MANUFACTURING OPERATIONS:

Allegations Regarding the United States Mint’s 

Golden Dollar Production Process Were Not 

Substantiated

OIG-02-067 March 21, 2002

Office of Inspector General

*******

The Department of the Treasury
Contents

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067) 

Page 1

Audit Report....................................................................................................... 2

Results in Brief.................................................................................................. 2

Background....................................................................................................... 3

Allegations and Review Results.......................................................................... 4

Reservations Expressed About the Mint’s Purchase of

 New Golden Dollar Burnishers ..................................................................... 4

Recommendation.......................................................................................... 9

Concern Surfaced About a Possible Negative Career Impact...........................10

Appendices

Appendix 1: Objectives, Scope, and Methodology......................................... 11

Appendix 2: Management Comments ........................................................... 12

Appendix 3: Major Contributors To This Report............................................. 13

Appendix 4: Report Distribution.................................................................... 14

Appendix 5: Mint’s Cost Benefit Analysis ..................................................... 15

Abbreviations

GAO U. S. General Accounting Office

 Mint U. S. Mint

 OIG Office of Inspector General

SBA Susan B. Anthony
OIG Audit

Report

The Department of the Treasury

Office of Inspector General

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067) 

Page 2

March 21, 2001

Henrietta Holsman Fore

Director

United States Mint

On February 1, 2001, the U. S. General Accounting Office (GAO), 

through its FraudNET, received allegations concerning (1) the 

acquisition and disposition of coin production equipment for the 

Mint’s new Golden Dollar coin and (2) a senior Mint official 

suffering a negative career impact. GAO referred the complaint 

letter to our office for review.

Our objectives were to determine how the Mint handled the 

acquisition and disposition of the equipment in question and 

whether there was merit to the complaints.

We interviewed the complainant, Mint employees at the Mint’s 

Headquarters in Washington, D.C., and Mint facilities in Denver, 

Colorado; and Philadelphia, Pennsylvania. We also analyzed files 

maintained at the Mint Headquarters and the Denver and 

Philadelphia Mint locations. Our fieldwork was performed from 

April 2001 through November 2001. A more detailed description 

of our objectives, scope, and methodology is provided as

Appendix 1. 

Results in Brief

Our review found that the Mint’s decision to purchase new 

burnishers for the production of the new Golden Dollar was a 
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

Page 3

reasonable business decision and consistent with the facts known 

to the Mint at the time the decision was made. In addition, we 

found no evidence that a senior Mint official suffered a negative 

career impact because of alleged resistance to implementing the 

Golden Dollar production process directed by Mint Headquarters.

We recommend that the Mint reevaluate its need for the single 

barrel burnisher now sitting idle at the Philadelphia Mint and 

determine whether future needs of the Mint justify the retention of 

this asset. If not, the burnisher should be properly disposed of.

The Mint responded that it had conducted a thorough evaluation of 

production needs at the Philadelphia Mint and would use the idle 

burnisher to replace a leased machine at that facility. The action 

planned and taken by the Mint meets the intent of our 

recommendation. The complete text of the Mint’s response is 

provided in Appendix 2. 

Background

In a letter dated April 11, 2001, the GAO referred a complaint 

letter to Treasury’s Office of Inspector General that concerned 

mismanagement at the Mint. According to the Complainant, this 

alleged mismanagement resulted in the unnecessary expenditure of 

$3.5 million for equipment used in the production of the Golden 

Dollar at the Mints in Philadelphia and Denver.

According to the Complainant, the Mint purchased and deployed 

new burnishers to process Golden Dollar blanks for circulation. 

The Complainant alleged that a burnisher (single barrel) was 

purchased for the Philadelphia Mint at a cost of $500,000, which 

turned out to be inadequate for its purposes. A larger (dual barrel) 

replacement burnisher was then purchased for the Philadelphia 

Mint at a cost of $1 million. A third burnisher (dual barrel) was 

purchased for the Denver Mint, at also a cost of $1 million. The 

Complainant further stated that an estimated $1 million was spent 

installing the burnishers.
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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The Complainant also stated that in trial runs, the Denver Mint 

showed that the burnishers were not needed to produce a high 

quality circulating coin. Further, existing burnishing equipment 

could adequately process the dollar material with a change in 

chemicals used in the burnishing or cleaning cycle.

