Board of Governors of the Federal Reserve System

Federal Reserve System Budgets

The Federal Reserve Board of Governors and the Federal Reserve Banks prepare annual budgets as part of their efforts to ensure appropriate stewardship and accountability.¹ This section presents information on the 2016 budget performance of the Board and Reserve Banks, and on their 2017 budgets, budgeting processes, and trends in expenses and employment. This section also presents information on the costs of new currency.

System Budgets Overview

Tables 1 and 2 summarize the Federal Reserve Board of Governors' and Federal Reserve Banks' 2016 budgeted and actual and 2017 budgeted operating expenses and employment.²

Table 1. Total operating expenses of the Federal Reserve System, net of receipts and claims for reimbursement, 2016-17

Millions of dollars, except as noted

Table 2. Employment in the Federal Reserve System, 2016-17

2016 Budget Performance

In carrying out its responsibilities in 2016, the Federal Reserve System incurred $4,338.6 million in net expenses. Total System operating expenses of $5,452.6 million were offset by $1,113.9 million in revenue from priced services, claims for reimbursement, and other income. Total 2016 System operating expenses were $142.7 million, or 2.6 percent, less than the amount budgeted for 2016.

2017 Operating Expense Budget

Budgeted 2017 System operating expenses, net of revenue and reimbursements, are $359.4 million, or 8.3 percent, higher than 2016 actual expenses. The Reserve Bank budgets comprise almost three-quarters of the System budget (figure 1). Budgeted 2017 revenue from priced services and claims for reimbursements are expected to remain relatively stable in 2017.

Trends in Expenses and Employment

From the actual 2007 level to the budgeted 2017 amount, the total operating expenses of the Federal Reserve System have increased an average of 4.1 percent per year (figure 2). Over the same period, nondefense discretionary spending by the federal government has increased an average of 2.4 percent per year (figure 3). Federal Reserve System employment declined from 2007 through 2010 because of continued efforts to reduce the size of the System's check service and because of efficiency improvements in cash and support functions. Staffing has subsequently increased in information technology (IT) to support large application-development projects, information security efforts, end user services, and the central computing environment. Supervision resource levels were augmented to meet requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and to support portfolio growth (figure 4).

Growth in supervision expenses over the past 10 years has been driven by additional supervisory resources needed to respond to the financial crisis, to continue to implement expanded responsibilities mandated by the Dodd-Frank Act, to build out the cybersecurity supervision program, and to support other strategic national initiatives. Expense growth in the monetary policy area during the financial crisis has been followed by a focus on enhancing financial stability monitoring and dedicating additional resources to regional economic research.

Federal Reserve Bank expenses in the cash area have increased as a result of a multiyear effort to modernize the cash-processing and inventory-tracking infrastructure. These increases have been partially offset by lower expenses because of efficiency improvements in cash operations. Treasury services expenses have increased to meet evolving needs, including the automation of the Treasury's collection and payment services, the addition of Treasury applications to the Treasury Web Application Infrastructure (TWAI), and other requested projects.³

2017 Capital Budgets

The capital budgets for the Board and Reserve Banks total $72.5 million and $416.6 million, respectively.⁴ As in previous years, the capital budgets in 2017 include funding for projects that support the strategic direction outlined by the Board and each Reserve Bank. These strategic goals emphasize investments that continue to improve operational efficiencies, enhance services to Bank customers, and ensure a safe and productive work environment.

Board of Governors Budget

Board of Governors

The Board's budget is grounded in the principles established by the Strategic Plan 2016-19 (www.federalreserve.gov/publications/gpra/files/2016-2019-gpra-strategic-plan.pdf) and provides funding to advance the plan's goals, objectives, and initiatives.⁵ The budget is structured by division, office, or special account.

The Board's budget process is as follows:

• At the start of the budget process, the chief operating officer and chief financial officer meet with the Committee on Board Affairs (CBA) to recommend a specific growth target for the Board's operating budget. The recommended growth target includes known changes in the run-rate of the Board's ongoing operations, constraining growth for additional positions, and targeted increases in select goods and services accounts. Board members and the Executive Committee, comprising directors of each division, were briefed on the targets.
• To achieve the CBA's growth target, divisions review their resource requirements, reallocate funding to support mission-critical activities and strategic priorities, and submit initial budget requests, including proposed initiatives and potential savings.
• Division of Financial Management staff review initial budget requests submitted by divisions and collaborate with all divisions to achieve the growth target. In addition, division directors collaborate and adjust their requested positions to align with the CBA's guidance.
• The chief operating officer and chief financial officer subsequently meet with the Executive Committee and the CBA to further review and refine the budget submissions. Once the budget has been finalized, the administrative governor submits the budget to the full Board for review and final approval.
• Expenses are monitored throughout the year. Quarterly financial forecasts provide insights into budgetary pressures. Variances are analyzed and reported to senior management.

