REVIEW OF SURCHARGES FROM THE 

SALE OF COMMEMORATIVE COINS 

01G01-026 DECEMBER 15,2000 

Office of Inspector General 

***** 

United States Department of the Treasury 
.- DEPARTMENT OF THE TREASURY 

WASHINGTON, D.C. 20220 

December 15, 2000 

r OFFlCE OF 

INSPECTOR GENERAL 

MEMORANDUM FOR JAY W. JOHNSON, DIRECTOR 


UNITED STATES MINT 


FROM: 	 Dennis S. Schindel 

Assistant Inspector General for Audit 

SUBJECT: 	 Review of Surcharges from the Sale of 

Commemorative Coins 

This memorandum transmits the subject final report. Our 


overall objective was to determine whether the United States 


Mint's (Mint) commemorative coin programs were properly 


managed. 


Our review found that the Mint properly obtained and analyzed 


matching funds information provided by the recipient 


organizations and prepared and issued required quarterly 


flnanclal reports to Congress. Our review also identified 


areas where improvements could be made. We are making 


recommendations in six areas that address the Mint's need to 


(1) develop a methodology for reconciling trial balance and 


profit and loss accounts, (2) document evaluations of standard 


cost rates, (3) fully disclose important financial related 


information to management prior to authorizing interim 


surcharge payments, (4) develop and implement follow-up 


procedures that ensure annual audit requirements are met, 


(5) reexamine its methodology for allocating General and 


Administrative costs, and (6) communicate its Compliance 

Procedures for Surcharge Eligibility & Payments more broadly. 

Although the Mint generally agreed with all our 


recommendations, the Mint's response to recommendations 3 and 


4, which concern annual audits of surcharge funds received and 


expanded, do not meet the intent of our recommendations. We 


have incorporated Mint comments and our response into the 


report as appropriate. The complete text of the Mint's 


comments are presented in Appendix 1. 

Page 2 


We appreciate the courtesies and cooperation provided to our 


auditors during the audit. If you wish to discuss this 


report, please contact me at (202) 927-5400, or have a member 


of your staff contact Barry L. Savill, Director, Program 


Audits, at (202) 927-2968. 


Attachment 


cc: 	David Pickens 


Associate Director 


Numismatic Strategic Business Unit 


U.S. Mint 


Cathy Williams 


Audit Liaison 


U. S. Mint 

Table of Contents 

OVERVIEW ......................................................................................................................1 

BACKGROUND............................................................................................................... -1 

OBJECTIVE, SCOPE, AND METHODOLOGY.......,-....-.-,. -,.............................4 

AUDIT RESULTS.............................-.................................................................................... 4 

DETERMINING PROGRAM COSTRECOVERY..................................................................... 4

SURCHARGEPAYMENTS.................................................................................................... 7 

ANNUAL AUDITSOF SURCHARGE W S RECEIVED AND EXPENDED...............................lo 

ALLOCATION OF GENERAL AND ADMINISTRATIVECOSTS.......................................14 

SURCHARGE ELIGIBILITY AND PAYMENTSGUIDANCE................................................. .17 

APPENDICES 

APPENDIX1. MANAGEMENT RESPONSE 

OIG-0 1-026 	 REVIEW OF SURCHARGES FROM THE 

SALE OF COMMEMORATIVE COINS 
Overview 

This report presents the results of our audit to determine 

whether the United States Mint's (Mint) commemorative 

coin programs and related surcharges were properly 

managed. Our audit work was performed from August 

1999 through June 2000 and was conducted as part of 

the Ope of Audit Annual PLm For Fiscal Year 1999. 

Our review found that the Mint properly obtained and 

analyzed matching funds information provided by the 

recipient organizations and prepared and issued required 

quarterly financial reports to Congress. Our review also 

identified areas where improvements could be made. We 

are making recommendations in six areas that address 

the Mint's need to (1)develop a methodology for 

reconciling trial balance and profit and loss accounts, 

(2)document standard cost rate evaluations, (3)fully 

disclose important financial related information to 

management prior to authorizing interim surcharge 

payments, (4)develop and implement follow-up 

procedures that ensure annual audit requirements are 

met, (5)reexamine its methodology for allocating General 

and Administrative costs, and (6)communicate its 

Compliance Proceduresfor Surcharge Eligibility &

Payments more broadly. 

Background 

Established in 1792, the Mint is an integral part of the 

Department of the Treasury. The primary mission of the 

Mint is to manufacture coins, receive deposits of gold and 

silver bullion, and safeguard the Government's holdings 

of monetary metals. 

The Mint is structured into three strategic business units 

(SBUs). me Protection Business Unit provides multiechelon security Mintwide. The Circulating Business 

Unit manufactures and distributes circulating coinage to 

the Federal Reserve. The Numismatic Business Unit 

oversees all activities associated with collector and 

investor products sold worldwide, including the 

manufacture of commemorative coins. 

Commemorative coins are manufactured at the Mint's 

facilities in San Francisco, California; Denver, Colorado; 

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Philadelphia, Pennsylvania; and West Point, New York. 

Authorized by Congress, commemorative coins are coins 

that typically celebrate and honor American people, 

places, events, and institutions. Commemorative coins 

are also used to raise funds for designated recipient 

organizations by adding a surcharge to the price of the 

coin. Surcharges &om the sales of these coins help fund 

a variety of organizations and projects that benefit the 

community. For instance, surcharges for the George 

Washington commemorative coin were paid to the Mount 

Vernon Ladies' Association to provide a permanent source 

of support for the preservation of George Washington's 

home and to educate the American people about the life 

of George Washington. 

Commemorative coin programs are created by enabling 

legislation enacted by Congress. The enabling legislation 

dictates the coin specifications, mintages, cost 

considerations, surcharge amount to be collected, and the 

purpose for which the funds can be used. Historically, 

the Mint has been required to pay surcharges to 

recipients whether or not all the Mint's program costs 

were recovered and without anv., accountabilitv2 

requirement for the recipient organization. Congress and 

the Administration recognized the weaknesses inherent in 

paying surcharges regar2less of whether the Mint's 

program costs were recovered. As a result, Public Law 

(Pub. L. No.) 104-208, Omnibus Consolidated 

Appropriations for Fiscal Year 1997(the Act),was enacted 

on September 28, 1996. 

The Act imposed three broad requirements on the 

payment of surcharges to recipient organizations. 

1. The designated recipient must raise matching funds 

from private sources in an amount equal to or greater 

than the maximum amount the organization may 

receive from the proceeds of such surcharge. Also, the 

matching funds raised must be for the purpose(s) 

specified by the enabling legislation. 

2. 	The Mint is required to recover all numismatic 

operation and program costs allocable to the program 

before any surcharges can be paid to the recipient 

organization. 

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3. €The designated recipient organization must submit to 

an annual audit of surcharge funds received and 

expended. 

These requirements make the recipient organizations full 

partners in bearing costs, risks and marketplace realities, 

and assure that allof the Mint's costs of operating these 

programs were fully recovered. 

Since passing Pub. L. No. 104-208, Congress has 

authorized nine commemorative coin programs with issue 

dates durhg Calendar Years 1997 to 1999. The following 

chart lists those programs along with the name of the 

recipient organization, and surcharges paid by the Mint 

as of February 2000. 

