Federal Reserve System Budgets
The Federal Reserve Board of Governors and the Federal Reserve Banks prepare annual budgets as part of their efforts to ensure appropriate stewardship and accountability.1 This section presents information on the 2021 budget performance of the Board and Reserve Banks and on their 2022 budgets, budgeting processes, and trends in expenses and employment. This section also presents information on the costs of new currency.
System Budgets Overview
Tables D.1 and D.2 summarize the Federal Reserve Board of Governors' and Federal Reserve Banks' 2021 budgeted, 2021 actual, and 2022 budgeted operating expenses and employment.2
Table D.1. Total operating expenses of the Federal Reserve System, net of receipts and claims for reimbursement, 2021–22
Millions of dollars, except as noted
Item | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Board 1 | 884.4 | 863.9 | –20.5 | –2.3 | 965.9 | 102.0 | 11.8 |
Office of Inspector General | 35.1 | 33.8 | –1.3 | –3.7 | 36.0 | 2.2 | 6.5 |
Reserve Banks 2 | 5,029.8 | 5,047.3 | 17.4 | 0.3 | 5,434.6 | 387.4 | 7.7 |
Currency 3 | 1,136.0 | 1,035.3 | –100.8 | –8.9 | 1,118.3 | 83.0 | 8.0 |
Total System operating expenses4 | 7,085.3 | 6,980.3 | –105.0 | –1.5 | 7,554.8 | 574.5 | 8.2 |
Revenue from priced services | 439.1 | 456.3 | 17.2 | 3.9 | 477.2 | 20.9 | 4.6 |
Claims for reimbursement5 | 710.4 | 786.3 | 75.9 | 10.7 | 829.7 | 43.4 | 5.5 |
Other income 6 | 2.8 | 2.4 | –0.4 | –15.1 | 1.0 | –1.4 | –59.0 |
Revenue and claims for reimbursement 7 |
1,152.3 | 1,245.0 | 92.7 | 8.0 | 1,307.9 | 62.9 | 5.1 |
Total System operating expenses, net of revenue and claims for reimbursement |
5,933.0 | 5,735.3 | –197.7 | –3.3 | 6,246.9 | 511.6 | 8.9 |
Note: Here and in subsequent tables, components may not sum to totals and may not yield percentages shown because of rounding.
1. Reflects the 2021 revised operating budget approved on July 16, 2021. Return to table
2. Excludes Reserve Bank assessments by the Board of Governors for costs related to currency and the operations of the Board of Governors, Office of Inspector General, and the Consumer Financial Protection Bureau. Return to table
3. The 2021 and 2022 budgets include Bureau of Engraving and Printing (BEP) facility costs. The 2021 budget includes an additional $40.2 million that was not part of the original budget. Starting in 2022, the currency budget tracks the BEP facility projects separately as multicycle total project costs. The 2022 budget for the multicycle projects is $58.3 million. Return to table
4. Includes total operating expenses of the Federal Reserve Information Technology support function and the System's Office of Employee Benefits, the majority of which are in the Reserve Banks. Return to table
5. Reimbursable claims include the expenses of fiscal agency. In 2021 actual, the fiscal agency allocated portion of the pension is also included but is not included for the budget. The fiscal agency budgeted pension expense is $68.3 million in 2021 and $81.0 million in 2022. Return to table
6. Fees that depository institutions pay for the settlement component of the Fedwire Securities Service transactions for Treasury securities transfers. Return to table
7. Excludes annual assessments for the supervision of large financial companies pursuant to Regulation TT, which are not recognized as revenue or used to fund Board expenses. (See section 4, "Supervision and Regulation," for more information.) Return to table
Table D.2. Employment in the Federal Reserve System, 2021–22
Item | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Board | 3,013 | 2,973 | –41 | –1.3 | 3,083 | 111 | 3.7 |
Office of Inspector General | 136 | 127 | –9 | –6.7 | 133 | 5 | 4.3 |
Reserve Banks 1 | 20,470 | 20,401 | –69 | –0.3 | 21,212 | 811 | 4.0 |
Currency | 19 | 16 | –2 | –11.3 | 19 | 3 | 17.3 |
Total System employment | 23,638 | 23,517 | –122 | –0.5 | 24,447 | 931 | 4.0 |
Note: Employment numbers presented include average number of personnel (ANP) for the Board and headcount for the Reserve Banks. ANP is the average number of employees expressed in terms of full-time positions for the period and includes outside agency help. Headcount is the number of active employees in an organization. Headcount is the actual number of people employed (actual) or expected to be employed (projected) at a given date and includes full-time and part-time staff.
1. Includes employment of the Federal Reserve Information Technology (FRIT) support function and the Office of Employee Benefits (OEB). Return to table
2021 Budget Performance
In carrying out its responsibilities in 2021, the Federal Reserve System incurred $5,047.3 million in net expenses. Total System operating expenses of $6,980.3 million were offset by $1,245.0 million in revenue from priced services, claims for reimbursement, and other income. Total 2021 System operating expenses were $197.7 million, or 3.3 percent, less than the amount budgeted for 2021.
2022 Operating Expense Budget
Budgeted 2022 System operating expenses of $6,246.9 million, net of revenue and reimbursements, are $511.6 million, or 8.9 percent, higher than 2021 actual expenses. The Reserve Bank budgets comprise almost three-quarters of the System budget (figure D.1). Budgeted 2022 revenue from priced services is 4.6 percent higher than 2021 actual revenue, primarily reflecting higher volume from automated clearinghouse (ACH) services and funds transfers offset by lower volume from check and securities transfers.
Trends in Expenses and Employment
From the actual 2012 amount to the budgeted 2022 amount, the total operating expenses of the Federal Reserve System have increased an average of 4.9 percent annually (figure D.2), which is the same as the 10-year growth rate between 2011 and 2021. The total rate of growth in Federal Reserve System expenses reflects the staffing increases in information technology (IT) to support large application development projects, information security efforts, end-user services, and the central computing environment. Supervision resource levels were augmented to meet requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and to support portfolio growth (figure D.3).
Growth in supervision expenses over the past 10 years has been driven by implementation of expanded responsibilities mandated by the Dodd-Frank Act, changes in the state member bank portfolio, building out the cybersecurity supervision program, and supporting other strategic national initiatives. However, supervision growth has moderated because of the Economic Growth, Regulatory Reform and Consumer Protection Act, and as supervisory conditions improved, efficiencies were found and resources were shifted toward higher-risk activities and emerging risks. In particular, resources were temporarily shifted from supervision to support the credit and liquidity facilities responding to the COVID-19 pandemic in 2020. Supervision expenses for 2021 reflect the end of this temporary support and the return of supervision staff from their work for the credit and liquidity facilities.
Expense growth in the monetary policy area during the financial crisis has been followed more recently by increased investment in financial stability monitoring, operational activities, and the dedication of additional resources to regional economic research.
Growth in fee-based services is primarily for investments in the payment infrastructure modernization efforts, including the FedNow SM Service initiative, and investments associated with multiyear technology initiatives to modernize processing platforms for Fedwire and automated clearinghouse (ACH).3
Expenses for services to financial institutions continue to increase as a result of the next-generation currency-processing program (NextGen).4 More recently, increased demand for cash and social distancing protocols related to the COVID-19 pandemic have resulted in higher personnel costs for cash operations and other related expenses for essential on-site staff, such as hazard pay, rapid COVID-19 testing, and frequent and in-depth cleaning services. Growth in services to financial institutions and the public is also attributable to the addition of resources in support of the credit and liquidity facilities created in response to the COVID-19 pandemic.
