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FEDERAL RESERVE BOARD WASHINGTON SUBJECT: X-3726 May 29, 1923' Con ..nit t e e on Economy and E f f i c i e n c y . Dear Sir: In pursuance of its plait of keeping the Reserve Banks in touch with the work of the Board's Committee on Economy and Efficiency, there has been forwarded to you as Chairman of the Board of Directors of your bank, each month, an exhibit showing in comparative form the costs of operating each function and expense unit of the several Federal Reserve Banks and Branches for the month. There have also been sent you from time to time letters informing jtoti of the general progress of the Committee's work. This letter is being sent to inform you and the officers of your bank of recent developments and the present status of the Committee's work, also of certain changes it is desired to make in the compilation of the expense reports. In a letter dated December 12, 1922, X-3582, there was outlined a plan for a study of the four major functions of the banks. Such a study has since been made of the following functions: Currency and Coin Transit and Collections Accounting Loans, Rediscounts and Investments* During April the representatives of the banks met in twelve different groups, three for each of the four functions under review* At these meetings there was a discussion and comparison of the methods of the four banks in each group, following which the chairman of each group prepared a report setting forth in comparative form the methods of the banks, and wherever possible a comparison of the unit costs. The group chairmen have since met with the Board's Committee for a study and discussion of the results accomplished from this survey. Much information has been collected which it is believed will be of value to the banks. Die Board's Corns it tee is of the opinion that better results will follow from the passing on to the banks of comments and suggestions respecting specific operations, than would result from an attempt to make a complete report of the entire survey, much of which report would be of comparatively little interest. This policy will, therefore, be pursued and as the study of the material now in hand progresses, the banks will be fully informed of anything which will be of interest to them. The group chairmen have reported that the bank representatives were practically X-3726 unanimous i n s t a t i n g t h a t much "benefit had a l r e a d y r e s u l t e d from t h e s t u d y and comparison of methods, and from t h e s e r e p o r t s i t i s a p p a r e n t t h a t n e a r l y a l l of t h e banks have p r o f i t e d a s a r e s u l t of t h i s i n t e r change of i n f o r m a t i o n and i d e a s . At t h e meeting of bank r e p r e s e n t a t i v e s h e l d i n Chicago on December 13, 1922, i t was recommended t h a t a s soon as p r a c t i c a b l e , Form E would, h e d i s c o n t i n u e d a s a monthly r e p o r t . I t h a s now been d e c i d e d to t a k e t h i s s t e p and t h e banks a r e , t h e r e f o r e , a d v i s e d t h a t t h i s r e p o r t need no longer be s e n t monthly t o t h e B o a r d ' s Committee on Economy and E f f i c i e n c y , b a t t h a t i t should b e submitted q u a r t e r l y , the n e x t r e p o r t t o be f o r the q u a r t e r ending June ) 0 , 1923* As a r e s u l t of the r e c e n t survey i t seems a d v i s a b l e to make a few changes i n t h i s r e p o r t and i n t h e d e t a i l e d i n s t r u c t i o n s r e l a t i n g t o i t . I t i s r e q u e s t e d t h a t t h e s e changes be r e f l e c t e d i n t h e r e p o r t f o r t h e f u l l q u a r t e r ending June 30 n e x t . These changes a r e a s f o l l o w s : 1. The "Receiving and Proving Checks" u n i t of the Check C o l l e c t i o n Function i n c l u d e d on page 18 of t h e r e p o r t i s t o be e l i m i n a t e d . The s u r v e y i n d i c a t e s t h a t t h e m a j o r i t y of the banks do n o t h a v e t h e i r o r g a n i z a t i o n s d i v i d e d i n such a way a s t o make i t possible to obtain accurate costs f o r t h i s u n i t , and t h a t t h e convenience of the m a j o r i t y w i l l be b e t t e r s u i t e d and more a c c u r a t e f i g u r e s o b t a i n e d b y i n c l u d i n g t h e c o s t of t h i s o p e r a t i o n a s a p a r t of t h e c o s t of h a n d l i n g t h e s e v e r a l c l a s s e s of checks i n c l u d e d i n t h i s f u n c t i o n under t h e i r r e s p e c t i v e h e a d i n g s . You a r e , t h e r e f o r e , r e q u e s t e d t o c a n c e l e n t i r e l y t h e upper h a l f of page B-)9 in t h e manual of i n s t r u c t i o n s f o r the d i s t r i b u t i o n of e x p e n s e s , which w i l l r e s u l t i n t h e complete e l i m i n a t i o n of the "Receiving and P