Dolly Madison 1 ~istoricPreservation 1$2,102,503 

1 Franklin Delano 

1

1

1 Roosevelt Memorial 1 1 

Franklin D. Roosevelt 

1 Jackie Robinson I Foundation 

1 Robert F. Kennedy- I Memorial 

(MountVernon Ladies' / Association 

1~lackRevolutionarv - War

Patriots Memorial $ 

National Fund for the 


U.S. Botanical Garden $3,481,760 


National Park Foundation 


And Yellowstone Park 


Foundation 


1

/ $1,425,430 

/ $2,054,420 

1 $ 963,115 

I 

0 


Jackie Robinson 


Robert F. Kennedy 


George Washington 


Black Patriots 


Botanic Garden 


Yellowstone Park 


$ 742,500 


$1,390,834 


National Law Enforcement 


Memorial Maintenance 


Fund 


Law Enforcement Officers 


Allnine commemorative coin programs were covered, in 

part, by this review. 

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Objective, Scope, and Methodology 

The objective of this review was to determine whether the 

Mint's commemorative coin programs and related 

surcharges were properly managed. 

To accomplish our objective, we conducted on-site work 

fkom August 1999 through June 2000. We interviewed 

key persomel involved in the management of the Mint's 

commemorative coin programs at its Headquarters and at 

the Mint in Philadelphia, Pennsylvama (Philadelphia 

Mint). We also interviewed key personnel from recipient 

organizations and related public accounting bs. We 

reviewed enabling legislation, prior Office of Inspector 

General and General Accounting Office audit reports, and 

Treasury and bureau policies and procedures related to 

commemorative coins. We also visited the Philadelphia 

Mint to observe its commemorative coin production 

process. In addition, we reviewed accounting information 

maintained by the Mint, analyzed audited financial 

statements s;bmitted'by recipient organizations, and 

examined pertinent fde correspondence. 

Our audit work was conducted in accordance with 

GovernmentAuditing Standards issued by the Comptroller 

General of the United States, and included such tests as 

were deemed necessary. 

Audit Results 

Dete- - Promam Cost Recoverv 

The Mint could not produce an audit trail for two major 

categories of cost with regard to its commemorative coin 

program's profit and loss statements. As a result, we 

were unable to determine the accuracy and reliability of 

the cost3 the Mint reported in its commemorative coin 

profit and loss statements. Therefore, we believe the 

commemorative coin program's profit and loss statements 

do not provide an acceptable basis for internal and 

external users who must make surcharge payment 

decisions, assess program performance, or determine 

legal compliance. 

Two factors contributed to this condition. First, the Mint 

lacked a comprehensive methodology for assessing the 

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accuracy and reliability of financial information contained 

in its profit and loss statements. Second, 'he Mint did 

not produce documentation to support its standard cost 

rates, which the Mint used to project program costs for 

the nine programs totaling about $20.2 million as of 

Fiscal Year (FY) 1999. 

Discussion 

The Act requires the Mint to withhold surcharge 

payments from commemorative coin program 

beneficiaries until all operation and program costs are 

recovered. To comply with this requirement, the Mint 

developed and implemented a system for accumulating, 

reporting, and assessing each commemorative coin 

program's profitability prior to authorizing surcharge 

payments. 

Office of Management and Budget (OMB)Circular A-123, 

Management Accountability and ControL states that 

appropriate management controls should be integrated 

into each system established by agency management to 

direct and guide its operations. The documentation for 

transactions, management controls, and other significant 

events must be clear and readily available for 

examination. 

To assess the Mint's compliance with the Act's cost 

recovery and OMB's management control requirements, 

we (1)examined commemorative coin program files 

maintained by the Mint and (2)requested detailed 

accounting information pertaining to the Mint's 

commemorative coin programs. 

Our examination of the program files showed that the 

Mint prepared year-end and quarterly profit and loss 

statements for each commemorative coin program. The 

year-endstatements were prepared using actual program 

costs. The quarterly statements were prepared using 

standard cost rates to estimate certain production-related 

costs. The Mint used the quarterly profit and loss 

statements, along with other relevant information, to 

ensure alloperation and program costs were recovered 

prior to authorizing surcharge payments to recipient 

organizations. 

-

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To assess the Mint's commemorative coin program 

financial information, we requested detailed cost 

information that would allow us to establish reasonable 

assurance that the information was accurate and reliable. 

Although we made several requests for supporting 

documentation, the Mint could not produce the requested 

information. For instance, the Mint could not produce a 

list of the accounts from the trial balance that comprised 

"Manufacturing and Assembling" and "General& 

Administrative & Marketing,"' which were major cost 

categories included in the end-of-year profit and loss 

financial statements. These two cost categories 

represented about 47 percent of all costs associated with 

the production and sales of commemorative coin items as 

of FY 1999. Because the Mint did not produce support 

for the composition of these cost categories,we were 

unable to assess the accuracy or reliability of the actual 

costs the Mint reported on its end-of-year profit and loss 

statements. 

We then requested documentation from the Mint that 

would show how the Mint determined the standard cost 

rates it used to prepare its quarterly profit and loss 

statements and subsequent evaluations of those rates. 

Again, the Mint could not produce the requested 

documentation. Consequently,we were unable to assess 

the basis, methodology, and procedures used to establish 

and periodically evaluate the standard cost rates theMint 

used to compile the commemorative coin's quarter@

financial statements. The Mint used the FY 1996 

standard cost rates to compile the quarterly profit and 

loss statements for FYs 1997, 1998, and 1999. According 

to Mint officials, its standard cost reporting system 

provided accurate and reliable financial information on its 

commemorative coin programs. However, without the 

requested supporting documentation, we were unable to 

confirm the Mint's contention. 

Although our review did not fkd any evidence that the 

Mint's commemorative coin programs lost money, we 

believe the Mint's inability to produce requested financial 

information regarding its year-end and quarterly 

commemorative coin program profit and loss statements 

is a significant weakness that needs to be addressed. 

' For consistency reasons we used the account titles from the quarterly profit and loss 

statements. 

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Recommendation 

1. €The Director of the Mint should develop and 

implement a clear and complete methodology for 

assessing the accuracy and reliability of the financial 

information contained in its profit and loss 

statements. At a minimum, the Mint should make it 

possible to perform a detailed reconciliation between 

the trial balance and the profit and loss statement 

accounts and ensure that evaluations of its standard 

cost rates are documented and provide, where 

warranted, for periodic adjustments to those standard 

cost rates. 

Management Response and OIG Comment 

In its response to the draft report, the Mint indicated 

concurrence with this recommendation and stated it 

recognized the need to update its cost standards. As part 

of the FY2000 financial statement audit, the Mint 

planned to document and update its cost standards. The 

OIG considers the action planned by the Mint to be 

responsive to this recommendation. 

Surcharge Pavments 

The Mint's surcharge payment process did not ensure 

that senior management was fully advised of all

significant cost considerations prior to its authorization of 

interim payments. This condition was due, in part, to the 

Mint not requiring forecasts of its production, sales, and 

marketing information to be reported, along with the 

financial statements, to management before an interim 

surcharge payment decision was made. As a result, 

management was not provided operational information 

that could have influenced its surcharge payment 

decisionDiscussion 

Section 529 of the Act, Payment of Surcharges, states that 

no amount derived from the proceeds of a surcharge 

imposed on the sale of any numismatic item shall be paid 

from the fund to any designated recipient organization 

unless (1)all operation and program costs have been 

recovered, and (2)the recipient organization submits an 

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audited financial statement showing the organization 

raised the required amount in matching funds. 

