Budget Results -
Fourth Quarter 2007
Budget and Staffing Modifications
During the fourth quarter of 2007, three modifications were made
to the 2007 Corporate Operating Budget, in accordance with the authority
delegated by the Board of Directors in the 2007 Budget Resolution:
October 2007, the Chief Financial Officer approved a reallocation
of $3.7 million and $0.5 million, respectively, from the
Salaries and Compensation expense category in the ongoing
operations components of the budgets of the Division of Supervision
and Consumer Protection (DSC) and the Division of Information
Technology (DIT) to the Equipment expense category in DIT’s
budget. The additional $4.2 million in equipment funding
was required to support the procurement of application software
and equipment for the new Java/Unix platform and to upgrade
or replace obsolete equipment. This funding reallocation
reduced DIT’s projected 2008 budget requirements. Funds
were available for reallocation in the DSC and DIT Salary
and Compensation budgets because a large number of vacancies
in those organizations were not filled as quickly as projected.
October 2007, funding was reallocated within the individual
budgets for the Executive Offices to better align those budgets
with projected personnel, travel, and other expenses for
each office. There was no net change to the total budget
for any major expense category in the combined Executive
- In December 2007, DIT reallocated $343,000 within
the ongoing operations component of its budget from the Equipment
expense category to the Buildings expense category in order
to properly account for expenses related to the installation
of a wireless antenna at the Seidman Center. These expenses
were initially budgeted in and charged to the Equipment category,
but it was subsequently determined that they should have been
charged to the Buildings category and treated as a capital
improvement to the complex. This reallocation resulted in no
net change to the total approved DIT budget.
A 2007 Investment Budget spending projection for the Legal Information
Management System (LIMS) project was also revised during the
quarter. The 2007 spending estimate for LIMS was reduced by $206,380,
to be consistent with a revised project plan for the project.
That amount will remain available for use by the LIMS project
in 2008, in accordance with approved Investment Budget procedures.
of Spending for the Implementation of Deposit Insurance
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 on
systems changes required in conjunction with Deposit Insurance
Reform in 2006, and $1.8 million was spent on printing and distribution
costs. During 2007, an additional $4.9 million (excluding internal
salaries and compensation expenses) was spent to support Deposit
Insurance Reform implementation, as follows:
- Approximately $4.3 million was spent for system development
and enhancement activities. All of the targeted systems have
now been upgraded and are fully functional for the deposit
insurance reform implementation.
- Approximately $0.6 million was spent for additional
printing and distribution of updated deposit insurance brochures.
All updates of printed materials that were required to support
the implementation of deposit insurance reform were completed
and distributed by year-end 2007.
In addition, DIR hired in mid-2007 two new employees to support
deposit insurance pricing on an ongoing basis, as authorized
by the Board in March 2006. Estimated 2007 Salary and Compensation
expenses for these employees were approximately $170 thousand.
All requirements for the initial implementation of Deposit Insurance
Reform, as outlined in the case presented to the Board in March
2006, have now been completed. Accordingly, this will be the
final quarterly report on expenses incurred in connection with
those requirements. As of December 31, 2007, the Corporation
had spent a total of approximately $9.8 million over two years
to support the initial implementation of Deposit Insurance Reform
(excluding Salary and Compensation expenses for the two new DIR
spending variances by major expense category and division/office
for the year ending December 31, 2007, are discussed below.
Significant spending variances are defined as those that
either (1) exceed the annual budget; or (2) are under the
total annual budget by $1 million or more and represent more
than three percent of the major expense category or total
Spending Variances by Major Expense Category
There were four major expense categories in which there were significant
spending variances for the year in the Ongoing Operations component
of the 2007 Corporate Operating Budget:
Services-Personnel expenditures were $29 million, or 16
percent, less than budgeted. The variance was largely due
to lower-than-budgeted payments to the Department of Justice
for litigation services; less-than-anticipated spending
for IT-systems development, operations, and maintenance
support; 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
resources contractual services.
expenditures were $3 million, or 5 percent, less
than budgeted. Overall corporate travel costs were
lower because DRR staff participated in fewer compliance
examinations than initially projected and CEP rotation
schedules were adjusted, resulting in less travel
for CEP participants. In addition, lower-than-projected
travel costs were incurred for supervision, field
oversight and litigation activities in the Legal
- Outside Services-Other expenditures were
almost $2 million, or 10 percent, less than budgeted.
