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Board of Governors

of the Federal Reserve System

mi• 92

February 1992
This publication is available from Publications Services, Board of Governors of the Federal
Reserve System, Washington, DC 20551.

Contents
1

INTRODUCTION

Parti

The 1992 Budgets

5
5
7
8
8

Chapter 1
FEDERAL RESERVE SYSTEM
Net Expenses
Trends in Expenses and Employment
Operational Areas
1992 Budget Initiatives

11
11
12
14
17
19
19
21
22

Chapter 2
BOARD OF GOVERNORS
Overview of the Budget
Operations Budget by Operational Area
Operations Budget by Division
Operations Budget by Object of Expense
Capital Budget
Trends
Extraordinary Items
Office of Inspector General

23
23
25
26
30
31
32
33
33

Chapter 3
FEDERAL RESERVE BANKS
Major Initiatives
1992 Budget Objective
Operational Areas
Objects of Expense
Capital Outlays
Trends in Expenses and Employment
Volume and Unit Costs
1991 Budget Performance

Part II
37
37
40

Special Analysis

Chapter 4
TREASURY DIRECT: A BOOK-ENTRY SAFEKEEPING
SYSTEM FOR I N D I V I D U A L INVESTORS
Features of Treasury Direct
Growth of Treasury Direct

Appendixes

45
45
46
47

Appendix A
MISSION AND OPERATIONAL AREAS
OF THE FEDERAL RESERVE SYSTEM
Monetary and Economic Policy
Services to the U.S. Treasury and Other Government Agencies
Services to Financial Institutions and the Public
Supervision and Regulation

49
49
50

Appendix B
BUDGET PROCESSES
The Budget and Control Process of the Board of Governors
The Budget and Control Process of the Federal Reserve Banks

55
55
58
58
59

Appendix C
SPECIAL CATEGORIES OF SYSTEM EXPENSE
Priced Services
Capital Outlays
Special Projects
Currency Printing

Appendix D
SOURCES AND USES OF FUNDS

63
63
66

Appendix E
FEDERAL RESERVE SYSTEM AUDITS
General Accounting Office
Office of Inspector General

Appendix F
EXPENSES A N D EMPLOYMENT
AT THE FEDERAL RESERVE BANKS

MAPS OF THE FEDERAL RESERVE SYSTEM

Introduction
This report describes the budgeted
expenses of the Federal Reserve System
for 1992 and compares them with
expenses for 1990 and 1991. For 1992,
the Federal Reserve System has budgeted
net operating expenses of $776.2 million.
During this year, the System expects to
realize $786.1 million, or 45.6 percent
of its total operating expenses, from its
priced services. Total operating expenses
are budgeted at $1,725.2 million, an
increase of 6.9 percent over 1991 estimated expenses.
The Federal Reserve System consists
of the Board of Governors in Washington, D.C., the twelve Federal Reserve
Banks with their twenty-five Branches,
the Federal Open Market Committee,
and three advisory groups—the Federal
Advisory Council, the Consumer Advisory Council, and the Thrift Institutions
Advisory Council.
The System was created by the Federal Reserve Act, passed by the Congress
in 1913 to establish a safer and more
flexible monetary and banking system.
After the inception of the Federal
Reserve System, it became clear that
these original purposes were part of
broader national economic and financial
objectives. Stability and growth of the
economy, stability in the purchasing
power of the dollar, and reasonable
balance in transactions with foreign
countries have come to be recognized
as primary objectives of governmental
economic policy. Over the years, such
objectives have been articulated by
the Congress in legislation giving the
Federal Reserve more authority and
responsibility.

As the nation's central bank, the Federal Reserve, through its conduct of
monetary policy, attempts to ensure
growth of the economy consistent with
price stability. As the nation's lender of
last resort, the Federal Reserve also has
the responsibility to forestall national
liquidity crises.
Because a sound financial structure is
essential to an effective monetary policy
and a growing and prosperous economy,
the Congress has entrusted the Federal
Reserve with a variety of bank supervisory and regulatory functions. Among
other things, the Federal Reserve
administers the laws that regulate all
bank holding companies; it supervises
state-chartered banks that are members
of the Federal Reserve System; it
regulates the foreign activities of U.S.
banks and the U.S. activities of foreign
banks; and it establishes rules to ensure
that consumers are informed adequately
and treated fairly in credit transactions.
The Federal Reserve System also
plays a major role in the nation's
payments mechanism. Federal Reserve
Banks distribute currency and coin,
provide both wire and automated
clearinghouse transfers of funds and
securities, and process 32 percent of all
domestic checks. The Federal Reserve
serves as the fiscal agent for the U.S.
Treasury and provides a variety of other
financial services for the Treasury and
other government agencies.
To carry out these responsibilities in
1991, the Federal Reserve System spent
an estimated $1.6 billion and earned
an estimated $928 million in revenue
from priced services, reimbursements,

Annual Report: Budget Review, 1989-90

and other income, for a 1991 total of
$687 million in net operating expenses.
The major source of Federal Reserve
income is earnings on the portfolio of
U.S. government securities in the System
Open Market Account, estimated at
$21.3 billion in 1991. The System uses
purchases and sales from this portfolio
to implement monetary policy. Gains on
foreign exchange transactions approximated $2.5 billion.
Each year the Federal Reserve returns
to the U.S. Treasury its earnings in
excess of expenses, dividends, and
surplus—in 1991, an estimated $20.8
billion. These earnings are treated as
receipts in the U.S. budget accounting
system; projections of these earnings by
the Office of Management and Budget
appear in the U.S. budget.
•

Parti
The 1992 Budgets

Chapter 1

Federal Reserve System
For 1992, the Federal Reserve System
has budgeted net operating expenses of
$776.2 million. It expects to realize
$786.1 million, or 45.6 percent of total
budgeted operating expenses, from
revenues from priced services. Total
operating expenses are budgeted at
$1,725.2 million, an increase of 6.9 percent over 1991 estimated expenses. The
budgeted operating expenses of the
System comprise those of the Reserve
Banks, $1,596.4 million, and the Board
of Governors, $128.8 million (tables 1.1
and 1.2).
Not included in these costs are
Reserve Bank special projects, budgeted
at $20.1 million for 1992, up from
$6.8 million estimated for 1991.1 Also
excluded is the budgeted cost of currency at $325.8 million for 1992, an
increase of 25.2 percent over the
estimated 1991 cost of $260.2 million.2
When special projects and the cost of
currency are added to operating expenses, the Reserve Banks account for
77.1 percent of the total; the Board,
6.2 percent; special projects, 1.0 percent;
and currency, 15.7 percent (chart 1.1).
This distribution of expenses is similar
to that in 1991.

Net Expenses
The System expects to recover 55.0 percent of the expenses it incurs during
1992. The following items are deducted
from System operating expenses to
derive net expenses: (1) revenue from
priced payments mechanism services
provided to depository institutions, (2)
other income from services on behalf of
the U.S. Treasury that are paid for by
depository institutions using the services, and (3) claims for reimbursement
by the U.S. Treasury and other government agencies for fiscal agency services. After deducting these items, the
net expenses of the System of $776.2
million show an increase of 13.0 percent
over net System operating expenses
estimated for 1991.
As required by the Monetary Control
Act, receipts for priced services represent
fees that are set to recover the full cost
of providing these services to depository
institutions, including the imputed costs
of float and the return on capital that
would have been provided and the taxes
Chart 1.1
Distribution of Expenses of the
Federal Reserve System, 19921

1. As research and development efforts, special
projects are separate from the continuing operations
of the System and, therefore, are not included in
System operating expenses. These relatively costly,
short-term projects are expected to benefit both the
System and the banking industry as a whole. A
description of the special projects for 1992 appears
in appendix C.
2. The Federal Reserve bears the cost associated
with the printing of new currency at the Bureau of
Engraving and Printing. Because this cost is
determined largely by public demand for new
currency, it is not included in Federal Reserve
operating expenses. See appendix C.

1. See text notes 1 and 2.

Annual Report: Budget Review, 1989-90

that would have been paid had a commercial entity in the private sector furnished
the services. The revenue from priced
services is detailed in table 1.3; the
constraint imposed on Federal Reserve
budgets by the need to keep such services
competitive and the calculation of fees
are discussed in appendix C. A l l sources
and uses of funds are presented in appen-

dix D; the audits of the System are listed
in appendix E.
The category ' 'Other income'' in table
1.2 includes fees from such services as
the transfer of U.S. Treasury book-entry
securities in the secondary market, the
settlement of such transfers among
depository institutions, and wire transfer
of funds between a depository institution

Table 1.1
Operating Expenses, Special Projects, and Cost of Currency
of the Federal Reserve System, 1990-921
M i l l i o n s o f dollars, except as noted

E n t i t y and
type o f expense
2

Reserve B a n k s
Personnel
Nonpersonnel
Board o f Governors3
Personnel
Nonpersonnel

System operating expenses
Personnel
Nonpersonnel
Special projects 4
Currency

Percent change

1990
actual

1991
estimate

1992
budget

1,406.6
897.6
509.0

1,501.5
971.2
530.3

1,596.4
1,037.6
558.8

6.7
8.2
4.2

6.3
6.8
5.4

103.7
79.0
24.7

112.9
86.8
26.1

128.8
94.5
34.3

8.9
9.9
5.7

14.1
8.9
31.4

1,510.3
976.6
533.7

1,614.4
1,058.0
556.4

1,725.2
1,132.1
593.1

6.9
8.3
4.3

6.9
7.0
6.6

5.2

6.8

20.1

260.2

325.8

34.9

25.2

192.9

1. I n this and subsequent tables i n this v o l u m e , details
m a y not s u m to totals and may not y i e l d percentage
changes s h o w n because o f rounding.
2. For detailed i n f o r m a t i o n , see chapter 3.

1990-91

1991-92

3. Includes expenses o f the O f f i c e o f Inspector General. For detailed i n f o r m a t i o n , see chapter 2.
4. See text note 1 and appendix C .
5. See text note 2 and appendix C .

Table 1.2
Operating Expenses of the Federal Reserve System, Net of Receipts
and Claims for Reimbursement, 1990-92
M i l l i o n s o f dollars, except as noted

Item

T o t a l System operating expenses
LESS
Revenue f r o m p r i c e d services
Other income
C l a i m s f o r reimbursement 2

1990
actual

1991
estimate

1992
budget

1,510.3

1,614.5

1,725.2

746.5
19.1
140.3

758.4
19.4
149.7

687.0

Percent change
1990-91

1991-92

6.9

786.1
5.01
157.9

1.6
1.6
6.7

3.7
-74.2
5.5

776.2

13.7

13.0

EQUALS

Net System operating expenses

604.4

1. B e g i n n i n g January 1992, fees f o r transfer o f U.S.

2. Costs o f fiscal agency services p r o v i d e d to the U.S.

Treasury b o o k - e n t r y securities w i l l no longer be i n c l u d e d

Treasury and other g o v e r n m e n t agencies f o r w h i c h the

i n " O t h e r i n c o m e , " but w i l l be f o r w a r d e d d i r e c t l y to the

agencies have agreed to reimburse the Federal Reserve. I n

Treasury's account.

practice, not all these claims are paid.

Federal Reserve System
Table 1.3
Revenue from Priced Services, 1990-92
M i l l i o n s o f dollars

Service
Funds transfers and
net settlement
Automated clearinghouse
services
Commercial checks
Book-entry securities
transfers
Definitive securities
safekeeping
Noncash collection
Special cash services
Total

1990
actual

1991
estimate

1992
budget

79.7

79.6

87.6

53.5
571.9

58.8
578.2

64.9
592.7

10.7
5.3

11.6
4.5

12.3
3.9

10.8
14.5

10.6
15.1

9.4
15.4

746.4

758.4

786.2

and the Treasury. (But see note 2 in
table 1.2.)
Claims for reimbursement represent
the expenses incurred by Reserve Banks
in providing fiscal agency services to the
U.S. Treasury or to other government
agencies and for which the agencies have
agreed to reimburse the Federal Reserve.

Trends in Expenses and
Employment
From 1982 (actual expenditures) to 1992
(amount budgeted), the expenses of the
Federal Reserve System have increased
Chart 1.2
Operating Expenses of the Federal
Reserve System, 1982-921
B i l l i o n s o f dollars

an average of 5.2 percent per year in
current dollars and 1.6 percent when adjusted for inflation (chart 1.2). Over the
same ten-year period, System employment has increased by 666 (chart 1.3).
From 1982, when the transition to the
requirements of the Monetary Control
Act of 1980 was completed, through
1984, System expenses remained essentially flat when adjusted for inflation,
and employment declined. In 1985, the
Federal Reserve increased the staff in a
pronounced effort to strengthen supervision and regulation of member banks
and bank holding companies. The
System was able partially to offset the
increase in staff through reductions in
employment in other areas, primarily in
services to financial institutions and the
public and in support and overhead.
In 1988, the Expedited Funds Availability Act (title V I of Public Law 100-86,
the Competitive Equality Banking Act
of 1987) became effective. The act requires the Federal Reserve to issue regulations to ensure the prompt availability
of funds and the expeditious return of
checks. Increases in staff throughout
the System in 1988 and 1989 resulted
from implementing the provisions of
this legislation.

Chart 1.3
Employment in the Federal Reserve
System, 1982-921
T h o u s a n d s o f persons

i
1. For 1991, estimate; for 1992, budget.
2. Calculated w i t h the G N P price deflator.

1982

1987

1. For 1991, estimate; for 1992, budget.

i
1992

Annual Report: Budget Review, 1989-90

In 1990 and 1991, several major
factors influenced expense and staffing
levels in the System. The System
continued nationwide expansion of the
Regional Delivery System, which will
centralize the issuance of over-thecounter savings bonds. Spending on bank
supervision expanded, reflecting an
increase in the number and complexity
of examinations, increased attention
to problem institutions, and passage
of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989
(FIRREA).

Operational Areas
Federal Reserve expenses are classified
for budgeting purposes according to the
four major operational areas of the
System: monetary and economic policy,
services to the U.S. Treasury and other
government agencies, services to finan-

cial institutions and the public, and
supervision and regulation (table 1.4).
Costs for support and overhead are
redistributed or allocated to these four
areas. Only the Reserve Banks perform
services for the Treasury and other
government agencies. The operational
area unique to the Board of Governors,
System policy direction and oversight, is
considered an overhead expense of the
System (see chapter 2).

1992 Budget Initiatives
Several major initiatives will continue
or will begin in 1992. The System will
continue to improve facilities at several
head office and branch buildings, and
recently completed projects w i l l be subject to real estate tax increases.
The upward pressures on expenses
and staffing associated with supervision

Table 1.4
Operating Expenses of the Federal Reserve System, by Operational Area, 1990-92 1
M i l l i o n s o f dollars, except as noted
Operational area
and entity

1990
actual

1991
estimate

1992
budget

Percent change
1990-91

1991-92

Monetary and economic policy
Reserve Banks
Board o f Governors

162.9
99.0
63.9

176.5
107.5
69.0

188.8
113.0
75.8

8.3
8.6
8.0

7.0
5.1
9.9

Services to the U.S. Treasury and
other government agencies 2

156.9

169.4

180.1

8.0

6.3

Services to financial institutions
and the public
Reserve Banks
Board o f Governors

942.4
938.9
3.5

988.9
985.3
3.6

1,046.3
1,042.1
4.2

4.9
4.9
2.9

5.8
5.8
16.7

Supervision and regulation
Reserve Banks
Board o f Governors

248.2
211.9
36.3

279.7
239.4
40.3

310.0
261.2
48.8

12.7
13.0

11.0

10.8
9.1
21.1

1,510.4
1,406.7
103.7

1,614.5
1,501.6
112.9

1,725.2
1,596.4
128.8

6.9
6.7
8.9

6.9
6.3
14.1

Total
Reserve Banks
Board of Governors3

areas i n chapter 2 are not the same as the numbers shown
1. Operating expenses reflect all allocations for support
i n this table.
and overhead and exclude capital outlays. The operational
" - " " F ^ s e r v e Banks on y. The Board o f Governors does
area unique to the Board o f G o v e i i U l t , Ay W i l l i pUllL'y
not provide these servk ;s.
direction and oversight, w h i c h is s t o w n separately i n
>f the Office o f Inspector General.
chapter 2, has been allocated across t|ii
' f f f i e S W C H
O Q R A f W s
listed here. A s a result, the numbers for trie operational

F a d ere:!
?

R e s e r v e
Q f

o 11 i c

B a n k

Federal Reserve SystemAudits9
and regulation activities will carry over
from 1991 into 1992.
Nine Reserve Banks w i l l upgrade
check systems to improve the efficiency
of check processing.
The System will continue automation
projects related to office automation,
contingency, and increased computer
capacity.
Expenses for fiscal services w i l l
continue to increase as the System moves
into the final phase of implementing the
Regional Delivery System for savings
bonds.
Besides these initiatives, the continued
rise in health care costs and an increase
in the matching contribution under the
thrift plan for System employees have
contributed to the 1992 budget increase.
Partly offsetting these increases are
productivity and operational improvements in a number of areas.
•

Chapter 2

Board of Governors
The 1992 budget of the Board of
Governors comprises three parts: a Board
operations budget of $123.6 million, an
extraordinary items budget of $3.2 million for special projects of a unique or
one-time nature, and an Office of Inspector General budget of $2.0 million.
The Board authorized 1,608 positions
for the operational areas and 21 for the
Office of Inspector General; no positions
are required for the extraordinary items
budget.

Overview of the Budget
Board Operations
The operations budget of $123.6 million,
which covers the Board's four operational areas, is 11.4 percent greater than
estimated 1991 expenses. Increases in
salaries and benefits for current personnel
and in the price of goods and services
account for 51 percent of the rise.
Initiatives to increase staffing and improve automation, largely in the supervision and regulation and monetary and
economic policy operational areas, account for the remaining 49 percent.
The budget adds a total of forty-one
positions and abolishes two for a net
increase of thirty-nine. Of this total,
twenty-five positions are for the supervision and regulation function. Coupled
with positions added during 1991 and
fewer vacancies, the new positions will
enhance the Board's ability to manage
a growing workload in international
supervision, enforcement, and litigation
as well as increased responsibilities
arising from such legislation as the For-

eign Bank Supervisory Enhancement
Act. Fourteen positions have been added
for the monetary and economic policy
function to strengthen and expand longterm research, to help in a nationwide
effort to improve the quality of government economic statistics, and to enhance
analytical capabilities through additional
automation.

