Audit Report

OIG-20-042

MANUFACTURING AND REVENUE

Mint Controls Over Raw Materials and Coin Exchange 

Programs Need Improvement 

August 18, 2020

Office of Inspector General

Department of the Treasury
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i 

Contents

Audit Report

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

Background.................................................................................................. 6

Circulating Coin Raw Materials................................................... 6

Mint's Raw Material Contracts ................................................... 8 

Mint's Coin Exchange Programs ................................................. 9 

Audit Results..............................................................................................11

Finding 1 Mint Relies Mainly on its Material Suppliers For Raw Materials 

Quality Assurance of Circulating Coins......................................13

Mint Has Not Conducted Regular Reviews of Material Suppliers' 

Quality Management Systems..................................................13

Raw Materials Inspection and Testing is Inconsistent and Not Fully 

Implemented..........................................................................16

Recommendations ..................................................................21

Finding 2 Controls Over the Mint's Coin Exchange Programs Are Deficient..24

Certification Process Needs Improvement.................................. 26 

Mutilated Coin Redemption Program SOP Not Followed............... 28 

Melting of Coins Cannot Be Ensured .........................................33

Recommendations .................................................................. 36

Appendix 1: Objectives, Scope, and Methodology........................................... 39

Appendix 2: Management Response.............................................................. 45

Appendix 3: Major Contributors to This Report............................................... 49

Appendix 4: Report Distribution....................................................................50

Abbreviations

Board Board of Governors of the Federal Reserve System

FRB Federal Reserve Bank

ISO International Standards Organization

JAMES Joint Audit Management Enterprise System

Jarden Jarden Zinc Products, LLC

Mint United States Mint

NCR Non-Conformance Report

Olin Brass Olin Brass, Inc.

NFR Notification of Findings and Recommendations
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) ii

OIG Office of Inspector General

PEF Public Enterprise Fund

PMX PMX Industries, Inc.

PWC PricewaterhouseCoopers LLP 

QMS Quality Management System

Treasury Department of the Treasury

SOP standard operating procedure
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Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 1 

August 18, 2020 

David J. Ryder

Director

United States Mint

This report presents the results of our audit of the United States

Mint’s (Mint) controls over the quality assurance of raw 

materials used in the production of U.S. circulating coinage, 

which are the coins used for everyday transactions in trade and 

commerce and include the penny, nickel, dime and quarter.

Our review included the quality assurance of raw materials that 

the Mint acquires from all its circulating coinage material 

suppliers, as well as the coins returned to the Mint from the 

public and the Board of Governors of the Federal Reserve 

System (Board) that are recycled back into circulating coinage 

raw materials.

The objective of our audit was to determine the adequacy of the 

Mint’s controls over the quality assurance of raw materials, 

including controls over the composition of coins returned 

through the Mint’s coin exchange programs and used in the 

production of circulating coinage.1 This included the review of 

the quality assurance procedures for raw materials prior to the 

minting of circulating coinage. We did not evaluate the Mint’s 

quality assurance controls related to its production of circulating 

coinage. We conducted fieldwork from January 2018 through 

April 2019 with subsequent updates in May 2020. 

To accomplish our objective, we interviewed Mint officials, all 

material suppliers, contractors responsible for the quality 

assurance of raw materials, and Board officials to obtain their 

perspective on the quality of circulating coinage and 

 

1

 The term “coin exchange programs” refers to both the Mint’s Mutilated Coin Redemption 

Program and the uncurrent coin redemption process followed by banks in returning uncurrent 

coins that are worn to the Mint. See the Background section of this report for additional detail.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 2 

involvement with the coin exchange programs. We conducted 

site visits at the Mint’s facilities in Philadelphia, Pennsylvania

and Denver, Colorado, as well as at all of the Mint’s material 

suppliers to observe the quality assurance processes used in the 

inspection and testing of raw materials. Additionally, we 

observed the Mint’s controls over its coin exchange programs 

for damaged and worn coins at one of the Mint’s material 

suppliers. We also reviewed applicable documentation pertaining 

to the quality assurance of raw materials for circulating coins 

and the coin exchange programs including, but not limited to, 

Mint policies and procedures, quality reports, and the material 

suppliers’ performance data and reports. Appendix 1 provides a 

more detailed description of our objective, scope, and 

methodology.

Results in Brief

We found that the Mint and material suppliers have mature 

processes in place which yield minimal quality issues. However, 

we also found that the Mint relies mainly on its material 

suppliers to ensure the quality of the circulating coin raw 

materials. Additionally, the Mint’s inspections and testing to

validate the quality of raw materials were limited and 

inconsistent between the Mint facilities, and there are 

opportunities for the Mint to improve controls over quality.

As part of our audit, we reviewed the Mint’s coin exchange 

programs in which coins are returned and then recycled back 

into raw materials for future coin production. We found the

Mint’s controls over its coin exchange programs were deficient.

The Mint resumed the Mutilated Coin Redemption Program in 

January 2018 without finalizing or following its draft standard 

operating procedures (SOP) or having the capability to 

authenticate coins returned.2 We also found that there were no 

formal procedures over the uncurrent coin redemption process. 

These deficiencies expose the Mint to the risk of paying out 

tens of millions of dollars for non-genuine U.S. coinage, as well 

 

2

 The Mint suspended its Mutilated Coin Redemption Program in 2015. See the Background 

section below for additional detail.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 3 

as not being able to ensure that these coins are being melted, 

as required by law, and recycled.

3

Due to the significance of these deficiencies, we determined it 

was essential to immediately share our findings with Mint 

management. In August 2018, we issued a Notification of 

Findings and Recommendations (NFR) to the Mint, 

recommending the Mint strengthen and develop its procedures 

over mutilated and uncurrent coin redemptions. The 

recommendation included improving its inspection and sampling 

methods along with the use of subject matter experts. 

Furthermore, we recommended that the Mint temporarily 

suspend shipments of mutilated and uncurrent coins to its 

material suppliers until after these improvements were 

implemented. In response to our recommendations, the Mint 

immediately suspended shipments of mutilated and uncurrent 

coins to recyclers and formally suspended the Mutilated Coin 

Redemption Program a year later in July 2019. However, the 

Mint continued its acceptance of uncurrent coins for redemption 

without strengthening and developing procedures, which would 

provide the Mint the ability to authenticate uncurrent coins 

being redeemed. Following our field work, the Mint provided its 

updated and finalized SOPs for both the Mutilated and 

Uncurrent Coin Redemption Programs which the Mint developed 

in response to concerns raised in this audit report. These 

updated SOPs will be reviewed in a future audit.

 

We recommend that the Director of the Mint ensures the Mint: 

1. Conducts regular reviews of the suppliers’ quality systems to 

ensure that the suppliers are acting in the best interest of the 

Mint. This includes regular site visits or periodic reviews of the 

suppliers’ quality system documentation. 

2. Develops and implements SOPs that are consistent among 

Mint facilities to ensure quality assurance processes over 

sampling, inspection, and testing of materials for circulating 

coinage are standardized and documented; and that materials 

 

3

 The Mint’s redemption of uncurrent and mutilated coins is a discretionary service offered and not 

required by law. However under 31 U.S.C. 5120, Obsolete, mutilated, and worn coins and 

currency, U.S. coins withdrawn from circulation, as is done by the Mint through redemptions, are 

required to be melted.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 4 

received meet the specifications required in the contracts and 

by U.S. law.

3. Considers sampling and testing the material after blanking in 

order to assess the material quality throughout the coil.

4

4. Verifies incoming raw material weights to ensure that the 

Mint is receiving the raw materials paid for. 

5. Considers improving raw materials traceability by using a 

unique number to identify each coil rather than a group lot 

number.

6. Strengthens and finalizes SOPs for all coin exchange 

programs before accepting any redemptions. This would include 

using tests and subject matter experts to authenticate the 

genuineness of coins redeemed, as well as working with the 

Board to develop appropriate interagency procedures to assure 

the integrity of the coin redemption process for uncurrent coins.

7. Follows all SOPs, including but not limited to, procedures 

related to sampling, inspecting, and testing coins; and

appropriately documenting redemptions. Additionally, ensure 

that adequate background investigations are conducted on bulk 

redeemers and decisions to allow participation into the 

Mutilated Coin Redemption Program are based on relevant data 

from the background investigation. The Mint should add criteria 

such as obtaining financial statements for analyses of the 

potential bulk redeemers and performing site visits at their 

premises as part of the background investigation process for 

entry into the program. The Mint should document how this 

criteria was met, and if these steps were not performed, the 

reasons why.

8. Ensures that all coins returned to the Mint and removed from 

circulation are destroyed timely and sufficiently accounted for. 

In a written response, Mint management concurred with our 

eight recommendations and outlined the corrective actions, 

planned or taken, to address our recommendations. Specifically, 

 

4

 The term blanking refers to the process that makes the rough shape of a coin. See the 

Background section of this report for additional detail.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 5 

in response to our first recommendation, the Mint has 

conducted, and continues to conduct, regular reviews of the 

suppliers' quality systems that include regular site visits. In 

response to recommendation number 2, the Mint documented 

and standardized the types of testing conducted on materials 

for circulating coinage across the Philadelphia and Denver Mint

facilities. In response to recommendation number 3, the Mint 

plans to implement coin blank bend testing in fiscal year 2020.

