U.S. Currency:

Printing of Flawed Redesigned $50 Notes

T-GGD-98-8: Published: Oct 1, 1997. Publicly Released: Oct 1, 1997.

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GAO discussed issues related to the Treasury's recent production of flawed, newly redesigned $50 notes.

GAO noted that: (1) neither the Bureau of Engraving and Printing (BEP) nor the Federal Reserve know specifically how many flawed notes are among the 217.6 million redesigned notes produced before September 8, 1996; (2) BEP views the problem as a start-up issue to be expected with production of a completely new note design; and (3) Federal Reserve officials have not decided what to do with the flawed notes, but have identified three options: (a) destroy all 217.6 million redesigned notes and replace them; (b) inspect the 217.6 million notes and destroy and replace only those notes that are found to be flawed; or (c) circulate the 217.6 million notes after the higher quality new notes have been in circulation for a few years.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Federal Reserve and BEP, in consultation with the Secret Service, revised an existing MOU that established acceptable quality levels for each new currency design prior to general production. The Board and BEP are to mutually agree on a limited initial production quantity of newly designed currency to ensure that all technical problems are identified and resolved prior to full production. In addition, BEP recently implemented an Acceptable Quality Level Sampling Program to provide additional assurance to the Federal Reserve that the currency being shipped to the Federal Reserve Banks is of an acceptable quality.

    Recommendation: The Secretary of the Treasury and the Board of Governors of the Federal Reserve should formalize an agreement to have the Federal Reserve, Bureau of Engraving and Printing, Secret Service, and other relevant Treasury officials involved in the currency production process for future redesigned notes to inspect production and agree on an acceptible level of quality.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: The Federal Reserve and BEP, in consultation with the Secret Service, revised an existing memorandum of understanding (MOU) that established acceptable quality levels for each new currency design prior to general production. The Board and BEP are to mutually agree on a limited initial production quantity of newly designed currency to ensure that all technical problems are identified and resolved prior to full production. In addition, BEP recently implemented an Acceptable Quality Level Sampling Program to provide additional assurance to the Federal Reserve that the currency being shipped to the Federal Reserve Banks is of an acceptable quality.

    Recommendation: The Secretary of the Treasury and the Board of Governors of the Federal Reserve should formalize an agreement to have the Federal Reserve, Bureau of Engraving and Printing, Secret Service, and other relevant Treasury officials involved in the currency production process for future redesigned notes to inspect production and agree on an acceptible level of quality.

    Agency Affected: Federal Reserve System: Board of Governors

  3. Status: Closed - Implemented

    Comments: The Federal Reserve and BEP revised an existing MOU that requires them to scrutinize a limited production quantity of newly designed currency to ensure that all technical problems are identified and resolved prior to full production. The Federal Reserve must consult with BEP to establish quality criteria for each new design and evaluate and approve test notes provided by BEP prior to general production. BEP must provide pre-production test notes to the Federal Reserve for all newly designed notes. The Federal Reserve must notify BEP of any product that does not conform to acceptable quality levels.

    Recommendation: The Secretary of the Treasury and the Board of Governors of the Federal Reserve should limit initial production of newly designed currency to the number that would be necessary to provide reasonable assurance that all production problems are resolved, and include such a limitation in their written agreement.

    Agency Affected: Department of the Treasury

  4. Status: Closed - Implemented

    Comments: The Federal Reserve and BEP revised an existing MOU that requires them to scrutinize a limited production quantity of newly designed currency to ensure that all technical problems are identified and resolved prior to full production. The Federal Reserve must consult with BEP to establish quality criteria for each new design and evaluate and approve test notes provided by BEP prior to general production. BEP must provide pre-production test notes to the Federal Reserve for all newly designed notes. The Federal Reserve must notify BEP of any product that does not conform to acceptable quality levels.

    Recommendation: The Secretary of the Treasury and the Board of Governors of the Federal Reserve should limit initial production of newly designed currency to the number that would be necessary to provide reasonable assurance that all production problems are resolved, and include such a limitation in their written agreement.

    Agency Affected: Federal Reserve System: Board of Governors

  5. Status: Closed - Implemented

    Comments: BEP, in consultation with the Federal Reserve, has implemented improved line structure in the newly designed $20 note to reduce the potential for production problems.

    Recommendation: The Secretary of the Treasury and the Board of Governors of the Federal Reserve should explore the feasibility of design changes that might lessen the potential for production problems for future redesigned denominations.

    Agency Affected: Department of the Treasury

  6. Status: Closed - Implemented

    Comments: BEP, in consultation with the Federal Reserve, has implemented improved line structure in the newly designed $20 note to reduce the potential for production problems.

    Recommendation: The Secretary of the Treasury and the Board of Governors of the Federal Reserve should explore the feasibility of design changes that might lessen the potential for production problems for future redesigned denominations.

    Agency Affected: Federal Reserve System: Board of Governors

 

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