Major

Initiatives

The operations budget provides for
increased staffing, improved training
programs, and improved automation
support for the supervision and regulation function. These changes are
necessary to meet continued growth in
workload, particularly in international
supervision, policy analysis, applications,
litigation, and enforcement. Initiatives
in the area of monetary and economic
policy require increased staffing to
support a governmentwide effort to
improve economic statistics. Other important initiatives are more Boardwide
in focus and include improved automation capabilities, a higher level of
facilities maintenance, and creation and
acquisition of additional office space.
The budget does not include funds to
meet requirements of potential legislation. I f legislation is passed, new
requirements will be considered by the
Board. Also, the budget does not provide
funds for a special investigative unit
proposed for the supervision and
regulation function but not yet fully
developed or costed out. A proposal will
be presented to the Board when the
objectives are reviewed and the necessary resources identified.

Annual Report: Budget Review, 1989-90

Extraordinary Items
The $3.2 million budget for extraordinary items covers a 1992 Survey of
Consumer Finances to enhance the
quality of economic data, an audit of the
Federal Reserve Bank of Kansas City by
an outside firm, and a study by an
outside consultant to ensure the security
of the transfer of funds and securities via
Fedwire.
Office o f Inspector General
The $2.0 million budget for the Office of
Inspector General is $0.3 million, or
17.1 percent, greater than estimated 1991
expenses. The majority of the increase
w i l l fund two new audit manager
positions. Also included in the budget is
an increase for travel and training
associated with implementation of a new
Developmental Assignment Program.

Operations Budget by
Operational Area
The 1992 Board activities fall into four
broadly defined operational areas:

monetary and economic policy, supervision and regulation, services to financial institutions and the public, and
System policy direction and oversight
(also see chapter 1 and appendix A). For
each operational area, the costs shown
include support and overhead expenses,
which are allocated to each area in
proportion to direct expenses. Higher
costs associated with salary increases,
rate increases for insurances, and other
items that affect expenses in all operational areas are not discussed separately
by area, but they are included in the
discussion by object class. Data on
expenses and positions for each operational area for 1990-92 are shown in
tables 2.1 and 2.2.

Monetary and Economic Policy
The budget for monetary and economic
policy is $59,712,000; this amount is
$4,482,000, or 8.1 percent, more than
estimated 1991 expenses. The budget
provides an increased level of funding
for the divisions that support this

Table 2.1
Expenses of the Board of Governors for Operational Areas,
Extraordinary Items, and Office of Inspector General, 1990-92 1
Thousands o f dollars, except as noted

Type o f expense

Monetary and economic
policy
Supervision and regulation..
Services to financial
institutions and the
public
System policy direction and
oversight

1991
estimate

1992
budget

51,259
29,092

55,230
32,223

2,765
19,283

1990
actual

1990-91 change
Amount

Percent

59,712
38,649

3,971
3,131

7.7
10.8

4,482
6,426

8.1
19.9

2,947

3,328

182

6.6

381

12.9

20,465

22,216

1,182

6.1

1,751

8.6

8.3

12,689

11.4

27.8

2,826
293

17.1

Total, Board operations ...

102,399

110,865

123,555

8,466

Extraordinary items
Office o f Inspector General .

0
1,341

335
1,714

3,161
2,007

335
373

1. Operating expenses include allocations for support and overhead.
2. The Savings Target has been removed f r o m the total, but not f r o m the individual
operational areas; therefore, the details do not sum to the total.

1991-92 change
Amount

Percent

Board of Governors
function to meet an increasing workload,
expand long-term research, and improve
the quality of economic data. Automation
initiatives, including continuation of the
phased development of the research
computing system, are key elements of
the divisions' plans to manage the
workload. Because productivity improvements alone are no longer sufficient, the
budget requests fourteen new positions:
six economists, five research assistants,
and three information systems analysts.
(A fourth information systems analyst
position added in the Division of
Research and Statistics supports the
supervision and regulation function.)
Investments in research automation
have produced productivity gains that,
combined with adjustments in priorities
and reductions in long-term research,
have limited the degree of staff growth.
The greater personnel requirements, in
large measure driven by an effort to
meet analytical requirements at the
Board, also reflect increased support for
the Division of Banking Supervision
and Regulation and the Division of
Consumer and Community Affairs.
Questions on such topics as the farm

credit system, insurance companies,
interest-rate risk, capital standards, and
regulation of government-sponsored
enterprises have added to the workload.
Studies on banking legislation, deposit
insurance, and consolidation in the
banking industry are typical of areas
requiring increased attention not possible
with the current level of resources. The
additional staff resources w i l l slow
continued growth in the volume of
uncompensated overtime by exempt
personnel and will allow for a moderate
increase in long-term research.

Supervision and Regulation
The budget for supervision and regulation is $38,649,000; this amount is
$6,426,000, or 19.9 percent, more than
estimated 1991 expenses. A significant
portion of the large increase will fund
new staff positions. Twenty-five positions have been added, eighteen in the
Division of Banking Supervision and
Regulation, six in the Legal Division,
and one in the Division of Research and
Statistics. (A seventh position added in

Table 2.2
Positions Authorized at the Board of Governors for Operational Areas,
Support and Overhead,1 and Office of Inspector General, 1990-92
Type o f expense

Monetary and economic
policy
Supervision and regulation..
Services to financial
institutions and the
public
System policy direction and
oversight

1990
actual

1991
estimate

1992
budget

1990-91 change

1991-92 change

Amount

Percent

Amount

Percent

401
280

401
293

415
318

0
13

0
4.6

14
25

10.0

155

154

-1

-.6

701

699

-2

-.3

Total, Board operations ..

1,557

1,569

1,608

2.5

Office o f Inspector General.

10.5

Support and overhead

1. Support and overhead positions not allocated to operational areas.

3.5
8.5

Annual Report: Budget Review, 1989-90

the Legal Division is associated with
support and overhead.) These positions,
in conjunction with positions added
during 1991, particularly four attorney
positions added in the Legal Division
late in the year, account for the majority
of the increase.
The additional Division of Banking
Supervision and Regulation positions
are required to meet the division's
current workload. The six positions in
the Legal Division were added largely in
anticipation of passage of the Foreign
Bank Supervisory Enhancement Act. No
new positions have been added in the
Division of Consumer and Community
Affairs; however, should merger activity
or protested actions increase significantly, that division may also require
additional resources.
In addition to costs associated directly
with new initiatives, the budget continues
to fund the Board's share of the automation costs for development of the
National Information Center (NIC). This
project will be the sole source of consolidated structure and financial data and
will be of major benefit to the supervision
and regulation operational area. The
1992 effort will be devoted primarily to
the transition from existing software to
the NIC database. Development of the
NIC w i l l reduce Systemwide costs,
improve data integrity, and lead to more
timely and more meaningful analysis of
applications, merger requests, and other
actions.
Automation enhancements are needed
to allow the divisions to replace obsolete
equipment with equipment capable of
greater interaction with the NIC, Bank
Holding Company Performance Report
(BHCPR), Home Mortgage Disclosure
Act (HMDA), and other critical databases. The upgraded equipment will
improve the staffs ability to meet tight
deadlines and will result in higherquality analyses and finished products.

Services to Financial Institutions
and the Public
The budget for services to financial
institutions and the public is $3,328,000,
an amount $381,000, or 12.9 percent,
more than estimated 1991 expenses. This
operational area is composed almost
entirely of programs supporting the
payments function in the Division of
Reserve Bank Operations and Payment
Systems. The increase will fund development and improvement of the cash
tracking project for the System and a
lower level of staff vacancies.

System Policy Direction
and Oversight
The budget for the System policy
direction and oversight operational
area is $22,216,000, a $1,751,000, or
8.6 percent, increase over estimated 1991
expenses. This function is composed of
most of the Division of Reserve Bank
Operations and Payment Systems and
parts of the Offices of Board Members, Secretary, and Staff Director for
Management.
The increase in this budget is less
pronounced than the increases in the
budgets for other operational areas
because of fewer initiatives. Much of the
rise is tied to a lower level of vacancies
and a new position in the Office of
Board Members. Development of mainframe software to provide improved
financial information to the Division of
Reserve Bank Operations and Payment
Systems also affects costs.

Operations Budget by Division
Table 2.3 shows the 1992 budget for
each Board division, office, and special
account. The figures highlight the
budget's emphasis on the supervision
and regulation operational area, im-

Board of Governors
proved distributed processing and office
automation, and the economic statistics
improvement project. Table 2.4 gives
the number of authorized positions by
division and office.
D i v i s i o n o f Banking Supervision
and Regulation
As a result of existing law and the
condition of the banking industry, the
workload in the Division of Banking
Supervision and Regulation continues to
increase in volume and complexity. The
division's budget increase, $3.4 million,
or 24.4 percent, over estimated 1991
expenses, provides for new positions,

automation, and training resources. The
Bank Holding Company Performance
Report will be rewritten to improve
responsiveness to System staff and to
implement new ratio definitions.
The addition of eighteen positions
w i l l support a greater volume of
international and multinational work,
policy analyses, and applications issues.
Much of the increase in workload
continues to be driven by the condition
of the banking industry, including
requirements for increased enforcement, more detailed analysis of mergers
and applications, rapid processing of
government-assisted transactions, and
development of policies related to

Table 2.3
Expenses of the Board of Governors, by Division, Office, or Special Account, 1990-92
Division, office,
or special account

1990
actual

1991
estimate

1992
budget

1990-91 change
Amount

Percent

1991-92 change
Amount

Percent

3,111,602
3,100,526
4,682,066
20,498,526
7,441,618

3,414,465
3,449,313
4,996,667
21,718,513
8,151,498

3,750,732
3,581,553
5,996,364
23,642,884
8,778,777

302,863
348,787
314,601
1,219,987
709,880

9.7
11.2
6.7
6.0
9.5

336,267
132,240
999,697
1,924,371
627,279

9.8
3.8
20.0
8.9
7.7

11,712,263

13,947,628

17,349,519

2,235,365

19.1

3,401,891

24.4

3,321,848
19,040,146

3,655,868
18,978,303

4,037,932
20,727,583

334,020
-61,843

10.1
-.3

382,064
1,749,280

10.5
9.2

Controller
1,893,262
2,051,530
1,763,916
129,346
Consumer and
Community
3,331,146
Affairs
2,761,321
3,593,281
569,825
Staff Director for
Management
4,048,852
5,269,386
5,739,801
1,220,534
Reserve Bank
Operations
and Payment
Systems
9,838,372 10,770,462 11,669,347
932,090
Information Resources
Management
19,550,103 21,059,940 22,967,821
1,509,837
8,719,504
Monetary A f f a i r s
8,209,392
9,116,691
510,112
1,589,314
1,254,264
1,236,479
Special projects
-17,785
I R M income account' . -17,935,439 -19,727,434 -21,038,617 -1,791,995

7.3

158,268

8.4

20.6

262,135

7.9

30.1

470,415

8.9

9.5

898,885

8.3

7.7
6.2
-1.4
-10.0

1,907,881
397,187
352,835
-1,311,183

9.1
4.6
28.5
-6.6

8.3

12,689,512

11.4

Board Members
Secretary
Legal
Research and Statistics.
International Finance . .
Banking Supervision
and Regulation
H u m a n Resources
Management
Support Services

Total, Board
operations
Extraordinary items
Office o f Inspector
General

102,399,376 110,865,000 123,554,512

8,465,624

335,000

3,161,000

335,000

1,341,281

1,714,492

2,007,673

373,211

2,826,000
27.8

1. Income f r o m various Board divisions for use o f central I R M ( D i v i s i o n o f Information
Resources Management) resources.

293,181

17.1

Annual Report: Budget Review, 1989-90

innovations in the marketplace, such as
mortgage-backed securities. Finally, the
budget funds continued upgrades to
office automation equipment and the
expansion of network facilities.
The division's budget does not fund
any requirements that might result from
such proposed legislation as a banking
reform bill or legislation similar to the
Foreign Bank Supervisory Enhancement
Act. Nor are funds budgeted for a proposed special investigative unit, pending
development of requirements and identification of necessary resources.

Legal D i v i s i o n
The budget for the Legal Division has
increased by $1.0 million, or 20 percent
over estimated 1991 expenses, to a total
of $6.0 million. Most of the increase
will cover the costs of four attorney

positions added in late 1991 and seven
new positions to be added in 1992. The
positions added in 1991 were needed to
handle growth in the international and
litigation areas. The 1992 positions are
needed as a result of recent legislation
on international supervision, which
significantly increased requirements for
policy analysis and formulation.

D i v i s i o n o f Information Resources
Management
The increase in the 1992 budget for the
Division of Information Resources
Management, to a total of $23.0 million,
is needed to fund vendors' increases in
prices of software and maintenance and
to provide contractual support to meet
the division's labor requirements. The
increase will also fund initiatives to
support requirements throughout the

Table 2.4
Positions Authorized at the Board of Governors, by Division or Office, 1990-92
D i v i s i o n or office

1990
actual

1991
estimate

1992
budget

Change
1990-91

1991-92

Board Members
Secretary
Legal
Research and Statistics
International Finance
Banking Supervision and
Regulation
H u m a n Resources Management
Concern 1

40
57
67
255
103

38
58
72
256
103

38
57
79
268
105

-2
1
5
1
0

174
48
22

183
48
22

201
48
22

9
0
0

18
0
0

Support Services
Controller
Consumer and C o m m u n i t y A f f a i r s
Staff Director for Management
Reserve Bank Operations and
Payment Systems
Information Resources M a n a g e m e n t . . .
Monetary A f f a i r s
Special projects

259
31
42
8

259
31
43
7

0
0
1

-1

0
0
0
0

113
275
61
2

116
271
62
0

116
271
63
0

3
-4

0
0

-2

1,557

1,569

1,608

19
11

19
12

21
12

2
0

Total, Board operations
Office o f Inspector General
FFIEC2

1. E E O Concern positions managed by the D i v i s i o n o f Human Resources Management.
2. Federal Financial Institutions Examination Council.

-1
7
12
2

Board of Governors
Board, such as improved records
management and the premise-wide
network, as well as some internal
projects such as upgraded microcomputers.

D i v i s i o n o f Research and Statistics
The budget for the Division of Research
and Statistics is $23.6 million, an
increase of $1.9 million, or 8.9 percent,
over estimated 1991 expenses. Most of
the increase is tied to the twelve new
positions in 1992 and consulting services for the statistics improvement
project. The new positions are needed to
meet requirements for a larger number
of banking, regulatory, and capital
analyses and to improve the division's
ability to perform long-term research.
Five of the positions, as well as consulting support and automation resources, are needed for the project the
division is undertaking in conjunction
with government efforts to improve economic statistics. The budget also includes
funds for continued expansion of the
distributed processing system for the
research divisions.

D i v i s i o n o f Reserve Bank
Operations and Payment Systems
The 1992 budget for the Division of
Reserve Bank Operations and Payment
Systems is $11.7 million, an increase
of $0.9 million, or 8.3 percent, over
estimated 1991 expenses. The increase
is needed to enhance software for support
of the System's cash and currency
tracking projects and for office automation enhancements. A small portion
of the increase will be used to address
payments system issues in Eastern
Europe and to adjust, through training,
to the changing requirements affecting
the skill mix of the division's staff.

D i v i s i o n o f Support Services
The 1992 budget for the Division of
Support Services is $21.0 million, an
increase of $1.7 million, or 9.2 percent,
over estimated 1991 expenses. Requirements for new office space to accommodate new positions budgeted for 1992
will add costs for reconfiguration of
Board premises and additional leasing.
The increase also will fund a higher
level of maintenance necessary to care
for aging facilities. Depreciation for 1991
capital investments in facilities and new
telephone and security systems will also
add cost.

Operations Budget by
Object of Expense
The most significant expense item in the
Board's 1992 budget is personnel
expenses, which account for 75 percent
of operating expenses. The increase in
the salary budget, $6.3 million, includes
not only annual salary increases for
current personnel but also salaries for
new positions, both those added in late
1991 and the thirty-nine positions added
for 1992. A lower vacancy rate also
contributes to the increase. Retirement
costs for 1992 are $0.7 million, or
12.5 percent, greater than estimated 1991
expenses, primarily because of increases
in the Board's matching contribution to
the thrift plan and in the wage base
subject to social security and medicare
taxes.
Insurance costs also are up over
estimated 1991 expenses, by $0.3 million, or 5.4 percent. The rate increase for
the Board's health insurance plan,
combined with a higher level of staffing
from new positions and fewer vacancies,
accounts for $0.4 million of the increase.
The rate increases for the Federal employee health benefits plan, the effect
of higher salaries on medicare, and

Annual Report: Budget Review, 1989-90

miscellaneous increases add $0.1 million.
Partially offsetting these increases is a
$0.2 million decrease in workers compensation, reflecting a large one-time
payout in 1991.
Table 2.5 presents the budget by object
of expense. Increased use of contractual
professional services w i l l provide

software development support for
important projects as well as expert
advice for data improvement and
examiner training initiatives, and at the
same time w i l l keep increases in
permanent staffing to a minimum. Travel
costs are expected to be higher in 1992
because of higher airfares, a greater

Table 2.5
Operating Expenses of the Board of Governors, by Object of Expense, 1990-92
1990
actual

Object o f expense

Personnel
Salaries
Retirement
Insurance
Total
Goods and services
Travel
Postage and
expressage
Telephone and
telegraph
Printing and binding . . .
Publications
Stationery and
supplies
Software
Furniture and
equipment
Rentals
Books and
subscriptions
Utilities
Building repairs
and alterations
Equipment repairs
and maintenance..
Contingency
Processing
Center expenses...
Contractual
professional
services
Tuition/registration
and membership
fees
Subsidies and
contributions
Depreciation
A l l other
Total

Total, Board
operations
Extraordinary items
Office o f Inspector
General

1991
estimate

1992
budget

1990-91 change
Amount

Percent

1991-92 change
Amount

Percent

68,565,290
4,600,876
4,931,007
78,097,173

73,821,168
5,232,478
6,462,477
85,516,123

80,165,410
5,888,294
6,812,277
92,865,981

5,255,878
631,602
1,531,470
7,418,950

7.7
13.7
31.1
9.5

6,344,242
655,816
349,800
7,349,858

8.6
12.5
5.4
8.6

3,402,408

3,791,561

4,502,591

389,153

11.4

711,030

18.8

1,141,989

1,245,076

1,270,800

103,087

9.0

25,724

2.1

1,758,280
1,153,340
-558,890

1,698,767
1,109,802
-651,750

1,641,150
1,112,400
-471,280

-59,513
-43,538
-92,860

-3.4
-3.8
-16.6

-57,617
2,598
180,470

-3.4
.2
27.7

897,458
2,100,704

866,475
2,463,726

863,481
3,037,952

-30,983
363,022

-3.5
17.3

-2,994
574,226

-.3
23.3

827,092
-964,521

695,101
-917,677

852,073
-719,704

-131,991
46,844

-16.0
4.9

156,972
197,973

22.6
21.6

578,255
1,701,944

630,541
1,730,000

721,343
1,735,000

52,286
28,056

9.0
1.6

90,802
5,000

14.4
.3

943,208

877,921

1,723,500

-65,287

-6.9

845,579

96.3

1,837,383

2,042,822

2,181,560

205,439

11.2

138,738

6.8

236,866

238,100

291,922

1,234

53,822

22.6

2,685,648

2,978,660

4,021,410

293,012

10.9

1,042,750

35.0

601,730

757,800

989,929

156,070

25.9

232,129

30.6

529,289
5,881,929
-451,909
24,302,203

714,210
5,795,775
-718,033
25,348,877

682,254
6,378,380
-126,230
30,688,531

184,921
-86,154
-266,124
1,046,674

34.9
-1.5
-58.9
4.3

-31,956
582,605
591,803
5,339,654

-4.5
10.1
82.4
21.1

102,399,376 110,865,000 123,554,512 8,465,624

12,689,512

11.4

335,000

3,161,000

335,000

1,341,281

1,714,492

2,007,673

373,211

2,826,000
27.8

293,181

17.1

Board of Governors
volume of travel to resolve supervisory
issues, and relocation costs for new
staff. Software expenses are rising as a
result of rate increases for mainframe
software and the changing technological
needs of the Board. Finally, with the
aging of facilities, there is an increased
need for building repairs and alterations.

