oversight

Coin and Currency Production: Issues Concerning Who Should Provide Security

Published by the Government Accountability Office on 2003-07-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Subcommittee on Domestic
             and International Monetary Policy, Trade,
             and Technology, Committee on Financial
             Services, House of Representatives

July 2003
             COIN AND
             CURRENCY
             PRODUCTION
             Issues Concerning
             Who Should Provide
             Security




GAO-03-696
             a
                                               July 2003


                                               COIN AND CURRENCY PRODUCTION

                                               Issues Concerning Who Should Provide
Highlights of GAO-03-696, a report to the      Security
Subcommittee on Domestic and
International Monetary Policy, Trade, and
Technology, Committee on Financial
Services, House of Representatives




The U.S. Mint and the Bureau of                The Mint and BEP use their own police forces to provide security. Eight of
Engraving and Printing (BEP),                  the 12 coin and currency organizations in the other G7 nations responded to
which produce the nation’s coins               our requests for information. Four organizations reported that they only
and currency, provide their own                used their own security forces; 2 organizations said they used their own
security and have experienced                  security forces supplemented with contractor personnel; 1 organization said
some problems with theft by
employees. Although security is
                                               it used an outside agency to supplement its own security force; and 1
necessary to carry out the agencies’           organization said that it used an outside agency to provide its security.
missions, their primary function is            Private businesses that handle large amounts of cash, such as banks and
producing money. In light of these             casinos, that we contacted said they used either their own security staff or
thefts, a congressional committee              contractor staff.
asked GAO whether the Mint and
BEP should continue to provide                 The Mint and BEP have experienced some thefts by employees over the last
their own security or whether the              decade. The Mint, which did not have records of security incidents that
United States Secret Service should            occurred more than 5 years ago, reported 74 incidents of theft involving
provide their security.                        about $93,000 from 1998 though 2002, while BEP reported 11 incidents of
                                               theft from 1993 through 2002 involving about $1.8 million. Both the Mint and
Among the issues that GAO was
asked to address were (1) how do
                                               BEP had threat assessments made of their facilities and processes and took
the Mint, BEP, and other                       corrective action to enhance security.
organizations that produce or
handle large amounts of cash                   The Secret Service said that if its Uniformed Division were charged with the
provide their security; (2) what               responsibility of protecting the Mint and BEP, the two agencies could benefit
thefts have occurred at the Mint               from the Secret Service’s expertise in protection and criminal investigations.
and BEP and what steps have they               However, unlike Secret Service police officers, Mint and BEP security
taken to prevent thefts from                   personnel are already familiar with the coin and currency production
recurring; and (3) what are the                processes, which is a benefit in identifying security risks in these
potential benefits and costs of                manufacturing facilities. Further, if the Secret Service protected the Mint
having the Secret Service provide              and BEP, the government could incur additional costs because the Secret
Mint and BEP security?
                                               Service requires more training for its officers than the Mint and BEP police.
The Mint said it generally agreed              The Secret Service police officers also are provided more costly retirement
with the findings and conclusions              benefits than the Mint and BEP police.
that applied to the Mint. BEP and
the Secret Service provided
technical comments regarding the
report, which GAO incorporated
where appropriate, but had no
overall comments on the report.




www.gao.gov/cgi-bin/getrpt?GAO-03-696.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Bernard Ungar
at (202) 512-2834 or ungarb@gao.gov.
Contents



Letter                                                                                                                  1
                             Results in Brief                                                                           2
                             Background                                                                                 4
                             How Security Is Provided at the Mint, BEP, and Selected Other
                               Organizations                                                                            5
                             Thefts at the Mint and BEP and Steps They Have Taken to Prevent
                               Such Incidents                                                                           9
                             Potential Benefits and Costs of Having the Secret Service Provide
                               Mint and BEP Security                                                                15
                             Agency Comments                                                                        21


Appendixes
              Appendix I:    Scope and Methodology                                                                  22
             Appendix II:    Data Concerning the U.S. Mint and the Bureau of Engraving
                             and Printing Police Forces                                                             25
             Appendix III:   Data Regarding the United States Secret Service’s Uniformed
                             Division                                                                               26
             Appendix IV:    Comments from the U.S. Mint                                                            27




                             Abbreviations

                             BEP          Bureau of Engraving and Printing
                             CSRS         Civil Service Retirement System
                             DHS          Department of Homeland Security
                             FERS         Federal Employees Retirement System
                             FLETC        Federal Law Enforcement Training Center
                             FPS          Federal Protective Service
                             GSA          General Services Administration
                             OPM          Office of Personnel Management
                             TSA          Transportation Security Administration

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                             Page i                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
A
United States General Accounting Office
Washington, D.C. 20548



                                    July 18, 2003                                                                                  Leter




                                    The Honorable Peter T. King
                                    Chairman
                                    The Honorable Carolyn B. Maloney
                                    Ranking Minority Member
                                    Subcommittee on Domestic and International
                                     Monetary Policy, Trade, and Technology
                                    Committee on Financial Services
                                    House of Representatives

                                    The U.S. Mint and the Bureau of Engraving and Printing (BEP)—
                                    Department of the Treasury agencies that produce the nation’s coins and
                                    currency—have experienced some thefts in the last decade by their
                                    employees, including the theft of about $1.6 million in test currency1 from
                                    BEP in 1994. The government’s money producing facilities are also
                                    considered by law enforcement officials to be potential terrorist targets
                                    because of their symbolic importance and role in the U.S. economy. During
                                    fiscal year 2002, the Mint produced and shipped about 15 billion circulating
                                    coins, and BEP produced and shipped about 7.1 billion Federal Reserve
                                    notes. Although the primary mission of the Mint and BEP is to produce
                                    money, they also provide their own security.

                                    In light of these thefts by Mint and BEP employees, you asked us to review
                                    (1) how security is provided at the Mint and BEP and how that compares
                                    with the security arrangements at coin and currency producing
                                    organizations in other countries and at businesses that handle large
                                    amounts of money, (2) what thefts have occurred at the Mint and BEP in
                                    recent years and what steps have been taken to prevent thefts from
                                    recurring, and (3) what are the potential benefits and costs of having the
                                    United States Secret Service provide Mint and BEP security?

                                    To address these questions, we obtained and reviewed Mint, BEP, and
                                    Secret Service police job classifications, application and training
                                    requirements, and salaries and benefits; thefts that occurred from 1998




                                    1
                                     Test currency is produced for design, equipment, and/or material testing or experimental
                                    purposes to evaluate counterfeit deterrent features or for other purposes. In this case, the
                                    currency was spendable and looked like real money.




                                    Page 1                          GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                   through 20022 at the Mint and from 1993 through 2002 at BEP; crimes that
                   occurred and arrests that were made from 1993 through 2002 at buildings
                   protected by the Secret Service’s Uniformed Division; and government and
                   consultant security assessments of Mint and BEP security. We sought
                   information from the other G7 nations (Canada, France, Germany, Italy,
                   Japan, and the United Kingdom) regarding the security arrangements at
                   their 12 money producing facilities and received responses from 8
                   organizations in those countries. Further, we verified whether
                   recommendations for security improvements at the Mint and BEP had been
                   implemented. In addition, we interviewed officials from the Mint, BEP,
                   Secret Service, and the Federal Reserve System and representatives from
                   selected businesses, such as banks and casinos, that handle a large amount
                   of cash about their security arrangements. We did our work in Washington,
                   D.C.; Philadelphia, Pennsylvania; and Ft. Knox, Kentucky, in accordance
                   with generally accepted government auditing standards and investigative
                   standards established by the President’s Council on Integrity and Efficiency
                   from July 2002 through June 2003. Our detailed scope and methodology are
                   contained in appendix I.



