Bureau of Engraving and Printing

Fiscal Year Ended June 30, 1975

154 1975 REPORT OF THE SECRETARY OF THE TREASURY

TABLE 2.—Exports and imports of gold into the United States for industrial use, calendar year 1974

[Thousands of fine troy ounces]

Country Exports Imports

Austria 11,014 Canada ^ 19 841 Japan 2197 . Singapore ., ^..... 13 1 1,979 Switzerland 408 16 United Kingdom 120 U.S.S.R 124 21 West Germany 81 Yugoslavia 23 6 Other countries Total 633 4,078 Net imports of gold 3,445

1 Includes purchases from foreign accounts at the Federal Reserve Bank of New York. NOTE.—Imports are shown from country of flnal export as reported by Department of the Treasury gold licensees and do not indicate prior shipment from country in which the gold was produced.

BUREAU OF ENGRAVING AND PRINTING The Bureau of Engraving and Printing, one of the world's largest securities manufacturing establishments, designs and produces the major evidences of a financial character issued by the United States. It is responsible for the production of U.S. currency, postage stamps, and public debt instruments, as well as miscellaneous financial and security documents. Reorganization Faced with increasingly more complex demands from customer agencies for security printed products, the Bureau reviewed the appro priateness of its organizational structure for initiating and controlling the technological and operational changes needed to continue cost- effective completion of mission requirements. A Bureau-wide reorga nization, effective in fiscal 1976, will provide cohesive top manage ment direction and functional concentration in the areas of research and engineering, operati/)ns, and administration. Finances Operations of the Bureau are financed by means of a revolving fund established in accordance with the provisions of Public Law 656, approved August 4, 1950. This fund is reimbursed by customer agen cies for the direct and indirect costs of the Bureau for work and services performed, including administrative expenses. In followup of the directive by the House Subcommittee on Appro priations to develop alternate methods of financing, the Bureau in corporated a surcharge in the cost of its products beginning in fiscal 1975. The surcharge provides funds to help finance predictable equip-

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ADMINISTRATIVE REPORTS 155

ment acquisitions. However, it was recognized that the new surcharge alone would not provide sufficient funds to acquire major equipment in adequate quantities to meet current needs. Tlierefore, the Bureau entered into equipment contracts on a monthly lease-with-option-to- buy financing arrangement (lease-to-ownership), without termination contingency liability. The absence of liability requirements enabled the Bureau to obtain essential major equipment without cash outlay. Utilizing this method of financing, contracts were let for the acquisi tion of six modem high-speed intaglio printing presses and six pro duction models of the currency overprinting and processing equipment (COPE). Delivery of two of the intaglio printing presses is expected by July 1975, and three of the COPE machines by August 1975. Estimated annual savings in currency production costs from complete utilization of this equipment is $3 million. Currency program Currency deliveries in fiscal 1975 totaled 2.8 billion notes, compared with 2.3 billion notes in fiscal 1974. The smaller volume in fiscal 1974 refiected a reduction by the Federal Eeserve System in the level of its cash inventory due to reassessment of its emergency reserve require ments. Heretofore the Bureau has destroyed currency and other securities mutilated during the production processes by burning in the Bureau incinerator. Due to air pollution, the District of Columbia Government requested the Bureau to develop other means. During February 1975, the Bureau installed a system whereby the mutilated currency is shredded, baled, and shipped to the Crane Paper Co. in Dalton, Mass., for recycling into newly manufactured currency paper. Each month, approximately 20,000 pounds of shredded currency paper is being disposed of in this manner instead of incineration, resulting in reduced air pollution and paper conservation. Alternate nonpolluting systems for destruction of other mutilated paper products of a security nature are planned for fiscal 1976. Operational changes accomplished during fiscal 1975 included the shrink wrapping of currency packages, which replaced the traditional method of the kraft wrapping process, and the installation of paper lifts at the guillotine cutting machines, which eliminates the need for manual handling. Both are labor-saving improvements. Food coupon program During fiscal 1975, the Department of Agriculture issued a new series of food coupons, designed by the Bureau, with different denom inations and book conformations. Since the private sector banknote companies were unable to undertake production of the total number of coupons needed by the changeover date of March 1, 1975, OMB ap proved the Bureau's request to continue production of the old series through January 1975. On January 24, 1975, the Department of Agriculture requested the Bureau to extend production of the old series for an emergency require ment of 4 million $30 food coupon books by February 15, to meet the increase in eligible recipients. During March 1975, the Department again requested the Bureau's service, this time to assist in producing

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156 1975 REPORT OF THE SECRETARY OF THE TREASURY

the new series, since the private sector banknote companies were unable to meet production requirements under the escalated program. Total deliveries in nscal 1975 were 3.3 billion food coupons (approxi mately 16 percent of the req^uirements of the Department of Agricul ture) , compared with 2.5 billion delivered in fiscal 1974. Postage stamp program Deliveries of U.S. postage stamps were 26.7 billion pieces in fiscal 1975, compared with 29.5 billion in fiscal 1974. (Abnormally heavy production requirements in fiscal 1974 were occasioned by the postal rate increase.) The Bureau began installation of two modern postage stamp presses ordered in 1972. One is a multicolor intaglio web press to be used for printing stamps in coil form. The other is a cpmbination gravure- intaglio web press which will introduce a new dimension in the pro duction of other types of multicolor postage stamps. The versatility of these presses will materially broaden the range of printing process capabilities and provide operational experience to help determine the new generation of presses to be designed for replacement of obsolete single-color web presses. The Bureau also purchased equipment for mechanizing the manu facture of postage stamps in book form. This equipment can print the book covers, collate the covers with preprinted intaglio stamps, and process the finished books in one continuous operation. Substantial manpower savings and lower production costs will be realized. During fiscal 1975, the Bureau manufactured its first pressure-sensi tive postage stamp, a 1974 Christmas design, "Peace on Earth," which eliminated the need for moistening prior to affixing the stamp to the envelope surface. Distribution was limited to five postal regions as a pilot project for determining public acceptance. The six-color stamp was printed by the gravure process and then converted to die-cut sheet stamps on prototype equipment. Offset printing presses A sheet-fed multicolor offset press to produce postage stamps was installed during fiscal 1975 and will be operational early in the next fiscal year. This press will eliminate the need for multiple passes of sheets through two presses when more than two-color offset printing is required. Acquisition of a web-fed offset printing press is proposed during fiscal 1976, to be used primarily for the production of red strip stamps for distilled spirits. The elimination of the need to number such stamps in a separate printing operation will result in significant recurring annual savings. Internal audit An intensive program of internal audit evaluated operational ef ficiency and economy, and ascertained compliance with prescribed regulatory directives. During fiscal 1975, 61 reports of audit contain ing 229 recommendations for improvements were released for man agement consideration. Coverage included fiscal and management audits and reviews of operations and programs, conducted on a sched uled, special, and unannounced basis.

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ADMINISTRATIVE REPORTS 157

Quality control During fiscal 1975, improved quality control measures provided greater assurance that postage stamp books, coils, and sheets were consistently maintained at acceptable quality levels. In addition, two new quality assurance programs were implemented for the early iden tification and correction of causes of excessive postage stamp spoilage during manufacturing and processing operations, and for monitoring in-house handling arid storage of paper to reduce waste and spoilage. Warehouse To resolve the Bureau's Critical shortage of warehouse space, interim arrangements were made to utilize 10,000 square feet of space at the Naval Gun Factory to store paper which was ordered for production of the Christmas postage stamps. In April 1975, the Bureau was suc cessful in obtaining space in a modern warehouse located at Lorton, Va. Executive development The first phase of the Bureau's executive development plans involved the identification of specific kinds of knowledge and ability necessary at each level of Bureau management. In the second phase, an assess ment center matched those requirements with candidate potential. De velopment plans for incumbent managers are based on a series of per sonal and operational goals for improvement. Followup development and career planning has been ongoing with eight candidates who emerged from the management assessment center. In the initial seminar of a planned series the group met with members of top management to develop an awareness of current management approaches, issues, and priorities. The Kepner-Tregoe process for problem analysis and decisionmaking is being utilized for incuiribent managers and executive development candidates. The objective is to provide participants with basic ideas for organizing and using information in solving problems, making decisions, and anticipating future problems. The approach deals with inajor problems of the Bureau without regard for internal organiza tional boundaries which may or may not conform to the functional dimensions of the problem. This not only serves to upgrade the man ager's problem-solving and decisionmaking skills, but also provides a developmental team-building approach to solving internal problems. Supervisory development system During September 1974, a special projects group was organized to study and revise the supervisory personnel system. The new system provides for an assessment center, a supervisory intern program, revised development program, and a new evaluation plan. The initial outline of the total system was approved in February 1975, and the special projects team has since initiated revisions of existing selection and promotion guidelines^ development of instruments for use in the assessment center, and development of a modular training program. The final program plan will be completed and ready for implementa tion during the next fiscal year.