According to the Complainant, the Golden Dollar process 

development took place at both the Philadelphia and Denver Mints. 

However, the Golden Dollar production process developed by 

Denver was largely ignored. Consequently, Mint Headquarters 

mandated that Denver follow the same process used in Philadelphia 

to process the Golden Dollar. 

The Complainant also inferred that a senior Mint official had been 

negatively affected because he/she did not go along with the 

direction provided by Mint Headquarters, presumably concerning 

the Golden Dollar production process. 

For review purposes, we summarized the allegations into two 

issues. These issues and the results of our review are detailed in 

the following section of this report. 

Allegations and Review Results

Reservations Expressed About the Mint’s Purchase of New Golden Dollar 

Burnishers

The Mint purchased new burnishers for the production of the new 

Golden Dollar coin that were unnecessary due to a poor 

development process employed by the Mint. These burnishers are 

now sitting idle.

Our review showed that the Mint’s decision to purchase new 

burnishers for the production of the new Golden Dollar was a 

reasonable business decision and consistent with the facts known 

to the Mint at the time the decision was made. Although all the 

burnishers were idle at the conclusion of our review, the Mint’s 
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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process for producing the Golden Dollar had not changed. The 

burnishers were, therefore, still considered necessary for future 

production of the Golden Dollar.

The United States $1 Coin Act of 1997, dated December 1, 1997, 

required the Secretary of the Treasury to place into circulation a 

new one-dollar coin upon the depletion of the Government’s supply 

of Susan B. Anthony (SBA) coins. The 1997 Coin Act further 

provided that the new dollar coin would be golden in color; have a 

distinctive edge; have tactile and visual features that make the 

denomination of the coin readily discernable; and have similar 

metallic, anti-counterfeiting properties as other coinage in 

circulation.

To avoid having to produce additional SBA coins and to take 

advantage of the “Year 2000” promotions, the Mint wanted to get 

the new dollar coin (hereafter referred to as the Golden Dollar) into 

production as early as possible in calendar year 2000. 

Consequently, Mint personnel were initially given approximately 30 

months to design, develop, and begin production of the new 

Golden Dollar coin.

During this intervening 30-month period, Mint personnel met on 

numerous occasions with various stakeholders to ensure that the 

design and qualities of the Golden Dollar coin would meet with 

public approval and the needs of the commercial markets. Based 

on the legislated requirements for the new coin and input received 

from its stakeholders, the Mint had two major hurdles to overcome 

in developing its production process for the Golden Dollar.

The first hurdle stemmed from the requirement that the new dollar 

coin have a “golden color.” This requirement meant that the Mint

had to develop a new alloy in order to produce the new coin. A 

complicating factor was the strong desire by the vending machine 

industry, the primary market for the new Golden Dollar coin, that 

the Golden Dollar have the same electro-magnetic signature1as the 

 

1Coin changers on vending machines use magnetic impulse to distinguish coin denominations. This magnetic pulse is 

referred to as the coins electro-magnetic signature.
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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SBA dollar. According to industrial estimates, it would cost 

vendors about $800 million to convert their vending equipment if 

the electro-magnetic signature of the Golden Dollar did not match 

the signature of the SBA.

Because of the unusual coloring and its desire to match the electromagnetic signature of the SBA coin, it took the Mint about 24 

months to develop an alloy with the appropriate golden color that 

would provide lasting quality. This alloy development process took 

Mint personnel much longer then was originally anticipated.

The second hurdle stemmed from the requirement that the new 

coin have a distinctive edge that tactilely would make the new coin 

readily discernable from other denominations. Based on meeting 

with its stakeholders and focus groups, the Mint decided the new 

dollar coin would have a wider border. This wider border was 

determined to be especially helpful to the blind in identifying the 

Golden Dollar by touch. The wider border, however, presented 

new challenges in developing a production process.

