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X-3782
RECOMMENDATIONS PRES:&.'NTED TO TEE BO.ARD 1 S
CO!v!.UTTEE ON ECONOMY AND EFFICIENCY BY
THE AUXIL 'J:.ARY COI...WITTEE FOLLOWING 'IHE
FUNCTION.lL GROUP l'.mETINGS.
--- - - - - - - - - -- -- - -- - - - - -- - - - -- - - - - - -- - - CURRENCY AND COIN.
1. CONDITI_Q_N__ AS _TO SORT OF CURRENCY RECEIVED i3Y FEDERAL RESERVE :UANRS
FROM MEM:aERS.
Nine oanks require that all deposits be sorted as to denomination, while three banks receive from country memuers i_unassorted.
It is the view of the Committee that it is reasonable
and consistent with good banking practice to require that all money
deposited be sorted a.s to denomination, and it is
RECOMME:NDED that all banks arrange to receive all currency
sorted a.s to denomination.
2. METHOD OF COUNT.
The method of sorting and counting currency is found to be
nearly uniform with the exception that one of the bank:. receiving
currency unsorted as to denoTI".ina.tion makes it a pra.ctice to thumb
count and also to verify before sorting.
It was the view of the
Committee that this extra operation is unnecessary and it
RECOM.NJENDS that this oank consider handl:Lng its rr.oney on the
Same basis as the other banks in the System.
3·
SORTING OF FIT MONEY AS TO KI}ID.
It wa.s found that one bank has ma.de it a. regular practice not
to sort its fit money as to kind.
Several of the banks occasionally
follow the same pra.ctice when exceptionally busy, while a number
of the banks have always sorted a.s to kind regardless of conditions.
It is apparent that a. considera.ble. saving of time can be effected
-2by packaging fit money without assortment as to kind, and it is
therefore
:RECOM:viENDED tha.t fit mcney be put up, without assortrrent a.s to
kind, with discretion, care being exercised not to permit a vault
accumulation of unsorted currency.
(NOTE: Tee Eoardrs Committee on Econorrw and Efficiency sees
no objection to this practice, provided. a va:vlt a.ccumulation
of unassorted currency of not more than two days tL1.rnover is
permit ted . )
4 .. ACCU!IIDLATION OF o~ms
.ANI)
TT~ros FOR couFTING rN DU1J!_S}4~.ASONS.
About h0lf of t:1e oanks now permit tills of the one and two
dollar denomination to accumulate during the period when money is being
received in large quar. . ti ties for J.a.ter
~1andling
du:dng the dull seasons.
The principal object ion to this practice is the a.cc,mru.J.ation and
practical retirement from circulation of a. con&iclers.ble quantity of
bills of these denominations.
There is, hoJVever, a.n o'Jvious economy
in the practice of permitting one and two dollar bills to a.ccumulate
during peak
~overrsnts
for subsequent handling by experienced
counters, and i t is the opinion of
t~1e
rr~ney
Boa.rd 1 ;;; Committee tha.t all the
banks should follow this course V'ihenever pracUcable.
5· METHOD OF
~o
DETER1vUNING PBCPOR'!'ION OF N'E'N MONEY PAID OUT.
or three of the banks have a.dopted a more or less elaborate
plan for making an equitable di& tribution of new currency, while
several ha.ve no particular plan, the proportion of new money being
determined largely by the amom1t of fit currency on hand.
tha.t the plans now in effect at many of
th~
It is apparent
bai'I.ks do not. result in an
-3-
X-3782
equitable distri'cut5.or. of ne'N Ct'.rrcncy a.:l.d. in some respects may
be costly to the barllr:s through the duplication of shipping charges
and handling.
It is a.lso apparent t:1at the plan for the distribution
of currency approved by the Trea.sury no longer obtains to a.ny extent.
It is therefore REC07JI1ElTDED. that the Federal Reserve :;.,oa.rd take
such action, preferably through a. ccmnittee representing the banks, .
as will result in the formulation a.nd adoption of an equitable plan
for the distribution. of currency which will prove satisfa.ctory to all
the banks and also to the
Tre~.sury.
(NOTE: Ti1e :Doa:cd 1 s Coi!1mi t tee on Econorr,y and Effie iency has already
requested the Federal Reserve Board to take action.)
.6· .SORTING OF FIT !TOTES REC3~ VI:D Fho; 1 OTHES. FEDERAL RESERVE E.ANKS.
There is a. wide variation in the practice among the Federal Reserve :Danks in handling fit Federa.l Reserve notes received from other
Federal Reserve l.lanks.
In some cases, this currency is resorted and
in other ca.ses i t is paid out as received.
It is apparent that the
resorting and counting of this currency is an entirCJl;y unnecassa.ry and·
unwarranted operation, and it is
RECOJ';IMEriDED tr"at, the prcl.Ctice be discontinued.
The only apparent excuse for this operation results from a. difference in the standard of fitness adopted by the different banks and
it is apparent that a. uniform standard should be adopted.
