FEDERAL RESERVE BOARD 557,

WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d

November 10, 193*+ B-1030

SUBJECT: F u n c t i o n a l Expense 'Reports

Dear S i r :

The minutes of the committee meet ing on accoun t ing held, a t the

F e d e r a l Reserve Bank of Chicago on June 27 and. 28, 193^. c o n t a i n the

f o l l o w i n g r e s o l u t i o n which was adopted by the Committee:

" I t was moved by Mr. Fleming and seconded by Mr. G-ilmore t h a t a Committee be appo in ted f o r the purpose of r e v i s i n g t h e f u n c t i o n a l expense r e p o r t Form E so t h a t i t w i l l shoF the u n i t co s t f o r a l l s e r v i c e s f o r which a h a n d l i n g charge might be found n e c e s s a r y , and a l s o t h a t i t should b e . r e v i s e d so a s to p rov ide an a c c u r a t e comparison of a l l o t h e r c o s t s of F e d e r a l Reserve bank o p e r a t i o n s . "

While no formal committee was appo in t ed , Mr. Myrick of the D iv i s ion

of Bank Opera t ions has p r epa red , w i th the a s s i s t a n c e of Mess r s . Ea rha r t

and Mangels of the Fede ra l Reserve Bank of San F r a n c i s c o , a t e n t a t i v e r e -

v i s i o n of the f u n c t i o n a l , expense r e p o r t , Form E, i n accordance w i th the

above quoted r e s o l u t i o n , and of the Manual of I n s t r u c t i o n s govern ing i t s

p r e p a r a t i o n . A copy of the r e v i s e d Form end Manual and of an exp lana to ry

memorandum p repa red by Mr. Myrick i s i n c l o s e d . Mr. Walden, C o n t r o l l e r ,

F e d e r a l Reserve Bank of Richmond, has reviewed the r e v i s e d Form and Manual

of I n s t r u c t i o n s ana has made a number of s u g g e s t i o n s i n r e g a r d t h e r e t o .

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His sugges t ions and. o the r s winch have "been made a re s e t f o r t h "below

f o r your c o n s i d e r a t i o n a long wi th the Manual and Form E as r e v i s e d .

(1) That the f u n c t i o n a l expense r e p o r t s "be r e v i s e d a long the l i n e s

i n d i c a t e d i n the proposed i n s t r u c t i o n s so as to provide f o r o b t a i n i n g

u n i t c o s t s f o r a l l s e r v i c e s f o r which a s e rv i ce charge may "be found nec-

e s s a r y , "but t h a t t he ac tua l r e d i s t r i b u t i o n of c e r t a i n genera l expenses

to such expense u n i t s be d e f e r r e d u n t i l such time as i t appears t ha t the

l e v y i n g of s e r v i c e charges i s imminent.

(2) That p r o v i s i o n be made i n the p r o v i s i o n of Space f u n c t i o n f o r

i n c l u d i n g d e p r e c i a t i o n charges on bank b u i l d i n g s and on f i x e d machinery

and equipment. If t h i s sugges t ion i s adopted, the amount of d e p r e c i a t i o n

charges would no t be included in cu r r en t expenses on Form 96 but would be

shown a t the bottom of page 1 e.n Form S f o r reconci lement pu rposes .

(3) That a p ropo r t i on of the expenses of the P r o v i s i o n of Space

f u n c t i o n , i n c l u d i n g d e p r e c i a t i o n charges on bank b u i l d i n g s and on f i x e d

machinery and equipment, be r e d i s t r i b u t e d to those f u n c t i o n s and expense

u n i t s f o r which more accu ra t e cos t f i g u r e s are to be obta ined i f s e rv ice

charges a re to be i n s t i t u t e d i n s t e a d of showing the f a i r r e n t a l va lue of

the space occupied by such u n i t s as a memorandum i tem. I f t h i s change

i s to be made, the Manual might provide t h a t the p r o v i s i o n of space

expenses chargeable to a given f u n c t i o n or expense u n i t should r ep re sen t

the same p ropo r t i on of the t o t a l cos t of the p r o v i s i o n of Space f u n c t i o n

as t h e number of square f e e t of ope ra t ing or o f f i c e and v a u l t f l o o r

space occupied by such f u n c t i o n or expense u n i t r e p r e s e n t s of the t o t a l

number of square f e e t of such space i n the bank. The term " v a u l t f l o o r '

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space" as here used i s in tended to comprise the t o t a l f l o o r space i n s ide

the v a u l t i n c l u d i n g tha t occupied by vau l t compartments or c h e s t s .

(4) That p r e s e n t i n s t r u c t i o n s r e l a t i n g to expenses i n c u r r e d in

c o l l e c t i n g paper of closed "banks "be not changed as recommended in the

minutes (page 9) of the committee meeting on account ing, he ld i n Chicago

on June 2~J and 28, 193^.