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158 1975 REPORT OF THE SECRETARY OF THE TREASURY

General educational development During fiscal 1975,70 employees participated in various phases of the general educational development (GED) program. Seven employees completed the courses and elected to take tlie GED examination, re ceiving their high school equivalency diplomas. Upward mobility program The upward mobility program was initiated with a survey of interest conducted in August 1974. Approximately 320 employees responded. Following completion of a skills inventory, each candidate was coun seled by trained upward mobility career counselors.. Seven target positions which were identified to be filled through this program were formally advertised during March 1975. Eighty-three candidates were processed through the upward mobility center and were ranked and certified on a promotion register which will remain active for such positions for a 1-year period. Each selected candidate will be afforded individual training and development to enable him or her to meet the qualifications of the target position in accordance with Civil Service Commission regulations. Awards program During fiscal 1975, 1,141 employees received special achievement awards and 47 employees were granted high quality pay increases. Nonrecurring savings of $139,278 were realized this fiscal year from this part of the incentive awards program. Under the employee sug gestion program, 174 suggestions were received, of which 61 were adopted, and it is estimated that the Bureau will realize annual re curring savings of $15,455 and nonrecurring savings of $1,980. Equal employment opportunity program The Bureau's equal employment opportunity program, in an effort to increase the number of Spanish-speaking employees, broadened recruitment contacts in fiscal 1975. Employee committees for equal employment opportunity provided an effective and direct avenue of communications between employees and top management. Employ ment statistics indicate definite progress in the advancement of minor ities and females in the number of craft journeyman and higher grade General Schedule and Wage Grade positions. Labor-management relations The Bureau continued to give special emphasis and attention to the conduct of all labor-management dealings within the spirit and intent of Executive Order No. 11491, as amended by Executive Order No. 11838 of February 6,1975. At the close of the fiscal year, there existed within the Bureau grants of exclusive recognition to 17 AFL-CIO affiliate unions covering 25 craft units, 1 noncraft unit, 1 guard unit, and 1 GS clerical/technical unit. There were 12 approved substantive labor-management agreements. The unions functioned as a dynamic part of the Bureau and were a major factor in management con siderations.

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ADMINISTRATrV^E REPORTS 159

Safety program During the 4-month period from January through April 1975, there was an increase of 10 injuries over the same period in 1974. However, the frequency rate of lost-time injuries when compared for the same period reflected a dramatic upward spiral. Projecting the monthly average of lost-time cases during 1975 to date, it is anticipated that approximately 120 such injuries, representing a 167-percent increase, will occur during this calendar year. Primarily, this is attributable to changes in the Federal Employees' Compensation Act which became effective November 6, 1974. The factor having greatest impact is that the employee becomes immedi ately eligible for continuation of pay by the Bureau for up to 45 days without charge to any leave account. The prior regulation required placing an employee in a leave-without-pay status for 3 days, await ing compensation claim adjudication. In light of the changes in the act, attention was concentrated upon reported injury cases which could be expected to result in continuation of pay. Investigations were promptly conducted, with a comprehensive report of findings and, as appropriate, referral to the area manager for remedial action to eliminate the cause or minimize recurrence. Constant communication with supervisors continued to broaden the basis for understanding plant safety and the supervisor's role in ac complishing safety goals. Also solicited was union representative participation in the Bureau's safety awareness program, including surveys of work areas, machinery, and processing operations. . The Bureau's comprehensive industrial safety program includes close collaboration with the medical office. The Bureau has acquired an electronic audiometer and soundproof hearing testing chamber for use in a hearing conservation program for employees. Service to the public The Bureau continued to promote increased public awareness of the security characteristics of genuine currency. Security exhibits were furnished for four numismatic and philatelic shows. In addition, the Bureau produced two distinctive souvenir cards in conjunction with the American Numismatic Association's 83d anniversary convention in Bal Harbour, Fla., and the National Philatelic Exhibitions of Washington, D.C. Sales of the souvenir cards not only responded to expressed public interest but also defrayed costs of participation by the Bureau at these events. Participation at exhibits is expected to accelerate during the Bicentennial era. The Bureau of Engraving and Printing continues to be one of the major points of interest for visitors to the Washington area. During fiscal 1975, 616,040 visitors took the self-guided tour of Bureau opera tions. Other tours geared to technical needs and particular interests are conducted on an individual need basis such as for agents of the TT.S. Secret Service, representatives of domestic and foreign firms in the printing industry, and news media personnel.

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ADMINISTRATIVE REPORTS 1 55 During fiscal 1976, two cases were appealed to the Secretary from initial decisions by an administrative law judge. One case resulted in a reduction of the disposition made by the administrative law judge from disbarment to suspension. The other, on appeal from the initial decision rendered in fiscal 1975, resulted in an affirmation ofthe administrative law judge's order of disbarment. During the transition quarter, one appeal to the Secretary was made and was pending as of September 30, 1976. During the fiscal year, the Office represented the Department in one employee appeal to the Civil Service Commission of an adverse action taken against him by a bureau of the Department. Proposed regulations governing practice before the Bureau of Alcohol, Tobacco and Firearms were pending at year's end. Those regulations would provide the Director of Practice with parallel duties with respect to such practice as he has relative to practice before the IRS. On March 21, 1975, the Director of Practice was named executive director for the Joint Board for the Enrollment of Actuaries. The Joint Board, formed pursuant to section 3041 of the Employee Retirement Income Security Act of 1974, is responsible for the enrollment of individuals who wish to perform actuarial services under the act and for the suspension and revocation of the enrollment of such individuals after notice and opportunity for hearing. During the fiscal year, the Joint Board promulgated regulations governingtheenroUmentof actuaries before January 1, 1976. In addition, regulations governing standards of performance by enrolled actuaries and Joint Board regulations implementing the Freedom of Information and Privacy Acts were adopted. Two public hearings were held relative to those regulations. A third public hearing was held during the transition quarter relative to proposed regulations governing the enrollment of actuaries on or after January 1, 1976. During the fiscal year, 3,753 applications for enrollment were filed. Of those, 2,417 were enrolled. There were 178 applications withdrawn and 59 applications were abandoned. Proposed denials were issued 1,241 applicants, of which 740 were denied enrollment. Including the undeter mined proposed denials, 359 applications were pending at the close of the fiscal year. To facilitate the regulations governing enrollment, three actuarial examinations were offered applicants for enrollment during the fiscal year. The examinations, scheduled at 58 cities, were coordinated by the executive director. In this connection, a total of 2,661 applications were processed. The Joint Board had not adopted regulations governing revocation and suspension as of the fiscal year's close.

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156 1976 REPORT OF THE SECRETARY OF THE TREASURY the production of U.S. currency, postage stamps, public debt securities, and miscellaneous financial and security documents.

Currency program Currency deliveries in fiscal 1976 totaled 2.8 billion notes, approxi mately the same as the number produced in fiscal 1975. During the transition quarter, 0.7 billion notes were produced. On November 3, 1975, the Secretary ofthe Treasury announced that the Bureau of Engraving and Printing would commence production of $2 Federal Reserve notes for first-day-of-issue on April 13, 1976, the anniversary of Thomas Jefferson's birth. During fiscal 1976, the Bureau produced over 400 million $2 Federal Reserve notes, representing approximately 14 percent ofthe total currency program. Supplanting one- half the face value of the annual requirement for $ 1 notes with $2 notes would permit savings in manufacturing costs estimated at $27 million over the next 5 years. During fiscal 1976, the Bureau placed into operation six production models ofcurrency overprinting and processing equipment (COPE). This equipment, acquired through lease-to-ownership financing, will reduce costs for currency manufacturing by approximately $1.8 million annually. Several additional improvements in currency manufacturing were in progress, including automatic sheet counting, examining modifications, automated packaging, and revised work standards. Potential annual recurring savings are estimated to be $1.5 mUlion.

Postage stamp program Deliveries of U.S. postage stamps were 31.5 billion pieces in fiscal 1976, compared with 28 billion pieces in fiscal 1975. During the transition quarter, 6.9 billion stamps were produced. As part of the continual modernization of Bureau operations, particu larly in the labor-intensive postage stamp processing areas, the Bureau has contracted for 6 postage stamp booklet-forming machines capable of producing any variety of folded booklet containing from 2 to 36 stamps. Practical and production acceptance trials of a prototype were successful ly completed. Two additional machines are scheduled for delivery in November 1976 and the remaining three machines during 1977. Savings from use of the six machines are estimated at $1 million annually. Also planned is an automated book-stamp packaging system which will produce subpackages within master packages, a concept that permits the

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ADMINISTRATIVE REPORTS 1 5 7 U.S. Postal Service to improve field operations by maintaining the integrity of a sealed unit until delivery to the point of issue. The Bureau also began utilizing glue instead of stitching for binding stamp and food coupon books, which is expected to save approximately $414,000 annually. Food coupon program Approximately 14 percent of the food coupon requirements were produced by the Bureau during fiscal 1976. The Bureau continued to assure a sufficient supply of food couporis for the Department of Agriculture through execution of contracts with two private sector firms. Responsibility included the establishment and monitoring of quality and security controls and procedures.

Presses A multicolor intaglio web press purchased for the primary production of postage stamps in coil form became operational in November 1975, affording the Bureau improved capability to produce three-color coil stamps and multidenomination book stamps printed on a common sheet. The proposed acquisition of a used two-color letterpress will effect savings in the printing of a number of securities by accomplishing face printings in one operation instead of two. Production of Treasury notes on the two-color letterpress wiU yield annual savings of $95,000 for an initial investment of $5,000 plus shipping and installation charges. Delivery has been made of four high-speed intaglio sheet-fed presses for currency production, having capabilities far in excess ofthe presses being replaced. These new presses represent a segment ofthe Bureau's plan to modernize press equipment to decrease unit costs to the Federal Reserve System.

