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Appendix A: Federal Reserve Budget Processes

The Board of Governors and the Federal Reserve Banks have separate budgets and separate budget processes.

Board of Governors

The Board's budget covers a two-year period. The budget process is as follows:

The Board's Office of Inspector General (OIG), in keeping with its statutory independence, prepares its proposed budget apart from the Board's budget. The OIG presents its two-year budget directly to the Chairman for action by the Board.

Federal Reserve Banks

The Reserve Banks' budgets cover one year. Each year, each Bank establishes major operating goals for the coming year, devises strategies for attaining those goals, estimates required resources, and monitors results. The Banks' budgets are structured by operational area, with support and overhead attributable to each area charged to that area.

The operations and financial performance of the Reserve Banks are monitored throughout the year by way of a cost-accounting system, the Planning and Control System (PACS). Under PACS, the costs of all Bank services, both priced and nonpriced, are grouped by operational area, and the associated costs of support and overhead are charged to these areas accordingly. PACS makes it possible to compare budgets with actual expenses, and it facilitates comparison of the financial and operating performances of the Banks. During the budget year, the Banks must submit proposals for major purchases of assets to the Board for further review and approval.

Following is a summary of the Reserve Bank budget process:

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