Capital Budget
The capital budget f o r 1992 is
$5.0 million, or $100,000 less than estimated 1991 expenditures. The budget
provides for requirements in the areas of
automation and telecommunications,
improvements to facilities, and relatively
small equipment replacements in such
locations as the cafeteria.
Continued investment by all the
Board's divisions in workstation, network, and office automation systems
will cost $3.3 million. The budgets for
the divisions involved in research include
funds for new and upgraded workstations, printers, and peripheral equipment. Also included are funds to enhance the system used by the Division
of International Finance to make it
compatible with both the DOS- and
UNIX-based systems used throughout
the Board. The budget for the Division
of Information Resources Management
includes funds for a premise-wide
network and a document-management
system. The budget for the Division of
Banking Supervision and Regulation
includes new file servers, improved
microcomputers, and other enhancements to improve data storage, handling,
and retrieval capabilities needed to take
full advantage of all data sources,
including the new supervisory information system. Automation equipment for
new staff is also included in the budget.
The remaining funds are for smaller
projects. For example, the Office of the
Controller is acquiring a specialized

network to run the Financial Management System (FMS) more efficiently,
using off-the-shelf software, in a distributed environment. The Division of
Support Services is acquiring a larger
network device on which to manage a
large library of software tailored to its
needs as well as a system to replace the
computer that monitors and controls
energy consumption. The division's
budget also includes funds for a videoconferencing bridge that will improve
communications and reduce Boardwide
travel costs.
Facilities improvements include a
number of projects. The first phase of a
multiyear effort to repair concrete slabs
in the north parking garage has been
approved. A new air handler w i l l
improve heating, ventilation, and air
conditioning in the data center. Capital
funds will be required for reconfigurations to provide office space.
Software costing more than $50,000
is capitalized. The budget includes funds
for such software for the mainframe, the
new FMS, and the distributed system for
the Division of Support Services.

Trends
The increase in the 1992 operations
budget of the Board over estimated 1991
expenses, 11.4 percent, is significantly
greater than the 7.8 percent average
annual rate of increase for the last five
years and the 7.1 percent increase for the
last ten years. The larger increase reflects
the surge in workload that has finally
exceeded the ability of managers to
absorb through improved productivity.
Charts 2.1 through 2.5 provide data on
trends for the period from 1982.
Adjusted by the GNP deflator, the
average annual increase in Board costs
since 1982 has been 3.1 percent.
Although this figure is low relative to
the substantial growth in workload, the

Annual Report: Budget Review, 1989-90
Chart 2.2
Expenses for Personnel Services at
the Board of Governors, 1982-921

Chart 2.1
Operating Expenses of the Board
of Governors, 1982-921

M i l l i o n s o f dollars

130

1982

1987

1992

1. Excludes the Office of Inspector General and extraordinary items. For 1991, estimate; for 1992, budget.
2. Calculated w i t h the G N P price deflator.

Expenses i n millions o f
Year

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

Current dollars

1982 dollars

67.2
71.6
76.5
82.0
84.0
86.3
89.9
95.6
102.4
110.9
123.6

67.2
69.1
71.4
74.3
74.1
73.8
74.2
76.3
78.3
81.4
90.8

1982

1987

i
1992

1. Excludes the Office o f Inspector General. For 1991,
estimate; for 1992, budget.
2. Calculated w i t h the G N P price deflator.

Chart 2.3
Expenses for Goods and Services at
the Board of Governors, 1982-921
M i l l i o n s o f dollars

Current dollars

annual increase has been rising. For the
ten years ending in 1990, the average
annual increase was 1.5 percent. The
recent rise is attributable to a higher
level of staffing, adjustments of salaries
resulting from the new employeecompensation program, and sharp
increases in benefit costs, particularly
for health insurance. The salary and
benefit changes have had a particularly
noticeable impact, as 75 percent of the
Board's budget is for staffing.
For the first time since 1988, the
goods and services budget increased at a
faster pace than the personnel budget.
The shift is a result of depreciation
expenses on a larger stock of capitalized
automation equipment, costs of maintaining the Board's facilities and pro-

I
1982

I
1987

1992

1. Excludes the Office o f Inspector General and extraordinary items. For 1991, estimate; for 1992, budget.
2. Calculated w i t h the G N P price deflator.

viding additional office space, and a
decision to satisfy software requirements
through temporary contractual arrangements rather than hiring additional
permanent staff. The latter decision was
made in recognition of the temporary
nature of the increased requirement
for development of software for the
mainframe.
Personnel costs have been affected by
the increase in the total number of
positions and the decline in the number
of position vacancies. The 1992 increase

Board of Governors
Chart 2.4
Annual Rate of Change in Operating
Expenses of the Board of Governors,
1982-921

Chart 2.5
Employment and Authorized Positions
at the Board of Governors,
1982-92'
Number, in thousands

Percent

1.7

9
1.6
6
1.5

3
Employment
1982

1987

1992

1. Excludes the Office o f Inspector General and extraordinary items. For 1991, estimate; for 1992, budget.

1987

1982

Year

in positions, to a total of 1,608, returns
the Board to the same number as in
1985. In recent years, increases in the
supervision and regulation operational
area were offset by decreases elsewhere.
Between 1985 and 1991, the number
of positions in the Division of Banking
Supervision and Regulation increased
from 138 to 183 while the overall
number of positions at the Board
declined.
The combined effects of the new
employee-compensation program and the
slowdown in the economy have resulted
in a reduced rate of staff turnover and a
lower level of vacancies. This is proving
extremely important to the Board in
meeting key requirements. Turnover in
1991 was the lowest in many years, and
a low rate is projected in the 1992
budget.
The 1992 rate increase for the Board's
health insurance plan, 6.3 percent, is
significantly below the 22 percent annual
rate of increase in the previous five
years. The lower rate of increase reflects
some reductions in the plan's benefits,
necessary in light of the large and
continuing increases that were pro

1992

1. Year-end data. Excludes twenty-eight summer intern
and youth positions and Office o f Inspector General. For
1991, estimate; for 1992, budget.

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

Employment

Authorized
positions

1,525
1,583
1,588
1,521
1,484
1,486
1,484
1,485
1,495
1,516
1,550

1,563
1,612
1,653
1,580
1,540
1,541
1,534
1,528
1,529
1,541
1,580

jected to continue indefinitely without
management action.

Extraordinary Items
Three projects are covered by the
extraordinary items budget. The first is
the 1992 Survey of Consumer Finances,
which w i l l collect important financial
data used for a wide variety of policy
analysis and monetary policy purposes.
The project reflects the Board's interest
in enhancing the quality of economic
data by obtaining information on income,
assets, debts, pensions, employment, use
of financial services, savings behavior,
and other characteristics of U.S. households. Cross-categorization of the data

Annual Report: Budget Review, 1989-90

w i l l allow important statistical observations useful in a wide variety of economic studies.
The second project, an audit of the
Federal Reserve Bank of Kansas City by
a public accounting firm, was originally
scheduled to be performed in 1991;
because more lead time was needed for
procurement, the project was rescheduled
for 1992. The Financial Examinations
Program in the Division of Reserve
Bank Operations and Payment Systems
will audit the other Reserve Banks as
usual. The objective of the outside audit
is to provide assurance that internal
audits at the Reserve Banks achieve
desired controls and standards consistent
with those applied by the accounting
profession.
The third project covered by the
extraordinary items budget is a study
by an outside consultant to ensure the
security of the transfer of funds and
securities via Fedwire. The study will
focus on additional security enhancements that should be incorporated in the
Federal Reserve System information
security architecture to ensure the reliability and security of the Fedwire system.

Office of Inspector General
The 1992 budget for the Office of
Inspector General (OIG) funds implementation of the 1992 portion of the
OIG Strategic Plan 1991-1995 to audit,
review, and investigate Board operations,
to help ensure economic and efficient
use of the Board's resources.
The budget of $2,007,673 is $293,181,
or 17.1 percent, higher than estimated
1991 expenses. The increase is due
largely to the addition of two new audit
manager positions and related expenses.
The office's goods and services expenses
will decrease slightly, primarily because

of a one-time software purchase in
1991 and reduced use of external legal
services.
The office's operations continue to
expand into the main mission areas of
the Board and the Reserve Banks.
Although the primary audits envisioned
for each of the Board's operational areas
are performance audits, the OIG w i l l
also conduct financial and EDP (electronic data processing) audits.
Three operations reviews (of the Legal
Division, the Division of Consumer and
Community Affairs, and the Office of
Board Members) scheduled for 1992 are
the last remaining to be conducted during
the five-year cycle begun in 1988.
The two new audit manager positions
added for 1992 w i l l increase the number
of authorized positions to twenty-one.
The new audit managers w i l l be
responsible for specific audit sections.
The investigation function w i l l cover the
full range of investigative requirements
arising from complaints, indications of
waste, fraud, and abuse identified by
audit staff or management, and requests
from management or the Congress.
Advice on fraud detection also w i l l be
provided as part of the audits and
operations reviews. Responsibilities for
review of legislation and regulation w i l l
continue.
•

Chapter 3

Federal Reserve Banks
The 1992 operating budgets for the Federal Reserve Banks approved by the
Board of Governors total $1,596.4 million, an increase of $94.8 million, or
6.3 percent, over estimated 1991 expenses (table 3.1). Not included in this
amount are expenses for special projects
related to Check Image Processing
($4.3 million), Development of Currency
Authentication Systems ($9.3 million),
and Automation Consolidation ($6.5 million). Including the costs of these special projects, the Banks' 1992 budgets
total $1,616.5 million, an increase of
$108.1 million, or 7.2 percent, over estimated 1991 expenses.
Employment excluding the staff associated with the special projects is budgeted at 23,871 average number of
personnel (ANP), an increase of 40 ANP,
or 0.2 percent, over estimated 1991
employment.1 Total budgeted employment including the special projects is
23,973, an increase of 140 ANP over
estimated 1991 employment. The automation consolidation special project
accounts for the 100 ANP increase related to special projects.
Expenses for personnel, which comprise salaries and benefits, account for
$1,037.6 million, or 65 percent of
Reserve Bank expenses in 1992, an

1. The term average number of personnel
describes levels and changes in employment at the
Reserve Banks. ANP measures the number of
employees in terms of full-time positions for the
time period. For instance, a full-time employee
who starts work July 1 counts as 0.5 ANP for that
calendar year; two half-time employees who start
January 1 count as 1 ANP. The ANP for any given
year is the average number of full-time employees
(measured in this way) in the months of that year.

increase of $66.4 million, or 6.8 percent,
over estimated 1991 personnel expenses
(table 3.2). Nonpersonnel expenses are
budgeted at $558.8 million, an increase
of $28.5 million, or 5.4 percent, over
1991; these expenses are influenced
primarily by automation and building
projects.
The following two sections discuss
the major initiatives and the budget
objective for the Reserve Banks in 1992.
Subsequent sections provide details for
the four operational areas as well as
objects of expense, capital outlays, and
long-term trends. Appendix C gives details on capital outlays, special projects,
and other special categories of expense.
Appendix F gives further data by District
and by operational area.

Major Initiatives
The 1992 increase in total expenses
includes $36.6 million for Reserve Bank
initiatives (table 3.3). Among the initiatives are:
• Projects to improve facilities at head
offices and branches
• Increased efforts in supervision and
regulation
• E n h a n c e d check and cash
operations
• Increased efforts in automation
• Enhanced programs for the U.S.
Department of the Treasury
Improvements to facilities throughout
the System will add $18.7 million in
1992. Expenses associated with two
major building projects account for
nearly all the increase: New York's East

Annual Report: Budget Review, 1991-92

Rutherford Operations Center (EROC)
($9.2 million) and Dallas' new building
($7.9 million). Ongoing building projects
at the Cleveland, St. Louis, and Kansas
City offices also contribute to the
increase.
Initiatives in supervision and regulation will increase expenses by $8.5
million and add 108 ANP; however, the
net impact on the System will be 99
ANP because of staff decreases in a
few Districts. A majority of the Banks
attribute the need for additional staff to
increased workloads, increased examination of foreign banks, and more problem
institutions. Expenses related to travel
and increased automation also w i l l contribute to the increase in this area.

Nine Banks collectively have budgeted $2.8 million to improve the
efficiency of check systems. Most of
these projects are continuing efforts and
are contributing to a reduction in checkstaff levels.
The Banks anticipate spending $1.0
million in 1992 for enhanced currency
processing. Increases are primarily in
San Francisco for the full-year impact of
additional processing equipment and
staff to handle the projected growth in
currency volume.
Projects related to office automation,
contingency, and increased computer
capacity will continue. These initiatives
(excluding expenses for EROC and the
new building in Dallas) are projected to

Table 3.1
Expenses and Employment at the Federal Reserve Banks, 1991-92 1

Expenses (millions
Operations 2
Special projects
Total

Employment (average
of personnel)3
Operations 2
Special projects
Total

Change

1992
budget

1991
estimate

Category

Amount

Percent

94.8
13.3
108.1

6.3

dollars)
1,501.6
6.8
1,508.4

1,596.4
20.1
1,616.5

7.2

number
23,831
2
23,833

23,871
102
23,973

40
100
140

.2
.6

1. Excludes capital outlays.
2. Includes support and overhead (see appendix F, table F.3, note 1, for definitions).
3. See text note 1 for definition o f average number of personnel.

Table 3.2
Operating Expenses of the Federal Reserve Banks, by Object, 1990-92 1
Thousands of dollars, except as noted

Object

Personnel
Nonpersonnel
Total

1990
actual

1991
estimate

1992
budget

Percent change
1990-91

1991-92

897,614
509,038

971,248
530,333

1,037,609
558,796

8.2
4.2

6.8
5.4

1,406,652

1,501,581

1,596,405

6.7

6-3

1. Includes the costs of support and overhead (see appendix F, table F.3, note 1, for definitions).

Federal Reserve Banks
add $2.0 million in 1992. Boston,
Cleveland, and San Francisco have
budgeted large office automation projects
to enhance end-user computing. Philadelphia and Richmond plan to acquire
software development tools to improve
computer programming productivity.
Atlanta has budgeted for equipment to
improve contingency and reliability.
Expenses for fiscal services are
projected to increase $2.4 million. Of
the overall increase, $2.1 million will be
incurred as the System moves into the
final phase of implementation of the
Regional Delivery System (RDS), which
involves centralized issuance of overthe-counter savings bonds. The 1992
increase is primarily for expenses
associated with the addition of 67 ANP.
(A total staff increase of 350 ANP is
projected by the time the RDS project is
fully implemented.) In addition, Minneapolis anticipates increased expenses and
ANP for the Savings Bond Masterfile
project, as volume is projected to double
in 1992. RDS and Masterfile staff
increases are partially offset by staff
decreases in other fiscal activities.
Expenses related to Treasury initiatives
are fully reimbursable.
The increase in the Reserve Banks'
matching contributions to the employee
thrift plan will add an estimated $4.6
million to Bank expenses in 1992.
Partially offsetting these increases are
initiatives that will result in savings
of $3.4 million. Savings have been
identified at Boston, Cleveland, Kansas
City, and San Francisco. The savings are
being achieved by increased productivity
and Districtwide consolidation of certain operations. San Francisco's check
initiatives and the consolidation of its
fiscal operations are expected to save
$1.1 and 25 ANP. Productivity gains in
Cleveland's check, fiscal, and currency
operations will produce savings of $0.8
million and 34 ANP.

1992 Budget Objective
In 1991, the Board approved a twotiered approach to establishing the 1992
budget objective. First the increase in
general operating expenses was targeted
at 4.5 percent of projected 1991
expenses. Then expenses for budget
objective factors were estimated. The
Board anticipated that these expenses,
which include the costs of several
Systemwide efforts and District-specific
building projects, would add between
1.5 and 2.4 percentage points. Staff
believed the figure would be at the lower
end of the range and recommended an
overall budget objective of 6.5 percent.
This guideline excluded the expenses of
special projects. Table 3.4 shows a
comparison of the 1992 budget objective
and the 1992 budget.
The 1992 budget increase for general
operating expenses of 4.2 percent is
$4.9 million, or 0.3 percent, less than the
budget objective. The Banks are under
the 4.5 percent general operating expense
target primarily because of lower-thanTable 3.3
Operating Expenses Budgeted for
Major Initiatives of the
Federal Reserve Banks, 1992
Millions
o f dollars

Percent
o f 1992
operating
budget

18.7
8.5
2.8
1.0

1.2
.6
.2
.1

2.0
2.4
4.6

.1
.2
.3

-3.4

-.2

Total

36.6

2.5

MEMO
Increase i n total operating
expenses, 1991 estimate
to 1992 budget

94.8

6.3

Initiative

F a c i l i t y improvements
Supervision and regulation
Enhanced check operations . . .
C u r r e n c y initiatives
A u t o m a t i o n and
contingency projects
Fiscal initiatives
Thrift plan
P r o d u c t i v i t y and operational
improvements

Annual Report: Budget Review, 1989-90

Table 3.4
Comparison of 1992 Budget Objective
and Budget of the Reserve Banks
over Estimated 1991 Expenses1
Percent change
1992
budget
objective

1992
budget

Operating expenses
Budget objective factors
Special projects

4.5
1.9
.8

4.2
2.1
.8

Total

7.2

Item

1. See data on expenses in table 3.1.

anticipated spending for daylight overdraft processing and a smaller-thanexpected increase in postage expenses.
The increase of $32.2 million, or
2.1 percent, for budget objective factors
is within the range approved by the
Board. The budgeted expenses for most
of the factors vary only slightly from the
budget objective, but the 1992 increase
for supervision and regulation is expected to be $8.5 million, or $6.3 million
more than anticipated. The increase in
the budget objective for supervision and
regulation, $2.2 million, was based on
an anticipated increase in staff of 55.
The 1992 budget reflects a staff increase
of 99 ANP. The deteriorating condition
of banks on the east coast and the plan to
expand examination programs throughout the System will require additional
examiners.

