Board Report: February 28, 2013
| 2012 | 2011 | |
|---|---|---|
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash | $638,550 | $543,453 |
| Accounts receivable from member organizations | 885,200 | 785,708 |
| Accounts receivable from non-members — net | 189,930 | 91,520 |
| Total current assets | 1,713,680 | 1,420,681 |
| NONCURRENT ASSETS: | ||
| Furniture and equipment leased — net | 97,929 | 137,625 |
| Central Data Repository software — net | 3,393,963 | 5,138,312 |
| Home Mortgage Disclosure Act software — net | 1,716,718 | 2,273,492 |
| Total noncurrent assets | 5,208,610 | 7,549,429 |
| TOTAL ASSETS | $6,922,290 | $8,970,110 |
| LIABILITIES AND CUMULATIVE RESULTS OF OPERATIONS | ||
| CURRENT LIABILITIES: | ||
| Accounts payable and accrued liabilities payable to member organizations | $840,720 | $805,796 |
| Other accounts payable and accrued liabilities | 484,866 | 285,947 |
| Accrued annual leave | 38,880 | 22,971 |
| Capital lease payable | 41,040 | 39,376 |
| Deferred revenue | 3,950,737 | 3,125,930 |
| Total current liabilities | 5,356,243 | 4,280,020 |
| LONG-TERM LIABILITIES: | ||
| Capital lease payable | 61,786 | 102,825 |
| Deferred revenue | 1,159,944 | 4,285,874 |
| Deferred rent | 10,085 | 9,996 |
| Total long-term liabilities | 1,231,815 | 4,398,695 |
| Total liabilities | 6,588,058 | 8,678,715 |
| CUMULATIVE RESULTS OF OPERATIONS | 334,232 | 291,395 |
| TOTAL LIABILITIES AND CUMULATIVE RESULTS OF OPERATIONS | $6,922,290 | $8,970,110 |
See notes to financial statements.
| 2012 | 2011 | |
|---|---|---|
| REVENUES: | ||
| Assessments on member organizations | $687,332 | $687,107 |
| Central Data Repository | 5,398,279 | 4,936,912 |
| Home Mortgage Disclosure Act | 3,999,638 | 3,727,927 |
| Tuition | 3,605,056 | 3,246,549 |
| Community Reinvestment Act | 949,761 | 946,928 |
| Uniform Bank Performance Report | 396,883 | 351,646 |
| Total revenues | 15,036,949 | 13,897,069 |
| EXPENSES: | ||
| Data processing | 4,392,625 | 4,164,479 |
| Professional fees | 4,277,394 | 4,121,224 |
| Salaries and related benefits | 2,023,401 | 1,781,660 |
| Depreciation | 3,371,828 | 2,869,594 |
| Rental of office space | 264,989 | 264,989 |
| Administration fees | 261,000 | 281,000 |
| Travel | 277,321 | 242,659 |
| Other seminar expenses | 22,694 | 33,526 |
| Rental and maintenance of office equipment | 33,612 | 27,544 |
| Office and other supplies | 34,145 | 56,237 |
| Printing | 23,561 | 18,389 |
| Postage | 1,419 | 2,564 |
| Miscellaneous | 10,123 | 5,046 |
| Total expenses | 14,994,112 | 13,868,911 |
| RESULTS OF OPERATIONS | 42,837 | 28,158 |
| CUMULATIVE RESULTS OF OPERATIONS — Beginning of year | 291,395 | 263,237 |
| CUMULATIVE RESULTS OF OPERATIONS — End of year | $334,232 | $291,395 |
See notes to financial statements.