Inks Significant progress has been made toward producing currency and postage stamps with water wipeable inks through the acquisition ofa sheet- fed multicolor intaglio press. Advantages in using water wipeable inks include savings of large quantities of wiping paper used to remove excess ink from the engraved plate; reduction in the bulk of waste generated in the wiping operation; and the elimination of the use of more volatile solvents. Although the press is in the experimental ink-testing mode, it is made operational for producing postage stamps as production require ments warrant.

Quality control The Quality Control Branch developed and implemented procedures for the new high-speed currency and postage stamp equipment to assure that the highest quality is maintained while the cost benefits of the equipment are maximized: These procedures incorporate the immediate feedback of information to operating personnel to preclude the manufac ture of unacceptable products. The program provides additional confi dence that the quality of circulated currency is consistently maintained at acceptable levels. Internal audit program An intensive program of internal audit provided for the evaluation and reexamination of operational efficiency and economy, and ensured

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158 1976 REPORT OF THE SECRETARY OF THE TREASURY compliance with prescribed regulatory directives. During fiscal 1976 and the transition quarter, 78 reports of audit were released and contained 408 recommendations for possible improvements which were referred for management consideration. Coverage included fiscal and management type audits and reviews of operations and programs, conducted on a scheduled, special, and unannounced basis.

Destruction of mutilated securities The Bureau installed a system to destroy paper securities which eliminates the air pollution associated with the former incineration method. Improvements in the process originally envisioned produced immediate savings of $70,000 annually. Additional savings of $260,000 during fiscal 1977 and approximately $441,000 in fiscal 1978 are expected with the acquisition of additional equipment.

Safety Because of the industrial nature of Bureau operations, employee safety is a matter of vital management concern. Safety management programs include comprehensive safety training; investigation and analysis of all accidents to identify standard cause factors; scheduled and unscheduled safety audits; incorporation of safety and health standards into the equipment acquisition cycle to insure safety coverage from initial design to the disposition stage; the establishment, implementation, and review of safety and health standards; and input and involvement by employee safety committees.

Labor-management relations The Bureau fosters constructive and harmonious relationships with employees and labor organizations representing them. Special emphasis and attention is directed toward the conduct of all labor-management dealings within the spirit and intent of Executive Order 11491, as amended by Executive Order 11838 of February 6, 1975. At the close ofthe period, there existed within the Bureau grants of exclusive recognition to 17 AFL-CIO affiliate unions covering 25 craft units, 1 noncraft unit, 1 guard unit, and 1 GS clerical/technical unit.

Position management During fiscal 1976, the Bureau's position management program was reviewed by the Office of Personnel, Department ofthe Treasury. Under the Bureau's program, a Position Management Board (PMB) was established to coordinate manpower planning activities, recommend policy and procedures to the Director, and allocate manpower. Reviews by the PMB were cited by the Department as constituting an excellent means of assuring utilization of sound position management principles and techniques. The report also indicated excellent participation in the program by both management officials and industrial relations specialists.

Management development The current management development program emphasizes the iden tification and selection of individuals possessing those characteristics indicating potential for effective management in the Bureau of Engraving and Printing. For each managerial position filled, the proportion of managerial ability versus technical expertise is established. The evalu-

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ADMINISTRATIVE REPORTS 1 59 ation-selection process includes identification of managerial skills by means of the assessment center technique. Developmental positions have been identified for those with assessed managerial potential. The selection process for such positions stresses general managerial skills. Individual development plans designed for each candidate highlight the training and experience necessary for movement into the management sphere. Seminars have also been developed for new and advanced managers which are designed around structural, technological, and management issues impacting upon the Bureau's operational effectiveness.

Personnel management reviews A special study compared the Bureau's security guard position with similar positions in other agencies in terms of types of security programs operated, duties performed, grade levels, and pay structures. Analysis also included such factors as age distribution, employee turnover, average pay, differentials, and overtime during the past 5 years. Several courses of action were explored which would permit upgrading the guard position and/or its reclassification in the police series. The Bureau participated in the Civil Service Commission's review of draft standards for the new factor evaluation system (FES) of classifica tion. Thirteen positions were reviewed, audited, and redescribed in the FES format. These positions represent approximately 125 incumbents in the clerical, secretarial, professional, and technical series. In anticipation of this new system, FES training has been incorporated into the Bureau's basic supervisory training program. A study was initiated to ensure accurate and expeditious processing of retirement applications. Findings indicated the need for a standard operating procedure manual and a monitoring system, which are now in the developmental stages.

Upward mobility Thirteen employees were selected for placement into identified upward mobility positions, all of which are GS positions affording promotional opportunities beyond the target level. The process for selection into these positions included the assessment center technique, which was reviewed in the Civil Service Commission's Technical Memorandum 75-5, "An Overview of the Upward Mobility Assessment Center for the Bureau of Engraving and Printing." A comprehensive review ofthe first year's program was made, resulting in revisions of the upward mobility program and promotion policies. Provisions have been made for greater emphasis and an improved framework for career counseling, a mechanism for acquiring basic skills judged to be lacking in some program participants, and greater flexibility in the application process as well as the selection process.

Awards During fiscal 1976, 1,228 employees received special achievement awards and 30 employees received high quality pay increases, with nonrecurring savings of $143,394 being realized. Under the employee suggestion phase ofthe program, 183 suggestions were received, of which 55 were adopted, with savings of $423,516.

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160 1976 REPORT OF THE SECRETARY OF THE TREASURY During the transition quarter, 50 employee suggestions were received for consideration. Eighteen superior work performance awards were presented to summer employees. The awards program is being reviewed with emphasis on the concept of group awards based on the achievement of measurable objectives which can be linked to organizational improvement. Experimentation with production work teams has been conducted in preparation for broader implementation of this group concept. A comprehensive study has been completed which assesses the impact of the mandatory linkage of the awards program with the performance evaluation system on the effectiveness of both programs. Major reviews of both programs are expected.

Service to the public The exhibit phase of the Bureau's public relations program was accelerated to accommodate Bicentennial-related numismatic and phila telic events for the period from July 1, 1975, to the end of calendar year 1976. Security exhibits were provided for 15 scheduled activities. The Bureau produced a series of three distinctive Bicentennial souvenir cards which were released for first-day sale at the American Stamp Dealers Association's National Postage Stamp Show, New York, N.Y.; the International Philatelic Exhibition, Philadelphia, Pa.; and Stamp Expo '76, Los Angeles, Calif. In addition, souvenir cards were issued in conjunction with exhibit participation at the American Numismatic Association's annual conventions at Los Angeles, Calif, and New York, N.Y., as well as the Government-sponsored U.S. Bicentennial Exposition on Science and Technology at Cape Canaveral, Fla. Sales of souvenir cards not only responded to expressed public interest but also served to defray costs of participation by the Bureau at these events. For the 15-month period, a total of 778,830 visitors utilized the public tour facilities of the Bureau, which continues to be one of the major attractions for visitors to the Washington area. The heavy influx of Bicentennial tourists during the summer months necessitated the issuance of admission tickets on a first-come-first-served basis, to assure equity and to accommodate the greatest number of persons.

OFFICE OF EQUAL OPPORTUNITY PROGRAM

Total program operations The Office of Equal Opportunity Program is under the immediate supervision of the Assistant Secretary (Administration). It assists the Secretary and the Assistant Secretary (Administration) in the formulation, execution, and coordination of policies related to equal opportunity for Treasury employees and employment policies and programs of commer cial banks, savings and loan associations, - savings banks, and other financial institutions that are Federal depositaries or issuing and paying agents of U.S. savings bonds and savings notes.

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ADMINISTRATIVE REPORTS 143 BUREAU OF ENGRAVING AND PRINTING

The Bureau of Engraving and Printing, the world's largest securities manufacturing establishment, designs and produces the major evidences of a financial character issued by the United States. It is responsible for the production of U.S. currency, postage stamps, public debt securities, and miscellaneous financial and security documents.

Finances The regular operations of the Bureau of Engraving and Printing have been financed since July 1, 1951, by means of a revolving fund established pursuant to Public Law 656, August 4, 1950 (31 U.S.C. 181). Agencies which the Bureau serves are required to make reimbursement for all costs incidental to the performance of work or services requisitioned. Since the inception of the revolving fund. Congress has supplied appropri ations as increases to the fund on three occasions. The last such appropriation becomes available in fiscal 1978. The legislation approving this appropriation also authorized the Bureau to adjust prices to permit the acquisition of capital equipment and provide future working capital, thus replenishing its revolving fund on a regular basis and precluding the necessity of having to request additional appropriations in the future f^r such purposes. During fiscal 1977 the Bureau included in the price of its products a surcharge totaling $7,838,000 earmarked for the acquisition of capital equipment. Beginning in fiscal 1978, the Bureau will also assess a surcharge to provide additional working capital. The total cost of sales and services was $118,880,000 for fiscal 1977, as compared with $111,289,000 in fiscal 1976, exclusive of surcharge.