In response to recommendation number 4, the Mint plans to 

implement procedures to verify incoming raw material weights 

through statistically appropriate monitoring processes. In 

response to recommendation number 5, the Mint will consider 

whether assigning a unique number for traceability up to the 

blanking press when coil identity is lost by design would be a 

cost-effective improvement to the Mint's current practice of 

tracing coils to the blanking press by their original coil and lot 

identifications as given by the suppliers. In response to 

recommendation number 6, the Mint has taken actions that 

include finalizing SOPs; organizing a scientific staff and building 

a more robust anti-counterfeit capability to improve the Mint's 

capacity to identify suspected counterfeit coins; and developing 

procedures to support interagency partners while complying 

with Mint requirements and good governance. In response to 

recommendation number 7, the Mint stated it addressed the 

recommendation for sampling, inspecting, testing, and 

documenting redemptions in its revised SOP and will assess the 

resource requirements to conduct robust analysis of potential 

bulk redeemers and document its decision. Lastly, for 

recommendation number 8, the Mint stated that the timely 

destruction and accounting of all coins returned to the Mint is in 

its revised SOP. The Mint’s management response, in its 

entirety, is included in appendix 2.

Management’s response, and corrective actions taken and 

planned, meet the intent of our recommendations. Management 

will need to record the estimated date for completing its 

planned corrective actions as well as the actual date of 

completed corrective actions in the Joint Audit Management 

Enterprise System (JAMES), Treasury’s audit recommendation 

tracking system. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 6 

Additionally, we also plan to conduct a future audit to assess 

the effectiveness of the Mint’s corrective actions implemented. 

Background 

As the sole manufacturer of legal tender coinage for the United 

States, the efficient and effective production and distribution of 

circulating coins is the Mint’s highest priority.

5 The Mint 

manufactures billions of circulating coins annually at its facilities 

in Philadelphia, Pennsylvania and Denver, Colorado.6 The Mint’s

circulating coin operations are funded by the supply and sale of 

circulating coins to the Federal Reserve Banks (FRB).7 The FRBs 

issue the circulating coins on behalf of the Mint to the public 

and business community through depository institutions. In 

fiscal year 2018, the Mint supplied approximately 13.7 billion 

circulating coins to the FRBs, which generated $321 million in 

seigniorage.

8

Circulating Coin Raw Materials

A circulating coin’s raw material composition is dependent upon 

the coin’s denomination and is specified by U.S. law.9

Manufacturing billions of circulating coins annually requires the 

Mint to purchase hundreds of millions of pounds of raw 

materials which are supplied in one of two forms.10 The first 

 

5

 Circulating coins, also referred to as circulating coinage, are the coins used for everyday 

transactions in trade and commerce and include the penny, nickel, dime and quarter. 6

 The Mint operates a total of six facilities which include West Point, New York; San Francisco, 

California; Fort Knox, Kentucky; Philadelphia, Pennsylvania; Denver, Colorado; and its 

headquarters in Washington, DC. 7

 Since 1996, the Mint has operated under the United States Mint’s Public Enterprise Fund (PEF) 

authorized under Public Law 104-52 (31 U.S.C. 5136) and not a congressional appropriation.

Mint operations and programs are paid out of the PEF. Revenues determined to be in excess of 

the amount required by the PEF are transferred to the Department of the Treasury (Treasury)

General Fund to help finance national debt. 8

 The Mint receives the face value of the circulating coins delivered to FRBs. Seigniorage is the 

profit, which is the difference between the cost of making a coin and its face value. 9

 31 U.S.C. 5112, Denominations, specifications, and design of coins, prescribes the material 

requirements for circulating coins, including the material alloy to be used for each denomination

and the physical dimensions such as weight, diameter and thickness. 10 The Mint obtains its raw materials for circulating coins from three major suppliers using 5-year 

indefinite quantity contracts.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 7 

type is in the form of an alloy strip coil, which is about 13 

inches wide, 1,500 feet long, and weighs about 6,000 

pounds.11 Figure 1 below shows a coil.

Figure 1: Raw Material Coil

Source: Office of Inspector General (OIG) photograph of a circulating 

coin raw material alloy strip coil on a forktruck at the Denver Mint 

warehouse.

As part of the Mint’s manufacturing process, coin blanks are 

punched out of the coils. This is the process for all circulating 

coin denominations except for the penny, for which the Mint 

purchases raw materials already in the form of coin blanks.12

Figure 2 below displays coin blanks that have been punched 

from a coil.

 

11 Alloy is a metal made by combining two or more metallic elements, which provides greater 

strength and resistance to corrosion. 12 Penny coin blanks are supplied to the Mint in tubs. A tub contains approximately 860,000 penny 

coin blanks and weighs about 4,700 pounds.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

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Figure 2: Blanks Punched Out of a Raw Material Coil

 Source: Image obtained from a March 2016 Mint press release.

Approximately 80 percent of material from a coil is utilized 

during the process when coin blanks are punched out of a 

coil.13 The remaining 20 percent becomes production scrap 

material.14 Figure 3 below displays scrap material which is 

produced after coin blanks are punched out of a coil.

Figure 3: Production Scrap Material

Source: Image provided by the Mint.

Mint’s Raw Material Contracts

The Mint’s contracts with its material suppliers specify that the 

composition of raw materials provided for circulating coins meet 

the requirements prescribed under U.S. law, and include specific 

dimensional, thickness, and other physical requirements for 

 

13 OIG analysis based on a 3-year average of Mint coil purchases and coil scrap material figures. 14 Production scrap material includes the excess material left from punching coin blanks from coils 

referred to as web scrap, as well as condemned coins or blanks rejected during the 

manufacturing process for various quality reasons.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 9 

which the Mint conducts various inspections and tests to 

assess the raw materials conformity. These include:

• visual inspections for defects and damage;

• dimensional and thickness inspections with a micrometer;

and 

• hardness testing and chemical analysis. 

Additionally, the Mint’s contracts require its material suppliers 

to have a quality control process in place as a means of helping 

to ensure quality standards will be met. Another component of 

the Mint’s contracts is the requirement that material suppliers 

accept and recycle scrap material generated during the 

complete life-cycle of a coin.15 The scrap material is to be 

recycled back into the raw materials the Mint purchases to

produce new circulating coinage. The scrap material includes 

production scrap generated during the Mint’s circulating coin 

manufacturing process, as well as coins previously issued into 

circulation which have been returned to the Mint through the 

Mint’s coin exchange programs.

Mint's Coin Exchange Programs

The Mint takes possession of circulating U.S. coins through

redemptions of uncurrent and mutilated coins. The Mint 

receives uncurrent coins from FRBs and mutilated coins from 

the public. Uncurrent coins are worn coins, but are machine 

countable and their genuineness and denominations are still 

recognizable. FRBs accumulate uncurrent coins, which the Mint 

collects and compiles at the Mint’s Philadelphia facility before 

the uncurrent coins are sent to the Mint’s material suppliers to 

be melted and recycled back into raw materials.16

Mutilated coins are bent or partial coins that are not machine 

countable, but their genuineness and denominations are still 

recognizable. The Mint operates the Mutilated Coin Redemption 

Program, which allows individuals and businesses to redeem 

 

15 The Mint receives a credit, based on market scrap value price, from material suppliers for scrap 

material returned. 16 The Mint credits FRB the face value of uncurrent coins that FRB redeemed.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 10

mutilated coins for reimbursement.17 Mutilated coins are 

received, inspected, and sampled by the Mint at either its 

Philadelphia facility or at its material suppliers. The mutilated 

coin inspection and sampling location is determined by the 

weight amount of mutilated coins being redeemed.18 The Mint 

incurs a loss on the Mutilated Coin Redemption Program 

because the Mint pays face value for the redeemed coins, but 

then only receives scrap value for the coins from its material 

suppliers when the coins are recycled. 

In 2014, the last full year before the Mutilated Coin Redemption 

Program was suspended, the Mint paid approximately 

$30 million to redeemers for 1.5 million pounds of mutilated 

dimes and quarters which were then sold for scrap to recyclers. 

The historical difference between the scrap value and the 

redemption price of dimes and quarters is $16 per pound; and 

as such, the Mint incurred a loss of approximately $24 million.19

In November 2015, the Mint suspended its Mutilated Coin 

Redemption Program to develop additional safeguards because 

of possible unlawful activity. To assist the Mint in this process, 

the Mint awarded task orders to PricewaterhouseCoopers LLP 

(PWC), who was already working with the Mint under a 5-year 

 

17 31 CFR part 100.11, Request for examination of bent or partial coin for possible redemption,

section (b), defines (1) bent coins as U.S. coins which are bent or deformed so as to preclude 

normal machine counting but which are readily and clearly identifiable as to genuineness and 

denomination; and (2) partial coins as U.S. coins which are not whole; partial coins must be 

readily and clearly identifiable as to genuineness and denomination. 18 Individuals and businesses which redeem in excess of 5,000 pounds of coins at a time ship the 

coins directly to the Mint’s material supplier after receiving authorization with instructions from 

the Mint. Redemptions under 5,000 pounds are sent to the Mint’s Philadelphia facility where 

they are combined with other redeemed coins and then sent to the Mint’s material supplier. 19 Coin redemptions are paid on a weight-equivalent formula, which results in an amount paid by 

the Mint that is equal to the coins’ face values. A 2016 assessment conducted by 

PricewaterhouseCoopers LLP (PWC) for the Mint stated that the historical difference between the 

scrap value and the redemption price of the clad coins, which are dimes and quarters 

denominations, is $16 per pound. Additionally, PWC found that historically over 70 percent of 

coins redeemed are clad denominations. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 11

contract.

