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Board of Governors of the Federal Reserve System

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 U.S. Department of the Treasury's Bureau of Engraving and Printing (BEP). Upon reviewing the order, the BEP establishes billing rates for new currency, which the 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 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 2010 were under budget by $80.1 million, or 11.4 percent, primarily because the BEP printed fewer notes than budgeted.

The approved 2011 new currency budget of $676.1 million is 8.6 percent higher than 2010 costs (figure 5). Printing costs for Federal Reserve notes represent 96 percent of the new currency budget, and expenses for currency transportation, counterfeit-deterrence research, and the BEP's Finance Directorate operations account for the remaining 4 percent (table 8).

Figure 5. Federal Reserve costs for new currency, 1997-2011

Note: For 2011, budgeted.

Table 8. Federal Reserve budget for new currency, 2010 and 2011
Thousands of dollars, except as noted
Item 2010 (actual) 2011 (budgeted) Percent change
Printing of new Federal Reserve notes 1 598,239 649,565 8.6
Currency transportation 16,901 18,318 8.4
Counterfeit-deterrence research 4,206 4,486 6.7
Reimbursement to the BEP's Finance Directorate 3,514 3,773 7.4
Total cost of currency 622,859 676,141 8.6

1. Includes expenses for other currency-related initiatives. Return to table

Printing of Federal Reserve Notes

The cost for printing the calendar-year 2011 currency order is budgeted at $649.6 million, an 8.6 percent increase over the cost for the 2010 order. The average cost per thousand notes increased 6.2 percent, from $89.75 in 2010 to $95.51 in 2011 (table 9), primarily because high fixed costs at the BEP are allocated among fewer notes than last year.

Table 9. Projected Federal Reserve costs of printing new notes, by type of note, 2011
Type of currency Number of notes (millions) Percentage of total notes Cost per thousand notes (dollars) Total cost (thousands of dollars)
Unthreaded ($1, $2) 2,610.7 38.5 55.49 144,866
Series 1996 ($100) 499.2 7.4 98.60 49,221
Series 2004
$5 646.7 9.5 99.28 64,204
$10 187.6 2.8 99.18 18,609
$20, $50 1,125.1 16.6 108.91 122,531
$100 1,718.5 25.3 144.80 248,834
Average cost ... ... 95.51 ...
Total 6,787.7 100.0 ... 648,265

... Not applicable.

Although the Board ordered 7.6 billion notes in FY 2011, the BEP based its pricing on annual production of only 6.8 billion notes. To meet the Board's order, the BEP expects to process a portion of the 1.1 billion new-design $100 notes produced and held for quality concerns during FY 2010 and reclaim nearly 800 million notes.19 Over the next several years, the BEP expects to sort the remaining notes on hold and reclaim additional notes that meet quality standards.

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Currency Transportation

The 2011 currency transportation budget is $18.3 million, which includes the costs of shipping new currency from the BEP to the Reserve Banks, of shipping fit and unprocessed currency between Reserve Banks, and of returning currency pallets to the BEP.

The 2011 budget for currency transportation increased 8.4 percent from 2010 costs, primarily because armored carrier contract rates are expected to increase 5.0 percent in 2011. In addition, the Board included funding to begin shipping new-design $100 notes to every Reserve Bank to build sufficient inventories before issuance.

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Counterfeit-Deterrence Research

The 2011 budget for counterfeit-deterrence research is $4.5 million, which includes costs associated with the Central Bank Counterfeit Deterrence Group (CBCDG) and the Reprographic Research Center (RRC). The CBCDG operates under the auspices of the G-10 central bank governors to combat digital counterfeiting and includes 32 central banks. The Board's $4.5 million share of the 2011 CBCDG budget comprises 99 percent of the Federal Reserve's counterfeit-deterrence budget and is $225,000 higher than the 2010 costs.20

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Bureau of Engraving and Printing Finance Directorate

The 2011 budget includes $3.8 million to reimburse the BEP for expenses incurred by its Destruction Standards and Compliance Division of the Office of Compliance (OC) and Mutilated Currency Division of the Office of Financial Management (OFM). The OC develops standards for Reserve Banks in the 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 OFM processes claims for the redemption of damaged or mutilated paper currency.

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19. In mid-2010, the BEP discovered sporadic creasing of the currency paper during high-pressure, intaglio printing. Because of the difficulty in detecting the problem, the BEP had produced approximately 1.1 billion new-design $100 notes, a portion of which might include creasing. The BEP is researching equipment to reclaim notes that meet the Board's quality standards and sort out those that do not. The BEP will not charge the Board for any reclaimed notes because the BEP assessed the Board a surcharge in 2010 that covered the cost of production. Similarly, the BEP will not issue a credit for any notes that do not meet quality standards. Return to text

20. The estimated RRC payment of $32,200 represents the remaining 1 percent of the counterfeit-deterrence research budget. The RRC 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 13, 2011