Currency program Deliveries ofcurrency in fiscal 1977 totaled 2.9 billion notes, as compared with 2.8 billion delivered in fiscal 1976. During fiscal 1977, the Bureau completed installation of two high-speed presses and six additional pieces of currency overprinting and processing equipment (COPE). Fail-safe apparatus being installed is designed to detect and prevent disoriented and other obviously defective sheets from traversing the equipment. Complete installa tion and operation will be accomplished during fiscal 1978.

Postage stamp program Deliveries of U.S. postage stamps were 27.7 billion units in fiscal 1977, as compared with 31.5 billion in fiscal 1976. During fiscal 1977, the Bureau acquired six booklet-forming machines. They are currently being installed and scheduled for full operation in the ensuing fiscal year, at which time the full cost benefits anticipated will be realized.

Food coupon program The Bureau continued its responsibility for assuring the Department of Agriculture's requirements for food coupons by rendering technical, contrac tual, financial, security, quality control, and other services and advice. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Fiscal Year Ended September 30, 1977

144 1977 REPORT OF THE SECRETARY OF THE TREASURY

Currency operations The engineering program to design the next generation of security printing equipment is in the second year ofa 7-year development program. Resources have been expended for developing more modern concepts which will be combined in a prototype security printing system. A two-phase engineering development program resulted in a feasible plan to construct a prototype machine having capability for electronically examin ing, counting, and consolidating currency sheets into processing lots. This equipment is expected to reduce currency manufacturing costs and streamline the overall currency processing system. A prototype is projected for comple tion within 3 years. The Bureau has acquired two Vacuumatic Super II sheet counting machines. Eight additional machines are scheduled for delivery early in 1978. Appropri ate accountability, staffing, training, and work methodology are in the development stages. These high-speed electronic sheet counters provide for cost-effectiveness by replacing the manually intensive verification count of currency sheet stocks. Complete recount of distinctive currency paper after delivery to the Bureau from the paper manufacturer has been discontinued and replaced by a Bureau- monitored quality and accountability and audit assurance program at the papermill. Annual recurring savings are estimated at $100,000. The second phase of the automated currency packaging and processing system has been accomplished with the introduction of automatic compression and plastic strapping equipment for currency packages, to be installed in line with existing plastic film overwrapping equipment. Steel bands and associated manual operations will be eliminated. Savings equal to those realized from implementation of the first phase, estimated at $300,000 per year, are anticipated from the second phase. A revision in currency sheet examining methods and procedures is being implemented. The change involves replacement of the two-step 32-subject examination and a subsequent l6-subject reexamination, with a single 16- subject sheet examination. A $ 1.5 million annual recurring savings is expected in addition to improved workflow and improved workplace alignment. A pUot project is underway to validate projected savings by substituting secure mobile trash containers for plastic bags currently used in the trimming- splitting operation. This system obviates manual removal of trimmings requiring guard escorts. Savings in materials and manpower are estimated at $27,000 annually. A successful, alternative method of destroying mutilated currency, cutting to I/8-inch strips by guUlotine cutter, was implemented, doubling the maximum destruction capability (65,000 sheets per shift, as compared with 30,000 sheets per shift by the hammermUl method). The guillotine cutting method has the additional benefits of being safer and cleaner. In the Bureau's continuing effort to improve accountability and security controls, a contract has been awarded for an electronic counting system for the final counting of currency during its compression and banding into the 4,000-note "brick" form.

Postage stamp operations The operation of six newly acquired booklet-forming machines has provided the capability on each machine to form, from printed and examined rolls of stamps and rolls of unprinted cover stock, a finished stamp booklet ready for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Fiscal Year Ended September 30, 1977

ADMINISTRATIVE REPORTS 145

subpackaging. Savings from the use of the six machines are estimated at $ 1 million annually. A fully automatic wjapping system was installed to wrap trays of postage stamp coils in transparent heat-sealable shrink film. The new packaging method enhances security, and the transparency provides for quick positive identification ofthe product. Coil packaging and shipping in open-face shrink- wrapped trays is expected to result in recurring annual savings of $175,000. An extensive program to improve customer relations and provide higher quality postage stamps has been implemented. In addition to continuing quality control inspections made daily during all phases of manufacture, greater emphasis is being placed on the functional characteristics of the adhesive and phosphor used on postage stamps. The U.S. Postal Service estimates a $2 million cost per year for handling mail with insufficient phosphor. A program of onsite investigation of serious consumer concerns has been instituted to identify cause and ensure prompt remedial action.

Inks The ongoing program of ink research has developed water wipeable inks for printing on web and sheet-fed intaglio presses. Advantages in using such inks include savings of large quantities of wiping paper used to remove excess ink from the engraved plate, reduction in the bulk of waste generated in the wiping operation, and the elimination of the use of more volatile solvents. Postage stamps produced in whole or in part, using water wipeable inks, included the Telephone Centennial, Centennial of Sound Recording, Lafayette, Drafting of the Articles of Confederation, 50th Anniversary of Talking Pictures, and the Alta California commemorative issues.

Gravure cylinder production The final phase of renovation and equipment acquisition for the manufac ture of gravure cylinders was completed, with September 1 the established target date for the first gravure stamp to be produced completely in-house. That goal was exceeded by producing not only the 13-cent Herkimer at Oriskany commemorative stamp but also both issues of the 1977 Christmas stamps by that date. It is anticipated that this additional engraving capability will result in annual recurring savings of approximately $100,000 by eliminat ing private sector contract awards for such work.

Alien identification card The Immigration and Naturalization Service implemented an automated system to regulate immigration, identified as alien documentation, identifica tion, and telecommunications. At all ports of entry, photographic data ofeach alien is collected and sent to a central facility for fabrication of an identfication card. On March 25, 1977, production of the resident alien identification cards was begun in the Bureau. The back of the card is printed using special formula inks which provide fluorescent characteristics and optical character recognition blindness. The face side is photographically manufactured by contractor personnel.

Management development The Bureau provided staff support to the Department's efforts to develop a comprehensive executive/management development program which was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Fiscal Year Ended September 30, 1977

146 1977 REPORT OF THE SECRETARY OF THE TREASURY

issued on July 27, 1977. As a result of these concerted efforts, a fiscal 1978 management plan has been formulated which will enable the Bureau to identify, select, and train present and future high-potential managers.

Labor-management relations The Bureau continues to foster constructive and harmonious relationships with its employees and the 17 bargaining units which represent them. In keeping with the spirit and intent of Executive Order 11491, as amended, management deals with 16 AFL-CIO affiliate unions representing 25 distinct craft groups, a noncraft unit, and a guard unit. One independent union represents the GS clerical/technical unit. Thirteen substantive negotiated labor-management agreements are^ presently in existence. A series of training courses and seminars were initiated for each level of supervisory and management personnel. This program is designed to further improve the Bureau's record of effectiveness in negotiating with labor organizations and in dealing with labor relations matters.

Position management The Bureau's Position Management Board, which recommends manpower policy, procedures, and allocations, has emphasized position management in its review of manpower needs. This has resulted in the downward revision of internal personnel ceilings and more effective utilization of manpower. All Classification Act position descriptions are being prepared in accord ance with the Civil Service factor evaluation system (FES) guidelines. Wage and classification specialists received Civil Service Commission training. FES training has been incorporated into the Bureau's supervisory training program to familiarize management and supervisory personnel with the FES guidelines of position classification.

Awards During fiscal 1977, 1,280 employees received special achievement awards and 19 employees received high quality pay increases, with nonrecurring savings of $138,557 being realized. Under the employee suggestion phase of the program, 204 suggestions were received, ofwhich 92 were adopted, with savings of $53,232. Six summer employees were granted awards in recognition of their superior work performance.

Upward mobility program Following comprehensive reviews by union and departmental officials, the Bureau's upward mobility program and promotion policies were revised and approved in fiscal 1977. Five positions identified to be filled through upward mobility were announced in April 1977, and 183 applications were received. Applicants were evaluated by the assessment center technique and by special supervisory evaluation. Selection was made of seven employees for whom individual development plans are being formulated. Nonselected candidates are afforded performance and career counseling. Three of the five employees selected for upward mobility positions in the previous fiscal year have attained target positions and are no longer participants in the program. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Fiscal Year Ended September 30, 1977

ADMINISTRATIVE REPORTS 147

Safety The Bureau continued its efforts, consistent with stated policy, to be responsive to concerns as they related to employee safety and environmental well-being. Indicative ofthe successful accomplishments during the past fiscal year, the Bureau received the Secretary's Award for Safety (Honor) for having the most outstanding safety and health action plan. To promulgate and maintain a comprehensive and effective occupational safety and health program, several significant actions in terms of program development were accomplished, including a 1977 occupational safety and health action plan, personal protective equipment program, and a hearing conservation program. Recent interest in cardiopulmonary resuscitation as a lifesaving technique has resulted in programmed activity to provide training and familiarization to 300 key employees. Continuing priority attention is being given to the investigation and analysis of accidents to identify standard cause factors, comprehensive safety audits, and clarification and restatement of safety committee goals with particular emphasis on employee participation.