Results in Brief   The Mint and BEP use their own police forces to protect the money they
                   produce and its facilities and employees. Eight of the 12 coin and currency
                   organizations in the other G7 nations responded to our requests for
                   information. Four organizations reported that they only used their own
                   security forces; 2 organizations said they used their own security forces
                   supplemented with contractor personnel; 1 organization said it used an
                   outside agency to supplement its own security force; and 1 organization
                   said that it used an outside agency to provide its security. The six casino
                   and banking companies that we contacted handle large amounts of cash,
                   and they used either their own security staff or contractor staff. In general,
                   the businesses that used their own employees to provide security said they
                   did so to maintain greater control over their security operations, while the
                   businesses that used contract security personnel generally said they did so
                   because it was less costly.

                   The Mint reported that about $92,862 of government property, primarily
                   coins, was stolen from 1998 through 2002, involving 74 incidents. This
                   amount includes the market value of coins with production errors that

                   2
                    The Mint did not have data regarding thefts that occurred from 1993 through 1997;
                   therefore, it provided data on thefts that occurred from 1998 through 2002.




                   Page 2                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
were stolen from the Mint. BEP reported 11 incidents of theft from 1993
through 2002 totaling about $1.8 million, including 1 theft of $1.6 million in
currency by an employee in 1994. According to Mint and BEP security
officials, the thefts that occurred did not happen because of deficiencies in
the existing security forces, but were the result of breaches of trust by
employees. Moreover, the Mint and BEP have had outside organizations
review their security and assess threats and make recommendations for
improvements. The Mint has taken measures to prevent employee thefts,
such as improving internal controls and accountability over the production
of coins with errors, which are valuable to coin collectors. Among the
measures that BEP has taken to prevent employee thefts are implementing
camera surveillance of production employees and reducing the amount of
money in the vault where $1.6 million was stolen in 1994. We did not
identify any major security gaps that the Mint and BEP are not currently
addressing.

According to the Secret Service, if it were given the responsibility of
protecting the Mint and BEP, the two agencies could benefit from the
Secret Service’s expertise in protection and criminal investigations.
However, the disadvantages of using the Secret Service are that additional
costs could be incurred for initial training and retirement benefits. Further,
unlike Secret Service police officers, Mint and BEP security personnel are
familiar with the coin and currency production process, which is a benefit
in identifying security risks in such manufacturing facilities. An alternative
regarding the Mint and BEP police forces would be to transfer them to a
new, separate unit of the Uniformed Division. Under this alternative, the
existing Mint and BEP police forces would become a second tier of the
Uniformed Division and would be trained, supervised, and managed by the
Secret Service. A potential advantage of this arrangement would be that the
separate unit possibly could be used as a stepping-stone for Mint and BEP
police who would like to become Uniformed Division officers. Further, this
arrangement could streamline activities, such as procurement, training,
and recruitment, that may save the government money. However, creating
two tiers of Uniformed Division officers with different hiring standards,
retirement benefits, and collective bargaining rights could cause problems
with morale. According to the Secret Service, because of the differences in
the hiring standards between the Uniformed Division and the Mint and BEP
police, the stepping-stone concept for the Mint and BEP police officers
would be impractical and the Secret Service would not use them in
fulfilling its other protective responsibilities. In addition, placing
responsibility for the security of the Mint and BEP in a separate agency that
is not part of the Treasury Department could hinder the responsiveness of



Page 3                     GAO-03-696 Who Should Provide U.S. Mint and BEP Security
             the security personnel to the Mint and BEP. The Secret Service said that
             this alternative offers no advantages to the Secret Service; would place
             additional financial, manpower, and other administrative burdens on the
             agency; and would dilute the Uniformed Division’s protective mission.

             In commenting on a draft of this report, the Mint said it generally agreed
             with the findings and conclusions that applied to the Mint. BEP and the
             Secret Service had no overall comments on the draft report.



Background   The Mint and BEP, which are part of the Treasury Department, produce the
             nation’s coins and currency. The Mint primarily produces circulating coins
             in Denver, Colorado, and Philadelphia. It also makes numismatic coins and
             medals and stores over $100 billion in government precious metals at
             facilities in Denver; Fort Knox; Philadelphia; San Francisco, California;
             Washington, D.C.; and West Point, New York. BEP produces (1) the nation’s
             currency for the Federal Reserve System, (2) many security documents
             that the federal government issues, and (3) some postage stamps. Its
             production facilities are in Washington, D.C., and Ft. Worth, Texas. During
             fiscal year 2002, the Mint produced and shipped about 15 billion circulating
             coins at a cost of $430.9 million, including $47.2 million for security. BEP
             produced and shipped about 7.1 billion Federal Reserve notes in 2002 at a
             cost of $376.7 million, including $33.2 million for security.

             The authority of the Mint and BEP to establish police forces is derived from
             40 U.S.C. § 1315, which provides the Mint and BEP police with powers to
             enforce federal laws and regulations for the protection of individuals and
             property, including making arrests and carrying firearms. Prior to the
             enactment of the Homeland Security Act of 2002, the Administrator of the
             General Services Administration (GSA), through GSA’s Federal Protective
             Service (FPS), was responsible for policing government buildings under
             GSA’s control and had delegated this responsibility to the Secretary of the
             Treasury who redelegated it to the Mint and BEP. Although the Homeland
             Security Act amended 40 U.S.C. § 1315 by transferring responsibility for
             this policing authority to the Secretary of the Department of Homeland




             Page 4                    GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                        Security (DHS),3 the savings provisions in the act state that the existing
                        delegations will continue to apply.4 Additional security legislation found in
                        Public Law 104-208 (1996) provides Mint and BEP police officers with the
                        authority to carry out their duties on Mint and BEP property and the
                        surrounding areas and while transporting coins, currency, and other agency
                        assets.5

                        The primary mission of the Secret Service is to protect the President and
                        other individuals, enforce the nation’s counterfeiting laws, and investigate
                        financial crimes. In carrying out this mission, the Secret Service’s
                        Uniformed Division also protects the buildings in which the people it
                        protects are located, such as the White House complex, the Treasury
                        Department headquarters building and annex, the Vice President’s
                        residence, and foreign diplomatic missions. The Uniformed Division has
                        statutory authority to carry out its duties under 3 U.S.C. § 202 and 18 U.S.C.
                        § 3056, including the power to make arrests, carry firearms, and execute
                        warrants issued under the laws of the United States. The Secret Service’s
                        jurisdiction extends throughout the United States on mission-related work.



How Security Is         The Mint and BEP use their own police forces to protect their facilities and
                        the money they produce. Eight of the 12 coin and currency organizations in
Provided at the Mint,   the other G7 nations responded to our requests for information. Four
BEP, and Selected       organizations reported that they only used their own security forces; 2
                        organizations said they used their own security forces supplemented with
Other Organizations     contractor personnel; 1 organization said it used an outside agency to
                        supplement its own security force; and 1 organization said that it used an
                        outside agency to provide its security. The six casino and banking
                        businesses that we contacted, which handle large amounts of cash, used
                        either their own security staff or contract staff. In general, the businesses
                        that used their own employees to provide security said they did so to
                        maintain greater control over their security operations, while the
                        businesses that used contract security personnel generally said they did so
                        because it was less costly.



