I. Management's Discussion and Analysis - The Year in Review
Effective Management of Strategic Resources
To carry out its mission successfully, the FDIC must effectively manage and
utilize a number of critical strategic resources particularly its human,
financial, and information technology (IT) resources. Major accomplishments
in improving the Corporation's operational efficiency and effectiveness
are described below. Although the FDIC is not subject to the President's
Management Agenda, many of these efforts are consistent with the spirit of
Expansion of Virginia Square Facility
Management of Financial Resources
Beginning in 2003, the Corporation separated its investment expenses from its
annual operating budget in order to ensure a more rigorous approach to the
approval and management of major investment initiatives. The single most
significant current initiative is the construction of additional FDIC office
and multipurpose buildings adjacent to the existing facilities at Virginia
Square. This project will eliminate the need for the Corporation to lease
commercial space in downtown Washington, DC, and will substantially reduce
future facility costs. Management processes have been implemented to ensure
adherence to the project budget and schedule. Once completed and occupied,
the new building will provide estimated cost savings of approximately $78
million (net present value) over 20 years, when compared to the projected
costs associated with the current headquarters leasing arrangements. Construction
has progressed on schedule and under budget. Occupancy began in mid-January
2006 and should be completed prior to the end of the first quarter 2006,
Human Capital Management The
FDIC's employees are its most important resource for accomplishing
its mission. For that reason, it seeks to continue to be the employer of choice
within the financial regulatory community and to operate a human resources
program that attracts, develops, evaluates, rewards and retains a high-quality
results-oriented workforce. This has been a difficult challenge over the past
13 years because the Corporation has been in a continuous downsizing mode as
it completed the residual workload from the banking and thrift crises of the
late 1980's and early 1990's.
Although the pace of downsizing has slowed in the past few years, the Corporation
continues to adjust both the size and composition of its workforce to meet
the changing course of the financial services industry. In 2005, the FDIC implemented
a number of strategies identified in the human capital plan developed in 2004
to procure the skill sets needed in this new environment.
In 2005, the FDIC completed its workforce restructuring activities in the
Division of Resolutions and Receiverships and the Division of Information Technology,
and identified the skills sets needed to better position these organizations
for future challenges. Through judicious use of Voluntary Early Retirement
Authority, Voluntary Separation Incentive Payments, and outplacement assistance,
our Information Technology organization met its workforce restructuring goals
without the need for involuntary separations. The Division of Resolutions and
Receiverships involuntarily separated 66 employees, while reducing its workforce
by over 50 percent (a reduction of more than 250 positions from the 2004 authorized
level). In both organizations, any remaining vacancies were matched with employees
with the requisite skill sets. The Corporation also plans workforce restructurings
in several support divisions in 2006.
In 2005, the FDIC established the
Corporate Employee Program (CEP) to begin the cross-training that will produce
the flexible workforce envisioned in the
FDIC's Human Capital Plan. During the year, four CEP training classes
were held for approximately 100 new hires and existing employees. In addition,
employees in the Supervision business line who had prior experience in the
Resolutions and Receiverships business line received refresher training.
The FDIC requested increased flexibilities from the Office of Personnel Management
(OPM) to facilitate implementation of its Human Capital Plan. In 2005, the
FDIC received OPM approval to establish a three-year career internship for
the Corporate Employee Program. This delegation provided additional hiring
flexibility with the ability to permanently retain or release these employees
at the end of three years. The FDIC also established a Corporate Expert pay
plan to hire and retain nationally recognized experts in a limited number of
senior, non-managerial positions. In addition, the Corporation received authority
to waive the dual compensation restrictions allowing the rehiring of annuitants
in critical positions in the event of a severe banking emergency. In 2006,
the Corporation will continue to seek increased human resources flexibilities
through OPM authorities and legislation as needed.
The FDIC conducted negotiations
with the National Treasury Employees Union (NTEU) over compensation and benefits,
and met its goals of providing competitive
pay and benefits that allow the Corporation to continue its status as an "employer
of choice" in the financial regulatory community. A significant portion
of the compensation in all pay plans remains linked to each employee's
contributions to the FDIC's goals and objectives and overall success.
