Detailed Information on the
Bureau of Engraving and Printing: Protection and Accountability Assessment

Performing in-depth, annual assessments of the program's security and accountability by an internal group not associated with the program and contracting with an outside group on a 2- to 3-year cycle. BEP continues to ensure the accountability of product and the safeguarding of innovative counterfeit-deterrent technologies through stringent testing oversight; physical inventories; unannounced compliance reviews, and independent audits of the quality management system which directly impacts security and accountability monitoring. In 2006, BEP initiated a program that requires that an in depth accountability and security assessment be conducted each year by an independent contractor or an internal group not associated with the production or storage of U.S. currency.

Ensuring that proper accountability and security features are identified and addressed during each stage of acquisition and installation of new equipment. The BEP's Internal Control Policy Committee have developed policies to ensure that from concept, through solicitation to factory inspection and Bureau acceptance of new production equipment, accountability and security personnel are directly involved to ensure that proper accountability and security features are identified and addressed during each stage of acquisition and installation. In addition, if space is being reconfigured for production processes, the Office of Security provides clearance to ensure proper camera coverage and two-person compliance.

Updating and revising the Bureau's strategic plan; the new plan will focus on enhancing the Protection and Accountability program. The Bureau's strategic plan is currently being updated and revised; the new plans will emphasis focus on enhancing the protection and accountability program.

Perform in-depth, annual assessments of the program's security and accountability processes by an internal group not associated with the program and contracting with an outside group on a 2- to 3-year cycle.

Ensure that proper accountability and security processes are identified and addressed during each stage of acquisition and installation of new equipment.

Measure: Currency shipment discrepancies per million notes delivered.

Explanation:This indicator reflects the Bureau'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: Security costs per 1000 notes delivered.

Explanation:An indicator reflecting the cost of providing effective and efficient product security and accountability. This standard is developed annually based on the past year's cost performance and anticipated cost increases. The formula used to calculate this measure is the total cost of security divided by the number of notes produced divided by 1000.

Measure: Total Financial Losses

Explanation:The aggregate amount of annual financial losses that have been reported, investigated, and verified as unrecoverable, as a result of the following: improper and/or erroneous payments or purchases (including late payment penalties); total regulatory fines and claims paid; and other financial losses.

Measure: Improper and/or erroneous payments or puchases.

Explanation:An indicator reflecting the ability of the Bureau of Engraving and Printing to make payment for goods and services for only authorized expenses and in a timely manner.

Measure: Total regulatory fines and claims paid.

Explanation:The annual amount of all regulatory fines and tort claims paid by the BEP.

Measure: Other financial losses.

Explanation:The face value of product theft that has been reported, investigated, and verified, during the production, delivery and destruction process.

Is the program purpose clear?

Explanation: The mission of the Bureau of Engraving and Printing (BEP) is to design and manufacture high quality security documents that deter counterfeiting and meet customer requirements for quality, quantity and performance. The purpose of the Bureau's Protection and Accountability program is to provide effective and efficient security and accountability during the manufacture and delivery of United States currency to the Federal Reserve, as well as protect thousands of BEP employees and contractors, facilities and equipment. The value of what the Bureau produces requires it to have the highest standards of accountability and control available. The Bureau occupies three government-owned facilities. The Main and Annex buildings, located in Washington, DC, produce Federal Reserve Notes and other security products. The Western Currency Facility, located in Fort Worth, Texas, produces Federal Reserve Notes. In addition to housing production facilities, free tours of currency operations are offered to the public in both Washington, DC and Fort Worth.

Evidence: 31 U.S.C. 321(a) (4). Public Law 81-656 - 1950. Public Law 95-81 - 1977.

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

Explanation: The Bureau's Protection and Accountability of Assets activity addresses the need to protect billions of dollars in Treasury and other government stored assets. In order to accomplish this, the Bureau maintains a comprehensive on-line, real-time integrated management information system that provides detailed accountability in a complex, multi-plant environment. In addition, the BEP Police safeguard thousands of BEP employees and contractors as well as millions of dollars in equipment and facilities against potential threats. Accountability of product and the safeguarding of innovative counterfeit-deterrent technologies are achieved through stringent testing oversight; physical inventories; internal, unannounced compliance reviews, and independent audits of the quality management system which directly impacts security and accountability monitoring.

Evidence: Section 807 of PL 104-132, the Antiterrorism and Effective Death Penalty Act of 1996. Office of Inspector General (OIG) Audit Report (OIG-05-024); Information Technology: Additional Efforts Needed to Mitigate Security Vulnerability in the Bureau of Engraving and Printing's Network and Systems. Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. Science Applications International Corporation - Bureau of Engraving and Printing, Baseline Threat Assessment, August 2004. United States General Accounting Office (GAO) Report to the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, Committee on Financial Services, House of Representatives - Coin and Currency Production Issues Concerning Who Should Provide Security; July 2003. BEP Strategic Plan (pg 16, 17).