Excluded from the 1992 spending
target was the projected increase of
$5.2 million, or 0.3 percent, associated
with the Check Image Processing and
Currency Authentication Systems special
projects. The 1992 budget for these
projects represents an increase of $6.7
million over the 1991 estimate, $1.8
million for the Check Image project and
$4.8 million for the Development of
Currency Authentication Systems. In
addition, a new special project has been
established to capture the costs associated with Automation Consolidation.
The 1992 budget for this special project
is $6.5 million.

Operational Areas
Tables 3.5 and 3.6 summarize Reserve
Bank expenses and employment in each
of the four operational areas. Tables 3.7
though 3.10 show expense details for
each area.

Monetary and Economic Policy
The 1992 budget increase of $5.5 million, or 5.1 percent above 1991 estimated
expenses, reflects a staff increase of
3 ANP, salary administration actions,
increased equipment and data-processing
costs associated with automation initia-

Table 3.5
Operating Expenses of the Federal Reserve Banks, by Operational Area, 1990-92
Thousands o f dollars, except as noted

Operational area

Monetary and economic policy
Services to the U.S. Treasury
and other government agencies
Services to financial institutions
and the public
Supervision and regulation

Total

1990
actual

1991
estimate

1992
budget

Percent change
1990-91

1991-92

98,973

107,530

113,021

8.6

5.1

156,934

169,355

180,060

7.9

6.3

938,862
211,884

985,340
239,356

1,042,078
261,246

5.0
13.0

5.8
9.1

1,406,652

1,501,581

1,596,405

6.7

6.3

Federal Reserve Banks
tives, costs associated with new building
projects in two Districts, and increased
costs of the research libraries in some
Districts. Staffing increases are due primarily to the full-year effect of economists hired during 1991.
At the District level, New York has
budgeted for automation initiatives that
include replacement of an information
display system (IDS) in the Open Market and Foreign Exchange areas and
installation of an office information
system in the statistics area. New York's
budget also reflects higher costs for
data-processing support due to increased
volume on the Securities Trading and
Clearing System (STACS).

Services to the U.S. Treasury and
Other Government Agencies
The 1992 budget for this operational
area is projected to be $180.1 million, or
6.3 percent greater than estimated 1991
expenses. Staffing levels are expected
to decline by 8 ANP. The continued
conversion of over-the-counter savings
bonds to the Savings Bond Regional
Delivery System will add 71 ANP to the
consolidated operations-savings bonds
area, but staff in other savings bonds
activities will decrease by 55 ANP.
Savings bond volume is expected to
increase by 9.0 percent, while unit costs
are budgeted to decrease by 0.4 percent.

Table 3.6
Employment at the Federal Reserve Banks, by Activity, 1990-92
Average number of personnel, except as noted 1

Activity

Operational areas
Monetary and economic policy
Services to the U.S. Treasury
and other government agencies
Services to financial institutions
and the public
Supervision and regulation
Support and
Support
Overhead

1990
actual

772

1991
estimate

791

1992
budget

794

Percent change
1990-91

1991-92

2.4

1,816

1,909

1,902

5.1

-.4

9,214
2,217

9,121
2,378

8,974
2,477

-1.0
7.3

-1.6
4.2

4,533
4,940

4,658
4,974

4,730
4,995

2.8
.7

1.5
.4

23,492

23,831

23,872

1.4

overhead2

Total

1. See text note 1 for definition o f average number o f personnel.
2. See appendix F, table F.3, note 1, for definitions.

Table 3.7
Expenses of the Federal Reserve Banks for Monetary and Economic Policy, 1990-92
Thousands o f dollars, except as noted
1990
actual

1991
estimate

Economic policy determination
Open market trading

80,157
18,816

86,186
21,344

Total

98,973

107,530

Service

1992
budget

Percent change
1990-91

1991-92

90,543
22,477

7.5
13.4

5.1
5.3

113,021

8.6

5.1

Annual Report: Budget Review, 1989-90

Services to Financial Institutions
and the Public
The 1992 budget for this operational
area, which includes both priced and
nonpriced operations, is expected to
increase by $56.7 million, or 5.8 percent
above estimated 1991 expenses. Staff is
to be reduced by 147 ANP, primarily in
the commercial checks (-118 ANP),
definitive securities safekeeping and
noncash collection ( - 1 3 ANP), and
automated clearinghouse ( - 1 0 ANP)

operations. These decreases are partially
offset by staff increases in currency and
coin operations (19 ANP).
Commercial check processing is by
far the largest service ($504.9 million),
accounting for almost half the budgeted
expenses for this operational area and
requiring 5,480 ANP; the anticipated
increase in expenses is $21.4 million,
or 4.4 percent above estimated 1991
expenses. Staffing levels for 1992 include a reduction of 118 ANP resulting
from improved operations, continued

Table 3.8
Expenses of the Federal Reserve Banks for Services to the U.S. Treasury
and Other Government Agencies, 1990-92
Thousands o f dollars, except as noted

Service

Savings bonds
Consolidated operations, savings bonds
Other Treasury issues
Consolidated operations, other Treasury
issues
Central Treasury and agency services
Government accounts
Food coupons
Other

Total

1990
actual

1991
estimate

1992
budget

Percent change
1990-91

1991-92

40,069
13,566
15,872

37,143
23,724
15,316

35,576
28,593
16,339

-7.3
74.9
-3.5

—4.2
20.5
6.7

1,495
21,950
23,926
15,546
24,508

1,275
22,338
24,778
18,499
26,282

1,396
23,636
26,467
19,702
28,351

-14.7
1.8
3.6
19.0
7.2

9.5
5.8
6.8
6.5
7.9

156,933

169,355

180,060

7.9

Table 3.9
Expenses of the Federal Reserve Banks for Services to Financial Institutions
and the Public, 1990-92
Thousands o f dollars, except as noted
Percent change

1990
actual

1991
estimate

1992
budget

Currency and coin
Special cash
Commercial checks
Other checks
Funds transfer
Automated clearinghouse
Book-entry securities transfers
Definitive securities safekeeping
and noncash collection
Loans to members and others
Public programs
Other

156,240
13,652
473,099
24,650
63,731
78,880
31,027

168,215
14,208
483,528
27,965
71,562
82,598
33,318

183,279
14,695
504,892
29,816
75,742
89,527
35,274

7.7
4.1
2.2
13.5
12.3
4.7
7.4

9.0
3.4
4.4
6.6
5.8
8.4
5.9

14,710
15,073
43,762
24,038

14,542
15,987
48,710
24,708

14,288
16,826
51,977
25,764

-1.1
6.1
11.3
2.8

-1.7
5.2
6.7
4.3

Total

938,862

985,340

1,042,079

5.0

5.8

Service

1990-91

1991-92

Federal Reserve Banks
automation in the area of check adjustments, reductions in adjustment
backlogs, conversion to optical disk
storage systems in several Districts, and
continued improvements in processing
return items. Commercial check volume
is budgeted to decrease 0.2 percent,
while unit costs are budgeted to increase
4.2 percent.
Expenses for the currency service are
expected to increase $13.3 million, or
9.3 percent, over 1991. Staff will increase
by 19 ANP. Currency volume is projected to grow by 6.1 percent in 1992.
The major initiatives affecting this
service are managing increased volumes
and the Second Generation Currency
Processing project.
The automated clearinghouse (ACH)
service is budgeted to increase by
$6.9 million, or 8.4 percent. Growth in
expenses w i l l shift from government to
commercial A C H services, as commercial A C H volumes continue to grow
at faster rates. Total A C H volume is
projected to increase 15.9 percent in
1992, resulting in a 6.4 percent decrease
in unit cost. Major initiatives affecting
this service are conversion to A l l Electronic A C H service and the Future
A C H System project.
Expenses for the funds transfer
service are expected to increase by
$4.2 million, or 5.8 percent. Staff w i l l

decrease by 7 ANP. The increase in
costs is primarily the result of increased
data-processing, data-communications,
and data-systems support costs associated with volume growth. Some accounting costs allocated to this service will
decrease as a result of funds summarization initiatives.

Supervision and Regulation
The increase of $21.9 million, or
9.1 percent, for this operational area is
due mainly to the addition of 99 ANP
and increases in compensation, equipment (primarily laptop computers),
travel, training, and automation. Staff
increases are necessitated by increased
demands on the Federal Reserve's
examination staffs, including more
examinations of broader scope, increased
emphasis on Bank Secrecy Act issues,
the need to monitor compliance with
and pursue enhancements to international
risk-based capital standards, the increasing number of organizations that
are likely to require special attention in
the form of extended examinations in
several Districts, and continued strengthening of consumer affairs operations.
Expenses are also affected by initiatives
in the areas of payment system risk and
daylight overdraft pricing.

Table 3.10
Expenses of the Federal Reserve Banks for Supervision and Regulation, 1990-92
Thousands o f dollars, except as noted

Service

Supervision o f District
financial institutions
Administration o f laws and regulations
related to banking
Studies o f banking and financial
market structures

Total

1990
actual

1991
estimate

1992
budget

131,328

151,430

69,257

76,929

11,298

211,884

Percent change
1990-91

1991-92

168,666

15.3

11.4

80,559

11.1

4.7

10,997

12,021

-2.7

9.3

239,356

261,246

13.0

9.1

Annual Report: Budget Review, 1989-90

Objects of Expense
Personnel expenses comprise officer and
employee salaries, other compensation
to personnel, and retirement and other
benefits. Total personnel costs are
expected to increase by 6.8 percent in
1992, accounting for 65.0 percent of
Reserve Bank expenses (table 3.11).
Salaries and other compensation for
personnel account for 52.0 percent of
1992 budgeted expenses, and anticipated
growth is $45.1 million, or 5.7 percent.
The increase for salaries, $46.6 million,
or 6.0 percent, will be partially offset
by a decline of $1.5 million in other
personnel expenses. Merit pay increases
of $37.1 million, or 4.8 percent, are the

primary reason for salary expense
growth. Also contributing to additional
salary expenses are promotions, reclassifications, structure adjustments, and
staffing level increases. These increases
are partially offset by short-term position
vacancies (lag) and reduced overtime
expenses.
Retirement and other benefits expenses, which account for 13.0 percent
of the 1992 Reserve Bank budgets, are
anticipated to increase by $21.3 million,
or 11.5 percent, over 1991. The increase
is the result of continued escalation of
hospital and medical costs, a rise in
social security, workers compensation,
and unemployment compensation payments, and the higher employer con-

Table 3.11
Operating Expenses of the Federal Reserve Banks, by Object, 1990-92
Thousands o f dollars, except as noted

Object

1990
actual

1991
estimate

Percent change

1992
budget

1990-91

1991-92

PERSONNEL
O f f i c e r s ' salaries
E m p l o y e e s ' salaries
Other personnel 1
Retirement and other benefits
T o t a l personnel

73,979
646,980
12,872
163,784
897,615

80,598
693,656
11,329
185,666
971,249

85,005
735,867
9,784
206,954
1,037,610

8.9
7.2
-12.0
13.4
8.2

5.5
6.1
-13.6
11.5
6.8

NONPERSONNEL
Forms and supplies
Equipment
Software
Shipping
Travel

53,418
162,773
32,221
83,461
28,883

54,942
167,862
32,931
89,661
32,383

55,997
179,611
34,433
91,295
33,970

2.9
3.1
2.2
7.4
12.1

1.9
7.0
4.6
1.8
4.9

Buildings
Insurance
Real estate taxes
Property depreciation
Utilities
Rent
Other
Total buildings

802
22,430
33,545
25,486
22,029
19,194
123,486

912
27,104
35,666
26,776
23,364
19,178
133,000

1,132
30,811
40,228
29,465
24,771
20,259
146,666

13.7
20.8
6.3
5.1
6.1
-.1
7.7

24.1
13.7
12.8
10.0
6.0
5.6
10.3

Recoveries
A l l other2

-35,204
60,000

-35,690
55,244

-38,033
54,860

1.4
-7.9

6.6
-.7

509,037

530,333

558,796

4.2

5.4

1,406,652

1,501,582

1,596,406

6.7

6.3

T o t a l nonpersonnel

Total

1. Expenses f o r certain contractual arrangements, and miscellaneous personnel expenses.
2. C o m m u n i c a t i o n s , fees, contra-expenses, shared costs distributed, shared costs
support cost distributed, support cost received, and other.

received,

Federal Reserve Banks
tribution to the employee thrift plan in
1992.
Nonpersonnel expenses account for
35.0 percent of the 1992 Reserve Bank
budgets, reflecting a projected increase
of 5.4 percent over 1991.
Equipment expenses are expected to
increase by 7.0 percent, accounting for
11.3 percent of total expenses in 1992.
An equipment depreciation increase of
$8.4 million, or 9.5 percent, is attributable to continuing upgrades of dataprocessing equipment in some Districts,
the full-year impact of equipment
purchased in 1991, and the New York
EROC and Dallas facilities programs.
Shipping expenses are projected to
increase by 1.8 percent, accounting for
5.7 percent of Reserve Bank expenses in
1992. This small increase is due
primarily to an increase in Interdistrict
Transportation System costs offset by
savings in postage costs as a result of
RDS implementation.
Building expenses, which account for
9.2 percent of total 1992 expenses, are
expected to increase by 10.3 percent
over 1991 because of higher real estate
taxes and the full-year effect of recently
completed capital projects in a number
of Districts. The New York EROC and

Dallas building projects contribute
heavily to the large increases.
Recoveries are expected to increase
by $2.3 million, or 6.6 percent, in 1992,
primarily because of increased income
from tenants and expanded electronic
A C H services.
Foreign travel expenses total $2.6
million, up 8.5 percent over 1991 but
accounting for only 0.2 percent of total
expenses. Examiner travel, budgeted at
$1.6 million, is up 11.2 percent. Foreign
travel expenses for Bank Presidents and
First Vice Presidents, at $186,000, are
up 19.0 percent over estimated 1991
expenses. Of this amount, $112,000 is
budgeted for New York, primarily for
that District's participation in the work
of the Bank for International Settlements.

Capital Outlays
Capital outlays are budgeted at $259.1
million, a decrease of $24.0 million,
or 8.5 percent, from estimated 1991
expenses (table 3.12). The decrease is a
result of the near completion of two
major building projects, the Dallas
building and New York's East Rutherford Operations Center. The Reserve

Table 3.12
Capital Outlays of the Federal Reserve Banks, by Class of Outlay, 1990-92
Thousands o f dollars, except as noted

Class o f outlay

Data-processing and datacommunications equipment
Buildings
Furniture, furnishings,
and fixtures
Other equipment
Land and other real estate
B u i l d i n g machinery and equipment
Leasehold improvements
Software

Total

1990
actual

1991
estimate

1992
budget

94,715
76,313

72,221
138,753

12,279
14,613
35,055
8,906
1,012

242,893

Percent change
1990-91

1991-92

112,452
51,257

-23.7
81.8

55.7
-63.1

22,874
20,550
3,294
23,571
1,813

28,512
34,311
8,632
18,665
2,830
2,454

86.3
40.6
-90.6
164.7
79.1

24.6
67.0
162.0
-20.8
56.1

283,076

259,112

16.5

-8.5

Annual Report: Budget Review, 1991-92

Banks' capital budgets continue to be
dominated by outlays for data-processing
and data-communications equipment.
Outlays for data-processing and datacommunications equipment for 1992
amount to $112.5 million, approximately
43.4 percent of total capital outlays. The
largest portion of these outlays is for
central processing units and check
equipment ($25.5 million), primarily for
data- and check-processing systems at
EROC ($9.2 million) and Dallas ($4.5
million). Purchases and upgrades of
storage devices are planned by all
Districts. In addition, Chicago has
budgeted $6.3 million for equipment
related to a system communication
center.
Purchases of furniture and other
equipment are budgeted at $62.8 million,
about 24.2 percent of total capital
outlays. New York's planned purchase
of equipment for installation at EROC
accounts for approximately one-fourth
of these outlays ($15.4 million). The
Districts plan to spend approximately
$16.7 million on cash-related equipment,
including currency processing machines
at EROC and Baltimore ($8.7 million),
cash materials handling systems at
several offices ($3.9 million), and currency briqueters at EROC, Atlanta, and
Chicago ($1.0 million).
Building outlays account for $51.3
million in the 1992 budget, about
19.8 percent of total capital outlays. The
amount includes renovation and remodeling projects in several Districts ($15.3
million), consulting fees associated with
the planned new facility at Minneapolis
($8.3 million), and construction of New
York's EROC ($6.3 million).
Land and other real estate purchases
are budgeted at $8.6 million. The largest
item is land for the new Minneapolis
building ($4.2 million); another $2.0
million is budgeted for a new parking lot
at San Francisco's Portland office.

Building machinery and equipment
outlays are budgeted at $18.7 million. A
large portion of these outlays is related
to the Dallas building project ($6.3
million); the remainder w i l l enable
several Districts to upgrade or replace
existing machinery and equipment.
Outlays for leasehold improvements
are budgeted at $2.8 million.

