PART 2: OUR WORK

Fiscal Agent for the U.S. Treasury

DELIVERING INNOVATION AND EFFICIENCY IN FEDERAL FINANCIAL MANAGEMENT

By Kathleen O'Neill Paese, Senior Vice President, Banking Treasury Services

Kathleen O'Neill Paese

In 1915, the 12 Federal Reserve banks were designated as fiscal agents of the United States. Today, the Reserve banks provide support for the U.S. Treasury Department's accounting, collections, payment and debt-management functions. The Federal Reserve System is a trusted partner, helping the Treasury meet its goal of transforming and modernizing federal financial management.

The responsibilities for the Fed are great, as it is charged with supporting the essential financial-management services provided by the Treasury and its bureaus to federal agencies and the public. For the fiscal year ending September 2013, the Treasury auctioned more than $7 trillion in marketable securities, collected $3.16 trillion in receipts and issued more than $2.4 trillion in payments. In addition, the Treasury's Bureau of the Fiscal Service accounts for the nation's debt to the penny each day. As fiscal agents, the Federal Reserve banks ensure that the systems that facilitate and track this extensive volume of financial transactions are working properly; the banks also ensure that the flow of government funds is efficient, dependable and secure.

At the St. Louis Fed, we share the Treasury's commitment to innovation and efficiency. The St. Louis Fed's Treasury division is composed of four departments: Treasury Financial Management (TFM), Treasury Agency Support (TAS), Treasury Collateral and Cash Management (TCCM) and the Treasury Relations and Support Office (TRSO). Through these, the St. Louis Fed not only provides financial-management systems and operations support to the Treasury, but also performs an important leadership and coordination function for Treasury support activities throughout the Federal Reserve System.

The St. Louis Fed's Treasury division has been instrumental in rewriting several of the federal government's accounting systems. Overhauling these systems is a multiyear endeavor, one that is necessary for increasing the accuracy and timely reporting of federal accounting information.

Innovation, likewise, is driving the St. Louis Fed's efforts to develop state-of-the-art systems for forecasting and investing federal government funds. These systems will enhance the Treasury's ability to produce daily forecasts of its funds held at the Fed and to determine the government's borrowing needs, ensuring that the total debt outstanding is within statutory limits.

At the same time, we are working to consolidate multiple systems into a single authoritative source for federal government accounting information. The applications developed and operated by St. Louis' TFM department will provide the Bureau of the Fiscal Service and federal agencies with the ability to produce financial reports that are more timely, accurate and reliable, while reducing the reporting and reconciliation burden on federal agencies.

Building on our proven record of leadership, the St. Louis Fed's responsibilities were expanded in 2012 to provide critical support for the Treasury's efforts to reduce the issuance of improper government payments. This resulted in the formation of a new office within the Treasury division: the TAS department. The Do Not Pay team in TAS is helping all federal agencies to confirm that the right recipients receive the right payments for the right reasons at the right times. By incorporating robust data analytics into the government's payment functions, the St. Louis Fed is helping agencies identify and eliminate improper payments. With the data analytics and business intelligence services provided by the Do Not Pay team in St. Louis, government agencies are able to strengthen internal controls to reduce payment errors, waste, fraud and abuse.

In addition to Do Not Pay, TAS provides customer call center support for a broad portfolio of Treasury programs. TAS interacts with federal agencies on the Treasury's behalf, providing outreach and onboarding services for a range of the Treasury's financial-management applications and services. Collaboration between the Reserve banks and the Treasury is essential, not only for ensuring the smooth functioning of government financial systems, but also for establishing future plans to enhance and evolve these systems to meet the changing needs of government.

In 2013 and early 2014, the Treasury conducted a review of all fiscal agent support in the Fed System with a desire to better align similar functions and improve efficiency and cost effectiveness. In April 2014, the Treasury announced that the St. Louis Fed was selected as one of four "core" Reserve banks that will support the Treasury's cash-management, accounting, collateral and enterprise functions. The St. Louis Fed will be taking on responsibility for five additional fiscal agent functions currently provided by other Reserve banks. Some of the transferring functions (such as the Treasury Collateral Monitoring function and the Bank Management Service) and other current St. Louis Fed functions (such as all cash management functions) will fall under the new TCCM department, which was established in mid-2014.

In 2001, the St. Louis Fed was selected as the Reserve bank responsible for establishing and leading the TRSO. The TRSO manages the Fed System's overall relationship with the Treasury—coordinating all System initiatives related to the Treasury—and serves as the central point of contact for policy issues, new initiatives and problem resolution. The office monitors most of the fiscal agent support provided by the 12 Reserve banks. The TRSO serves a unique role among the Reserve banks, offering System-wide leadership and coordination of fiscal agent support to the Treasury. The TRSO identifies opportunities to improve and streamline existing Fed System support for the Treasury, along with identifying potential new support activities that would help the Treasury to achieve its strategic objectives.

Hot-button issues, such as the 2013 debt-ceiling situation and the government shutdown, often require the TRSO's active engagement. The TRSO works with each Reserve bank and Treasury representatives to assess the operational impact of policy decisions and to determine appropriate actions for keeping the government's payment and support systems fully functional in the event of any type of disruption or crisis.

In addition, in recent years, the TRSO has been tapped to manage two high-profile public education campaigns on behalf of the Treasury, both with the ultimate goals of increasing efficiencies within the government's financial systems and saving taxpayer dollars. The Go Direct program began in 2004 to encourage recipients of federal benefit payments to switch to electronic direct deposit for those payments, thereby reducing the Treasury's issuance of costly paper checks. The Treasury department estimates that the Go Direct campaign saved $1.15 billion in taxpayer dollars and will save $1 billion more over the next 10 years. By the time the Go Direct campaign concluded in March 2013, the program surpassed the goal to have 96 percent of all federal benefit payments made electronically.

In 2012, the Treasury discontinued the sale of paper savings bonds and began selling bonds exclusively online. Again, the goal was to make government transactions more efficient and save taxpayer dollars. And again, the TRSO was asked to manage a public education campaign to support the switch. The campaign is called Ready.Save.Grow. The move from paper to electronic bond sales is expected to save American taxpayers approximately $70 million over the first five years of the program. Since being launched, Ready.Save.Grow. has developed into a robust education campaign to help people save through affordable, safe and convenient Treasury savings options. These include the myRA Treasury retirement account, announced by President Barack Obama in his 2014 State of the Union address. A key task for the TRSO will be to raise awareness about and support the implementation of the myRA Treasury retirement account.

As fiscal agent, the St. Louis Fed's Treasury division is committed to providing exceptional support to the Treasury. Whether developing new systems, providing support to agencies and the public, or leading and coordinating Reserve bank fiscal agent services, our goal is to help the U.S. Treasury meet its strategic objective to transform federal financial management.