Annual Report Budget Review 2013
Board of Governors Budgets
The Board of Governors operates under a one-year budget. In keeping with its statutory independence, the Office of Inspector General (OIG) prepares its proposed budget apart from the Board's budget. The Board and OIG budgets for 2013 were approved in December 2012.
2012 Budget Performance
In this Section:
Board of Governors
The Board ended 2012 with expenses that totaled less than its operating plan by $14.3 million. The Board's 2012 single-year capital spending was also less than its operating plan, and all multiyear capital projects remained within their project life budgets.
Expenses for salaries and benefits were $0.3 million, or 0.1 percent, less than the operating plan, mainly attributable to the following factors:
- Divisions and offices took longer than expected to fill vacancies.
- There were fewer promotions and reclassifications than anticipated.
- Actual payout of accrued annual leave was less than expected.
Expenses for goods and services were $14.1 million, or 8.9 percent, less than the operating plan; the underrun was primarily in contractual professional services due to fewer-than-expected executive searches, less utilization of contractors, and delays in data purchases. Expenses in the "all other" category were also under budget due to lower-than-expected transportation subsidy program expenses, while other expense categories were under budget due to timing delays.
The Board's 2012 single-year capital purchases totaled less than the operating plan by $4.3 million. The Board encountered certain project delays, causing some projects to fall below budget expectations. As of year-end 2012, budgets for the Board's multiyear capital projects totaled $93.4 million, and spend to-date totaled $48.1 million. Two multiyear capital projects were completed and retired at year-end; all other multiyear capital projects are still in process and are expected to be completed within their budgeted amounts.
Office of Inspector General
The OIG's operating expenses for 2012 totaled $14.9 million, or $5.6 million less than the $20.6 million operating budget. Expenses for salaries and benefits were $13.0 million, or 19.1 percent less than the operating plan as a result of slower-than-anticipated hiring as the OIG sought well-qualified candidates. Expenses for goods and services were $2.0 million, or 56.5 percent less than the operating plan. As a result of delayed hiring, funds allocated for office and computer equipment purchases for new employees remained unspent, and fewer-than-expected employees traveled to conduct reviews and attend training.
The OIG's 2012 single-year capital purchases totaled less than the operating plan by $0.2 million. The OIG experienced several project delays, resulting in some projects to fall short of budget estimates. The OIG's budget for multiyear capital projects totaled $2.7 million. Expenses on these projects to-date totaled $0.5 million. The OIG's multiyear capital projects are still in progress and expected to be completed within their respective timelines and budgets.
2013 Budgets
In this Section:
Board of Governors
For 2013, the Board approved a $560.0 million operating budget, a $10.8 million single-year capital budget, and a $261.2 million increase to the multiyear capital projects budget (table 4).
The operating budget includes amounts to fund the Board's ongoing operations (the current services budget) as well as new initiatives that support the strategic themes identified in the Board's Strategic Framework 2012-15 (see www.federalreserve.gov/publications/gpra/files/2012-2015-strategic-framework.pdf). Increases to the current services budget include additional personnel services costs related to salaries and benefits expenses for 138 positions added in 2012, as well as increases for contractual professional services to fund the Survey of Consumer Finances, which is conducted every three years. Every division and office, as part of the budget formulation process, thoroughly reviewed its proposed budget to identify where potential savings could be realized. These reductions were incorporated into the divisions' base budgets.
Table 4. Operating expenses and capital expenditures of the Board of Governors, 2011-13
Millions of dollars, except as noted| Item | 2011 (budgeted) 1 | 2011 (actual) | 2012(budgeted) 2 | 2012 (actual) | 2013 (budgeted) |
|---|---|---|---|---|---|
| Board of Governors | 475.2 | 440.4 | 511.8 | 497.4 | 560.0 |
| Office of Inspector General | 18.0 | 11.9 | 20.6 | 14.9 | 26.9 |
| Single-year capital expenditures 3 | 6.2 | 5.0 | 17.9 | 13.5 | 11.0 |
| Multiyear capital projects 4 | 31.9 | 23.4 | 25.1 | 12.5 | 261.2 |
Note: Components may not sum to totals and may not yield percentages shown because of rounding.