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

Explanation: The Bureau of Engraving and Printing employs a mix of traditional law enforcement and one-of-a-kind accountability and control systems. This program is responsible for safeguarding employees, buildings, and other government assets of the Bureau of Engraving and Printing. Other government programs are mandated to safeguard employees, buildings, and government assets as well; therefore, some similarities exist. BEP Police officers perform traditional law enforcement procedures similar to those provided by other federal police, such as the U.S. Capitol Police, U.S. Mint Police and the U.S. Park Police. However, BEP's Police officers are the sole agents tasked with the protection of the Nation's paper currency in addition to their other law enforcement duties. The uniqueness of the Bureau's protection plan was illustrated in an issue paper dated 12/14/05, to OMB regarding the practicality of merging the BEP and Mint police force. The following conclusion was noted, "Because of limited benefits of a combined police force, and the costs, it is the position of the Treasury Department that pursuing a merger of the Mint and BEP police forces is not practical."

Evidence: BEP Strategic Plan, U.S. Mint Strategic Plan, Internal Control Policy Committee Charter

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

Explanation: The BEP protection and accountability program is free of major flaws that limit effectiveness or efficiency. However, since there is some duplication with other Federal protection forces, it could be cost effective to combine protection forces. The program analyzed the feasibility of combining police forces with the U.S. Mint in 2005 and found that it would not be cost effective to merge the two forces. Independent unannounced accountability and security reviews are conducted monthly, in production, processing, storage and off-line areas to document compliance to internal security and accountability directives, policies and procedures.

Evidence: Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. OIG Report (OIG-06-015) - Bill and Coin Manufacturing: Control Issues Identified at the Bureau of Engraving and Printing Western Currency Facility; December 8, 2005. Science Applications International Corporation - Bureau of Engraving and Printing, Baseline Threat Assessment, August 2004. OIG Report (OIG-06-018) - Audit of Bureau of Engraving and Printing's Fiscal Years 2005 and 2004 Financial Statements; December 20, 2005.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: The Bureau's Protection and Accountability of Assets activity supports Treasury's strategic objective to Increase the Reliability of the U.S. Financial Systems. BEP's ability to provide effective and efficient product security and accountability during the manufacture and delivery of currency notes to the Federal Reserve helps to preserve the integrity of the nation's currency. This budget activity represented less than 11% of the total BEP Budget, approximately $61 million in FY 2006. The program is designed so that resources are targeted to achieve program objectives and to ensure that resources reach only the programs intended beneficiaries. Internal budget formulation processes develop the annual allocations to this program and to the activities described below, based on a review of the prior-year results and any current-year changes to operations, as applicable. The program develops an annual operating plan to ensure that funding allocations will enable the program to meet its annual and long-term objectives. In order to protect currency notes during manufacture the Bureau maintains an integrated and comprehensive program of physical and process security controls supported by an equally important program of accountability controls and oversight. The Protection and Accountability program is comprised of the following activities: 1) Personnel Security, which includes background investigations, performed by Office of Personnel Management (OPM) as well as in-house investigators. BEP staff are required to undergo initial and intermittent background checks, the frequency of which are determined on a government-wide basis by OPM. In order to achieve cost efficiencies in performing background investigations, this program has determined that it is most efficient for in-house employees to perform local background checks and to contract with OPM for the non-local background checks. Total resources for this function are allocated according to the number of required back-ground checks each year. 2) Physical Protection includes monitoring/surveillance in designated areas of vulnerability. Resources for this activity are primarily in-house labor costs (FTE); current staffing levels are in accordance with Secret Service recommendations on placement of physical protection in sensitive areas, such as areas that are not covered by constant video-surveillance but can be adequately protected by intermittent human surveillance. Also included, are service contract costs associated with maintaining BEP's security equipment; the maintenance and placement of security cameras based on Secret Service recommendations and other monitoring equipment. 3) Product and Inventory control. This activity consists of compliance reviews and audits of internal control processes. Resources for this function are for in-house labor costs (FTE) of the Office of Compliance. This office provides constant surveillance of internal controls, which are required to meet audit and compliance review standards. Resource allocations for this office are fairly consistent from year to year since the audit and compliance review requirements do not change significantly from year to year. Because of the interrelationships between the activities, less than adequate and efficient funding in any one area would seriously jeopardize the overall effectiveness of the program. In addition to the above activities, the overall program is reviewed regularly by external security professionals to ensure that the program is managed effectively and that sufficient resources are allocated to all facets of this critical program.

Evidence: Office of Management Control Performance Plans - 2005. BEP Strategic Performance Plan. BEP Congressional Budget Submissions.

