Annual Report Budget Review 2013
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 uses to prepare the annual budget for new currency. Each month, the Board assesses the costs of new currency to each Federal Reserve Bank.
2012 Budget Performance
The cost for new currency during calendar-year 2012 totaled $721.1 million, which represents a decrease of $26.0 million, or 3.5 percent, from the 2012 budget. The decrease is primarily because of a reduction in Federal Reserve note printing and currency transportation costs. In February 2012, the director of the Division of Reserve Bank Operations and Payment Systems modified the fiscal year 2012 print order by increasing the number of current-design $100 notes by 400 million to meet heightened demand and reducing the amount of new-design $100 notes by the same amount. This modification resulted in no change to the total number of notes in the order, but decreased the number of more-expensive new-design $100 notes, thereby reducing expenses by nearly $13 million.20 Expenses were reduced further when the BEP refunded approximately $6.9 million to the Board as part of the transfer of the currency education program from the BEP to the Board.21 Additionally, transportation expenses were $13.5 million under budget primarily because the Board did not ship as many new-design $100 notes as it had budgeted.
In this Section:
The approved 2013 new currency budget of $797.6 million is 10.6 percent higher than 2012 costs (figure 5). Printing costs for Federal Reserve notes comprise about 92 percent of the new currency budget. Expenses for currency transportation, the currency quality assurance (CQA) program, the currency education program (CEP), and counterfeit-deterrence research comprise the remaining 8 percent (table 8).
Table 8. Federal Reserve budget for new currency, 2012 and 2013Thousands of dollars, except as noted
|Item||2012 (actual)||2013 (budgeted)||Change|
|Printing Federal Reserve notes||687,705||734,774||47,069||6.8|
|Currency quality assurance||7,260||13,400||6,140||84.6|
|Currency education program||482||9,512||9,030||1,874.2|
|Total cost of new currency||721,074||797,600||76,525||10.6|
BEP Bureau of Engraving and Printing.
Printing of Federal Reserve Notes
The cost for printing the calendar-year 2013 currency order is budgeted at $734.8 million, a 6.8 percent increase over the cost for the 2012 order. The average cost per thousand notes also increased 3.5 percent from $88.73 in 2012 to $91.81 in 2013. The increase is primarily attributable to a higher volume of more-expensive new-design $100 notes included in the 2013 budget compared with 2012. As the country's highest denomination note, the $100 note is a prime target of counterfeiters around the world; the new-design notes are the most expensive of all U.S. notes to produce because they contain new security features to deter counterfeiting.
The 2013 currency transportation budget is $30.7 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 2013 budget for currency transportation increased nearly 80 percent from 2012 costs. More than 95 percent of the difference between the 2013 budget and 2012 estimate ($13 million) is attributable to costs associated with shipping 2.5 billion new-design $100 notes from the BEP's two facilities to each of the Federal Reserve offices in preparation for issuance.
Currency Quality Assurance Program
The 2013 currency quality assurance program budget is $13.4 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. During 2013, the consultants will continue to facilitate the implementation of the new quality system for the BEP, support the new-design $100 note issuance by ensuring the BEP produces a sufficient quantity of notes that meet agreed-upon quality standards, and provide temporary resources to the BEP to sustain critical aspects of the quality system.
Currency Education Program
The 2013 currency education program budget is $9.5 million. The goal of the 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. In addition to these general currency-education-related tasks, in 2013, the currency education program will dedicate significant resources to education efforts in support of the new-design $100 note. Because there are currently more than 8 billion $100 notes in circulation worldwide, the currency education program must reach a diverse global population to ensure a smooth transition to the new design.
The 2013 budget for counterfeit-deterrence research is $5.8 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 $5.5 million share of the 2013 Central Bank Counterfeit Deterrence Group budget comprises 95 percent of the Federal Reserve's counterfeit-deterrence budget. The remaining 5 percent reflects additional research toward increasing security features of Federal Reserve notes.
Other Reimbursements to the Bureau of Engraving and Printing
The 2013 budget includes $3.4 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.
20. The variable cost of production for the current-design $100 note is $29.04 per thousand notes compared with $60.92 for the new-design $100 note. Return to text
21. The Board assumed responsibility from the BEP for the currency education program on October 1, 2011. However, because the Board operates on a calendar-year basis, it continued to provide funding to the BEP for the currency education program through the end of 2011. The BEP then provided a refund to the Board in 2012 because the BEP did not incur expenses associated with the program during that time. Return to text