It is therefore RECOMIVIENDED tha.t the committee, the desigr.a.tion
of which was recommended under the preceding heading, shall a.lso be
requested to determine upon a. standard of fitness sa.tisfa.ctory to all
the banks and to the Treasury.
•
-4-
X-3782
(NOTE: Tl.'le Joard' s Comrd.ttee on Economy a.nd Efficiency ha.s
already requested the Federal Reserve Joa.rd to take action.)
7. VERIFICATION OF
NEv'l !'!!ON:H:;1
REC~~IVg;D
FT.OM TP.EASlTRY BY F. R. AGEN"T.
Several banks make it a. pr3ctice to slit the outer wrapper of
original packages of currency in such a. way as to perrni t of an inspection of the straps to determine ttat the rr.oney is of the denomination
indicated by the outside wrapper.
It is REC0!'.1:1ENDED that, as a. matter of saf aty, all oanks adopt
this or some similar rr.ethod for determining the denomination of tha
rr.oney received from the Treasury Department, in view of the fact that
this money is sometimes held in stora.ge for a. long time.
'
8 • lV!ERIT PLAN FOR COr.lPENSATION OF MO:NEY COUNTERS.
Two of the banks
ha~e worl~d
out
rat~er
elaborate plans for the
compensation of money counters on a sliding <>cale based upon output.
Must of the banl:s rnainta.in more or less cocplete records of the work
of money counters, but do not ·oo.se compensatio:c
records.
en tirt:Slyupon thesd
It was the view o_f the Cornrni tteo that probably the time had
not yet arrived when all reserve banks could profitably put this
operation upon a piece '1'/0rk basis.
It is, hoNever, EECOTf.:,J:ENDED that all banks maintain a record of
the vvork of each individual money counter and tl"a t these records be
made known to the counters to encourage a. spirit of competition.
Following the conference with the C'rd.irman, one of the mediu."'l
sized banks of the System adopted
&.
method of grading its rr.oney counters,
which resulted in very greatly increasing its output.
The method
ad.opted and the results are explained in detail in the attached. memorandu."'l
-5-
X-3782
"Exhibit A" which is submitted for the informa.tion of all banks.
(NOTE; The Board's Committee on Econonw and Efficiency believes tha.t if this plan is intelligently followed, rrarked
results will be obtained,)
9.
CH:B~GKING
- ------ ...
-
OF POST
--·- OFFICE REGISTRY RECEIPTS FOR CURRENCY SHIPMENTS.
--·-~·
Some banks continue the practice of ootaining a.nd checking the
rP-turn registry receipt ca.rds furnished l:ly t·he Post Office for all
shipments made, in addition to checking the receipts received from
the consignees.
It was the viev': of the committee that these postal
receipts are of no benefit to the banks and tha.t the work of checking
and tracing them is unnecessary a.nd unwarranted, a.nd it is therefore
RECOM!'/JENDED tha.t their use be discontinued.
10. USE BY MEMBER l3.AL'fKS OF .A ST.ANDJJID FORM OF ADVICE OF CTJRF.ENCY SHIPMENTS.
Several of the banks ore furnishing members with a standard form
of advice, including a request for the effecting of insur:mce, to be
used in all cases where shipments are made to reserve banks.
It wa.s
the view of the Committee tha.t the use of such a. form is sound in
principle and is good practice, inasmuch as it can be rr:ore promptly
routed to the proper departrr..ent for the effecting of insurance and
cheCking of tha arrival of shipmunts.
It is SUGGESTED that those banks not now using such forms give
the matter consideration.
11. FORMS FOR USE AS RECEIPT FOR .AND RECORD OF SH!Pi:IENTS ..AND FOR
EFFECTING INSURANCE.
Several of the banks a.re using more or less simila.r forll.'il pre~ pa.rt.Jd
in triplicate or quadruplicate with which at one writing
then~ ~3
-6-
x-3782
prepa.red a complete record of registered mail ~J::/;~pments including
a receipt for the use of the Post Office, a notice to the registered
mail insurance underwriters, and a. record for the use of the a:udi ting
department, if desired.
A few of the banks a.re not using such a form,
but are making up two separate records of all such shipments, one for
the purpose of effecting imnJrance, and one for the purpose of securing a receipt from the Post Office.
It was the v:iew of the Committee
that the use of a form of this chara.cter is very mU.ch to be desired,
not only because of the econonw in the preparation of the records,
but from the standpoint of safety in the effecting of insurance •
A
similar form is also adaptable for the purpose of securing a. record
of and receipt for express shipments.
There is a wide variation in the style of forms in use by those
banks which are following this plan.
The Cornrr.i ttee considered the
form adopted by the Federal Reserve :Bank of Dallas, a san:ple of which
is attached (EXhibit B), as the most economical of any of those submitted.
It is RECOMMENDED that those banks not now using similar forms
adopt this plan, and that those banks now using more e::pensive forms
for this purpose revise them with a view to reducing the cost of
printing ..