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: BEP's protection and accountability program is uniquely designed to protect the Nation's currency in an effective and efficient manner while in Bureau custody. The program is graded on the following performance measures in support of the Bureau's long-term outcome of providing complete protection of US currency in the most cost-effective manner possible while meeting the expectations of the Federal Reserve and the public. There are three long-term measures for this program. The first measure, total financial losses, represents the aggregate amount of annual financial losses that have been verified as unrecoverable as a result of improper or erroneous payments or purchases; total regulatory fines and claims paid. The second measure, currency shipment discrepancy, is an indicator that reflects the ability to provide effective product security and accountability. This measure refers to product overages or shortages of as little as a single currency note in shipments to the Federal Reserve Banks. In addition to these is the measure security cost per 1000 notes delivered. This measure reflects the cost of providing product security.

Evidence: BEP Strategic Plan (pg 17). Departmental Performance and Reporting System (PRS). BEP Congressional Budget Submissions. Internal Summary Assessment and Findings Reports.

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

Explanation: BEP's target is to achieve a "Zero Discrepancy Rate" in all shipments sent to the Federal Reserve by 2012. This target is difficult to achieve, given the amount of currency notes produced and the speed at which the notes are processed. However, BEP continually strives for zero discrepancies. These discrepancies can consist of shortages, overages and defective Federal Reserve Notes in any new currency shipment. Each reported discrepancy is investigated and adjudicated. BEP tracks two measures related to achieving a zero discrepancy rate, security costs per 1000 notes, and financial losses. There are three long-term measures for this program. The first measure, security costs per 1000 notes delivered, is at the lowest level possible without compromising the security posture of the Bureau. BEP's ambitious target is to reduce security costs to $4.25 per 1000 notes delivered by 2012; this represents a cost reduction of more than 25% from the FY 2006 actual of $6.00 per 1000 notes delivered. BEP will strive to achieve this target through a combination of competitive sourcing initiatives, leveraging of best practices of other federal law enforcement agencies, targeted system investments, and improvements in facility design that incorporate security attributes. The second measure, financial losses, is based on the actual dollar value (face value) of losses as opposed to product cost. These are losses that have been reported, investigated, and verified as unrecoverable, from the following: theft of product during production, other asset theft, and other losses. BEP's goal is have $0 in financial losses by 2012. The third measure, currency shipment discrepancies per million notes delivered, is also $0 by 2012.

Evidence: Bureau of Engraving and Printing and Federal Reserve Board "Joint Procedures for Considering Differences in New Currency Transactions", December 1. 1993. BEP Strategic Plan (pg 17). Departmental Performance and Reporting System (PRS). BEP Congressional Budget Submissions.

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

Explanation: The performance measures that are reported regularly to the Department of the Treasury, currency shipment discrepancies and security costs, are reported internally on a monthly basis and provided to the Department quarterly. These measures are indicators of the effectiveness of established accountability procedures, internal control, and fiscal responsibility. In 2005, the Bureau implemented an additional long-term measure that provided a baseline for further reporting. BEP's long-term financial loss measure is the aggregate amount of annual financial losses that have been reported, investigated, and verified as unrecoverable. They are reported in three subcategories as the following; improper and/or erroneous payments or purchases (including late payment penalties); total regulatory fines and claims paid; and other financial losses. These costs have been tracked internally on an annual basis for several years and are now reported to Treasury.

Evidence: The 2005 CFO Performance and Accountability Report. Management's assertion on the effectiveness of internal controls over financial reporting (based on challenging requirements similar to those set by the Sarbanes-Oxley Act) - unqualified opinion. BEP Strategic Plan. Departmental Performance and Reporting System (PRS). BEP Congressional Budget Submissions

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

Explanation: The BEP's annual performance measure, currency shipment discrepancies per one million notes delivered, has been reported on for several years. BEP's annual target has been 0.01%, which the Bureau has been able to meet or exceed on a regular basis. BEP continually strives to meet its long-term goal of zero discrepancies, and has been able to do so several times. The security cost per 1000 notes delivered measure was established in 2004 with a baseline of $5.95. However, due to the loss of the postage stamp program in FY 2006 all protection activities are now fully costed in the currency program. This caused a temporary spike in protection costs for currency leading to an increased target of $6.25 in 2006; however, in 2008 the target is reduced to $5.65 per 1000 notes delivered. The 2008 target reflects an increase in cost of far less than the expected cumulative inflation rate since the 2004 baseline. In 2005, the Bureau implemented an additional long-term measure that provided a baseline for further reporting. BEP's long-term financial loss measure is the aggregate amount of annual financial losses that have been reported, investigated, and verified as unrecoverable. The 2008 target for this measure is set at $28,000 and the BEP will strive for an ambitious target of $0 by 2012. The 2008 target represents a 58% reduction in losses compared with 2006 actual data. This measure is also reported on in three subcategories in the following areas; improper and/or erroneous payments or purchases (including late payment penalties); total regulatory fines and claims paid; and other financial losses. These areas have been tracked internally on an annually basis for several years, and are now reported to Treasury.