Internal audit program An intensive program of internal audit provides for the evaluation and reexamination of operational efficiency and economy, and ensures compli ance with prescribed regulatory directives. During fiscal 1977, 84 reports of audit were released and contained 552 recommendations for possible improvements which were referred for management consideration. Coverage included fiscal and management-type audits and reviews of operations and programs, conducted on a scheduled, special, and unannounced basis. Liaison is maintained with the departmental Office of Audit vand the General Accounting Office.

Service to the public The Bureau continues to be one of the major attractions for visitors to the Washington area. During fiscal 1977, a total of 553,522 visitors utilized the self-guided tour facilities of the Bureau. Exhibits of securities were provided for 11 scheduled philatelic and numismatic events. In addition, four souvenir cards were produced and issued for first-day sale at the Milwaukee Philatelic Society Exhibition, Milwaukee, Wis., the Rocky Mountain Philatelic Exhibition, Denver, Colo., the American Numismatic Association Convention, Atlanta, Ga., and the Puerto Rico Philatelic Exhibition, San Juan, P.R. Sales of souvenir cards continue to respond to expressed public interest and serve to defray costs of participation by the Bureau at these events.

OFFICE OF EQUAL OPPORTUNITY PROGRAM

The Office of Equal Opportunity Program is under the immediate supervi sion of the Assistant Secretary (Administration), who is the Department's principal Compliance Officer and the Department's Equal Employment Opportunity Officer. The Office assists the Secretary and the Assistant Secretary (Administration) in the formulation, execution, and coordination of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Fiscal Year Ended September 30, 1978

156 1978 REPORT OF THE SECRETARY OF THE TREASURY

the previous year. There were 19 appeals from denials by the Commissioner of Internal Revenue of applications for enrollment to practice before the IRS. These appeals remained pending as of September 30, 1978. There were three decisions on appeal pending from the previous fiscal year. Two decisions reversed the denial; one appeal was pending at the year's end. Eighteen administrative proceedings for disbarment or suspension were initiated against practitioners before the IRS during fiscal 1978. Together with the 6 cases remaining on the administrative law judge docket on October 1, 1977, 24 cases were before the administrative law judge during the year. Five of those cases resulted in the acceptance of an offer of consent to voluntary suspension from practice before the IRS pursuant to 31 CFR, section 10.55(b) prior to reaching hearing. Initial decisions imposing disbarment were rendered in six of the cases. One complaint was dismissed. On September 30, 1978, 12 cases were pending on the docket awaiting presentation to or decision by an administrative law judge. During fiscal 1978, one case was appealed to the Secretary from the initial decision by an administrative law judge. The appeal remained pending at yearend. In addition, one decision was issued by the Secretary on an appeal from the initial decision of an administrative law judge pending October 1, 1977. In that appeal, the administrative law judge's order of suspension was changed to an order of disbarment. The Director of Practice is Executive Director of the Joint Board for the Enrollment of Actuaries. The Joint Board, formed pursuant to section 3041 of ERISA, is responsible for the enrollment of individuals who wish to perform actuarial services under the act and for the suspension and revocation of the enrollment of such individuals after notice and opportunity for hearing.

BUREAU OF ENGRAVING AND PRINTING

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ADMINISTRATIVE REPORTS 157 means of this fund, the Bureau financed a program involving a total projected cost for sales and services of $130 million in fiscal 1978, as compared with $118,592,000 in fiscal 1977. Of long-range significance is the fact that Public Law 95-81 also authorized the Bureau to include in the charge for its products an amount to be accumulated for the acquisition of capital equipment and to provide future working capital. This authority should preclude the need to request future additional appropriations for those purposes. During fiscal 1978, the Bureau included in the price of its products surcharges totaling about $5,700,000—$4,730,000 earmarked for equipment and $970,000 recorded as additional working capital.

Currency program Deliveries ofcurrency in fiscal 1978 totaled 3.3 bUlion notes, as compared with 2.9 billion notes delivered in fiscal 1977. During fiscal 1978, the Bureau negotiated a buy-out-for-cash agreement for four high-speed intaglio printing presses that had been acquired on a lease-purchase contract. These presses are fully operational, and the agreement to buy out resulted in a savings of $500,000. In addition, negotiations were initiated with other vendors supply ing currency production equipment to the Bureau on a lease-purchase basis in an effort to produce similar savings by cash purchases of contracts. During this period, the 1977 currency series bearing the signatures of Secretary Blumenthal and United States Treasurer Morton was introduced. A revision in currency examining methods and procedures involving conversion to a single 16-subject examination, initiated during fiscal 1977, has been fully implemented. It is anticipated that $ 1,500,000 in annual savings wUl be achieved. Improvement of currency overprinting and processing methods, and refinement of production standards have contributed to a 14-percent increase in productivity, and will result in annual savings exceeding $500,000. Based on an economic evaluation of altemative processes, acquisition ofthe initial pieces of equipment that will constitute the next generation of security printing and processing equipment is proceeding. Initial procurement work is underway for the acquisition of two 50-subject currency presses which, because they represent a 56-percent increase in productivity over present 32- subject equipment, are expected to save in excess of $1,500,000 annually. Ancillary numbering and processing equipment will also be acquired. Benefits in space and energy utilization will be realized as well. A system has been developed to economically salvage perfect currency notes located on partially defective currency sheets. Because implementation of this proposal will reduce the volume of notes requiring destruction, it is expected to generate significant ecological benefits through reduced disposal of security waste material. Replacement of chipboard trays and plastic bags, used for in-process transport and to secure currency, by a two-piece polypropylene box is expected to yield annual savings of $50,000, as well as improve product security. Typical printing errors with graphic illustrations of defective currency are described in an improved quality standard and updated training manual. The inspection accuracy program was improved to more definitively determine the effectiveness of currency examination. This program provides management quicker information for the retraining of examiners or other performance improvement.

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158 1978 REPORT OF THE SECRETARY OF THE TREASURY A recently developed method of mechanical currency sheet examining has been expanded to include sheet counting and consolidating into a single operation. Plans for trimming and splitting 32-subject currency sheets are currently being formulated and will significantly increase productivity while providing greater note margin consistency. Expected savings cannot be determined without further experimentation. An identification system compatible with automatic currency handling equipment at Federal Reserve banks (including fitness determination and detection of counterfeit notes) has been jointly selected by the Bureau and the Federal Reserve System. A contract is being negotiated by the Federal Reserve System for delivery of the equipment to the Bureau during 1980.

Postage stamp program Deliveries of U.S. postage stamps were 28.5 biUion units in fiscal 1978, as compared with 27.4 billion units in fiscal 1977. The program included production of a new series of 15-cent stamps issued in conjunction with the decision to change the prime postal rate. A supply of nondenominated stamps, some previously produced by the Bureau in anticipation of this situation, were also issued at the time of the rate change in order to meet the surge in demand for stamps at that time. To determine public acceptance of a small-size postage stamp, the U.S. Postal Service authorized the issuance of the 13-cent Indian Head Penny Special Issue Stamp as an experiment. These stamps were printed in 600- subject sheet size (as opposed to normal 400-subject), and public reaction was favorable. Based on the results of the initial experimental issue, the Postal Service proposes to authorize additional issues of smaller size stamps in the future. Installation and acceptance trials of six postage stamp booklet-forming machines were concluded during fiscal 1978. AU machines are fully operation al and are utilized for producing vending and over-the-counter postage stamp booklets. An automatic labeling system, designed to affix pressure sensitive labels to coils of lOO's, was installed in the CoU Manufacturing Section. The system, consisting of 9 machines, attains the same productivity as 12 machines previously required. A significant reduction in energy demands was realized since the new system requires no heating application. Additionally, methods improvements and the efficiency ofthe system will result in estimated savings of $270,000. The pile delivery on the L perforating machine was converted from a manual operation to a fully automated system, and is used to perforate approximately 25 percent of the annual postage stamp sheet production requirements. This system was developed from an in-house design and has reduced manpower requirement by 50 percent, resulting in annual savings of about $16,000. An innovative package for postage stamp booklets produced on the newly acquired booklet-forming machines was accepted and approved by the Postal Service. The design is a foldout tray containing popup divider panels made from inexpensive chipboard. This development enhances the integrity of the package and allows for improved security and accountabUity of its contents upon receipt at field post offices. InstaUation of a Bureau-designed system for the automatic subpackaging and overwrapping of postage stamp booklets is planned for fiscal 1979. Improved handling methods have been developed for reducing the person nel complement required to load postage stamp coils into trays for packaging.

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ADMINISTRATIVE REPORTS 159 Annual savings of approximately $310,000 are anticipated untU the next generation of coil manufacturing and packaging equipment is operational. Installation of a hydraulic roll splitter has significantly improved the operation for destruction of mutilated postage stamp rolls. Annual recurring savings of approximately $15,000 are anticipated. Improvement was made to the inspection accuracy program used to determine the effectiveness of postage stamp sheet examination. It provides more rapid management information for the retraining of examiners or other performance improvement. Quality standards have been developed for the newly installed postage stamp booklet-forming equipment. These are designed to provide ready reference to operating personnel for maintaining required quality standards. Research was conducted into the feasibility of reducing to one, from two or three, the number of sets of engraved cylinders currently required to produce a postage stamp issue by the gravure process. Studies revealed that a systematic method of dechroming and rechroming the original set of cylinders increased the lifespan so that the majority of commemorative issues required only one set of cylinders. Based on the average number of such issues printed by the Bureau by the gravure process, preliminary cost estimates indicate a recurring annual savings of approximately $120,000.