r o v i n g ^Checks" u n i t . The f i v e o p e r a t i o n s f o r m e r l y s e t up under the "Receiving and P r o v i n g Checks" u n i t , namely Receiving Fixing l i a b i l i t y date Endorsing Sorting ( f i r s t sort) L i s t i n g (proof of incoming cash l e t t e r ) or a s many of them a s a r e a p p l i c a b l e , s h o u l d then be added t o each of t h e f i v e o t h e r u n i t s maMng up the Check C o l l e c t i o n F u n c t i o n , namely C i t y checks ( c l e a r i n g s ) C i t y checks ( o t h e r than c l e a r i n g s ) Government checks Country checks R e t u r n Items » -32. X-3726 "Member Banks' Accounts" u n i t and "Reserve Def i c i e n c i e s " -unit a p p e a r i n g on page 22 of t h e r e p o r t a r e t o be combined, h e r e a f t e r r e p o r t i n g the e n t i r e expense u n d e r the u n i t "Member Banks' A c c o u n t s " . S i m i l a r l y pages B-49 and B-50 of t h e manual of i n s t r u c t i o n s f o r the d i s t r i b u t i o n of expenses should ba changed by adding to t h e o p e r a t i o n s l i s t e d under "Member Banks' Accounts" on page B-49, a l l o p e r a t i o n s now l i s t e d under "Reserve D e f i c i e n c i e s " on page B-50. This change i s c o n s i d e r e d d e s i r a b l e f o r the r e a s o n t h a t i n most of the banks a l l or a c o n s i d e r a b l e p o r t i o n of the work f o r m e r l y a l l o c a t e d t o "Reserve D e f i c i e n c i e s " i s performed by the same c l e r k s who perform t h e o p e r a t i o n s a l l o c a t e d t o "Member Banks' Accounts". 3• There i s a l s o t o be a change i n t h e measurement of t h e volume of work performed i n "Recording Loans and R e d i s c o u n t s " u n i t of t h e Loans, Rediscounts and I n vestments F u n c t i o n . To accomplish t h i s r e s u l t i t i s r e q u e s t e d t h a t t h e r e be added on page 33 of t h e r e p o r t , t o appear a s t h e l a s t item under "Recording Loans and Rediscounts" u n i t , the f o l l o w i n g Number of n o t e s r e b a t e d * I t i s then r e q u e s t e d t h a t t h e f i g u r e a p p e a r i n g a s t h e t o t a l on the t h i r d l i n e under t h i s u n i t be t h e t o t a l of t h e f o l l o w i n g : Number of n o t e s r e d i s c o u n t e d Number of c o l l a t e r a l n o t e s d i s c o u n t e d Number of n o t e s r e c e i v e d a s c o l l a t e r a l t o b i l l s payable Number of n o t e s r e c e i v e d a s a d d i t i o n a l c o l l a t e r a l to general l i n e Number of n o t e s r e b a t e d , I n t h i s way t h e t o t a l r e p o r t e d as "Volume" w i l l i n clude a l l n o t e s a c t u a l l y h a n d l e d . T h i s change i s made f o r the r e a s o n t h a t t h e r e i s v e r y n e a r l y a s much work connected with n o t e s r e b a t e d and n o t e s r e c e i v e d a s c o l l a t e r a l a s i n t h e case of n o t e s a c t u a l l y d i s c o u n t e d . A c o r r e s p o n d i n g change should be made on page D-2 of t h e manual of i n s t r u c t i o n s . In t h e course of the r e c e n t survey i t appeared t h a t s e v e r a l of t h e bank r e p r e s e n t a t i v e s were u n f a m i l i a r w i t h t h e f u n c t i o n a l expense e x h i b i t now b e i n g p r e p a r e d and d i s t r i b u t e d by t h e B o a r d ' s Committee, and i n some c a s e s had had no p r e v i o u s o p p o r t u n i t y of s t u p i n g t h e comparisons -4- X-3'726 of t h e expanse of the s e v e r a l banks f o r t h e i r p a r t i c u l a r f u n c t i o n s « The B o a r d ' s Committee i s now f u r n i s h i n g t o each bank two c o p i e s of t h i s e x h i b i t and w i l l be glad to f u r n i s h more upon r e q u e s t # I t i s suggested t h a t one copy of t h i s r e p o r t be s p l i t up and d i s t r i b u t e d so t h a t each o f f i c e r w i l l r e c e i v e t h a t p o r t i o n of the r e p o r t i n which he i s p a r t i c u l a r l y i n t e r e s t e d . The B o a r d ' s Committee wishes t o e x p r e s s i t s a p p r e c i a t i o n of t h e work done by t h e o f f i c e r s of the s e v e r a l banks who were d e s i g nated t o represent t h e i r respective i n s t i t u t i o n s in the conducting of the r e c e n t s t u d y of the f o u r f u n c t i o n s . With such cooperation:-' between t h e banks a s was m a n i f e s t e d a t t h e s e c o n f e r e n c e s i t should be p o s s i b l e to accomplish much i n t h e way of economy and e f f i c i e n c y of o p e r a t i o n of the Reserve Banks. Very t r u l y y o u r s , A. C. M i l l e r , Chairman Committee on Economy and E f f i c i e n c y To Chairmen of a l l F e d e r a l Reserve Banks, Copies t o t h e Governors & Chairmen of Procedure Committees
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