To implement the Act's surcharge payment requirements, 

the Mint developed guidance that provided for interim 

surcharge payments. The Mint's guidance provided that 

any interim payment would depend on the financial 

performance of the program and the risk of loss the Mint 

may be exposed to by releasing surcharge funds before 

the termination of the coin program. 

The Mint also developed general time frames for 

evaluating whether to make an interim payment and the 

maximum amount of the payment. The following chart 

illustrates those time frames and the maximum amount 

of the payments. 

Interim Surcharge Payments 

According to the Mint's guidance, the final surcharge 

payment may not result in the Mint incurring a loss. The 

final accounting of the commemorative coin program is 

performed after the "close of the program."' 

To dete-e whether the Mint's guidance on interim 

surcharge payments was implemented, we reviewed file 

documentation for all nine commemorative coin 

programs. We found that the Mint had made surcharge 

payments totaling about $13.6 million to 8 of the 9 

recipient organizations since 1997.3 We also found that 

Mint personnel properly implemented its guidance 

concerning established time periods and maximum 

amounts payable. For instance, we found that each 

The close of a program is determined by the enabling legislation. 

One organization had not raised the required amount of matching funds and, thus, was 

not eligible to receive surcharge payments. -

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commemorative coin program file contained 

documentation showing, when appropriate: 

a profit and loss statement was prepared prior to 

interim and final surcharge payments, 

the authorizing memorandum contained a 

recommendation by the Chief Financial Officer 

regarding the payment, 

the Director of the Mint authorized the surcharge 

payment, and 

the final surcharge payment was withheld until the 

program closed and all related costs were recovered. 

Consequently, we believe the Mint adhered to its guidance 

before making surcharge payments. 

To determine whether the Mint's guidance concerning 

interim surcharge payments was appropriate, we 

analyzed applicable Act requirements and the Mint's 

guidance. Our analysis indicated that the Mint's 

implementing guidance was not inconsistent with the 

Act's surcharge payment requirements. The Mint's 

guidance, however, did not sufficiently address important 

risk factors pertaining to the interim financial reports 

used by management to authorize surcharge payments. 

For instance, the 6 and 9 month evaluation guidance did 

not address factors that could significantly influence the 

reported cost, such as: 

whether the production of the commemorative coin 

was complete and allreasonable costs were known, 

the likelihood of manufacturing additional coins 

subsequent to any interim surcharge payment, 

the possibility of a Congressional extension of the coin 

program to &ow for additional sells or increased 

production, or 

consumer demand and on-hand inventory of unsold 

coins. 

Each of these factors could generate unexpected costs 

after an interim surcharge payment by the Mint, which 

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could result in a violation of the Act's surcharge payment 

provision. Furthermore, a review of five memorandums 

used as a basis by management to authorize interim 

surcharge payments totaling about $6.4 don revealed 

that neither the memorandums nor the accompanying 

financial reports fully addressed the four risk factors 

listed above. Despite the absence of this information, 

however, we found no instance where the Mint authorized 

or made a surcharge payment that resulted in a 

commemorative coin program losing money.4 

Nevertheless, disclosure of pertinent information to 

management is (1)important for the proper 

understanding of the interim financial reports and 

(2)would further reduce the Mint's risk associated with 

making interim surcharge payments. 

Recommendation 

2. 	The Director of the Mint should ensure risk factors 

related to the Mint's production, sales, and marketing 

forecasts are adequately considered prior to making an 

interim surcharge payment. The risk factors should 

be included in the Mint's Compliance Procedures For 

Surcharge EZigibility &Payments guidance and each 

factor addressed in the Mint's surcharge authorization 

memorandum, which includes an interim financial 

report. 

Management Rewonse and OIG Comment 

The Mint concurred with this recommendation. In its 

response, the Mint stated it had added risk factors related 

to production and sales to its compliance procedures and 

surcharge authorization memorandum. The OIG agrees 

with the actions being taken. 

AnnualAudits of Suchawe Funds Received and Emended 

The Mint did not ensure that recipient organizations met 

the annual audit requirements of the Act. As a result, the 

Mint was unable to verify that surcharge funds in excess 

of $4.6 million paid to two recipient organizations were 

used for the purpose specified in the coin program's 

enabling legislation. 

Our assessment was based on available ibancial information.

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Four factors contributed to this condition. Fit, the Act 

did not provide for specific remedies if a recipient 

organization did not provide for the required annual 

audits. Second, the Mint did not develop written 

guidance for following up with recipient organizations 

that did not submit required annual audit 

documentation. Third, the Mint did not obtain any formal 

acknowledgement from the recipient organizations that 

they understood their responsibilities with regard to the 

annual audit requirements and the possible remedies 

available to the Mint when the recipient organization did 

not meet its responsibilities. Fourth, Mint personnel did 

not properly determine the dates when the recipient 

organizations were to submit, to the Mint, the annual 

audit documentation. 

Section 529 of the Act, Annual Audits,states that each 

recipient organization shall provide for an annual audit of 

all surcharge payments received from the Mint. The 

audits are to commence the first fiscal year the 

organization receives a surcharge payment and continue 

until all amounts received are fully expended or placed in 

trust. A copy of the annual audit report is to be sent to 

the Mint not later than 90 days after the end of the fiscal 

year for which an audit is required. The Act did not, 

however, provide direction on how the Mint was to enforce 

the annual audit requirement or remedies for 

noncompliance. 

To implement the annual audit requirements specified by 

the Act, the Mint asked recipient organizations to 

(1)complete and submit an audited schedule of all 

surcharge funds received and expended during the 

recipient's fiscal year, (2)provide a written assertion by its 

Chief Executive Officer or Chief Financial Officer that it 

had met the compliance requirement of the Act and the 

specific enabling legislation, and (3)submit an auditor's 

compliance report.' Based on the documentation 

provided, Mint personnel should determine whether the 

recipient organizations used the surcharge funds received 

Recipient organizations may apply by letter for a waiver of audit requirements for any 

fiscal year, other than the bt and last, when it believes surcharge funds received or 

expended are minimal and there are no outstanding audit findings or significant internal 

control risk or deficiencies. 

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for the purposes specified in that program's enabling 

legislation. 

In cases where the recipient organization was unable or 

unwilling to have an audit conducted or audit findings 

were not resolved, the Mint's midance 

., 

~rovided

L it could

seek reimbursement, suspend surcharge payments, or 

take other necessary steps. This guidance, 

- however, did

not provide proactive actions (e.g., sending follow-up 

letters to the recipient organization)that should be taken 

when a recipient organization did not provide the required 

audit documentation in a timely manner. 

To determine whether the Mint properly implemented the 

Act and its policies regarding annual audits, we reviewed 

the program files for the nine commemorative coins 

covered by our review. We found, at the time of our 

review, that 2 of the 9 recipient organizations should have 

submitted the annual audit documentation to the Mint. 