                        3
                        Public Law 107-296, 116 Stat. 2135, 2178 (2002).
                        4
                        Public Law 107-296, 116 Stat. 2135, 2310-2311 (2002).
                        5
                        Note to 31 U.S.C. § 5141.




                        Page 5                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Mint and BEP Police Forces   As of March 2003, the Mint had 381 police officers. It also employed 38
                             people to provide administrative support for its security operations. BEP
                             had 209 police officers as of March 2003. It also employed 36 people to
                             provide administrative support for its security operations. In addition, BEP
                             employed 79 security specialists, investigators, and security managers who
                             BEP does not count as police officers, but who are licensed and trained to
                             carry firearms and can provide back-up for the police. BEP conducts most
                             of its own background investigations, while the Mint contracts out this
                             work.6

                             The Mint and BEP police primarily provide security by guarding entry and
                             exit at the agencies’ facilities and conducting electronic surveillance. In
                             contrast to the Secret Service, which is concerned primarily with
                             protecting individuals and, as part of that mission, controlling public access
                             into protected facilities, the Mint and BEP police are focused on preventing
                             employees from taking coins and currency from the facilities. Both the
                             Mint and BEP police use outside experts to conduct threat assessments
                             regarding their facilities and to make recommendations for security
                             improvements.

                             The Mint and BEP police provide security for production facilities that are
                             not located in the same cities. The Mint police provide protection at the
                             primary coin production facilities in Denver and Philadelphia; the facilities
                             in San Francisco and West Point, which produce numismatic coins; the Ft.
                             Knox facility, where gold and other precious metals are stored; and the
                             Mint’s Washington, D.C., headquarters. The BEP police provide protection
                             at BEP’s Washington, D.C., headquarters and at currency production
                             facilities in Washington, D.C., and Ft. Worth.

                             Because both the Mint and BEP protect money producing facilities, the two
                             agencies have considered merging their police forces. According to the
                             Mint, a combined police force could exercise greater flexibility in
                             deploying security personnel in response to emergencies. However, the


                             6
                              Background investigations are conducted on Mint and BEP job applicants and contractors,
                             and periodic investigation updates are conducted on current employees. The Mint’s
                             background investigations are conducted by the Internal Revenue Service’s National
                             Background Investigation Center and the Office of Personnel Management (OPM). In fiscal
                             year 2002, BEP conducted 1,247 background investigations and referred 191 investigations
                             to OPM. BEP referred these investigations to OPM because the applicants had lived and
                             worked in multiple states. According to BEP, it was more cost-effective for OPM to conduct
                             those investigations because OPM has several offices located throughout the United States.




                             Page 6                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                             Mint also said that (1) because of the geographic dispersion of the Mint’s
                             and BEP’s production facilities, the number of police positions that could
                             be eliminated through a merger of the police forces would be limited and
                             (2) all Mint and BEP police officers would have to be trained in the security
                             aspects of both the coin and currency production processes.

                             BEP management was opposed to merging the Mint and BEP police forces
                             because the centralization of the forces would not necessarily lead to a
                             more effective security effort, and these officials raised questions regarding
                             managerial controls, allocation of resources and funds, and accountability.
                             BEP management noted that because Mint and BEP production facilities
                             are not located in the same cities, local supervision still would be needed at
                             each facility.

                             Although the Mint and BEP are not pursuing a merger of their police forces,
                             they are considering sharing certain security-related functions. In April
                             2003, Mint and BEP officials met to discuss the sharing of security-related
                             services and agreed to share intelligence information, and they are studying
                             the feasibility of jointly conducting drug testing and background
                             investigations.

                             Appendix II provides specific information regarding Mint and BEP police
                             forces in terms of the facilities they protect, job classifications, number of
                             police, application requirements, starting salaries, attrition rates, and
                             training requirements.



Security Arrangements at     We sent questionnaires to both the coin and currency producing
Money Producing Facilities   organizations in the six other G7 nations (Canada, France, Germany, Italy,
                             Japan, and the United Kingdom) requesting information about who
in Other Countries
                             provides their security and whether they had experienced thefts from 1993
                             through 2002. Eight of the 12 coin and currency producing organizations
                             responded to our requests for information. Four organizations reported
                             that they only used their own security forces; 2 organizations said they
                             used their own security forces supplemented with contractor personnel; 1
                             organization said it used its own security force and personnel from the
                             country’s customs agency; and 1 organization said that the country’s
                             Ministry of Defense provided its security.

                             Two of the 8 organizations reported that they had experienced thefts of
                             $1,000 or more over the last 10 years; 1 of those organizations was
                             protected by its own security force, and the other was protected by the



                             Page 7                     GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                           country’s Ministry of Defense. The organization that was protected by its
                           own security force reported experiencing two thefts. One incident involved
                           an employee’s theft of gold that was worth about $40,000. The other
                           incident involved two employees’ theft of error coins worth about $1,000 to
                           coin collectors. The second organization, which was protected by the
                           country’s Ministry of Defense, reported that currency worth about $40,200
                           was stolen from its facilities. The other 6 organizations that responded said
                           they had not experienced any thefts of $1,000 or more over the last 10
                           years.



Security Arrangements at   We contacted four banks and two casinos regarding who provides their
Businesses that Handle     security and why because, like the Mint and BEP, these entities also handle
                           large amounts of cash. The security director for one banking company said
Large Amounts of Cash      that it only uses its own security guards in its major cash vault facilities,
                           which may contain hundreds of millions of dollars. He said that from his
                           company’s assessment of risk factors and experiences, it appeared that its
                           own well-trained, well-paid security guards are more dependable, reliable,
                           and honest than contract guards. The security directors at the three other
                           banks we interviewed said that they used contract security personnel to
                           provide their security because of the cost advantages compared with hiring
                           in-house staff. Of those three companies that used contract guards, one
                           also used in-house staff to supervise contract personnel and to guard its
                           cash vault operations.

                           Security directors from two major casino companies both said that they
                           employ their own security staff, rather than using contract staff. The
                           security director of the first company said that using its own security staff
                           provides the company with more control, for example, by conducting
                           background investigations on staff to ensure their suitability. Similarly, the
                           security director of the second company said that it is difficult to maintain
                           supervisory control or take corrective actions over contract security
                           officers.




                           Page 8                     GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Security Arrangements at     The Federal Reserve System, the nation’s central bank, employs its own
the Federal Reserve System   police force.7 Security personnel were granted federal law enforcement
                             authority under the Uniting and Strengthening America by Providing
                             Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
                             Patriot) Act of 2001.8 A Federal Reserve security official said that the
                             Federal Reserve preferred to use its own police force because it is
                             important to (1) know the officers and their training and capabilities and
                             (2) have the police force under its management control. The Federal
                             Reserve reported that it had experienced 12 internal thefts by its employees
                             in the past 10 years totaling $516,080, of which $239,562 has been recovered
                             to date.9



Thefts at the Mint and       We asked the Mint and BEP to provide information regarding thefts that
                             occurred over the last decade. We reviewed these incidents with Mint and
BEP and Steps They           BEP security officials in terms of what happened, why, and how they
Have Taken to Prevent        occurred, and what steps have been taken to prevent thefts from recurring.
                             According to Mint and BEP security officials, the thefts did not occur
Such Incidents               because of deficiencies in the existing security forces, but were the result
                             of breaches of trust by employees. Further, both the Mint and BEP have
                             had threat assessments conducted regarding their facilities and have
                             generally implemented the recommendations that were made to improve
                             security. As a result, it does not appear that the Mint and BEP have major
                             security gaps that they are not currently addressing.