Tables 3 and 4 summarize the Board's 2016 budgeted and actual expenses and its 2017 budgeted expenses by division, office, or special account and by account classification, respectively. Table 5 summarizes the Board's budgeted and actual authorized position count for 2016 and 2017. Table 6 summarizes the Board's budgeted and actual capital outlays for 2016 and 2017. Each table includes a line item for the Office of Inspector General (OIG), which is discussed later in this section.

Table 3. Operating expenses of the Board of Governors, by division, office, or special account, 2016-17

Millions of dollars, except as noted

Table 4. Operating expenses of the Board of Governors, by account classification, 2016-17

Millions of dollars, except as noted

Table 5. Positions authorized by the Board of Governors, by division, office, or special account, 2016-17

2016 Budget Performance

Total expenses for Board operations were $688.6 million, which was $20.9 million, or 2.9 percent, less than the approved 2016 budget of $709.5 million. The Board's 2016 single-year capital spending was less than budgeted by $2.3 million, or 25.5 percent, and multiyear capital projects remained within their project budgets, with actual spending in 2016 less than budgeted by $39.2 million, or 64.8 percent, driven by less-than-planned spending for building improvement projects.

Personnel services expenses were $4.6 million less than the budget primarily due to higher-than-planned labor capitalization for software projects and reimbursements from other agencies; amount and timing of compensation actions; lower-than-expected health insurance premiums; and lower costs for centrally-managed benefits, which fluctuate because of changes in actuarial and demographic assumptions. Goods and services expenses were $16.3 million less than the budget primarily due to lower use of contractual services; lower-than-expected expenses for data purchases, software renewals, and travel; and lower depreciation expenses due to delays in several capital projects.

2017 Operating Expense Budget

The 2017 budget for Board operations is $744.6 million, which is $55.9 million, or 8.1 percent, higher than 2016 actual expenses and 4.9 percent higher than the 2016 budget. The operating budget includes amounts to fund the Board's ongoing operations and to support the six overarching pillars identified in the Board's Strategic Plan 2016-19.

For 2017, authorized positions for Board operations total 2,847, an increase of 58 positions, or 2.1 percent, from 2016 actual levels. The increase is in line with the overall position growth target set by the CBA and provides additional resources to advance initiatives that support the Strategic Plan's pillars related to project development and resource allocation, data, and technology. The positions are aligned with the Strategic Plan, and over 80 percent of the new positions support the monetary policy, public programs, and supervision and regulation functions.

Risks in the 2017 Budget

The 2017 operating budget follows the steps taken in recent years to better align budget requests with historic hiring trends and spending patterns, while ensuring the funding of the Board's highest priorities. Meeting the approved growth targets required all divisions to make tradeoffs and prioritize resources to fund mission-critical activities for 2017.

During the budget process, many divisions noted the potential impact that reducing their budget requests would have on meeting demands. Staff from the Division of Financial Management will work closely with all divisions throughout the year to mitigate potential budget overruns by closely monitoring spending. Building improvements projects will continue to be an area of focus, from both a budget and project management perspective, given their size, complexity, and strategic importance.

2017 Capital Budgets

The Board's 2017 single-year capital budget totals $14.0 million, which represents an increase of $5.0 million from the 2016 budget. The increase is driven primarily by the reclassification of data center funding from the multiyear capital budget to the single-year capital budget. The change reflects completion of the data center's relocation and the move to steady-state operation of the new facility.

The Board's multiyear capital budget totals $412.2 million, which includes 2017 expected outlays of $58.3 million. The budget includes increases to the Martin Building renovation project due to updated construction cost estimates, additional improvements at the New York Avenue Building, modernization of the financial data repository application, and additional automation funding for a supervision and regulation data architecture used throughout the Federal Reserve System.

Table 6. Capital outlays of the Board of Governors, by capital type, 2016-17

Millions of dollars, except as noted

Office of Inspector General

The budget for the OIG is grounded in its Strategic Plan 2013-16 and Strategic Plan 2017-20 (https://oig.federalreserve.gov/strategic-plan.htm) to enhance its oversight of the Board and the Consumer Financial Protection Bureau (CFPB). The OIG's Strategic Plan 2017-20 includes goals and objectives to deliver results that promote agency excellence; promote a diverse, skilled, and engaged workforce and foster an inclusive, collaborative environment; optimize external stakeholder engagement; and advance organizational effectiveness and model a culture of continuous improvement.