12. QQ.n!.
With two exceptions the banks do not handle wrapped coin·
It
was the vie w of the Conmi t tee that the requi reman t of moe t of the banks
that all coin be deposited in bulk causes an economic waste in the
bx-eaking down of a large amount of coin a.l.rea.dy m-a.pped.
It was a.lso
the view of the Con:mittee that the banks should not attempt to supply
X-3752
-7-
wrapped coin in cases where it is necessary for it to be wrapped at
their own expense.
It is therefore RECOM:IIEI>IDED that all banks receive wrapped coin
of the one, five and .ten cent denominations and pay out such coin as
far as it will go without rewrapping and that the banks should not
furnish wrapped coin except suCh as is received in that form.
13. COST OF SUPPLIES.
While all banks are using substantially the same supplies in
the handling of currency and coin, tr.ere is a very
considerabl~
variation in the quality and also in the cost of the supplies used.
It is therefore
RECOM~DED
that a plan of standardization of
supplies and, if necessary, central purchasing, be considered in order
tha.t all banks may secure these supplies at the lowest possible
(NOTE: T'ne :Ooa.rd 1 s Committee on Econorey and Efficiency is
now giving this matter attention, and the banks will be
advised of the results as promptly as possible.
X-3782
-8TRANSIT AND COLLECTIONS.
14. DESCRIPTION OF ITEL:IS ON CASH LETTI;:;RS :_
There is considerable variation in the method of the banks in
describing cash items on outgoing
tr~~sit
letters.
Three banks
describe every item by batch or block number; two banks describe
every item by ADA nurr.oer; t·No bar.ks describe even a.mounts oy AJJA
number; five banks do not describe any items.
It is the view of the Cozro.mittee tha.t a. de;;;cription of other than
items of even
~~ounts
from, say, $500 and up, is unnecessary and in-
volves an unwarranted expense, a.nd it is, t:':lerefore,
RECOM'1IENDED that all banks diacontinue deacribing ca.sh items on
tra."lsit letters addressed to the dra.wee bank except in C8ses of even
amounts of above $500.
15.
NOTIFYING :J.ANl:S OF TFEIR FII:SUBE TO "'IRE FO:-J-P.AY!ii.ENT Of~ TO PROTEST
.ACCOFJ)IHG TO
IN?TRUCT~
It is the practice of several banks to se!lc;. a forrrn.:i. notice to
all banks failing to wire non-payment or failing to pre test, while
several of the banks do not send such notices.
It is understood that
several of the banks have been informed by Counsel thu.t the sending·
of these notices does not afford any additional protection.
It is therefore BECO!'f1ENDED that the banks consult ·vith their
Counsel with respect to this matter vvith a view to diocontil'ming these
notices, wherever
pra~ticable.
16. RECEIPTS FOR RETURNED ITEI!IS CHARGED B.ACK.
T'.ne banks are about equally divlded ·oetueen those that do obtain
receipts for returned i terns a.nd those that do
r~ot.
It is the view of the
r.:.·f-"·Js
X-3782 ~;: ;' .
-9-
Committee that with the frequent reconciling of accounts it is not
necessary to obtain receipts for these items and
beca~e
of the con-
siderable expense incu.t-red by checking a.nd tracing receipts, it is
RECOMMENDED that all banks diacontinue the practice of requiring
receipts for returned items.
17 • CONTROL OF NON-C.;\SH COTJLECTION ITEMS.,
Several of the banks a.re ma.inta.ining a control on non-ca.sh collection items in process of collection.
It is the view of the Com-
mittee that the cost of maintaining this control is entirely out of
proportion to any benefits that can be derived therefrom.
It is therefore RECOMLlENDED that all banks t.aving such a control
discontinue it so far as it applies to collection items.
The banks
will probably find it advisable to continue any control they now have
with respect to negotiable securities ha.ndled in connection with these
collections·.
18. REDEMPTION OF RETUBJ."'mD ITEr-iS.
There is considerable variation in the practice of redeeming re•
turned items.
In most cities there is a so-called
11
retur"ued item
clearing", but in addition to this • a.t nearly all points, items are
also l'edeemed over the counter, the
ge~1eral
pra.ctice being to issue
so-called redeiX!Ption or teller's checks which are. cleared the following da.y,
One of the bank$ furnishes a duplicate form for use with all
items
ret~d.
This form being :presented with the items • one copy
being stany;>ed and returned to the messenger a.s a receipt and the other
copy serving as a credit tickat to the returning membarts a.ccount.
-10-
X-3782
This method saves considerable clerical labor and makes unnecessary the
issue of redemption checks.
It is the view of the Committee that banks
that a.re now using redemption checks for this purpose would find this
method more economical and efficient.
It is therefore BECOht.:ENDED that banks .now using redemption checks
consider the adoption of the duplicate ticket method.
Sample copy of
the ticket used by the b.;41l-: 5.n q_ue.:>tion is attached (Exhibit C).
