FR3054_20170530_omb

Supporting Statement for the
Payment Systems Surveys
(FR 3054; OMB No. 7100-0332)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the voluntary Payments Systems Surveys (FR 3054; OMB No. 7100-0332).
This family of reports is comprised of the following four surveys:
 Ad Hoc Payments Systems Survey (FR 3054a)1
 Currency Quality Sampling Survey (FR 3054b)
 Currency Quality Survey (FR 3054c)
 Currency Functionality and Perception Survey (FR 3054d)
The FR 3054a is an annual survey used to obtain information specifically tailored to the
Federal Reserve’s operational and fiscal agency responsibilities. The FR 3054a may be
conducted independently by the Board or jointly with another government agency, a Federal
Reserve Bank, or a private firm. The FR 3054b is an annual survey used to assess the quality of
currency in circulation and may be conducted by the Board, jointly with the Federal Reserve
Bank of San Francisco’s Cash Product Office (CPO), the Federal Reserve Bank of Richmond’s
Currency Technology Office (CTO), and each Reserve Bank’s cash department. The FR 3054c
is a semiannual survey used to determine depository institutions’ and Banknote Equipment
Manufacturers’ (BEMs) opinions of currency quality and may be conducted jointly with the CPO
and CTO. The FR 3054d is a survey used to assess the functionality of Federal Reserve notes in
bank-note handling equipment. The data collected from the FR 3054d are used as inputs for
future designs of Federal Reserve notes. The FR 3054d may be conducted jointly with the U.S.
Treasury’s Bureau of Engraving and Printing (BEP) and the CTO. The FR 3054a, FR 3054b,
FR 3054c, and FR 3054d are sent to financial and nonfinancial businesses.
The Board may use the data collected from these surveys to determine (1) demand for
currency and coin, (2) market preferences regarding currency quality, (3) quality of currency in
circulation, (4) features used by the public and bank note authentication equipment to
denominate and authenticate bank notes, and (5) whether changes to Reserve Bank sorting
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Certain criteria apply to information collections conducted via the Board’s ad hoc clearance process. Such
information collections shall (1) be vetted by the Board’s clearance officer as well as the Division director
responsible for the information collection, (2) display the OMB control number and respondents shall be informed
that the information collection has been approved, (3) be used only in such cases where response is voluntary, (4)
not be used to substantially inform regulatory actions or policy decisions, (5) be conducted only and exactly as
described in the OMB submission, (6) involve only noncontroversial subject matter that will not raise concerns for
other Federal agencies, (7) include information collection instruments that are each conducted only one time, (8)
include a detailed justification of the effective and efficient statistical survey methodology (if applicable), and (9)
collect personally identifiable information (PII) only to the extent necessary (if collecting PII, the form must display
current privacy act notice). In addition, for each information collection instrument, respondent burden will be
tracked and submitted to OMB.

algorithms are necessary to ensure that currency in circulation remains fit for commerce. The
current annual burden for the FR 3054 is estimated to be 19,150 hours.
Background and Justification
The Board oversees the Federal Reserve Banks’ provision of financial services to
depository institutions; develops policies and regulations to foster the efficiency and integrity of
the U.S. payment system; works with other central banks and international organizations to
improve the payment system more broadly; conducts research on payments issues; and works
closely with the BEP and U.S. Secret Service (USSS) on currency design, quality issues, and to
educate the global public on the security features of Federal Reserve notes.
The Board periodically gathers data from various groups (including financial and
nonfinancial institutions, BEMs, or global wholesale bank-note dealers) regarding demand for
currency and coin, the quality and functionality of bank notes, the public’s perceptions of
security features, and how individuals use currency. These data are considered particularly
essential when (1) critical economic changes occur, (2) the U.S. Treasury’s BEP encounters
production problems and bank notes do not meet standards, (3) new bank note designs are under
consideration, (4) issues of immediate concern arise from Federal Reserve System committee
initiatives and working groups, or (5) Congress enacts new legislation. The time needed to
complete the information collection approval process poses a serious obstacle to collecting and
processing data that are both accurate and timely. Therefore, the Board proposes to retain the
Payments Systems Surveys to allow for the collection of timely data without the delay of the
approval process.
On March 17, 2006, the Board revised the policy framework governing the provision of
cash services. The policy revisions were intended to reduce overuse of Federal Reserve Bank
services, motivate recirculation best practices, and reduce the societal cost of providing fit
currency. The final currency recirculation policy required Federal Reserve Banks to adopt and
implement a currency-quality policy before the recirculation fee took effect.2 Information
gathered from these surveys helps the Federal Reserve determine when a note is no longer fit for
further circulation and when machine authentication is impaired because of note quality.
In support of the Board’s currency recirculation policy, the CPO and CTO monitor the
quality of currency by analyzing data on bank notes processed at Federal Reserve Banks each
month. To assess the validity of the monthly monitoring and the quality of currency in
circulation, the CPO would on an annual basis, randomly select depository institutions that have
a deposit account with a Federal Reserve Bank and ask them to voluntarily submit, as part of
their normal deposits, currency that is unsorted from their commercial customers.