In keeping with its statutory independence, the OIG prepares its proposed budget apart from the Board's budget. The OIG presents its budget directly to the Board for approval.

2016 Budget Performance

Total expenses for OIG operations were $31.2 million, which was $0.6 million, or 1.9 percent, less than the approved 2016 operating budget. Personnel services expenses were $0.5 million less than budgeted because of higher-than-budgeted vacancy rates. Goods and services expenses were $0.1 million less than budgeted because of less-than-anticipated spending in several areas, partially offset by an office space reconfiguration. The OIG did not have single-year capital spending in 2016. Multiyear capital projects remained within their project budgets, with actual spending in 2016 higher than planned because of the buildout of the OIG's New York regional office.

2017 Operating Expense Budget

The 2017 budget for OIG operations is $34.3 million, which is $3.1 million, or 9.9 percent, higher than 2016 actual expenses and 7.8 percent higher than the OIG's 2016 budget. For 2017, authorized positions for the OIG total 132, an increase of 2 positions, or 1.5 percent, from 2016 actual levels. The additional funding and positions will assist the OIG in implementing the goals, objectives, and activities identified in its strategic plan.

2017 Capital Budget

The OIG's multiyear capital budget totals $3.2 million, which includes 2017 expected cash outlays of $0.2 million for the continued buildout of the San Francisco regional office.

Federal Reserve Banks Budgets

Each Reserve Bank establishes major operating goals for the coming year, devises strategies for attaining those goals, estimates required resources, and monitors results. The Reserve Banks' budgets are structured by functional area, with attributable support and overhead charged to each area. The budgets are formulated to ensure alignment with each Reserve Bank's and the System's strategic priorities, including

• promoting financial stability through effective monitoring, analysis, and policy development
• promoting safety and soundness of financial institutions through effective supervision
• contributing to the formulation of monetary policy and enhancing monetary policy implementation to become more effective, flexible, and resilient
• leading efforts to enhance the security, resiliency, functionality, and efficiency of financial services

The Reserve Bank budget process is as follows:

• Reserve Bank and Board governance bodies provide budget guidance for major functional areas for the upcoming budget year.
• The Reserve Banks develop budgets that incorporate this guidance, and senior leadership in the Reserve Banks reviews the budgets for alignment with Reserve Bank and System priorities.
• The Reserve Banks submit preliminary budget information to the Board for review, including documentation to support the budget request.
• Board staff analyzes the Banks' budgets, both individually and in the context of System initiatives.
• The Board's Committee on Federal Reserve Bank Affairs (BAC) reviews the Bank budgets.
• The Reserve Banks make any needed changes, and the BAC chair submits the revised budgets to Board members for review and final action.
• Throughout the year, Reserve Bank and Board staffs monitor actual performance and compare it to approved budgets and forecasts.

In addition to the budget approval process, the Reserve Banks must submit proposals for certain capital expenditures to the Board for further review and approval.

Tables 7, 8, and 9 summarize the Reserve Banks' 2016 budgeted and actual expenses and 2017 budgeted expenses by Reserve Bank, functional area, and account classification.⁶ Table 10 shows the Reserve Banks' budgeted and actual employment for 2016 and budgeted employment for 2017. In addition, table 11 shows the Reserve Banks' budgeted and actual capital outlays for 2016 and budgeted capital for 2017.

Table 7. Operating expenses of the Federal Reserve Banks, by District, 2016-17

Millions of dollars, except as noted

Table 8. Operating expenses of the Federal Reserve Banks, by operating area, 2016-17

Millions of dollars, except as noted

Table 9. Operating expenses of the Federal Reserve Banks, by account classification, 2016-17

Millions of dollars, except as noted

Table 10. Employment at the Federal Reserve Banks, by District, and at FRIT and OEB, 2016-17

2016 Budget Performance

Total 2016 operating expenses for the Reserve Banks were $4,032.1 million, which is $84.5 million, or 2.1 percent, less than the approved 2016 budget of $4,116.6 million. The actual average number of personnel (ANP) was less than the 2016 budget, largely because of changes in project plans, turnover, and hiring delays. The Reserve Banks' 2016 capital spending was less than budgeted by $86.5 million, or 21.4 percent, because of changes in timing and scope for numerous initiatives.