Treasury services expenses have increased to meet expanding scope and evolving needs, including business and technology modernization of payment services, financing and securities services, and accounting and reporting services, as well as significant investment in infrastructure and technology services.
2022 Capital Budgets
The capital budgets for the Board and Reserve Banks total $139.0 million and $621.5 million, respectively.5 As in previous years, the 2022 capital budgets include funding for projects that support the strategic direction outlined by the Board, System leadership, and each Reserve Bank. These strategic goals emphasize investments that continue to improve operational efficiencies, enhance services to Bank customers, and ensure a safe and productive work environment.
Board of Governors Budgets
Board of Governors
The Board's budget is based on the principles established by the Strategic Plan 2020–23 and provides funding to advance the plan's goals and objectives.6 This functional alignment helps ensure organizational resources are used to advance the Board's mission and provide a structure to fund strategic priorities over the four-year time horizon.
The Board's budget process is as follows:
- At the start of the budget process, the chief operating officer and chief financial officer meet with the Committee on Board Affairs (CBA) to recommend a specific growth target for the Board's operating budget. For 2022, the recommended growth target included known changes in the run-rate of the Board's ongoing operations, the full-year impact of the budget amendment approved in 2021, long-term space plan, increases to centrally managed retirement and post-retirement benefits, strategic priorities for 2022, and the triennial Survey of Consumer Finances. After endorsement by the CBA, Division of Financial Management (DFM) staff communicate the target to the Executive Committee, which comprises the directors of each division.
- To achieve the CBA's growth target, divisions allocate resources to their highest priorities and seek tradeoffs and efficiencies.
- DFM staff review initial budget requests submitted by divisions and collaborate with all divisions and functional areas to achieve the growth target.7
- The chief operating officer and chief financial officer subsequently brief the CBA on the budget submissions. Once the budget is finalized, the administrative governor submits the budget to the full Board for review and final approval.
- DFM staff monitor expenses throughout the year. Quarterly financial forecasts provide insight into budgetary pressures. Staff analyze variances and report the variances to senior management.
Tables D.3, D.4, and D.5 summarize the Board's 2021 budgeted and actual expenses and its 2022 budgeted expenses by operating area; division, office, or special account; and account classification, respectively. Table D.6 summarizes the Board's 2021 budgeted and actual authorized positions and its budgeted positions for 2022. Each table includes a line item for the Office of Inspector General (OIG), which is discussed later in this section.
Table D.3. Operating expenses of the Board of Governors, by operating area, 2021–22
Millions of dollars, except as noted
Item | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Monetary policy and financial stability 1 | 370.5 | 365.2 | –5.3 | –1.4 | 415.5 | 50.3 | 13.8 |
Supervision | 390.5 | 378.8 | –11.7 | –3.0 | 420.9 | 42.1 | 11.1 |
Payment system and Reserve Bank oversight | 75.0 | 72.2 | –2.8 | –3.7 | 75.9 | 3.7 | 5.1 |
Public engagement and community development | 48.5 | 47.7 | –0.8 | –1.6 | 53.7 | 6.0 | 12.5 |
Total, Board operations | 884.4 | 863.9 | –20.5 | –2.3 | 965.9 | 102.0 | 11.8 |
Office of Inspector General | 35.1 | 33.8 | –1.3 | –3.7 | 36.0 | 2.2 | 6.5 |
Note: This table presents financial performance for the Board's operating areas, which align with the Reserve Banks. Monetary policy and financial stability aligns with monetary and economic policy within the Reserve Banks; growth in 2022 is driven by strategic priorities and employment growth. Supervision aligns with supervision and regulation within the Reserve Banks; growth in 2022 is driven by strategic priorities and employment growth. Payment system and Reserve Bank oversight is an operating area unique to the Board. Public engagement and community development aligns with services to financial institutions and the public within the Reserve Banks. Office of Inspector General growth in 2022 is driven by employment growth and higher Board support and overhead allocations.
1. Includes the Survey of Consumer Finances. Return to table
Table D.4. Operating expenses of the Board of Governors, by division, office, or special account, 2021–22
Millions of dollars, except as noted
Division, office, or special account | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Research and Statistics | 93.5 | 94.1 | 0.6 | 0.7 | 100.3 | 6.2 | 6.6 |
International Finance | 37.3 | 36.6 | –0.7 | –1.9 | 40.2 | 3.6 | 10.0 |
Monetary Affairs | 42.6 | 41.5 | –1.1 | –2.6 | 45.8 | 4.4 | 10.5 |
Financial Stability | 17.0 | 15.6 | –1.4 | –8.2 | 20.3 | 4.8 | 30.6 |
Supervision and Regulation | 123.5 | 118.6 | –4.8 | –3.9 | 128.7 | 10.1 | 8.5 |
Consumer and Community Affairs | 35.9 | 35.0 | –0.9 | –2.6 | 38.8 | 3.8 | 10.9 |
Reserve Bank Operations and Payment Systems |
46.9 | 45.6 | –1.3 | –2.8 | 49.0 | 3.4 | 7.5 |
Board Members | 26.2 | 26.0 | –0.3 | –1.0 | 27.4 | 1.4 | 5.5 |
Secretary | 9.8 | 9.7 | 0.0 | –0.5 | 10.4 | 0.7 | 6.8 |
Legal | 34.5 | 33.1 | –1.4 | –4.1 | 36.3 | 3.2 | 9.7 |
Chief Operating Officer | 15.1 | 13.5 | –1.6 | –10.7 | 15.7 | 2.2 | 16.2 |
Financial Management | 14.6 | 14.4 | –0.2 | –1.3 | 15.2 | 0.8 | 5.7 |
Information Technology | 140.0 | 136.2 | –3.9 | –2.8 | 148.5 | 12.3 | 9.0 |
Management | 167.6 | 168.1 | 0.5 | 0.3 | 185.8 | 17.7 | 10.5 |
Centrally managed benefits1 | 47.0 | 58.9 | 11.8 | 25.1 | 55.0 | –3.8 | –6.5 |
Extraordinary items2 | 51.1 | 33.3 | –17.8 | –34.8 | 54.1 | 20.8 | 62.3 |
Savings and reallocations3 | –20.3 | –17.6 | 2.7 | –13.2 | –20.3 | –2.7 | 15.5 |
Survey of Consumer Finances 4 | 2.1 | 1.4 | –0.7 | –34.8 | 14.7 | 13.3 | 961.1 |
Total, Board operations | 884.4 | 863.9 | –20.5 | –2.3 | 965.9 | 102.0 | 11.8 |
Office of Inspector General | 35.1 | 33.8 | –1.3 | –3.7 | 36.0 | 2.2 | 6.5 |
1. For 2022, Special Projects and Retirement and Benefits have been merged. Centrally Managed Benefits includes centralized Boardwide benefit programs, such as accrued annual leave, academic assistance, and relocation, and retirement and post-retirement benefits, which fluctuate because of changes in actuarial assumptions and demographics. Return to table