                             7
                              After the September 11, 2001, terrorist attacks, the Board of Governors temporarily
                             supplemented the security at its Washington, D.C., facilities with an armed contract security
                             service, but the contact security service is now being phased out.
                             8
                              Public Law 107-56, 115 Stat. 272, 333 (2001), amended 12 U.S.C. § 248, by adding subsection
                             (q) on uniform protection authority of Federal Reserve facilities.
                             9
                              The Federal Reserve indicated that the theft of some of the missing money is still under
                             investigation and that it expects to recover more of the stolen cash.




                             Page 9                          GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Thefts at the Mint   Although we requested that the Mint provide information on thefts that
                     occurred during the past 10 years, the Mint indicated that it did not have
                     records of thefts that occurred more than 5 years ago and provided records
                     regarding incidents that occurred from 1998 through 2002. The Mint’s
                     records indicated that about $92,862 of government property (primarily
                     coins) was stolen during that time, including $80,000 total market value of
                     coins with production errors (“error coins”) that a Mint employee stole
                     from 1998 through 2000.10 The records reflected 74 reports of theft that
                     occurred both inside and outside of Mint facilities. They also indicated that
                     two employees were convicted of stealing from the Mint; an employee who
                     stole 400 to 500 error coins was sentenced to prison, and another employee
                     who was caught stealing 35 1-dollar coins was sentenced to probation.

                     Mint records indicated that about $82,357 of property (primarily coins) was
                     reported stolen from inside Mint facilities from 1998 through 2002,
                     involving 28 incidents, including the following:

                     • the theft by an employee of 400 to 500 coins, including error coins with a
                       total value to coin collectors of about $80,000, and

                     • 27 other incidents involving the theft of $2,357 of coins and government
                       property, such as office and production equipment, including 10
                       incidents involving coins found on employees or contractors with a face
                       value of at least $36.11

                     Outside of Mint facilities, about $10,505 in government property was
                     reported stolen, involving 46 incidents, including the following:



                     10
                      The Mint did not record the value of all items that were stolen during this period.
                     Therefore, the total value of the items stolen is incomplete. The Mint also reported the total
                     market value, rather than the face value, of the 400 to 500 coins that were stolen by an
                     employee from 1998 through 2000. The head of a company that specializes in the buying and
                     selling of error coins told us that the value of error coins depends on many factors, such as
                     the type of error and the rarity of the coins. He said, for example, that a circulating
                     commemorative state quarter that is 50 percent off-center could be worth between $150 to
                     $200, depending on which state is on the coin and how many similar coins are available.
                     However, other rare error coins can be worth tens of thousands of dollars apiece. Mint
                     officials said that although error coins are valuable to coin collectors, they are considered to
                     be scrap by the Mint with negligible cost.
                     11
                       Because the Mint did not maintain records regarding the value of some of the coins
                     involved in these incidents, the actual value of these items is higher than $36.




                     Page 10                          GAO-03-696 Who Should Provide U.S. Mint and BEP Security
• 33 reports from Mint customers who claimed that they did not receive
  coins sent through the mail, valued at $6,357;

• 9 reports of other stolen property, such as coins, coin blanks (coins that
  have not yet been stamped), and office equipment, valued at $1,356;

• 3 reports of penny blanks that were stolen from rail cars in 1999 and
  2000, valued at about $592;12 and

• 1 report of $2,200 in nickels that were stolen while being transported by
  truck in 2000.

We asked the Mint Police Chief whether the thefts occurred due to
deficiencies in the police force and what has been done to prevent thefts
from recurring. The Police Chief said that the incidents occurred because
of an abuse of trust by employees, which he said that no police force could
prevent. Regarding the most serious incident—the theft of 400 to 500 coins
by a Mint employee from 1998 through 2000—the Police Chief said that this
occurred when the Mint was producing a high volume of coins and new
production equipment was installed at the Philadelphia facility, which
began producing large numbers of error coins. He said that thousands of
error coins were on the production floor during this period. He also said
that because the first coin made in a batch was not being checked before
continuing a production run, many error coins were produced before
corrections were made to the equipment. The Police Chief said that the
employee was able to take the coins out of the Mint facility over that 3-year
period because he did not exceed the threshold set to trigger the metal
detectors.

The steps that the Mint took to prevent thefts from recurring did not
involve improvements to the police force, but concerned improved internal
controls and production procedures. For example, to prevent thefts of
error coins, the Mint has required that the first coin produced in a batch be
checked for errors; that new equipment be used to quickly destroy error
coins once they are made, rather than having them brought to the metal
fabricator to be melted; that a report be prepared and provided to the
police chief each time an error coin is produced; and that error coins be
locked up. The Mint also is in the process of sealing off the production


12
 This amount represents the value of penny blanks stolen during two of the three incidents.
The Mint did not report the value of the penny blanks stolen in the third incident.




Page 11                        GAO-03-696 Who Should Provide U.S. Mint and BEP Security
areas from the rest of the production facility. In addition, the Mint is
considering requiring production employees to wear uniforms, which
would not have pockets or pants cuffs where coins could be hidden.

Regarding the coins that Mint customers purchased, but claimed that they
did not receive, the Mint’s Police Chief said the Mint has joined the U.S.
Postal Service’s interagency fraud group, which helps to identify postal
addresses that could be used to fraudulently order coins. Regarding the
theft of coins while being transported, the Mint Police Chief said that coins
are transported by contractors and that the government is fully insured for
their loss. The Police Chief said that the Mint tries to minimize thefts by
employees by having background investigations conducted on personnel
hired and by severely punishing those who are caught stealing.

The Mint indicated that it conducts threat assessments of its facilities every
5 years. In December 2000, Sandia National Laboratories assessed Mint
facilities and made 42 recommendations to improve security in its report.
None of these recommendations pertained to improvements in the police
force, for example, in terms of the officers’ training or skills.

In February and March 2003, we visited the Mint’s Philadelphia and Ft.
Knox facilities and found that 9 of the 13 recommendations contained in
the Sandia report pertaining to those facilities were fully implemented. Of
the 4 recommendations that had not been implemented, the Mint indicated
that it plans to implement 3 of them. The fourth recommendation had not
been implemented because the Mint believed, and we agreed, that it
detracted from, rather than enhanced, security. The Mint is also in the
process of conducting other security reviews in connection with
countering possible terrorist threats.13 To avoid possibly compromising
security, we are not discussing in this report the specific subjects of the
ongoing reviews or the specific security recommendations contained in
past assessments.