| 2012 | 2011 | |
|---|---|---|
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: | ||
| Results of operations | $42,837 | $28,158 |
| Adjustments to reconcile results of operations to net cash provided by operating activities: | ||
| Depreciation | 3,371,828 | 2,869,594 |
| (Increase) decrease in assets: | ||
| Accounts receivable from member organizations | (99,492) | 490,542 |
| Other accounts receivable | (98,410) | 12,921 |
| Increase (decrease) in liabilities: | ||
| Accounts payable and accrued liabilities payable to member organizations | 34,924 | (33,356) |
| Other accounts payable and accrued liabilities | 113,238 | (284,515) |
| Accrued annual leave | 15,909 | (4,775) |
| Deferred revenue (current and non-current) | (2,583,162) | (2,080,991) |
| Deferred rent | 89 | 3,391 |
| Net cash provided by operating activities | 797,761 | 1,000,969 |
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | ||
| Capital expenditures | (660,365) | (1,169,016) |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||
| Capital lease payments | (42,299) | (35,315) |
| NET INCREASE (DECREASE) IN CASH | 95,097 | (203,362) |
| CASH BALANCE — Beginning of year | 543,453 | 746,815 |
| CASH BALANCE — End of year | $638,550 | $543,453 |
See notes to financial statements.
The Federal Financial Institutions Examination Council (the Council) was established under Title X of the Financial Institutions Regulatory and Interest Rate Control Act of 1978. The purpose of the Council is to prescribe uniform principles and standards for the federal examination of financial institutions and to make recommendations to promote uniformity in the supervision of these financial institutions. The five agencies represented on the Council during 2012, referred to collectively as member organizations, are as follows:
In accordance with the Financial Services Regulatory Relief Act of 2006, a representative state regulator was added as a full voting member of the Council in October 2006.
The Council was given additional statutory responsibilities by Section 340 of the Housing and Community Development Act of 1980, Public Law 96-399. Among these responsibilities are the implementation of a system to facilitate public access to data that depository institutions must disclose under the Home Mortgage Disclosure Act of 1975 (HMDA) and the aggregation of annual HMDA data, by census tract, for each metropolitan statistical area.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) was signed into law. This legislation substituted the director of the Consumer Financial Protection Bureau for the director of the Office of Thrift Supervision (OTS) as a member of the Council effective July 21, 2011.
The Council’s financial statements do not include financial data for the Council’s Appraisal Subcommittee (the Subcommittee). The Subcommittee was created pursuant to Public Law 101–73, Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Although it is a subcommittee of the Council, the Appraisal Subcommittee maintains separate financial records and administrative processes. The Council is not responsible for any debts incurred by the Appraisal Subcommittee, nor are Appraisal Subcommittee funds available for use by the Council.
Basis of Accounting — The Council prepares its financial statements in accordance with accounting principles generally accepted in the United States (GAAP).
Revenues — Assessments are made on member organizations to fund the Council’s operations based on expected cash needs. Amounts over- or under- assessed due to differences between actual and expected cash needs are presented in the “Cumulative Results of Operations” line item during the year and then may be used to offset or increase the next year’s assessment. Deficits in “Cumulative Results of Operations” can be recouped in the following year’s assessments.
The Council provides training seminars in the Washington, D.C. area and at locations throughout the country for member organizations and other agencies. The Council also coordinates the production and distribution of the Uniform Bank Performance Reports (UBPR) through the FDIC. Tuition and UBPR revenue are adjusted at year-end to match expenses incurred as a result of providing education classes and UBPR services. For differences between revenues and expenses, member agencies are assessed an additional amount or credited a refund based on each member’s proportional cost for the Examiner Education and UBPR budget. The Council recognizes revenue from member agencies for expenses incurred related to the Community Reinvestment Act, and the Home Mortgage Disclosure Act. The Council also recognizes revenue from other agencies and mortgage insurance companies related to the Home Mortgage Disclosure Act.
Capital Assets — Furniture and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years. Upon the sale or other disposition of a depreciable asset, the cost and related accumulated depreciation are removed and any gain or loss is recognized. The Central Data Repository (CDR) and the HMDA processing system, internally developed software projects, are recorded at cost as required by the Internal Use Software Topic of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).
Deferred Revenue — Deferred revenue includes cash collected and accounts receivable related to CDR and the HMDA processing system.
Deferred Rent — The lease for office and classroom space contains scheduled rent increases over the term of the lease. As required by FASB ASC 840 Topic Leases, scheduled rent increases must be considered in determining the annual rent expense to be recognized. The deferred rent represents the difference between the actual lease payments and the rent expense recognized.
Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Allowance for Doubtful Accounts — Accounts receivable for non-members are shown net of the allowance for doubtful accounts. Accounts receivable considered uncollectible are charged against the allowance account in the year they are deemed uncollectible. The allowance for doubtful accounts is adjusted monthly, based upon a review of outstanding receivables. The allowance for doubtful accounts is $0 and $59 for 2012 and 2011, respectively.
| 2012 | 2011 | |
|---|---|---|
| Accounts receivable: | ||
| Board of Governors of the Federal Reserve System | $211,061 | $132,539 |
| Consumer Financial Protection Bureau | 42,253 | 0 |
| Federal Deposit Insurance Corporation | 268,871 | 194,230 |
| National Credit Union Administration | 42,370 | 46,051 |
| Office of the Comptroller of the Currency | 320,645 | 412,888 |
| $885,200 | $785,708 | |
| Accounts payable and accrued liabilities: | ||
| Board of Governors of the Federal Reserve System | $545,770 | $494,234 |
| Consumer Financial Protection Bureau | 5,397 | 0 |
| Federal Deposit Insurance Corporation | 161,700 | 175,940 |
| National Credit Union Administration | 28,470 | 27,080 |
| Office of the Comptroller of the Currency | 99,383 | 108,542 |
| $840,720 | $805,796 | |
| Operations: | ||
| Council operating expenses reimbursed by members | $687,332 | $687,107 |
| FRB-provided administrative support | $261,000 | $281,000 |
| FRB-provided data processing | $4,392,625 | $4,164,479 |
The Council does not directly employ personnel, but rather member organizations detail personnel to support Council operations. These personnel are paid through the payroll systems of member organizations. Salaries and fringe benefits, including retirement benefit plan contributions, are reimbursed to these organizations. The Council does not have any post-retirement or post-employment benefit liabilities since Council personnel are included in the plans of the member organizations. Due to organizational changes resulting from the Dodd-Frank Act, the OCC absorbed all financial related activity of the OTS on July 21, 2011.
Member organizations are not reimbursed for the costs of personnel who serve as Council members and on the various task forces and committees of the Council. The value of these contributed services is not included in the accompanying financial statements.
In 2003, the Council entered into an agreement with UNISYS to enhance the methods and systems used to collect, validate, process, and distribute Call Report information, and to store this information in CDR. CDR was placed into service in October 2005. At that time, the Council began depreciating CDR on the straight-line basis over its estimated useful life of 63 months. In 2009, the Council reevaluated the useful life of CDR and decided to extend the estimated useful life by an additional 36 months based on enhanced functionality of the software. The Council records depreciation expenses and recognizes the same amount of revenue. The Council also pays for hosting and maintenance expenses for CDR and recognizes the associated revenue from members. In 2012, the Council had enhancements made to CDR of $ 1,031,009. Some of these enhancements, which affect the asset value, were paid for directly by the FDIC. This non-cash event in the amount of $282,040 is excluded from the Statement of Cash Flows.