Yet, we found no evidence in the program files that either 

of the two organizations submitted the required 

documents. 

When questioned about the missing audit documentation, 

we were informed by Mint personnel that they had 

mistakenly used the Government's instead of the 

recipient organization's end of fiscal year to calculate 

when the required documentation was due. This error 

inadvertently extended the actual due date. According to 

our calculations, the two recipient organizations had 

received more than $4.6 million in surcharge payments 

from the Mint. In addition, we determined that the 

required audit documentation was overdue by as much as 

9 months without any follow-up action by the Mint. 

When we questioned the two recipient organizations 

about Qe required audit documentation, one recipient 

claimed that it had not spent any of the surcharge funds 

received from the Mint; thus, an audit was not required. 

We believe this organization's understanding of the Mint's 

guidance was incorrect. The other recipient organization 

claimed that it had submitted the required audit 

documentation. However, as of December 8, 1999, 

responsible Mint personnel informed us that the Mint had 

not received the applicable audit documentation. 

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Recommendations 

3. 	The Director of the Mint should develop and 

implement follow-up procedures that ensure 

required annual audit requirements are met This 

guidance should be included in the Mint's Compliance 

Procedures For Surcharge EligibilZity & Payments. 

4. €The Director of the Mint should strengthen the Mint's 

position with regard to annual audit requirements. 

The Mint should ensure recipient organizations llly 

understand (a)the annual audit requirements 

detailed in the Act and the Mint's compliance 

procedures and (b)the remedies available to the 

Governrnent for failure to comply with these 

requirements. 

5. €The Director of the Mint should ensure that the 

recipient organization's end of fiscal year is used to 

calculate the date of the annual audit submission to 

the Government. 

Management Response and OIG Comment 

In its response, the Mint concurred with the intent of 

Recommendations 3 and 4 but proposed alternative 

actions. ?"he Mint responded that it does not have the 

legislative authority or enforcement tools to ensure that 

recipient organizations meet the annual audit 

requirements of Pub. L. No. 104-208. The Mint proposed 

referring the names of recipient organizations that fail to 

meet the annual audit requirement to the OIG for 

examination. The Mint also stated that it now includes 

wording in the initialletters sent to new surcharge 

recipient organizations that clearly states the annual 

audit requirement. - We do not believe the actions taken or proposed in the 

Mint's response to Recommendations 3 and 4 meet the 

intent of our recommendations. First, the Mint's 

response did not indicate any specific steps planned or 

taken to address Recommendation 3. Second, the Mint's 

response did not indicate what action, if any, it planned 

to take to ensure that recipient organizations understood 

the remedies available to the Government if the recipients 

failed to comply with the annual audit requirement. 

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Lastly, the Mint's proposed alternative of referring 

delinquent organizations to the OIG for audit was not 

agreed to by ~e OIG. In fact, the OIG issued a 

memorandum to the Mint that addressed theMint's 

proposal to refer delinquent recipient organizations to the 

OIG. 

In our memorandum, we specifically stated that the OIG 

would not routinely accept referrals of delinquent 

organizations for audit from the Mint. Our memorandum 

outlined the reasons why we would not accept such 

referrals. We, therefore, consider Recommendations 3 

and 4 to be unresolved. 

The Mint concurred with Recommendation 5 and stated 

that it now uses the recipient organization's end of fiscal 

year to calculate when the annual audit submission is 

due to the Government. The OIG agrees that the action 

taken by the Mint meet the intent of this 

recommendation. 

Allocation of General and Administrative Costs 

The Mint's current methodology for allocating General 

and Administrative (G&A) costs6is one of several 

acceptable methodologies for cost allocation. However, 

the current methodology may not assign G&A costs to

operations and products according to the relative benefits 

received by each. As a result, it is possible that a 

disproportionate share of G&Acosts were allocated to the 

Mint's circulating coin programs, thus, understating 

numismatic program costs, which includes 

commemorative cobs. This condition existed largely 

because of past deficiencies with the Mint's accounting 

system and business structure that prevented the Mint 

from implementing a more precise methodology for 

allocating G&Acosts.

G&A costs are regular operating expenses of a business that are not directly related to a 

product and include accounting services, automated data processing, and hum 

resources. 

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Discussion 

The Act, Pub. L. No. 104-208, mandated several 

provisions reforming the Mint's Commemorative Coin 

Program. Among the provisions was the requirement that 

the Mint withhold surcharges from commemorative coin 

program beneficiaries until all numismatic operation and 

program costs allocable7to the program, under which the 

numismatic item was produced and sold, were recovered. 

To ensure that shared costs would be allocated between 

mission activities on a fair and equitable basis, the Mint 

awarded a contract for a review of its G&A cost allocation 

procedures. As a result of this review, the Mint 

implemented its current methodology for allocating G&A 

costs. The Mint's current G&A allocation methodolom 

was proposed as an interim solution by the contract; 

because the Mint was moving to an activity based 

approach for assigning costs to mission activities. 

To determine whether She Mint was appropriately 

recouping G&A costs related to the production of 

commemorative coins, we reviewed the Mint's profit and 

loss statements and assessed the composition of the G&A. 

pool. Our review showed that in 1998 the Mint allocated 

about 14 percent or $5.6 million of its total G&Acosts to 

numismatic programs. The remaining 86 percent or 

$35.4 million of G&A costs were allocated to the Mint's 

circulating coin programs. Sales from numismatic and 

circulating coin programs during the same period were 

$672 and $923 million, respectively. Based on this initial 

assessment, our opinion was that G&Acosts may have

been too heavily weighted to the Mint's Circulating Coin 

Program, thus, understating the G&A costs allocated to

its Numismatic Coin Program, which included 

commemorative coins. Additional analysis disclosed the 

followingissues: 

The allocation methodology of G&Agives the	

impression it is based more on the programs' ability to 

bear-the-cost rather than on any relationship to the 

program. 

'A cost is allocable if it is assignable or chargeable to one or more cost objectives on the 

basis of relative benefits received or other equitable relationship. Implicit in this defmition 

is that the cost is distributed in reasonable proportion to the benefits received. 

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AU G&Acosts were fully allocated between the 

Numismatic and Circulating Business Units based on 

sales less metal, fabrication, and surcharges. The 

allocation to one business unit was, therefore, 

dependent on the sales of the other business unit. 

This approach may not adequately distinguish 

between variable and fixed G&Acosts. For example, if 

sales, cost of metal, fabrication, and surcharges for 

numismatic products remained constant but the sales 

and cost of metal and fabrication for circulating coins 

increased, then: (1)the total dollar allocation of G&A 

to circulating coins would increase even though there 

was no commensurate increase in G&A, and (2) the 

total dollar allocation of G&A to the numismatic 

products would decrease despite no commensurate 

decrease in sales or product costs. 

The composition of the G&Apool appeared too diverse 

to use a single allocation base. For example, the G&A 

pool consists of costs associated with activities that 

fall under the Office of the Director, Chief Financial 

Officer, and Chief Information Officer. Consequently, 

many of these costs have no direct relationship to the 

numismatic or circulating programs. Therefore, the 

cost behavior pattern for each activity may relate to a 

cost driver other than sales, such as, the number of 

personnel, labor hours, or percent of time devoted to a 

program. 

