UNITED STATES MINT

www.usmint.gov

UNITED STATES MINT

ANNUAL REPORT

2003
COINS AS 

ICONS OF HISTORY

United States coins have been

silent witness to the American

experience. Our coins went with

Lewis and Clark as they explored

the Louisiana Purchase to the

Pacific Ocean...Our coins were 

targeted by train-robbers and

stagecoach bandits throughout

America’s westward expansion...

Our coins have gone everywhere

that Mankind has gone -- from

the bottom of the ocean to beyond

the earth’s atmosphere with the 

Space Shuttle.

Wherever United States coins 

travel, they serve as reminders 

of the values that all Americans

share. The words and symbols 

that define us as Americans have 

a permanent place in our coins:

“Liberty”... “In God We Trust”...

“E Pluribus Unum”...The profiles

of our country’s greatest 

leaders... America’s freedom

embodied in the bald eagle.

Our coins are small declarations 

of our beliefs. They showcase how

we see ourselves and our sense 

of sovereign identity. And they

serve as ambassadors of American 

values and ideals.

COINS AS 

ICONS OF DEMOCRACY

During our nation’s early years,

the founding fathers sometimes

became directly involved in coin

production. For example, George

Washington contributed some of

his own silver to the manufacture

in July 1792 of about $100 worth

of the half dime, the first coin

struck by the federal government.

Today, the public frequently 

plays a pivotal role in designing

coins. For example, the image 

of the Pemaquid Point lighthouse

that appears on the Maine State

Quarter was chosen by popular

vote, with over 100,000 Maine 

residents voting over the Internet.

This coin was released on 

June 2, 2003.
UNITED STATES MINT

ANNUAL REPORT

The Mission of the United States Mint

is to manufacture the highest quality 

circulating, numismatic, and bullion coins 

at the lowest possible cost and to deliver them

in a timely manner . . .

to expand our markets through exceptional

customer service, product development, and

innovative marketing . . .

to sell numismatic and bullion products 

at a reasonable price and profit . . .

and to provide security over assets

entrusted to us.

2003
TEAM VISION

The United States Mint will:

Provide value to the American people;

Ensure integrity in our commitments and

communications;

Achieve world-class performance.

THE UNITED STATES MINT IS UNIQUE

The Mint makes money in every sense of the word.

In FY 2003, we:

• Contributed $600 million to the United States Treasury

General Fund.

• Produced about 11.4 billion circulating and 

numismatic coins.

• Were the world’s largest mint in terms of 

production and revenues.

The Mint is one of the few federal agencies that produces

and sells consumer products.

The Mint’s customer service is the best in the federal 

government, and is on par with the customer service 

delivered by the top ten private sector companies,

according to the American Customer Satisfaction Index.

The Mint is the #1 seller of gold, silver and platinum 

bullion coins in the world.

The Mint Police guards approximately $95.2 billion 

(market value at end of FY 2003) worth of the nation’s

gold and silver reserves. The Mint’s Bullion Depository in

Fort Knox, Kentucky sets the standard for high security

operations by inspiring the expression “as secure as 

Fort Knox.”
TABLE OF CONTENTS

Director’s Letter

7 Manufacturing

12 Sales and Marketing

16 Protection

18 Office of the Chief

Financial Officer

20 Office of the Chief

Information Officer

22 The 50 State Quarters®

Program

24 Management’s Discussion

and Analysis

37 FMFIA

38 Financial Statements

41 Notes to Financial

Statements

54 Auditors’ Reports

60 Supplemental Financial

Information

63 Report of the Office of 

the Inspector General

66 Schedule of Custodial

Gold and Silver Reserves

68 Glossary of Terms

THE UNITED STATES MINT FACILITIES

The United States Mint has six facilities:

1. Headquarters in

Washington, D.C. where

Mint-wide policies are

developed, manufacturing

operations and marketing

are managed, and administrative and customer service

functions are conducted

2.The Denver facility in Colorado, where circulating coins and uncirculated coins are manufactured; tours of

this facility are coordinated through Congressional offices

3.The Philadelphia facility in Pennsylvania, where coins and medals

are engraved, and circulating coins, uncirculated sets, commemorative coins and medals are manufactured; tours of this facility are

coordinated through Congressional offices

4.The San Francisco facility in California, where clad and silver proof

sets are manufactured

5.The West Point facility in New York, where commemorative coins

and the entire family of American Eagle proof and uncirculated

coins in gold, silver, and platinum are manufactured

6.The United States Bullion Depository in Fort Knox, Kentucky, where

U.S. gold reserves are stored

1

3 2

5

4

6
Dear Collectors, Customers and Colleagues:

We want to transform the United States Mint – which is the world’s largest mint

– into the world’s safest, most efficient, and most technologically advanced mint. We

also want to produce the world’s best numismatic products. To achieve these goals,

we are completely revamping the way that coins are designed, produced and

distributed. We are also making important investments in our people and

equipment; our Mints are now cleaner, brighter and better places to work than

ever before.

