Detailed Information on the
New Currency Manufacturing Assessment

BEP will closely monitor its design and overhead costs related to the manufacture of New Currency to ensure the most efficient production and distribution of future denominations. A BEP priority is to produce the most secure currency for the nation in the most cost effective manner possible. In order to ensure efficient production of currency notes, BEP is investing in new technologies that will provide the capability for real time collection of performance data. Data will be available on the shop floor for evaluation by the production supervisors and program managers. In summary form, this information is evaluated and presented to executive and program managers in order to closely monitor design and overhead costs related to the manufacture of currency notes.

BEP will continue working with Federal partners to assess the impact of new designed currency on counterfeiting performance measures across government. BEP works closely with the Advance Counterfeit Deterrent Steering Committee to identify and evaluate future currency designs. The Bureau participates jointly with The Treasury Department, Federal Reserve Board and United Secret Service to determine the effectiveness of current counterfeit deterrent features, focusing on both the reliability of the manufacturing process and incorporating new features and the effectiveness of these features through the course of daily cash transactions.

BEP needs to closely monitor efficiency measures during the rollout of new currencies in light of additional upfront capital and design costs. In order to ensure efficient production of currency notes, BEP is investing in new technologies that will provide the capability for real time collection of performance data. Data will be available on the shop floor for evaluation by the production supervisors and program managers. In summary form, this information is evaluated and presented to executive and program managers in order to closely monitor design and overhead costs related to the manufacture of currency notes.

Continuing to work with the Advanced Counterfeit Deterrent Steering Committee to assess the impact of new currency designs on counterfeiting performance measures across government.

Monitor design and overhead costs related to the manufacture of currency to ensure the most efficient production and distribution of future denominations.

Measure: Percent of face value of currency in circulation that is counterfeit.

Explanation:This measures tracks the face value of counterfeit notes passed on the American public compared to total currency in circulation. This measure has been discontinued.

Measure: Percent of currency notes delivered to the Federal Reserve that meet its quality requirements.

Explanation:An indicator reflecting the Bureau's ability to provide a quality product. All notes delivered to the Federal Reserve go through rigorous quality inspections. These inspections ensure that all counterfeit deterrent features, both overt and covert are functioning as designed.

Measure: Currency shipment discrepancies per million notes. This measure refers to product overages or underages of as little as a single currency note in shipments of finished notes to the Federal Reserve Banks.

Explanation:A qualitative indicator reflecting BEP's ability to provide effective product security and accountability. This measure refers to product overages or underages of as little as a single currency note in shipments of finished notes to the Federal Reserve Banks.

Measure: Manufacturing cost per 1,000 new design currency notes delivered (in dollars).

Explanation:An indicator of currency manufacturing efficiency and effectiveness of program management. This standard is developed annually based on the past year's performance, contracted price factors, and anticipated productivity improvements. Actual performance comparison against the standard depends on BEP's ability to meet annual spoilage, efficiency, and capacity utilization goals established for this product line.

Measure: Maintain ISO Certification. ISO Certification signifies that the certified organization follows a rigorous quality control program under stringent international standards.

Explanation:ISO is an internationally recognized quality assurance program aimed at improving the quality of manufactured products. Certification requirements entail implementation and adherence to written procedures and detailed work instructions which document all processes that affect the quality of each product line. ISO certification signifies that the certified organization follows a rigorous quality control program under stringent international standards and provides current and future Bureau customers assurance that our currency-manufacturing program will deliver high quality security products.

Is the program purpose clear?

Explanation: The Bureau of Engraving and Printing (BEP) was formally established on August 3, 1877. BEP operates on the basis of authority conferred upon the Secretary of Treasury by United States Code. 'The Secretary of the Treasury shall mint coins, engrave and print currency and security documents, and refine and assay bullion, and may strike medals.' The Bureau's mission is to securely and efficiently produce United States currency, postage stamps, and other government securities that satisfy the current and future needs of the American public and the government agencies which serve them.

Evidence: 31 U.S.C. 321(a)(4); FY 2004 Congressional Budget Submission (BEP-01)

Does the program address a specific and existing problem, interest, or need?

Explanation: The government has an interest in preventing the circulation of counterfeit currency domestically and world-wide. New design currency, with deterrent features, is designed to prevent counterfeiting by digital and other reprographic technologies. By continually enhancing the security of U.S. currency the public's confidence and trust is maintained. Every year the public is harmed by the counterfeiting of United States currency and other U.S. obligations. A secure currency program helps to promote a stable U.S. and World economy by increasing citizens' "economic security."