Evidence: The 2005 CFO Performance and Accountability Report. Management's assertion on the effectiveness of internal controls over financial reporting (based on challenging requirements similar to those set by the Sarbanes-Oxley Act) - unqualified opinion. Office of Management Control Performance Plans (inventories, internal review, compliance review, quality audits) - 2004 and 2005. BEP Strategic Plan. Departmental Performance and Reporting System (PRS).

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

Explanation: The BEP partners with the Federal Reserve to track and report shipment discrepancies in an effort to keep discrepancies to a minimum and to further prevent any future discrepancies from occurring. Each reported discrepancy is investigated and adjudicated in accordance with procedures agreed upon in the "Joint Procedures for Considering Differences in New Currency Transaction" December 1, 1993. The Bureau occupies government-owned facilities in both Washington, DC and Fort Worth, Texas. The Bureau partners with the following local agencies to assist in achieving its goal for total losses and assessing threat levels: The Washington Airport Authority (Reagan National and Dulles International Airport) in order to facilitate armed escorts of BEP securities and sensitive Bureau items and is a member of the Airport Law Enforcement Committee (ALEC), which is comprised of Federal, State and local law enforcement that meets quarterly to discuss matters of mutual interest; the Washington, DC Metropolitan Police Department; City of Fort Worth, TX Police Department; and City of Blue Mound, TX Police Departments for preventive and law enforcement activities and incarcerations. BEP is also a member of the Washington Area Council of Governments (COG), an organization that provides a focus for action and develops responses to public safety, environment, health concerns and human services for the greater Washington, DC area. In addition, the Bureau is a member of and participates in The Alliance Security Group, located in the Fort Worth, TX area, which is composed of Federal, State and local law enforcement and commercial financial and business entities that meet quarterly to discuss mutual security concerns. The BEP and the U.S. Mint maintain a close working relationship as well and have had a number of shared service initiatives that have included the following: information security; the development and implementation of a common pay scale for Mint and BEP police officers; heightened management collaboration, police officer recruiting and retention, and drug testing.

Evidence: BEP Strategic Plan. BEP Circular 70-03.18, February 14, 2006; Physical Inventory Requirements for Sensitive Property and Security Items. BEP Circular 71-00.64, July 26, 2005; Bureau of Engraving and Printing Zero Tolerance Policy. BEP Circular 71-00.65, October 27, 2005; Custody and Control of Security Items. Chief Financial Officer Performance and Accountability Report 2005.

Are independent 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: The U.S. Secret Service, Government Accountability Office, and Office of the Inspector General as well as other independent security professionals perform comprehensive evaluations of BEP protection and accountability activities on a regular basis. Examples of independent evaluations that have been conducted include evaluations of the BEP security and accountability program conducted by Kelly, Anderson & Associates, Inc. and KPMG Peat Marwick, as well as a baseline threat assessment of BEP's program performed by Science Applications International Corporation (SAIC) in 2004. In addition, the Bureau of Engraving and Printing elected to receive an audit opinion on internal control over financial reporting under the applicable requirements of the more stringent Sarbanes-Oxley Act, rather than those set forth under A-123. Under Sarbanes-Oxley, management is required to; accept responsibility for the effectiveness of the entity's internal control over financial reporting; evaluate the effectiveness of the entity's internal control over financial reporting using suitable control criteria; support the evaluation with sufficient evidence; present a written assessment about the effectiveness of the company's internal control over financial reporting; and the assessment is included in the annual financial statement and must be audited, in its entirety, by the firm's independent audit firm. While under A-123, management is only responsible for; compliance at the department level; while risk assessment, testing, and documentation of results at the bureau level are limited to the bureau's material contribution to the department's consolidated financial statements; an audit opinion on the internal control assessment is not required, at any level; and the evaluation of entity level controls, activity level objectives and controls, risk identification, risk analysis and managing change is far less vigorous; and managements assessment of internal control over financial reporting at the Bureau level is limited to only the line items tested. During 2005, the BEP received an unqualified opinion from an independent auditor on the effectiveness of internal controls, one of the first government entities to receive such an opinion. As a requirement to maintain ISO certification, Underwriters Laboratories performs periodic assessments of BEP's quality management system and its continuous improvement program. In 2006, the Bureau requested that in depth accountability and security assessments be conducted each year by an independent contractor or an internal group not associated with the production or storage of U.S. currency. The effectiveness of the overall protection and accountability program employed by the BEP is demonstrated by an extremely low loss/product ratio. The effectiveness of the program is also demonstrated by the attainment of ISO 9001 certification. ISO is an internationally recognized quality assurance program aimed at promoting the adoption of a management system that establishes a process that governs the transformation of inputs into outputs to meet customer requirements. Components of the Bureau's ISO certified system include elements of the accountability activity in that the identification and traceability of product tracking procedures are tested for consistency and reliability.