We also contacted two coin dealers who specialize in buying and selling
error coins to ask about the recent circulation of such coins. The head of
one firm said that the number of error coins that he has seen has dropped



13
  According to the Mint’s Police Chief, following the September 11, 2001, terrorist attacks,
information regarding the Mint’s Philadelphia facility was found in Afghanistan indicating
that it was a potential terrorist target.




Page 12                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                significantly since the spring of 2001. The head of the other firm said that
                he is now seeing the fewest number of error coins in decades.



Thefts at BEP   BEP reported 11 incidents of theft from 1993 through 2002 involving about
                $1.8 million.14 According to BEP, seven employees were convicted of theft
                in connection with these incidents, including one employee who was
                sentenced to prison, and about $1.5 million of the stolen money was later
                recovered. The incidents included the theft of

                • $1,630,000 in test $100 bills from BEP’s Advanced Counterfeit
                  Deterrence Vault by a program manager in 1994 ($1.3 million of the
                  stolen money was later recovered);

                • $60,000 from a Federal Reserve vault inside BEP facilities by three BEP
                  employees in 1995;

                • $30,000 in blank, engraved $100 bills in 2001 by the former BEP currency
                  production chief;

                • $20,960 worth of stamps by a postage stamp worker in 1996, which was
                  recovered;15

                • $2,000 (100, $20 notes) by a machine operator in 1993 (most of which
                  were later recovered);

                • a 32-note sheet of $10 blank engraved notes by a contract cleaning
                  employee in 1993; and

                • $25 in worn and soiled currency in 1999 by a currency examiner, who
                  also admitted to taking $250 on one occasion and $400 on two other
                  occasions.

                No suspects were identified with respect to four other security incidents.
                Three of the four incidents involved $5,500 in currency that was reported

                14
                 Some cases involved currency for which the production process was not yet completed.
                One incident accounted for over $1.6 million of the $1.8 million total.
                15
                 This employee was caught taking $5,600 worth of stamps from a BEP production facility.
                Another $15,360 worth of stamps was found in the employee’s BEP locker and in the trunk
                of his automobile.




                Page 13                       GAO-03-696 Who Should Provide U.S. Mint and BEP Security
missing from BEP facilities in 1997 and 1998. The fourth incident involved
the recovery from Atlantic City casinos in 1996 and 1997 of $16,000 in
unfinished notes produced by BEP.

We asked BEP’s Security Chief whether the thefts occurred because of
deficiencies in the police force and what has been done to prevent thefts
from recurring. The Security Chief said that the incidents did not occur
because of deficiencies in the police force, but were due to a breach of
trust by employees. Further, he said that bags and purses that employees
carry with them to work are subject to search when leaving the facilities
without first establishing probable cause,16 but that BEP police need to
establish probable cause before searching an employee. Further, he
pointed out that in some cases, the currency and postage stamps that
employees attempted to steal did not leave BEP facilities because the
police were effective in preventing removal of the items.

BEP’s Security Chief said that the measures taken to prevent the
recurrence of thefts include implementing the video surveillance of
production staff, reducing the amount of money in the vault where $1.6
million was stolen in 1994, increasing the number of layers of wrap
surrounding the currency after it is produced, rewrapping currency in the
presence of security personnel when the original wrap has been damaged
due to handling, increasing the number of police patrols in certain areas,
having currency transported by a least two authorized personnel, and
having the word ‘TEST’ imprinted on test currency.

In June 1994, following a BEP employee’s theft of $1.6 million in test
currency from BEP’s Washington, D.C., production facility, the Treasury
Department directed that steps be taken to improve the security and
internal controls at BEP, including an in-depth physical security review to
be conducted by the Secret Service. In December 1994, the Secret Service
completed its review and recommended 343 security improvements at BEP.
Also, BEP contracted with KPMG Peat Marwick to review internal controls
at BEP’s production facilities. In January 1995, KPMG made 134
recommendations for internal control improvements. Further, in
September 1999, BEP contracted with the consulting firm Kelly, Anderson




16
 Probable cause has been defined as reasonable grounds to suspect that a person has
committed or is committing a crime.




Page 14                       GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                         & Associates17 to review, evaluate, and document security and internal
                         control corrective actions taken by BEP. Kelly Anderson reported in
                         February 2000 that 19 of the Secret Service’s recommendations and 7 of the
                         KPMG recommendations needed additional effort. In February and March
                         2003, we found that BEP had fully implemented 14 of the 19 Secret Service
                         recommendations and is in the process of implementing another. BEP
                         indicated that it did not intend to fully implement the other 4
                         recommendations (3 of the 4 were partially implemented) for cost and
                         other reasons, which we did not believe to represent major gaps in security.
                         We selected a random sample of 20 other Secret Service recommendations
                         that were identified as being high risk and KPMG recommendations
                         pertaining to that facility and verified that they had been implemented.

                         Three of the Secret Service recommendations directly pertained to the
                         police force. Two of the recommendations were to improve police training,
                         and the third was to improve background checks on police before they are
                         hired. Kelly Anderson reported in 2000 that these recommendations were
                         fully implemented.

                         BEP’s Security Chief said that, in addition to the agency’s ongoing
                         assessments of terrorist-related threats, BEP is planning to have a
                         contractor further assess terrorist threats and possible countermeasures.
                         To avoid possibly compromising security, we are not discussing in this
                         report what the future threat assessment would encompass or the specific
                         security recommendations contained in past assessments.



Potential Benefits and   According to the Secret Service, if it were given the responsibility of
                         protecting the Mint and BEP, those agencies could benefit from the Secret
Costs of Having the      Service’s expertise in protection and criminal investigations. However,
Secret Service Provide   unlike the Secret Service’s Uniformed Division, the Mint and BEP police
                         are already familiar with the coin and currency production processes,
Mint and BEP Security    which is an advantage in identifying security risks. In addition, the
                         government would incur additional costs for the initial training of police
                         and retirement benefits if the Secret Service assumed responsibility for
                         protecting the Mint and BEP.



                         17
                           Kelly Anderson, which is based in Alexandria, Virginia, provides consulting services to
                         federal government agencies under a contract with the General Services Administration for
                         management, organization, and business improvement services.




                         Page 15                        GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Secret Service’s Uniformed   The Secret Service’s Uniformed Division consists of police officers whose
Division                     duties are focused on the agency’s protective responsibilities, which are to
                             protect the President and other individuals. As of February 2003, the
                             Uniformed Division had 1,106 officers. The Secret Service requires
                             Uniformed Division officers to obtain top-secret security clearances and
                             submit to a polygraph test, which the Mint and BEP do not. The Secret
                             Service also requires its officers to receive more initial training than the
                             Mint and BEP police, and the Secret Service’s training is focused on its
                             protective mission. Appendix III provides Uniformed Division data
                             regarding facilities that the Secret Service officers protect, number of
                             police, application requirements, starting salaries, attrition rates, and
                             training requirements.