The 2016 operating budget underrun was primarily driven by updated benefits assumptions and revised project plans in the Treasury, cash, and fee-based services functions. Revised project plans include evolving Treasury requests, the implementation of the evolving operations procedural changes and lower-than-expected costs for the CashForward initiative, and delays in development efforts for Fedwire enhancements.⁷ The underrun was partially offset by increased expenses for the TWAI and increased expenses for the automated clearinghouse (ACH) modernization project.⁸

Total 2016 actual employment for the Reserve Banks, the Federal Reserve Information Technology (FRIT), and the Office of Employee Benefits (OEB) was 19,330 ANP, an underrun of 94 ANP, or 0.5 percent, from 2016 budgeted staffing levels. The underruns are primarily in the Treasury and cash business lines and in support services, reflecting operational efficiencies, hiring delays, and updated project plans. These underruns are partially offset by lower-than-budgeted turnover and lag in supervision and by unbudgeted resource needs for national programs in supervision, for IT, and for the ACH modernization initiative. Other adjustments reflect updated project plans, turnover, and hiring delays across most other areas.

2017 Operating Expense Budget

The 2017 operating budgets of the Reserve Banks total $4,312.4 million, which is $280.4 million, or 7.0 percent, higher than 2016 actual expenses. The largest increase is in the supervision function to support the cybersecurity supervision program, the continued buildout to meet the requirements of the Dodd-Frank Act, and other strategic national initiatives. In the monetary policy and public programs areas, several Reserve Banks plan to fill research and policy positions. Allocated expenses to monetary policy for law enforcement and expenses in the open market function for automation efforts are also projected to increase.

Budgeted expenses for services to the Treasury, which are fully reimbursable, are increasing primarily to support the full implementation of Navy Cash, the TWAI, the Invoice Processing Platform (IPP), and the Post Payment System initiative.⁹ Increases in cash expenses are related to the implementation of the CashForward initiative and program planning expenses of the next-generation currency-processing machines, as well as increases in allocated support and overhead expenses. Expenses related to fee-based services are increasing to fund the ACH platform modernization initiative and development efforts for Fedwire enhancements.

Total 2017 budgeted employment for the Reserve Banks, FRIT, and OEB is 19,822 ANP, an increase of 492 ANP, or 2.5 percent, from 2016 actual employment levels. The increase is primarily driven by support and overhead, Treasury services, IT, fee-based services, and monetary policy functions. Support and overhead is increasing as Reserve Banks strengthen human resources capabilities; expand enterprise risk-management capabilities; enhance facilities maintenance; and address a need for increased resources in multimedia, corporate planning, and internal audit. In the Treasury services function, ANP increases are due to updated requirements for ongoing projects, including Stored Value Card efforts, retail securities, collection services, and fiscal collateral monitoring services.¹⁰ IT staff is increasing to support application development projects, primarily for the national supervision initiatives and Treasury programs. Staff is also increasing in the fee-based services for the ACH platform modernization initiative and Fedwire enhancements and in monetary policy to support regional economic research.

Reserve Bank officer and staff personnel expenses for 2017 total $3,238.4 million, an increase of $201.2 million, or 6.6 percent, from 2016 actual expenses. The increase reflects expenses associated with additional staff and budgeted salary adjustments, including merit increases, equity adjustments, promotions, and funding for variable pay.

The 2017 Reserve Bank budgets include a 3.0 percent merit program for eligible officers, senior professionals, and staff totaling $62.2 million and a variable pay program totaling $196.5 million. Budgeted equity adjustments and promotions total $7.1 million for officers and senior professionals and $25.0 million for staff.

Risks in the 2017 Budget

The most significant risks in the 2017 budget are related to personnel costs. Changes in assumptions and updated demographic information that are used to determine benefit expense affect Reserve Bank budgets. Reserve Banks are concerned about their ability to retain, hire, and replace staff, particularly those with specialized skills and experience in monetary policy, supervision, or IT. The increased focus on cybersecurity and application modernization may affect IT spending decisions. Mergers and acquisitions in the banking industry and potential changes in regulations with the new administration could shift supervisory responsibilities and influence Reserve Bank resource levels. The Bureau of the Fiscal Service's Fiscal Agent Consolidation effort will continue to affect projects in 2017 and over a longer-term planning horizon as business-line transition timelines are refined.

