U.S. Mint Numismatic Coin Programs: Allegation of Additional Losses on
the Olympic Commemorative Coin Program (Testimony, 06/26/97,
GAO/T-AIMD-97-124).
GAO discussed its 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. GAO has not yet completed its work and,
accordingly, cautions that its results are only preliminary.
GAO noted that: (1) the Mint has two lines of manufacturing business;
(2) it manufactures circulating coins, which reportedly constituted 78
percent of its fiscal year (FY) 1996 revenues; (3) 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; (4) the Olympic Coin Program is one of the
largest and most complex commemorative coin programs ever managed by the
Mint; (5) the Mint was authorized to design a total of 32 Olympic
Program coins and manufacture not more than approximately 18 million
coins, which later was reduced to not more than 13.3 million coins; (6)
according to Mint records, it has produced 4.1 million Olympic coins, of
which 1.8 million remain unsold; (7) 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; (8) the quarterly report by the Mint provided
to the subcommittee through March 1997 shows cumulative losses in the
Olympic Coin Program of approximately $2.8 million; (9) 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; (10) 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; (11) GAO is currently reviewing
the remaining difference between the allegation and Mint records of 18.3
million; (12) 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;
(13) however, Mint officials contend that most of this packaging
pertains either to other numismatic programs or can be used by other
commemorative coin programs; (14) other remaining differences appear to
relate to coin quantities and valuations, surcharges and shipping costs,
and related general and administrative costs; (15) recent legislation,
coupled with new accounting principles for the federal agreement,
provide a framework for improving the Mints financial management; and
(16) if implemented properly, these requirements would provide more spe*
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-AIMD-97-124
TITLE: U.S. Mint Numismatic Coin Programs: Allegation of
Additional Losses on the Olympic Commemorative Coin Program
DATE: 06/26/97
SUBJECT: Cost accounting
Financial management systems
Currency and coinage
Sports
Financial management
Losses
Marketing
IDENTIFIER: U.S. Mint Olympic Coin Program
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Cover
================================================================ COVER
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.
Thursday,
June 26, 1997
U.S. MINT NUMISMATIC
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
GAO/AIMD-97-124T
(911745)
Abbreviations
=============================================================== ABBREV
============================================================ Chapter 0
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 OLYMPIC PROGRAM
---------------------------------------------------------- Chapter 0:1
The Mint has two lines of manufacturing business. It manufactures
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 negotiating a bulk sale to the U.S. Olympic
Committee for the coins' use as contributor gifts.
--------------------
\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.
THE ALLEGATION
---------------------------------------------------------- Chapter 0:2
The quarterly report by the Mint provided to the subcommittee through
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 losses\a (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.
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 REQUIREMENTS TO IMPROVE
THE MINT'S FINANCIAL MANAGEMENT
---------------------------------------------------------- Chapter 0:3
Recent legislation, coupled with new accounting principles for the
federal government, provide a framework for improving the Mint's
financial management. Public Law 102-390 required the Mint to
prepare annual financial statements and to have them independently
audited, beginning with fiscal year 1993. Also, Public Law 104-208,
the Omnibus Consolidated 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.
-------------------------------------------------------- Chapter 0:3.1
Mr. Chairman, that concludes my prepared remarks for the record. I
would be pleased to respond to any questions the subcommittee may
have.
*** End of document. ***