If the allocation of G&Acosts were revised, it could 

have a significant impact on the profitability of the 

Commemorative Coins Program. 

Our review also noted that the Mint had undertaken 

many initiatives to change its operations since 

implementing its current methodology for allocating G&A

costs. F6r instance, the Mint reorganized its business 

activities to better identify direct costs and implemented a 

new management information and accounting system. In 

addition, during the past year, the Mint took a major step 

in implementing Activity Based Costing (ABC).' 

8 Activity-Based Costing (ABC) is an accounting system that assigns costs to products 

based on the resources they consume. The costs of all activities are traced to the product 

for which they are performed. Overhead costs are also traced to a particular product rather 

than spread arbitrarilv across all product lines. 

OIG-01-026 	 REVIEW SURCHARGES FROM THE PAGE 16 

SALE OF COMMEMORATIVE COINS 
With the business initiatives implemented during the last 

3 years, the Mint now has the means, through ABC, to 

more precisely trace GgrA activity costs to the appropriate 

business unit or program. 

Recommendation 

6. The Director of the Mint should ensure that the Mint's 

implementation of ABC provides for an equitable and 

cost effective methodology for allocating G&A costs. 

The Mint should also ensure that its implementation 

of ABC with regard to G&A activities is completed in a 

timely manner. 

Mwement Response and OIG Corunlents 

The Mint's response indicated agreement with this 

recommendation. According to the Mint, it was in the 

process of implementing ABC technique in its corporate 

finance business units. In addition, the Mint planned to 

implement ABC in its other corporate offices. The OIG 

considers the actions planned or taken by the Mint to be 

responsive to the recommendation. 

Surcharge Eligibilitv - and Payments Guidance

The Mint developed and issued surcharge eligibility and 

payment guidance that was consistent with provisions of 

the Commemoratiue Coin ProgramRestrictions of 1996. In 

addition, the Mint routinely provided this guidance to 

those organizations that were authorized by enabling 

legislation to receive surcharge payments. However, the 

Mint has not communicated this guidance to potential 

recipients and the general public-guidance that potential 

recipients and the public could, prospectively, be required 

to comply with. In addition, the Mint did not seek public 

comment on its implementing guidance. Consequently, 

recipient organizations have found some aspects of the 

Mint's guidance confusing and organizations 

contemplating financial support from a commemorative 

coin program may not be aware or fully understand the 

stringent procedural requirements they must meet to 

receive surcharge payments from the Mint. 

We believe two factors have contributed to this situation. 

First, the Mint's management did not widely disseminate 

its implementing guidance or solicit public comment with 

OIG-01-026 €REVIEW OF SURCHARGES FROM THE PAGE 17 

SA.LE OF COMMEMORATIVE COINS 
regard to surcharge payments. Second, until recently, no 

commemorative coin program had gone through a full life 

cycle as outlined in the Mint's guidance. 

Discussion 

Historically, the Mint was required to make surcharge 

payments to recipient organizations whether or not all 

commemorative coin program costs were recovered. The 

Congress recognized the weaknesses inherent in this 

process and enacted Pub. L. No. 104-208 (theAct). 

Section 529 of the Act, Commernoratiue Coin Program 

Restrictions, significantly modified surcharge eligibility 

and payment requirements. The Act imposed three new 

requirements: first, recipient organizations must raise 

matching funds from private sources; second, the Mint is 

required to recover its operation and program cost before 

making surcharge payments; and third, recipient 

organizations must submit annual audited financial 

statements. 

The Mint, in turn, developed and issued Compliance 

Proceduresfor Surcharge Eligibility & Payments as a guide 

for carrying out its responsibility under the Act. The 

Mint's guidance was intended for use by the Mint and 

recipient organizations subject to the Act. The guide 

details the sequential steps that occur in the life of a 

commemorative coin program and describes requirements 

and specific compliance actions, many of which are 

statutorilv reauired. The guide - covers four broad areas: 

~atchi<Fu<ds, Determining Program Cost Recovery, 

Surcharge Payments, and Pinnual Audits of Surcharge- Funds ~Gceivedand Expended. 

In assessing how effective the Mint has been in 

implementing the 1996 Commemoratiue CoinProgram 

Restridions, we first reviewed the Mint's implementing 

guidance. Our review found that the Mint's guidance was 

consistent with the legal provisions of the Act. Our review 

also disclosed that the Mint had not publicly notified 

potential recipients of the Mint's guidance. 

To assess how the implementation of the Mint's surcharge 

eligibility and payments guidance affected the recipient 

organizations, we contacted representatives from sevengof 

*Wewere unable to contact two of the recipient organizations. 

OIG-01-026 €REVIEW OF SURCHARGES FROM THE PAGE 18 

SALE OF COMMEMORATIVE COINS 
the nine organizations covered by our review. Based on 

our discussion with these representatives, we learned 

that none had had an opportunity to comment on the 

Mint's compliance procedures. The representatives told 

us they were interested and could provide valuable 

constructive comments. Most representatives also told us 

that it would have been helpful to have lmown what the 

Mint's surcharge eligibility and payment requirements 

were prior to the Congress enacting the legislation for 

their commemorative coin program. 

In addition, we learned that all seven recipient 

organizations found it necessary to contact the Mint to 

obtain additional guidance or clarification after reading 

the Mint's implementing guidance. For example, one 

organization did not believe that it needed to submit 

audited hancial statements until it had actually spent 

the surcharge funds it had received from the Mint. 

Therefore, it had not submitted the required audited 

financial statements and accompanying attestations. Had 

the public been provided an opportunity to comment on 

the Mint's guidance, the confusion experienced by the 

recipient organizations may have been minimized. 

Suchage eligibility and payments guidance is important 

to potential recipients and the public because it outlines 

the requirements organizations must abide by to receive 

surcharge payments under the Mint's Commemorative 

Coin Program. With the experience gained by the 

recipient organizations and the Mint in implementing the 

1996Act restrictions, we believe it is now appropriate for 

the Mint to solicit constructive comments regarding its 

surcharge eligibility and payments procedures. 

Recommendation 

7. The Director of the Mint should seek comment on the 

Mint's Commemorative Coin Program compliance 

procedures from interested parties, modify its 

procedures where appropriate, and make the 

procedures more accessible to potential recipient 

organizations and the public. 

ManaPement Res~onseand OIG Comment 

The Mint agreed with this recommendation. In its 

response, the Mint stated that it planned to send copies 

OIG-01-026 	 REVIEW OF SURCHARGES FROM THE PAGE 19 

SALE OF COMMEMORATIVE COINS 
of its compliance procedures to potential surcharge 

recipients, place these procedures on its web site, seek 

feedback from surcharge recipients on the procedures at 

the end of a program, and modify the procedures, where 

appropriate, based on the feedback it received. The OIG 

considers the actions planned by the Mint responsive to 

the recommendation. 