Trends in Expenses
and Employment
For the ten years ending in 1992,
expenses of the Reserve Banks will have
increased an average of 5.1 percent per
year (chart 3.1). From 1987 through
1992, the annual growth in Bank
expenses has been 5.9 percent. Increases
in expenses were slightly higher after
1987 because of implementation of EFA
(Expedited Funds Availability Act) and
increased bank supervision.
The number of employees at the
Reserve Banks has increased from
23,230 in 1982 to 23,871 in 1992, an
increase of 641 ANP (chart 3.2). Since
1982, staffing has increased in supervision and regulation (681 ANP) and
services to financial institutions and the
public (408 ANP) because additional
Chart 3.1
Operating Expenses of the
Federal Reserve Banks, 1982-92 1
B i l l i o n s o f dollars

1982

1987

1. For 1991, estimate; for 1992, budget.
2. Calculated with the GNP price deflator.

_l_

1992

Federal Reserve Banks
Chart 3.2
Employment at the Federal Reserve
Banks, 1982-921
ANP, in thousands

Table 3.13
Changes from 1991 to 1992 in
Volume and Unit Costs of
Federal Reserve Bank Services
Percent
Service

Payments
Commercial checks
Automated clearinghouse
Funds transfers
Other checks
Cash
Fiscal

1. For 1991, estimate; for 1992, budget. See text note 1
for definition o f A N P .

resources were needed to meet expanded
responsibilities in the two areas. Partially
offsetting these increases were decreased
staff in overhead services (681 ANP)
resulting from Systemwide efforts to
control costs.

Volume and Unit Costs
Volume for all measured operations is
expected to increase by 2.8 percent over
1991, and unit cost is expected to rise by
2.9 percent (table 3.13). Over the years
1987 through 1992 budget, volume is
expected to increase at an average annual
rate of 3.1 percent and unit cost at an
average annual rate of 1.8 percent.
The increase in unit cost expected for
1992 reflects a rise in unit cost in all
areas except A C H services and savings
bonds. In the area of commercial checks,
the largest component of the index,
unit cost is expected to increase by
4.2 percent and volume to decrease by
0.2 percent; the decrease in volume is
due primarily to bank mergers.

1991 Budget Performance
The 1991 Reserve Bank budgets were
approved in December 1990 at a total of

Securities and noncash

All services

Volume

U n i t cost

2.4
-.2
15.9
4.5
-1.1

2.4
4.2
-6.4
1.3
7.0

4.8

3.6

3.8

3.5

-1.5

5.1

2.8

2.9

$1,501.0 million, an expected increase
of $86.4 million, or 6.1 percent, over
estimated 1990 expenses. The Reserve
Banks now estimate that 1991 expenses
w i l l have been $1,501.6 million, or
$0.6 million over the approved budget.
Five Reserve Banks expect to be
within 0.1 percent of their approved
1991 budgets. As a result of a building
accident that caused water damage to its
computer, Minneapolis anticipates a
budget overrun of $2.9 million, or
4.1 percent. Richmond anticipates a
budget overrun of $492,000, or 0.4 percent, primarily because additional staff
are needed in the area of supervision and
regulation. Seven Districts expect to be
under budget by less than 1 percent. •

Part II
Special Analysis

Chapter 4

Treasury Direct: A Book-Entry Safekeeping
System for Individual Investors
Treasury Direct is a book-entry system
for safekeeping Treasury securities that
is operated by the Federal Reserve
Banks, on behalf of the U.S. Department
of the Treasury. The system is most
suited to serving the needs of individual
investors who tend to hold Treasury
securities until maturity and prefer to
safekeep the securities with the Treasury
Department.
Treasury Direct was designed by the
Federal Reserve System and the Treasury
Department as part of the department's
ongoing efforts to eliminate the handling
of engraved Treasury securities; it is
maintained on a central computer operated by the Federal Reserve Bank of
Philadelphia. Introduction of the system
in mid-1986 permitted the Treasury
Department to begin issuing its securities
in book-entry-only form (that is, no
certificate is issued). Treasury officials
estimate that in its first seven years of
operation, Treasury Direct will have
saved the department and U.S. taxpayers
$46 million through increased efficiency
in securities issuance, servicing, redemption, and payment of interest.

Features of Treasury Direct
In addition to saving money, Treasury
Direct has improved services to investors. For many investors, it offers a
number of important advantages.

computer rather than in paper form.
With engraved securities, loss or theft is
always a concern. If an engraved security
that was issued in registered form (that
is, with the security owner's name
inscribed on the security) is lost or
stolen, replacement is possible, but the
time and documentation required for
replacement are considerable. If an
engraved security issued in bearer form
(that is, payable to the bearer) is lost or
stolen, recovery is unlikely, and filing a
claim entails considerable paperwork as
well as cost and time. With Treasury
Direct, there is no engraved security to
be lost; instead, the security is held on a
computer in the owner's name.
More Registration Options
Treasury Direct offers investors a
broader choice of registration options
than is available with engraved securities.
The system also enables owners to
establish clear ownership and survivorship rights to their securities. Among
the popular registration options are
designation of a beneficiary, joint
ownership with or without right of survivorship, and registration of a natural
guardian of a minor or custodian under
an applicable "gifts to minors" statute.
In addition, the registration on a Treasury
Direct account can be changed faster
than it can for engraved securities issued
in registered form.

Added Security
Treasury Direct affords investors more
safety than do engraved securities,
because the securities are held on a

Improved Payment Procedures
Investors using Treasury Direct have
greater assurance of prompt receipt of

Annual Report: Budget Review, 1989-90

securities-related payments. Payments
are made automatically via direct deposit to a checking or savings account at
a financial institution designated by the
investor. Prior to Treasury Direct, all
payments were made by check, and
most were mailed to the investor; also,
interest payments to investors holding
bearer (coupon) securities were not
automatic, but required investors to clip
the maturing coupons and present them
for collection. Treasury Direct provides
payment automatically. In addition, the
direct deposit feature precludes loss or
theft of checks and gives investors
immediate access to their funds on
payment day.

ample time to request reinvestment at
maturity or to cancel an earlier instruction to reinvest.

Simplified Recordkeeping
Treasury Direct account holders receive
a single statement of account for all
securities held under each registration
option and with the same payment
instructions. Such a consolidated statement can simplify bookkeeping for
investors who hold a number of securities
in the system.

Nationwide Servicing Offices
Easier Reinvestment and
Redemption
When an engraved security matures, it
must be presented, in person or by
registered mail, to a Federal Reserve
Bank or Branch for redemption or
reinvestment. In the Treasury Direct system, investors merely inform a Federal
Reserve Bank or the Treasury Department, by mail, about how a maturing
security should be handled. If it is to be
redeemed, the investor's account at his
or her depository institution is automatically credited for the redemption
proceeds on the day the security matures.
If it is to be reinvested in a Treasury
security being issued the day the original
security matures, the new security is
added to the investor's Treasury Direct
account, and any difference between the
value of the maturing security and the
purchase price of the new security is
automatically deposited in the investor's
account at a designated depository
institution. Also, under Treasury Direct
the investor is notified by mail when a
security is about to mature and is given

Investors can obtain information about
and conduct transactions involving
Treasury Direct accounts at the Treasury
Department or at thirty-six Federal
Reserve Banks and Branches around the
United States (see accompanying list).
All locations can establish new Treasury
Direct accounts, process purchases of
Treasury securities, handle securities
transfers from one Treasury Direct
account to another or from Treasury
Direct to the Federal Reserve's commercial book-entry system, and make a
variety of requested changes to account
information. A l l locations will also
provide forms and written information
and handle telephone inquiries.
Each account holder is assigned a
Treasury Direct servicing office based
on mailing address. However, an account
holder who travels or spends extended
periods of time in a different location
may deal with the servicing office nearest
the temporary location. Any servicing
office can conduct a transaction or handle
an inquiry for any Treasury Direct
account holder regardless of the assigned
office.

Treasury Direct
Treasury Direct Servicing Offices
Federal Reserve Bank or Branch

Telephone Number

Address

F R B Atlanta

404-521-8657*
404-521-8653

Securities Service Department
104 Marietta Street, N W
Atlanta, G A 30303

F R B Baltimore

301-576-3500*
301-576-3300

P.O. B o x 1378
Baltimore, M D 21203

FRB Birmingham

205-731-8702*
205-731-8708

P.O. B o x 10447
B i r m i n g h a m , A L 35283

F R B Boston

617-973-3805*
617-973-3810

P.O. B o x 2076
Boston, M A 02106

FRB Buffalo

716-849-5158*
716-849-5000

P.O. B o x 961
B u f f a l o , N Y 14240-0961

F R B Charlotte

704-358-2424*
704-358-2100

P.O. B o x 30248
Charlotte, N C 28230

F R B Chicago

312-786-1110*
312-322-5369

P.O. B o x 834
Chicago, I L 60690

F R B Cincinnati

513-721-4787 Ext. 334

P.O. B o x 999
Cincinnati, O H 45201

F R B Cleveland

216-579-2490

P.O. B o x 6387
Cleveland, O H 44101

F R B Dallas

214-651-6362

Security Dept. Station K
400 South A k a r d Street
Dallas, T X 75222

F R B Denver

303-572-2475*
303-572-2470 or -2473

P.O. B o x 5228
Denver, C O 80217-5228

F R B Detroit

313-963-4936*
313-964-6157

P.O. B o x 1059
Detroit, M I 48231

F R B E l Paso

915-544-4730

P.O. B o x 100
E l Paso, T X 79901

F R B Houston

713-659-4433

P.O. B o x 2578
Houston, T X 77252

F R B Jacksonville

904-632-1178*
904-632-1179 o r - 1 1 9 0

P.O. B o x 2499
Jacksonville, F L 32231-2499

F R B Kansas C i t y

816-881-2767*
816-881-2409

P.O. B o x 440
Kansas C i t y , M O 64198

F R B L i t t l e Rock

501-324-8272

P.O. B o x 1261
L i t t l e Rock, A R 72203

F R B Los Angeles

213-624-7398

P.O. B o x 2077
Terminal Annex
Los Angeles, C A 90051

FRB Louisville

502-568-9240*
502-568-9236 or -9238

P.O. B o x 32710
Louisville, K Y 40232

FRB Memphis

901-523-7171 Ext. 641*
Ext. 622

P.O. B o x 407
Memphis, T N 38101

FRB Miami

305-471-6257*
305-471-6497

P.O. B o x 520847
M i a m i , F L 33152

F R B Minneapolis

612-340-2051*
612-340-2075

250 Marquette A v e .
Minneapolis, M N 55480

Annual Report: Budget Review, 1989-90

Treasury Direct Servicing Offices—Continued
Federal Reserve Bank or Branch

Telephone Number

Address

F R B Nashville

615-251-7236*
615-251-7100

301 Eighth Ave., N .
Nashville, T N 37203-4407

F R B N e w Orleans

504-593-3290*
504-593-3200

P.O. B o x 61630
N e w Orleans, L A 70161

FRB New York

212-720-5823*
212-720-6619

Federal Reserve
P.O. Station
New Y o r k , N Y 10045

F R B Oklahoma C i t y

405-270-8660*
405-270-8652

P.O. B o x 25129
Oklahoma C i t y , O K 73125

F R B Omaha

402-221-5638*
402-221-5636

2201 Farnam Street
Omaha, N E 68102

F R B Philadelphia

215-574-6580*
215-574-6680

P.O. B o x 90
Philadelphia, P A 19105

F R B Pittsburgh

412-261-7988*
412-261-7863

P.O. B o x 867
Pittsburgh, P A 15230-0867

F R B Portland

503-221-5931*
503-221-5932

P.O. B o x 3436
Portland, O R 97208-3436

FRB Richmond

804-697-8355*
804-697-8372

P.O. B o x 27622
Richmond, V A 23261

F R B Salt Lake C i t y

801-322-7844*
801-322-7900

P.O. B o x 30780
Salt Lake C i t y , U T 84130

F R B San Antonio

512-978-1330*
512-978-1303 or -1305

P.O. B o x 1471
San Antonio, T X 78295

F R B San Francisco

415-974-3491*
415-974-2330

P.O. Box 7702
San Francisco, C A 94120

F R B Seattle

206-343-3615*
206-343-3605

Securities Services Dept.
P.O. B o x 3567
Terminal Annex
Seattle, W A 98124

F R B St. Louis

314-444-8602*
314-444-8665

P.O. B o x 14915
St. Louis, M O 63178

U.S. Treasury Department

202-874-4000
202-874-4026**

Bureau o f the Public Debt
D i v i s i o n o f Customer Services
Washington, D C 20239-0001

* F o r recorded information.
* * D e v i c e for hearing impaired.

Free Services
Investors are not charged for the services provided by Treasury Direct. Also,
at this time there is no limit on the
number of Treasury Direct accounts an
individual can have.

Growth of Treasury Direct
Treasury Direct has grown in popularity
since it began to accept all Treasury

issues in 1986. By the end of 1986,
77,942 Treasury Direct accounts with a
par value of $731 million had been
established; twelve months later, the
totals had grown to 391,779 accounts
with a par value of $22.6 billion; as of
December 31, 1991, the numbers were
1,094,915 accounts with a par value of
$64.4 billion. In 1991 alone, Treasury
Direct servicing offices in Federal
Reserve Banks and Branches handled
approximately 600,000 new security

Treasury Direct
purchases, 1.8 million account-servicing
transactions, and 1.6 million telephone,
written, and walk-in inquiries and sent
out more than 11.7 million notices and
account statements to Treasury Direct
account holders.

By offering convenience and a range
of services, Treasury Direct has become
an attractive alternative for investors
who wish to hold their Treasury
securities on the books of the Treasury
Department.

Appendixes

45
Appendix A

Mission and Operational Areas
of the Federal Reserve System
The Federal Reserve Banks and the
Board of Governors have established
four major operational areas to account
for their activities: monetary and economic policy, services to the U.S.
Treasury and other government agencies, services to financial institutions
and the public, and supervision and
regulation of financial institutions.1 This
appendix describes each of these areas
in detail.

Monetary and Economic Policy
The Federal Reserve contributes to the
attainment of the nation's economic and
financial goals through actions to
influence money and credit in the economy. The System has several tools to
affect the availability and cost of the
nation's money and credit: setting
reserve requirements; setting the discount
rate (which affects the cost of borrowing); and open market operations,
the primary tool of monetary policy.
The seven-member Board of Governors sets reserve requirements and acts
on requests from the Federal Reserve
Banks to adjust the discount rate. The
Federal Open Market Committee
(FOMC) meets in Washington eight
times a year, usually twice each business
quarter, to set policies for System open

1. Services to the U.S. Treasury and other
government agencies is an operational area unique
to the Federal Reserve Banks. The fourth
operational area for the Board of Governors,
System policy direction and oversight, provides
resources for the supervision of Board and Bank
programs and is discussed in chapter 2.

market operations; it comprises the
Board, the president of the Federal
Reserve Bank of New York, and, on a
rotating basis, the presidents of four
other Reserve Banks.
A vast amount of banking and financial data flows through the Reserve
Banks to the Board, where it is compiled
and made available to the public in
weekly and monthly statistical releases
on such topics as the monetary aggregates, interest rates, bank credit, and
exchange rates. The research staffs at
the Board and the Reserve Banks use
this information, along with data collected by other public and private institutions, to assess the state of the economy and the relationships between the
financial markets and economic activity.
Staff members provide background for
the Board and for each meeting of the
FOMC by preparing detailed economic
and financial analyses and projections
for the domestic economy and international markets. In addition, they conduct
longer-run economic studies of issues at
the regional, national, and international
levels.

Services to the U.S. Treasury
and Other Government Agencies
The U.S. government uses the Federal
Reserve as its bank. Through deposit
accounts at the Federal Reserve Banks,
the government issues its checks and
payments and collects its receipts. The
Reserve Banks also process wire transfers of funds and automated clearinghouse payments and give the Treasury
daily statements of account activity.

Annual Report: Budget Review, 1989-90

Beyond these typical depository activities, the Federal Reserve Banks provide
several unique services to the government. They monitor the tax receipts
deposited in the 13,026 tax and loan
accounts maintained by depository institutions designated to perform this function, they hold the collateral that those
institutions pledge to support those and
other government deposits, and they
transfer funds to the Treasury's account
at its request. The Reserve Banks assist
the Treasury in its financing of the
public debt by issuing, servicing, and
redeeming all marketable Treasury
securities as well as all U.S. savings and
retirement plan bonds. In another unique
fiscal service, the Reserve Banks redeem
food coupons for the U.S. Department
of Agriculture and destroy them.

Services to Financial Institutions
and the Public
The Federal Reserve System plays a
central role in the nation's payments
mechanism, which consists of many
independent systems designed to move
funds among financial institutions across
the country. The Federal Reserve distributes currency and coin, processes
checks for collection, operates electronic
funds transfer networks, and provides
for transfers of securities and for coupon
collection.
Ensuring that the supply of currency
and coin meets the public's demand for
cash is the responsibility of the Federal
Reserve. The Reserve Banks obtain currency and coin from the Bureau of
Engraving and Printing and from the
Mint and distribute it to the public
through depository institutions. The
Banks use highly sophisticated equipment to count cash, identify counterfeits,
and destroy currency that is unfit for

circulation. In 1991 the Reserve Banks
paid out $285.2 billion in currency and
$4.8 billion in coin and destroyed
$73.8 billion of unfit currency.
The Reserve Banks collect and clear
checks under the specific authority of
the Federal Reserve Act of 1913. The
Banks, Branches, and regional checkprocessing centers currently clear
approximately 18.5 billion checks each
year with an average daily value of more
than $50 billion. Most checks deposited
with the Federal Reserve by financial
institutions are collected on the day they
are deposited or on the next business
day.
The Federal Reserve also plays a
central role in the nation's payments
mechanism through its wire transfer
system, Fedwire. Depository institutions
can draw on their reserves or clearing
accounts at the Reserve Banks through
Fedwire and transfer funds anywhere
in the country. Approximately 6,969
depository institutions use Fedwire
through direct computer connections
with Federal Reserve Banks, and
another 4,399 institutions use Fedwire
through off-line means such as telephone. In 1991, approximately 64 million transfers valued at about $191 trillion were sent over Fedwire, an average
of $3.0 million per transfer and $761 billion per day.
The Federal Reserve allows participants in private clearing arrangements to
exchange and settle transactions on a net
basis through reserve or clearing-account
balances. Users of net settlement services include local check clearinghouse
associations, automated clearinghouse
(ACH) networks, credit card processors,
automated teller machine networks, and
national and regional funds and securities
transfer networks. In 1991, approximately 770,000 net settlement entries
were processed by the Reserve Banks.