20 According to the Mint’s statement of work for PWC, 

it was suspected that there was a fraudulent scheme which 

involved the production of counterfeit U.S. coins at foreign 

factories. These coins are mutilated and imported into the 

United States and then fraudulently submitted to the Mint for 

cash reimbursement through the Mutilated Coin Redemption 

Program. In January 2018, the Mint resumed the Mutilated Coin 

Redemption Program after making revisions that were intended 

to update and improve the integrity of the mutilated coin 

redemption process.21

Audit Results

We found that the Mint and its material suppliers have mature 

processes in place which yield minimal quality issues. However, 

we also found that the Mint relies mainly on its suppliers’ 

systems and certifications to ensure the quality of raw 

materials. Additionally, the inspections and testing conducted 

by the Mint to validate the quality of incoming raw materials

were limited and inconsistent between Mint facilities. We also 

noted opportunities for the Mint to improve controls over quality 

exist. In addition, we looked at the materials that were returned 

through the Mint’s coin exchange programs, as these materials 

are used by the Mint’s material suppliers to fabricate new raw 

materials used to make U.S. circulating coinage. We found that 

the controls over the Mint’s Mutilated Coin Redemption Program 

and the uncurrent coin redemption process are deficient.

Specifically, as discussed above, in November 2015, the Mint 

suspended its Mutilated Coin Redemption Program to develop 

additional safeguards because of possible unlawful activity. 

Subsequently, in January 2018, the Mint resumed the Mutilated 

 

20 Three task orders were added to the existing contract to address the Mint’s concerns related to 

the Mutilated Coin Redemption Program. PWC’s U.S. public sector business, which was 

responsible for the task orders, was renamed Guidehouse after being acquired by Veritas Capital 

in May 2018 and are referred to as PWC throughout this report. The initial contract was to 

provide an annual assessment of the Mint’s internal control over financial reporting in accordance 

with the Office of Management and Budget Circular A-123, Management's Responsibility for 

Enterprise Risk Management and Internal Control, and financial advisory services. 21 Department of the Treasury, United States Mint, Exchange of Coin, Final Rule, Federal Register,

Vol. 82, No. 243, (December 20, 2017) page 60309-60312. 

https://www.gpo.gov/fdsys/pkg/FR-2017-12-20/pdf/2017-27026.pdf
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

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Coin Redemption Program after making revisions that were 

intended to update and improve the integrity of the mutilated 

coin redemption process. However, our review found that the 

Mint resumed the Mutilated Coin Redemption Program without

finalizing or following a draft SOP in place over the program. 

Although the SOP acceptance criteria identifies counterfeit 

coins as an unacceptable item, the draft SOP failed to require 

any tests or use of subject matter experts to make this 

determination. As a result, we found the Mint processed the 

mutilated coin redemptions without the capability to 

authenticate the genuineness of the coins. 

Additionally, we found that there were no formal SOPs over the 

uncurrent coin redemption process. We found that the 

genuineness and complete melting of coins exchanged could not 

be assured. These control deficiencies exposed the Mint to the 

risk of paying out tens of millions of dollars for non-genuine 

U.S. coinage, as well as not being able to ensure that coins 

withdrawn from circulation are melted.

Due to the significance of these deficiencies, we determined it 

was essential to immediately share our findings with Mint 

management. In August 2018, we issued a NFR to the Mint, 

recommending the Mint strengthen and develop its procedures 

over mutilated and uncurrent coin redemptions. The 

recommendation included improving its inspection and sampling 

methods along with the use of subject matter experts. 

Furthermore, we recommended that the Mint temporarily 

suspend shipments of mutilated and uncurrent coins to its 

material suppliers until after these improvements were 

implemented. In response to our recommendations, the Mint 

immediately suspended mutilated and uncurrent shipments to 

recyclers and, in July 2019, officially, once again, suspended 

the Mutilated Coin Redemption Program. However, the Mint 

continued its acceptance of uncurrent coins for redemption 

without strengthening and developing procedures. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

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Finding 1 Mint Relies Mainly on its Material Suppliers For Raw 

Materials Quality Assurance of Circulating Coins

We found that the Mint and material suppliers have mature 

processes in place which yield minimal quality issues; however, 

controls can be improved. We also found that the Mint relies 

mainly on the suppliers’ Quality Management System (QMS) 

and International Standards Organization (ISO) certification to 

ensure the quality of the raw materials.

22 Additionally, the 

inspection and testing conducted by the Mint to validate the 

quality of incoming raw materials is limited and inconsistent 

between Mint facilities. The Mint has two primary controls to 

ensure the quality of raw materials for circulating coins.23 First, 

the Mint requires that its material suppliers have a QMS to help 

ensure materials supplied to the Mint meet the contract 

standards. Second, the Mint inspects and tests circulating coin 

raw materials. 

Mint Has Not Conducted Regular Reviews of Material 

Suppliers’ Quality Management Systems

We found that all of the Mint’s circulating coin material 

suppliers had a QMS in place and were ISO certified.24 Included 

in the material suppliers’ QMSs were SOPs, standard data 

keeping, routine operator inspections, automated controls, and 

designated quality specialists. The material suppliers’ QMSs also 

included the use of laboratories to conduct testing on chemical 

composition and the physical characteristics to ensure raw 

materials meet Mint contract specifications. Mint officials and 

its material suppliers told us that the material suppliers’ QMSs 

 

22 A QMS is a formalized quality system that documents processes, procedures, and responsibilities 

and helps to coordinate and direct activities to meet customer requirements. ISO 9001 is an

international standard which defines standardized quality assurance processes based on industry 

best practices. ISO 9001 is the most prominent approach in specifying requirements for QMS. 23 According to GAO, Standards for Internal Control in the Federal Government (GAO-14-704G; 

issued Sep. 2014), a control comprises the plans, methods, policies, and procedures used to 

fulfill the mission, strategic plan, goals, and objectives of an entity. 24 An ISO 9001 recertification audit is done every 3 years by an independent party. Additionally, 

annual ISO surveillance audits occur each year and there are internal auditors, who are personnel 

of the suppliers, used for ongoing monitoring.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

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were operating as intended and that quality issues with raw 

materials occurred infrequently. 

To monitor material suppliers’ performance, the Mint uses a 

Quality Scorecard Program. The intent of the program is to 

measure the performance of material suppliers in meeting 

contract requirements in four areas, including: 

• QMS assessments of the material suppliers, 

• Raw material quality assessments,

25

• Timeliness and completion of raw material delivery, and

• Corrective Action/Preventive Action Program.

26

We found that the Mint monitored its material suppliers’

performance in all areas except for the QMS assessments. As a 

result, the Mint relied on its material suppliers’ QMSs to ensure 

raw materials quality without performing QMS assessments. 

When we asked for the date the Mint had last conducted a 

QMS assessment, which includes a material supplier site visit or 

a documentation review, neither the Mint nor its material 

suppliers could provide a time when one had been conducted. In 

fact, Mint officials and material suppliers could not recall any 

on-site inspections or reviews of the material suppliers’ QMSs 

by the Mint within the last 5 years. According to the Mint’s 

Supplier Scorecard SOP, QMS assessments are completed 

during the initial contract evaluation for each supplier and as 

determined necessary. The SOP also states that supplier 

certification to ISO standards may preclude the need for a QMS 

assessment. 

The Mint’s Chief of Quality told us that the Mint had travel 

restrictions due to budget constraints and has not been able to 

conduct inspections at material suppliers in a number of years. 

Additionally, we were told by Mint officials that they did not 

feel the need to conduct QMS assessments because there were 

minimal raw material quality issues and the material suppliers’ 

 

25 Raw materials quality is monitored by the Mint though sampling incoming raw materials. Quality 

can also be determined indirectly during the manufacturing process if issues are found. 26 The Corrective Action/Preventive Action Program tracks issues, including material quality issues 

and the corresponding corrective actions until an issue is resolved. This includes issues identified 

in Non-Conformance Reports (NCR).
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

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ISO certifications provide sufficient evidence that there are 

adequate quality assurance processes in place. Furthermore, the 

Mint could request the material suppliers’ QMS documentation, 

if needed.

Based on our analysis, we concur that there were relatively few 

material quality issues of the coils, of which none identified 

were related to raw material chemical composition of the coils. 

The most problematic material quality issue experienced was 

delamination.27 From fiscal years 2015 through 2017, 46 out of 

80 Non-Conformance Reports (NCR), or approximately 60 

percent, related to delamination.28 Figure 4 below displays a 

delaminated segment of coil. 

Figure 4: A Segment of Delaminated Coil

Source: Photograph from a Mint April 2017 internal quality report. 