OIG-01-026 	 REVIEW OF SURCHARGES FROM THE PAGE 20 

SALE OF COMMEMORATIVE COINS 
Appendix 1 

Page 1of 8 

MANAGEMENT RESPONSE €

DEPARTMENT OF THE TREASURY €

UNITED STATES MINT 

WASHINGTON.D.C.20220 

MEMORANDUM FOR DENNIS S. SCHINDEL 

ASSISTANT INSPECTOR GENERAL FOR AUDIT 

From: Jay ~einsteinhM~G& €

Associate DiectorIChief Financial Officer 

Subject: 	 Draft Audit Report entitled "Review of Surcharges from the 

Sale of Commemorative Coins (A-DO-99-060) 

The purpose of this memorandum is to respond to the draft audit report entitled "Review 

of Surcharges £rom the Sale of Commemorative CO* (A-DO-99-060) dated August 

2000. We appreciate the opportunityto review the draft report and provide our response 

for the record. 

Summary of Our Response €

The Mint agreeswith the general intent of the seven recommendations in your report', 

however, the Mint does not have the legislative authority to ensure that recipient 

organizations meet the annualaudit requirements of Public Law 104-208. As an 

alternative to the OIG's recommendation, the Mint intends to continue the practice 

adopted during the audit of referring to the OIG the names of the recipient organizations 

that fail to meet the annualaudit requirements so that the OIG can exercise the authority 

granted it by Public Law 104-208 to examine the books and records of recipient 

organizations. We believe thatthis will help motivate recipient organizations to comply 

with the Public Law's annual audit requirementsand allow, when they do not, that the 

annualaudits be conducted by the OIG. It is unfortunate that the OIG's draft audit report 

fails to acknowledge that during the audit theMint referred two recipient organizations to 

the OIG for failure to file the annualaudits and is silent on the OIG's legislated 

authoritiesto conduct audits of recipient organizations' use of smharge proceeds.

Despite concurrencewith the remainder of the recommendations, we take exception to 

the erroneom background commentary that accompaniesrecommendations one and two, 

andthe factthat the issues outlined in recommendation five were substantially corrected 

at the time that fieldwork was conducted for this audit While we recognize the need to 

update our cost standards(recommendation one), the background commentary included 

in the audit report unfairly questions the credibility of the Mint's Enterprise Resource 

Planning System (ERP) and it's underlying internal controls. Also, the background 

wording points to a continued lack of understanding on the part of the Office of Inspector 

General of the principles underlying the application of standard costs in a manufacturing 

OIG-01-026 	 REVIEW OF SURCHARGES FROM THE PAGE 21 

SALE OF COMMEMORATIVE COINS 
Appendix 1 

Page 2 of 8 

MANAGElVENT RESPONSE 

environment. The effectivenessof the Mint's ERP system is evident by our earning of a 

sixth consecutive unqualified opinion on our hnancial statement audit The sixth 

unqualified opinion was rendered aztheend of the fust year of implementation of our 

comprehensive ERP system. 

We are pleased that the IG concluded that "Mint perso~elproperly implemented its 

guidance concerningestablishedtime periods and maximum amounts payable'' and that 

the OIG ...believe@) the Mint adhered to its guidance before making surcharge 

payments." Nonetheless, the tone of the narrative accompanying recommendation two is 

suchasto cast doubt on the overall integrity and effectiveness of the Mint's surcharge 

payments process, which we believe is unwarranted. 

This audit report includes a recommendation to ensure thatthe surcharge recipient's end 

of fiscal year is used to calculate the date of its annualaudit submission to the 

Government (recommendationfive). We acknowledgethat we nrperienced some 

confusion very early in our administation of the program regarding this issue. However, 

we long ago resolved thisissue and so informed the Office of Inspector General at the 

start of this audit. 

The Mint is currently strengthening our position with respectto annualaudit 

requirements (recommendationfour). This effort involvesenhancing the 

communications of audit requhmm3sto surcharge recipients, including notification that 

failure to comply with annualaudit requirements willresult intheir referral to the Office 

of Impxior General. The Mint is committed to the implementationof Activity Based 

Costing (recommendation six). Fiy, we will seek direct feedback regarding the 

relevant complianceprocedures hm sunbarge recipients. We will incorporate this 

feedback, as appropriate, to continudly improve our procedures and guidance. 

Determining Program Cost Recovery 

Recommendation #I: The Director of the Mint should develop and implement a clear 

and complete methodology for assessing the accuracy and reliability of the financial 

infodon contained in-its profit and loss statements. At a minimum,the Mint should 

make it possible to perform a detailed reconciliation between the ~al balance and the 

and loss statement accounts and ensure that evaluations of its standard cost rates 

are documented and pmvide, where warranted, for periodic adjustments to those standard 

~rofit . - - cost rates. 

Mint Response: We concur ~iththis recommendation. Fieldwork for this audit 

began during the firstym of implemenration of the CONS System, the Mint's 

com~rehensiveEnterorise Resource Plannine -. ERP), Svstem. . Onlv three of the

nine commemorativecoin programs analyzed for thisaudit were fully accounted 

for withinthe COINS system. The vast majority of the accountingfor the other 

commemorativecoin programs included in this audit was performed with the 

Mint's legacy systems (IFMS and FMIS). Ourcurrent reconciliationefforts 

OIG-01-026 €REVIEW OF SURCHARGES FROM THE PAGE 22 

SALE OF COMMEMORATIVE COINS 
Appendix 1 

Page 3 of 8 

MANAGEMENT RESPONSE 


benefit £ram the more robust functionality ofthe COINSsystem, as contrasted 

with the limited functionality in theMint's legacy systems. An importantfeatllle 

ofthe Mint's ERP systemisthe timely provision ofrelevant standardwst 

information. Accordingly, as part oftheFY 2000 financialstatement audit we are 

documentingand updating the cost standardsupon which this crucialfinanciat 

information isbased 

Whilewe generally concurwith thisrecommendation,we take exceptionto the mannerin €

which it is characterized in the report. Much ofthe aualysisleading up to this €

recommendationisflawed in that the Mint's proper application of standardcost €

methodologiesis not fully taken into account Additionallymuch ofthe analysiscan be €

interpreted as unfairly questioningthe credibility ofthe Mint's EnterpriseResource €

Planning System (ERP). €

Page 4 ofthe auditreportstates"Office of Management and Budget (OMB)CircularA123,ManagementAccounrabiIiry andControl, Sratesthatappmpriatemanagement 

controlsshould be integrated into each systemestablishedby agencymanagement to 

direct and guide its operations. The documentatonfortransactions,management 

controls, and othersignificant eventsmust be clear and readily available for 

examination" The context in which this language isincluded could lead a casualreader 

to believe that theMint has weak and undocumented cont~olsin place forthe surcharge 

payment process. 

Nothing could be furtberfromthe truth. The Mint usespmfit and loss dataon the 

program that takesinto considerationthe total cost of the programto-date as well as 

anticipated coststo close the program. By retaining 25% ofsurchaqp received, the 

Mint mitigatesthe risk of not recovering the total costs ofthe program. The Mint has 

well documented processesto notify the surcharge recipients ofrelevant legislative 

requirementsand we have well documented and proven controlsin place forsurcharge 

payments. 