Evidence: % of face value of currency in circulation that is counterfeit; % of currency notes delivered to the Federal Reserve that meet its quality requirements.

Is the program designed so that it is not redundant or duplicative of any Federal, state, local or private effort?

Explanation: There is no other Federal, State, or local governmental entity that produces U.S. currency. BEP's manufacturing operations are not similar to the manufacturing programs of the U.S. Mint. The technologies used to manufacture currency are different from those employed to mint coins. The major advantage of currency compared to coin is the adaptability of the currency substrate (paper or polymer) to new design features and/or elements that enhance the counterfeit deterrence characteristics. The range of design and counterfeit deterrent features that can be accommodated on metal for coins is quite limited in comparison. The limited capability to add counterfeit deterrent design elements is a principle factor in limiting its use in most parts of the world to fractional denominations of the particular nation's currency. Higher value and higher risk denominations are manufactured in note form to take advantage of a full range of counterfeit deterrent features to mitigate the increased risk.

Evidence: 31 U.S.C. 321(a)(4)

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The BEP program is free of major flaws that limit efficiency or effectiveness. There are a variety of models and organizational structures for currency production in the world; however, none of them reach the scale of the United States system.

Evidence: CFO Accountability reports 1991 - 2002; Future of money study; Cost Comparison of Alternate Substrate Polymers

Is the program effectively targeted, so program resources reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: The new currency program does not have any direct beneficiaries, although citizens are the ultimate beneficiaries of a safe and secure currency.

Evidence:  

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The Bureau's most vital strategic goal is to stay ahead of the technology curve with respect to ensuring the integrity of the Nation's currency. In order to achieve this goal, the Bureau has partnered with the U.S. Secret Service and the Federal Reserve to devise a long-term, counterfeit deterrent strategy for U.S. currency that features regular redesign of currency notes. The BEP has established quality performance targets to 1) ensure new design currency is specifically produced and delivered to the Federal Reserve at consistently high quality and 2) demonstrate that BEP maintains a world class quality management system. Also, the BEP follows commercial manufacturing practice by setting an annual manufacturing cost standard (efficiency measure) for each denomination including the new design note.

Evidence: FY 2005 Departmental Budget - GPRA Performance Section

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: BEP's new currency design manufacturing program's primary objective is the production of high quality counterfeit deterrent notes to protect the integrity and security of U.S. currency. This objective depends on the BEP's capability to produce counterfeit deterrent notes of consistently high quality that meet the Federal Reserve's standards. Accordingly, the BEP has established ambitious targets for quality notes delivered to the Federal Reserve. In addition, BEP is pursuing upgraded accreditation under International Organization for Standardization (ISO) quality management standards. ISO is an internationally recognized quality assurance program aimed at improving the quality of manufactured products. ISO certification signifies that the certified organization follows a rigorous quality control program under stringent international standards and provides current and future Bureau customers assurance that our currency-manufacturing program will deliver high quality security products. BEP's ISO recertification consists of an independent audit of the 20 components of BEP's Quality Management System (QMS) on an annual basis.

Evidence: BEP will begin the delivery of new currency design notes known as NexGen currency in the following timeframe: $20 note in 2003, $50 note in 2004 and the $100 note in 2005. Concurrently BEP is developing and evaluating additional counterfeit deterrent features for use in future generation notes (FuGen) to be released to the public in 7 to 10 years after NexGen currency. BEP Strategic Plan (pg 3); ISO Certification; % of Federal Reserve orders met as requested- Target-100%

Does the program have a limited number of specific annual performance measures that demonstrate progress toward achieving the program's long-term measures?

Explanation: The BEP is revising its strategic plan and is establishing several annual performance goals to demonstrate progress towards achieving the long-term goals of the program. Semi-annually BEP executives and program managers meet in an all-day planning and performance review session to evaluate performance trends and progress toward achieving strategic objectives. The following performance measures demonstrate progress towards achieving the programs long-term goals: % of currency notes delivered to the Federal Reserve that meet customer quality requirements, maintain/upgrade ISO certification, # of notes returned by the Federal Reserve due to manufacturing defects (per million notes delivered), currency shipment discrepancies (per million notes).

Evidence: FY 2005 Departmental Budget Submission (BEP-08-11)

Does the program have baselines and ambitious targets and timeframes for its annual measures?

Explanation: BEP has established ambitious annual targets.