This wider bordered coin required a relatively large amount of metal 

to be moved during the stamping process, much more then 

previous coins had required. Thus, it was necessary to stamp the 

border, called upsetting, before the coin was annealed.2 As a 

result of the wider boarder, the annealing process left a residue on 

the coin that proved difficult to remove. The burnishing3 process 

previously used by the Mint for all other coin denominations was 

incapable of cleaning the inside rim of the wider border of the 

Golden Dollar.

With time running out until the Golden Dollar was to be introduced 

into the consumer market, the Mint was forced to address this 

second hurdle in an expedited manner. Both the Philadelphia and 

 

2

 Annealing is the process of heating the coin blanks to soften the metal prior to striking the die images onto each face.

3

 Burnishing is the process of cleaning coin blanks after they have been annealed. The annealing process leaves a hard 

residue on the coin, especially around the rais ed rim. 
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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Denver Mints became engaged in the research and development of 

a new production process that would ensure the Golden Dollar met 

the needs of the public. The Philadelphia Mint was to “lead” this 

developmental effort. Although the production approach taken by 

the two Mints were distinctly different, the success of both 

approaches hinged on their ability to effectively clean the annealed 

coins. 4

Over a 2-month period, Mint engineers consulted with chemical 

experts and experimented with different cleaning solutions to 

remove the residue left by the annealing process. In the end, the 

Mint rejected the use of chemicals for cleaning the Golden Dollar 

because it was unable to duplicate the Denver process at the 

Philadelphia Mint, the chemicals were hazardous to the workers, 

and the resultant by-products from the process presented the Mint 

other environmental problems. As a result, Mint Headquarters 

personnel believed that the only proven method was to use a 

burnisher that used small stainless steel ball bearing as polishing 

media.

Two manufacturers made suitable burnishing equipment that used 

steel bearings as a polishing media. Only one of the two 

companies identified by the Mint made a dual barrel capacity 

machine that would meet the then projected demand of more than

1 billion Golden Dollar coins per year. This same company also had 

a single barrel capacity machine immediately available for lease. 

The usual lead-time for the construction of this type of burnisher 

was 6 to 9 months.

To meet its target production schedule, the Mint entered into a 

lease agreement for the single barrel burnisher for a period not to 

exceed 12 months and a purchase agreement for a dual barrel 

 

4

The process developed by the Denver Mint followed the normal coin production process (i.e., blanking, annealing, 

burnishing, upsetting, stamping) with only a change in the chemicals used in the burnishing process. The process 

developed by the Philadelphia Mint and Headquarters engineers (i.e., blanking, upsetting, annealing, burnishing, and 

then stamping) required the use of burnishers that used ball bearings as a cleaning media. 
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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burnisher of higher capacity to be delivered to the Philadelphia Mint 

when constructed.

Within 7 months of awarding its first contract for a dual barrel 

burnisher, the Mint entered into another contract for a second dual 

barrel burnisher to be delivered to the Denver Mint. At about this 

same time, the Mint decided to purchase the single barrel burnisher 

that was currently being leased at the Philadelphia Mint. The 

Mint’s justification for purchasing these two machines was:

• The leased burnisher had proven to be the only successful 

way to polish the Golden Dollar.

• The dual barrel machine would allow production of the 

Golden Dollar at Denver and ensure that the Denver Mint 

would have similar Golden Dollar production capacity to 

prevent numismatic rarity.5

• A cost benefit analysis had been performed and supported 

the purchase (See Appendix 5 for details).

• The single barrel burnisher would serve as a backup in 

Philadelphia for the Golden Dollar and if production dropped 

off the equipment could be used in a numismatic or a 

circulating capacity.

Because of the steady increase in demand for all coin 

denominations, including the demand for the Golden Dollar, and the 

Mint’s inability to keep pace, the Mint ceased all commercial 

oriented marketing programs for the coin soon after it was 

introduced.