Mission and Operational Areas
Approximately 29,000 depository
institutions participate in the Federal
Reserve's A C H service, which makes
one-time and recurring payments electronically instead of by check. The
depository institutions use the A C H
service for credit transactions, primarily
to pay salaries and pensions, and for
debit transactions such as preauthorized
bill payments and cash concentration
debits. Of the approximately 11,100
A C H endpoints, 3,700 have electronic
connections with the Federal Reserve;
the others receive payment data via
magnetic tapes or paper registers. In
1991 the Reserve Banks processed
more than 1.6 billion A C H transactions
valued at about $6.7 trillion; 32 percent
of the transactions were for the federal government, and the rest were
commercial.
The securities services provided by
the Reserve Banks cover the handling
of book-entry securities and definitive
securities and the collection of coupons
and miscellaneous items. The bookentry service, begun in 1968, enables
holders of government agency securities
to transfer them electronically to other
institutions throughout the country. The
Reserve Banks maintained approximately 14,372 book-entry accounts in
1991 and processed approximately
11.2 million securities transfers.
In the definitive securities service, the
Banks store physical securities ineligible
for maintenance on the Federal Reserve's
book-entry system. The Federal Reserve
held about $15.1 billion of such securities
in priced accounts at the end of 1991.
In its noncash collection service, the
Federal Reserve presents coupons,
bonds, and miscellaneous items, such as
bankers acceptances and certain checks
and drafts, for collection. Coupon collection, which accounts for approximately
98 percent of the transactions in this

service, amounted to 2.9 million coupon
envelopes in 1990 and about 2.2 million
coupon envelopes in 1991.

Supervision and Regulation
Under the authority of the Federal
Reserve Act and the Bank Holding Company Act, the Federal Reserve System
plays a major role in the supervision and
regulation of banks and bank holding
companies. Under the Bank Holding
Company Act, the Board is responsible
for ensuring that all activities of bank
holding companies are "closely related
to banking and a proper incident
thereto." The Board of Governors adopts
regulations to carry out statutory directives and establishes System supervisory
and regulatory policies; the Reserve
Banks conduct on-site examinations and
inspections of state member banks and
bank holding companies, review applications for mergers, acquisitions, and
changes in control from banks and bank
holding companies, and take formal
supervisory actions. The System makes
available to the public nonidentifying
information it periodically collects on
the condition and income of banks and
bank holding companies.
Beyond these activities, the Federal
Reserve maintains continuous oversight
of the banking industry to ensure the
overall safety and soundness of the
financial system. This broader responsibility is reflected in the System's presence in financial markets, through open
market operations, and in the Federal
Reserve's role as lender of last resort.
In 1991 the System maintained the
intensified supervision program for state
member banks and bank holding companies that was implemented five years
ago as a result of the increase in the
number of bank failures and problem
banks. In 1991 the Board and the Reserve

Annual Report: Budget Review, 1989-90

Banks examined approximately 790 state
member banks, inspected approximately
2,254 bank holding companies and
their subsidiaries, and acted on a total
of 3,083 international and domestic
applications.
The Board enforces compliance by
state member banks with the federal
laws protecting consumers in their use
of credit. In 1991 the System conducted approximately 591 compliance
examinations.
The Board's supervisory responsibilities also extend to foreign operations of
U.S. banks and, under the International
Banking Act, to U.S. operations of foreign banks.
•

49
Appendix B

Budget Processes
As a group, the Reserve Banks follow a
budgeting process distinct from that of
the Board of Governors. This appendix
surveys those processes and explains
PACS, the planning and control system
the Banks use for accounting.

The Budget and Control Process
of the Board of Governors
The Board involves all levels of its
management in a planning, budget, and
control process based on the calendar
year. Under authority delegated by the
Chairman, the administrative governor
oversees the process to ensure that all
elements are coordinated, objectives are
achieved, and duplication of effort is
avoided.
The Board structures its budget in
four operational areas: economic and
monetary policy, supervision and regulation of financial institutions, services
to financial institutions and the public,
and System policy direction and oversight. Costs for data processing are
distributed to the four major areas according to usage. Expenses for other
elements of support and overhead are
allocated to the four areas in proportion
to the share of direct costs attributable to
each area.

The Budget Schedule
In the spring, each division at the Board
reviews its goals and resource requirements by obtaining guidance from oversight committees made up of Board
members, by participating in System
planning sessions, and by conducting
division planning sessions. The manage-

ment of each division lists events likely
to affect the division's budget and
estimates budget changes associated with
those events. Simultaneously, the Office
of the Controller prepares a budget estimate based on the current level of operation, taking into account known or
anticipated factors such as wage and
benefit increases and changes in costs
for goods and services. The controller
uses this projection of expenses, with
the estimates from the other divisions
and guidance from the Board's oversight
committees, to estimate a budget guideline. The Chairman and the administrative governor review the proposed guideline before it is submitted to the Board
in June. Using the staff analyses, the
Board approves a guideline in an open
meeting, and the divisions use the
guideline to develop their budgets.
During the summer, the divisions
prepare their budgets. First the Board's
controller and staff director for management and then the appropriate oversight
committees review them. These reviews
usually result in improved coordination,
better consistency among division plans
and objectives, and reduced expenses.
The administrative governor then presents the consolidated budget proposal
to the Chairman for his review and
comments. In early December, at an
open meeting, the budget is presented to
the Board of Governors for action.

The Budget of the OIG
The Board's Office of Inspector General
(OIG), in accordance with its statutory
independence, prepares its proposed
budget apart from the oversight and

Annual Report: Budget Review, 1989-90

guideline process just described and
submits it directly to the Board without
formal staff review. The Board may
seek staff assistance in reviewing the
budget of the OIG before reviewing and
approving it at the same open meeting as
the regular budget.1
Treatment of Capital Expenditures
In 1985 the Board began capitalizing
certain assets and depreciating their
value over appropriate time periods
instead of expensing them in their year
of purchase. Capitalizing, which is in
accordance with generally accepted
accounting principles, more closely
aligns the cost of capital assets with
their periods of service and is consistent
with the accounting practices followed
by the Reserve Banks.
Assessments
After the Board adopts its budget, the
cash requirement for the first half of the
year is estimated. The administrative
governor reviews and approves this
estimate in early January, and, as the
Federal Reserve Act provides, the required amount is raised by an assessment
on each of the Reserve Banks in
proportion to its capital stock and
surplus. The cash requirement for the
second half of the year is estimated in
June, and the second assessment is made
in July. To minimize cash balances held
by the Board, funds are transferred
quarterly.

Financial Monitoring and Control
A l l levels of Board management monitor
and review Board expenses throughout
1. Operations of the OIG are also discussed in
chapter 2 and appendix E.

the budget year. To facilitate this process,
each division constructs quarterly operating plans. Administrative management
observes performance against these plans
monthly and submits quarterly reports to
the Board.
At midyear, the controller and the
staff director for management review
current expenses with each division
director, estimate expenses for the entire
year, and submit the estimate to the
Board with any recommendations for
reallocations. The midyear review helps
control current expenses and provides a
baseline for analyzing budget requests.
At the beginning of the next year, the
controller and the staff director for
management report to the Board on the
previous year's performance against
budget and operating goals.

The Budget and Control Process
of the Federal Reserve Banks
Each year the Federal Reserve Banks,
like the Board, establish major operating goals for the calendar year, devise
strategies for their attainment, estimate
required resources, and monitor results
of current operations and financial
performance.
The Budget Process
A task force drawn from staff members
of the Board and the Reserve Banks
develops a proposed budget guideline
for the coming year based on forecasts
of changes in workload and productivity
at the Reserve Banks. The Conference
of First Vice Presidents and the Conference of Presidents of the Reserve Banks
review the work of the task force and, if
necessary, revise it before sending it to
the Board of Governors. The Board
determines the appropriateness of the
proposed level of spending and at about
midyear communicates the budget ob-

Budget Processes

jective to the Reserve Banks for their
guidance in developing plans and
budgets. To plan for priced services, the
Banks update a multiyear strategic
statement.
The management of each Bank department develops its budget on the
basis of workloads, required initiatives,
and the budget objective. Senior Bank
officials review the departmental requests and, with the president and first
vice president, determine priorities for
the overall budget level to be recommended to the Bank's board of directors. In the fall, the Board of Governors
approves the budget of each Reserve
Bank as well as the fee schedule for
priced services, which is developed
simultaneously with the budget data.

The Capital Budget Process
The Reserve Banks account for capital
expenditures in accordance with generally accepted accounting principles and,
therefore, include depreciation of capital
assets in expenses. Technical staff
members at the Board review all plans
for large capital expenditures, whether
for buildings, automation equipment,
furnishings, or land. The staff members
then make recommendations to the
director of the Division of Reserve Bank
Operations and Payment Systems or to
the Board of Governors, depending on
the significance of the item or project.

the cost-recovery objectives for priced
services. The product directors and the
Pricing Policy Committee examine the
budgets for priced services.2 A committee of three governors reviews the budget
of each Reserve Bank and meets with
the president and first vice president of
each Bank to discuss issues and
directions. Following review by the
committee of three governors, all Bank
budgets are sent to the Board of
Governors for action at a public meeting
in December.

Special Projects
Special projects are those few research
and development efforts that have the
potential to make a major improvement
in the nation's payments mechanism or
in the Federal Reserve's ability to
provide services. Because of their longrange importance, special projects are
approved separately from the process
described above, which focuses on
operational costs. Although not included
in the budget objective, these projects
are individually approved by the
Conference of Presidents and the Board
of Governors, and their effect on total
system outlays is carefully reviewed.
Three such projects, described in
appendix C, have been approved for
1992.

Review at the Board of Governors
In the fall, analysts at the Board review
the budget of each Reserve Bank and
note Systemwide issues to be addressed
during the budget review. They analyze
the executive summary and the statement
of objectives in each budget in light of
the Bank's own trends, plans at the other
Banks, the System budget objective, and

2. The product directors are the first vice
presidents at selected Reserve Banks with responsibility for day-to-day policy guidance over specific
Systemwide priced services. The Pricing Policy
Committee comprises one governor, the Board's
staff director for Federal Reserve Bank activities,
the presidents of two Reserve Banks, and the first
vice presidents of two other Reserve Banks.

Annual Report: Budget Review, 1989-90

The Planning and Control System
The Planning and Control System
(PACS), implemented by the Reserve
Banks in 1977, is the fundamental cost
accounting system for all the services
provided by the Banks, whether priced
or nonpriced, special or routine. Under
PACS, budgets can be compared with
actual expenses by service and object,
and the Board of Governors can compare
the financial and operating performances
of the Reserve Banks.
PACS groups all costs by major services, listed on the facing page under the
four operational areas and support and
overhead. The costs of support and
overhead, in turn, are fully allocated to
the four operational areas. PACS offers
a detailed analysis of all these services

and activities, including productivity
statistics (primarily unit costs and items
per employee-hour), "environmental"
statistics (to clarify the differences
among the Banks' operating environments), and "quality" statistics (to measure performance).
PACS affords the Banks a review of
expenses, an audit trail, and expense
accountability. Through periodic on-site
reviews, the Board confirms that the
Reserve Banks are complying with
PACS instructions and also with System
guidelines set by the Board. In addition,
the General Accounting Office and an
outside public accounting firm have
determined in independent examinations
that PACS is an appropriate and effective
accounting mechanism for the Federal
Reserve.

Budget Processes
Federal Reserve Bank Services
OPERATIONAL AREAS

SUPPORT AND OVERHEAD

Monetary and economic policy
Economic policy determination
Open market trading

Support
Data services
Centrally provided support
Occupancy service
Printing and supplies
Centralized planning
District projects

Services to the U.S. Treasury
and other government agencies
Savings bonds
Consolidated operations—savings bonds
Other Treasury issues
Consolidated operations—other Treasury issues
Centrally provided Treasury and agency services
Government agency issues
Other Treasury and government agency services
Treasury and other government coupons
Food coupons
Government accounts
Services to financial institutions and the public
Special cash service
Currency
Coin
Transfer of account balances
Automated clearinghouse
Commercial check
Other check
Book-entry securities
Definitive securities
Loans to depository institutions and others
Noncash collection
Public programs
Other
Supervision and regulation
Supervision of District financial institutions
Administration of laws and regulations
related to banking
Market structure and supervisory and regulatory
policy studies

Overhead
Administration
System projects and contingency processing center
Special projects
Mail
Legal
General books and budget and expense control
Files and records storage
Personnel
Purchasing
Protection
Motor vehicles
Library
Telephone
Audit

55
Appendix C

Special Categories of System Expense
This appendix discusses System expenses for priced services, capital assets,
special projects, and currency printing.

Priced Services
The Monetary Control Act of 1980
(MCA) requires the Federal Reserve
to make available to all depository
institutions, for a fee, certain services
that the Federal Reserve had previously
provided without explicit charge and
only to member banks. As the act
requires, the cost of providing these
services includes all direct and indirect
costs, the interest on items credited
before actual collection (float), and the
private sector adjustment factor (PSAF).
The PSAF is the return on capital that
would have been provided and the
taxes that would have been paid had
the services been furnished by a private
business firm.
To meet the requirement for the full
recovery of costs, the Federal Reserve
has developed an annual pricing process
involving a review of Reserve Bank
expenses in addition to the review
required by the budget process. Use of
the budgets is an integral part of the
pricing exercise because most of the
recoverable costs of priced services are
direct and indirect costs as determined
by the budgets. To assist depository
institutions in their planning to provide
or use correspondent banking services,
the Federal Reserve usually sets each
year's prices only once, in the fourth
quarter of the preceding year.
Fees for Federal Reserve services must
be approved by the product director for
the respective service, by the Pricing

Policy Committee, and ultimately by the
Board of Governors.1 If fees for any
service are set so that the full recovery
of costs is not anticipated, the Board
announces the rationale.
The cost of float is estimated by
applying the current federal funds rate to
the level of float expected to be generated
in the coming year. Estimates of income
taxes and the return on capital are based
on tax and financing rates derived from
a model of the fifty largest U.S. bank
holding companies; these rates are
applied to the assets the Federal Reserve
expects to use in providing priced services in the coming year. The other
components of the PSAF are derived
from the budgets of the Reserve Banks
and the Board: the imputed sales tax
(based on budgeted outlays for materials,
supplies, and capital assets); the imputed
assessment for insurance by the Federal
Deposit Insurance Corporation (FDIC)
(based on expected clearing balances
and amounts deferred to depository institutions for items deposited for
collection with the Reserve Banks); and
an estimate of the direct and indirect
expenses of the Board of Governors that
is related to the development of priced
services.
The inclusion of all these costs means
the Federal Reserve offers its priced
services on a basis comparable with that
in the private sector, and the discipline
of the market ensures that the prices
charged will be no higher than necessary.

1. See appendix B, note 2, for a description of
the position of product director and of the Pricing
Policy Committee.

Annual Report: Budget Review, 1989-90

Calculation of the PSAF for 1992
In 1991 the Board approved a 1992
private sector adjustment factor of $79.9
million, a decrease of $5.9 million, or
6.8 percent, from the PSAF of $85.8
targeted for 1991.
Asset Base
The estimated value of Federal Reserve
assets to be used in providing priced

services in 1992 is $6,531.8 million
(table C.l). The value of assets assumed
to be financed through debt and equity
in 1992 is $563.6 million, an increase of
$32.9 million, or 6.2 percent, over 1991
(table C.2). This increase results largely
from capital expenditures for bank premises planned by the Reserve Banks next
year and from an increase in long-term
prepayments of equipment maintenance
costs.

Table C.l
Pro Forma Balance Sheet for Federal Reserve Priced Services, 1991-921
Millions of dollars
1991

Asset or liability

1992

ASSETS

Short-term assets
Imputed reserve requirement on clearing balances
Investment in marketable securities
Receivables2
Materials and supplies2
Prepaid expenses2
Items in process of collection3
Total short-term assets
Long-term assets
Premises23
Furniture and equipment2
Leasehold improvements and long-term prepayments2
Capital leases
Total long-term assets

244.1
1.790.4
32.8
8.2
13.7
3.637.5

372.0
2.728.0
32.7
5.6
11.2
2.868.1
5,726.7

305.3
146.8
23.9
.3

Total assets

6,017.6
341.0
139.2
33.9
.1

476.3

514.2

6,203.0

6^31.8

LIABILITIES

Short-term liabilities
Clearing balances and balances arising
from early credit of uncollected items
Deferred-credit items
Short-term debt4

2,466.7
3,205.3
54.7
5,726.7

Total short-term liabilities
Long-term liabilities
Obligations under capital leases
Long-term debt4
Total long-term liabilities .
Total liabilities
Equity

Total liabilities and equity
1. Data are averages for the year.
2. Financed through the PSAF; other assets are selffinancing.
3. Includes allocations of Board of Governors' assets

3,511.4
2,456.7
49.5

.3
154.8

6,017.6
.1
170.4

155.1

170.5

5,881.8

6,188.1

321.2

343.7

6,203.0

6,531.8

to priced services of $0.5 million for 1991 and $0.3
million for 1992.
4. Imputed figures representing the source of financing
for certain priced-service assets.

Special Categories of System Expense

Cost of Capital and Taxes
and Other Imputed Costs
For 1992, a pretax rate of return on
equity of 10.7 percent is planned. Other
required PSAF recoveries for 1992—
imputed sales taxes, imputed FDIC
insurance assessment, and Board expenses—total $23.5 million, up from

$19.9 million approved for 1991 (table
C.2). The decrease in the PSAF of $5.9
million is due primarily to a decrease in
the pretax return on equity rate from
14.5 percent in 1991 to 10.7 percent in
1992 attributable to the weaker 1990
financial performance of bank holding
companies included in the model relative

Table C.2
Derivation of the Private Sector Adjustment Factor (PSAF), 1991-92
Millions of dollars, except as noted
1991

1992

54.7
476.0
530.7

49.5
514.1
563.6

Cost of capital (percent)3
Short-term debt
Long-term debt
Pretax return on equity 4 .
Weighted average...

8.6
9.4
14.5
12.9

7.9
9.2
10.7
10.2

Capital structure (percent)
Short-term debt
Long-term debt
Equity
Total

10.3
29.2
60.5
100.0

30.2
61.0
100.0

30.5

29.4

Capital costs5
Short-term debt
Long-term debt.
Equity
Total

4.7
14.5
46.7
65.9

3.9
15.7
36.8
56.4

Other costs
Sales taxes
Assessment for federal deposit insurance
Expenses of Board of Governors
Total

8.7
9.2
2.0
19.9

10.2
11.4
1.9
23.5

Total PSAF recoveries
Millions of dollars
As a percent of capital ..
As a percent of expenses

85.8
16.2
14.7

79.9
14.2
13.2

Item
P S A F COMPONENTS

Assets to be financed1
Short-term
Long-term 2
Total

Tax rate (percent) 4 .
REQUIRED P S A F RECOVERIES

1. The asset base for priced services is directly
determined.
2. Total long-term assets less capital leases that are
self-financing.
3. A l l short-term assets are assumed to be financed by
short-term debt. Of the total long-term assets, 33 percent
are assumed to be financed by long-term debt and
67 percent by equity. The data are average rates paid by
the bank holding companies included in the sample.