 

27 Delamination is the separation of the outer layer of a coin, or blank, due to incomplete bonding or 

impurities and is more likely to occur when the alloy is subjected to stress as during the process 

when a coin is struck. According to Mint officials, delamination can occur in any part of the coil 

and predominately occurs in quarters, as it is a clad alloy. 28 A NCR is issued when a quality problem is identified. Our analysis identified that from fiscal years 

2015 through 2017, the Mint received approximately 43,000 coils and issued 80 NCRs related 

to raw materials quality. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

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For penny blanks, we also found there were relatively few 

material quality issues, which mostly related to staining or 

spotting on the surface of the penny blanks.29

While we concur with the Mint that a small amount of raw 

material quality issues may indicate that the raw material 

suppliers’ QMSs are operating as intended, we also believe that 

regular site visits to monitor the suppliers’ quality systems or 

reviews of QMS documentation by Mint personnel are important 

management practices to ensure the continued quality of raw 

materials. In addition, the Mint should be actively involved in 

the review of quality requirements and practices of its material

suppliers that the Mint deems are important, which may not be 

included in the ISO 9001 standards that the material suppliers 

are following. 

Raw Materials Inspection and Testing is Inconsistent 

and Not Fully Implemented

During our review, we found that the Mint inspects and tests 

circulating coin raw materials at both its Philadelphia and 

Denver facilities; however, not all circulating coin raw materials 

are inspected and tested prior to being used in production. We 

also found that the Mint could not trace quality issues identified 

in production back to the coil from which the coins originated. 

Additionally, we found that the Mint’s inspection and testing of 

raw materials, including documentation and procedures between 

Mint facilities, was inconsistent or absent and that neither Mint 

facility validates the quantity of circulating coin raw materials 

received.

Raw Materials Quality Not Validated 

According to Mint officials, quality assurance of circulating coin 

raw materials begins prior to the shipment of the raw material 

coil by the material supplier. A sample from the coil, called a 

 

29 Penny blanks have a zinc-copper alloy exterior which is prone to staining or spotting when 

exposed to high moisture or humidity. The Mint identifies these issues through visual inspections. 

Our review of the Mint’s NCRs from fiscal years 2015 through 2017 showed that the Mint had 

eight NCRs related to material quality of the penny blanks. The Mint received approximately 

32,000 tubs of penny blanks during the same period.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 17

coupon, is sent to the respective Mint facility which plans to 

use the coil in the production of coins.30 We were told by Mint 

procurement and quality officials that the coupons are tested 

against a number of parameters that include, among other

items, testing for delamination, physical dimensions, and 

chemical analysis to assure material suppliers are adhering to 

the contract. We were told by Mint officials that the coil 

shipment to the Mint does not proceed if the coupon does not 

pass the Mint’s testing. Additionally, a visual inspection of the 

coil for damage of raw material is conducted during the receipt 

at Mint facilities.31 Figure 5 below displays a coupon in which 

the alloy had separated and failed the delamination test.

32 

Figure 5: A Delaminated Coupon

Source: Mint photograph from a September 2015 Mint internal 

quality report.

We reviewed the Mint’s raw materials quality assurance 

procedures and documentation, and spoke to staff responsible

in each facility for coupon testing. We found that, despite 

Mint’s procedures requiring all coupons to be tested, most of

 

30 Material suppliers are contractually obligated to send a small sample, the coupon, cut from each 

coil in advance of the coil shipment for testing. Each coupon is labeled with an identification 

number by the material supplier so it can be traced back to the respective coil from which it 

originated. 31 In addition to testing coupons, the Mint employs various automated controls and has regular 

operator checks and designated quality assurance specialists who conduct various forms of coin 

testing during production. Observations are logged and material issues will result in a NCR to the 

material supplier. 32 A delamination test, also known as a bend test, bends the coupon in a 90 degree angle. The 

coupon can break in half as seen in figure 4, but the material should not separate, which this 

picture displays.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 18

the coupons were not tested. Our analysis found that the Mint 

only documented tests for about 13 percent of the coupons.

33

Additionally, most of the coupons were tested a week after the 

coil was received by the Mint.

Philadelphia Mint officials told us that they test about 1 out of 

every 6 coupons received. According to Philadelphia Mint 

officials, the number of coupons tested has decreased because 

the quantity of quality issues found has decreased.

34 Denver 

Mint officials told us that all coupons were tested. However this 

could not be substantiated because not all the test results were 

recorded. We observed a Denver Quality Specialist test coupons 

for a shipment of eight coils, in which one coupon failed the 

thickness test. The system being used to record coupon testing 

displayed a single entry on each date going back months when 

there should be evidence of multiple data entries on each day.

When we asked the reason for not recording all coupon testing 

data, we were told that there may be some different processes 

used between different shifts at the Denver facility, resulting in 

the test data being recorded differently.

GAO Standards for Internal Controls in the Federal Government

calls for managers to clearly document internal controls and all 

transactions and other significant events. Documentation and 

records should be properly managed and maintained.35

Additionally, the Federal Records Act requires each federal 

agency to make and preserve records necessary to document 

the agency’s policies, decisions, procedures, and essential 

transactions.36

We believe that the Mint should adhere to its testing procedures 

and document the results of those tests accordingly to ensure 

 

33 OIG analysis is based upon total coils received and total number of coupons received in 2017. 

The Mint tested approximately 1,700 coupons for 12,800 coils, which is approximately 13 

percent. 34 Material suppliers typically send six to eight coils per truckload to the Mint facilities due to road 

weight limitations. Correspondingly, the Mint receives six to eight coupons at a time representing 

samples from the upcoming coils to be shipped. 35 GAO, Standards for Internal Control in the Federal Government (GAO-14-704G; issued Sep. 

2014). 36 44 U.S.C. 3101, Records management by agency heads; general duties. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 19

that testing is conducted and the results of these tests are 

recorded. 

Defects Found in Production Not Traceable Back to Raw 

Materials

Our review of the Mint’s sampling data, receiving records, and 

production logs determined that the Mint is unable to trace all 

production defects back to the specific coils where the defects 

originate. We found that this is due to the Mint not using a 

unique number to identify each coil, but instead identifying coils 

in a group lot number. This prevents the Mint from determining

the source of quality issues which makes quality control more 

difficult and may result in the Mint putting bad materials into 

production. According to Treasury Directive 80-05, Department 

of the Treasury Records Management, all Treasury bureaus are 

to establish adequate and proper documentation of their 

functions, policy decisions, procedures, and essential 

transactions in a manner that promotes accountability and 

establishes a historical record.37

Testing and Inspection Procedures Not Consistent Between 

Facilities or Absent

We found that policies and procedures for testing were not 

consistent between each facility, which resulted in not all tests 

being performed and logged for each coupon tested. Although 

both facilities tested some coupons for physical characteristics 

such as hardness and thickness, the following tests were not 

consistent or documented:

• Philadelphia Mint did not conduct delamination testing on 

coupons. 

• Denver Mint officials stated coupons are tested for 

delamination, but they did not document the results. 

 

37 Treasury Directive 80-05, Department of the Treasury Records Management (June 26, 2002), 

was superseded by a revised version dated January 2018; however, the sections and 

requirements referred to in the document are still in effect due to the Federal Records Act (44 

U.S.C. 3101 et. Seq.).
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 20

• Denver Mint did not conduct chemical analysis on the 

coupons.

38

• At the time of our May 2018 site visit to the Philadelphia 

facility, we found chemical analysis testing had been 

suspended in January 2018 due to equipment failure and 

had not resumed after replacement equipment was onsite. 

• Philadelphia lacked formal written procedures over penny 

blank inspection and testing.

39

According to GAO’s Standards for Internal Controls in the 

Federal Government, management is responsible for designing 

policies and procedures and building them in as an integral part 

of the entity’s operations.

Mint officials told us that the overall processes used to produce 

and test raw materials were mature and yielded minimal quality 

issues. In addition, quality issues could be found in production 

through automated controls, as well as operator tests and 

quality teams who inspect coins throughout the Mint’s 

production process. 

Though raw material issues are minimal, it is good management 

practice to ensure the controls over the inspection and testing

of raw materials are formalized and consistent between facilities 

to safeguard the quality of circulating coin raw materials 

provided to the Mint. Additionally, the Mint should consider 

conducting periodic testing of the blanks produced by the Mint 

for physical specifications such thickness, weight, and clad 

strength. Mint officials and the material suppliers stated that 

delamination could occur at any place in the coil. Testing the 

blanks would help ensure that the quality is uniform throughout 

the coil.

 

38 According to a Mint internal memo, the Denver facility suspended chemical analysis on the 

coupons’ chemical composition in 2003. During that time, a cost benefit analysis concluded that 

testing of the alloy composition was no longer necessary since no alloy composition deviations 

had been found, the supplier tests are available for audit upon request, and the suppliers were 

ISO certified. 39 As penny coin blanks are supplied to the Mint, penny coin blank sampling consists of selecting 

800 penny blanks a week from a single tub where a visual inspection and weight test is 

conducted after which the diameter and edge thickness of ten penny coin blanks are inspected 

and a hardness test conducted.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 21

Raw Material Weights Not Verified

We found that neither Philadelphia nor Denver have procedures 

for verifying raw material weights. The Mint pays approximately 

$400 million annually for circulating coin raw materials, which 

is based on the weight. However, we found that circulating coin 

raw materials are received and put into inventory without 

verifying the accuracy of the weight. We were told by Mint 

officials that they rely on the weight provided by the material 

suppliers in the shipping information and discrepancies are 

adjusted during the Mint’s annual physical inventory. 