Evidence: FY 2004 Congressional Budget Submission (BEP-08-11); FY 2005 Departmental Budget Submission (BEP-08-11); Targets: 1) % of Federal Reserve orders met as requested- Target-100% 2) # of notes returned by the Federal Reserve due to manufacturing defects (per million notes delivered) - Target -.0250 3) Maintain/upgrade ISO Certification- Target-certified 4) Currency shipment discrepancies (per million notes) - Target .0100.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, etc.) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The BEP partners with the Federal Reserve and U.S. Secret Service in the development of counterfeit deterrent currency. A joint committee of representatives from BEP, the Federal Reserve, Secret Service and Treasury works to predict future counterfeit trends and risks and develops strategies to counter these risks. To stay ahead of technology available to counterfeiters, the BEP established the Securities Technology Institute, a collaborative effort with Johns Hopkins University, to develop, test and evaluate new counterfeit deterrent features for U.S. currency and other security documents. The next generation $20 note, scheduled to be put in circulation this fall, contains a feature developed in conjunction with a 24-nation effort to deter the use of personal computers and inkjet printers in counterfeiting.

Evidence: Interagency Working Group (IWG) meeting minutes, June 12, 2003

Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Independent auditors (Ernst and Young LLP Certified Public Accountants) review the BEP during its annual audit process. In addition, BEP's ISO recertification consists of an independent audit of the 20 components of BEP's Quality Management System (QMS) on an annual basis.

Evidence: 2002 CFO Accountability report; IWG meeting minutes June 12, 2003; Monthly cost and production reports; ISO Certification

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The budget is generally aligned with the program goals and is linked to the BEP's strategic plan.

Evidence: The BEP uses activity-based costing principles to assess full cost of each of its main programs. The BEP's congressional justification and budget documentation are presented in accordance with long-standing congressional direction specified for the BEP revolving fund.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The BEP is revising its strategic plan and is establishing several annual performance goals to demonstrate progress towards achieving the long-term goals of the program. Semi-annually BEP executives and program managers meet in an all-day planning and performance meeting to review annual goals and performance. Planning and performance deficiencies are identified and program managers are assigned responsibility for implementation of corrective actions.

Evidence: Draft FY 2004 -2008 BEP Strategic Plan

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: BEP collects monthly production and cost performance data from the shop floor and its cost accounting systems. This information is evaluated and presented to executive and program management at the monthly production and cost meeting. Also, the Federal Reserve provides quality and shipment discrepancy data to BEP on a monthly basis.

Evidence: 1. Monthly cost and production reports 2. Quarterly Goal-Sharing Update 3. BEP Management Information System (BEPMIS)

Are Federal managers and program partners (grantees, subgrantees, contractors, cost-sharing partners, etc.) held accountable for cost, schedule and performance results?

Explanation: The BEP uses performance measures to evaluate the performance of its SES and mid-level managers. Also, monthly production and cost reviews are held with the executive team to examine and discuss financial (cost) information and performance measures. Program managers are expected to explain and justify variances as well as make adjustments when necessary to improve performance. The Bureau implemented a goal sharing program a few years ago to incentivize managers and employees to be accountable for results. A monetary benefit is available to employees based on achievement of specific cost, performance and safety goals that the BEP is focused on for a given year.

Evidence: 1. Monthly cost reports 2. SES performance plans 3. Quarterly Goal-Sharing update 4. 2002 CFO Accountability report

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: The BEP is an industrial revolving fund and its currency program operations are funded from the sale of currency (at cost) to the Federal Reserve System. All funds are obligated in a timely manner for the intended purpose.

Evidence: 2002 CFO Accountability report with unqualified audit opinion; SF 132 Apportionment.

Does the program have procedures (e.g., competitive sourcing/cost comparisons, IT improvements, approporaite incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: BEP has developed procedures to allow managers to find efficiencies and improve cost effectiveness in program execution. Frontline managers can assess the status of key performance measures through the BEP management information system. The BEP's goal sharing program provides incentives to encourage managers and employees to work together to exceed aggressive performance standards. The BEP runs a suggestion program that recognizes employee suggestions with monetary awards.

Evidence: Over the past five years more than $20 million has been saved through the implementation of employee suggestions. Incentives - FY 2003 Annual goal sharing program, BEP Management Information System (BEPMIS).

Does the program collaborate and coordinate effectively with related programs?

Explanation: BEP meets monthly with the Federal Reserve to discuss program issues and concerns. BEP participates with Treasury, Federal Reserve, and Secret Service through the Advanced Counterfeit Deterrence Committee to develop and implement strategy to protect U.S. currency from current and future counterfeiting threats. In addition, the Bureau and the Mint maintain a close working relationship and have a number of shared service initiatives that include the following: Exchange of high-level information technology managers to effect knowledge transfers in the areas of IT infrastructure, server configuration and information security; cooperation in sales efforts; collaboration on product designs; the development and implementation of a common pay scale for Mint and BEP police officers; and heightened management collaboration and discussion on issues such as supply chain management, police officer recruiting and retention, drug testing, and employee development.