19. CLEARING HOUSE !vlEMJEES~IP.
The basis upon which the Federal Reserve Banks ba.ve clea.ring house
rr2mbership varies considerably in the different cities.
the membership is on the same basis as that of
In some ca.ses
com~rcial baru~s;
assessments being based upon items taken to the clea.ring house, which
results in a progressive increase from year to year in amounts paid by
the reserve ba.nl{s; in other ce.ses membership is obtained upon the payment of q. flat fee; and in still others it is· complimentary.
It wa.s
the view of the Committee that the service rendered by the reserve banks
in connectio.n with the opera.tion of the clearing hous-Js sLould in roost
cases warrant the clearing houses giving complimentary mar:;bers:l.ip to
reserve banks or at lea.st in reducing the membership fed to a nominal
amount.
It is RECOUJ1,!ENDED that banks now paying r::.ore than a nominal fee
give this matter consideration.
20. PAYME11T OF GOVERNiiEJ:.JT COUPONS.
In two or three cases the banks 1
'.'l~:ile
giving imrradiQte credit
for Government coupons, are accumula.ting them over the peak periods
rather than supplying the necessary help to rr.ake prompt shipment and
X-3782
-11charges to the account of t:he Treasurer,
u.
S.
580
It is the view of the
Committee that this practice is unwarranted and that a.ll coupons should
be charged to the Trea.surerts account the sa.n:a day credit is given.
To make this possible, it is
RECOM!1ENDED that the banks give consideration to combining the
work of paying Government coupons with the work of counting money, so
tha.t the money counters could be rrore effectively employed in the
handling of coupons over the peak veriods.
21. LISTING CLEARING HOUSE CRECT\:S.
A number of banks sort all clearing house i terns before proving
incoming
letters~
after which the block sheet is prepared in duplicate,
one copy being stripped up to a.ccompany the. checks to the clearing
house raCk, thus avoiding an additional listing.
lt is the view of
the Committee tha.t w~:.ile the application of this method will depend
in considerable measure on the number of bankS in the clearing house
and the distribution of items among the banks, tha.t this plan will
nevertheless prove very efficient in all cases where it can be adopted ..
It is BECOM!1ENDED that all banks not now using it consider this
plan of handling clearing house items.
22. N.QN-CASH COOORY COLLECTION'S.
Some banks give credit for non-cash collection i terns as of the.
da.te pczyment is received by the collecting reserve bank, even thougt
advice of payment is not received and actual credit given until
several da.lfs later.
It is the view of the Connnittee tha.t this method, as a regular
practice, is unnecessary, and it is
-12-
X-3782
RECOM111ENDED that cradit should not be given as of a previous da.te
e·xcept in unusual ca.ses where the amount is sufficient to warrant the
·J~Jork.
•
- 13 ACCOUNTING:
There is a wide variation in tl1e practice of the banks with
reference to the prepa:::-ation of statements and reports, scme banks
apparently
th~~
consi~ering
others.
tion~of
statements and
that o!lly
it necessary to prepare a much larger number
It was the view of the Committee
t~1ose
re.._..~orts
~1at
the prepara-
involves considerable ex-pense and
statements and re;Jor ts found by experience to be
absolutely necessary should be prepared.
It is tnerefore REC0Vi:11ENDED that every bank give careful
consideration to its statements and reports with a view toreducing the number and also sill!Plifying the form of those that are
prepared.
24.
MEllffiER BANKS ACCOUHTS:
T'ne methods of
booli.::.:~eeping
parable at most of t:1e
bm-.~;.s.
were found to be reasonably com-
Nino ba:..•l.-:s are now furnishing
members with a daily statement, five mailing statemffi'lts on the
day of date, and four on the following day.
nishing
semi-mont~ly
Two
b~u:s
are fur-
statements, one furnishes all. bru1ks desiring
it (2(about 255'~) with a daily statement.
furnishes weekly statements to all banks.
The twelfth bank
Four banks are furnish-
ing statements including a full description of all items, and
eight banks are furnishing statements prepared an a Burroughs
rr.a.c.t'J.ine, indicntint; tlle character of entries by synibol.
t.: '-''N
~-::;,(})
(L
X-37G2
- 14One bank has perfected a metDod of'bookkeeping under which
it writes both the statement and the ledger at a single operation,
the statement also including the deferred items.
Tnis plan has
worked well in the bank in which it is in operation, and it is the
view of the Comr.uittee ti:lat some of the other banks in the System
would find this
pl~1 e~ually
efficient.
There is
a~tached
a
memorandum ( "E.x:.':libi t D") cu tlining this plar. in detail.
Three of the
b~~s ~-.ave
discontinued t:he operation of the
deferred or so-called float ledgers, resulting in considerable
economy in operation.
T::tere is attached a memorandum ( 11 Exhi bit E")
outlining the plan of one of these banks in accoaplishing this result.
It is the view of the Committee that the maintaining of a
deferred ledger
m1d
posting in detail of all deferred items is
unnecessary.