While we are proud of our accomplishments, the United States Mint must overcome

a significant challenge: the continuing decline in demand for circulating coinage.

Accordingly, we continue to reduce costs, eliminate non-value added activities, and

streamline our operations.

Our pride of ownership shines through all of our work. The United States Mint’s

manufacturing and customer service achievements for Fiscal Year (FY) 2003 include:

• Producing about 11.4 billion coins for circulation and collectors.

• Contributing $600 million to the United States Treasury General Fund.

• Ranking as the #1 federal agency and among the top ten private sector

companies on the American Customer Satisfaction Index – an 

unprecedented achievement for a federal agency.

• Selling almost $100 million worth of coins and coin-related products over 

the Internet.

• Serving as the #1 seller of gold, silver, and platinum bullion coins in the world,

with the American Eagle being the #1 selling bullion coin.

• Launching state commemorative quarters for Mississippi, Illinois, Alabama,

Maine and Missouri, and attracting a total of about 11,000 attendees to 

launch celebrations.

• Slashing our Lost Time Accident (LTA) rate to 1.48 per 200,000 work hours 

– down by 35 percent from FY 2002.

• Reducing our FY 2003 financial plan by $42.4 million in response to 

decreased demand for circulating coins.

This fiscal year, we significantly improved the quality of our products. In addition, we

continued to improve our supply chain management systems and coin inventory

management systems to make them leaner, faster and more efficient. This effort was

furthered by our recent roll-out of information technology (IT) resources. These

resources are improving projections of coin demand, smoothing costly swings in coin

production volume, and facilitating cost-cutting, around-the-clock communications

with our key raw materials suppliers and the Federal Reserve.

The United States Mint is opening up new channels of communication with the

public. These channels include our award-winning advertising program and business

Henrietta Holsman Fore

Director, United States Mint

BUSINESS-LIKE

GOVERNMENT

PRODUCT QUALITY

EDUCATION
forums for collectors. In addition, we are innovating new methods to recruit young

coin collectors, who are reenergizing the coin-collecting community. For example,

we posted on our website free lesson plans for parents and teachers of K through

6th graders, and thereby triggered a cyber stampede involving over 770,000 

downloads from the site.

We are continually expanding our dynamic product offerings. During FY 2003, we

issued an innovative, frosted bronze medal that, as part of our Presidential Medal

Series,honors President George W.Bush. This fiscal year,the United States Mint also

introduced the National Wildlife Refuge System Centennial Medal Series, which sold

out in record-setting time. These silver medals are the first products to bear a new

laser frosting developed by the United States Mint. In addition, our first-of-its-kind

partnership with the United States Postal Service produced several new products

that package together quarters and stamps, two of the world’s most popular types

of collectable products. The appeal of these products helped attract about 200,000

new customers to the United States Mint during FY 2003.

An ongoing renaissance in coin design gained renewed momentum from the

Congressional charge to redesign the nickel in honor of the bicentennial

of the Louisiana Purchase and the Lewis and Clark expedition.

These design changes will be the first changes to the nickel since

1938. Over the last two years, thousands of coin collectors and

dealers have expressed to me enthusiasm for the national coin

redesign initiative; they regard it as an historic expression of our

national identity, values and pride.

Reflecting our unwavering passion for outstanding artistry, the

United States Mint received in FY 2003 two Coin of the Year

Awards,which are among the most prestigious awards for coin design:

the Rhode Island State Quarter, which was produced in 2001, won as the

“Best Trade Coin” and the American Buffalo Commemorative Coin, which was

produced and sold in 2001, won as the “Most Popular Coin.” During FY 2003, we

released the American Eagle platinum coin – Patriotic Vigilance. We believe that

Patriotic Vigilance,which is the first coin to showcase together the bald eagle and the

American flag,is among the most evocative coins ever produced by the United States

Mint.