Evidence: OIG Report (OIG-06-018) - Audit of Bureau of Engraving and Printing's Fiscal Years 2005 and 2004 Financial Statements; December 20, 2005. Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. OIG Report (OIG-05-024) - Information Technology: Additional Efforts Needed to Mitigate Security Vulnerabilities in the Bureau of Engraving and Printing's Network and Systems; March 4, 2005. Underwriters Laboratories Inc. ISO9001:2000 Continuous Assessment Reports for audits conducted April 26-27, 2005; March 2-4, 2005; September 14-16, 2004; August 24-25, 2004; April 28-30, 2004; and March 15-16, 2004. Science Applications International Corporation - Bureau of Engraving and Printing, Baseline Threat Assessment, August 2004.

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 Protection and Accountability activity is a separate budget activity in BEP's annual budget. It is aligned with program goals and is directly linked to the BEP's Strategic Plan. The BEP uses performance-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 in accordance with generally accepted accounting principles.

Evidence: BEP Congressional Budget Submissions. BEP Strategic Plan.

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

Explanation: Recent threat assessments of Bureau facilities and processes by independent security professionals have found deficiencies in the Bureau's strategic planning process. It was determined that BEP did not plan for the potential impact of new manufacturing technologies on the Bureau's protection and accountability program. Protection and accountability was more of an afterthought of the planning process and was not treated as a strategic priority. Prior to the Kelly, Anderson & Associates Inc. Review on the Internal Control, Security, and Accountability in 2005; security and accountability for new space, equipment, or processes were identified after the fact and this aspect of the planning process was identified as a deficiency. Under the umbrella of BEP's newly reconstituted Internal Control Policy Committee several changes have been implemented to address these deficiencies. During the concept, through solicitation to factory inspection testing and Bureau acceptance testing of new overprinting equipment, accountability and security personnel are directly involved to ensure that proper accountability and security features are identified and addressed during each stage of acquisition and installation of the new equipment. In addition, if space is being reconfigured for production processes, the Office of Security provides clearance to ensure proper camera coverage, two-person compliance, and badge readers are installed prior to any production start up. The ICPC meets on a bi-weekly basis to provide overall guidance and direction to the BEP internal control program that addresses security and accountability. The committee ensures that Bureau resources are managed in an effective and efficient manner to achieve mission goals; Bureau assets are safeguarded against waste, fraud, loss, unauthorized use, or misappropriation; accountability is maintained over assets; obligations and costs are incurred in compliance with applicable law; and transactions are properly recorded and accounted for to permit the preparation of reliable financial statement and other reports. The Bureau's strategic plan is currently being updated and revised; the new plan will emphasis focus on enhancing the protection and accountability program.

Evidence: Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. Science Applications International Corporation - Bureau of Engraving and Printing, Baseline Threat Assessment, August 2004. BEP Strategic Plan. United States General Accountability Office (GAO) Report to the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, Committee on Financial Services, House of Representatives - Coin and Currency Production Issues Concerning Who Should Provide Security; July 2003.

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: Frontline managers can assess the status of performance real time through the BEP management information system and program manager's discuss successes and propose improvements at monthly meetings. BEP's Office of Financial Management, in coordination with the Office of Currency Production, collects monthly cost, performance and accountability data; this information is evaluated and presented to executive and program management at monthly cost and performance meetings. Performance information is shared between BEP facilities, where various methods to improve performance are discussed. In addition, the Federal Reserve provides quality and shipment discrepancy data to BEP as a basis for evaluation and correction. BEP reports on all annual performance measures to the Department on a quarterly basis.

Evidence: Federal Reserve Board Liaison. Quality Management System. Departmental Performance and Reporting System (PRS).

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: The Bureau of Engraving and Printing has three contractors at the Washington, DC facility and one contractor at the Fort Worth, TX facility that directly support the security systems. Contractors are responsible for BEP's security system operation, maintenance and installation of the Bureau's Access Control Alarm Management System (ACAMS), for the monitoring of BEP's Police Operations and Product Security Close Circuit Television (CCTV) Systems, and for providing training for "screeners" that inspect packages at BEP entrances and exits. Screeners are tested internally on a periodic basis using controlled tests for proficiency in detecting the introduction or removal of contraband from the facilities. The solicitations for all the above performance-based contracts contain the contractors' responsibilities for cost, schedule and performance criteria. The Bureau Police collaborate with FLETC (Federal Law Enforcement Training Center) for training needs. All Bureau executives and senior managers have performance plans that include a security and accountability performance element. In addition, the Senior Executive Service evaluation includes an organizational assessment that includes protection and accountability performance measures.