It is RECOMMENDF..D,
( 1)
that the operation of t~e def~rred cred.i t ledgers
be discontinued by all b~1ks, and it is suggested
that all bru1ks give consideration to combining the
,;:;repar3.tion of ledgers and staten:e. .: ts in a single
operation;
( 2)
that advising be reduced to the lowe<;t possible
minimum. In cases where daily stateLents are mailed
on t4e same date it should be possible to elirr~nate
all advising except for deferred credits and for
loru~ transactions, and if daily statement includes
a stateme:..1t of deferred items, t:-:.e advising of such
cre.:lits could also be eliminatedj
(3)
that the practice of furnis:1i::lg postal cari acknowlei~;rr:e:.:l ts to direct sen.:lL1g Dc"-_>·..::.s of c t:."ler Cl.i s tricts
fol· c..ll letters recej.ved be iiscontinued a:.~i no
acknowledgments sent except in cc..ses w::C.ere ;:;elfaidr8ssed a.:J stamped. card:;;; are received wi t:1 the
letters.
X-3732
- 15-
25.
RESERVE DEFICIENCIES:
There is considerable variation in the amount of work performed
in connection with this operation.
With a few f?XCeptions all of the
banks are checking for clerical accuracy the reports received from
the member
b~~ks indicati~6
tneir demand ani time deposits as the
basis for computing reserve requirements.
Corrmi ttee
t~1at
wa~
tne view of the
t:·wse re.:'0rts should be cowplc;tely checked.
Most of tiie
statements
It
w: t . .:
b~"L:s
-1ave been
c:.~ec~dng t~1e
Corrptroller's call
t.1.1e reports 1:-1ade by member ban-'::s.
In some cases,
thi.::. cl1ecking . .J.a.S been d.o1-:.e once each year, in o tj,er cases more
frequently, and in some cases not at all.
Committee that
t~1is c~J.ec,d~1g
once each year, and.
t~1at
It was
t~1e
view of the
snould be done by all banks, at least
with tl'le e.ACeption of member banks lmown
to be careless in tbis respect, it should not be done more
tr~
twice each year.
A few ban·s :'klve !7'..ale it a practice to
as to the accuracy of
with bis work:.
t~e
c~1eck
all defer.ced items
deferred availability date in com1ection
It is t:1.e vio;;w of the Committee that t:O.is is
unnecessary.
It is RECOI'!JMEl\TD.ED,
(1)
That all banks check fer clerical a.ccu.racy all
reports received from members.
( 2)
That all bankS cl1eck the figttres shom on Comptroller's
call statements at least once and not exceeding twice
each year with the reports received from the merrber
banks.
f3)
That those ban~:s now checking the availability date
on deferred items in connection with this work discontinue the practice.
- 16-
2b.
FEDERAL RESERVE BAN~~ ACCOUNTS:
One of t·,vo
met~:ods
of
c~1ecldng
the accounts with the other
Ii'aderal Reserve Banks has been adopted by nearly all of the banks.
One
met~od
provides for the charging of all iterrs regardless
of availability to an 11uncollected items n acount and the handling
of the c..ccoun t on a rerni ttance basis.
Under
t~1e
other met·J.od.. all items are c::arged to a "deferred
debi ts 11 account and later transferred on the date of availability
to a "collected items" or "due from 11 account.
Vllhile both met1:cods
~lave
appeared. to be satisfactory to the
banks using them, it is more difficult to analyze the float in
connection with tra;:1si t i terns under t:1e first met~1od than under
the second, and as several of the -us1l::s are doing considerable extra
work in connection with the analysis of the float, it is the view of
the Committee that in such cases the second method would prove more
economical, inasnuch as tile transfer ·of items from the "deferred
debits" account is practically automatic and involves a mininum of
labor.
It is therefore SUGGESTED that the banks give consideration to
the respective merits of the two plans with a view to adopting that
which will prove most economical in operation.
27 • TRA1\fSFER OF FUNDS:
T.ne methods in use i::i t-1e iifferant banks for the i:..andling of
this work do not vary greatly.
The principal difference is in the
extent to whic:1. the ban:;s ~1ave a:::lopted multiple forms for the
preparation of advices and entries.
The extent to which any bank
- 17way profitably use such forms will depend 1.n a considerable measure
on the volume of its work.
Several of the banks continue to prepare and to forward to
other reserve ban:i..s copies of telegrams a.'1d typewritten advice
forms covering transfers m.ad.e and. in some cases with reference to
transfers received as well.
It was t:1.e view of tne Committee that
the use of confirmation and advice forms is unnecessary.
It is therefore RECOI\1:;!F}JDED, tl1at all
bat1.~
s discontinue the
forwarding of advices of any ::ind whatsoever to other reserve banks
in connection with transfers, either received or sent, the only
advice needed .in such ce.ses being t:1e original telegram and the
regular daily statement of
cr~dits.
It is the practice of some
ban~cs
to wire out-of-tovvn members
advices of credits, in some cases such wires are sent only for
transfers received from other bm~~s.