2. Includes several strategic projects, including the Martin renovation, replacement of the Board's human capital, financial management and procurement systems, and a centralized position pool. Return to table
3. Includes negative adjustments to reflect measured budget risks for large, complex projects and historical under execution. In addition, includes Board support and overhead allocations to the Office of Inspector General and Currency. Return to table
4. The survey collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes, and is conducted every three years. Return to table
Table D.5. Operating expenses of the Board of Governors, by account classification, 2021–22
Millions of dollars, except as noted
Account classification | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Personnel services | |||||||
Salaries | 503.9 | 501.8 | –2.2 | –0.4 | 535.7 | 33.9 | 6.8 |
Outside agency help1 | 33.9 | 32.6 | –1.3 | –3.8 | 38.3 | 5.7 | 17.4 |
Retirement/thrift plans | 70.3 | 75.4 | 5.0 | 7.1 | 78.0 | 2.7 | 3.5 |
Employee insurance and other benefits | 43.9 | 42.1 | –1.8 | –4.2 | 45.6 | 3.5 | 8.4 |
Net periodic benefits costs2 | 16.5 | 20.9 | 4.5 | 27.0 | 18.5 | –2.4 | –11.5 |
Subtotal, personnel services | 668.6 | 672.8 | 4.2 | 0.6 | 716.2 | 43.4 | 6.5 |
Goods and services | |||||||
Postage and shipping | 0.6 | 0.6 | 0.0 | –7.1 | 0.3 | –0.3 | –51.0 |
Travel | 9.4 | 3.6 | –5.9 | –62.0 | 9.2 | 5.6 | 157.0 |
Telecommunications | 8.3 | 6.4 | –1.9 | –22.7 | 7.1 | 0.6 | 10.1 |
Printing and binding | 0.7 | 0.5 | –0.2 | –28.8 | 0.7 | 0.1 | 24.7 |
Publications | 0.3 | 0.4 | 0.0 | 11.3 | 0.3 | 0.0 | –10.1 |
Stationery and supplies | 1.0 | 1.0 | –0.1 | –7.1 | 1.1 | 0.1 | 14.1 |
Software | 29.8 | 27.7 | –2.1 | –7.2 | 35.6 | 8.0 | 28.8 |
Furniture and equipment (F&E) | 6.9 | 6.6 | –0.3 | –4.9 | 10.0 | 3.4 | 51.9 |
Rentals | 38.0 | 37.8 | –0.1 | –0.4 | 37.5 | –0.3 | –0.8 |
Data, news, and research | 18.5 | 18.3 | –0.3 | –1.4 | 35.7 | 17.4 | 95.2 |
Utilities | 1.7 | 2.3 | 0.6 | 37.3 | 1.9 | –0.4 | –15.7 |
Repairs and alterations—building | 4.7 | 4.0 | –0.6 | –13.3 | 4.9 | 0.9 | 21.3 |
Repairs and maintenance—F&E | 5.0 | 4.4 | –0.6 | –12.4 | 5.5 | 1.0 | 23.7 |
Contractual professional services | 43.5 | 37.2 | –6.3 | –14.5 | 49.2 | 12.0 | 32.2 |
Interest | 0.0 | 0.0 | 0.0 | –62.8 | 0.0 | 0.0 | 38.7 |
Training and dues | 4.9 | 2.9 | –2.0 | –41.6 | 6.0 | 3.1 | 109.5 |
Subsidies and contributions | 3.2 | 3.1 | –0.1 | –3.3 | 3.2 | 0.2 | 5.1 |
All other | 4.0 | 5.1 | 1.1 | 28.1 | 5.1 | –0.1 | –1.0 |
Depreciation/amortization | 56.2 | 50.3 | –5.9 | –10.5 | 59.9 | 9.6 | 19.1 |
Support and overhead allocations3 | –16.9 | –17.6 | –0.7 | 3.9 | –19.1 | –1.5 | 8.4 |
IT income4 | –0.3 | 0.0 | 0.3 | –100.0 | 0.0 | 0.0 | 0.0 |
Income | –3.9 | –3.5 | 0.4 | –10.7 | –4.4 | –1.0 | 28.3 |
Subtotal, goods and services | 215.8 | 191.1 | –24.7 | –11.4 | 249.7 | 58.6 | 30.7 |
Total, Board operations | 884.4 | 863.9 | –20.5 | –2.3 | 965.9 | 102.0 | 11.8 |
Office of Inspector General | |||||||
Personnel services | 31.2 | 29.1 | –2.1 | –6.7 | 31.2 | 2.1 | 7.4 |
Goods and services 5 | 18.9 | 18.4 | –0.5 | –2.9 | 20.1 | 1.8 | 9.7 |
Subtotal, excluding operating income | 50.1 | 47.5 | –2.6 | –5.3 | 51.4 | 3.9 | 8.3 |
Operating income6 | –15.0 | –13.7 | 1.4 | –9.0 | –15.4 | –1.7 | 12.7 |
Total, OIG operations | 35.1 | 33.8 | –1.3 | –3.7 | 36.0 | 2.2 | 6.5 |
1. For 2022, contractor expenses that met the ANP definition were moved from goods and services (contractual professional services) to personnel services (outside agency help) to provide a more complete view of personnel expenses. This change is in alignment with the Reserve Banks. For comparability, changes are also reflected for 2021 budget and actual. Return to table
2. Net periodic benefits costs other than services costs related to pension and post-retirement benefits. Return to table
3. Includes a net zero transfer of costs from the Board operating budget to the OIG and Currency operating budgets for Board support and overhead expenses attributable to the OIG and Currency. Return to table
4. Includes other earned income collected from the Currency budget. Return to table
5. Includes Board support and overhead allocations to the OIG. Return to table
6. The OIG operating budget incorporates earned income from the Consumer Financial Protection Bureau. Return to table
Table D.6. Positions authorized by the Board of Governors, by division, office, or special account, 2021–22
Division, office, or special account | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Research and Statistics | 364 | 364 | 0 | 0.0 | 364 | 0 | 0.0 |
International Finance | 166 | 168 | 2 | 1.2 | 168 | 0 | 0.0 |
Monetary Affairs | 186 | 186 | 0 | 0.0 | 186 | 0 | 0.0 |
Financial Stability | 80 | 80 | 0 | 0.0 | 80 | 0 | 0.0 |
Supervision and Regulation | 497 | 497 | 0 | 0.0 | 497 | 0 | 0.0 |
Consumer and Community Affairs | 138 | 138 | 0 | 0.0 | 138 | 0 | 0.0 |
Reserve Bank Operations and Payment Systems |
187 | 187 | 0 | 0.0 | 187 | 0 | 0.0 |
Board Members | 121 | 123 | 2 | 1.7 | 123 | 0 | 0.0 |
Secretary | 54 | 55 | 1 | 1.9 | 55 | 0 | 0.0 |
Legal | 132 | 132 | 0 | 0.0 | 132 | 0 | 0.0 |
Chief Operating Officer | 65 | 65 | 0 | 0.0 | 65 | 0 | 0.0 |
Financial Management | 72 | 72 | 0 | 0.0 | 72 | 0 | 0.0 |
Information Technology | 418 | 418 | 0 | 0.0 | 418 | 0 | 0.0 |
Management | 485 | 485 | 0 | 0.0 | 485 | 0 | 0.0 |
Extraordinary items 1 | 14 | 9 | –5 | –35.7 | 9 | 0 | 0.0 |
Total, Board operations | 2,979 | 2,979 | 0 | 0.0 | 2,979 | 0 | 0.0 |
Office of Inspector General | 140 | 140 | 0 | 0.0 | 142 | 2 | 1.4 |
Note: Budget represents authorized position count at the beginning of the year, and actual represents authorized position count at year-end.
1. Centralized position pool used for strategic areas of growth. Return to table
2021 Budget Performance
Total expenses for Board operations were $863.9 million, which was $20.5 million, or 2.3 percent, lower than the approved 2021 budget of $884.4 million.8
Personnel services expenses were $4.2 million, or 0.6 percent, higher than the approved budget, driven by higher pension expenses that fluctuate with changes in actuarial assumptions and demographics, and higher accrued annual leave expenses as staff used less leave as a result of the COVID-19 pandemic. Goods and services expenses were $24.7 million, or 11.4 percent, lower than the approved budget as the COVID-19 pandemic resulted in less-than-planned travel and training activities, lower utilization of contractual professional services, and lower depreciation expenses because of the shift in the substantial completion of the Martin Building renovation project.