To further enrich and invigorate coin designs, we established a new Artistic Infusion

Program during FY 2003. This precedent-setting program will create a pool of 40

accomplished artists who will submit new designs for selected coins and

medals. Experts in graphic design, sculpture, engraving and other visual arts,

and artists participating in the Artistic Infusion Program will represent the

diverse backgrounds and interests of the public.

Not confined to the United States Mint, the spirit of change is sweeping through

mints all over the world as they confront declines in coin demand. As Vice President

NEW PRODUCTS

COIN DESIGN
United States Mint 2003 Annual Report

of the international Mint Directors Conference (MDC), I am encouraging our

international membership to respond to these declines by adopting management

and production efficiencies and good governance practices. We are also discussing

strategies for expanding world coin markets. Reflecting such strategies, the MDC is

now, for the first time, holding international marketing forums in addition to

manufacturing forums.

The United States Mint is confronting the extreme challenges of the post-September

11th era by bolstering the Mint Police’s recruitment program, training officers in

terrorism prevention and terrorism defense techniques, enhancing our IT security

systems, sharing intelligence with other security agencies and refining comprehensive

contingency plans.

Our people are our most important resource. We are striving to build a culture

based upon performance and teamwork. We are committed to creating a model

workplace where all of our colleagues are treated with respect and dignity. During

FY 2003, we invested almost $3 million in training.

All of our work reflects the United States Mint values of accountability, leadership,

trust/respect/integrity, teamwork and communication. These values were reinforced

by this year’s release of the United States Mint Strategic Plan 2002-2007 One Team.

One Vision.

From humble beginnings in 1792, the United States Mint has grown into one of the

leading manufacturing organizations of the twenty-first century. With a focused,

business-minded approach, we will continue to contribute to America’s rich history,

produce the finest coins, provide first-rate customer service and educational

products, and deliver value to the American people.

INTERNATIONAL

The United States Mint will host

the international XXIII MDC in

San Francisco,California from

March 18 to 23,2004.

Immediately after this event,the

United States Mint will assume

the MDC Presidency.

SECURITY

OUTLOOK
United States Mint 2003 Annual Report 7

OPERATIONAL OVERVIEW

MANUFACTURING

At the heart of the United States Mint’s (Mint) operations are the activities of the

Office of Manufacturing, which produced 11.4 billion circulating coins and 20.2 

million numismatic coins during FY 2003. Also during FY 2003, Manufacturing

improved safety, energy conservation, environmental compliance, quality and coin

destruction capabilities; streamlined coin inventory management and supply chain

management; reduced cycle time; produced medals and sold American Eagle

Bullion coins.

CIRCULATING COINAGE

FISCAL YEAR 2003 CIRCULATING COIN PRODUCTION 

(PIECES IN MILLIONS)

PENNY NICKEL DIME QUARTER HALF DOLLAR DOLLAR TOTAL

Philadelphia 3,038.4 385.2 944.0 1,224.6 5.6 3.5 5,601.3

Denver 3,257.6 328.3 863.5 1,325.6 5.0 3.1 5,783.1

Total 6,296.0 713.5 1,807.5 2,550.2 10.6 6.6 11,384.4

Because the United States’ economy remained sluggish during FY 2003,coin production

declined from a total of 14.9 billion circulating coins in FY 2002 to 11.4 billion 

circulating coins in FY 2003. This drop reflects declines in the production of all coin

denominations.

SAFETY

The Mint is committed to reducing its Lost Time Accident (LTA) rate to zero. The

Mint is steadily approaching this goal;its annual LTA rate per 200,000 work hours has

generally trended downwards since the mid 1990s.

Continuing this downward trend, the Mint’s LTA rate for FY 2003 was 1.48 – down

by 35 percent from FY 2002,64 percent from FY 2001 and 71 percent from FY 2000.

In addition, the Mint achieved an LTA rate of zero for two (nonconsecutive) months

of FY 2003. These were the first months that the Mint remained entirely LTA-free

during the six years for which detailed monthly records are available.

During FY 2003, the Mint worked to improve safety by:

• Forming and chartering a Safety Steering Committee comprised of senior

managers and union officials.

• Sponsoring the participation of managers and safety professionals in a workshop

held by Dupont Safety Resources, a consulting firm that specializes in helping

organizations improve their safety and health records while improving their

business performance.