Due to the downturn in the economy in early 2001, the Mint 

experienced a sudden and dramatic decline (from more than 1 

 

5

The Mint’s practice is to spread its production evenly between facilities to avoid “numismatic rarities.” Numismatic 

rarities result if only a few coins (less than 35 percent of the total) are made in one Mint compared to the other Mints, 

collectors buy the fewer/rarer coins and remove them from circulation.
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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billion in FY 2000 to less than 90 million in FY 2001) in shipments 

of Golden Dollars. And early indications are that shipments of 

Golden Dollars may decline even more in FY 2002. As a result, the 

Mint ended FY 2001 with about 324 million Golden Dollar coins in 

storage, which should satisfy shipments to the FRB for the next 

few years. Thus, the Mint no longer has a need for the single 

barrel burnisher as a backup for the Golden Dollar production 

process.

In summary, we found no evidence that the Mint’s decision to 

procure burnishers was inconsistent with prudent business practice 

or with facts available to management at the time the purchase 

decision was made. Despite the dramatic drop in production 

demand for the Golden Dollar, the Mint still has a need for the dual 

barrel burnishers in the production of dollar coins.

Recommendation

1. The Mint Director should ensure that the Mint reevaluates its 

need for the single barrel burnisher now sitting idle at the 

Philadelphia Mint and determine whether future needs of the 

Mint justify the retention of this asset. If not, the burnisher 

should be properly disposed of.

Management Comments. The Mint stated that a thorough 

evaluation was conducted of its production needs and a 

decision was made to retain the single barrel burnisher. The 

Mint plans to use this burnisher in its Numismatic coin 

production operation at the Philadelphia Mint. 

OIG Comment. We consider this recommendation to have a 

management decision; however, the Mint needs to establish a 

target completion date for installation of the single barrel 

burnisher and for recording final Mint action in the Inventory, 

Tracking and Closure System. 
Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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Concern Surfaced About a Possible Negative Career Impact

A senior management official at the Mint suffered a negative career 

impact because he/she resisted the implementation of the Golden 

Dollar process directed by the Mint.

Our review did not substantiate that the senior management 

official identified in the complaint suffered a negative career 

impact because of alleged resistance to implementing the 

Headquarters directed Golden Dollar production process.

* * * *

We would like to extend our appreciation for the cooperation and 

courtesies extended to our staff during the review. If you have any 

questions, please contact me at (202) 927-5904 or William S. 

Schroeder, Audit Manager, at (202) 927-5419. Major contributors 

to this report are listed in Appendix 3.

Thomas E. Byrnes

Director, Manufacturing Operations
Appendix 1

Objectives, Scope, and Methodology

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

Page 11

Our review objectives were to determine how the Mint handled the 

acquisition and disposition of the machinery in question and 

whether there was merit to the allegations.

Our review included interviews with the Complainant, Mint 

employees at the Mint’s Headquarters in Washington, D.C., and 

the Mint facility’s in Denver, Colorado; and Philadelphia, 

Pennsylvania. Interviews were conducted with plant engineers, 

program and project managers, legal counsel, and die shop 

personnel. We also analyzed documents maintained at the Mint 

Headquarters and the Denver and Philadelphia Mint locations. 

Documents obtained and analyzed during our review included but 

were not limited to purchase justifications, cost evaluations, 

procurement requests, purchase orders and contracts, production 

and inventory records, and demand data. Our fieldwork was 

performed from April 2001 through November 2001. 

We conducted our audit in accordance with generally accepted 

government auditing standards.
Appendix 2

Management Comments

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

Page 12
Appendix 3

Major Contributors To This Report

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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Thomas E. Byrnes, Director, Manufacturing Operations

William S. Schroeder. Audit Manager

Andras Schneider, Auditor
Appendix 4

Report Distribution

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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The Department of the Treasury

Office of Strategic Planning and Evaluations

Office of Accounting and Internal Control

Office of Budget

U.S. Mint

Director

Audit Liaison

Office of Management and Budget

OIG Budget Examiner
Appendix 5

Mint’s Cost Benefit Analysis

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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Purchase of Denver Burnisher

Background

Using a dual barrel burnisher the Philadelphia Mint would not be able to meet the 

projected demand of more than two billion Golden Dollar coins per year. One 

alternative was to ship coin blanks to Canada for burnishing at the Canadian Mint. 

Another alternative was to purchase a second burnisher for the Denver Mint at an 

approximate cost of $900,000. The following assumptions were made by the Mint in 

performing its cost benefit analysis that lead to the procurement of a dual barrel 

burnisher for the Denver Mint:

1. The Golden Dollar would be made at Denver and Philadelphia.

2. The round trip costs of shipping blanks from Philadelphia to either Denver or the 

Canadian Mint would be $7000 per 2 million blanks.

3. The cost to burnish blanks at the Canadian Mint would be .0055 per blank 

($11,000 per 2 million).

4. A total of 2.5 billion coins per year would need to be processed.

The following chart shows the cost benefit calculations made by the Mint and those 

made by the OIG.

 PRODUCTION QUANTITIES 

COST DESCRIPTION 2.5 BILLION(B) 1.8 B * 1.3 B*

BURNISHING $4.1(million) 0.5 0.0

SHIPPING $3.6 3.2 2.2

TOTAL $7.7 3.7 2.2

PURCHASE COST $0.9 0.9 0.9

RETURN ON INVESTMENT 859% 416% 247% 

* We did not find support for making a cost comparison against a potential demand of 2.5 billion coins. 

The highest demand projection we found was for 1.845 billion coins, and a probable net demand of 

1.270 billion. We, therefore, made independent cost benefit calculations for these lower demand 

figures to determine whether they would support a different business decision (i.e. ship excess coin 

blanks to Canada for burnishing and to Denver for stamping or purchase a second dual barrel burnisher 

for the Denver Mint).
Appendix 5

Mint’s Cost Benefit Analysis

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

Page 16

Auditors Note: Any of the three cost benefit analysis presented in the above chart 

would have resulted in a management decision to purchase the dual barrel burnisher 

for Denver instead of shipping burnished coins to Denver from Philadelphia. Under a 

worse case scenario, dollar coin demand would have to be in the 500 million range for 

the project to exceed a 1 year payback, assuming Philadelphia burnished all blanks and 

ships half (250 million) to Denver for minting. 
Appendix 5

Mint’s Cost Benefit Analysis

Unsubstantiated Allegations Regarding the Mint’s Golden Dollar 

Production Process (OIG-02-067)

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Purchase of Leased Burnisher

Background

To meet the Mint’s Golden Dollar production schedule for issuing the new dollar coin 

in January 2000, the Mint leased a single barrel burnisher for its production operations 

at the Philadelphia Mint. This leased burnisher, along with augmenting shipments of 

Golden Dollar blanks to the Canadian Mint for burnishing, was the Mint’s interim 

production solution until a duel barrel burnisher could be built and delivered to the 

Philadelphia Mint.

The following assumptions were made by the Mint in performing its cost benefit 

analysis that lead to the procurement of the single barrel burnisher leased by the 

Philadelphia Mint:

1. The Mint would lose 1 days production capacity per month due to a breakdown 

of equipment

2. The purchase cost of the leased burnisher would be $450,000

PRODUCTION QUANTITIES

COST DESCRIPTION 5.6 MILLION * 4.0 MILLION

SHIPPING COST/MONTH $23,100 $16,500

COST PER YEAR $277,000 $198,000

PURCHASE COST $450,000 $308,043 **

RETURN ON INVESTMENT 62% 64%

* Mint used 5.6 million coins as a daily production figure, but the Philadelphia Mint’s demand was not 

that large, only 4.0 million coins per day (at the 2.5 billion coins per year level)

** Actual cost to mint to break lease and purchase burnisher was $308,043