The Board's 2021 single-year capital spending was less than budgeted by $4.4 million, or 23.7 percent, driven by lower spending on equipment purchases and life-cycle replacements and supply chain delays that shifted purchases into 2022. Multiyear capital projects spending in 2021 was less than budgeted by $17.2 million, or 10.6 percent, due to delays in building improvement projects. Table D.7 summarizes the Board's budgeted and actual capital expenditures for 2021 and 2022.
Table D.7. Capital expenditures of the Board of Governors, by capital type, 2021–22
Item | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Board | |||||||
Single-year capital expenditures | 18.4 | 14.1 | –4.4 | –23.7 | 20.0 | 6.0 | 42.5 |
Multiyear capital expenditures | 162.3 | 145.2 | –17.2 | –10.6 | 118.9 | –26.2 | –18.1 |
Total capital expenditures | 180.7 | 159.2 | –21.5 | –11.9 | 139.0 | –20.3 | –12.7 |
Office of Inspector General | |||||||
Single-year capital expenditures | 0.1 | 0.0 | –0.1 | –103.4 | 0.0 | 0.0 | –100.0 |
Multiyear capital expenditures | 0.0 | 0.0 | 0.0 | n/a | 0.0 | 0.0 | n/a |
Total capital expenditures | 0.1 | 0.0 | –0.1 | –103.4 | 0.0 | 0.0 | –100.0 |
Board and OIG total capital expenditures | 180.8 | 159.2 | –21.6 | –11.9 | 139.0 | –20.3 | –12.7 |
Note: The amount reported for the multiyear capital budget represents the expected expenditure for the budget year.
n/a Not applicable.
2022 Operating Expense Budget
The 2022 budget for Board operations is $965.9 million, which is $102.0 million, or 11.8 percent, higher than 2021 actual expenses. Staff formulated the operating budget to advance the Board's strategic priorities, and it includes initiatives that support policy deliberations; promote safety, soundness, and stability of financial institutions; foster a safe, efficient, and accessible payment and settlement system; promote broader, ongoing engagement with the public; and optimize operations.
In addition, the 2022 budget includes growth driven by strategic priorities, employment growth expected to occur in 2022; funding for the Board's compensation and benefit programs; ongoing facilities and automation projects; and a step-up approach to travel and training expenses, which were significantly impacted by the COVID-19 pandemic in 2021.
Authorized positions for 2022 are 2,979, consistent with the 2021 authorized number.9
2022 Capital Budgets
The Board's 2022 single-year capital budget totals $20.0 million, which is $6.0 million, or 42.5 percent, higher than 2021 actual capital expenditures. The increase is driven by supply chain delays that shifted data center infrastructure purchases from 2021 to 2022. The proposed budget also includes continued investments in automation projects and routine life-cycle replacements of equipment and building components.
The Board's multiyear capital budget is driven by facilities projects. Expected capital expenditures in 2022 total $118.9 million and reflect the Board's commitment to provide a secure, modern environment that meets the needs of the workforce and leverages opportunities to increase collaboration, efficiency, productivity, and sustainability. Table D.7 summarizes the Board's budgeted and actual capital expenditures for 2021 and 2022.
Office of Inspector General
The budget for the Board's OIG is grounded in the goals established in its strategic plan.10 The goals are to deliver results that promote agency excellence; promote a diverse, skilled, and engaged workforce and foster an inclusive, collaborative environment; optimize external stakeholder engagement; and advance organizational effectiveness and model a culture of continuous improvement.
In keeping with its statutory independence, the OIG prepares its proposed budget apart from the Board's budget. The OIG presents its budget directly to the Board for approval.
2021 Budget Performance
Expenses for OIG operations, excluding operating income, were $47.5 million, which was $2.6 million, or 5.3 percent, lower than the approved 2021 budget of $50.1 million. Personnel services expenses were lower than the approved budget amount by $2.1 million, or 6.7 percent, driven by higher-than-expected vacancy rates.
Goods and services expenses were $0.5 million, or 2.9 percent, lower than the approved budget amount, driven by the effect of the COVID-19 pandemic on travel, training, software, and contractual professional services spending. Operating income was $1.4 million, or 9.0 percent, lower than the approved budget amount; the office conducted less work related to the Consumer Financial Protection Bureau than planned because of the ongoing, increased oversight and investigative responsibilities related to the Board's programs created in response to the COVID-19 pandemic. Including operating income, total expenses for OIG operations were $33.8 million in 2021. The OIG's single-year capital spending was de minimis in 2021.
2022 Operating Expense Budget
The 2022 budget for OIG operations, excluding operating income, is $51.4 million, which is $3.9 million, or 8.3 percent, higher than 2021 actual expenses. This increase is driven by expected employment growth in 2022, funding for the Board's compensation and benefit programs, and escalations for goods and services. Employment growth is expected to cause accompanying increases in support and overhead expenses. Including operating income, the 2022 budget for OIG operations is $36.0 million. There were no budgeted amounts for the OIG's single-year and multiyear capital expenditures for 2022.
The OIG has 142 authorized positions for 2022, an increase of 2 over the authorized number for 2021. The increase in authorized positions is driven by anticipated oversight work associated with the Board's COVID-19 pandemic response and the continually increasing importance of and risk associated with cybersecurity and IT operations.
Federal Reserve Banks Budgets
Each Reserve Bank establishes operating goals for the coming year that are aligned with the System's key strategic objectives, devises strategies for attaining those goals, estimates required resources, and monitors results. The Reserve Banks structure their budgets around specific functional areas reflecting the core responsibilities of the Federal Reserve:
- contributing to the formulation of monetary policy and enhancing monetary policy implementation to become more effective, flexible, and resilient, through public communication, outreach, and economic education
- promoting financial stability through effective monitoring, analysis, and policy development
- promoting safety and soundness of financial institutions through effective supervision
- leading efforts to enhance the security, resiliency, functionality, and efficiency of services provided to financial institutions and the public
The Reserve Bank budget process is as follows:
- The Conference of Presidents, operating through its Committee on Spending Stewardship, defines, in close consultation with the Board's Committee on Federal Reserve Bank Affairs (BAC), key strategic objectives for the System. Considering longer-term environmental trends and historical growth rates of expense, these governance bodies articulate an aggregate System-level growth expectation for a multiyear period.
- The Reserve Banks develop budgets that reflect this direction, through framing and making appropriate trade-offs, and senior leadership in the Reserve Banks reviews the budgets for alignment with Reserve Bank and System priorities.
- The Reserve Banks submit for Board review preliminary budget information, including documentation to support the budget request.
- Board staff analyzes the Banks' budgets, both individually and in the context of System initiatives and in the context of areas such as payments and IT, where there is a high degree of cooperation among the Banks to support Systemwide operations and initiatives.
- Expenses associated with services provided to the Treasury require authorization from the Bureau of the Fiscal Service.
- The BAC reviews the Banks' budgets.
- The Reserve Banks make any needed changes, and the BAC chair submits the revised budgets to Board members for review and final action.
- Throughout the year, Reserve Bank and Board staffs monitor actual performance and compare it with approved budgets and forecasts.
In addition to the budget approval process, the Reserve Banks must submit proposals for certain capital expenditures to the Board for further review and approval.
Tables D.8, D.9, and D.10 summarize the Reserve Banks' 2021 budgeted and actual expenses and 2022 budgeted expenses by Reserve Bank, functional area, and account classification.11 Table D.11 shows the Reserve Banks' budgeted and actual employment for 2021 and budgeted employment for 2022. In addition, table D.12 shows the Reserve Banks' budgeted and actual capital expenditures for 2021 and budgeted capital for 2022.
Table D.8. Operating expenses of the Federal Reserve Banks, by District, 2021–22
Millions of dollars, except as noted
District | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Boston | 312.2 | 330.7 | 18.5 | 5.9 | 389.2 | 58.5 | 17.7 |
New York | 1122.7 | 1142.3 | 19.6 | 1.7 | 1245.2 | 102.8 | 9.0 |
Philadelphia | 210.7 | 217.6 | 6.8 | 3.2 | 231.9 | 14.4 | 6.6 |
Cleveland | 236.4 | 257.3 | 20.9 | 8.9 | 317.8 | 60.5 | 23.5 |
Richmond | 546.2 | 452.4 | −93.7 | −17.2 | 369.3 | −83.1 | −18.4 |
Atlanta | 425.1 | 428.8 | 3.6 | 0.9 | 466.9 | 38.2 | 8.9 |
Chicago | 453.5 | 455.8 | 2.3 | 0.5 | 489.2 | 33.4 | 7.3 |
St. Louis | 446.8 | 437.2 | −9.6 | −2.1 | 487.4 | 50.1 | 11.5 |
Minneapolis | 193.2 | 201.6 | 8.4 | 4.4 | 223.4 | 21.7 | 10.8 |
Kansas City | 381.9 | 384.5 | 2.6 | 0.7 | 422.8 | 38.2 | 9.9 |
Dallas | 258.2 | 267.4 | 9.2 | 3.6 | 290.8 | 23.4 | 8.8 |
San Francisco | 443.0 | 471.6 | 28.6 | 6.5 | 500.8 | 29.1 | 6.2 |
Total Reserve Bank operating expenses | 5029.8 | 5047.3 | 17.4 | 0.3 | 5434.6 | 387.4 | 7.7 |
Note: Includes expenses of the FRIT support function and the OEB and reflects all redistributions for support and allocation for overhead. Excludes Reserve Bank capital expenditures as well as assessments by the Board of Governors for costs related to currency and the operations of the Board of Governors and the Consumer Financial Protection Bureau.
Table D.9. Operating expenses of the Federal Reserve Banks, by operating area, 2021–22
Millions of dollars, except as noted
Operating area | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Monetary and economic policy | 845.4 | 851.7 | 6.3 | 0.7 | 902.7 | 51.0 | 6.0 |
Services to the U.S. Treasury and other government agencies | 657.8 | 626.5 | −31.3 | −4.8 | 728.4 | 101.9 | 16.3 |
Services to financial institutions and the public1 | 1,384.6 | 1,404.2 | 19.6 | 1.4 | 1,457.3 | 53.1 | 3.8 |
Supervision and regulation | 1,551.2 | 1,574.7 | 23.6 | 1.5 | 1,670.7 | 96.0 | 6.1 |
Fee-based services to financial institutions 2 | 590.9 | 590.2 | −0.7 | −0.1 | 675.6 | 85.4 | 14.5 |
Total Reserve Bank operating expenses3 | 5029.8 | 5047.3 | 17.4 | 0.3 | 5434.6 | 387.4 | 7.7 |
1. Services to financial institutions and the public includes cash services. Return to table
2. Includes operating expenses related to development of the FedNow Service. Return to table
3. Operating expenses exclude pension costs, reimbursements, and operating expense of the Board of Governors (see table D.4). Return to table
Table D.10. Operating expenses of the Federal Reserve Banks, by account classification, 2021–22
Millions of dollars, except as noted
Account classification |
2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Salaries and other benefits 1 | 3,800.4 | 3,776.4 | −24.0 | −0.6 | 3,920.1 | 143.6 | 3.8 |
Building | 346.9 | 302.8 | −44.1 | −12.7 | 186.4 | −116.4 | −38.5 |
Software costs | 342.0 | 357.1 | 15.1 | 4.4 | 416.8 | 59.7 | 16.7 |
Equipment | 234.8 | 231.7 | −3.1 | −1.3 | 251.5 | 19.8 | 8.6 |
Recoveries2 | −381.9 | −304.6 | 77.4 | −20.3 | −124.7 | 179.8 | −59.0 |
Expenses capitalized | −137.5 | −111.8 | 25.6 | −18.6 | −137.8 | −26.0 | 23.3 |
All other 3 | 825.1 | 791.5 | −33.5 | −4.1 | 922.5 | 130.9 | 16.5 |
Total Reserve Bank operating expenses | 5029.8 | 5047.3 | 17.5 | 0.3 | 5434.6 | 387.4 | 7.7 |
1. Includes salaries, other personnel expense, and retirement and other employment benefit expenses. It does not include pension expenses related to all the participants in the Retirement Plan for Employees of the Federal Reserve System and the Reserve Bank participants in the Benefit Equalization Plan and the Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks. These expenses are recorded as a separate line item in the financial statements; see "Table G.9. Income and expenses of the Federal Reserve Banks, by Bank" in Appendix G, "Statistical Tables." Return to table
2. Includes tenant rent and cash access fee recoveries for 2021 budget and Q1–Q2 of 2021 actuals. Tenant rent is included in building for Q3–Q4 actuals and 2022 going forward. Cash access fees are not included in Q3–Q4 of 2021 actuals and 2022 going forward. Return to table
3. Includes fees, materials and supplies, travel, communications, and shipping. Return to table
Table D.11. Employment at the Federal Reserve Banks, by District, and at FRIT and OEB, 2021–22
District | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Boston | 1,184 | 1,234 | 50 | 4.2 | 1,323 | 89 | 7.2 |
New York | 3,189 | 3,015 | −174 | −5.5 | 3,146 | 131 | 4.3 |
Philadelphia | 932 | 902 | −30 | −3.2 | 916 | 14 | 1.6 |
Cleveland | 1,042 | 1,172 | 130 | 12.5 | 1,254 | 82 | 7.0 |
Richmond | 1,502 | 1,517 | 15 | 1.0 | 1,545 | 28 | 1.8 |
Atlanta | 1,663 | 1,697 | 34 | 2.0 | 1,726 | 29 | 1.7 |
Chicago | 1,708 | 1,636 | −72 | −4.2 | 1,709 | 73 | 4.5 |
St. Louis | 1,432 | 1,442 | 10 | 0.7 | 1,394 | −48 | −3.3 |
Minneapolis | 1,113 | 1,085 | −28 | −2.5 | 1,145 | 60 | 5.5 |
Kansas City | 2,075 | 2,075 | 0 | 0.0 | 2,146 | 71 | 3.4 |
Dallas | 1,331 | 1,277 | −54 | −4.1 | 1,363 | 86 | 6.7 |
San Francisco | 1,790 | 1,823 | 33 | 1.8 | 1,880 | 57 | 3.1 |
Total, all Districts | 18,961 | 18,875 | −86 | −0.5 | 19,547 | 672 | 3.6 |
Federal Reserve Information Technology | 1,443 | 1,462 | 19 | 1.3 | 1,600 | 138 | 9.4 |
Office of Employee Benefits | 66 | 64 | −2 | −3.0 | 65 | 1 | 1.6 |
Total, System | 20,470 | 20,401 | −69 | −0.3 | 21,212 | 811 | 4.0 |
Table D.12. Capital expenditures of the Federal Reserve Banks, by District, and of FRIT and OEB, 2021–22
Millions of dollars, except as noted
District | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
Boston | 85.3 | 30.6 | –54.6 | –64.1 | 56.2 | 25.5 | 83.2 |
New York | 78.8 | 53.8 | –25.0 | –31.7 | 70.1 | 16.2 | 30.2 |
Philadelphia | 54.8 | 38.7 | –16.1 | –29.4 | 24.2 | –14.5 | –37.4 |
Cleveland | 28.0 | 23.7 | –4.3 | –15.4 | 41.4 | 17.7 | 74.7 |
Richmond | 17.7 | 8.9 | –8.9 | –50.1 | 18.6 | 9.7 | 109.7 |
Atlanta | 34.2 | 13.3 | –20.9 | –61.1 | 57.2 | 43.8 | 329.3 |
Chicago | 32.6 | 25.4 | –7.1 | –21.9 | 54.2 | 28.8 | 113.3 |
St. Louis | 19.4 | 9.2 | –10.5 | –54.2 | 22.3 | 13.4 | 151.5 |
Minneapolis | 25.6 | 27.5 | 1.9 | 7.4 | 20.3 | –7.2 | –26.0 |
Kansas City | 35.9 | 29.5 | –6.4 | –17.9 | 51.0 | 21.6 | 73.1 |
Dallas | 26.8 | 21.3 | –5.5 | –20.4 | 31.6 | 10.3 | 48.1 |
San Francisco | 82.8 | 52.9 | –29.9 | –36.1 | 91.8 | 39.0 | 73.7 |
Total, all Districts | 521.9 | 334.5 | –187.4 | –35.9 | 539.0 | 204.4 | 61.1 |
Federal Reserve Information Technology | 76.8 | 63.1 | –13.7 | –17.8 | 82.4 | 19.3 | 30.6 |
Office of Employee Benefits | 0.2 | 0.2 | 0.0 | –19.1 | 0.2 | 0.0 | –7.3 |
Total | 598.9 | 397.8 | –201.1 | –33.6 | 621.5 | 223.8 | 56.3 |
2021 Budget Performance
Total 2021 operating expenses for the Reserve Banks were $5,047.3 million, which is $17.4 million, or 0.3 percent, more than the approved 2021 budget of $5029.8 million. The expense overrun is largely driven by additional investments to support the Federal Reserve's commitment to modernize the nation's payment system and establish a safe and efficient foundation for the future via the FedNow Service initiative. These overruns are partially offset by less than budgeted expenses in travel and meetings because of the COVID-19 pandemic, and higher than anticipated turnover. Actual headcount was 20,401, an underrun of 69 headcount, or 0.3 percent, from 2021 budgeted staffing levels.
The Reserve Banks' 2021 capital expenditures were less than budgeted by $201.1 million, or 33.6 percent, primarily driven by plan changes because of the COVID-19 pandemic, including timing and scope for building-related initiatives, and project delays because of supply chain issues.
2022 Operating Expense Budget
The 2022 operating budgets of the Reserve Banks total $5,434.6 million, which is $387.4 million, or 7.7 percent, higher than 2021 actual expenses.12 Growth in monetary policy reflects increased resources dedicated to regional economic research. The increase in Treasury Services is primarily attributable to expanded efforts to modernize business processes and applications for federal payments and electronic tax collection. Additionally, increases in cash expenses are driven by the second phase of NextGen. Supervision expenses are increasing primarily because of growth in the supervisory portfolio. Increases in fee-based services reflect investments in the FedNow Service.
Total 2022 budgeted employment for the Reserve Banks, Federal Reserve Information Technology (FRIT), and the Office of Employee Benefits (OEB) is 21,212 headcount, an increase of 811 headcount, or 4.0 percent, from 2021 actual employment levels. A key driver of this increase is IT resources, largely to support Reserve Bank and Treasury-related cloud architecture initiatives and configurations. Other primary sources of growth are to support the FedNow Service; efforts to enable national support functions in procurement, finance, and human resource management; initiatives to support change management and enterprise strategy; and to enhance product offerings and ensure the security and resiliency of the FedLine Solutions.13
Reserve Bank officer and staff personnel expenses for 2022 total $4,020.5 million, an increase of $244.1 million, or 6.5 percent, from 2021 actual expenses. The increase reflects expenses associated with additional staff and budgeted salary administration adjustments.14
The 2022 Reserve Bank budgets include a salary administration program for eligible officers, senior professionals, and staff totaling $116.8 million and a variable pay program totaling $255.3 million.
2022 Capital Budgets
The 2022 capital budgets for the Reserve Banks, FRIT, and OEB total $621.5 million.15 The increase in the 2022 capital budget is $223.8 million, or 56.3 percent, greater than the 2021 actual levels of $397.8 million, largely reflecting ongoing multiyear IT and building strategic initiatives, some of which were paused in 2021 because of the COVID-19 pandemic. Initiatives in the 2022 capital budget support major workspace renovations, address aging building infrastructure in several Reserve Banks, improve IT infrastructure, and provide application upgrades and releases.
Capital Expenditures Designated for Conditional Approval
The BAC chair designated projects with an aggregate cost of $81.2 million in 2022 for conditional approval, requiring additional review and approval by the director of the Board's Division of Reserve Bank Operations and Payment Systems before the funds are committed.16 The expenditures designated for conditional approval include a large-scale building project, NextGen, and a cash infrastructure remodel. Technology projects include investments for FedNow; an initiative to streamline finance, procurement, and controller processes in the Federal Reserve Bank of New York; and an initiative to modernize the Markets Group operations platform.
Other Capital Expenditures
Significant capital expenditures (typically expenditures exceeding $1 million) that are not designated for conditional approval include total multiyear budgeted expenditures of $1,167.8 million for 2022 and future years, of which the single-year 2022 budgeted expenditures are $443.8 million. This category includes mechanical and electrical infrastructure upgrades and office space renovations. IT projects include ongoing IT infrastructure investments, initiatives that enable better access to data and enhance cybersecurity and cyber resiliency, and applications to support fee-based services, Treasury, supervision, and cash.
Capital initiatives that are individually less than $1 million are budgeted at an aggregate amount of $96.5 million for 2022 and include building maintenance expenditures, scheduled software and equipment upgrades, and equipment and furniture replacements.
Currency Budget
The currency budget provides funds to reimburse the Treasury's Bureau of Engraving and Printing (BEP) for expenses related to the production of banknotes, and the Board's activities related to its role as issuing authority of the nation's currency in the form of Federal Reserve notes.17 As issuing authority, the Board works closely with its strategic partners, such as the Reserve Banks, the Department of the Treasury, the BEP, and the U.S. Secret Service to help maintain the integrity of and public confidence in our nation's currency.
The Board works to ensure that the notes meet quality standards from production through destruction, monitors counterfeiting risks and threats for each denomination, contributes to the development of banknote security features and new design concepts, and conducts adversarial analysis to ensure the banknote security features and designs are robust against counterfeiting. The budget includes activities that support its issuing authority role, reimbursements to the BEP for banknote printing, the cost of shipping new currency from the BEP to Reserve Banks and fit currency between Reserve Banks, and funds the Currency Education Program (CEP). The CEP aims to protect and maintain confidence in U.S. currency worldwide by coordinating counterfeit detection training to Reserve Bank and foreign central bank staff, providing information about banknote security features, and conducting outreach to key stakeholders on U.S. Currency Program (USCP) initiatives.
The annual currency budget process is as follows:
- Each year, under authority delegated by the Board, the director of the Division of Reserve Bank Operations and Payment Systems submits a fiscal year print order for notes to the director of the BEP.18
- The BEP forecasts expenses for the single-cycle calendar-year and multicycle project budgets. The single-cycle budget included fixed and variable costs for printing Federal Reserve notes and support costs. The multicycle budget includes costs related to facility projects. Board staff develop budgets for Board expenses in relation to strategic guidance set by Cash leadership.
- The various sections of the budget are independently reviewed by Board staff, who also prepare a consolidated budget recommendation for BAC and Board approval.
- The BAC reviews the proposed currency budget.
- The BAC chair submits the proposed currency budget to Board members for review and final action.
2021 Budget Performance
The Board's 2021 actual single-cycle operating expenses for new currency were $950.4 million, which was $95.9 million, or 9.2 percent, below the budgeted amount for 2021. The underrun is primarily due to lower than planned production of notes from the BEP. Additional underruns are due to fewer shipments of notes from the BEP to Reserve Banks and delays in contracted research and development support for banknote development.
BEP Single-Cycle Operating Costs
BEP single-cycle operating costs were $894.1 million, which was $86.3 million, or 8.8 percent, below the budgeted amount for 2021. The budget underrun is primarily attributable to an underrun in variable printing costs. The budget was based on the delivery of 8.2 billion notes, which was the mid-range of estimated volume, and the most likely scenario, of the 2021 print order range of between 7.6 and 9.6 billion notes. However, the BEP delivered 6.8 billion notes during 2021. The lower-than-planned deliveries were a result of delays to note production because of COVID-19 shutdowns at the BEP, weather and adverse event shutdowns, and a complex denominational mix.19
BEP Multicycle Project Operating Costs
The currency budget includes funds for the BEP's Fort Worth facility expansion and Washington, D.C., replacement facility.20 The expanded Fort Worth facility will support additional note production needs, and that expansion project is currently approved for a total project budget of $282.8 million. The new Washington, D.C., replacement facility will replace the existing 100-year-old Washington, D.C., facility, which will enable the BEP to meet modern production requirements.21
The 2021 expenses for facility projects were $4.9 million less than budgeted. The Board and BEP agreed to pause the Washington, D.C., replacement facility's design and engineering work to implement better governance, program management, and financial control processes to address the risks of such a large and complex project. However, reimbursements for environmental impact analysis, site demolition, and site preparation expenses continued.
Board Single-Cycle Operating Costs
Board costs were $9.5 million, or 14.5 percent, under the budgeted amount for 2021. The underrun is attributable to lower costs for currency transportation and banknote development. The currency issuance underrun is due to fewer shipments of notes from the BEP to Reserve Banks than expected, which resulted in decreased BEP shipment costs. This was partially offset by the increased shipments between Reserve Banks needed to rebalance inventories across the System. The banknote development underrun is primarily the result of lower membership fees, contract terminations for banknote studies, and delays for several projects that were affected by the pandemic.
2022 Budget
Table D.13 summarizes the 2022 single-cycle currency operating budget of $1,060.0 million.22 The 2022 single-cycle operating budget represents an increase of $109.6 million, or 11.5 percent, from 2021 actual expenses. BEP costs associated with the printing of Federal Reserve notes are 93.3 percent of the operating budget. Board expenses for currency issuance, banknote development, and currency education comprise the remaining 6.7 percent of the operating budget. Table D.14 provides an overview of the multicycle project budget that funds the BEP's facility projects.
Table D.13. Federal Reserve single-cycle currency budget, 2021–22
Millions of dollars, except as noted
Item | 2021 budget |
2021 actual |
Variance 2021 actual to 2021 budget |
2022 budget |
Variance 2022 budget to 2021 actual |
||
---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | ||||
BEP costs | 980.4 | 894.1 | −86.3 | −8.8 | 989.2 | 95.1 | 10.6 |
Printing Federal Reserve notes | 975.4 | 889.4 | −86.0 | −8.8 | 983.8 | 94.4 | 10.6 |
BEP fixed printing costs | 518.6 | 518.0 | −0.6 | −0.1 | 612.5 | 94.5 | 18.2 |
BEP variable printing costs | 456.8 | 371.4 | −85.4 | −18.7 | 371.3 | −0.1 | 0.0 |
BEP support costs | 5.0 | 4.7 | −0.3 | –5.9 | 5.4 | 0.7 | 15.4 |
Currency reader | 1.1 | 0.7 | –0.3 | –31.9 | 1.0 | 0.2 | 33.8 |
Destruction and compliance | 3.9 | 3.9 | 0.0 | 1.2 | 4.4 | 0.5 | 12.0 |
Board expenses | 65.8 | 56.1 | –9.5 | –14.5 | 70.8 | 14.5 | 25.8 |
Currency issuance 1 | 33.6 | 29.1 | –4.5 | –13.5 | 37.6 | 8.5 | 29.2 |
Banknote development 2 | 26.4 | 21.8 | –4.6 | –17.3 | 27.1 | 5.3 | 24.2 |
Currency education 2 | 5.9 | 5.4 | –0.5 | –7.7 | 6.1 | 0.7 | 13.8 |
Operating budget | 1,046.2 | 950.4 | –95.9 | –9.2 | 1,060.0 | 109.6 | 11.5 |
1. This line item was previously identified as currency transportation. Starting in 2022, the currency issuance category includes transportation, personnel, and other support costs. Return to table
2. Personnel, travel, and training costs were previously displayed as line items in the budget. These costs are now included in the Banknote development and Currency education budget categories that they support. Return to table
Table D.14. Multicycle projects in the currency budget, 2021–22
Millions of dollars, except as noted
Item | 2020 and prior actual | 2021 budget | 2021 actual | 2022 budget | Project lifetime budget |
---|---|---|---|---|---|
BEP facility funding | |||||
Fort Worth facility expansion | 160.0 | 40.2 | 40.2 | 52.8 | 282.8 |
Washington, D.C., replacement facility | 0.7 | 49.6 | 44.7 | 5.5 | TBD1 |
Total | 160.7 | 89.8 | 84.9 | 58.3 | 282.8 |
1. TBD To be determined. Return to table
BEP Single-Cycle Operating Costs
The proposed 2022 budget to fund the BEP expenses associated with the printing of Federal Reserve notes is $989.2 million, which is $95.1 million, or 10.6 percent, greater than 2021 actual expenses.
The proposed budget for fixed printing costs is $612.5 million, which is $94.5 million, or 18.2 percent, greater than 2021 actual expenses. The increase is primarily attributable to capital purchases aligned with the long-term capital equipment plan and IT upgrades. There are also increased research and development expenses to support the new security features for the next family of notes.
Variable printing costs for 2022 align with 2021 actual expenses. Although the BEP expects to deliver more notes in 2022 than in 2021, 7.2 billion notes compared with 6.8 billion notes, the accompanying variable printing costs remain stable because economies of scale are realized with increased deliveries.
BEP Multicycle Project Operating Costs
The multicycle project budget includes $52.8 million in 2022 for the Fort Worth facility expansion to expand the final production area and administrative office space. The BEP plans for this project to be 85 to 90 percent complete by the end of 2022.
Board approval for the Washington, D.C., replacement facility's project lifetime budget will be sought when the BEP's Project Management Office and U.S. Army Corps of Engineers have finished the work underway to implement the prerequisite governance, program management, and financial control processes needed for such a large and complex project. The current total project estimate is $1,988.1 million. The multicycle project budget includes $5.5 million in 2022 funds for expenses related to environmental impact analysis, site demolition, and site preparation.
Board Single-Cycle Operating Costs
Board costs are estimated to be $70.8 million, which is $14.5 million, or 25.8 percent, more than 2021 actual expenses. The increase is primarily driven by currency issuance and banknote development costs.
The currency issuance budget increases are primarily attributable to increased BEP and intra-System shipment costs to transport the increased note deliveries, rebalance banknote inventories across the System, and fund alternative transportation methods.23 Budget increases also include funds for an additional position and contracts to support upcoming changes to the USCP and the Board's strategic priorities.
