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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:
- Each Board division examines its operating environment and considers whether any adjustments to its mission, priorities, activities, and associated resources might improve the efficiency and effectiveness of the Board's operations. A proposed budget based on Boardwide priorities and planning assumptions is prepared for each division.
- The divisions provide their proposed budgets to the Staff Planning Group (SPG), a group composed of senior-level Officers from across the Board, which develops a preliminary Board-wide budget. The Board's Committee on Board Affairs (CBA) then reviews the preliminary budget and clarifies outstanding planning issues with SPG.
- The CBA submits the proposed budget to the Board for its consideration and approval.
- If events warrant any changes to the approved budget, the CBA seeks additional Board approval.
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:
- The business leaders in each functional area provide guidance to assist the Banks as they develop their budget projections for the upcoming year. The budget information is submitted to Board staff for review.
- Board staff review the Banks' budgets, both individually and in the context of Systemwide issues and other Banks' plans.
- The Committee on Federal Reserve Bank Affairs is briefed on the Bank budgets.
- The budgets are provided to the members of the Board for final action.