oversight

U.S. Mint Numismatic Coin Programs: Allegation of Additional Losses on the Olympic Commemorative Coin Program

Published by the Government Accountability Office on 1997-06-26.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Domestic and International
                          Monetary Policy, Committee on Banking and Financial
                          Services, House of Representatives


For Release on Delivery
Expected at
10 a.m.
                          U.S. MINT NUMISMATIC
Thursday,
June 26, 1997             COIN PROGRAMS

                          Allegation of Additional
                          Losses on the Olympic
                          Commemorative Coin
                          Program
                          Statement of Theodore C. Barreaux
                          Associate Director, Audit Oversight and Liaison
                          Accounting and Information Management Division




GAO/T-AIMD-97-124
                      Mr. Chairman and Members of the Subcommittee:

                      We are pleased to be here today to discuss our preliminary findings
                      regarding an allegation about the U.S. Mint’s Atlanta Olympic
                      Commemorative Coin Program (Olympic Coin Program). The allegation
                      claims that the Olympic Coin Program has lost approximately
                      $24.7 million, while the Mint has previously reported losses of only about
                      $2 million. You asked in April that we review the allegation to determine
                      whether it is true.

                      We have not yet completed our work and, accordingly, caution that our
                      results are only preliminary. Also, it is important to note that we are using
                      figures provided by the Mint’s financial management and cost accounting
                      system. The reliability of that system has been criticized extensively over
                      the past several years. The Mint has acknowledged this problem and has
                      stated that it is developing a new system that is designed to integrate its
                      finance, marketing, and manufacturing functions. Accordingly, we caution
                      that figures we are citing today may not necessarily be accurate.


                      The Mint has two lines of manufacturing business. It manufactures
The Olympic Program   circulating coins, which reportedly constituted 78 percent of its fiscal year
                      1996 revenues. The remaining 22 percent consisted of the manufacture of
                      numismatic products for collectors including medals; proof coins;
                      uncirculated coins; gold and silver bullion coins; and several
                      commemorative coin programs, including the Olympic Coin Program.

                      The Olympic Coin Program is one of the largest and most complex
                      commemorative coin programs ever managed by the Mint. The Mint was
                      authorized to design a total of 32 Olympic Program coins and manufacture
                      not more than approximately 18 million coins,1 which later was reduced to
                      not more than 13.3 million coins.2 According to Mint records, it has
                      produced 4.1 million Olympic coins, of which 1.8 million remain unsold.

                      The Olympic Coin Act provides that no coins shall be minted after
                      December 31, 1996, but there is no date by which sales shall end. Mint
                      officials informed us that the Mint is attempting to sell its remaining
                      Olympic Program coins. For example, officials said that the Mint’s fall
                      sales catalog will include Olympic Program coins, and that the Mint is

                      1
                       Doug Barnard, Jr.—1996 Atlanta Centennial Olympic Games Commemorative Coin Act, Public Law
                      102-390, October 6, 1992.
                      2
                       Public Law 104-74, December 26, 1995.



                      Page 1                                                                   GAO/T-AIMD-97-124
                                       negotiating a bulk sale to the U.S. Olympic Committee for the coins’ use as
                                       contributor gifts.


                                       The quarterly report by the Mint provided to the subcommittee through
The Allegation                         March 1997 shows cumulative losses in the Olympic Coin Program of
                                       approximately $2.8 million. According to the Mint’s Chief Financial
                                       Officer, the Olympic Coin Program could lose at least another $3.6 million
                                       if the Mint does not sell all of its remaining Olympic Program coins for a
                                       total potential loss of $6.4 million.

                                       An anonymous letter dated in March 1997 and addressed to the Treasurer
                                       of the United States stated that losses in the Olympic Coin Program were
                                       approximately $24.7 million. The table below compares the allegation with
                                       Mint records.

Comparison of Alleged Losses to Mint
Records                                Dollars in millions


                                       Alleged Losses:                                                       $(24.7)
                                       Mint Records:
                                       Cumulative reported losses                                              (2.8)
                                       Unsold inventory                                           $(15.5)
                                       Less inventory loss allowance                                 3.5
                                       Net unsold inventory                                        (12.0)
                                       Less net metal salvage value                                  8.4
                                       Additional potential lossesa                                            (3.6)
                                       Total reported and additional potential losses                          (6.4)


                                       Difference Between Alleged Losses and Mint Records                    $(18.3)
                                       a
                                       Potential losses if inventory remains unsold.



                                       The $3.6 million in additional potential losses beyond the $2.8 million
                                       reported through March 1997 by the Mint consists of labor and overhead
                                       costs to manufacture the coins, the cost of melting down all the metal for
                                       reuse, and some Olympic imprinted packaging material. Although these
                                       additional potential losses are less than the $24.7 million loss in the
                                       allegation, when added to the program’s $2.8 million cumulative loss
                                       previously reported to the subcommittee, they double Mint losses to a
                                       total of approximately $6.4 million.




                                       Page 2                                                     GAO/T-AIMD-97-124
                        We are currently reviewing the remaining difference between the
                        allegation and Mint records of $18.3 million. At this point, more than
                        one-half of the remaining difference appears to relate to packaging
                        material, which according to the allegation was purchased specifically for
                        the Olympic Coin Program. However, Mint officials contend that most of
                        this packaging pertains either to other numismatic programs or can be
                        used by other commemorative coin programs. Other remaining differences
                        appear to relate to coin quantities and valuations, surcharges and shipping
                        costs, and related general and administrative costs.


                        Recent legislation, coupled with new accounting principles for the federal
Recent Requirements     government, provide a framework for improving the Mint’s financial
to Improve the Mint’s   management. Public Law 102-390 required the Mint to prepare annual
Financial               financial statements and to have them independently audited, beginning
                        with fiscal year 1993. Also, Public Law 104-208, the Omnibus Consolidated
Management              Appropriations Act for Fiscal Year 1997, required detailed quarterly
                        accounting for commemorative coin programs authorized after
                        September 30, 1996. Finally, Managerial Cost Accounting Concepts and
                        Standards for the Federal Government are effective for the fiscal year 1997
                        Mint audit. If implemented properly, these requirements would provide
                        more specific information regarding the results of individual coin
                        programs. For example, the fiscal year 1994 through 1996 audits of the
                        Mint’s financial statements disclosed significant problems in the Mint’s
                        cost accounting system, and helped to form the basis for the Mint’s
                        decision to develop a new overall integrated financial management system.


                        Mr. Chairman, that concludes my prepared remarks for the record. I would
                        be pleased to respond to any questions the subcommittee may have.




(911745)                Page 3                                                    GAO/T-AIMD-97-124
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 6015
Gaithersburg, MD 20884-6015

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested