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Board of Governors of the Federal Reserve System
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Annual Report Budget Review 2012

Currency Budget

Each year, under authority delegated by the Board, the director of the Division of Reserve Bank Operations and Payment Systems orders new currency from the Treasury's Bureau of Engraving and Printing (BEP). Upon reviewing the order, the BEP estimates printing costs for new currency during the calendar year, which Board staff use to prepare the annual budget for new currency. Each month, the Board assesses the costs of new currency to each Federal Reserve Bank through an accounting procedure similar to that used in assessing the costs of the Board's operating expenses to the Banks. Total new currency expenses for 2011 were under budget by $26.1 million, or 3.9 percent, primarily because the BEP printed fewer notes than budgeted.

The approved 2012 new currency budget of $747.0 million is 14.9 percent higher than 2011 costs (figure 5). Printing costs for Federal Reserve notes represent 95 percent of the new currency budget; certain other BEP costs, expenses for the currency education program, the currency quality assurance program, currency transportation, and counterfeit-deterrence research represent the remaining 5 percent (table 8).

Figure 5. Federal Reserve costs for new currency, 1998-2012
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Note: For 2012, budgeted.

Table 8. Federal Reserve budget for new currency, 2011 and 2012
Thousands of dollars, except as noted

Item 2011 (actual) 2012 (budgeted) Percent change
BEP-related expenses
Printing Federal Reserve notes 1 618,714 707,231 14.3
Currency education program 2 4,500 ... ...
Other 3,475 3,692 6.2
Board expenses
Currency education program 114 2,800 ...
Currency quality assurance 2,992 5,200 73.8
Currency transportation 15,728 22,795 44.9
Counterfeit-deterrence research 4,487 5,318 18.5
Total cost of currency 650,011 747,036 14.9

1. Expenses for printing Federal Reserve notes do not include costs associated with the currency education and currency quality assurance programs. These costs were included in printing costs in previous budget documents. Return to table

2. The BEP managed the currency education program through September 30, 2011. The Board began managing the program effective October 1, 2011; therefore, 2011 estimates for BEP expenses include costs incurred by the BEP during the first three quarters, and 2011 estimates for Board expenses include costs incurred by the Board during the fourth quarter. Return to table

BEP Bureau of Engraving and Printing.

... Not applicable.

Printing of Federal Reserve Notes

The cost for printing the calendar-year 2012 currency order is budgeted at $707.2 million, a 14.3 percent increase over the cost for the 2011 order. The increase is primarily attributable to a higher volume of more-expensive Series 2004 notes included in the 2012 budget compared with 2011. Series 2004 notes are more expensive because they include colored backgrounds and additional security features, resulting in higher costs of paper and ink, compared with older-series notes. The average cost per thousand notes, however, decreased 8.6 percent from $97.26 in 2011 to $88.89 in 2012, primarily because the BEP's high fixed costs will be spread over a greater number of notes in 2012.

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Currency Quality Assurance Program

The 2012 currency quality assurance program budget is $5.2 million. During 2010, the Board hired a consulting firm to assist with the development and implementation of a comprehensive currency quality assurance program for the BEP. The long-term goals of this program are to improve the BEP's ability to produce high-quality notes consistently, thereby reducing spoilage and functional failures of notes in circulation.23 During 2012, the currency quality assurance consultants will continue work to facilitate this multiyear initiative.

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Currency Education Program

The 2012 currency education program budget is $2.8 million.24 The goal of the currency education program is to provide information on the design and security features of Federal Reserve notes to users worldwide. To do that, the program is focused on ensuring that users of U.S. currency know what genuine Federal Reserve notes look like, are aware of the security features in each denomination, and know how to use those security features to distinguish between genuine and counterfeit notes.

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Currency Transportation

The 2012 currency transportation budget is $22.8 million, which includes the costs of shipping new currency from the BEP's two facilities to the Reserve Banks, of shipping fit and unprocessed currency between Reserve Banks, and of returning currency pallets to the BEP.

The 2012 budget for currency transportation increased 45 percent from 2011 costs, primarily because the Board has ordered more notes in 2012. The Board estimates that it will make approximately 500 (25 percent) more shipments in 2012 than in 2011.

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Counterfeit-Deterrence Research

The 2012 budget for counterfeit-deterrence research is $5.3 million, which includes costs associated with the Central Bank Counterfeit Deterrence Group and the Reprographic Research Center. The Central Bank Counterfeit Deterrence Group, established by the Governors of the G10 central banks to combat digital counterfeiting, is a consortium of 32 central banks and monetary authorities that issue bank notes. The Board's $5.3 million share of the 2012 Central Bank Counterfeit Deterrence Group budget comprises 99 percent of the Federal Reserve's counterfeit-deterrence budget.25

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Other Reimbursements to the Bureau of Engraving and Printing

The 2012 budget includes $3.7 million to reimburse the BEP for expenses incurred by its Destruction Standards and Compliance Division of the Office of Compliance and Mutilated Currency Division of the Office of Financial Management. The Office of Compliance develops Reserve Bank standards for cancellation and destruction of unfit currency and for note accountability, and reviews Reserve Banks' cash operations for compliance with its standards. As a public service, the Mutilated Currency Division processes claims for the redemption of damaged or mutilated currency.

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23. During 2012, the Board estimates that the cost of spoilage, based on 2012 variable printing costs and historical spoilage rates, will be approximately $38.5 million.  Return to text

24. On October 1, 2011, management of the currency education program transitioned from the BEP to the Board, aligning currency education with the Board's other currency-related responsibilities as the issuing authority for Federal Reserve notes.  Return to text

25. The estimated Reprographic Research Center payment of $41,000 represents the remaining 1 percent of the counterfeit-deterrence research budget. The Reprographic Research Center is a state-of-the-art facility, hosted by the National Bank of Denmark, that is used for adversarial testing of banknote designs and counterfeit-deterrent features for its 13 member countries.  Return to text

Last update: July 11, 2012

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