GAO’s Best Practices in Achieving Consistent, Accurate 

Physical Counts of Inventory and Related Property states that 

there are many factors that can cause the record of on-hand 

inventory to differ from the physical quantity counted.40 The 

lack of reliable information impairs the government’s ability to 

safeguard its assets, among other things, from theft, loss or 

mismanagement. Based on the results of a Mint sample of 20 

coils weighed during its 2018 analysis, we believe not verifying 

raw material weights may result in overpaying for raw 

materials.41

Recommendations

We recommend that the Mint Director ensures the Mint: 

1. Conducts regular reviews of the suppliers’ quality systems to 

ensure that they are acting in the best interest of the Mint. 

This includes regular site visits or periodic reviews of the 

suppliers’ quality system documentation.

 

40 GAO, Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related 

Property (GAO-02-477G; issued March 2002). 41 Our conclusion is based on the results of a Mint sample of 20 coils weighed during 2018. The 

sample showed that 14 out of 20 coils, or 70 percent, weighed an average of 11 pounds less 

than the material suppliers stated weight. The Philadelphia and Denver facilities received a 

combined total of approximately 12,000 coils during 2017, which could result in a significant 

amount of overpayments if these coils are consistently lower in weight than the stated weight on 

the invoice. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 22

Management Response

Management concurred with the recommendation. Management 

stated that the Mint has conducted, and continues to conduct, 

regular reviews of the suppliers' quality systems that include 

regular site visits. Management further stated that from fiscal 

years 2013 to 2015, the Mint conducted five quality site visits

and reviews at the suppliers. Management also stated that this 

was followed by a two-year gap in visits; however, nonconforming material notifications and corrections continued. The 

Mint also increased supplier reviews and visits with four visits in 

fiscal year 2018 and five visits in fiscal year 2019. The focus of 

these visits has been on supplier correction actions and Quality 

Management System records. Supplier reviews are planned for 

fiscal year 2020. 

OIG Comment

Management’s response and corrective actions, planned and 

taken, meet the intent of our recommendation. Management 

will need to record the estimated dates for completing its 

planned corrective actions as well as the actual dates of 

completed corrective actions in JAMES, Treasury’s audit 

recommendation tracking system.

2. Develops and implements SOPs that are consistent among 

Mint facilities to ensure quality assurance processes over 

sampling, inspection, and testing of materials for circulating 

coinage are standardized and documented; and that 

materials received meet the specifications required in the 

contracts and by U.S. law.

Management Response

Management concurred with the recommendation. Management 

stated that the Mint documented and standardized the types of 

testing conducted on materials for circulating coinage across 

the Philadelphia and Denver Mint facilities. All coil coupons are 

now tested and the Philadelphia facility restarted penny blank 

sampling in fiscal year 2018. Management also stated that the 

Mint’s quality assurance strategy seeks to reduce supplier 

delaminations during the supplier’s production while improving 

quality control with more robust sampling. As to the Mint not 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 23

testing all raw material, Management stated that sampling is a 

function of risk management and problem detection and that it 

is not mathematically reasonable to test everything.

OIG Comment

Management’s response and corrective actions taken meet the 

intent of our recommendation. Management will need to record

the actual dates of completed corrective actions in JAMES, 

Treasury’s audit recommendation tracking system.

3. Considers sampling and testing the material after blanking in 

order to assess the material quality throughout the coil. 

Management Response

Management concurred with the recommendation. Management 

stated that the Mint will implement coin blank bend testing in

fiscal year 2020. The Mint currently monitors the blanking of 

the coil by checking the thickness and diameter.

OIG Comment

Management’s response and planned corrective action meet the 

intent of our recommendation. Management will need to record 

the estimated date for completing its planned corrective action 

in JAMES, Treasury’s audit recommendation tracking system.

4. Verifies incoming raw material weights to ensure that the 

Mint is receiving the raw materials paid for. 

Management Response

Management concurred with the recommendation. Management 

stated that the Mint will implement procedures to verify 

incoming raw material weights through statistically appropriate 

monitoring processes. Management also stated that the Mint 

will continue to monitor finished coin, bulk bag weights, and 

count data to evaluate weight variances in the inventory to 

protect the Mint’s working capital.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 24

OIG Comment

Management’s response and planned corrective action meet the 

intent of our recommendation. Management will need to record 

the estimated date for completing its planned corrective action 

in JAMES, Treasury’s audit recommendation tracking system.

5. Considers improving raw materials traceability by using a 

unique number to identify each coil rather than a group lot 

number. 

Management Response

Management concurred with the recommendation up to the 

blanking press when coil identity is lost by design. Management 

stated that the Mint currently does accurately trace coils to the

blanking press by their original coil and lot identifications as 

given by the suppliers. The Mint uses these identifications to 

contain and control non-conforming material as needed. 

Accordingly, Management stated that the Mint will consider 

whether assigning a unique number would be a cost-effective 

improvement to its current practice.

OIG Comment

Management’s response and planned corrective action meet the 

intent of our recommendation. Management will need to record 

the estimated date for completing its planned corrective action

in JAMES, Treasury’s audit recommendation tracking system.

Finding 2 Controls Over the Mint’s Coin Exchange Programs Are 

Deficient

We found that the controls over the Mint’s Mutilated Coin 

Redemption Program and the uncurrent coin redemption process 

were deficient. Additionally, we found that the Mint resumed

the Mutilated Coin Redemption Program without finalizing or 

following a draft SOP in place over the program. Specifically, 

although the SOP acceptance criteria identifies counterfeit coins 

as an unacceptable item, the draft SOP failed to require any 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 25

tests or use of subject matter experts to make this 

determination. 

As a result, we found the Mint processed the mutilated coin 

redemptions without the capability to authenticate the

genuineness of the coins. We also found that there were no 

formal SOPs over the uncurrent coin redemption process. As a 

result of these deficiencies, the genuineness and recycling of 

coins redeemed through the Mint’s coin exchange programs 

could not be assured. These deficiencies expose the Mint to the 

risk of paying out tens of millions of dollars for non-genuine 

U.S. coinage, as well as not being able to ensure that these 

coins are being melted and recycled.42 

Due to the significance of these deficiencies, we determined it 

was essential to immediately share our findings with Mint 

management. In August 2018, we issued a NFR to the Mint 

recommending the Mint strengthen and develop its procedures 

over mutilated and uncurrent coin redemptions. The 

recommendation included improving its inspection and sampling 

methods along with the use of subject matter experts. 

Furthermore, we recommended that the Mint temporarily 

suspend shipments of mutilated and uncurrent coins to its 

material suppliers until after these improvements were 

implemented. In response to our recommendations, the Mint 

suspended mutilated and uncurrent shipments to recyclers until 

all SOPs are updated and personnel are trained. The Mint

formally suspended the Mutilated Coin Redemption Program 

again in July 2019.

43 However, the Mint continued accepting 

uncurrent coins for redemption without strengthening and 

developing procedures to ensure its ability to authenticate 

uncurrent coins redeemed. 

 

42 Following completion of OIG fieldwork on this audit, the Mint provided updated and finalized 

SOPs for both its Mutilated and Uncurrent Coin Redemption Programs. These SOPs were not 

reviewed as part of this audit and will be reviewed in a future audit. 43 Department of the Treasury, United States Mint, Suspension of Bent and Partial Coin Exchange 

by United States Mint, Notice, Federal Register, Vol. 84, No. 140, (July 22, 2019) page 35181. 

https://www.govinfo.gov/content/pkg/FR-2019-07-22/pdf/2019-15490.pdf. The Mint announced 

the second suspension of the Mutilated Coin Redemption Program. The Mint had initially 

suspended this program in November 2015.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 26

Certification Process Needs Improvement

Following the program’s initial suspension in 2015, the Mint 

resumed the Mutilated Coin Redemption Program in January 

2018 after implementing revisions aimed to improve security 

and minimize the potential for fraudulent activity, such as the 

redemption of non-genuine U.S. coinage. This included the 

development of a draft SOP, which according to Mint officials, 

contains two primary controls to strengthen the program. The 

two controls include a participant certification process and

sampling to authenticate mutilated coin redemptions to reduce 

the risk of accepting non-genuine U.S. coinage. 