• Awarding a contract for implementing a unified, Mint-wide safety program. This

program includes assessing and benchmarking safety and health practices at Mint

facilities and identifying opportunities for improving practices.
United States Mint 2003 Annual Report 8

• Developing action plans to address these opportunities, and implementing these

action plans.

• Improving employee awareness about safety issues by distributing educational

materials and holding supervisor safety meetings.

ENERGY CONSERVATION

The Mint is implementing various energy conservation strategies that include

educating employees about the importance of energy conservation, implementing

innovative employee work schedules, modifying equipment, and installing energyefficient windows. Through these initiatives, the Mint is conserving 2,913,000 KWH

of energy and 3,227,000 gallons of water per year at its five field facilities. By

achieving these resource savings, as well as by renegotiating some of its energy

contracts, the Mint is saving more than $125,000 annually.

The Mint’s achievements for FY 2003 also include developing a contract with Public

Service of Colorado to provide the Denver Mint with 1,500 MWH of wind energy,

which will account for 10 percent of the Denver Mint’s annual energy needs. This

contract will help the Mint exceed a voluntary goal that federal agencies obtain at

least 2.5 percent of their energy from renewable resources. This voluntary goal was

suggested by Executive Order 13123 “Greening The Government Through Efficient

Energy Management.”

ENVIRONMENT

The Mint is committed to complying with all Executive Orders addressing

environmental issues and all local, state, and federal environmental regulations.

During FY 2003, Manufacturing gave special attention to complying with Executive

Order 13148 (EO 13148) “Greening the Government Through Leadership in

Environmental Management.” EO 13148 includes substantive program requirements

and deadlines that are designed to help federal agencies integrate environmental

management and accountability into their day-to-day decision-making and long-term

planning. During FY 2003, the Mint remained on schedule to satisfy all requirements

of EO 13148 by conducting the following activities:

An Award-Winning Energy

Conservation Program

The United States Mint’s energy 

conservation program is among

the most effective of those 

managed by the Department of

Treasury’s nine bureaus. During

the last ten years,the United

States Mint has won three

Federal Energy Management

Awards from the United States

Department of Energy. No

other Treasury bureau won this

award as many times during

this period.

0

1

2

3

4

5

FY 00 FY 01 FY 02 FY 03

4.9

3.9

2.2

1.4

U.S. MINT LOST TIME ACCIDENT RATE
United States Mint 2003 Annual Report 9

• Continued implementing a Mint-wide Environmental Management System (EMS) 

according to guidelines provided in the Mint’s EMS Reference Manual, which was 

completed in FY 2002. EMS implementation is expected to be completed by

Spring 2004.

• Provided EMS training to all essential EMS managers and supervisors.

• Conducted monthly environmental self-audits using facility-specific checklists that

are designed to help each Mint facility achieve sustained compliance with all 

relevant environmental regulations. These checklists were developed earlier but 

fully tested in FY 2002. During FY 2003, all Mint facilities achieved 100 percent

environmental compliance with these self-inspection checklists.

• Continued planning for environmental assessments to be conducted by an outside 

consulting company at each Mint facility in FY 2004.

• Continued implementing an Environmental Management Information System

(EMIS) that will use state-of-the-art information technology to centralize and

manage all environmental information. EMIS implementation is expected to be 

completed during FY 2004.

• Continued preparing all of the Mint’s manufacturing facilities to qualify for

certification by the International Organization for Standardization (ISO) for

International Standard 14001 in FY 2004. International Standard 14001 is

comprised of voluntary standards that address the environmental performance of

manufacturing organizations.

QUALITY 

During FY 2003, Manufacturing improved the Mint’s Quality Management System

(QMS) by:

• Approving a Manufacturing Quality Systems Manual that provides guidelines for 

implementing the Mint’s QMS.

• Designing and implementing a Supplier Quality Audit Program according to

guidelines provided in the Mint’s Manufacturing Quality Systems Manual. This 

program is designed to ensure that the Mint obtains production materials,

such as strip, blanks, packaging and die steel, from suppliers that provide high 

quality materials. This program is based upon a scorecard system that 

evaluates suppliers on various attributes, such as their ratings on product

quality audits, timeliness of deliveries and responsiveness to needed

corrections.