                             We asked the Secret Service to provide data on the number and types of
                             crimes and arrests that had occurred at the White House complex (which
                             includes the White House, the Eisenhower Executive Office Building, and
                             the New Executive Office Building) and the adjacent Treasury Department
                             headquarters building and annex during the last 10 years. It reported an
                             average of 1,574 incidents each year at these facilities from 1993 through
                             2002. The Secret Service reported, for example, in 2002, 34 arrests, 30 bomb
                             threats, 5 demonstrations, 177 incidents of weapons (not firearms) found
                             during magnetometer checks, 3 fence jumpers and unlawful entries, and 44
                             suspicious packages and vehicles.18 We also asked the Secret Service to
                             break down the types of arrests that were made at the White House
                             complex and the Treasury Department headquarters and annex during the
                             past 10 years. The data indicated that from 1993 through 2002, the Secret
                             Service made 72 arrests for unlawful entry, 66 of which were in the White
                             House complex, and 25 arrests for theft in the area surrounding the White
                             House complex (none of the arrests for thefts were reported as having
                             occurred within the White House complex or the Treasury Department
                             building).

                             In providing the data regarding the number of security incidents that
                             occurred at facilities protected by the Secret Service, the Secret Service
                             emphasized that the Uniformed Division has a different mission than the
                             Mint and BEP. The Secret Service said that the Uniformed Division is


                             18
                              The number of incidents that the Secret Service reported for 2002 was substantially lower
                             than in previous years from 1993 through 2001. According to the Secret Service, the
                             decrease was likely the result of the suspension of public tours at the White House after the
                             September 11, 2001, terrorist attacks.




                             Page 16                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
concerned primarily with protecting individuals and, as part of that
mission, controlling public entry into its protected facilities. By
comparison, the Mint and BEP police forces are concerned primarily with
the theft of coins and currency by their agencies’ own employees from their
respective facilities. According to the Secret Service, this difference
between the missions of the Uniformed Division and the Mint and BEP is
substantial and unique, and to compare data regarding the number of
security incidents that occurred at facilities protected by the Uniformed
Division and the Mint and BEP would result in an unfair analysis of the
abilities and actions of the Uniformed Division. We are not implying that
these data are similar or comparable; we present these data to illustrate the
differences between the types and number of security incidents that are
handled by the Secret Service and the Mint and BEP, which reflect their
different missions, and to show that facilities protected by the Secret
Service are not crime-free.

The Chief of the Uniformed Division said that assuming the additional
responsibility of protecting the Mint and BEP would result in the dilution of
the Secret Service’s core protective responsibilities. He said that giving the
Secret Service responsibility for the security of Mint and BEP facilities
would divert from the agency’s core protective mission and would cause a
staffing shortage. Further, he said that it would not be in the Secret
Service’s best interests to take on the additional responsibility of providing
security for the Mint and BEP at a time when the effect of transferring the
Secret Service from the Treasury Department to DHS is undetermined.

Mint and BEP officials were opposed to having an outside law enforcement
agency assume responsibility for their security functions because they said
that security is best accomplished by their own employees who are familiar
with the agencies’ internal operations and the coin and currency
production processes. Mint and BEP officials also said that their police
officers have opportunities for advancement through promotion to
supervisory positions. BEP also said that police are encouraged to transfer
into career security positions, such as general investigator and security
specialist. However, they also said that a larger agency such as the Secret
Service may offer more opportunities for advancement. We asked the
Secret Service to provide data on the number of Uniformed Division
officers who had become special agents at the agency from fiscal years
1998 to 2002 and found that relatively few officers had become agents.
(Duties of special agents include investigation and protection, while the
mission of Uniformed Division officers is focused on protection.) The data
indicated that an average of 21 officers had become special agents each



Page 17                    GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                               year during that 5-year period out of an average Uniformed Division
                               workforce of about 1,040 officers, or about 2 percent.

                               If the Mint and BEP police became part of the Uniformed Division and
                               there was a rotation of duties, the Secret Service’s mission of protecting the
                               president and providing security at national special security events could
                               be more appealing to some police officers, compared with the routine
                               nature of protecting Mint and BEP facilities. The Mint’s Police Chief said
                               that, to provide variety in the work of Mint police officers and to increase
                               morale, up to 50 Mint police officers a year help the Uniformed Division
                               perform duties at special events—for example, at the Olympics.



Potential Costs Associated     If the Secret Service protected the Mint and BEP, the government could
with Having the Secret         incur additional costs because the Secret Service requires more initial
                               training for its officers than the Mint and BEP police, Uniformed Division
Service Protect the Mint and
                               officers can retire with less government service than the Mint and BEP
BEP                            police, and the Secret Service would have to increase management and
                               overhead to handle the additional workforce. Further, it is unknown how
                               many Mint and BEP police officers would be able to meet the Secret
                               Service’s hiring standards or what the costs would be of absorbing these
                               officers into the Secret Service’s retirement system.

                               The Uniformed Division provides new hires with 6 more weeks of initial
                               training than the Mint police and 1 more week of training than the BEP
                               police. The Uniformed Division spends an average of $20,033 per officer for
                               initial training, compared with $16,306 per officer at the Mint and $18,791
                               per officer at BEP.

                               The government also could be expected to incur higher retirement costs if
                               the Secret Service protected the Mint and BEP because Uniformed Division
                               officers receive federal law enforcement retirement benefits, which allows
                               them to retire after 20 years of service at age 50 or at any age with 25 years
                               of service.19 By comparison, Mint and BEP police receive standard
                               retirement benefits for federal employees, which generally allow them to
                               retire after 30 years of service at age 55 if covered by the Civil Service


                               19
                                Under the Federal Employees Retirement System (FERS), officers receiving federal law
                               enforcement retirement benefits receive 1.7 percent of their high-3 years of employment,
                               multiplied by the first 20 years of service, and 1 percent multiplied by each year of service
                               greater than 20 years.




                               Page 18                          GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Retirement System (CSRS) or after 30 years of service under the Federal
Employees Retirement System (FERS).20 Agency contributions for
employees receiving federal law enforcement retirement benefits are 31.4
percent for employees in CSRS and 22.7 percent for employees in FERS. By
comparison, agency contributions for employees receiving standard
retirement benefits are 17.4 percent for employees in CSRS and 10.7
percent for employees in FERS. Further, because employees receiving
federal law enforcement retirement benefits may retire sooner than those
who do not receive such benefits, it is likely that there would be higher
turnover in the police force, resulting in the need to train more officers and,
thus, in higher training costs over time.

If the Secret Service assumed responsibility for protecting the Mint and
BEP and added 590 officers to its Uniformed Division to carry out that
responsibility, the size of the Uniformed Division’s police force of 1,106
officers would increase by about 50 percent. Such an increase would likely
require the Secret Service to add additional overhead and resources to
manage the additional workforce. However, there also could be an offset by
reducing or possibly eliminating similar positions at the Mint and BEP. It
was not possible to estimate during our review what additional people and
facilities would be needed or what cost would be incurred.

In addition, if the Secret Service assumed responsibility for protecting the
Mint and BEP, it is unknown how many of the Mint and BEP police would
qualify to become part of the Uniformed Division, considering that
applicants to become Uniformed Division officers are required to submit to
a polygraph test and obtain top-secret security clearances, which are not
required for Mint and BEP police. According to the Secret Service, for
example, a substantial number of applicants for the position of Uniformed
Division officer are rejected at the polygraph stage of the process. The
Secret Service also requires applicants to meet certain physical fitness
standards. Lastly, for those Mint and BEP police hired by the Uniformed
Division, there would be a cost of including them in the federal law
enforcement retirement plan. According to the Office of Personnel
Management, it could cost the government an estimated $72.7 million (in


20
  To retire with full standard federal retirement benefits, employees generally must be at
least between ages 55 and 57 with 30 years of service. The age at which they are eligible to
retire with unreduced retirement benefits depends on the year of their birth and the specific
retirement plan under which they are covered (CSRS or FERS). Employees who are age 60
can retire with 20 years of service; employees who are age 62 can retire with 5 years of
service.