2017 Capital Budgets

The 2017 capital budgets for the Reserve Banks, FRIT, and OEB total $416.6 million. The increase in the 2017 capital budget is $99.3 million, or 31.3 percent, more than the 2016 actual levels of $317.3 million, largely reflecting ongoing multiyear building and information technology projects. Initiatives in the 2017 capital budget include supporting workspace renovations, addressing aging building infrastructure, replacing the Treasury auction system, and providing application upgrades and releases.

Table 11. Capital outlays of the Federal Reserve Banks, by District, and of FRIT and OEB, 2016-17

Millions of dollars, except as noted

Capital Expenditures Designated for Conditional Approval

The BAC chair designated projects with an aggregate cost of $85.6 million in 2017 for conditional approval, requiring additional review and approval by the Board's director of the Division of Reserve Bank Operations and Payment Systems.¹¹ The expenditures designated for conditional approval by the chair of the BAC include large-scale building projects to renovate conference centers, cafeteria spaces, cash vault, and executive office spaces; mechanical and electrical infrastructure upgrades; and the migration of major applications off of the mainframe.¹²

Other Capital Expenditures

Significant capital expenditures (typically expenditures exceeding $1 million) that are not designated for conditional approval include total multiyear budgeted expenditures of $571.1 million for 2017 and future years, of which the single-year 2017 budgeted expenditures are $252.3 million. Expenditures in this category include IT support for Treasury, supervision, and monetary policy initiatives and building expenditures for office space renovations, security enhancements, and elevator upgrades.

Capital initiatives that are individually of less than $1 million are budgeted at an aggregate amount of $78.7 million for 2017 and include building maintenance expenditures, equipment and furniture replacements, and scheduled software and equipment upgrades.

Currency Budget

On an annual basis, Board staff develops a print order for the Bureau of Engraving and Printing (BEP) based on staff's assessment of currency demand and other factors. Staff estimates the number of Federal Reserve notes the Board will order from the BEP to meet demand based on monthly monitoring of payments to and receipts of currency from circulation, forecasts of growth rates for payments to and receipts of currency from circulation, operational factors, and other policy considerations. The Board reimburses the BEP for all costs related to the production of currency.¹³ Historically, about 90 percent of the notes that the Board orders each year replace unfit currency that Reserve Banks receive from circulation and destroy.

The annual currency budget process is as follows:

• Each August, based on Board staff's assessment of currency demand and other factors, the Board's director of the Division of Reserve Bank Operations and Payment Systems submits a fiscal year print order for currency to the director of the BEP.
• Each December, Board staff estimates expenses for the calendar-year currency budget, including printing expenses (based on estimated production costs provided by the BEP); certain other BEP initiatives; and expenses for currency transportation, quality assurance, counterfeit-deterrence and analysis, education, outreach, research, and depreciation.¹⁴
• The BAC reviews the proposed currency budget.
• The BAC chair submits the proposed currency budget to Board members for review and final action.

2016 Budget Performance

The Board's 2016 actual expenses for new currency were $700.7 million, a decrease of $36.7 million, or 5.0 percent, from the 2016 budget. More than half of the budget underrun is attributable to lower-than-budgeted BEP expenses because the BEP purchased fewer currency readers than budgeted, encountered significant delays with the new building project, and delivered fewer notes than budgeted.¹⁵ The remainder of the budget underrun is attributable to lower-than-projected costs for transporting new and fit notes from the BEP to Reserve Banks and among the Reserve Banks, and delays in awarding contracts for activities related to counterfeit deterrence and currency education.

2017 Operating Expense Budget

The 2017 operating budget for currency is $726.0 million, which is $25.3 million, or 3.6 percent, higher than 2016 actual expenses (figure 5). Printing costs for notes are about 93 percent of the operating budget. Expenses for currency transportation; quality assurance; counterfeit deterrence and analysis; currency education, outreach, and research; other BEP initiatives; and depreciation make up the remaining 7 percent (table 12).

Table 12. Federal Reserve currency budget, 2016 and 2017

Thousands of dollars, except as noted

Printing of Federal Reserve Notes

The currency budget includes $673.8 million in printing costs for calendar-year 2017, an increase of 2.1 percent from 2016 actual expenses. The increase is primarily attributable to the BEP's additional funding to support the acceleration of the next-design family of notes.

Currency Reader Program

The 2017 currency reader budget is approximately $1.7 million, which is $30,000 higher than 2016 actual expenses. The budget includes $0.5 million to purchase and distribute nearly 8,500 currency readers to qualified blind or visually impaired individuals at no cost to the user. The BEP expects to distribute fewer readers in 2017 than it did in 2016 because it believes that a majority of qualified individuals have either received a reader or downloaded the BEP's smartphone currency reader application. In addition, the budget includes nearly $1.2 million to reimburse the Library of Congress for administering the currency reader program through the existing infrastructure of its book reader program, which is managed by the National Library Service, and other administrative and outreach expenses.