Specifically, participants that redeem over 5,000 pounds of 

mutilated coins annually are called bulk redeemers and require a 

certification, which is a background investigation, to participate 

in the program.44 The Mint’s draft SOP calls for one of two 

levels of certification based upon the redemption amount. A 

greater level of due diligence in the background investigation is 

to be conducted for higher certification levels.45 The Mint’s SOP 

also calls for participants requiring certification to be notified of 

the background investigation. Failure by a participant to give 

authorization or requested information to the Mint will result in 

their denial to participate in the Mutilated Coin Redemption 

Program. According to Mint officials, the majority of mutilated 

coins submitted for redemption are from bulk redeemers.46 

Additionally, according to the Mint, a critical element for 

mitigating potential fraud within the Mutilated Coin Redemption

Program is establishing a comprehensive vendor certification 

program. The SOP also identifies that both a site visit and a 

financial statement audit are options to check for potentially 

illegal activity. However, we found that neither of these two 

reviews occurred. We were told by Mint officials that the Mint 

would have conducted a site visit if necessary. However, the 

 

44 All participants must submit an application, which is to include, among other information, how 

the participant came into possession of coins each time there is a redemption. 45 The Mint contracted PWC to conduct the certification process in which a background report is 

supplied to the Mint. The Mint determines the level of certification/due diligence that PWC will 

provide. Recertification is required every 3 years. 46 OIG analysis found that bulk redeemers accounted for 99 percent of the amount of mutilated 

coins redeemed since the Mutilated Coin Redemption Program resumed in January 2018.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 27

majority of applicants did not have audited financial statements 

and the Mint felt that site visits would not yield significant 

information.

Our review of one background investigation report provided to 

the Mint found that a bulk redeemer had the same address 

location as a massage parlor. After the Mint approved this bulk 

redeemer’s certification, the participant submitted 

approximately 30 thousand pounds of coins to the Mint for 

redemption of which the Mint took possession. The background 

investigation provided to the Mint by PWC also provided an 

image of the applicant’s business location which was a single 

entity operating a massage parlor business.47

While the Mint did not consider either a financial statement 

audit or a site visit as necessary and since these are options in 

vetting applicants, we believe that the Mint needs to establish 

criteria in its SOP for when documented reviews of financial 

statements and site visits of potential bulk redeemers are 

necessary as these processes are essential in order to fully vet 

applicants considered risky. Additionally, we consider the 

businesses which are redeeming millions of dollars in coins and 

yet claim not to have audited financial statements to be 

suspicious. We believe these businesses should have a site 

visit. 

We asked the Mint official that managed the Mutilated Coin 

Redemption Program who was involved in the certification 

approval process and if the Mint had denied anyone into the 

Mutilated Coin Redemption Program and were told that no one 

had been denied. The decision to allow high risk participants 

into the program involved multiple personnel, which included 

the Mint’s Chief Financial Officer, Mint’s legal group and the 

manager of the Mutilated Coin Redemption Program. 

 

47 According to PWC, the information used in creating the background report is provided by either 

the Mint or gathered from public information. If the participant does not provide financial 

information to the Mint and the information is not publically available, PWC does not perform a 

financial analysis nor does PWC conduct a site visit as it is not within the scope of its task order. 

The approval or rejection of a participant’s certification is at the sole discretion of the Mint.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 28

Mutilated Coin Redemption Program SOP Not Followed

The Mutilated Coin Redemption Program draft SOP outlines the 

mutilated coin submission process, which includes the sampling 

and inspection processes to determine if the mutilated coins 

meet the Mint’s acceptance criteria. According to Mint and 

PWC officials, the SOP should help mitigate risks found during 

the previous program, including the risk of redeeming nongenuine U.S. coinage and accepting mutilated coins as 

uncurrent. There are eight types of items considered to be 

unacceptable if found in a redemption.

48

As part of our audit, we observed the Mint’s mutilated coin 

redemption process in which the Mint received approximately 

450 thousand pounds of mutilated coins from multiple bulk 

redeemers during August 2018. While we found that Mint 

personnel visually inspected the mutilated coins, we also found 

that they were largely unaware of the specific sampling and 

receiving requirements in the SOP. As a result, Mint personnel

were not properly following critical processes outlined in the 

Mint’s SOP. 

Specifically, we observed that Mint personnel did not complete 

the following procedures outlined in the SOP to: 

• Verify that trucks are secured and sealed upon arrival and 

coin return authorization is included with the shipment, 

• Observe the receipt and weighing in on the truck scale, 

• Obtain a picture of sampled container contents, 

• Sample a required quantity of coins from each selected 

container, and 

• Inspect the coins in the prescribed method to ensure the 

submitted coins meet the Mint’s acceptance criteria. 

According to the Mint’s SOP mutilated coin sampling plan, the 

inspection process consists of sampling a specified number of 

coins which are to be removed from a container, poured into an 

inspection area, and then inspected against the Mint’s 

 

48 Included among the eight types of unacceptable items are foreign coins, slugs, miscellaneous 

metal (i.e. nuts, bolts, and washers), counterfeit coins and uncurrent coins. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 29

acceptance criteria. However, we observed the number of coins 

inspected and sampled by Mint personnel was only a small 

fraction of the number required per the SOP. Additionally, we 

found Mint personnel conducting the redemption were unable to 

immediately provide the certification level of the redeemers, 

which is necessary information, to ensure the level of sampling 

to be conducted. According to the Mint’s contractor, PWC, the 

SOP sampling plan was created to determine if the coins being 

redeemed met the definition of mutilated coins and that the 

sampling plan must be followed in order to have confidence that 

the coins sampled are representative of the entire redemption 

shipment.

We also did not observe any formal documentation being used 

to record the sampling conducted for mutilated coins. The SOP 

requires that an inspection log be used during the inspection 

process to track and record the results. When we presented our 

concerns that the methodology from the Mint’s SOP was not 

being followed to the Mint personnel conducting the inspection 

and sampling, a Mint official told us that the SOP was a draft 

and the procedures and documents referenced in the SOP were 

not finalized. 

Furthermore, we found that although SOP acceptance criteria 

identifies counterfeit coins as an unacceptable item, the draft 

SOP failed to require any tests or use of subject matter experts 

to make this determination. As a result, we found the Mint 

processed the mutilated coin redemptions without the capability 

to authenticate of genuineness of the coins. Additionally, the 

SOP was biased towards accepting redemptions because

sampling tolerances allow a percent of non-genuine coins to be 

redeemed. The SOP also allows for a second sample to be 

drawn only in the instance where the number of an

unacceptable item is exceeded during the initial sample.

Redemptions Exceeded SOP Acceptance Criteria 

As part of our review of the Mint’s mutilated coin redemption 

process, we obtained samples from the redemptions. We found 

instances where coins redeemed did not meet the Mint’s 

acceptance criteria, including coins that were not readily and 

clearly identifiable as genuine U.S. coinage and distinguishable 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 30

by denomination.

49 For example, in one redemption, we 

identified that many of the coins returned as mutilated appeared 

to be uncurrent coins. We raised our concern to the Mint official 

in charge of the redemption and were told that, based on his 

visual inspection, the redemption met the Mint’s acceptance 

criteria. We obtained a sample from this redemption and found 

our sample to have approximately double the percentage of 

uncurrent coins allowable under the Mint’s acceptable criteria

for mutilated coins.

50

Additionally, we observed the material supplier processing 

containers during the mutilated coin redemption. We noted

instances in which coins returned appeared to contain foreign 

contaminants or were otherwise not clearly recognizable as 

genuine U.S. currency. 51 According to the draft SOP, samples 

of a redemption can include a certain percentage of foreign

coins, slugs, and miscellaneous metals. The figure below 

displays coins from our sample, which are not clearly

recognizable as U.S. currency.

 

49 OIG samples were obtained from bulk redeemers’ containers. The coins were obtained from 

various locations in the containers. 50 OIG analysis is based on 112 coins obtained from one redemption of mutilated coins submitted 

by a redeemer that were scheduled to be melted. 51 The material supplier’s sampling/inspection process, as part of its receiving process for accepting 

materials, consisted of the following: 1) a visual inspection; 2) use of a spectrometer to measure 

coinage composition; and 3) use of a magnetic rod to look for contaminants, as all U.S. coins are 

non-ferrous and the coins should not be magnetic. We observed that the material supplier 

sampled/inspected 100 percent of containers received using these methods. If there are concerns 

about the material quality, the container is emptied onto an inspection conveyor belt table where 

the contents are visually inspected and run past a powerful electrical magnet to remove metal 

contaminants. 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 31

Figure 6: Mutilated Coins Which Are Not Clearly Recognizable as U.S. 

Coinage.

Source: Mutilated coins sample taken by OIG during the Mint’s redemption 

process. 

Also, we found in another sample, many of the coins returned 

had the exact same method of wear and some were peeling. For 

example, in a sample containing approximately 500 coins, we 

found coins peeling, blistering, and many appeared to have been 

mutilated in the same manner. These conditions raise questions 

regarding the genuineness of these coins.

Figure 7: Mutilated Coins Which Are Peeling and All Similarly Worn.

Source: Mutilated coins sample taken by OIG during Mint’s redemption 

process. 

When questioned about the authenticity of the coins found in 

our mutilated coin samples, one Mint official told us that Mint 

personnel overseeing the redemption process lacked the 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 32

expertise and equipment to appropriately identify non-genuine 

U.S. coinage and that visual inspection is used to authenticate 

the coins.

52 Additionally, the Mint relies on its material suppliers 

to tell the Mint if the chemical composition is off when the 

redeemed coins are melted. 

As we cited above, the Mint already incurs a loss on the 

Mutilated Coin Redemption Program because the Mint pays face 

value for the redeemed coins and receives only scrap value for 

the coins from its material suppliers when the coins are 

recycled. Further exposing the Mint to additional losses is the 

Mint paying out tens of millions of dollars for non-genuine U.S. 

coinage by not being able to or appropriately authenticating 

U.S. coinage.