2

Currency Recirculation Policy, Federal Reserve Bank Services
www.frbservices.org/operations/currency/currency_recirculation_policy.html.

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The Board works closely with the BEP and USSS on bank note design to ensure that
bank notes consistently meet the needs of the public, are usable in all types of transactions
(including those involving automated equipment), and can be easily authenticated. To maintain
a sound money supply, it is important that currency function properly in all types of transactions
and can be easily authenticated and denominated by all users. To assess how BEMs determine
the authenticity and denomination of a bank note, it is important to conduct meetings and
interviews with these stakeholders regarding currency security features and key bank-note design
elements.
Description of Information Collection
Ad Hoc Payments Systems Survey (FR 3054a)
The Board may conduct the Ad Hoc Payments Systems Survey once per year to collect
information on specific issues that affect its decisionmaking. The principal value of the
FR 3054a is the flexibility it provides the Federal Reserve to respond quickly to the need for data
due to unanticipated economic, financial, or regulatory developments and unforeseen
congressional requests for information. The Board cannot predict what specific information
would be needed but, because such needs are generally very time sensitive, may conduct the
FR 3054a as needed.
The survey topics may be time sensitive and the questions of interest may vary with the
focus of the survey. Because the relevant questions can change with each survey, there is no
fixed reporting form. For each survey, the Federal Reserve prepares questions of specific topical
interest. The Board, in consultation with any partners, would then determine the relevant target
group to contact.

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The FR 3054a may cover the following topics:
demand for currency
demand for $1 coins
demand for transactional coin
market preferences regarding the quality of currency (new versus fit)
public awareness of and preferences for bank-note designs and security features
currency usage patterns and behaviors
effectiveness and demand for educational information about bank notes

Adequate data of this sort are not available from any other source. Less formal
information collection studies, such as focus groups or cognitive interviews, would use a set of
structured qualitative and quantitative questions as a guide to more extended discussion of the
questions and answers.
Written quantitative surveys enable the Board to collect a limited amount of data from a
defined set of consumers, financial institutions, stakeholders, or related entities in the event of an
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immediate and critical need for specific information. These data are not collected on any other
reporting form or on the same frequency as other substantively similar data.
The FR 3054a may be conducted through a private firm, which would be chosen in a
competitive bidding process or other acceptably negotiated process.3 The research instruments
may be developed by the Federal Reserve alone or jointly with the firm selected by the Federal
Reserve. If a private firm is selected, the firm would be responsible for developing and testing
proposed survey procedures, following a sampling protocol which would be established by the
Federal Reserve before the survey is administered, conducting the survey as specified by the
Federal Reserve, preparing data files containing the responses, computing analysis weights, and
documenting all survey procedures.4 Data editing and analysis of the results would be conducted
either solely by the Federal Reserve or jointly with the firm.
Currency Quality Sampling Survey (FR 3054b)
The Board works jointly with the CPO, the CTO, and each Federal Reserve Bank’s cash
department to conduct the FR 3054b once per year to collect information on the quality of
currency in circulation. The respondents to the FR 3054b are depository institutions that have
deposit accounts with a Federal Reserve Bank.