Evidence: Bureau of Engraving and Printing performance based contracts. SES appraisal forms showing accountability for performance.

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

Explanation: The Bureau of Engraving and Printing operations are financed by means of a revolving fund which is reimbursed through product sales, thereby eliminating the need for appropriations from Congress. The operating budget for the protection and accountability program, which is based on the need for that fiscal year, is aligned with the program goals and linked to the BEP's Strategic Plan. All funds for this program are obligated in a timely manner and for the intended purpose. The program is adequately funded; it represents approximately 11% of the total BEP Budget. Financial status reports are generated monthly and evaluated against the annual financial plan.

Evidence: The 2005 CFO Performance and Accountability Report. BEP Congressional Budget Submissions.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate 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 security and accountability program execution. Frontline managers assess the status of performance through the BEP management information system and discuss successes and propose improvements at monthly meetings. BEP's Office of Financial Management, in coordination with the Office of Currency Production, collects monthly cost, performance and accountability data; this information is evaluated and presented to executive and program management at monthly cost and performance meetings. The Bureau's long-term measure, security costs per 1000 notes delivered, is kept at the lowest level possible without compromising the security posture of the Bureau. BEP's target for this measure is keep security costs at or below 10% of the total BEP budget and long-term plans are to work to reduce this measure to at or below 5% of the total BEP budget by 2012. In an effort to meet this goal and decrease overtime costs, the Bureau has competitively sourced several of its more traditional security functions. In addition, BEP's goal sharing awards program provides incentives to encourage managers and employees to work together to exceed aggressive performance standards. The Bureau also encourages individual initiative and creativity through a suggestion program that recognizes employee suggestions with a share of any monetary saving. Over the last two years BEP has saved over $1.3 million by implementing employee suggestions.

Evidence: BEP Management Information System (BEPMIS). Working group meeting minutes. Annual goal sharing program.

Does the program collaborate and coordinate effectively with related programs?

Explanation: The Bureau collaborates on a daily basis with an on-site Federal Reserve Liaison who is heavily involved in the Bureau's accountability over assets function as well as quality programs. Bureau management also meets regularly with the Federal Reserve to discuss program related issues and concerns. In addition to the above collaborative efforts, the Bureau performs audits of currency destruction procedures for the Federal Reserve Banks. The BEP and the U.S. Mint maintain a close working relationship and have had a number of shared service initiatives, including the following: an exchange of high-level information technology managers to effect knowledge transfers in the areas of IT infrastructure, server configuration and information security; the development and implementation of a common pay scale for Mint and BEP police officers; heightened management collaboration and discussion on issues such as supply chain management, police officer recruiting and retention, and employee drug testing.

Evidence: Federal Reserve Board Liaison. Working group meeting minutes.

Does the program use strong financial management practices?

Explanation: The Bureau has a proven record of strong financial management practices; the BEP has received an unqualified (clean) audit opinion from independent auditors for the past twenty-one years. The Bureau has a proven record of strong financial management practices; the BEP has received an unqualified (clean) audit opinion from independent auditors for the past twenty-one years. The Bureau has established an internal management control function to conduct reviews and studies to evaluate the efficiency and effectiveness of all BEP programs and major initiatives, to include the security and accountability functions. The effectiveness of the Bureau's internal control program is demonstrated by receiving an unqualified opinion from an independent review on management's assertion on the effectiveness of internal controls. This internal control review was based on challenging requirements similar to those set by the Sarbanes-Oxley Act rather than those set forth under A-123. Under Sarbanes-Oxley, management is required to; accept responsibility for the effectiveness of the entity's internal control over financial reporting; evaluate the effectiveness of the entity's internal control over financial reporting using suitable control criteria; support the evaluation with sufficient evidence; present a written assessment about the effectiveness of the company's internal control over financial reporting; and the assessment is included in the annual financial statement and must be audited, in its entirety, by the firm's independent audit firm. While under A-123, management is responsible for; compliance at the department level only; while risk assessment, testing, and documentation of results at the bureau level are limited to the bureau's material contribution to the department's consolidated financial statements; an audit opinion on the internal control assessment is not required, at any level; and the evaluation of entity level controls, activity level objectives and controls, risk identification, risk analysis and managing change is far less vigorous; and managements assessment of internal control over financial reporting at the Bureau level is limited to only the line items tested. In 2005, the Bureau of Engraving and Printing was one of the first government entities to receive such an opinion, and in 2006 the Bureau has again received an unqualified opinion on its internal control over financial reporting.

Evidence: The 2005 CFO Performance and Accountability Report. Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. OIG Report (OIG-06-018) - Audit of Bureau of Engraving and Printing's Fiscal Years 2005 and 2004 Financial Statements; December 20, 2005.