Mint Has No SOP for Uncurrent Coin Redemptions

We found that the Mint did not have formalized procedures over 

the redemption process for uncurrent coins and relied on FRBs 

to authenticate the coins. According to a Mint official at the 

time of our audit, the Mint’s SOP was developed only for 

mutilated coin redemptions because uncurrent coins come from 

FRBs, who make the determination as to whether coins are

uncurrent. 

 

During our review, we found numerous issues with uncurrent 

coin redemptions, including:

• Large amounts of foreign containments, such as scrap 

metal, which had to be removed at additional expense; 

• Some coins appeared worn in a similar fashion which 

raised questions regarding their genuineness; and 

• Significant amounts of mutilated coins in the uncurrent 

redemption. 

 

52 The material suppliers also conducted their own tests on the coins prior to accepting them, 

which included a surface test of a sample of coin returns and a test for metallic contaminants 

using a metallic probe.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 33

The figure below displays a random sample of uncurrent coins

taken by OIG. The sample consisted of approximately 700 coins 

in which only 3 coins met the definition of uncurrent. 

Figure 8. OIG Sample of Uncurrent Coins From FRBs Showing Mutilated 

Coins in Mix.

Source: Uncurrent coin redemption sample taken by OIG during Mint’s 

redemption process. 

When we asked about the uncurrent coins redeemed, a Mint 

official told us that the Mint lacked the ability to authenticate or 

make the determination as to what was an uncurrent coin. 

Board officials told us that authenticating coins is the Mint’s 

responsibility. The Board authenticates only currency because it 

has the authority to issue currency, but not coinage. The 

distribution of coins through FRBs is done on behalf of the Mint 

as a public service. 

Melting of Coins Cannot Be Ensured

The Secretary of the Treasury is required by law to melt U.S. 

coins removed from circulation.53 The Mint provides the means 

to accomplish this through its coin exchange programs. We 

found the Mint mainly relies on its contracts with its material 

 

53 According to 31 U.S.C. 5120, Obsolete, mutilated, and worn coins and currency, the Secretary 

of the Treasury shall melt obsolete and worn U.S. coins withdrawn from circulation. Additionally, 

the Secretary is responsible for accounting for withdrawn coins, metal from the coins, as well as 

any proceeds or losses from metal sales and coin redemptions.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 34

suppliers to ensure mutilated and uncurrent coins are melted

and does not have a reconciliation process in place. 

The Mint’s contracts with its material suppliers stipulate that all 

uncurrent and mutilated coins sent to its material suppliers shall 

be melted. Additionally, title to the coins pass from the Mint to 

the material suppliers upon delivery. According to the Mint’s 

annual report, all mutilated and uncurrent coins sold to its 

material suppliers to be processed into coils or blanks to be 

used in future coin production have been defaced.

54 However, 

we found this statement to be inaccurate as we found neither 

uncurrent or mutilated coins redeemed and sent to the Mint’s 

material supplier for recycling had been defaced. Figure 9 below 

displays three coins that were defaced and sold as scrap to its 

material supplier rather than issued into circulation by the Mint. 

 Figure 9. Defaced Coins

 Source: Treasury OIG sample from material supplier raw material 

inventory taken on June 5, 2018. 

The Mint had no formalized procedures in place to ensure 

uncurrent coins are melted. According to the Mint, security 

melts are conducted for material determined to be sensitive and 

uncurrent coins. A security melt is a melt that is supervised by 

Mint police to ensure proper control. However, during a site 

visit to one material supplier, we found a substantial amount of 

 

54 Defaced coins are coins which have been put through a coin defacing machine by the Mint to 

render them unrecognizable and unusable. This procedure is typically performed on coins that do 

not meet Mint standards for issuance into circulation. Mint officials stated the Mint previously 

used secure melts, with Mint Police present, to dispose of coins. However, defaced coins are not 

considered legal tender, and therefore, do not require a secure melt, so they can be disposed of 

with the Mint’s normal scrap and without the added security.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 35

unsecured uncurrent coins which were to be melted with no 

scheduled melt date.

55

Additionally, during site visits to two Mint material suppliers, we 

found a significant amount of mutilated coins that had been left 

unsecured in these material suppliers’ facilities after a Mint 

mutilated coin redemption from about 1 to 4 months prior to our 

visit. At one material supplier, we found mutilated coins being 

stored in the shipping/staging area that had limited physical 

deterrents in place to prohibit access to approximately 35 bulk 

bags and 7 boxes of mutilated coins. Additionally, none of the 

bulk bags or boxes were sealed or covered. Access to the coins 

was possible by reaching into the bag or box. Also, one of the 

bulk bags was rolling off its pallet and was close to spilling 

coins out onto the warehouse floor.

Figure 10. Mutilated Coins Left Unsercured at Material Supplier

Source: Material supplier picture taken at during OIG site visit. 

The Mint’s Mutilated Coin Redemption Program draft SOP 

directs the Mint to conduct a variety of verification activities 

during the processing of mutilated coins from bulk redeemers. 

These activities include the witnessing of the mutilated coin 

melts, which we found is not being performed. Failure by the 

Mint to witness the melts exposes the Mint to the risk that 

 

55 We found 10 containers or approximately 35 thousand pounds of uncurrent pennies in the 

material supplier’s warehouse waiting to be melted.
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 36

coins could be subsequently used as currency or redeemed 

again at face value.

We were told by a Mint official that the Mint will not redeem 

coins that are melted or totally defaced. We believe that, if the 

Mint defaces the coins being removed from circulation so that 

the coins cannot be redeemed again before being sent to 

material suppliers, this would meet the intent of 31 U.S.C.

5120. With that said, the Mint should consider processing coin 

redemptions at its facility where the Mint can totally deface the 

coins. This will allow the Mint the time to appropriately sample 

and inspect the coins in a secure location and also prevent the 

Mint, as we noted during our audit, from passing title to coins

that are still considered legal tender to its material suppliers. 

Recommendations 

We recommend that the U.S. Mint Director take the following 

actions before processing any mutilated or uncurrent 

redemptions and ensures the Mint: 

1. Strengthens and finalizes SOPs for all coin exchange 

programs before accepting any redemptions. This would 

include using tests and subject matter experts to 

authenticate the genuineness of coins redeemed, as well as 

working with the Board to develop appropriate interagency 

procedures to assure the integrity of the coin redemption 

process for uncurrent coins. 

Management Response

Management concurred with the recommendation. Management 

stated the Mint finalized the SOPs to address the 

recommendations contained in our August 2018 Notification of 

Findings and Recommendations. The Mint acknowledges that its 

capability to authenticate mutilated and uncurrent coins 

previously relied primarily on visual inspection and metallurgic 

and magnetic testing. Management stated that the Mint has 

since organized a scientific staff and is building a more robust 

anti-counterfeit capability that will improve the Mint's capacity 

to identify suspected counterfeit coins. Additionally, the Mint is 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 37

developing procedures to support interagency partners while 

complying with Mint requirements and good governance.

OIG Comment

Management’s response and corrective actions, planned and 

taken, meet the intent of our recommendation. Management 

will need to record the estimated dates for completing its 

planned corrective actions as well as the actual dates of 

completed corrective actions in JAMES, Treasury’s audit 

recommendation tracking system.

2. Follows all SOPs, including but not limited to, procedures 

related to sampling, inspecting, and testing of coins; and 

appropriately documenting redemptions. Additionally, ensure 

that adequate background investigations are conducted on

bulk redeemers and decisions to allow participation into the 

Mutilated Coin Redemption Program are based on relevant 

data from the background investigation. The Mint should add 

criteria such as obtaining financial statements for analyses of 

potential bulk redeemers and performing site visits at their 

premises as part of the background investigation process for 

entry into the program. The Mint should document how this 

criteria was met, and if these steps were not performed, the 

reasons why.

Management Response

Management concurred with the recommendation. Management 

stated the Mint will sample, inspect, and test coins and will 

study the bulk redeemer recommendations. The 

recommendation for sampling, inspecting, testing, and 

documenting redemptions is addressed in the Mint’s revised 

SOP. Management also stated the Mint will assess the resource 

requirements to conduct robust analysis of potential bulk 

redeemers and document its decision.

OIG Comment

Management’s response and corrective actions, planned and 

taken, meet the intent of our recommendation. Management 

will need to record the estimated dates for completing its 

planned corrective actions as well as the actual date of its 
Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 38

completed corrective action in JAMES, Treasury’s audit 

recommendation tracking system.

3. Ensures that all coins returned to the Mint and removed from 

circulation are destroyed timely and sufficiently accounted 

for. 

Management Response

Management concurred with our recommendation. Management 

stated that procedures to ensure that all coins returned to the 

Mint and removed from circulation are destroyed timely and are 

sufficiently accounted for is addressed in the Mint’s revised 

SOP. 

OIG Comment

Management’s response and corrective action taken meet the 

intent of our recommendation. Management will need to record 

the actual date of the corrective action taken in JAMES, 

Treasury’s audit recommendation tracking system. 

* * * * * *

We appreciate the cooperation and courtesies extended to our 

staff during the audit. If you wish to discuss the report, you 

may contact me at (617) 223-8638 or Ken O’Loughlin, Audit 

Manager, at (617) 223-8624. Major contributors to this report 

are listed in appendix 3. A distribution list for this report is 

provided as appendix 4. 