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The FR 3054b covers the following topics:
samples of currency
quality of bank notes received from commercial customers of depository institutions
a comparison of the quality of bank notes processed at Federal Reserve Banks with bank
notes received from commercial customers of depository institutions
Currency Quality Survey (FR 3054c)

The Board works jointly with the CPO and the CTO to conduct the FR 3054c twice per
year to collect information on the quality of currency in circulation. The respondents to the
FR 3054c are depository institutions that have deposit accounts with a Federal Reserve Bank
(once per year) and BEMs (once per year). The information collected is used to determine their
opinions of currency quality and assess the needs for currency quality in the marketplace.

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The FR 3054c covers the following topics:
opinions on currency quality
cash handling practices
uses of currency sorting equipment

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Firms used by the Federal Reserve to conduct past surveys include the University of Michigan’s Survey Research
Center (SRC); NORC (a social science and survey research organization at the University of Chicago); ICF
International Inc. in Calverton, MD; Rockbridge and Associates in Great Falls, VA; Research Triangle Institute in
Research Triangle Park, NC; and Ogilvy in Washington, DC.
4
As necessary, all documents and procedures would be reviewed by the Board.

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Currency Functionality and Perception Survey (FR 3054d)
The Board may work jointly with the BEP and CTO to conduct the FR 3054d up to four
times per year to assess the functionality of bank notes currently in circulation and to gain
information from BEMs that would be used as input in future designs of Federal Reserve notes.
The respondents to the FR 3054d are BEMs, and the information collected is used to determine
how their equipment authenticates currency and how future bank-note designs can incorporate
more or better machine-readable features.

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The FR 3054d covers the following topics:
opinions on currency quality
uses of sensor technology
the effectiveness of machine-readable features of bank notes

Time Schedule for Information Collection
The time schedules for the distribution of, response to, and collection of data for each
survey are determined during the planning phase prior to the distribution of the survey
instrument. Before data collection begins, staff from the Federal Reserve System will explain to
respondents the purpose of the survey and how the data would be used. The Federal Reserve
System may choose to keep survey data confidential, depending upon the nature of the data
collection. The Federal Reserve System decides whether to publish survey data that it obtained
from respondents and informs them, before publication, if the data would be confidential or
published on an individual or aggregate basis. Aggregate survey information may be cited in
published material such as staff studies or working papers, professional journals, the Federal
Reserve Bulletin, testimony and reports to the Congress, or other vehicles.
Legal Status
The Board’s Legal Division has determined that section 11(d) of the Federal Reserve Act
(12 U.S.C. 248(d)) authorizes the Board to “supervise and regulate through the Secretary of the
Treasury the issue and retirement of Federal reserve notes, except for the cancellation and
destruction, and accounting with respect to such cancellation and destruction, of notes unfit for
circulation, and to prescribe rules and regulations under which such notes may be delivered by
the Secretary of the Treasury to the Federal Reserve agents applying therefor.” The obligation to
respond to the FR 3054a, FR 3054b, FR 3054c, and FR 3054d is voluntary.
Because survey questions may differ from survey to survey, it is difficult to determine in
advance whether the information collected will be considered confidential. However,
information may be exempt from disclosure under exemption 4 of the Freedom of Information
Act (5 U.S.C. 552(b)(4)), if disclosure would likely have the effect of (1) impairing the
government’s ability to obtain the necessary information in the future, or (2) causing substantial
harm to the competitive position of the respondent. Additionally, should survey responses
contain any information of a private nature the disclosure of which would constitute “a clearly
unwarranted invasion of personal privacy,” such information may be exempt from disclosure
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under exemption 6 (5 U.S.C. 552(b)(6)). Confidentiality matters should be treated on a case-bycase basis to determine if any of the above exemptions apply.
Consultation Outside the Agency
At this time there has been no other consultation outside the Federal Reserve System;
however, surveys and studies may be conducted jointly with other agencies. If this were to
occur, the Federal Reserve would consult with other agencies’ staff, to the extent practicable, to
create a consistent set of questions or a substantively similar information collection.
On February 13, 2017, the Board published a notice in the Federal Register (82 FR
10480) requesting public comment for 60 days on the proposal to extend, without revision, the
FR 3054. The comment period for this notice expired on April 14, 2017. The Board did not
receive any comments. On May 15, 2017, the Board published a final notice in the Federal
Register (82 FR 22332) and the information collection will be extended as proposed.
Estimate of Respondent Burden
The current annual burden for the Payments System Surveys is estimated to be 19,150
hours. These reporting requirements represent less than 1 percent of total Federal Reserve
System paperwork burden.
The Board estimates that the FR 3054a would be conducted once per year with up to
20,000 individuals, law enforcement agencies, financial institutions, or businesses. Respondents
will be selected based either on their business relationship with the Federal Reserve, or as
identified by a market research firm. It is also estimated that each respondent would spend
approximately 0.75 hours preparing for and participating in each survey. The Federal Reserve
anticipates a 60 percent response rate.
The FR 3054b would be conducted on an annual basis. The Federal Reserve estimates
that each respondent would spend approximately 0.5 hours completing the bank-note collection
associated with this survey. The Board analyzes the quality of currency processed at all Federal
Reserve Banks and it randomly selects 300 respondents whose deposits reflect the average
quality of processed currency. The Federal Reserve anticipates a 60 percent response rate.
The FR 3054c would be conducted twice per year, once with approximately 25
depository institutions and once with approximately 25 BEMs. Depository institutions may be
selected from the Federal Reserve’s cash customer advisory council and BEMs may be selected
from the Federal Reserve’s central bank cash machine group. It is estimated that respondents
would spend approximately 30 hours preparing for and completing the FR 3054c and
participating in either face-to-face guided discussions or telephone interviews. Because their
businesses are directly affected by currency designs and currency quality, the Federal Reserve
anticipates a 100 percent response rate.