| 2012 | 2011 | |
|---|---|---|
| Capital asset CDR | ||
| Beginning balance | $20,120,566 | $19,371,661 |
| Software placed in use during the year | 1,031,009 | 748,905 |
| Total asset | $21,151,575 | $20,120,566 |
| Less accumulated depreciation | (17,757,612) | (14,982,254) |
| Central Data Repository software — net | $3,393,963 | $5,138,312 |
| Accounts payable and accrued liabilities related to CDR: | ||
| Payable to UNISYS for the CDR project | $219,762 | $216,012 |
CDR Financial Activity — The Council is funding the project by billing the three participating Council member organizations (FRB, FDIC, and OCC). Activity for the years ended December 31, 2012 and 2011 is as follows:
| Deferred Revenue | 2012 | 2011 |
|---|---|---|
| Beginning balance | $5,138,312 | $6,708,927 |
| Additions | 1,031,009 | 748,906 |
| Less revenue recognized | (2,775,358) | (2,319,521) |
| Ending balance | $3,393,963 | $5,138,312 |
| Current portion deferred revenue | $3,393,963 | $2,569,156 |
| Long-term deferred revenue | 0 | 2,569,156 |
| Total Deferred Revenue | $3,393,963 | $5,138,312 |
| Total CDR Revenue | ||
| Deferred revenue recognized | $2,775,358 | $2,319,521 |
| Hosting and maintenance revenue | 2,622,921 | 2,617,391 |
| Total CDR Revenue | $5,398,279 | $4,936,912 |
| Depreciation | ||
| Depreciation for the CDR project | $2,775,358 | $2,319,521 |
FRB provides maintenance and support for the HMDA processing system. In 2007, the Council began a rewrite of the entire HMDA processing system, which went into service in 2011. At that time the Council began depreciating the system on the straight-line basis over its estimated useful life of 60 months. The Council records depreciation expenses and recognizes the same amount of revenue each year. The Council also pays for maintenance expenses for the HMDA processing system and recognizes the associated revenue from the members and non-members. The financial activity associated with the processing system for the years ended December 31, 2012 and 2011 is as follows:
| 2012 | 2011 | |
|---|---|---|
| Deferred Revenue | ||
| Beginning balance | $2,273,492 | $2,783,868 |
| Additions | 0 | 0 |
| Less revenue recognized | (556,774) | (510,376) |
| Ending balance | $1,716,718 | $2,273,492 |
| Current portion deferred revenue | $556,774 | $556,774 |
| Long-term deferred revenue | 1,159,944 | 1,716,718 |
| Total Deferred Revenue | $1,716,718 | $2,273,492 |
| Total HMDA Revenue | ||
|
The Council recognized the following revenue from: Member organizations for the production and distribution of reports under the HMDA (includes the deferred revenue recognized in 2012) |
$3,111,398 | $2,857,085 |
| Department of Housing and Urban Development’s participation in the HMDA project | 546,809 | 556,207 |
| Mortgage insurance companies for HMDA-related work | 341,431 | 314,635 |
| Total HMDA Revenue | $3,999,638 | $3,727,927 |
| Capital asset HMDA | ||
| Beginning balance | $2,783,868 | $2,783,868 |
| Total asset | $2,783,868 | $2,783,868 |
| Less accumulated depreciation | (1,067,150) | (510,376) |
| HMDA software — net | $1,716,718 | $2,273,492 |
| Depreciation | ||
| Depreciation for the HMDA Rewrite project | $556,774 | $510,376 |
The Council entered into an operating lease with the FDIC in January 2010 to secure office and classroom space. Minimum annual payments under the operating lease having an initial or remaining non-cancelable lease term in excess of one year at December 31, 2012 are as follows:
| 2013 | 268,292 |
| 2014 | 271,772 |
| Total minimum lease payments | $540,064 |
Rental expenses under this operating lease were $264,989 and $264,989 as of December 31, 2012 and 2011, respectively.
In December 2009 and November 2010, the Council entered into capital leases for printing equipment. Furniture and equipment includes $198,485 for the capital leases. Accumulated depreciation is $100,556 and $60,860 for 2012 and 2011, respectively. The depreciation expense for the printing equipment is $39,697 and $39,697 for 2012 and 2011, respectively. Contingent rentals for excess usage of the printing equipment amounted to $20,544 and $13,531 in 2012 and 2011, respectively.
The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of December 31, 2012 are as follows:
| Years Ending December 31, | Amount |
|---|---|
| 2013 | 59,089 |
| 2014 | 59,089 |
| 2015 | 31,738 |
| Total minimum lease payments | 149,916 |
| Less amount representing maintenance | (42,733) |
| Net minimum lease payments | 107,183 |
| Less amount representing interest | (4,357) |
| Net minimum lease payments | 102,826 |
| Less current maturities of capital lease payments | (41,040) |
| Long-term capital lease obligations | 61,786 |
There were no subsequent events that require adjustments to or disclosures in the financial statements as of December 31, 2012. Subsequent events were evaluated through February 28, 2013, which is the date the financial statements were available to be issued.
******