Other Reimbursements to the Bureau of Engraving and Printing

The 2017 budget includes $4.0 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 (MCD) of the Office of Financial Management. The OC develops standards for cancellation and destruction of unfit currency and for note accountability at the Reserve Banks, and reviews Reserve Banks' cash operations for compliance with its standards. As a public service, the MCD also processes claims for the redemption of damaged or mutilated currency.

Currency Transportation

The 2017 currency transportation budget is $21.2 million, which is nearly $0.8 million, or 3.9 percent, higher than 2016 actual expenses. The budget includes the cost of shipping new currency from the BEP to Reserve Banks, of intra-System shipments of fit and unprocessed currency, and of returning currency pallets from the Reserve Banks to the BEP. The majority of the increase is attributable to a growth in armored carrier rates between 2016 and 2017, rates that are associated with new contracts.

Quality Assurance

The 2017 budget for the quality assurance program is $12.5 million, which is about $3.9 million, or 44.8 percent, higher than 2016 actual expenses. The budget will allow the currency quality assurance consultants to continue facilitating the implementation of the new quality system at the BEP; support the research, technology, and product development required for the next-design family of notes; and continue providing temporary resources to the BEP to sustain critical programs that have been implemented for the quality system. The budget also includes funding for the Board to contract for the research and development necessary to develop a new optical currency sensor.

Counterfeit Deterrence and Analysis

The 2017 budget for counterfeit deterrence and analysis is $8.1 million, which is nearly $2.9 million, or 55.3 percent, higher than 2016 actual expenses. The budget includes about $5.9 million for membership in the Central Bank Counterfeit Deterrence Group (CBCDG). The CBCDG operates under the auspices of the G-10 central bank governors to combat digital counterfeiting and includes 35 central banks. The budget also includes nearly $2.2 million to contract with commercial vendors and national labs to research, develop, test, and evaluate new or existing security features.

Currency Education, Outreach, and Research

The 2017 budget for currency education, outreach, and research is $4.6 million, which is $3.7 million, or 396.4 percent, higher than 2016 actual expenses. The budget includes nearly $3.1 million to fund the Board's currency education program (CEP), $1.0 million to contract for research in support of the next-design family of notes, and $0.5 million to conduct cognitive and perception studies.

The CEP is designed to protect and maintain confidence in U.S. currency worldwide by providing information on all circulating designs of Federal Reserve notes to the global public and key stakeholder groups. In 2017, the CEP will continue to conduct outreach to domestic and international businesses and retailers and to maintain the uscurrency.gov educational website.

2017 Capital Budget

The 2017 capital budget includes $0.6 million to purchase commercial evaluation tools and equipment similar to those used by the casual counterfeiter, which staff will use to assess the threat to potential security features using less-sophisticated techniques. This work will facilitate more advanced adversarial analysis at a shared laboratory funded and used by 14 participating central banks. This initiative involves the purchase of commercial evaluation tools, equipment, and materials similar to those used by the casual counterfeiter to assess the threat to potential new security features using less-sophisticated techniques.

2017 Budget Risks

Test equipment

In order to support its role as issuing authority and to facilitate the Treasury Department's and BEP's plan to accelerate a new-design family of notes, the Board is assessing with the BEP the need to equip an adversarial analysis test facility to assess the counterfeiting threat from the professional counterfeiter using commercial printing equipment. The test facility would be located at the BEP and use specialized, scientific staff from the Board and BEP to conduct the analysis. To advance this initiative, the Board and BEP may require additional test equipment to analyze potential new security features and ensure that security features can be integrated effectively into the new-design family of notes. This capability would provide more comprehensive information about threats to our notes and support the acceleration of the new-design family of notes. The BEP has developed requests for proposals for this additional test equipment and has included the associated capital costs in its billing rates. If, however, the BEP is unable to acquire this equipment in 2017, it may request that the Board purchase this equipment, which could cost between $7 million and $14 million.

New BEP Facility

The BEP received Treasury approval in 2015 to pursue a new building in the metropolitan Washington, D.C., area. The BEP continues to pursue strategies with the Government Services Administration that will facilitate necessary approvals to move the project forward. There is, however, no impact on the currency budget for 2017.

Footnotes