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The Federal Reserve anticipates conducting the FR 3054d four times a year with
approximately 250 respondents and estimates that each respondent would spend approximately
2.5 hours preparing for and participating in discussions with the Board, the BEP, the CTO, or the
USSS. BEMs may be selected from the Federal Reserve’s central bank cash machine group.
Because their businesses are directly affected by currency designs, the Federal Reserve
anticipates a 100 percent response rate.

Number of
respondents5
FR 3054a
FR 3054b
FR 3054c
FR 3054d

Estimated
Annual
average hours
frequency
per response

20,000
300
25
250

1
1
2
4

Estimated
annual burden
hours

0.75
0.5
30
2.5

Total

15,000
150
1,500
2,500
19,150

The total annual cost to the public for these surveys is estimated to be $747,885.6
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The cost of the surveys would depend on the size of the sample, the number of questions
asked, the type and complexity of the questions asked, the frequency of the surveys, and whether
the survey is conducted by a private firm or Federal Reserve System staff. The Board anticipates
that in most cases, staff from the Board, the CPO, and the CTO would conduct the FR 3054b and
FR 3054c, but that the majority of the work for the FR 3054a and FR 3054d would be conducted
using a private firm, working on behalf of the Board. The Board estimates that there would be
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Of these respondents, it is anticipated that for each survey conducted, approximately 10 percent would be small
entities as defined by the Small Business Administration (i.e., entities with less than $550 million in total assets).
6
For FR 3054a, the total cost to the public was estimated based on an assumption of 10,500 hours for individuals
and 4,500 hours for all others. For FR 3054b, FR 3054c, and FR 3054d, the total proposed cost to the public was
estimated based on the assumption that all respondents were businesses or government. The estimates use the
following formulas: (1) for individuals, the average consumer cost of $26 is estimated using data from the Bureau
of Labor Statistics (BLS) Economic News Release (USDL-14-0433) www.bls.gov/news.release/cewqtr.nr0.htm and
(2) for businesses and government, percent of staff time, multiplied by annual burden hours, multiplied by hourly
rates (30% Office & Administrative Support at $18, 45% Financial Managers at $67, 15% Lawyers at $67, and 10%
Chief Executives at $93). Hourly rates for each occupational group are the (rounded) mean hourly wages from the
Bureau of Labor and Statistics (BLS), Occupational Employment and Wages May 2016, published March 31, 2017,
www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using the BLS Occupational Classification
System, www.bls.gov/soc/.

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no additional staffing costs, but that staff may spend up to 1,200 hours per year working on these
collections, and may spend between $1.0 and $2.0 million for the private firm to develop,
administer, and analyze the results of these surveys.

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