.
  • Buildings expenditures were approximately $2 million, or 39 percent, less than budgeted. The budget for this category was increased during the third quarter to provide space for the additional staffing that was authorized in DRR and other organizations but is now expected to be expensed in the fourth quarter.
  • Outside Services-Other expenditures were approximately $1 million, or 213 percent, greater than budgeted, primarily due to the unanticipated increase in receivership and resolution activity that occurred during the third quarter. These expenses include telephone lines for call-in centers, real estate and personal property taxes, filing and other court costs, advertising costs, and bank service fees.

Significant Spending Variances by Division/Office1

Seven organizations had significant spending variances through the end of the third quarter:

  • The Division of Administration (DOA) spent approximately $7 million, or 5 percent, less than budgeted. The variance of $4.8 million in Ongoing Operations was primarily attributable to lower net costs for the Student Residence Center (because of increased proceeds derived from outside use of the facility) and lower-than-budgeted spending for contractual services. A $1.8 million variance in the Receivership Funding component of DOA’s operating budget reflected the addition of supplemental funding for facilities and equipment to support increased staffing in DRR and other organizations that is not expected to be spent until the fourth quarter.
  • The Legal Division spent approximately $6 million, or 9 percent, less than budgeted. The variance of $4.5 million in the Receivership Funding component of its operating budget was largely attributable to less-than-anticipated use of outside counsel in connection with resolutions and receivership activities. Also, there was a variance of $1.5 million in the Ongoing Operations budget component that was related to vacancies in budgeted positions.
  • The Division of Insurance and Research (DIR) spent approximately $3 million, or 10 percent, less than budgeted. The majority of this variance was due to vacancies in budgeted positions and lower-than-budgeted spending for the Central Data Repository.
  • The Executive Support Offices spent approximately $3 million, or 14 percent, less than budgeted. This variance was largely due to delayed execution of contracts for the FDIC’s 75th Anniversary Public Education campaign.
  • The Division of Resolutions and Receiverships (DRR) spent approximately $3 million, or 4 percent, more than budgeted. This variance was attributable to overspending in the Receivership Funding component of its operating budget due to the unanticipated increase in resolutions and receivership activity during the third quarter.
  • The Office of Inspector General spent approximately $2 million, or 12 percent, less than budgeted. This variance was due to vacancies in budgeted positions and later award of audit contract task orders than was planned during budget formulation.
  • The Division of Information Technology (DIT) spent approximately $3 million, or 13 percent, less than the 2008 spending estimate for investment projects through the third quarter. This was primarily attributable to $2.8 million in underspending for the multiyear Claims Administration System (CAS) investment project between January 1, 2008, and September 30, 2008, due to delays by the contractor in meeting project milestones. [Note: Unused CAS funding is carried over for use in future periods, but may be used only for the CAS investment project.]

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



Last Updated 12/15/2008 dofbusinesscenter@fdic.gov