Federal Reserve Bank - Finances

Finances

Each Federal Reserve Bank funds its own operations, primarily from interest on its loans and on the securities it holds. Expenses and dividends paid are typically a small fraction of a Federal Reserve Bank's income each year. By law the remainder must be transferred to the Board of Governors, which then deposits the full amount to the Treasury as interest on outstanding Federal Reserve Notes.

The Federal Reserve Banks conduct ongoing internal audits of their operations to ensure that their accounts are accurate and comply with the Federal Reserve System's accounting principles. The banks are also subject to two types of external auditing. Since 1978 the Government Accountability Office (GAO) has conducted regular audits of the banks' operations. The GAO audits are reported to the public, but they may not review a bank's monetary policy decisions or disclose them to the public. Since 1999 each bank has also been required to submit to an annual audit by an external accounting firm, which produces a confidential report to the bank and a summary statement for the bank's annual report. Some members of Congress continue to advocate a more public and intrusive GAO audit of the Federal Reserve System, but Federal Reserve representatives support the existing restrictions to prevent political influence over long-range economic decisions.