Page 19                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
present value dollars) if the entire existing Mint and BEP police forces
were given law enforcement retirement benefits. This computes to an
average of about $123,000 per officer. Because it was not possible to
determine how many of the existing Mint and BEP police officers would be
absorbed by the Uniformed Division, we could not estimate how much this
would cost.

An alternative regarding the Mint and BEP police forces would be to
transfer them to a new, separate unit of the Uniformed Division. Under this
alternative, the existing Mint and BEP police forces would become a
second tier of the Uniformed Division and would be trained, supervised,
and managed by the Secret Service. One potential advantage of this
arrangement would be that the separate unit possibly could be used as a
stepping-stone for Mint and BEP police who would like to become
Uniformed Division officers. Further, this arrangement could streamline
activities, such as procurement, training, and recruitment, that may save
the government money. For example, a unified police force could help
recruiting efforts by being able to offer a variety of duties and duty stations.
However, according to the Secret Service, because of the differences in the
hiring standards between the Uniformed Division and the Mint and BEP
police, the stepping-stone concept for the Mint and BEP police officers
would be impractical and the Secret Service would not use them in
fulfilling its other protective responsibilities. The Secret Service said that
this alternative offers no advantages to the Secret Service; would place
additional financial, manpower, and other administrative burdens on the
agency; and would dilute the Uniformed Division’s protective mission.
Further, Uniformed Division officers receive federal law enforcement
retirement benefits, while Mint and BEP police do not.

The Mint and BEP police are covered by the labor management and
employee relations provisions set forth in Chapter 71 of Title 5 of the
United States Code, while the Secret Service employees are exempt from
these provisions pursuant to 5 U.S.C. § 7103 (a)(3)(H). According to the
Secret Service, if the Mint and BEP forces became a separate unit of the
Uniformed Division, this would create animosity in the agency because the
Mint and BEP police would have collective bargaining rights while
Uniformed Division officers would not. The Mint said that because
Uniformed Division officers receive federal law enforcement retirement
benefits and the Mint and BEP police do not, the substantial disparity in the
compensation between the Mint and BEP police officers and the
Uniformed Division would create problems with morale and performance.
In addition, the Mint said that placing responsibility for security in a



Page 20                    GAO-03-696 Who Should Provide U.S. Mint and BEP Security
                  separate agency that is not part of the Treasury Department could hinder
                  the responsiveness of the security personnel to the Mint and BEP.
                  According to BEP, because of the difference in hiring standards between
                  the Uniformed Division and the Mint and BEP police forces, the Mint and
                  BEP police forces comprising the second tier would always feel less than
                  equal, which would also affect morale and create poor job performance.



Agency Comments   We provided copies of a draft of this report to the Directors of the Mint,
                  BEP, and Secret Service for comment. On June 30, we received written
                  comments from the Director of the Mint, which are reprinted in appendix
                  IV. The Mint Director said that the Mint concurred with the findings and
                  conclusions that apply to the Mint. BEP and Secret Service liaisons with
                  GAO provided by E-mail technical comments regarding the draft report,
                  which we incorporated where appropriate, but did not provide overall
                  comments on the report.


                  We are sending copies of this report to the Chairmen and Ranking Minority
                  Members of the Senate Committee on Banking, Housing, and Urban Affairs,
                  the House Committee on Financial Services, and the House Select
                  Committee on Homeland Security; the Secretary of the Treasury; the
                  Secretary of the Department of Homeland Security; the Directors of the
                  Mint, BEP, and Secret Service; and other interested parties. We will also
                  make copies available to others upon request. In addition, the report will be
                  available at no charge on the GAO Web site at http://www.gao.gov.

                  Major contributors to this report were Bob Homan, John Baldwin, Paul
                  Desaulniers, and John Cooney. If you have any questions, please contact
                  me on (202) 512-2834 or at ungarb@gao.gov.




                  Bernard L. Ungar
                  Director, Physical Infrastructure Issues




                  Page 21                   GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Appendix I

Scope and Methodology                                                                                   AA
                                                                                                         ppp
                                                                                                           ep
                                                                                                            ned
                                                                                                              n
                                                                                                              x
                                                                                                              id
                                                                                                               e
                                                                                                               x
                                                                                                               Iis




             To review how security is provided at the U.S. Mint and the Bureau of
             Engraving and Printing (BEP) and how it compares with other
             organizations, we interviewed Mint and BEP officials about their security
             practices, responsibilities, and security threats. We collected information
             about their police forces, including job classifications, number of police,
             application requirements, starting salaries, retirement benefits, attrition
             rates, training, and statutory authorities. In addition, we discussed with
             Mint and BEP officials the feasibility of consolidating certain security-
             related functions and collected information on the number of personnel
             who work on security at the two agencies, but who are not police officers.

             We also asked the 12 coin and currency producing organizations in the six
             other G7 nations (Canada, France, Germany, Italy, Japan, and the United
             Kingdom); the Federal Reserve; and businesses that handle a large amount
             of cash, such as banks and casinos, about who provides their security, why,
             and whether they had experienced thefts of items in value of more than
             $1,000 in each incident during the last 10 years. We chose to contact the
             coin and currency producing organizations in the other G7 nations because
             they were in other major industrialized, democratic countries. We received
             responses from 8 of the 12 foreign coin and currency producing
             organizations that we contacted regarding our requests for information.
             The coin and currency producing organizations in 1 country did not
             respond to our requests for information. The banks and casinos that we
             contacted were selected by the American Bankers Association and the
             American Gaming Association, which represent the banking and casino
             industries. However, the selected banks and casinos do not represent the
             views of the two industries.

             To determine what thefts have occurred at the Mint and BEP and whether
             steps have been taken to address them, we asked the agencies to provide
             information about thefts that have occurred at their facilities during the last
             10 years.1 We also reviewed relevant Department of the Treasury Office of
             Inspector General reports, including investigative reports pertaining to
             certain incidents of theft. We then discussed those incidents with the Mint
             and BEP security officials, and we also discussed with the officials the
             steps that were taken to prevent thefts from recurring and whether the
             thefts were caused by deficiencies in the police forces.


             1
              The Mint indicated that it did not have information regarding security incidents going back
             10 years. However, the Mint did provide information regarding security incidents that
             occurred during the past 5 years.




             Page 22                         GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Appendix I
Scope and Methodology




Regarding Mint security, we also reviewed a 2000 Sandia National
Laboratories report, which contained 42 recommendations to improve
security, to determine whether its recommendations pertaining to the
Mint’s Philadelphia, Pennsylvania, and Ft. Knox, Kentucky, facilities had
been implemented. We visited those facilities because more
recommendations pertained to those facilities compared with other Mint
facilities. In addition, we contacted two coin dealers about the circulation
of “error coins.” These dealers were selected because they specialized in
the buying and selling of error coins.