Platemaking A study was initiated in 1976 to determine the feasibUity of reducing the 24- hour time cycle required for platemaking operations. After considerable modification of the work processes and the platemaking equipment, the operation was accomplished on a two-shift basis in January 1977. The technology developed included automation of several aspects of electroplating such as automatic temperature control, tank level, and ampere-hour limiting of current flow. By January 1978, it was possible to complete the platemaking activity on a single work shift. Annual savings of $210,000 were realized. In addition, increased productivity and improved product quality and utilization of personnel were achieved.

Inks Major formula variations have been made for the black and green currency intaglio inks in order to improve suitability and comply with environmental requirements. Similarly, a number of postage stamp inks have been reformu lated to improve quality and to address changing raw material availability and environmental considerations. A trial is being conducted to determine the feasibility of purchasing currency intaglio ink bases from commercial sources. This will provide research referencing to state-of-the-art ink-making technology, possibly reduce costs associated with ink manufacturing, printing, and processing, and improve the ink-manufacturing work environment by some elimination of dry pigments handling. Efforts to develop water wipeable intaglio stamp inks have been successful and this expertise has been applied to a research and development program for water wipeable intaglio currency inks. Progress to date has been encouraging, and initial studies indicate resultant cost reduction in currency production by such conversion. Long-range studies are underway to determine whether alternative imaging systems could reduce costs and provide higher quality products. These areas

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160 1978 REPORT OF THE SECRETARY OF THE TREASURY involve the use of an excitation source such as electron beam curing, to effect immediate drying ofthe imaging materials as printed on the various substrates.

Food coupon program The Bureau continues to exercise responsibility for administering contracts awarded to two private banknote companies for the production of food coupons for the Department of Agriculture. During this period, the Bureau provided the Department of Agriculture with technical assistance and rendered services in the areas of quality control, security, contract negotiating, accountability procedures, and financial management. In addition, periodic unscheduled audits have been made at the contractors' plants to verify that the prescribed quality and security standards are maintained. Specifications were prepared, bids solicited, and a contract awarded for the production of a new $10 food coupon book containing six coupons (five $1 and one $5), to be issued early in the next fiscal year.

Alien identification card On March 25,1977, production ofthe resident alien identification cards was begun for the Immigration and Naturalization Service. The central facUity for fabrication of the cards initially established at the Bureau was transferred to a new location in Arlington, Tex., in July 1978.

Gasoline rationing program In conjunction with the congressional requirement that the Department of Energy prepare a contingency gasoline rationing program, the Bureau has provided technical advice regarding the design of a secure rationing document, and data regarding private and public sector capabilities to produce the volume of documents required to meet projected program demands.

Forensic science research and development A cooperative effort with another Government agency has led to the development of new types of distinctive red and blue fibers used in the manufacture of currency paper. During the next fiscal year, subsequent to the scheduled production of the fibers, the contracting agency will continue in cooperative research efforts to develop other fiber variations. Bureau input is provided to contractual research being conducted by the National Bureau of Standards for defining parameters leading to extended currency circulation life. This can conceivably lead to the development of alternate paper fiber compositions more technically appropriate to end-use requirements and to raw materials cost reduction. Forensic laboratory techniques have included research and the acquisition of instruments to improve capability for associating evidentiary materials relative to counterfeiting for the U.S. Secret Service.

Electronic processing programs The systems definition for the prototype currency examining machine has been completed. Hardware and software elements are being assembled by the contractor and the prototype machine is scheduled for delivery during 1980. The breadboard model and systems definition for an electronic counting system have been completed and the laboratory model for testing purposes wUl be ready for delivery to the Bureau in 1979.

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ADMINISTRATIVE REPORTS 161 An active development program is underway to apply the state-of-the-art electronic technology for (a) detection of inverted sheets at press, (b) identification and verification of numerical sequence of currency sheets, and (c) improved systems for drying security printings.

Security program A new security access control system, replacing the pass-badge system, with perimeter card readers, provides for enhanced overall physical security control, restricts personnel movement into and within sensitive areas, and will eliminate the time-consuming system of handwritten logs for recording personnel movement. A compatible minicomputer to provide for incorporat ing anti-intrusion and fire alarms in the system is under consideration. A handbook of security measures for self-protection, and for safeguarding property and home, was developed and the proposed manuscript has been endorsed by the Under Secretary of the Treasury for pubUcation and distribution to all employees of the Department.

Safety program About 5 percent of all Bureau employees have been trained in the techniques of cardiopulmonary resuscitation. In the area of industrial hygiene, the Bureau has expanded its hearing conservation program. Audiometric tests will be given to all employees to establish base data as to their present hearing capability, with periodic testing to ascertain possible hearing loss. The frequency of testing wUl be predicated upon the employee's work environment. In addition, the Bureau is acoustically treating areas where excessive noise levels cannot be reduced by engineering design. During fiscal 1978, lost-time cases associated with employee accidents were reduced by 15 percent from the previous fiscal period, reducing the Bureau's payment to the Office of Federal Workers' Compensation by $260,000.

Internal audit program An intensive program of internal audit provides for the evaluation and reexamination of operational and financial efficiency, economy, and internal control adequacy, as well as audit reviews of the financial accounts and reports, and ensures compliance with prescribed regulatory directives. During fiscal 1978, 67 reports of audit were published. Three hundred and twenty- seven recommendations for possible improvements were referred for manage ment consideration. Coverage included fiscal and management-type audits and reviews of operations and programs conducted on a scheduled, special, and unannounced basis.

Personnel management Traditionally, the position of plate printer has been filled in accordance with criteria prescribed by the Civil Service Commission and related Federal hiring requirements. In addition to the recruitment of qualified journeymen, an intensive 4-year apprenticeship program, including classroom and on-the-job training, is utilized to provide the required complement of journeyman plate printers. To augment these usual methods of selection and training, the position of intermediate plate printer was established. This will provide a recruiting supply of experienced press operators, and will reduce the period of time for a candidate to achieve journeyman plate printer's status from 4 years to 1. The position has been advertised with response from applicants

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162 1978 REPORT OF THE SECRETARY OF THE TREASURY

from all parts ofthe United States. Initial screening of applications wiU be made by a panel of experts approved by the CivU Service Commission, after which the potential candidates will be evaluated for final selection. Although the Bureau will continue to recruit and train candidates through the 4-year apprenticeship program, the establishment of the intermediate plate printer position will provide management with greater flexibility in filing these craft positions in order to meet short-term production requirements when an adequate supply of journeymen is unavailable. Reorganization of supervisory positions throughout the Plate Printing Division has resulted in the abolishment of the position of plate printer foreman and the establishment of the positions of plate printer assistant foreman and plate printer general foreman. Under the reorganization plan, the 23 foreman positions will be replaced with 20 assistant foreman positions charged with responsibility over operating sections, and the 3 general foremen will be responsible for overall coordination of division operations on each of the 3 work shifts. WhUe the salary rates ofthe former position of foreman and the newly established position of general foreman are identical, the salary rate for the position of assistant foreman wUl be 10 percent less than the prevailing rate for foreman. An annual recurring savings of $150,000 will result.

Management development As part of an effort to improve management effectiveness, the Bureau initiated a team-buUding and action planning process within the top manage ment staff as well as specific divisions. After a preliminary organizational assessment that identified factors inhibiting maximum effectiveness, partici pants shared concerns and ideas for improvement and engaged in group problem solving. Specific objectives were to enhance communications and to promote cooperation in order to clarify roles, functions, and responsibilities.

Labor-management relations The Bureau continues to foster constructive and harmonious relationships with its employees and the 17 bargaining units which represent them. In keeping with the spirit and intent of Executive Order 11491, as amended, management deals with 16 AFL-CIO affiliate unions representing 25 distinct craft groups, a noncraft unit, and a guard unit. One independent union represents the GS clerical/technical unit. Fourteen substantive negotiated labor-management agreements are now in force. Training courses and seminars were held for each level of supervisory and management personnel to further improve the Bureau's record of effectiveness in negotiating with labor organizations and in dealing with labor relations matters.

Awards During fiscal 1978, 1,222 employees received special achievement awards and 27 employees received high quality pay increases. Under the employee suggestion phase ofthe program, 150 suggestions were received, ofwhich 57 were adopted with tangible savings of $14,500. Twenty-nine summer employ ees were granted awards in recognition of their superior performance.

Performance evaluation system The Bureau's performance evaluation system and incentive awards program are being redesigned to provide for regular dialog between supervisors and employees on factors germane to specific job performance. The redesigned

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ADMINISTRATIVE REPORTS 163 incentive awards plan relates directly to measurable individual or group contributions to improved organizational performance, and provides a more effective tool for recognizing such contributions.

Equal employment opportunity program The Bureau continues to make progress in the advancement of minorities and women. One of several significant first accomplishments included the promotion ofa black woman to the top line management position of Assistant Director (Operations), GS-16. Numerical recruitment goals were established for occupations with under- represented percentages of minorities and women. Nine ofthe 17 identified goals had been accomplished by July 1978. The composition ofthe Bureau's work force continued to remain close to the availability of minorities and women in the local recruitment area, with employment constituting 72 percent blacks and 38 percent women.