4. The pretax rate of return on equity is based on
average after-tax rates of return on equity, adjusted by the
effective tax rate to yield the pretax rate of return on
equity for each bank holding company for each year.
These data are then averaged over the five years 1986-90
to yield the pretax return on equity for use in the PSAF.
5. The calculations underlying these data use the dollar
value of assets to be financed, divided as described in note
3, and the rates for the cost of capital.

Annual Report: Budget Review, 1989-90

to the 1985 performance included in
the 1991 calculation. The decrease is
partially offset by an increase in the
asset base and by a rise in the imputed
FDIC insurance assessment of $2.2
million resulting from an increase in
clearing balances maintained as well as
an increase in the FDIC assessment rate.
Capital Outlays
In accordance with generally accepted
accounting principles (GAAP), the Federal Reserve System depreciates the cost
of fixed assets over their estimated useful
lives. In the federal government, where
no requirement for depreciation accounting exists, the cost of fixed assets
is typically recorded as an expense at the
time of purchase. However, the Policy
and Procedures Manual for Guidance
of Federal Agencies of the General
Accounting Office, which governs
accounting procedures in the federal
government, specifies in title 2 the use
of depreciation accounting for business
types of operations and for activities that
recover costs from reimbursements or
user charges. Certain activities of the
Federal Reserve meet both these criteria.
Under GAAP, the cost of acquiring an
asset that is expected to benefit an entity
over future periods should be allocated
over those periods. Such treatment
allows a more realistic measurement of
operating performance.
The Banks capitalize and depreciate
all assets that cost $1,500 or more; they
can either capitalize or expense assets
costing less. The capitalization guideline
for the Board is $1,000.
The Banks maintain a multiyear plan
for capital spending. The Board, in turn,
requires the Banks to budget annually
for capital outlays by capital class to
estimate the effect of total operating and
capital spending. During the budget year,
the Banks must submit proposed major

purchases of assets to the Board for
further review and approval. The Board
of Governors reviews capital expenditures for the Board.
Special Projects
For 1992 the Board of Governors has
approved research and development for
three projects intended to provide longrange benefits to the Federal Reserve
and the banking industry. Because the
spending on such projects is relatively
high and short-term, the Federal Reserve
accounts for it separately from its
operating expenses.
Check Image Processing
In 1988, the Conference of First Vice
Presidents of the Reserve Banks approved the concept of testing digital
technologies to record images for use in
processing checks. The application that
provided the strictest parameters was
archiving information on government
check payments for the Department of
the Treasury. This application involves
storage of a large amount of data and
retrieval of high-quality data, requirements similar to those for processing
return items. Consequently, it was
decided to explore both applications
to determine the feasibility of the
technology.
The Check Image Processing special
project will continue to build on the first
four years of results. The focus during
1992 will be on developmental work in
preparation for sustained tests of highspeed image-capture systems for the
government check application, continued
developmental work on low-speed
personal computer-based systems for the
return item application, and leadership
of efforts to develop industry standards
for interchange of check images between
Banks (using different systems). The

Special Categories of System Expense

1992 budget for these efforts is $4.3
million. Including 1992 expenses, System expenditures on Check Image
Processing to date total $13.6 million.

team and development of a detailed plan
for achieving a consolidated automation
environment within the Federal Reserve
System.

Development of Currency
Authentication Systems

Currency Printing

In 1989, the Federal Reserve initiated a
special project for development of an
Optical Counterfeit Detection System
(OCDS). Later that year the project was
renamed Development of Currency
Authentication Systems because research
efforts included development not only
of an OCDS, but also of other authentication alternatives.
OCDS is an effort to improve
counterfeit-detection capabilities that will
enhance the currency service provided
to financial institutions and the public.
Other activities include development of
both long- and short-term authentication
alternatives that are expected to improve
the Federal Reserve's ability to detect
counterfeit currency. All these efforts
should produce counterfeit detector devices to be placed on the Federal Reserve's high-speed currency-processing
equipment.
The 1992 project budget includes
$9.3 million in support of these efforts.
Including 1992 expenses, expenditures
on this special project to date total
$15.8 million.
Automation Consolidation
In 1992, the Federal Reserve System
will incur its first expenditures for the
Automation Consolidation special
project. The project will result in
consolidation of all mainframe computer
operations at three sites within the
System. The three sites, selected in late
1991, are Richmond, Dallas, and New
York. The 1992 project budget of $6.5
million covers staffing of the project

The Bureau of Engraving and Printing
produces currency; the Federal Reserve
Banks put it into circulation through
depository institutions and destroy it as
it wears out. The Federal Reserve Act
stipulates that the costs of producing
currency, as well as the costs of putting
it into circulation and destroying it, are
to be assumed by the Federal Reserve
System (table C.3).
New currency is printed to replace
worn notes and to accommodate
increases in the demand for circulating
currency (table C.4). Notes are also
required for inventories held by the
Reserve Banks to meet changes in
demand.
To minimize the number of new notes
ordered and the cost of their printing, the
Board consults with the Bureau of
Engraving and Printing to ensure that it
uses efficient methods, maintains System
Table C.3
Currency in Circulation, New Notes Issued,
and Notes Destroyed, 1991 Estimate
Millions of pieces
Notes
in
circulation1

New
notes
paid
out 2

Notes
destroyed2

1
2
5
10
20
50
100

4,928
432
1,194
1,184
3,301
677
1,506

3,209
18
779
733
1,682
175
417

2,818
3
751
695
1,431
140
223

Total

13,222

7,013

6,061

Dollar
denomination

1. As of September 1991.
2. Based on actual levels through October and expected
levels for November and December. Notes paid out do not
include additions to inventory at the Reserve Banks.

Annual Report: Budget Review, 1989-90

guidelines on the quality of notes, and
sees that Reserve Banks do not destroy
notes prematurely. The Board and the

Banks also monitor all related costs,
such as those for transportation and
packaging.

Table C.4
Costs to the Federal Reserve of New Currency, 1990-92
Millions of dollars, except as noted
1990
actual

1991
estimated

1992
budget

Percent
change,
1991-92

Printing1
Shipping from Washington and western facility
Reimbursement to the Treasury
for issuance and retirement2

185.7
5.3

253.3
5.2

317.0
6.8

25.1
30.8

1.9

1.7

2.0

17.6

Total cost of currency

192.9

260.2

325.8

25.2

Item

1. Based on 7 billion notes in 1990, 8 billion notes in 1991, and 9 billion notes in 1992.
2. Includes intrasystem shipment of fit currency, purchase of currency pallets, and shipment of currency pallets to the Bureau of Engraving and Printing.

61
Appendix D

Sources and Uses of Funds
The Federal Reserve System, in accordance with generally accepted accounting principles, accrues income and
expenses and capitalizes acquisitions of
assets whose useful lives extend over
several years (see appendix C).
The System derives its income primarily from U.S. government securities
that the Federal Reserve has acquired
through open market operations, one of
the tools of monetary policy. These
earnings account for approximately
85 percent of current income (table D.l).
The current expenses of the Reserve
Banks consist of their operating expenses
and the costs of the earnings credits
Table D.l
Income of the Federal Reserve System,

1990-91
Millions of dollars
1990
actual

1991
estimate

U.S. government securities
Foreign currencies
Priced services
Other

117.9
19.994.5
2,603.9
730.2
30.1

25.6
19,262.3
2,498.9
737.3
27.2

Total

23.476.6

22,551.3

Source

granted to depository institutions on
clearing balances held with the Reserve
Banks (table D.2). The Reserve Banks
record extraordinary adjustments to
current net income in a profit and loss
account. The primary entries in the
account are for gains or losses on the
sale of U.S. government securities and
for gains or losses on assets denominated
in foreign currencies that result either
from the sale of those assets or from
their revaluation at market exchange
rates.
The Reserve Banks retain a surplus to
cushion unexpected losses, much as
commercial establishments retain earnings. The Board of Governors requires
that the surplus account at year-end be
equal to the capital paid in by the
member banks. Since the end of 1964,
the Board's policy has been to transfer
to the U.S. Treasury all net income after
paying the statutory dividend to member
banks and the amount necessary to
equate surplus to paid-in capital. The
amount transferred is classified as
interest on Federal Reserve notes. Such
payments were $23.6 billion in 1990 and
are estimated to be $20.8 billion in 1991.

Annual Report: Budget Review, 1989-90

Table D.2
Distribution of the Income of the Federal Reserve System, 1990-91
Millions of dollars
Item
Current income1

1990
actual

1991
estimate

23,477

22,551

1,211
139

1,268
160

22,127

21,124

2,201

496

LESS
2

Current expenses of Reserve Banks
Operating expenses
Costs of earnings credits
EQUALS

Current net income
PLUS

Net additions to, or deductions from (-), current net income

LESS
4

Cost of unreimbursed Treasury services

102

Assessments by Board
Board expenses
Cost of currency

104
193

110
261

Other distributions
Dividends paid to member banks 5 .
Transfers to, or from (-), surplus6

141
180

153
228

23,608

20,778

EQUALS

Payment to U.S. Treasury
1. See table D.l.
2. Net of reimbursements due from the U.S. Treasury
and other government agencies. Also reflects reductions
of $60.5 million in 1990 and $83.1 million in 1991 in
credits for net periodic pension cost.
3. This account is the same as that reported under the
same name in the table "Income and Expenses of Federal
Reserve Banks" in the Statistical Tables section of the
Board's Annual Report and includes realized and
unrealized gains on assets denominated in foreign currencies; gains on sales of U.S. government securities; and
miscellaneous gains and losses.

4. The cost of services provided to the U.S. Treasury
that are reimbursable under agreements with the Treasury
and for which reimbursement is not anticipated.
5. The Federal Reserve Act requires the Federal
Reserve to pay dividends to member banks at the rate of
6 percent of paid-in capital.
6. Each year the Federal Reserve transfers to its
surplus account an amount sufficient to equate surplus to
paid-in capital to provide a reserve against losses.

63
Appendix E

Federal Reserve System Audits
The Board of Governors, each of the
Reserve Banks taken separately, and
the Federal Reserve System as a whole
are all subject to several levels of audit
and review. At each Federal Reserve
Bank, a full-time staff of auditors under
the direction of a general auditor reports
directly to the Bank's board of directors.
The Board's Division of Federal Reserve Bank Operations, acting on behalf
of the Board of Governors, regularly
audits the financial operations of each
of the Banks and periodically reviews
all other Bank operations. The Office
of Inspector General (OIG) conducts
audits, operations reviews, and investigations of the programs and operations
of the Board and those Board functions
delegated to the Federal Reserve Banks.
The OIG retains an independent auditor
each year to certify the fairness of the
Board's financial statements and its

compliance with laws and regulations
affecting those financial statements.

General Accounting Office
The 1978 passage of the Federal Banking Agency Audit Act (Public Law
95-320) brought most of the operations
of the Federal Reserve System under
the purview of the General Accounting
Office (GAO). The GAO, which currently has 25 projects in various stages
of completion, since 1979 has completed 93 reports on selected aspects of
Federal Reserve operations (tables E.l
and E.2). The GAO has also involved
the Federal Reserve in about 68 other
reviews not directly related to the System and has terminated 39 others before
completion. The reports are available
directly from the GAO.

Table E.l
Active GAO Projects Relating to the Federal Reserve
Subject
Fraud backlog cases
Anticompetitive service contracts
Capital adequacy standards for securities brokers-dealers
Foreign affiliates of U.S. brokers-dealers
Federal tax deposit system
Collecting and disseminating thrift and bank call report data
Criminal cases from financial-institution fraud
Debt crisis in less-developed countries
Comparability of compensation and benefits of federal regulatory agencies .
Information on securities and futures activities exchanged between countries
Supervision and examination processes
Use of automation in clearance and setdement process
Foreign business structures that impede competition
Financing of multifamily housing
Future banking-industry consolidation
Banking supervision and regulation in Canada
Personnel management evaluation program
Activities of Credit and Commerce American Holdings
Bank-failure resolutions
Preparation and dissemination of the Federal Register
Joint Lending Program
Off-balance-sheet activities
Regulator oversight of bank automation systems
Export-credit abuse
Insider activity at banks

Annual Report: Budget Review, 1989-90

Table E.2
Completed GAO Reports Relating to the Federal Reserve System
Report
Comparing Policies and Procedures of the Three Bank
Regulatory Agencies
Are OPEC Financial Holdings a Danger to U.S. Banks or the Economy?
Federal Systems Not Designed to Collect Data on A l l Foreign
Investments in U.S. Depository Institutions
Considerable Increase in Foreign Banking in United States since 1972
Investment Policies, Practices and Performance
of Federal Retirement Systems
Federal Supervision of Bank Holding Companies Needs Better, More
Formalized Supervision
The Federal Reserve Should Assure Compliance
with the 1970 Bank Holding Company Act Amendments
Federal Agencies' Initial Problems with the Right to Financial
Privacy Act of 1978
Internal Auditing Can Be Strengthened in the Federal Reserve System .
Despite Positive Effects, Further Foreign Acquisitions of U.S. Banks
Should Be Limited until Policy Conflicts Are Fully Addressed
Federal Examinations of Financial Institutions: Issues That
Need to Be Resolved
Examinations of Financial Institutions Do Not Assure Compliance
with Consumer Credit Laws
Disappointing Progress in Improving Systems for Resolving
Billions in Audit Findings
An Economic Overview of Bank Solvency Regulation
Federal Reserve Security over Currency Transportation Is Adequate
The Federal Structure for Examining Financial Institutions
Can Be Improved
Response to Questions Bearing on the Feasibility
of Closing the Federal Reserve Banks
Bank Secrecy Act Reporting Requirements Have Not Met
Expectations, Suggesting Need for Amendment
Federal Reserve Could Improve the Efficiency of Bank Holding
Company Inspections
Financial Institution Regulatory Agencies Should Perform Internal Audit
Reviews of their Examination and Supervision Activities
Information on Selected Aspects of Federal Reserve System Expenditures
Federal Review of Intrastate Branching Can Be Reduced
Despite Improvements, Recent Bank Supervision Could
Be More Effective and Less Burdensome
Issues to Be Considered while Debating Interstate Bank Branching
The Federal Reserve Should Move Faster to Eliminate Subsidy
of Check-Clearing Operations
Information about Depository Institutions' Ancillary Activities Is Not
Adequate for Policy Purposes
Bank Merger Process Should Be Modernized and Simplified
An Analysis of Fiscal and Monetary Policies
Bank Examination for Country Risk and International Lending
Credit Insurance Disclosure Provisions of the Truth-in-Lending Act
Consistently Enforced Except When Decisions Appealed
Survey of Investor Protection and the Regulation
of Financial Intermediaries
Financial Institutions Regulatory Agencies Can Make Better Use
of Consumer Complaint Information
Expediting Tax Deposits Can Increase the Government's
Interest Earnings
Unauthorized Disclosure of the Federal Reserve's
Monetary Policy Decision
Federal Financial Institutions Examination Council Has Made Limited
Progress toward Accomplishing Its Mission
Control Improvements Needed in Accounting for Treasury Securities
at the Federal Reserve Bank of New York
Statutory Requirements for Examining International Banking
Institutions Need Attention

Number

Date

GGD-79-27
EMD-79-45

3/29/79
6/11/79

GGD-79-42
GGD-79-75

6/19/79
8/1/79

FPCD-79-17

8/31/79

GGD-80-20

2/12/80

GGD-80-21

3/12/80

GGD-80-64
GGD-80-59

5/29/80
8/8/80

GGD-80-66

8/26/80

GGD-81-12

1/6/81

GGD-81-13

1/21/81

AFMD-81-27
PAD-81-25
GGD-81-27

1/23/81
2/13/81
2/23/81

GGD-81-21

4/24/81

GGD-81-49

5/21/81

GGD-81-80

7/23/81

GGD-81-79

8/18/81

GGD-82-5

10/19/81

GGD-82-33
GGD-82-31

2/12/82
2/24/82

GGD-82-21
GGD-82-36

2/26/82
4/9/82

GGD-82-22

5/7/82

GGD-82-57
GGD-82-53
PAD-82-45
ID-82-52

6/1/82
8/16/82
8/31/82
9/2/82

GGD-83-3

10/25/82

GGD-83-30

7/13/83

GGD-83-13

8/25/83

GGD-84-14

11/21/83

GGD-84-40

2/3/84

GGD-84-4

2/3/84

AFMD-84-10

5/2/84

GGD-84-39

7/11/84

Federal Reserve System Audits
Table E.2
Continued
Report

Number

Supervisory Examinations of International Banking Facilities
Need to Be Improved
An Examination of Concerns Expressed about the Federal Reserve's
Pricing of Check-Clearing Activities
Difficulties in Evaluating the Effectiveness of the Community
Reinvestment Act
International Coordination of Bank Supervision: The Record to Date . . .
Implementation of the Export Trading Company Act of 1982
Information on Independent Public Accountant Audits
of Financial Institutions
An Analysis of Two Types of Pooled Investment Funds
How the Markets Are Developed and How They Are Regulated
U.S. Banking Supervision and International Supervisory Principles
Financial Institution Regulators' Compliance Examination
The Market's Structure, Risks, and Regulation
Dealer Views on Market Operations and Federal Reserve
Securities Transfer System
Questions about the Federal Reserve's Securities Transfer System
Federal Reserve Board Opposition to Credit Card Interest Rate Limits
Insulating Banks from the Potential Risk of Expanded Activities
The Federal Reserve Response Regarding Its Market-Making Standard
Change in Fees and Deposit Account Interest Rates since Deregulation
An Examination of Views Expressed about Access to Brokers' Services

.
.
.
.