Emergency Preparedness During
2005, the FDIC has strengthened and refined the FDIC Emergency Preparedness
Program, which includes the Emergency Response Plan and the Business Continuity
Plan. Some of the major accomplishments include expanding the capabilities
at the headquarters alternate site to include IT back-up operations; developing
a new emergency notification system to allow for immediate electronic and voice
notification of staff; and conducting an annual business impact analysis (BIA)
with major emphasis on IT systems and cost analysis. The annual BIA examined
the Corporate Business Continuity Plan to determine whether it was current
with regard to the Corporation's critical business functions and resources
needed to manage those functions during an emergency. The Corporation also
enhanced its emergency preparedness training with the development of computer-based
instruction for all employees. In addition, The FDIC continued to conduct emergency
preparedness exercises that included evacuation and shelter-in-place drills,
as well as tabletop and functional exercises.
Other Significant Information Technology Initiatives On
May 2, 2005, the FDIC implemented the New Financial Environment (NFE) and its
supporting systems. The implementation was the culmination of years of
effort by the FDIC to modernize its aging, highly-customized and complex financial
systems environment. NFE is a corporate-wide effort focused on implementing
an enterprise-wide, integrated software solution to support the current and
future financial needs of the FDIC. The NFE also enhances the capability of
other significant development efforts such as the Corporate Human Resources
Information System Time & Attendance System, and the Legal Integrated Management
System and also makes available more robust cost information that provides
a basis of improved decision making.
The FDIC continues to collect quality and timely information in 2005 with
the use of FDICconnect. FDICconnect is a secure Web site that facilitates electronic
communication with FDIC-insured institutions, and became the primary method
of delivery for the quarterly deposit insurance assessment invoices through
a rule change effective with the March 2005 assessment cycle. In 2005, over
150,000 transactions were completed by financial institutions using FDICconnect.
Transformation of the Information Technology Program In
2005, the FDIC completed critical steps toward transforming its information
technology program – an initiative begun in 2004. Using a roadmap developed
with Deloitte Touche over 18 months ago, the FDIC implemented an outsourcing
strategy, employee buyout and divisional reorganization that will significantly
improve the program's overall efficiency and effectiveness. The immediate
benefits of steps taken so far include:
Establishment of the Chief
Information Officer (CIO) Council, advising the CIO on all aspects of adoption
and use of IT at the FDIC.
Additional IT expertise and best practices from global contracting partners.
A leaner organization with fewer staff and an increased span of control.
A streamlined technical infrastructure.
A realigned IT product and services delivery-management structure that
is organized along the lines of the new systems development life cycle (Rational
Process - RUP).
A new delivery management structure that in conjunction with the new
Project Management Office (PMO) provides a consistent approach for all IT projects.
Enhanced integration of information security requirements and perspectives
in all IT projects.
The consolidation of nearly 100 support contracts into six. The structure
of the new contracts places emphasis on contractor performance and links contractor
compensation to results achieved rather than costs incurred.
Once completed, the FDIC anticipate benefits of the transformation will include:
The greater use of contracting partners for operation and implementation
allowing in-house staff to focus on strategic business planning, design and consultation.
Reduced costs through improving the efficiency and effectiveness of IT
products and services.
A targeted long-term plan for personal and technical development of all
IT employees resulting from a new skills assessment to be conducted during 2006.
Privacy Program In 2005, the
charter of the Chief Information Officer's Council was
expanded to include oversight of Privacy Act responsibilities, and the corporate
Privacy Program was enhanced under the guidance of the newly appointed Chief
Privacy Officer (CPO). The program's objective is to ensure that the
FDIC is taking appropriate steps to protect personally identifiable information
from unauthorized use, access, disclosure or sharing, and to protect associated
information systems from unauthorized access, modification, disruption or destruction.
One of the first priorities is in the area of employee awareness. The program
requires mandatory privacy training so that all FDIC employees and contractors
are aware of the requirements for safeguarding sensitive information and know
where to obtain privacy-related reference material. Many initiatives were completed
in 2005 in support of the newly enhanced Corporate Privacy Program, including
mandatory computer-based privacy training and distribution of a Privacy Awareness