The banknote development budget increases include membership fee increases and contract services for additional development and testing activities for the newly selected security features. Beginning in 2022, the Board will conduct studies to gather public perception data to support banknote development and receive advisory support for redesign efforts. Contract resources will also provide support on financial management, construction oversight, and program governance for the Washington, D.C., replacement facility.
In 2022, currency education will continue to broaden its domestic, international, and stakeholder education outreach, and improve and maintain the currency website and its infrastructure. The additional funds are attributable to contract price increases for website services and personnel costs as the team fills its vacancies.
The currency issuance, banknote development, and currency education budget categories also include personnel, travel, training, and support and overhead costs.24
Footnotes
1. Before 2013, information about the budgeted expenses of the Board and Reserve Banks was presented in a separate report titled Annual Report: Budget Review. Copies of that report are available at https://www.federalreserve.gov/publications/budget-review/default.htm.
Each budget covers one calendar year. Return to text
2. Substantially all employees of the Board and Reserve Banks participate in the Retirement Plan for Employees of the Federal Reserve System (System Plan). Reserve Bank employees at certain compensation levels participate in the Benefit Equalization Plan, and certain Reserve Bank officers participate in the Supplemental Retirement Plan for Select Officers of the Reserve Banks. The operating expenses of the Reserve Banks presented in this section do not include expenses related to the retirement plans; however, the 2021 claims for reimbursement include the allocated portion of the pension. Additional information about these expenses can be found in Appendix G, "Statistical Tables."
Board employees also participate in the Benefit Equalization Plan, and Board officers participate in the Pension Enhancement Plan for Officers of the Board of Governors of the Federal Reserve System (PEP). The operating expenses of the Board presented in this section include expenses related to Board participants in the Benefit Equalization Plan and PEP but do not include expenses related to the System Plan. Return to text
3. The Federal Reserve is developing a new round-the-clock, real-time payment and settlement service, called the FedNow Service, to support faster payments in the United States. The initiative to modernize the ACH processing platform was completed in early 2021. Return to text
4. The System is implementing a strategy to transition the current fleet of high-speed currency processing machines and the associated sensor suite from the Banknote Processing System platform to the future next-generation (NextGen) processing technologies (machines and sensor technologies). Return to text
5. The capital budget reported for the Board includes single-year capital expenditures and 2021 expected capital expenditures from multiyear projects of the Board and the Office of Inspector General. The capital budget reported for the Reserve Banks includes the amounts budgeted for the Federal Reserve Information Technology support function and the Office of Employee Benefits. Return to text
6. The Board approved the plan published in December 2019 and located at https://www.federalreserve.gov/publications/files/2020-2023-gpra-strategic-plan.pdf. Return to text
7. Monetary Policy and Financial Stability, Supervision, Payment System and Reserve Bank Oversight, Public Engagement and Community Development, and Mission Enablement (Support and Overhead). Return to text
8. In July 2021, the Board of Governors approved an amendment to the 2021 operating budget to address critical workload and projects. This amendment increased the operating budget from $869.5 million to $884.4 million. Return to text
9. In July 2021, the Board of Governors approved an amendment to the 2021 operating budget to address critical workload and projects. This amendment increased the authorized position count from 2,883 to 2,979. Return to text
10. The plan is located at https://oig.federalreserve.gov/strategic-plan.htm. Return to text
11. In 2021, the Federal Reserve implemented a new cost accounting framework in parallel with a new Enterprise Resource Planning application as part of a broader modernization effort. Additional information about the operating expenses of each of the Reserve Banks can be found in Appendix G, "Statistical Tables" (see "Table G.9. Income and expenses of the Federal Reserve Banks, by Bank"). Return to text
12. On December 13, 2021, the Board conditionally approved the 2022 Reserve Bank operating budgets totaling $5,432.1 million. Conditional approval was necessary because the System was still in the process of implementing the new Enterprise Resource Planning tool and new cost accounting framework. The refinement of costing and budgetary estimates arising from full implementation of the planning system resulted in a final total of $5,434.6 million, $2.6 million more than reported in December but well under the material revision threshold of 1 percent that would require additional Board action. Consequently, the director of the Division of Reserve Bank Operations and Payment Systems approved the revised 2022 Reserve Bank operating budgets.
Prior to the conditional approval of the 2022 operating expenses, the U.S. Department of the Treasury's Bureau of the Fiscal Service (Fiscal Service) had not yet finalized the approved level of funding for fiscal services provided by the Reserve Banks included in the Reserve Bank budgets. Subsequently, in March 2022, Fiscal Service provided their final authorization for the 2022 budget. The actual level of Reserve Bank spending for fiscal services is dependent on the Treasury's approval of funding and may vary from the budgeted amounts reflected in this report. Additional information is available at https://www.federalreserve.gov/foia/budgets.htm.
In addition, in consultation with the chair of the Committee on Federal Reserve Bank Affairs, the director of the Division of Reserve Bank Operations and Payment Systems designated $88.6 million of the 2022 operating expense budget associated with selected investments in the Treasury for conditional approval. Return to text
13. Enhancements to the FedLine Solutions include a multiyear transformational effort focused on evolving the FedLine network, authentication, and hosting infrastructure to meet customer, industry, and Federal Reserve System needs. Return to text
14. The salary administration program includes a budgeted pool for merit increases, equity adjustments, and promotions. Return to text
15. The Board delegated the approval of the resources for services provided to the Treasury to the director of the Division of Reserve Bank Operations and Payment Systems pending final authorization from the Bureau of the Fiscal Service. The 2022 capital budget, including those capital expenditures designated for conditional approval, reflect the final authorization from Fiscal Service. Return to text
16. Generally, capital expenditures that are designated for conditional approval include certain building projects, District expenditures that substantially affect or influence future System direction or the manner in which significant services are performed, expenditures that may be inconsistent with System direction or vary from previously negotiated purchasing agreements, and local expenditures that duplicate national efforts. Return to text
17. As mandated by the Federal Reserve Act, section 16, the Board reimburses the BEP for all costs related to the production of Federal Reserve notes. Section 16 of the Federal Reserve Act also requires that all costs incurred for the issuing of notes shall be paid for by the Board and included in its assessments to the Reserve Banks. Operations and capital investments of the BEP have been generally financed by a revolving fund that is reimbursed through product sales, nearly all of which are sales of Federal Reserve notes to the Board to fulfill its annual print order. Return to text
18. The Board delivers the annual print order to the BEP director in August of each year, and copies are available on the Board's website at https://www.federalreserve.gov/paymentsystems/coin_currency_orders.htm. Return to text
19. The 2021 print order included a larger ratio of higher denomination notes, which are more challenging and costly to produce than lower denomination notes. Return to text
20. The BEP facility projects were previously approved on a single-cycle operating budget basis. Funds that were not expended were not carried over to the next calendar year. In 2021, the Board approved shifting the BEP facility projects to a multiyear total cost approval to simplify the budgeting process, ensure that the BEP has sufficient cash to pay obligations that span multiple budget years, provide regular reporting of lifetime project costs, and provide flexibility to manage inherent project changes. Return to text
21. The rationale for the new facility is laid out in a Government Accountability Office (GAO) report published in April 2018; see BEP, Options for and Costs of a Future Currency Production Facility (Washington: GAO, April 2018), https://www.gao.gov/products/gao-18-338. Return to text
22. For 2022, the Board approved a $25,000 multicycle capital budget for adversarial analysis laboratory equipment. Return to text
23. Alternative transportation methods include chartered air service, which is more expensive than traditional shipment options but provides flexibility and resiliency. Return to text
24. The currency budget includes support and overhead costs for enterprise IT, facilities, law enforcement, human resources, and other services. Return to text