Regarding BEP security, we reviewed a 1994 Secret Service report, a 1995
KPMG Peat Marwick report, and a 2000 Kelly, Anderson & Associates
report regarding recommendations to improve security at BEP facilities.
We determined whether the 19 United States Secret Service
recommendations and the 7 KPMG recommendations that Kelly Anderson
indicated had not been implemented in 2000 were implemented. We also
determined whether a random sample of 20 high-risk recommendations
contained in the Secret Service and KPMG reports, which Kelly Anderson
reported had been implemented, were actually implemented. We visited
BEP’s Washington, D.C., facility to check whether recommendations had
been implemented because the recommendations in the Secret Service and
KPMG reports pertained to that facility.

To determine the potential benefits and costs of having the Secret Service
provide Mint and BEP security, we asked the Mint, BEP, Secret Service, and
Treasury Department for their views on which agency would be most
effective regarding various security-relations functions. We also compared
the information that we collected regarding the Secret Service’s Uniformed
Division with the data collected regarding the missions, security forces,
training costs, retirement benefits, and security incidents at the Mint and
BEP.

Regarding retirement costs, we asked the Office of Personnel Management
(OPM) to estimate how much more it would cost the government if the
Mint and BEP police were given the same law enforcement retirement
benefits that the Uniformed Division officers receive. To calculate the
estimate, OPM asked us to provide data on the number of police at the Mint
and BEP who are in the Civil Service Retirement System and the Federal
Employees Retirement System and their average salaries. We also asked
the Mint, BEP, and Secret Service to provide their views on the advantages
and disadvantages of transferring the Mint and BEP police forces to a
second tier of the Uniformed Division. The scope of our work did not



Page 23                   GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Appendix I
Scope and Methodology




include examining the advantages and disadvantages of contracting out
security services for the Mint and BEP.

We did our work in Washington, D.C.; Philadelphia; and Ft. Knox in
accordance with generally accepted government auditing standards and
investigative standards established by the President’s Council on Integrity
and Efficiency from July 2002 through June 2003.




Page 24                   GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Appendix II

Data Concerning the U.S. Mint and the Bureau
of Engraving and Printing Police Forces                                                                                                                                    Appendx
                                                                                                                                                                                 Ii




                                                           Mint police                                             BEP police
Protected facilities                                       Mint facilities in Denver, Colorado; Ft. Knox,          BEP facilities in Ft. Worth, Texas; and
                                                           Kentucky; Philadelphia, Pennsylvania; San               Washington, D.C.
                                                           Francisco, California; West Point, New York;
                                                           and Washington, D.C.
Federal job classification for police                      Police Officer (job classification 0083)                Police Officer (job classification 0083)
Number of police as of March 2003                          381                                                     209
Major job application requirements                         U.S. citizen                                            U.S. citizen

                                                           Pass a medical examination, drug screening,             Age 21
                                                           and background investigation
                                                                                                                   Pass the National Police Officer Selection Test
                                                           One year of specialized experience as a police
                                                           officer or comparable experience (may be                Pass a medical examination, drug screening,
                                                           substituted with a 4-year college degree in             and background investigation
                                                           Police Science or comparable field)
                                                                                                                   One year of specialized experience as a police
                                                           Obtain a secret security clearance                      officer or comparable experience (may be
                                                                                                                   substituted with a 4-year college degree in
                                                                                                                   Police Science or comparable field)
2003 starting salaries for police                          $38,852                                                 $38,852
stationed in Washington, D.C.
Fiscal year 2002 police attrition rates                    14 percenta                                             17 percenta
Fiscal year 2001 police attrition rates                    7 percent                                               7 percent
Mission training requirements                              10 weeks of basic training at the Federal Law           2 weeks of training before FLETC
                                                           Enforcement Training Center (FLETC)
                                                                                                                   10 weeks of basic training at FLETC
                                                           5 weeks of field training after FLETC
                                                                                                                   8 weeks of field training after FLETC
                                                           48 hours of annual training
                                                                                                                   2 weeks of annual training
                                                           In the 4th year of employment, 2 weeks of
                                                           advanced training
Sources: U.S. Mint and Bureau of Engraving and Printing.
                                                                   a
                                                                    This figure represents the attrition rate for police officers agencywide. Our June 2003 report on police
                                                                   recruitment and retention issues at 13 federal agencies, including the Mint and BEP, analyzed where
                                                                   Mint and BEP police who were stationed in Washington, D.C., and left their jobs in 2002, found other
                                                                   employment. (U.S. General Accounting Office, Federal Uniformed Police: Selected Data on Pay,
                                                                   Recruitment, and Retention at 13 Police Forces in the Washington, D.C., Metropolitan Area, GAO-03-
                                                                   658 (Washington, D.C.: June 13, 2003).) According to that report, of the 21 Mint police who were
                                                                   stationed in Washington, D.C., and left their jobs in 2002, 18 went to the Transportation Security
                                                                   Administration (TSA) and 3 went to other federal law enforcement agencies. The report also indicated
                                                                   that of the 32 BEP police who were stationed in Washington, D.C., and left their jobs in 2002, 12 went
                                                                   to TSA, 12 went to other federal law enforcement agencies, 3 went to state and local law enforcement
                                                                   agencies, and no information was available regarding the other 5 officers.




                                                                   Page 25                             GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Appendix III

Data Regarding the United States Secret
Service’s Uniformed Division                                                                                                                                Appendx
                                                                                                                                                                  iI




                                                         Secret Service’s Uniformed Division
                          a
Protected facilities                                     The White House complex, the Treasury Department headquarters building and
                                                         annex, the Vice President’s residence, and foreign diplomatic missions
Job classification                                       According to Secret Service officials, pursuant to 5 U.S.C. § 5102 (c), the Uniformed
                                                         Division is exempt from the federal job classification system and, therefore, its
                                                         officers do not have the 0083 job classification that applies to the Mint and BEP
                                                         police.
Number of police as of February 2003                     1,106
Major job application requirements                       U.S. citizen

                                                         Ages 21 to 36 at time of appointment

                                                         Pass the National Police Officer Selection Test

                                                         Pass a medical examination, drug screening, and background investigation

                                                         Possess a high school diploma or equivalent

                                                         Qualify for top-secret security clearance

                                                         Must submit to a polygraph test
2003 starting salaries for police stationed in           $40,345
Washington, D.C.
Fiscal year 2002 police attrition rates                  23 percentb
Fiscal year 2001 police attrition rates                  12 percent
Mission training requirements                            10 weeks of basic training at FLETC

                                                         11 weeks of specialized training after FLETC

                                                         22 hours of annual trainingc
Source: United States Secret Service.
                                                 a
                                                     The Secret Service protects the people who occupy these facilities.
                                                 b
                                                  According to our June 2003 report on recruitment and retention issues regarding 13 police forces in
                                                 the Washington, D.C., metropolitan area, including the Secret Service, of the 234 Uniformed Division
                                                 officers who left their jobs in fiscal year 2002, the greatest number (148 officers) went to work at the
                                                 newly created TSA.
                                                 c
                                                  This training reflects firearms requalification requirements only. Secret Service officials said that
                                                 Uniformed Division officers receive additional in-service training, depending on the group they are
                                                 assigned to, such as canine or counter-sniper.




                                                 Page 26                               GAO-03-696 Who Should Provide U.S. Mint and BEP Security
Appendix IV

Comments from the U.S. Mint                                                    Appendx
                                                                                     iIV




(543034)      Page 27   GAO-03-696 Who Should Provide U.S. Mint and BEP Security
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