IT is RECON.C'l:FNDED,
( 1)
tnat t~>.e ban:C>.s consider w'11et"1er wiring of ad vices
is necessary, and if it is, whether such advices
whic~·. are solely for the benefit of the member
b&~ks may not properly be sent collect;
(2)
that t:1ose ba."]j:s not now using duplicating forms
for the preparation of entries ru1d advices to
members consider wJether or not the volume of their
b"csine.ss is sucn tl1at economy can be effected by
L:e c.:.se of such forms.
28. APPROVAL OF EXPENDITURES :
There is considerable variation among the banks with respect
to the authorities granted for approval of expendi t1.1res, in some
cases all expenditures require the approval of a designated officer 1
and in other cases the approval of any officer of the bank is
:':§.'l:Micient.
t:< ...,,.""'/
~-
·..
'~
;X-3782
- 18 -
It ·,vas tho view of the Cormi ttee that it is desirable to
lirni t as closely as possible the C11:',t::·"cri ty for a;proval of expendi-
twes a1·1d it is
RECOrvr.IFNlJFD, L1at tho authority for the approval of expenses
be vested in d..;;;;;ic:,::.-:.ated officers and also that such au t . .:ori ty should
be exercised in connection with t:1e hs'J.e of the requisition in
adva..."'lce of tl-1e actual occurring o:f' t::s obligation.
(Note.
29. CAPITJ\L
ThG Board's Committee on Econoxey and Efficiency
belioves that t~~ough a carsful vise and control
of ruquisitions consideraole economy can be
effected.)
STOCi~:
It was fo;:ttJ,i
t~1::ct
several of the banks pay the serni-armual
dividends to stockhold.ers by the use of cashier 1 s or officer's
checks while in a few instances payment is made by credit to the
reserve account of the member.
It vv'o.s the view l..f the Cor.r:ittee
that the latter m0thod is not only ri10ra satisfactory to stockhglders, but is less expensive in it5 fCperations.
It is there:ore
RECOMMENDED, that all banks arrange to ;;ay dividends by credit.
'
X-3782
- 19LOANS, REDISCOUNTS .AND INVESTMENTS.
30. WIRING ADVICE OF CREDITS.
It is the practice of some ba.nks to wire advice of credits only
when requested, while at least one batik wires advice on all items.
It is the view of the Cor.m1ittee that, as this represents a
service to the member banlcs, it ;;;bould be unnecessary to 'Nire except
upon request and it is
Fill:COMlV!ENDED that advices of credits be wired only upon request
and then at the expense of the
req~lesting
ba.nk.
31. PREPARATION OF REPOHTS P.ND ST.ATE!iENTS.
A study of the material submitted indicates a wide variation
in the extent to \vhich different banks have considered it necessary
to go in preparing data 'Nhen presenting loans for approval and in
the preparation of statements and reports for internal use.
It would
a.ppea.r that a nurnber of banks are preparing statements which are of
questionable value and it is believ-ed that a very considerable part
of the difference in the cost of ha.'1dling this function a.t the
several banks is due to this one factor.
It is therefore RECOI&. '!ENDED tba t every bank give ca.reful con-
sideration to the reports and statements that are being prepared with
a view to eliminating those which do not serve a useful purpose commensurate Hi th their cost.
(NOTE: The noard's Corrmittee on Econorrw and Efficiency believes that this matter should be given careful and constant
attention, a.nd that very conaiderable economies will thereby
be effected.)
X-3782
- 20 32· SECURING CREDIT INFO:RMATIOlJ.
There was found to be a wide variation in the policy of the
several banks with respect to the extent that it is necessary to go
in the securing of credit information.
As an illustration, the cost
of the various outside re1Jorting sarvices for the System is approxima.tely $17,000 per annum.
from
$5,100 to $300.
The cost of the individual banks varies
Three of the banks do a considerable arrount of
outside investige.ting 'Nork while the other nina ba.nks do none at all.
In the cases of two banks there appeaTs to be a large amount of
duplication at the main office in connect ion with V\Ork originating
at the branches·.
While it is not the purpose of this Con~ittee to ·determine the
policy of each bank in this respect, it is the view of the Committee
that there is nevertheless an undue variaticn in the policies of the
several bariks with respect to this matter.
It is RECOitl!\ffilmED that each bank be requested to submit a brief
outline of its policy and of the vvork performeo. in securing credit
informa.tion, together with a.n estima.te of its cost for the current
year.
(NOTE: The Board's Comrr.dttee on Economlf and Efficiency requests
that this information be furcished-)
r-.
c..
EXHIBIT A.
·gn~
V'
X-37S2a.
Outline of Plan Used by One of the
Ba.nks to Measure the EffiC'iency of
its Money Counters.
Ma.chinery has been set up:
(a.) To make a real comparison each day of the volume of work
performed by each money counter.
(b) To· utilize this comparison so as to speed up the drones.
You will probably say that there is nothing new here, that all of the
Federal Reserve Ea.nks are already doing this very thing. The fact is,
probably, tha.t all of the banks are measuring their money counters' output
on the basis of the number of pieces ha.nd.led. This wa.s our former method.