1. During 2011, the Board approved a $0.4 million decrease in the Board's initial operating budget of $475.6 million, a $0.7 million increase in the Board's single-year capital budget, and a $12.2 million increase in the Board's multiyear capital budget. Return to table
2. During 2012, the Board approved a $2.2 million increase in the Office of Inspector General's multiyear capital budget. Return to table
3. Beginning in 2010, the Board began budgeting and reporting projects that span multiple budget cycles separate from single-year capital projects. Capital, as shown in this report, includes the Board and Office of Inspector General capital budgets and expenses. Return to table
4. Budget figures for multiyear capital projects represent annual changes to total project budgets. Return to table
Initiatives submitted by divisions and offices for 2013 underwent a different review process than in previous years. To be considered for approval, all budget requests had to be firmly grounded in the strategic framework. Initiatives that clearly supported themes and objectives described in the framework were approved and included in the 2013 budget request, whereas initiatives not identified in the strategic plan were referred back to the division to either self-fund or identify an alternative method of achieving the initiative's objectives. The approved 2013 operating budget includes $14.7 million in new initiatives to support several themes of the strategic framework. The bulk of the initiatives are for personnel to support implementation of strategic theme 1 (continue building a robust infrastructure for regulation, supervision, and monitoring risks to financial stability) and for contractual support to implement the data center project identified as an objective under strategic theme 3 (establish a modern, safe work environment).
The Board's 2013 single-year capital budget of $10.8 million is for routine equipment and software replacements. This represents a decrease of $6.3 million from the 2012 single-year capital budget. No initiatives were requested for 2013 that required additional single-year funds. The increase in multiyear capital provides funding for the data center relocation, Martin Building renovation, and human-resources-related automation projects.
Office of Inspector General
For 2013, the Board approved the OIG's $26.9 million operating budget and its $0.2 million single-year capital budget. The operating budget includes amounts to establish regional offices, full-year costs for two new positions authorized in 2013, and overhead costs previously included in the Board's operating expenses.
Authorized Positions
The Board's 2013 budget includes 2,540 authorized positions, representing a 2.9 percent increase over year-end 2012 total authorized positions (table 5). The 2013 initiatives include requests to increase staffing by 72 positions. The requested positions are consistent with the approved strategic framework and are primarily in support of the Board's new financial stability and supervisory mandate under the Dodd-Frank Act. Sixty-nine of the requested positions, representing 95.8 percent of the total increase, are in the economics divisions, the Division of Banking Supervision and Regulation, the Division of Reserve Bank Operations and Payment Systems, and the Legal Division. These positions will help the Board to continue building the infrastructure envisioned in strategic theme 1 using an interdisciplinary approach that combines the skills of economists, legal experts, quantitative analysts, and regulatory experts. The remaining three positions are in the Office of the Chief Operating Officer to support strategic theme 2 (redesign data governance and management processes to enhance the Board's data environment).
The OIG's 2013 budget includes 115 authorized positions, an increase of 2 positions from the prior year, to address specific needs identified during workforce planning efforts.
Table 5. Positions authorized at the Board of Governors, 2011-13
| Item | Position count 1 | ||||
|---|---|---|---|---|---|
| 2011 (budgeted) | 2011(ending) | 2012 (budgeted) | 2012 (ending) | 2013 (budgeted) | |
| Board of Governors 2 | 2,331 | 2,363 | 2,442 | 2,468 | 2,540 |
| Office of Inspector General | 85 | 85 | 113 | 113 | 115 |
Note: Includes only those divisions, offices, and special accounts that have authorized position counts.
1. Interns are not included in the numbers for positions or employment. Return to table
2. The counts (budgeted and ending) for 2011 include positions for cooperative education, worker trainee, and student aide programs that assist divisions Boardwide. Return to table
Areas of Risk
The Board faces three main areas of risk in its 2013 budget. The first relates to resource-management and process refinement under its new strategic framework. The Board's strategic framework outlines the associated resource requirements and a budgetary growth target that will guide the Board's financial approach for implementing the strategic themes. Achieving the framework's goals and objectives depends on keeping resources focused on the highest priorities while also increasing operating efficiencies and reducing administrative burden. Management has begun redesigning processes to achieve these objectives. However, establishing a new budgetary paradigm that strengthens financial discipline and creates opportunities for cost reductions will require time and sustained commitment across the organization.
The second area of risk relates to workforce issues. Workforce risks to the 2013 budget remain largely consistent with those identified during the prior year. In particular, the Board's ability to attract and retain qualified staff--both to meet the challenges associated with implementing Dodd-Frank Act requirements and to continue to meet the demands of other ongoing work requirements--remains a concern for a variety of reasons. First, the Board will continue to face challenges in finding and hiring qualified staff because of increasingly competitive markets in the federal and private sectors. Furthermore, divisions and offices will face the challenge of effectively integrating the number of positions approved in the 2013 budget.
The third area of risk relates to maximizing the efficiency and effectiveness of data management at the Board. Over the next few years, significant investments in the Board's data environment will be required. Indeed, significant requests for additional data in support of supervisory activities have been made in previous budget cycles. If data management does not become more efficient and effective, then staff may encounter difficulties in obtaining, interpreting, and analyzing large volumes of data that new supervisory tools will require.