Issues Related to Repeal of the Glass-Steagall Act
Preliminary Observations on the October 1987 Crash
Supervision of Overseas Lending Is Inadequate
Competitive Concerns of Foreign Financial Firms in Japan,
the United Kingdom and the United States
Administrative Expenses at FHLBB and FRB for 1985 and 1986
Government in the Sunshine Act Compliance at Selected Agencies
Trends in Commercial Bank Performance, December 1976-June 1987 ..
U.S. Commercial Banks' Securities Activities in London
Lending to Troubled Sectors
Government Check-Cashing Issues
Conflict of Interest: Abuses in Commercial Banking Institutions
Competitive Fairness Is an Elusive Goal
Independent Audits Needed to Strengthen Internal Control
and Bank Management
Information on the System's Check Collection Service
Oversight of Critical Banking Systems Should Be Strengthened
Activities of Securities of Bank Holding Companies
The Stock, Options, and Futures Markets Are Still at Risk
Update on U.S. Commercial Banks' Securities in London
U.S. Financial Services' Competitiveness under the Single
Market Program
Limited Public Demand for New Dollar Coin or Elimination of Pennies .
Oversight of Automation Used to Clear and Settle Trades Is Uneven . . .
The Government's Exposure to Risks
Office of Inspector General Operations at Financial Regulatory Agencies .
Additional Reserves and Reform Needed to Strengthen the Fund
More Transaction Information and Investor Protection Measures
Are Needed
Issues Relating to Banks Selling Insurance
Implementation of Risk-Based Capital Adequacy Standards
Overview of Six Foreign Systems
Deposit Insurance: A Strategy for Reform
Bank Supervision: Prompt and Forceful Regulatory Actions Needed

Date

GGD-84-65

9/30/84

GGD-85-9A

1/14/85

OCE-86-1

11/4/85

NSIAD-86-40
NSIAD-86-42

2/6/86
2/27/86

GGD-84-44FS
GGD-86-63
GGD-86-26
NSIAD-86-93
GGD-86-94
GGD-86-80BR

4/21/86
5/12/86
5/15/86
7/25/86
8/1/86
8/20/86

GGD-86-147FS
GGD-87-15BR

9/29/86
10/20/86

GGD-87-38BR
GGD-87-35
GGD-87-55FS
GGD-87-70
GGD-88-8

4/7/87
4/14/87
4/21/87
7/13/87
12/18/87

GGD-88-37
GGD-88-38
NSIAD-88-87

1/22/88
1/26/88
5/5/88

NSIAD-88-171
AFMD-88-33
GGD-88-97
GGD-88-106BR
NSIAD-88-238
GGD-88-126BR
GGD-89-12

6/2/88
6/15/88
7/20/88
7/28/88
9/8/88
9/26/88
10/7/88

GGD-89-35
GGD-89-61

1/27/89
5/12/89

AFMD-89-25
GGD-90-17

5/31/89
12/15/89

IMTEC-90-14
GGD-90-48
GGD-90-33
NSIAD-90-98

1/14/90
3/14/90
4/11/90
5/7/90

NSIAD-90-99
GGD-90-88
IMTEC-90-47
GGD-90-97
AFMD-90-55FS
AFMD-90-100

5/21/90
5/23/90
7/12/90
8/15/90
8/24/90
9/11/90

GGD-90-114
GGD-90-113

9/14/90
9/25/90

NSIAD-91-80
NSIAD-91-104
GGD-92-26
GGD-91-69

1/25/91
2/22/91
3/4/91
4/15/91

Annual Report: Budget Review, 1989-90

Table E.2
Continued
Report

Number

Date

Many Federal Agencies Collect and Disseminate Information
Money Laundering: The U.S. Government Is Responding to the Problem .
A Framework for Limiting the Government's Exposure to Risks
Treasury Tax and Loan Activity at Two Troubled Banks
OCC's Supervision of the Bank of New England
Was Not Timely or Forceful
Bank Holding Company Securities Subsidiaries' Market
Activities Update
Time Limits on Holding Deposits Generally Met
but More Oversight Needed
Legislation Needed to Strengthen Bank Oversight

NSIAD-91-173
NSIAD-91-130
GGD-91-90
AFMD-91-87

5/1/91
5/16/91
5/22/91
9/12/91

GGD-91-128

9/16/91

GGD-91-131

9/20/91

GGD-91-132
AFMD-92-19

9/30/91
10/21/91

during 1991 addressed the Board's
National Information Center developThe Board's Office of Inspector General ment project; its portable personal
functions in accordance with the Inspec- computer equipment loaner programs;
tor General Act of 1978, as amended. its revised compensation programs for
The OIG provides policy direction for officers and for wage and printer grade
audits, operations reviews, and investiga- staff; the fairness of the financial
tions of the programs and operations of statements of the Board and the Federal
the Board and its delegated functions at Financial Institutions Examination Counthe Federal Reserve Banks, and plans cil, and each agency's compliance with
and conducts them. The OIG also re- applicable laws and regulations; the
views existing and proposed legislation Board portion of the System's thrift plan
and regulations for economy and effi- financial audit statement; and the Board
ciency. It recommends policies and super- portion of a specific health benefit plan
vises and conducts activities that promote audit being conducted across a number
economy and efficiency and that prevent of agencies by the Office of Personnel
and detect waste, fraud, and abuse in Management. Operations review reports
Board and Board-delegated programs were issued on the Divisions of Monetary
and operations. In addition, it coor- Affairs, Research and Statistics, and
dinates its efforts with other govern- International Finance. An audit survey
mental and nongovernmental agencies of the Federal Reserve's commercial
to promote economy and efficiency and disk examination program also was
to detect and prevent fraud and abuse in conducted.
•
activities administered or financed by
the Board. The OIG keeps the Congress
and the Chairman of the Board fully
informed about serious abuses and deficiencies and about the status of any
corrective actions.
During 1991, the OIG reported on
eight audits and three operations reviews,
closed out thirteen investigations, and
conducted 1,283 legislative and regulatory reviews. Audit reports issued
Office of Inspector General

67
Appendix F

Expenses and Employment
at the Federal Reserve Banks
Table F.l
Operating Expenses of the Federal Reserve Banks, by District, 1991-92 1
Thousands of dollars, except as noted

District

1991
estimate

Total, all Districts

Amount

Percent

4,682
27,394
6,003
3,175
6,077
9,329
10,640
3,207
604
3,372
12,735
7,605

5.3
9.2
7.3
3.6
5.2
6.5
6.2
4.7
.8
3.5
12.9
4.3

1,501,582

1,596,405

94,823

6.3

6,840

20,076

13,236

1,508,422

1,616,481

108,059

Special projects
Total

Change

92,730
324,552
88,390
91,022
123,212
151,952
181,205
72,177
74,049
101,070
111,420
184,626

88,049
297,157
82,387
87,847
117,136
142,623
170,565
68,970
73,4452
97,698
98,685
177,021

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

1992
budget

7.2

1. Excludes capital outlays.
2. Includes $2.9 million for water damage to the computer site. Without these expenses
in 1991, Minneapolis' 1992 budget increase would have been 5.0 percent.

Table R2
Employment at the Federal Reserve Banks, by District, 1991-92
Average number of personnel, except as noted1
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total, all Districts
Special projects

1991
estimate

1992
budget

1,481
4,122
1,384
1,470
2,083
2,378
2,611
1,210
1,114
1,683
1,703
2,592

Change
Amount

Percent

1,476
4,177
1,402
1,438
2,075
2,433
2,643
1,200
1,117
1,626
1,718
2,565

-5
55
19
-32
-7
55
32
-10
2
-57
15
-27

-.3
1.3
1.4
-2.2
-.3
2.3
1.2
-.8
.2
-3.4
.9
-1.0

23,831

23,871

102

100

23,973
23,833
DigitizedTotal
for FRASER
http://fraser.stlouisfed.org/
1. See chapter 3, note 1, for definition of average number of personnel (ANP).
Federal Reserve Bank of St. Louis

140

Annual Report: Budget Review, 1989-90

Table F.3
Expenses of the Federal Reserve Banks, by Operational Area, 1991-92
Thousands of dollars, except as noted

Operational area
Monetary and economic policy
Services to the U.S. Treasury and
other government agencies
Services to financial institutions
and the public
Supervision and regulation
Total
MEMO

1991
estimate

1992
budget

Change
Amount

Percent

107,530

113,021

5,491

5.1

169,355

180,060

10,705

6.3

985,340
239,356

1,042,078
261,246

56,739
21,889

5.8
9.1

1,501,581

1,596,405

94,824

6.3

476,876
408,953

515,270
438,429

38,394
29,476

8.1
7.2

Support
Overhead

1. Costs of support and overhead included in expenses
by operational area. Support refers to activities, such as
data processing, whose costs can be charged to users

according to the amount of use. Overhead refers to
activities, such as auditing, whose costs are charged
according to the users' shares of total direct costs.

Table F.4
Expenses of the Federal Reserve Banks
for Monetary and Economic Policy, by District, 1991-92
Thousands of dollars, except as noted
District
Boston
New York 1
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

1991
estimate

1992
budget

5,330
42,791
4,103
4,979
4,944
6,194
7,482
5,560
6,104
4,936
6,465
8,640
107,530

Change
Amount

Percent

5,623
45,240
4,315
5,214
5,112
6,574
7,909
6,004
5,581
5,257
7,132
9,059

292
2,449
212
235
168
380
427
444
-523
321
666
418

5.5
5.7
5.2
4.7
3.4
6.1
5.7
8.0
-8.6
6.5
10.3
4.8

113,021

5,491

5.1

1. Expenses of open market trading operations, located in the District, are $21.3 million for 1991
and $22.5 million for 1992.

Expenses and Employment

Table F.5
Expenses of the Federal Reserve Banks
for Services to the U.S. Treasury and Other Government Agencies, by District, 1991-92
Thousands of dollars, except as noted

District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

1991
estimate

1992
budget

Change
Amount

Percent

8,617
36,175
18,331
13,371
10,439
13,885
18,552
8,708
6,466
10,925
8,891
14,906

9,354
38,678
19,936
13,363
10,985
15,215
20,116
8,858
6,912
11,309
10,574
14,760

736
2,503
1,605
-8
546
1,330
1,564
150
446
384
1,593
-146

8.5
6.9
8.8
-.1
5.2
9.6
8.4
1.7
6.9
3.5
17.7
-1.0

169355

180,060

10,705

Table F.6
Expenses of the Federal Reserve Banks
for Services to Financial Institutions and the Public, by District, 1991-92
Thousands of dollars, except as noted
Change

1991
estimate

1992
budget

Amount

Percent

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

62,355
162,466
47,993
58,109
87,858
104,121
113,183
45,080
48,615
61,688
64,815
129,058

65,019
180,155
50,818
60,192
91,652
109,741
119,033
46,711
48,404
63,290
72,361
134,704

2,664
17,689
2,825
2,082
3,794
5,619
5,850
1,631
-211
1,602
7,545
5,647

4.3
10.9
5.9
3.6
4.3
5.4
5.2
3.6
-.4
2.6
11.6
4.4

Total

985340

1,042,078

56,739

5.8

District

Annual Report: Budget Review, 1989-90

Table F.7
Expenses of the Federal Reserve Banks
for Supervision and Regulation, by District, 1991-92
Thousands of dollars, except as noted

District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

1991
estimate

1992
budget

Change
Amount

Percent

11,746
55,726
11,960
11,388
13,895
18,424
31,347
9,622
12,260
20,149
18,423
24,417

12,735
60,478
13,321
12,253
15,463
20,423
34,146
10,604
13,152
21,214
21,353
26,103

989
4,753
1,362
865
1,568
2,000
2,799
982
891
1,065
2,930
1,686

8.4
8.5
11.4
7.6
11.3
10.9
8.9
10.2
7.3
5.3
15.9
6.9

239356

261,246

21,889

9.1

Table F.8
Expenses of the Federal Reserve Banks
for Salaries of Officers and Employees, by District, 1991-92
Thousands of dollars, except as noted
1991
estimate

1992
budget

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

50,749
155,516
42,755
43,654
60,379
69,941
84,852
35,000
34,909
51,896
52,766
91,837

Total

774,254

District

Change
Amount

Percent

53,566
168,056
45,433
45,284
63,967
75,252
90,361
36,889
37,209
53,387
55,762
95,707

2,817
12,539
2,678
1,631
3,587
5,312
5,509
1,888
2,300
1,491
2,996
3,870

5.6
8.1
6.3
3.7
5.9
7.6
6.5
5.4
6.6
2.9
5.7
4.2

820,871

46,618

6.0

Expenses and Employment

Table F.9
Factors in the 1991-92 Change in Salaries
of Officers and Employees of the Federal Reserve Banks, by District
Percentage points
Merit
adjustment

Structure
adjustment

Promotion
and reclassification

Change in
staffing

Tumovei
and lag1

Overtime

Other

Total
change

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

4.2
5.0
4.5
4.5
5.0
5.1
4.9
4.9
4.7
5.0
4.8
4.5

.0
.3
.4
.1
.0
.2
.0
.1
.4
.3
.1
.7

1.3
1.3
.4
.3
1.4
.8
1.6
.6
.7
1.4
.5
.5

.0
2.0
1.9
-.4
2.0
2.2
.9
.0
1.0
-2.6
1.0
-.6

.0
-.8
-.5
-.8
-2.3
-.6
-.7
-.1
-.5
-1.1
-.9
-.8

-.1
.1
-.5
-.1
-.2
-.2
-.3
-.1
-.1
-.1
.1
.0

.2
.2
.0
.0
.1
.0
.1
.1
.4
.0
.0
.0

5.6
8.1
6.3
3.7
5.9
7.6
6.5
5.4
6.6
2.9
5.7
4.2

Total

4.8

1.0

-.8

-.1

6.0

District

1. Turnover is the replacement of a departing employee with one having a lower pay grade.
Lag is the time during which a position remains vacant.

Table F.10
Capital Outlays of the Federal Reserve Banks, by District, 1991-92
Thousands of dollars, except as noted

District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

Change

1991
estimate

1992
budget

Amount

Percent

9,044
78,773
6,456
11,092
16,475
9,771
19,539
7,125
8,293
5,129
92,837
18,543

10,348
77,450
10,063
11,502
11,997
19,402
23,472
7,151
15,778
9,148
37,386
25,415

1,303
-1,323
3,607
410
-4,477
9,630
3,933
26
7,485
4,019
-55,451
6,872

14.4
-1.7
55.9
3.7
-27.2
98.6
20.1
.4
90.3
78.4
-59.7
37.1

283,076

259,112

-23,964

-8.5

Annual Report: Budget Review, 1989-90

Table F.ll
Budget Performance of the Federal Reserve Banks,
Operating Expenses, by District, 1991
Thousands of dollars, except as noted

District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

1991
budget

1991
estimate

Change
Amount

Percent

88,742
296,931
82,398
87,956
116,644
143,128
171,018
69,261
70,520
97,753
98,680
177,935

88,049
297,157
82,387
87,847
117,136
142,623
170,565
68,970
73,445
97,698
98,685
177,021

-693
226
-11
-108
492
-505
—453
-291
2,925
-55
6
-915

-.8
.1
.0
-.1
.4
-.4
-.3
-.4
4.1
-.1
.0
-.5

1,500,965

1,501,582

618

Table ¥.12
Budget Performance of the Federal Reserve Banks,
Employment, by District, 1991
Average number of personnel, except as noted1
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

1991
estimate

Amount

Percent

1,485
4,080
1,366
1,499
2,073
2,387
2,628
1,222
1,099
1,697
1,714
2,611

1,481
4,122
1,384
1,470
2,083
2,378
2,611
1,210
1,114
1,683
1,703
2,592

-A
42
17
-28
9
-9
-17
-12
15
-14
-11
-19

-.3
1.0
1.3
-1.9
.4
-.4
-.7
-1.0
1.4
-.8
-.6
-.7

23,861

23,831

-30

-.1

1. See chapter 3, note 1, for definition of average number of personnel.

Change

1991
budget

Expenses and Employment

Table F.13
Expenses of the Federal Reserve Banks, by Operational Area, 1987-92
Thousands of dollars, except as noted

Year

1987
1988
1989
1990
1991 estimate
1992 budget

Monetary
and
economic
policy

Services to
the U.S.
Treasury
and other
government
agencies

Services to
financial
institutions
and the
public

Supervision
and
regulation

Total

86,484
87,283
93,553
98,973
107,530
113,021

135,693
141,524
145,547
156,934
169,355
180,060

799,227
848,481
916,310
938,862
985,340
1,042,078

170,428
185,090
195,076
211,884
239,356
261,246

1,191,832
1,262,379
1,350,487
1,406,652
1,501,581
1,596,405

5.5

5.8

8.9

5.9

MEMO

Average annual
change, percent

5.4

Table F.l 4
Employment at the Federal Reserve Banks, by Operational Area, 1987-92
Average number of personnel, except as noted1

Year

Monetary
and
economic
policy

Services to
the U.S.
Treasury
and other
government
agencies

Services to
financial
institutions
and the
public

Supervision
and
regulation

Support2

Overhead2

Total

776
766
783
773
791
794

1,837
1,819
1,771
1,816
1,909
1,902

8,776
9,033
9,423
9,214
9,121
8,974

2,148
2,209
2,198
2,217
2,378
2,477

4,452
4,562
4,552
4,533
4,658
4,730

5,025
4,952
4,948
4,941
4,974
4,995

23,013
23,340
23,674
23,496
23,831
23,871

2.9

1.2

1987
1988
1989
1990
1991 estimate
1992 budget
MEMO

Average annual
change, percent

1. See chapter 3, note 1, for definition of average number of personnel.
2. See table F.3, note 1, for definition.

Annual Report: Budget Review, 1989-90

Maps of the Federal Reserve System

MINNEAPOLIS •

12
I SAN FRANCISCO

CHICAGO•

•
^
CLEVELAND U

„ „

KANSAS C I T Y B

11 DALLAS
•

•
ST. LOUIS

•

BOSTON

" N E W YORK
PHILADELPHIA

•
RICHMOND

ATLANTA

HAWAII

LEGEND

Both pages
• Federal Reserve Bank city
• Board of Governors of the Federal
Reserve System, Washington, D.C.

Facing page
• Federal Reserve Branch city
— Branch boundary

NOTE

The Federal Reserve officially identifies
Districts by number and Reserve Bank
city (shown on both pages) and by letter
(shown on the facing page).
In the 12th District, the Seattle Branch
serves Alaska, and the San Francisco
Bank serves Hawaii.
The System serves commonwealths
and territories as follows: the New York

Bank serves the Commonwealth of
Puerto Rico and the U.S. Virgin Islands;
the San Francisco Bank serves American
Samoa, Guam, and the Commonwealth
of the Northern Mariana Islands. The
maps show the boundaries within the
System as of October 1990.

Maps of the Federal Reserve System

5-E

Baltimore

Pittsburgh

Cincinnati

Buffalo

NEW YORK

BOSTON

PHILADELPHIA

RICHMOND

CLEVELAND

• Nashville
Birmingham.
Louisville

Detroit •
Jacksonville

• Memphis

New Orleans
Miami
ATLANTA

ST. LOUIS

CHICAGO

• Helena

MINNEAPOLIS

Omaha*
ALASKA

Denver

Seattle
Portland
Oklahoma City

KANSAS CITY

Houston
San Antonio i

DALLAS

HAWAII

SAN FRANCISCO

FRB 1/1-2000-0292-C