Onpage 5the reportstates, 'To assessthe Mint's commemorativecoin program financial 

information,we requested detailed cost information that would allowus to establish 

reasonableassurance that the informationwas accurate and reliable. Although we made 

several requestsforsnpporting documentation,the Mint wuld not produce the requested 

information For instance, the Mint couldnot produce a list of accountsfromthe trial 

balance that comprised "Manufacturing and Assembling" and General& Administrative 

& Marketing," which were major cost categoriesincluded in the end-of year pmfit and 

lossfinancial information Again, the context oftheOIG's commentscan lead a reader 

to have totally unfounded doubtsaboutthe integrity ofthe Mint's hcial information 

We considerall field coststo be "Manufacturing and Assembling" and all headquarters 

costsare included in "General & Administrative& Marketing." We explained to the 

' OIGthat 100percent ofthe expenseaccounts in the Mint's consolidatedtrial balance 

were either "Manufaauring and Assemblingg or "General & Administrative& 

Marketing." We further explainedthatthe accountsfor "Manufaauring and 

OIG-01-026  REVIEW OF SURCHARGES FROM THE PAGE 23 €

SALE OF COMMEMORATIVE COINS €
Appendix 1 

Page 4 of 8 

MANAGEMENT RESPONSE 

Assembling'' resided in the trial balances of each Mint field location and that"General & 

Administrative & Marketing" expenses resided in the trial balance for Mint headquarters. 

There seems to be continuing confusion with your auditors on the use of standard cost 

methodologiesin a manufacturing environment We explained many times to your 

auditors thatthe Mint's ERP system is a standard costing system and thatdifferences 

between standard and actualcost are captured in variance accounts. In addition, we 

explained that the amounts reported in the variance accounts are allocated to the products 

sold by the Mint, thereby arriving at actual cost These practices are the normal 

convention used in costing pscductsmanufactured in a continuousprocess operation. 

SurchargePayments 

Recommendation #2: The Dior of the Mint should ensure riskfactors related to the 

Mint's production sales, and marketing forecasts are adequafely considered pnor to 

making an interim surchargepayment. The risk factors should be included in theMint's 

Compliance Rofedures for SurchargeEligibility & ~aymentsguidance and each factor 

addressed in the Mint's surcharge authorizationmemorandum, which includes an interim 

fiaancialreport 

Mint Response: The Mint concurs with the intent of this recommendation 

While we have always considered these factors prior to making interim snrcharge 

.

payments, . we have added them to ow compliance procedures and surchaxe- authorization memo. Since the onset of 1e~s1ativeerefomin 1997, production 

and sales factorshave always been included in the Mint's Surcharge Payments 

Checklist that accompanies the surcharge authorizationmemorandum. AS a resnlt 

of this audit, the possibility of a Congressional extensionhas recently been added. 

Unsold costs are included in the interim financiireport in determiningthe 

profitability of each program. 

The report correcdy states that "Mint persome1properly implemented its guidance 

concerning established time periods and maximum amounts payable. The OIG noted 

that 1) a profit and loss statement was prepared prior to interim and final surcharge 

payments,2) the authorizing memorandum conrained a recommendation fiom the Chief 

financialOfficerreffardingthe paymenf 3) the Director of the Mint authorized the 

surcharge paymenf aiid 4) the finalsurcharge payment was withheld uatil the program 

closed and all related costs were recovered Finally, the OIG correctly concludes that "... we believe the Mint adhered to its guidance before making surcharge paymentsn. 

Wide the Mint concurs withthe intent of this remmmendation, we are concerned with 

the manner in which the 01G characterize5background commenrary in suppon of this 

recommendation On page 6 of the draft report the OIG states thar 'The Mint's surcharge 

payment process did not ennne that senior management was fully advised of all 

significant cost considerationsprior to its authorization of interim payments ";on page 8 

the OIG statesthat "the Mint's guidance, however, did not dciently address important 

OIG-0 1-026 	 REVIEW OF SURCHARGES FROM THE PAGE 24 

SALE OF COMMEMORATIVE COINS 
--- 

.. Appendix 1 

Page 5 of 8 

MANAGEMENT RESPONSE €

risk fanonpertainjng to the interim financial reports used by management to authorize 

surcharge payments. For @stance,the 6 and 9 month evaluation guidance did not address 

factors that wuld significantly intluence the repod wst such as 1) whetha the 

production of the wkorative win was complete and all reasonable costs were 

known 21 the likelihood of manufacturineadditional wins subseauentto anv interim 

sunha&; paymenf 3) the possibility of a~~wgessional extension of the coin pro- to 

allow for additional sells or in-d production, or 4) consumer demand and on-hand 

inventoly of unsold wins". Again, the context in which this pimsing is cast cannot but 

help to cast unwarranted doubt on the integrity and effectiveness of the Mint's surcharge 

payment process. 

For Rasons explained below, includingthe comparable improbability of these risk 

factors, they were not part of the smbarge payment checklist reviewed by the auditoxs. 

The abs~lceofthese fmrs 6um the checklist does not mean they were not coasidae4 

for in reality the effects of these risk factors were taken into account The fan thatthe 

01G could nor idenafy a situation where the paymenrs made by the kt were incorrect 

for anv of the factors the OIG idendfied shows thatthese factors were considered ~~-~~~ even

tho& theywere so remote as to have no impact on '&charge payments. Nevathe1~3, 

to &fy the needs of the auditops and to foky document what had previously been 

wnsidered but not formally documented, we mcdi!ied our checklist and reflectedthis 

modification in the related surcharge payment rewmmendation memo. 

The modern em of wmmemorative coins began in 1982. Since that time, our experience 

tells us that the 6nal manufhng requirements for a commemorativecoin rnhown 

within six to nine months after the start of a program. In fact, the Mint has performed 

numerous analyses which enable us to forecast, with reasonable accuracy, the numbs of 

commemorarive wins thatwill be sold within a shortperiod after thisinitial "dropdatee. 

Sales levels of commemorativewins cannotbe legislated, only dmum mintagescan 

be prescribed by legislation. Sales of wmmemorative wins are subject to the vagaries of 

the marketplaceand must facekeen competition from other wUectib1es. Acwrdiogly, 

the Mint smves to manufacrurr wmmemorative wins in response lo projected consumer 

demand The cons of anv unsold coins are included with the profit and loss information 

that is UFRd to determine&ogram profitability for interim sur&arge payment purposes. 

This very conservative approach a "worst case" scenario where all -Id coius 

remain unsold. Such an approach helps to ensure that commemorativecoins are 

produced and sold by the Mint at Lno net wstmto the government 

Additionally, Congress never enacted legislationto extend the life of a 

commemorative coin pmgram or increase its coin mintage levels Such legislation would 

in effect close down the commemorative coin pmgram because the majority of coin 

collectors who purchase these wins base their decision on the coins' perceived sesxndary 

mxket value. Tlis value is calculated based on the length of the program and the 

maximum amount of wins thatcan be sold. 

OIG-0 1-026 	 REVIEW OF SURCHARGES FROM THE PAGE 25 

SALE OF COMMEMORATIVE COINS 
Appendiv 1 

Page 6 of 8 

MANAGEMENT RESPONSE 


Annual Audit of Surcharge Funds Reeeived and Ekpended 

Recommendation #3: The Dior of the Mintshould develop and implement follow-up 

procedures that ensure requid annual audit requirements are met This guidance should 

be included in the Mint's Compliance Proceduresfor Surcharge Eligibility & Payments. 