Career development Thirty-seven employees applied for three new positions identified to be filled through the CADE (upward mobility) program. Applicants were evaluated by the assessment center process and supervisory ratings. Individual development plans are being formulated for the three successful candidates, and counseling was afforded to all applicants.

Treasury payroll/personnel information system During fiscal 1978, the Bureau successfully transferred the computation and processing of its payroll and personnel information to the Treasury payroll/ personnel information system located at the Bureau of the Mint facility in San Francisco.

Service to the public The Bureau continues to be one of the major attractions for visitors to the Washington area. During fiscal 1978, over 500,000 visitors utUized the self- guided tour facilities of the Bureau. During the fiscal year, exhibits of securities were provided for five scheduled phUatelic and numismatic events.

OFFICE OF EQUAL OPPORTUNITY PROGRAM The Office of Equal Opportunity Program assists the Secretary and the Assistant Secretary (Administration) in the formulation, execution, and coordination of policies relating mainly to two programs: (1) The equal employment opportunity program for Treasury employees, and (2) compli ance surveUlance of the equal employment policies and programs of those financial institutions that are Federal depositaries or issuing and paying agents of U.S. savings bonds and U.S. savings notes. The President has expressed his intention to sign an Executive order in October 1978 consolidating the contract compliance program under the Department of Labor, thus reHeving Treasury of the responsibility for this program.

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134 1979 REPORT OF THE SECRETARY OF THE TREASURY

To assist the Joint Board in the performance of the examination duties imposed on it by ERISA, an Advisory Committee was established on Joint Board Examinations under the Federal Advisory Committee Act. Six meetings of the Committee were held during the fiscal year.

BUREAU OF ENGRAVING AND PRINTING The Bureau of Engraving and Printing, the world's largest securities manufacturing establishment, designs and produces the major evidences of a financial character issued by the United States. It is responsible for the production of U.S. currency, postage stamps, public debt securities, and miscellaneous financial and security documents.

Finances The operations of the Bureau of Engraving and Printing have been financed by means ofa revolving fund since July 1, 1951, established pursuant to Public Law 656, August 4, 1950 (31 U.S.C. 181), as amended by Public Law 95-81, July 31, 1977. The recent amendment authorized the Bureau to include in the charge for its products an amount to be accumulated for the acquisition or replacement of capital equipment and to provide for future working capital. Agencies which the Bureau serves are required to make reimbursement for all costs'incidental to the performanbe of work or services requisitioned. Congress has supplied appropriations as increases to the fund on three occasions since the inception of the revolving fund. The donated portion of the revolving fund is $14,250,000. The Bureau financed a program at a total cost of $135 mUlion in fiscal 1979, as compared with $132,407,383 in fiscal 1978 by means of this fund.

Implementation of a resource management concept The Bureau will operate under a highly decentralized management system, commencing with fiscal 1980, designed to provide individual managers with maximum authority and control over all key Bureau resources and programs. Twenty-two such elements have been identified and assigned, which includes every aspect of Bureau management. Individual resource management plans have been reviewed, amended, and approved by the Executive Management Committee composed of senior Bureau management. All plans are designed to contribute to the overall objective set by the Director, to provide fiscal 1980 products and services at the same cost levels as those provided in fiscal 1979. Regular participative reviews of progress wUl be made monthly for major programs and quarterly for other resources to provide opportunities for adjustment to major programs. The results of individual managerial efforts will be a basis for incentive awards.

Currency program Deliveries ofcurrency in fiscal 1979 totaled 3.9 bUlion notes, as compared with 3.3 bUlion notes in fiscal 1978.

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ADMINISTRATIVE REPORTS 135

The Bureau has reviewed customer demands for the next 5 years. A plan has been devised to acquire new production equipment to replace old equipment and meet increasing customer requirements. The plan awaits departmental and OMB approval. An extensive effort is being made to develop equipment for electronic examination of currency. The development of an electronic examining machine prototype is now under contract for expected delivery in the latter partof 1980. Magna press modifications planned at the time of contract settlement have been designed and will be implemented by the close of fiscal 1980. These changes will require extensive advanced scheduling to coincide with an increased demand on already existing heavy currency production schedules. Manual steel banding and wrapping equipment has been supplanted by two new fully automatic currency banding and wrapping units that wUl decrease manual intervention and speed the process. A newly developed mechanical detissuing machine has replaced the slow and labor-intensive manual detissuing operation in the Securities Examining Unit, resulting in faster turnaround time and increased productivity. An estimated annual savings of $16,000 is expected. The plan to abolish the Currency Receipt and Consolidation Unit was accomplished by consolidation and integration into the currency sheet examining function. Seventeen employees affected either have retired or have been reassigned to other operational needs. Annual recurring savings are estimated at $186,000. As a result of improved work station design and cooperation between management and labor, bookbinder productivity in the Trimming-Splitting Section was increased by 14 percent, from a standard of 36,000 to 41,000 sheets per person per day. The recurring annual savings to the currency program is approximately $70,000.

Postage stamp program Deliveries of U.S. postage stamps were 27.1 billion units in fiscal 1979, as compared with 28.5 billion units in fiscal 1978. Significant improvements in the control of functional characteristics of postage stamps have resulted in a reduction in consumer complaints. Historically, problems with phosphor, adhesive, and perforations were of concern to the general public and the U.S. Postal Service. A task force was established to monitor the base manufacturing cost of commemorative postage stamps. By prioritizing printing and processing objectives and coordinating applicable resources, the Bureau was successful in reducing product billing rates in spite of inflationary spirals and rising material costs. An innovative technique resulting from an employee suggestion permitted the examination of postage stamps in-line on the automatic booklet-forming machines. Although cost benefits were nominal, the technique increased machine avaUabUity to exainine coU stamps backlogged from the 1978 postal rate increase. For the first time in recent history, the Bureau supplied the U.S. Postal Service with hand-torn or manually separated plate blocks of higher denomination postage stamps of regular issue. Finished select quality plate blocks were processed and shipped to the city of first-day sale and post offices throughout the country. While cost savings were not realized by the Bureau, the Postal Service benefited in terms of efficient window transactions and improved accountability.

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136 1979 REPORT OF THE SECRETARY OF THE TREASURY

Future plans for postage stamp production were reviewed with completion of solicitations and commitment of funds for one web postage stamp press during the first quarter of fiscal 1980, and a possible option for an additional press in fiscal 1981.

Public debt securities As indicated by the Bureau of the Public Debt, the tentative schedule for conversion to the book-entry system will result in the discontinuation of printing and processing of Treasury bonds and notes by the Bureau of Engraving and Printing early in 1983.

Food coupon program The Bureau concluded responsibility for administering contracts for the production of food coupons for the Department of Agriculture with the completion ofthe fiscal 1979 contract. Future involvement by the Bureau will be limited to affording requested technical assistance to the Department of Agriculture commencing in fiscal 1980.

Gasoline rationing program The Bureau is pursuing a plan which will provide an emergency production capacity for gas rationing coupons without interruption to the currency supply, pursuant to legislation granting the President standby authority to order the rationing of gasoline. The basics of the plan have been approved by the Under Secretary and Deputy Secretary of the Treasury, and the Secretary of Energy, and have been submitted to the White House. Currently, the Bureau is completing equipment requirements specifications and is in the process of obtaining approval of a coupon design model. If rationing were ordered, the Bureau could activate the plan upon authoriza tion within 45 days.

Forensic science research and development Continuing cooperative efforts with Natick Army Research and Develop ment Command (NARADCOM) have resulted in the development of new types of distinctive red and blue fibers used in the manufacture of currency paper. Since November 1978, sufficient quantities have been produced by NARADCOM for use. In addition to a research and development contract for fiscal 1980, discussions are proceeding to provide for materials inclusion in the fibers to afford general public recognition. Action has been initiated, with planned continuity, to counter anticipated developments in the reprographic fields such as color copiers and improved photographic films. Research and development recommendations for techni cal countermeasures to be taken have been made by the Working Group and Steering Committee comprised of members representing the Federal Reserve Board, Bureau of Engraving and Printing, U.S. Secret Service, Bank of Canada, and Bank of England. A restructuring of the organization and mission of the research organization is planned to include, in addition to the present counterfeit analysis effort, a document deterrence program for implementing an ongoing technical evaluation program in threats and deterrent strategies related to deterrence of counterfeiting. This component would actively pursue research in repro graphics, electro/mechanical computer imaging, substrates, inks, photogra phy, and optics. Expertise wUl be maintained for implementation of future deterrent efforts both nationally and internationally.