Under it, we would discover that a certain money counter had a low
average. We would inquire the reason and we wotud be given any or all
of the following excuses:
That the particular counter had more rags than the others,
That the counter had hard luCk looking for differences,
That the counter waited half an hour to rna~· exchanges,
and so on. Always there were excuses, therefore. we set out to remove the
grounds on Which they rrere based.
It had be.en our pra.ctice to verify all currency on the day it was
sorted. We had adopted this plan so as not to carry errors overnight,· a.nd
also to give the rr.oney counters a variety of work to do with the idea of
lessening its monotony. We had accomplished these things but no fair comparison of Nork performed was possible, because all of the counters were
engaged in doing two kinds of work in varying proportions.
To straighten this out, we set up a separate verification unit. In
doing this, we incorporated two features with a view of lessening the
monotony of steady recount work.
Each morning a. bulletin is posted in the verification unit under the
caption, "Errors to be found", showing the differences carried overnight
from the previous da.y's sort. Before commencing ·work, the counters gather
around this bulletin a.nd take down a list of ini tia.ls and amounts to look
for during the day. \Vhen a verifier has found one of the differences, we
have her sign her initials in the proper place on the bulletin. A
seemingly unimportant detail, but it has had a very desirable effect on
the morale of the verifiers.
Sitting at a deSk for six or seven hours, however, is irksome at best.
To counteract this, we have the verifiers themselves carry their fit money
to the sealing machine to be sealed a.nd their unfit money to the canceling
'9--1!.J!..
''-t ,·
X-3782a
-2-
machine to be canceled. Units of 4o str~ps are given to them so that
t:·ley make these little trips about once a.."l hour. We find that this helps
to xake the work of verifying less monotonous.
)':ith the establishing of a sepa.rate verifying unit, the sorting units,
of course, continued breaking down all day, where formerly they had
switched·to recount about two or three o1 clock in the afternoon. Under the
old system, we had maintained an exChange desk in each unit to enable the
counters to make up even straps. lliese exchanges could not be XT~.a.de simultaneously, however, and it was found that each money counter began to J:T~.ak:e
up her exchanges about 30 minutes before closing time and then waited her
turn at the exchane:,a desk. Accordingly, we cut out the exchange desks and
required each sorter to break down up to five minutes of closing time and
then rrake up her odds. The re-handling of the extra amount of odds is
about ten.percent.of the extra work perforrred.
Formerly, When a sorter did not come out right in her proofs, she
would search for the difference herself and perha.ps consume an hour 1 s time
finding it.. Now, sorters are not allowed to look for their own differences,
but these are carried through to the verifying unit and posted on the
rr~rning bulletin.
All of these preliminaries were necessary before we could get down to
actual comparison of the volume of work performed. Previous comparisons
or· attempted comparisons had been made on the basis of number of pieces
handled •. :But it takes longer to break down 1000 pieces than it does to
verify them, and it takes longer to recount and paste 1000 ra~s than it
does to verify 1000 fit bills. To make any real corr~arison, therefore, it
seemed necessary to arrive at some common denominator. To this end, I have
made use of a. term which I will call 11 Minutes' work performed".
any
To arrive at this, we timed and averaged six of ou:r better rr~ney
counters working at average speed through one cycle of their routine in
verifying 4o straps of fit money:
Count
Exchange
Check
Sealing
Delivery
Returning
Total
34 min.
2
II
4)39 min.
9 min.
20 sec.
45
II
54
48
II
28
11
tl
35 "
50 sec.
58 sec.
Yle also timed and averaged the same six counters through one cycle of
their routine in handling 40 straps of unfit money:
X-37B2a
-3 ...
Count
Exchange
Pa.sting
Canceling
Dehvery
Return
34 min.
1
II
13
II
3
"
30 sec.
30
II
~--------}Q_~
4~nir~---'-3u.:::..~'_s e c.
13 min.
S sec.
From the foregoing, it was apparent that a good a:vera.ge rr:oney
counter required nine minu.tes and fifty-3ight seconds to verify, check,
seal, deliver and restoek 1000 fit notes. For ccnvenience, we ca.ll this
an even ten minutes. It wa.s also appa:rent that a gcod average money
counter required thirteen minutes and eigl:..t SE:conds to verify, paste,
cancel, deliver and restock 1000 rags. For convenience, we call this
an even thirteen minutes.
A record is kept of the n~~ber of fit notes and the number of rags
that each verifier recounts. 1~ne multipliers given in the previous pa.ragraph are applied to tnese amounts and the result is "Minutest work performed11 by each counter. In a six-hour day, vvhich is V'hat we are working
at present, there are 360 minutes. Arbitrari1y, we figured that an
average money counter might wa.ste thirty miJ•.;_·,_tes a day. Therefore, any
counter whose 11 Minutes; work performed 11 ec1uaJ.s or exceeds 330 is. called
good. A list of s::tch verifiers is :t:-osted each morning on a bulletin
board in the verifiers' unit under the caption 11 330 :Batters".