This variance reflected successful negotiations to
lower insurance rates, lower-than-anticipated outside
printing costs, and a reduction in the number of local
telephone lines needed for examinations as a result
of the deployment of wireless data cards to examiners.
Expenses were $3 million, or 28 percent, less than
budgeted. This variance was largely due to (a) lower-than-projected
spending by employees under the first year of the
new Professional Learning Accounts program; and (b)
charges of expenses for some off-site conferences
to the Travel expense category rather than the Other
Expenses expense category.
Funding component of the Corporate Operating Budget includes
budgeted 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. There were four major expense categories in
which significant spending variances occurred during the year
in the Receivership Funding component of the 2007 Corporate
and Compensation 2($2 million,
or 71 percent,
less than budgeted).
Services-Personnel ($49 million, or 79 percent, less
($4 million, or 64 percent,
less than budgeted).
- Buildings ($0.2 million, or 7 percent, more than
Variances in the first three expense categories were attributable
to the limited receivership and resolution activity that occurred
during the year. The overspending variance in the Buildings
category was due to incorrect coding of charges totaling $1.7
million (the expenses should have been charged to the Outside
Spending Variances by Division/Office3
There were significant spending variances from total approved
2007 budgets for nine organizations during the year:
spent $43 million, or 43 percent, less than budgeted. This
variance was mostly attributable to under spending in the
Receivership Funding component of its operating budget
due to the limited receivership and resolution activity
that occurred during the year.
- The Legal Division spent $18 million, or 20 percent,
less than budgeted. This variance was largely attributable
to under spending in the Receivership Funding component of
its operating budget due to the limited receivership and
resolution activity that occurred during the year.
spent $11 million, or 5 percent, less than budgeted for
DIT spent $8.6 million less than budgeted
in the ongoing operations component of its budget, primarily
due to lower-than-projected spending for application development,
operations, and maintenance activities. It also spent $2.6
million less than estimated in 2007 from the approved Investment
Budget projects that are monitored and reported to the Board
separately by the CIRC. These latter variances were attributable
primarily to delays in project schedules.
- The Division of Administration spent $7 million,
or 5 percent, less than budgeted. This variance was largely
attributable to (a) lower-than-anticipated net costs for
the Student Residence Center (due to higher-than-projected
proceeds received in connection with use of the facility
by outside parties), and (b) less use of compensation and
consulting services on human resource matters than originally
projected for 2007.
- DIR spent
$3 million, or 9 percent, less than budgeted. This variance
was attributable to the large number of budgeted positions
that were vacant during the year 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.
- The Inspector General spent $2 million,
or 8 percent, less than budgeted. This variance was primarily
to the fact that the OIG’s on-board staffing was below
its authorized staffing level throughout the year.
- DOF spent $2 million, or 6 percent, less than budgeted.
This variance was largely attributable to a larger-than-projected
number of vacancies due to unanticipated management and staff
departures during the year.
- Executive Support Offices spent nearly $2 million,
or 10 percent, less than budgeted. This variance was largely
attributable to budgeted positions that were vacant during
the year in the Office of Diversity and Economic Opportunity
and the Office of the Ombudsman.
- CU spent $1 million, or
4 percent, less than budgeted. This variance was attributable
to (a) lower-than-budgeted
spending for travel as a result of adjustments to the
travel requirements for CEP participants; and (b) reduced
for contractor services as a result of performance
issues with a contractor related to the development of the
training and commissioning program, which have since
systems development work will be required after the Board completes
rulemaking on the payment of dividends from the new Deposit Insurance
Fund (currently projected to occur no sooner than the first half
of 2009). At such time as those requirements are defined, they
will be funded through DIT’s annual ongoing operating budget
for information technology projects and will be accounted for as
a separate project.
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.
on division/office variances reflects variances in both the Corporate
Operating and Investment Budgets.