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Inks To facilitate the use of commercially available material and for environ mental considerations, extensive ink development research is currently in progress. This involves development of inks which can be formulated from commercially available material, control of the ink-manufacturing process to a measurable standard, and disposal of the residual material in an environmen tally acceptable manner. Intense materials research programs and organiza tional changes are projected to significantly improve the quality and environmental acceptability of ink products for security documents. Continuing development of an acceptable roller-wipe (water-wipe) intaglio green currency ink has resulted in prototypes which have achieved an estimated 90-percent success level. Additional press trials and formulation refinement are expected to assure suitable inks for application on present and planned printing press acquisitions. Development of a suitable black intaglio currency ink is underway and significant progress has been made. A new paper-wipe black intaglio currency ink, formulated to ease manufacturing difficulties and eliminate troublesome raw materials, has become a production reality. This should lead to a phaseout of the traditional formulation in use over many years. A cost-benefit analysis is in progress. Efforts are being made to convert rotogravure purchased finished inks to an ink base system. This may permit the establishment of base ink specifications on a bid basis, thus eliminating the necessity for rotational procurements of finished inks, especially specialized color-matched inks required for a number of commemorative postage stamps. The Bureau has successfully developed water-based rotogravure inks devoid of solvents. These inks have been used on a limited number of rotogravure postage stamp issues. The goal is to convert all solvent gravure inks to water base and, if successful, this will ameliorate developing constraints related to the environment, including fire hazards, atmospheric pollution, and workplace exposure to solvents. Research to identify basic causes of setoff of freshly printed green currency backs from one sheet to another in the intaglio press stacking delivery indicates the cause to be associated with agglomerates of a particular formula component. Differences in the depth of engravings on the different denomina tion currency notes also appear to influence the amount of setoff, serving to amplify the problem rather than cause it. Reformulation efforts are underway and success in this area can serve to reduce spoUage due to setoff and thus reduce costs.

Quality control A centralized quality information system has been implemented to provide rapid data feedback to operating elements. The system includes reporting detaUed quality data by product, process, and press, and comprehensive investigations of excessive spoUage. A quality resource management concept has been initiated. This concept gathers and coordinates all quality and inspection functions under a single resource manager. When fully implemented, the concept will provide direct control of all quality characteristics from the procurement of raw materials, through the manufacturing and processing stages, and ending with final products delivered to Bureau customers.

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138 1979 REPORT OF THE SECRETARY OF THE TREASURY

Accountability Improved accountabUity equipment has been designed for all production processes. This equipment will aUow for more exact accountability during production and provide immediate feedback of information through micro processor technology.

Internal audit program An intensive program of internal audit provides for the evaluation and reexamination of operational and financial efficiency, economy, and internal control, as well as audit reviews of financial accounts and reports; and ensures compliance with prescribed statutory and regulatory directives. During fiscal 1979, 54 reports of audit were released that contained 280 recommendations referred for management consideration. Coverage included fiscal and management-type audits and reviews of operations and programs conducted on a scheduled, special, and unannounced basis. Liaison is maintained with the departmental Office of Audit and the General Accounting Office.

Security program The security access control system, partially implemented during the previous fiscal year, replaced the pass-badge system and provides for enhanced overall physical security control. Card-actuated security barriers were installed for selected internal operational and securities processing areas, eliminating the time-consuming system of handwritten logs for documenting the personnel movement in sensitive areas.

Executive/management development program The executive/management development program was developed in accordance with Civil Service Reform Act mandates and Department of the Treasury directives. The policy specifies the roles and responsibilities of the Bureau Director, the Executive Resource Board, program mentors, and Senior Executive Service participants with regard to executive and manage ment selection, placement, and development. It includes methods for providing program participants \yith the skills, knowledges, and abUities necessary to move into executive and managerial positions. The program is viewed as an important component toward improving the efficiency and effectiveness of Bureau operations and accomplishing mission objectives. During fiscal 1979, five candidates were selected into the high potential management cadre as "assistant to" positions, and an individual development planning process was designed to provide project assignments and training to develop managerial skills.

Training resource management system A total system was designed to identify training needs, including budgetary requirements, for monitoring training and related expenses by organizational component. The system enhances capability for affording cost-effective training to meet the specific needs identified during the performance evaluation process.

Technical skills training Technical training was afforded for plate printer intermediates on the operation of sheet-fed presses. A similar program is being developed for training on web-fed presses. Training methods include video tapes and sUdes

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explaining the complex mechanisms of the Bureau's currency and postage stamp presses.

CADE (upward mobility) The CADE policy and promotion plan was revised during fiscal 1979. Three participants graduated from the program and six others are currently in trainee positions. Emphasis has been placed on improving and counseling skills of the CADE staff and increasing counseling opportunities for the CADE population.

Cooperative education The Bureau initiated a cooperative education program with the Rochester and West Virginia Institutes of Technology in printing management early in 1977. Since then, two employees have been enrolled in cooperative education work assignments, and one has completed the 1,040 work-hour experience and graduated from the program. The program, recently expanded to include the University of the District of Columbia, provides an opportunity to assess the performance of potential candidates who have educational backgrounds in printing management.

Labor-management relations A series of labor relations training courses and seminars for all levels of supervisors and managers is continuing. This program should further improve the Bureau's record of effectiveness in dealing with labor relations matters. The Bureau continues to foster constructive and harmonious relationships with its employees and the 17 bargaining units which represent them. In keeping with the spirit and intent of the newly enacted Civil Service Reform Act of 1978, management deals with 16 AFL-CIO affiliate unions represent ing 25 distinct craft groups, a noncraft unit, and a guard unit. One independent union represents the GS clerical/technical employees. Fifteen substantive negotiated labor-management agreements are presently in force. Various provisions of the labor agreements are being revised as the Bureau strives to come into compliance with the new law.

Compressed work schedules The first compressed work schedule among a group of unionized Federal sector employees was instituted in May 1979, when 22 employees of the Office of Engraving entered on a 4-day workweek. Since then, simUar work schedules have been introduced in two other components. The Bureau is studying the feasibility for additional application.

Performance evaluation system and awards Policies describing the performance evaluation and incentive award programs were revised and implemented during fiscal 1979. These programs are designed to foster supervisor-employee communications regarding perfor mance strengths and weaknesses, and to recognize and reward performance of demonstrable contribution to the organization. Training was afforded to all managers and supervisors in the new program policies. During fiscal 1979, 293 employees received special achievement awards and 18 employees were recipients of high quality pay increases. Under the employee suggestion phase ofthe program, 125 suggestions were received, of which 61 were adopted with savings of $474,165. Two summer employees were recognized with cash awards for superior work performance.

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140 1979 REPORT OF THE SECRETARY OF THE TREASURY

Public relations The Bureau continues to be one of the major attractions for visitors to the Washington area. Over 500,000 visitors avaUed themselves of the self-guided tour facUities during fiscal 1979. Additional service to the public was rendered by Bureau exhibit participation at four numismatic and two philatelic events.

OFFICE OF EQUAL OPPORTUNITY PROGRAM The Office of Equal Opportunity Program assists the Assistant Secretary (Administration) in the formulation, execution, and coordination of the policies and programs related to providing equal employment opportunity for 134,000 Treasury employees nationwide. The Office guides and oversees the implementation of the Department's EEO program and affirmative action plans prepared by 12 component bureaus; is responsible for the processing and adjudication of discrimination complaints from Treasury employees and applicants; and provides for the implementation of objectives associated with the Federal Women's Program and the Hispanic Employment Program. The following table provides a breakout of the Treasury work force by minority group status and grade grouping.

Department of the Treasury full-time employment by minority group status Comparison Comparison 1968 1972 1974 1977 1978 1977-1978 1968-1978 Number Percent Number Percent Total employees* 82,155 102,813 114.686 123.472 122.295 -1.177 -0.95 40,140 48.86 Black 11,777 15,619 18,216 19,904 19,882 -22 -.11 8.105 68.82 Hispanic 1,052 2,247 3,437 4,417 4,670 253 5.73 3,618 343.92 Native American 79 128 175 194 186 -4.12 107 135.44 Asian American 482 813 1,230 1,330 1,409 79 5.94 927 192.32 Other • 68,765 84,006 91.628 97,627 96,148 [,479 -1.51 27,383 39.82 Total GS employees 76,984 96.085 107,658 112,922 112,007 -915 -.81 35,023 45.49 Black 8,950 12.088 14,697 16.143 16,308 165 1.02 7,358 82.21 Hispanic 886 1.949 3,012 3,668 3,938 270 7.36 3,052 344.47 Native American 75 122 194 175 168 -7 -4.00 93 124.00 Asian American 462 720 1.099 1,175 1,272 97 8.26 810 175.32 Other 66,611 8L206 88,656 91,761 90,321 -1,440 -1.57 23,710 35.59 GS 1-4: Total • 19,120 24,126 25,526 28,051 26,319 -1,732 -6.17 7,199 37.65 Black 4,947 5,904 6,679 6.600 6,452 -148 -2.24 1,505 30.42 Hispanic 255 791 1,065 1,426 1,424 -2 -.14 1,169 458.43 Native American 25 45 84 47 42 -5 -10.64 17 68.00 Asian American 80 159 181 247 273 26 10.53 193 241.25 Other • 13.813 17,227 17,517 19.731 18.128 -1.603 -8.12 4.315 31.24 GS 5-8: Total • 19.480 27.601 33,295 32,977 34,178 1,201 3.64 14,698 75.45 Black 2,708 4,290 5,569 6,112 6.251 139 2.27 3.543 130.83 Hispanic 264 551 1,008 1,135 1,331 196 17.27 1,067 404.17 Native American 26 35 50 54 46 -8 -14.81 20 76.92 Asian American 141 249 445 385 439 54 14.03 298 211.35 Other • 16,341 22,476 26.223 25.291 26,111 820 3.24 9.770 59.79

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