Figures of some of the slow ones redncert to "MinutesT work performedrr
were an:a.zing. We had several counters, for AX!-l.J:lple, who were only performing 200 minutes' work out of the 360, E2pe-:::ially bad cases were
talked to or disposed with, but we haYe fcund tha.t t::Oe lure of ma:l.:ing the
~330 Batters 11 list exercises an even more P'Y~ent infl ue>1~e to·v11·.1.rds
speeding up than any bawling out by the depa:rtment rrana.ger. I have in
mind one case of a girl who ha.d been spoken to repeatedly and who, on the
first day, showed 212 "Minutes' work performed". Last Friday the same
girl showed 334 11Minutes 1 work performed 11 •
A similar principle has been applied to the breakdown. The result
of timing a. cycle in this work shovred that a good average money sorter
would break down and make up 1000 bills in twe~ty-two minutes. Here again,
when reduced to "Minutest wcrk performed", some of the slow counter-s were
found to be even slower than we thought they were. We post separately
a "330 Batters 11 list for the money sorters. There were five or six on
this list the first day and something like 30 last Friday.
Aside from the desirable effect it bas on the money handlers, this
plan works to the advantage of the department manager and his assistants
in that it enables them to visualize the loss in minutes on each lazy
and inefficient employee. They regard it as the fairest and most effective
plan we have tried out.
-4-
X-3782.a
The following figures will indicate the improvement which we have
been able to bring about:
April 2
No. of Counters
Total no. of pieces
.Average per counter
.Average per hour
78.4
537,099
6,851
1,246
May l
May 21
79-1
71S,204
9,080
1,513
703 .348
10,193
69
1,699
The hourly average is the real measure of efficiency. With respect
to this figure, our change in methods has resulted in an increci.se of
over 36%. If we apply this ratio to a. tota.l f':lr·:)e of about ninety
people, receiving a.n ann1l.al salary of about $100,000, it will effect a
saving decidedly worth while.
X-3782b
OUTLINE OF METHOD OF ONE BANK FOrt POSTiNG OF LEDGER
AND STATEMENT AT A SINGLE OPERI\TION.
Member Banks' Reserve Ledgers a.re in the form of a. Daily Statement,
the carbon copy of which oonsti tutes the :permanent ledger record. The
original copy is mailed to the member bank addressed. All posting is
dona with the Burroughs Book!-:ee:ping I11a.chine.
The operation of transferring balances, posting and proving is
exactly the same as tbough separate ledgers and statements were typed
except that both are prepared at the single operation.
The combined ledger and statenent form used also allows sufficient
space at the foot of the sheet to show L1 detail a.ll entries to the
"Deferred Credit 11 account-.
No credit ticket is _prepared and no advice, other than the da.ily
statement, is sent for daferred items~ the posting of deferred items
to the combined ledger and statement being done directly from the original
ca.sh letter. The deferred credits are also posted to a small control
ticket, a separate control ticket being prepared for each bank and each
availability date~ ~hese tickets are cumulative and upon the availability
da.te are used as th8 posting n:edium to the reserve a.ccount to which each
cash letter total is separately posted. T'.ae debit entry to the 11 Deferred
Credit" account being the total of the cont:rol ticke~ a-~d including a.ll
items available that day.
NOTE:
kny bank desiring samples of the forms usee, or
other informa.tion concerning the a.boYe opera.tion,
will please comzmmicate with the Committee.
f·95
EXHIBIT ''En
X-3782C
Outline of Method of Handling Deferred Credits
Without Posting to Ledger Accounts.
1.
All ·deferred Cash Letters received are routed to one point where
vvhere they are sorted:
(a) According to availability date;
(b) According to banks.
2.
After sorting as above, tickets are prepared in duplicate, the
original being sent to the bank as an advice, and the duplicate
being retained for suose~~ent use as an entry ticket. So far
as possible all cash letters of the same availability date are
included in the same t ickat, a total being shewn for each Ucke t.
3·
Adding machine lists are made of these tickets, with a separate
total for each availability date, the grand total agreeing with
the total of all deferred cash letters received.
4.
One entry is made for ~he total of the day, crediting the general
ledger control account "Deferred Credits"; after which the individual tickets are filed in pc:.ckages as already sorted, according
to availability dates.
5· A record is maintained of the total placed in the file for each
availability date, so tr..at upon removal the tickets becoming
available each day are .r.Xoved to this record.
6.
On availability date all tickets are removed from the file and
used as credit en tries to the member banka 1 res0r'ra accounts, the
total being offset by one debit entry to the general ledger account
"Deferred Credits".
7.
The tickets remaining in the file may be easily proved at any
time, each day's availability separately and in grand total, to
the general ledger control account.
Under the above method the posting of entries, first crediting and
later debiting individual deferred account, is avoided, with a large
saving of labor and printed forms. This method has been in use more
than a year in one of the larger bank£ and no difficulty has been experienced either in maintail::dng the proof or in obtaining any desired
information.
@FedFRASER