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

Explanation: Since 1993, the Bureau reported 12 incidents of theft involving approximately $1.9 million. BEP requested comprehensive threat assessments to be conducted of Bureau facilities and processes by independent security professionals. The Bureau has been highly responsive to any deficiencies found during these evaluations and has worked diligently on implementing any recommendations. The Bureau's strategic plan and capital investment program are focused on enhancing its accountability and security program. In addition to the independent assessments, the Bureau reconstituted its Internal Control Policy Committee (ICPC) to supplement and strengthen the Bureau's strategic plan. The ICPC meets on a bi-weekly basis to provide overall guidance and direction to the BEP internal control program that addresses security and accountability. The committee ensures that Bureau resources are managed in an effective and efficient manner to achieve mission goals; Bureau assets are safeguarded against waste, fraud, loss, unauthorized use, or misappropriation; accountability is maintained over assets; obligations and costs are incurred in compliance with applicable law; and transactions are properly recorded and accounted for to permit the preparation of reliable financial statement and other reports. In addition, the ICPC is functioning as the Bureau's Senior Management Council, overseeing the implementation of OMB Circular A-123, "Management's Responsibility for Internal Control" and its effort to obtain an opinion from its independent auditors on internal control. The BEP has effective programs in place to assist management in the continuous improvement of daily management processes as well. For example, 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 17 unions that represent our workforce through the use of a Joint Labor Council to facilitate an open dialogue between management and union members.

Evidence: ICPC meeting minutes. The CFO Performance and Accountability Report - 2005. BEP Strategic Plan.

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

Explanation: The BEP's long-term performance measure, currency shipment discrepancies per one million notes delivered, has been reported on for several years. BEP continually strives to meet its long-term goal of zero discrepancies, and has been able to do so several times. In 2006, the target of 0.01% was met. The second long-term goal, security cost per 1000 notes delivered, was established in 2004 with a baseline of $5.95. In FY 2006, the target of $6.25 was exceeded with an actual rate of $6.00 per thousand notes delivered. In 2008, the target is $5.65 per 1000 notes delivered, which reflects a cost savings and is far less than the cumulative inflation rate for the same two-year period. Consequently, in real dollar terms, the security cost per 1000 notes has decreased over the past two years, and the program is therefore on track to meet its long term goal of $4.25 per thousand notes delivered. The Bureau's long-term financial loss measure is the aggregate amount of annual financial losses that have been reported, investigated, and verified as unrecoverable, as a result of the following: improper and/or erroneous payments or purchases (including late payment penalties); total regulatory fines and claims paid; and other financial losses. The measure is reported in actual dollar value (face value) as opposed to product cost. In 2005, total financial losses of $131,000 were reported and in 2006, a target of no more than $75,000 was established and was exceeded with an actual value of $66,319. This indicates that the Bureau is on track to meet its long term goal of $0 by 2012. Another indicator of progress toward meeting long-term goals is the maintaining of ISO certification. The Bureau has leveraged its ISO certified quality management system to enable product and material control and traceability throughout the production process. The ISO quality management system not only provides the ability to trace ink problems back to a specific batch, but it also provides an accountability trail to investigate inventory and shipment discrepancies as well as other control irregularities.

Evidence: The CFO Performance and Accountability Report - 2005. BEP Congressional Budget Submissions. ISO 9001 Certification. Departmental Performance and Reporting System (PRS).

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

Explanation: The BEP's long-term/annual performance measure, currency shipment discrepancies per one million notes delivered has an annual target of .01%, which the Bureau has been able to meet or exceed on a regular basis each year since 2002. The second long-term/annual measure, security cost per 1000 notes delivered, was established in 2004 with a baseline of $5.95 per 1000 notes delivered. In 2005, the target was established at $5.95 and the actual was $5.75 per 1000 notes delivered. Due to the loss of the postage stamp program, all protection activities are now fully costed in the currency program. This was expected to cause a temporary spike in protection costs for currency leading to an increased target of $6.25 in 2006; the Bureau exceeded this target with an actual rate of $6.00 per 1000 notes delivered. In 2005, the Bureau implemented an additional long-term measure that provided a baseline for further reporting in 2006. BEP's long-term financial loss measure is the aggregate amount of annual financial losses that have been reported, investigated, and verified as unrecoverable. They are reported in three subcategories; improper and/or erroneous payments or purchases (including late payment penalties); total regulatory fines and claims paid; and other financial losses. These areas have been tracked internally on an annually basis for several years, and are now reported to Treasury. The 2006 target for this measure was set at $71,000; the Bureau's actual for the year for this measure was $66, 319, indicating that the Bureau is on track to meet the long-term goal. The annual measures that comprise this long-term goal showed mixed results for 2006. The target for improper and/or erroneous payments or purchases in 2006 was $1,000 and the actual result was $2,126. The target for total regulatory finds and claims paid was $70,000 and the actual amount was $48,693. The target for other financial losses was $0 and the actual amount was $15,500.