(5) That the Manual of I n s t r u c t i o n s be changed on page 42 so as

to provide f o r the r e d i s t r i b u t i o n of p r o t e c t i o n expense o n l y i n the case

cf guards who have r egu la r assignments to the f u n c t i o n s and expense u n i t s

shown thereon.

(6) That the second paragraph under "Stock of supp l i e s " f u n c t i o n

on page 48 of the Manual be changed so as to provide t ha t the cos t of the

s u p p l i e s purchased f o r d i r e c t d e l i v e r y to another u n i t may be charged

d i r e c t l y to t ha t u n i t .

(7) That p r o v i s i o n be made f o r charging obso le te forms to the

expense u n i t s f o r which they were o r i g i n a l l y purchased as o therwise the

cos t of obso le te forms would remain i n the s tock r e c o r d s .

(8) That the Manual of I n s t r u c t i o n s be changed on page 24 so as

to provide f o r the complete d i s t r i b u t i o n of Retirement System expenses

to the var ious expense u n i t s and f u n c t i o n s of the bank.

(9) That i n s t e a d of showing the es t imated expense of misce l laneous

a c t i v i t i e s ( c a f e t e r i a expense, medical expense, e t c . ) as a memorandum at

the end of c e r t a i n f i s c a l agency u n i t s , the cos t of such misce l laneous

a c t i v i t i e s be shown as an a d d i t i o n to the cost charged d i r e c t l y to such

u n i t s in the manner i l l u s t r a t e d below f o r U. S. Government I s s u e s , page

20 of Form E. B-1030

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TOTAL, U.S.GOVEBNMSNT ISSUES (Ex-c lu s ive of c o s t of o the r a c t i v i t i e s snown below)

ADD

Cost of o ther a c t i v i t i e s #

Prov is ion of space Prov i s ion of personnel Othi r ( s p e c i f y on r eve r se s ide )

TO?AX COST OF U.S.GO VERMEL ISSUES

*Sum of i tems narked, wi th an a s t e r i s k should be shown as "TOTAL COST OF U.S.UCVEKHbStiT ISSUES"

ffAny expenses of "o ther a c t i v i t i e s " which a re re imbursable should be charged d i r e c t to the app rop r i a t e u n i t of the "F i s ca l Agency, Custodianship , and Depos i ta ry" f u n c t i o n end l i s t e d on the r e v e r s e s i d e .

The above supplementary i tems would not , of course , be inc luded in the

r e c a p i t u l a t i o n of expenses of page 1 of Form 5 . In a l l o c a t i n g expenses to

these items the method proposed to be followed i s t h a t i n d i c a t e d in the

Manual f o r a l l o c a t i n g s i m i l a r expenses to c e r t a i n u n i t s f o r which a s e r v i c e

charge may be found necessa ry . I f the above sugges t ion i s adopted a number

of changes w i l l , of course, be necessary i n the Manual of I n s t r u c t i o n s .

Cer ta in changes a re a l s o suggested i n the d a t a c a l l e d f o r on space

occupied by the f i s c a l agency f u n c t i o n as i n d i c a t e d below;

MEMORANDA - BAM IMG HOUSE SPACE UTILIZED

O f f i c e space r e g u l a r l y ass igned; Number of sq . f t . F a i r r e n t a l va lue f o r six-month per iod a t

$ pe r sq . f t . per annum $ Reimbursement rece ived f o r six-month per iod $

Aver. Number Reimburs- Exp. not O f f i - Employ- ab le Reim-ce r s ees Expense bursab le

* *

*

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MSMORAKDA - BAiSKHJG HOUSE SPACE UTILIZED (Cont 'd )

Vault space r e g u l a r l y ass igned; Cubic f t . con t en t s of compartments F a i r r e n t a l va lue f o r six-month per iod a t

$ pe r cu. f t . per annum $ Reimbursement r ece ived f o r six-month per iod $

I t w i l l be apprec ia t ed i f you w i l l be good enough to have the t e n -

t a t i v e r e v i s i o n of the Manual and Form E and the above sugges t ions r e -

viewed end f u r n i s h the Board with your recommendations i n r e c a r d the re to

and wi th r e s p e c t to any o the r changes you would l i k e to have made in the

Manual and Form E. I t i s hoped t h a t i t w i l l be p o s s i b l e to have the

Manual pnd Form E p r i n t e d s h o r t l y a f t e r the f i r s t of the year end, accord-

ing ly , i t w i l l be apprec i a t ed i f your reply to t h i s l e t t e r i s mailed to

the Board as soon as p r a c t i c a b l e .

Very t r u l y yours ,

E. L. 8mead, Ch ie f , Div i s ion of Bank Opera t ions .

I n c l o s u r e s .

TO ALL GOVERNORS B-1030

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