Paper Money

Treasury OIG report explains problems with NexGen $100 notes

A report issued by the Treasury Department’s Office of the Inspector General sheds new light on the problems that halted production of the Series 2009 $100 notes.

Original images courtesy of Bureau of Engraving and Printing.

A report issued by the Treasury Department’s Office of the Inspector General on Dec. 31, 2019, sheds new light on the Bureau of Engraving and Printing, and specifically on the problems that halted production of the Series 2009 NexGen $100 Federal Reserve note.

The report, subtitled “BEP Improved Governance and Oversight over Note Development and Production But Challenges Remain,” is a follow-up to determine whether BEP followed the recommendations made by the OIG in January 2012.

Production of the Series 2009 NexGen $100 bill, the last in the five-note series of $5, $10, $20, $50, and $100 notes began at BEP’s Washington, D.C., and Fort Worth, Texas, facilities in January 2010.

Before long, intermittent creasing in the $100 notes was noted. By September 2010, defects had reached an unmanageable level. Production was suspended until the reason for the problem could be identified and fixed. By that time, about 1.4 billion unacceptable notes, many still in uncut sheets, had been printed — about 540 million notes at the Washington facility and 860 million notes at the Fort Worth facility.

A plan is made

In September 2011, the BEP and the Federal Reserve Board reached agreement on a plan to eliminate the earlier problems and resume production while minimizing creasing. The OIG 2012 report soon after called for a period of limited production of the $100 notes, with a validation procedure to ensure that problems were resolved before full production started. It also called for a new project management system for all future notes that would include the Federal Reserve Board, Secret Service, BEP, and others.

It also asked for an analysis of the options for disposing of the 1.4 billion $100 notes that were not accepted by the Federal Reserve Board. Acquisition of single-note inspection equipment with the possibility of reclaiming 95 percent of the unacceptable notes was agreed upon. After acquiring the equipment, only 39 percent of the notes put aside were reclaimed. Reasons given for the disparity included increased quality standards, changes in the notes’ physical condition from sitting for a lengthy time in storage, and false rejects. Also, the sheet position of some defective notes made it more sensible to destroy the whole sheet.

As far as resumed production was concerned, OIG found that validations were done at both the Washington and Fort Worth facilities and production was resumed in May 2013. Notes produced before initial production was suspended in 2010 are Series 2009. Those printed after production was resumed are Series 2009A.

Problems continue in D.C.

The full validation process, however, was incomplete. One by one, BEP completed four production line validations for the Fort Worth facility, but it could complete only one for the Washington plant, instead of the two planned there.

Then, in September 2013, a new quality problem emerged at the Washington plant that caused it to again halt printing of the $100 bill. Notes that were already shipped from Washington to the board for issue were returned to BEP, and the board stopped accepting $100 note deliveries from the Washington facility until it “demonstrated improvements in its manufacturing and quality operations and controls and a successful production validation was completed. A third-party assessment was also to be conducted to evaluate and verify the improvements.”

The new problem was called “mashing.” BEP defines that as over-inking that normally happens at printing startups. It can be significantly reduced through the use of ink solvents and software configuration upgrades to printing equipment.

The problem in Washington was that local environmental emission standards prohibited BEP from using the same ink that was being successfully used in Fort Worth.

A new ink solvent was identified in December 2013, but approval to use it was not given by local environmental regulators until November 2015.

With that approval, when all validations are completed, it should be possible for each printing facility to produce every denomination, leading to greater efficiency and lower costs. BEP’s goal for this is the 2020 fiscal year.

More from the report

Two other elements of the 39-page report of interest to collectors concern the Advanced Counterfeit Deterrence Steering Committee and the Banknote Development Process. ACD’s members include senior executives from Treasury, BEP, the Federal Reserve Board, Secret Service, and the Board’s Currency Technology Office. The group was created in 1982 and has overseen two complete currency redesigns, the New Currency Design or NCD family series, begun in 1996, and the current NexGen series.

The report says, “The ACD’s policy has been to redesign the note denominations collectively, as part of a family series, in which each note denomination has very similar architecture, but may have different security features incorporated in its design based on the counterfeiting threat posed to each denomination. Each note denomination redesign, development, and issuance schedule is undertaken individually and completed over the course of several years.”

BDP stands for Banknote Development Process, an system created in 2012 to “plan and execute new note development programs.” A new note has not yet been designed under this system, although an in-house note was created for internal testing purposes. The first note planned under this new process is called the “Catalyst $10 Note.” This note is said to have now entered the “Concept” phase, the first of five BDP phases.

Based on the ACD policy, this means that we should be seeing a new $10 note within several years. In 2013 it recommended that the next two denominations will be the $10 note and the $50 note, with a new $20 note waiting until 2030.

The report does not address design elements for the notes. New design themes were approved by Treasury Secretary Jacob Lew, including placing a portrait of Harriet Tubman on the $20 note, but those changes seem to have been placed on hold by the current administration. 

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