Evidence: Departmental Performance and Reporting System (PRS). The CFO Performance and Accountability Report - 2005.

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

Explanation: On a per unit basis, security costs declined from $5.95 per 1000 notes produced in 2004 to $5.75 in 2005 and $6.00 per 1000 notes produced in 2006. The formula used to calculate this measure is the total cost of security divided by the number of notes produced divided by 1000. In 2008, security cost increases will be held to less than the rate of inflation. Considering that the currency manufacturing program now carries the full cost of the protection program compared to 2004 when the postage stamp manufacturing program absorbed 15% of protection costs, the 2008 target is ambitious and demonstrates continued cost effectiveness. For the long term, BEP's total program costs for the Security and Accountability activity will decline to less than 5% of total Bureau operating costs. The Bureau's long-term performance measure, currency shipment discrepancies per one million notes delivered has an annual target of 0.01%, which the Bureau has been able to meet or exceed on a regular basis. BEP continually strives to meet its long term goal of 0%, and has been able to do so three out of the last four years.

Evidence: The CFO Performance and Accountability Report - 2005. Departmental Performance and Reporting System (PRS).

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

Explanation: The Bureau's post-production cash handling operations compare favorably with the cash handling operations of major banking institutions and the larger Federal Reserve Banks. This assessment is based on information from the Bureau on site Federal Reserve Board Liaison and BEP compliance reviews of Federal Reserve Bank currency processing and destruction functions. The Bureau employs its own Police Force to manage and perform the majority of BEP's traditional law enforcement activities, similar to that of the U.S. Mint, Federal Reserve, and money producing facilities in other countries. The GAO report "Coin and Currency Production-Issues Concerning Who Should Provide Security" found that organizations that employ its own security staff have greater control over security operations. For example, by conducting background investigations on staff it ensures job suitability, level of training is uniform, and supervisory controls are in place if corrective action is needed. As reported in the above cited GAO study, the U.S. Mint reported 74 incidents of theft, totaling $92,862 and the Federal Reserve reported 12 internal thefts during the 10-year period (1993-2002), totaling $516,080, of which less than half was recovered. During that same period of time the Bureau reported 11 incidents of theft totaling $1.8 million. Of this, $1.6 million was "test currency" of which approximately $1.3 million was recovered.

Evidence: Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. Science Applications International Corporation - Bureau of Engraving and Printing, Baseline Threat Assessment, August 2004. BEP Strategic Plan. United States General Accountability Office (GAO) Report to the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, Committee on Financial Services, House of Representatives - Coin and Currency Production Issues Concerning Who Should Provide Security; July 2003. Federal Reserve Board Liaison.

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

Explanation: The U.S. Secret Service, Government Accountability Office, and Office of the Inspector General as well as other independent security professionals perform comprehensive evaluations of BEP protection and accountability activities on a regular basis. These evaluations have found the Bureau to have strong management support for, and workplace compliance with, security, accountability and internal control policies and procedures indicating an effective program. In 2006, the Bureau started a program in which in depth accountability and security assessments will be conducted each year by an independent contractor or an internal group not associated with the production or inventory/shipping process. The effectiveness of the Bureau's internal control is further demonstrated by BEP receiving an unqualified opinion from an independent review on management's assertion on the effectiveness of internal controls. This internal control review was based on the challenging requirements similar to those set by the Sarbanes-Oxley Act. The Bureau of Engraving and Printing was one of the first government entities to receive such an opinion.

Evidence: The 2005 CFO Performance and Accountability Report. Management's assertion on the effectiveness of internal controls over financial reporting (based on challenging requirements similar to those set by the Sarbanes-Oxley Act) - unqualified opinion. Risk Assessment of Accountability Units - February 28, 2006 & August 28, 2002. Kelly, Anderson & Associates, Inc. Report on Internal Control, Security, and Accountability Review of the Western Currency Facility Bureau of Engraving and Printing; August 18, 2005. OIG Report (OIG-06-015) - Bill and Coin Manufacturing: Control Issues Identified at the Bureau of Engraving and Printing Western Currency Facility; December 8, 2005. OIG Report (OIG-05-024) - Information Technology: Additional Efforts Needed to Mitigate Security Vulnerabilities in the Bureau of Engraving and Printing's Network and Systems; March 4, 2005. Science Applications International Corporation - Bureau of Engraving and Printing, Baseline Threat Assessment, August 2004. United States General Accounting Office (GAO) Report to the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, Committee on Financial Services, House of Representatives - Coin and Currency Production Issues Concerning Who Should Provide Security; July 2003.