Recommendation #4: The Directorof the Mint should strengthen the Mint's position 

with ~spect toa~ual audit requirements. The Mint should ensure recipient organizations

fully undernand (a) the annual audit requirementsdetailed in the Act and the Mint's 

compliance procedures, and @)theremedies availableto the Government for failure to 

comply with thew requirements. 

Mint Rsponse: The Mint macurswith the intent of these two 

recommendations. However, the Mint does not have the legislativeauthority to 

ensure thatrecipient organizations meet the annual audit requirements of Public 

Law 104-208. As an altemadve to the OlG's.recommendation, the Mint intends 

to conrinue the practice adopted during the audit of refening to the OIG the names 

of the recipient 0rganirab:ons that fail to meet the annual audit quknents so 

that the OIG canexercise the authority granted it by Public Law 104-208to 

examine the bwks and records of recivient oreanizations. We believe ~-thatthis~-

will help motivate recipient o~ffanizatibnsto c&uply with the Public Law's mud 

audit requireme- and allow, when they do not that the annual audits be 

conducted by the 0s. 

Public Law 104-208(Omnibus ConsolidatedAppropriations Act for Fiwal year 1997) .. - requires that surcharge recipient organizations file annual audited statemen&of the f& 

received and how those funds are used. The aurhorizinr! legislation does not however. 

the Mint any enforcement tools should an organizadoi nor file the annual adred 

statemmu. However. PubLc Law 104208 does mt the mce of IrsDenor Genaal the 

author&' to examine &ipient organizations' books and records, &ectiky granting it 

the anthoriiv to conduct those audits should a recioient oreanization - bil to voluntarilv file

the req~ audited statements. 

The Mint now includes wording in the initialle8m sentm new surchme recioient 

ofgankjions, along with a copy of the CamplianceProcedures, W cl&y sites the 

mual audit resuirement We will also inform the recipient oreanization that failure to 

comply with th; mual a1G5t requirement will result ithe &&Iof thenan-wmpliance 

to the Officeof Inmector General. In our &odic conversations with o5dals of these 

organizations, we All remind them of &audit requirement. 

Recommendation #5: The Dior of the Mint should ensurethat the recipient 

organization's end of fid year is used to calcularethe dateof theannual audit 

submission to the Government 

OIG-01-026 REVIEW OF SURCHARGES FROM THE PAGE 26 €

SALE OF COMMEMORATIVE COINS €
Appendix 1 

Page 7 of 8 

MANAGEMENT RESPONSE 

Mint Response: The Mint concuri with thisrecommendationand, in fact, €

implemented corrective action during the early part of the OIG's audit €

We acknowledgethat early in the program we experienced some uncertainty regarding 

auditsubmissiondatesforthe first two programssubject to annual auditrequirements 

(Botanical Gardens and Jackie Robinson). As we informed your din the July 28, 

2000 exit conference, tbis issue wasresolved at the beginning of the audit (summer 

1999), and we have since been using the correct date forthe subsequent administrationof 

the p&gam. Our initialmisundec&d'mg in no way impeded ourfollow-up with 

recipient organizationsregarding their annual auditsubmissions. 

Allocation of General and Administrative Costs €

Recommendation #6: The Directorof the Mintshould ensure that the Mit's 

implementationof ABC providesfor an equitable and cost effectivemethodology for 

allocating G&A costs. The Mint should also ensurethatitsimplementationof ABC with 

regard to G&A activitiesis completed in a timely manner. 

Mint Response: The Mint not only believesin the merits of activity based 

costing to benaunderstand our costs, but we are in the process of implementing 

this costing technique in our corporate finance and circulating business units and 

plan to implement activity based costingin our numismatic business unit and 

other corporate offices. The Mint's implementationof activity based costingwill 

result in a more precise costing system as compared to our current already 

acceptable costing approach. The Mint-wide implementation of activity based 

costing will form the basis of the long-term revision ofthe Mit's G&A docation 

methodology. 

Currently,the Mint allocates G&A expenseswith a methodology based on a study 

conducted in 1996by Coopers& Lybrand, and subsequentlyreviewed by our 

independentpublic accountants. The Mint has received four consecutiveunqualified 

opinions since the implementationof this allocationmethodology. 

Surcharge Eligibility and Payments Guidance€ - Recommendation WI: The Director ofthe Mint should seek comment on the Mit's 

CommemorativeCoin Program complianceproceduresiiom interested parties, modify its 

procedures where appropriate, and make the procedures more accessibleto potential 

recipient organizations and the public. 

Mint Response: The Mint concurswith the general intent of tbis €

recommendation. In orderto make our complianceprocedures more accessible to €

potential surcharge recipient organizationswe will send them copies of these €

procedures once the potential recipient organization has obtained the mandatory €

OIG-01-026  REVIEW OF SURCHARGES FROM THE PAGE 27 €

SALE OF COMMEMORATIVE COINS €
* 	 Append% 1 

Page 8 of 8 

MANAGEMENT RESPONSE 


number of sponsors for pending legislation. Furthermore, in order to ensure the 

widest disb5butionpossible, the Mint will place the compliance procedures on our 

web site. Finally, we will seek feedback from surcharge recipients at the end of a 

program regarding our compliance procedures. We will modify our compliance 

procedures, where appropriate, based on this feedback. As a customer focused 

organization we are always receptive to input and feedbackthat improvesupon 

and strengthens our customer relationships. 

The Mint believes that we have always effectively communicated relevant legislative 

requirements to surcharge recipients. Specifically, requirements in the areas of 1) 

matchingfunds, 2) determining program cost recovery, 3) surcharge payments and 4) 

annual audits of surcharge funds have been adequately communicated. However, in 

response to this audif the Mint will enhance communications procedures by informing 

potential surcharge recipients (identified in pending legislation) of the specific 

compliance requirements that all surchargerecipients must adhereto and by posting the 

compliance procedures on our web site. We will alm seek feedback regarding our 

procedures from surcharge recipient organizations at.the end of a program, beginning 

with the Library of Congress program in early 2001.

We appreciate the opportunity to comment on this draft audit report We would also 

appreciate receiving information about how many resources were spent on this audit so 

that we can asses whether the audit was value added. I am requesting that you include 

our complete response in your finalreport. If you have any questions, please do not 

hesitate to call me. 

CC: €Jay Johnson 

John Mitchell 

GiI KDarich 

Howard Hyman - Mike Gordon 

Cathy Williams 

Mike Kess 

OIG-0 1-026 €REVIEW OF SURCHARGES FROM THE PAGE 28 

SALE OF COMMEMORATIVE COINS 
Appendix 2 

MAJOR CONTIBUTORS TO THE REPORT 

Barry Sad, Audit Director 

William S. Sehroeder, Audit Manager 

Charles Trahan,Team Leader 

Irene Aultman, Auditor

- OIG-0 1-026 	 REVIEW OF SURCHARGES FROM THE PAGE 29 

SALE OF COMMEMORATIVE COINS 
Appendix 3 €

REPORT DISTRIBUTION 

Department of the Treasury 

Office of Strategic Planning and Evaluations €

Office of Budget €

Office of Accounting and Internal Control €

United States Mint 

Director €

Office of ManaFement and Buuet -€

OIG Budget Examiner €

OIG-01-026  REVIEW OF SURCHARGES FROM THE PAGE 30 €

SALE OF COMMEMORATIVE COINS €