/s/

Sharon Torosian

Audit Director, Manufacturing and Revenue
Appendix 1: Objectives, Scope, and Methodology

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 39

The objective of our audit was to determine the adequacy of the 

United States Mint’s (Mint) controls over the quality assurance 

of raw materials, including controls over the composition of 

coins returned through the Mint’s coin exchange programs and 

used in the production of circulating coinage.56 This included the 

review of the quality assurance procedures for raw materials 

prior to the minting of circulating coinage. We did not evaluate 

the Mint’s quality assurance controls related to its production of 

circulating coinage.

To accomplish our objective, we performed the following 

activities during audit fieldwork from January 2018 through 

April 2019 with subsequent updates in May 2020: 

• Conducted interviews with Mint officials to gain a highlevel understanding of the processes for receiving, 

inspection, and quality assurance of raw materials. 

o From the Mint Headquarters, this included the: Chief of 

Internal Control; Chief of Quality; Senior Supplier 

Quality Engineer; Supplier Management Specialist and 

Contracting Officer's Representative for Mint’s raw 

material contracts; Metals Manager; and Business 

Analyst.

o From the Mint Philadelphia facility, this included the: 

Philadelphia Mint Quality Manager and other quality 

assurance personnel; Metallurgist; Chemist; Production 

Manager; Process and Industrial (quality) Engineers and 

various receiving, production, and shipping personnel.

o From the Mint Denver facility, this included the: Denver 

Quality Manager; Industrial Engineer of the Quality 

Assurance Division and other quality assurance 

personnel; Quality Lab personnel; Systems Accountant 

from the Mint Reporting and Internal Controls Branch; 

 

56 “Coin exchange programs” refer to both the Mint’s Mutilated Coin Redemption Program and the 

uncurrent coin redemption process followed by banks in returning uncurrent coins to the Mint.
Appendix 1: Objectives, Scope, and Methodology

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 40

and various receiving, production, and shipping 

personnel.

• Conducted walkthroughs of the Mint’s Philadelphia and 

Denver production facilities, including the following areas:

o Receiving/shipping areas, including Denver Mint’s offsite warehouse,

57

o Production, and

o Quality Assurance Labs. 

• Conducted interviews with the Mint’s circulating coin raw 

material suppliers to gain an understating of their 

production processes and quality management systems.

o GBC Metals, LLC, subsidiary Olin Brass DC Casting (Olin 

Brass) officials and personnel, including: the Vice 

President of Marketing and International; Director of 

Metals Management and Purchasing; Director of Quality 

and Process Engineering; and various engineers and 

production personnel, including personnel in the quality 

labs.

o PMX Industries, Inc. (PMX) officials and personnel, 

including the: Vice President of Manufacturing; Vice 

President of Sales and Marketing; Director of 

Marketing/Research and Development; Director of 

Quality Assurance; Manager Inside Sales; Laboratory 

Manager; and various engineers and production 

personnel, including personnel in the quality labs.

o Jarden Zinc Products, LLC (Jarden) officials and 

personnel, including the: Senior Vice President of 

Operations; Quality Manager; Manager U.S. Mint 

Fabrication Plant; Customer Service Manager; and 

various production personnel, including personnel in the 

quality labs.

 

57 The Denver Mint has a contract with Aspen Distribution, Inc. in Aurora, Colorado, to receive and 

store raw materials from the Mint’s material suppliers until they are needed for production.
Appendix 1: Objectives, Scope, and Methodology

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 41

• Conducted site visits at the Mint’s circulating coin raw 

material suppliers to observe their production processes 

and quality management systems, including the following 

areas:

o Receiving/shipping areas, 

o Production, and 

o Quality Assurance Labs. 

• Interviewed the Board of Governors of the Federal Reserve

System (Board) to obtain their perspective on the quality of 

circulating coinage.

• Reviewed applicable Department of the Treasury (Treasury) 

orders and directives, past Office of Inspector General

(OIG) reports, applicable laws and regulations, and 

government-wide guidance applicable to the quality 

assurance of raw materials.

• Reviewed applicable documentation from the Mint and its 

material suppliers, pertaining to the quality assurance of 

circulating raw materials, for fiscal years 2015 through

2017, including:

o Contracts with the Mint’s material suppliers; 

o Historical program data, including the amount of 

materials received; 

o Policies and procedures; and

o Quality reports and quality assurance information from 

(1) supplier quality management system documents and 

reports, (2) results from the Mint’s Supplier Scorecard 

Program and resulting Non-Conformance reports, and 

(3) sampling data from the results of Mint’s testing and 

sampling of coupons and penny blanks.

58

 

58 Our assessment of the amount and extent of quality issues was based on the Mint’s documented 

review and may or may not be representative of all quality issues or risks present at the time.
Appendix 1: Objectives, Scope, and Methodology

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 42

To assess controls over the composition of coins returned 

through the Mint’s coin exchange programs used in the 

production of circulating coinage, we performed the following:

• Conducted interviews with Mint officials responsible for 

the Mint’s coin exchange programs to gain an 

understanding of the programs and controls.

o From the Mint’s Headquarters, this included the: Chief 

of Accounting/Mutilated Coin Manager; Chief of Internal 

Control; Supplier Management Specialist and 

Contracting Officer's Representative for Mint’s raw 

material contracts; Metals Manager; and Business 

Analyst.

o From the Mint’s Philadelphia facility, this included the 

Traffic Manager and personnel responsible for 

inspecting and processing mutilated and uncurrent 

coins.

• Conducted interviews with the Mint’s circulating coin raw 

material suppliers to gain an understanding of their 

involvement with the mutilated coin program. 

o Olin Brass officials and personnel, including the: Vice 

President of Marketing & International; Director of 

Metals Management and Purchasing; Director of Quality 

and Process Engineering; and various engineers and 

production personnel, including personnel in the quality 

labs.

o PMX officials and personnel, including the: Vice 

President of Manufacturing; Vice President of Sales and 

Marketing; Director of Marketing/Research and

Development; Director of Quality Assurance; Manager 

Inside Sales; Laboratory Manager; and various engineers 

and production personnel, including personnel in the 

quality labs.
Appendix 1: Objectives, Scope, and Methodology

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 43

o Jarden officials and personnel, including the: Senior 

Vice President of Operations; Quality Manager; Manager 

U.S. Mint Fabrication Plant; Customer Service Manager; 

and various production personnel, including personnel in 

the quality labs.

• Observed the redemption and recycling of coins redeemed 

through the Mint’s coin exchange programs at Olin Brass

from July 31, 2018 through August 2, 2018, which 

included obtaining coin samples from the redemptions.

• Conducted interviews with the Mint’s contractor 

PricewaterhouseCoopers LLP (PWC) (now Guidehouse) 

which assisted in the restructuring of the Mint’s Mutilated 

Coin Redemption Program, including a: PWC Partner; 

Guidehouse Partner; and Manager/Subject Matter Expert 

with Guidehouse. 

• Conducted an interview with officials from Board Banknote 

Issuance and Cash Operations and the Federal Reserve 

Bank (FRB) Cash Product Office to obtain perspective on 

uncurrent coin redemptions and the Mutilated Coin 

Redemption Program, including, the Board’s Banknote 

Issuance and Cash Operations Assistant Director and 

Manager, and FRB’s Cash Product Office Manager and 

Senior Project Analyst. Also, obtained the officials’ 

perspectives on the quality of circulating coinage. 

• Reviewed applicable Treasury orders and directives, past 

OIG reports, applicable laws and regulations, and 

government-wide guidance applicable to the Mint’s 

Mutilated Coin Redemption Program.

• Reviewed applicable documentation pertaining to the coin 

exchange programs, including: 

o Contracts with the Mint’s material suppliers; 
Appendix 1: Objectives, Scope, and Methodology

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 44

o Historical program data, including the amount of 

uncurrent and mutilated coins received for the last 10 

years; 

o Policies and procedures, including the draft Mutilated 

Coin Program Standard Operating Procedure; and

o Program reviews conducted by PWC. 

We conducted this performance audit in accordance with 

generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis 

for our findings and conclusions based on our audit objectives. 

We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit 

objectives.
Appendix 2: Management Response 

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 45
Appendix 2: Management Response 

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 46
Appendix 2: Management Response 

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 47
Appendix 2: Management Response 

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 48
Appendix 3: Major Contributors to This Report

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 49

Ken O’Loughlin, Audit Manager

Richard Wood, Auditor-In-Charge

Olivia Scott, Referencer
Appendix 4: Report Distribution

Mint Controls Over Raw Materials and Coin Exchange Programs Need 

Improvement (OIG-20-042) 50

Department of the Treasury

Secretary

Deputy Secretary

Treasurer

Office of Strategic Planning and Performance Improvement

Office of the Deputy Chief Financial Officer, Risk and Control 

Group

United States Mint

Director

Office of Inspector General Audit Liaison

Office of Management and Budget

OIG Budget Examiner

United States Senate

Chairman and Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States House of Representatives

Chairman and Ranking Member

Committee on Financial Services

Subcommittee on National Security, International 

Development and Monetary Policy

Committee on Financial Services
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