Evidence:  

Does the program use strong financial management practices?

Explanation: For the past eighteen years, the BEP has received an unqualified (clean) audit opinion. There are no material internal control weaknesses identified for this activity. Further, the BEP has established an internal management control function to conduct reviews and studies to evaluate the efficiency and effectiveness of BEP programs, major initiatives, and finance functions.

Evidence: most recent meeting minutes are for the meeting held June 12, 2003.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The BEP has effective programs in place to assist management in the performance of their duties. For example, the BEP's EEO office ensures compliance with EEOC regulations and Treasury guidance. BEP's EEO office utilizes the Alternate Dispute Resolution (ADR) process where applicable and continues to cultivate a collaborative effort to positively impact complaint resolution and enhance management accountability through training and education. In addition, BEP strives to maintain a positive relationship with the 18 unions that represent BEP's workforce through the use of a Joint Labor Council to facilitate an open dialogue between management and union members. The BEP has made notable efforts to establish internal processes separate from its production functions that would address any management deficiencies.

Evidence: Interagency Working Group (IWG) meeting minutes, June 12, 2003

Has the program demonstrated adequate progress in achieving its long-term outcome performance goals?

Explanation: BEP has steadily improved the quality of the finished product delivered to the Federal Reserve as past year performance statistics indicate. Also, BEP has successfully maintained ISO certification after achieving certification for the first time in FY 2001.

Evidence: BEP's performance measures as reported in recent submissions are as follows: 1) % of Federal Reserve orders met as requested- 100% in 2001, 100% in 2002 2) Currency spoilage rate - new currency production - 7.4% in 2001, 5.6% in 2002 3) Manufacturing costs for currency (dollar cost per thousand notes produced) - $31.31 in 2001, $34.91 in 2002 4) # of notes returned by the Federal Reserve due to manufacturing defects (per million notes delivered) - .009 in 2001, .006 in 2002, 5) Maintain/upgrade ISO Certification- Certified in 2001, certified in 2002. 6) Currency shipment discrepancies (per million notes) - .00 in 2001, .00 in 2002. Sources: 2002 CFO Accountability report; FY 2004 Congressional Budget Submission (BEP-08-11); ISO 9001 Certification; Monthly cost and production reports; GPRA Performance Plan

Does the program (including program partners) achieve its annual performance goals?

Explanation: BEP met or exceeded its performance goals for FY 2002.

Evidence: BEP's performance against target as reported is as follows: 1) % of Federal Reserve orders met as requested- Target-100%, Performance -100%. 2) Manufacturing costs for currency (dollar cost per thousand notes produced) - Target-$30.45, Performance - $27.13 3) # of notes returned by the Federal Reserve due to manufacturing defects (per million notes delivered) - Target -.0250, Performance- .006 4) Maintain/upgrade ISO Certification- Target-certified, Performance -certified. 5) Currency shipment discrepancies (per million notes) - Target .0100, Performance- .00. Sources: FY 2004 Congressional Budget Submission (BEP-08-11); 2002 CFO Accountability report; GPRA Performance Plan.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year?

Explanation: The production roll-out of the redesigned, next generation $20 currency note earlier this spring began on schedule and early cost and performance results point to a successful start for this effort.

Evidence: FY 2002 final goal sharing report

Does the performance of this program compare favorably to other programs, including government, private, etc., that have similar purpose and goals?

Explanation: BEP's manufacturing operations are not similar to the manufacturing programs of any private or government program, including the U.S. Mint. The technologies used to manufacture currency are different from those employed to mint coins. The major difference between currency and coin is the adaptability of the currency substrate (paper or polymer) to new design features and/or elements that enhance the counterfeit deterrence characteristics. Foreign security printers do not produce comparable quantities of currency notes and design features vary widely from country-to-country. Foreign printers maintain currency performance data as proprietary information which further precludes meaningful comparisons with U.S. currency manufacturing performance.

Evidence: 31 U.S.C. 321(a)(4)

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: BEP's independent auditors annually evaluate and validate goal sharing results as part of the annual financial statement audit process. The Federal Reserve reviews cost proposals and pricing methodology on an annual basis, and GAO periodically requests information for review. BEP's annual ISO recertification consists of an independent audit of the 20 components of BEP's Quality Management System (QMS). In addition, the Secret Service performs a comprehensive evaluation of BEP security and accountability programs on a five-year cycle.

Evidence: 2002 CFO Accountability Report; ISO Certification; Secret Service's security and accountability report