• Implementing a pilot test at the West Point Mint according to guidelines provided

in the Mint’s Manufacturing Quality Systems Manual. This pilot test is designed to

evaluate the benefits of meeting the requirements of the new ISO 9001:2000

standard.

#1 In Bullion Sales

The American Eagle Bullion coin

is the top-selling bullion coin in

the United States and in the

world. During FY 2003,the

United States Mint sold 

approximately 466,000 Fine

Troy Ounces (FTOs) of American

Eagle Bullion gold coins,8.7 

million FTOs of American Eagle

Bullion silver coins,and 24,000

Gross Troy Ounces of American

Eagle Bullion platinum coins.
United States Mint 2003 Annual Report 10

Then: A Slow-Process

Using the United States

Mint’s first coining press,

which is pictured here, it

took three years to produce

the nation’s first one 

million coins.

Now: A High-Speed,

High-Tech Process

Today, the Denver and 

Philadelphia Mints together

can produce as many as

28 billion coins per year.

Because the equipment

and techniques used in

coin production have been

standardized, imperfect

coins are rare and 

becoming rarer every year.

• Developing a Manufacturing Quality Index (MQI) that will provide a uniform,

quantitative method for evaluating quality that will complement quality control

methods currently used at Mint facilities.

DESTRUCTION OF ERROR COINS

During FY 2003, the Philadelphia Mint and the Denver Mint acquired new equipment

to destroy damaged coins and blanks that do not meet production specifications and

non-current coins that have been removed from circulation. This new coin-destruction

equipment uses rolling mill technology to distort, mutilate, and thereby destroy the

value of coins and blanks. This technology is enabling the Philadelphia Mint and

Denver Mint to destroy condemned coins and blanks safer and faster than was possible

via previous procedures, which involved accumulating large volumes of out-ofspecification material for return to metal suppliers. It is also enabling these facilities

to avoid the high storage and security costs associated with maintaining and

witnessing the melting of such accumulations.

COIN INVENTORY MANAGEMENT

During FY 2003, the Mint partnered with the Federal Reserve to improve coin 

production planning and inventory management. As part of this effort, the Mint 

supported the Federal Reserve’s implementation of an Inventory Management and

Forecasting (IMF) tool at each of its 37 locations. This IMF tool is enabling the Federal

Reserve to better align its coin orders with true coin demand and to reduce the high

variability in its coin orders. It is thereby helping the Mint to smooth costly swings

in coin production. During FY 2003, the Mint also helped the Federal Reserve

reduce and balance its coin orders by transferring previously circulated coins

from Reserve Banks that have excess supplies to nearby Reserve Banks that

need additional coins.

SUPPLY CHAIN MANAGEMENT

During FY 2003, the Mint worked to incorporate best-in-business practices into every

link of its supply chain – from obtaining raw materials to distributing coins. As part

of this effort, the Mint is creating a new Extranet Coin Shipping application to convey

information about shipping schedules of raw materials and supplier inventories

between the Mint and its key suppliers.

In addition, the Mint’s plants are continuing to implement Total

Productive Manufacturing (TPM) strategies, which foster rapid,

continuous improvement of manufacturing processes through

employee involvement, employee empowerment, and closedloop measurements of results. During FY 2003, the Mint

improved TPM strategies by educating representatives of our

suppliers of raw materials and the Federal Reserve on the

principles of lean supply chain management.
United States Mint 2003 Annual Report 11

CYCLE TIME

Cycle time is a measure of the average amount of time it takes to process raw

materials into finished goods. The Mint is minimizing its cycle time and reducing costs

by eliminating non-value added steps from production processes. The Mint reduced

cycle time from 112 days in September 2002 to 73 days in September 2003.

MEDALS

National and other medals honor outstanding persons, events, and sites of special

meaning to the American people. During FY 2003, the following medals were issued:

President George W. Bush Medal: The Mint’s Presidential Medals date back to

the earliest days of the Republic. The President George W. Bush medal was 

presented to President George W.Bush on July 31,2003. The obverse features images

of President Bush and the American flag along with the inscription, “GEORGE W.

BUSH.” The reverse features images of the south portico of the White House and

the Presidential Seal, along with the inscription, “WE WILL NOT TIRE, WE WILL

NOT FALTER, AND WE WILL NOT FAIL.” The President George W. Bush medal

was produced through a process that created a frosted finish.

2003 National Wildlife Refuge System Centennial Medal Series: This

series offers both silver and bronze medals honoring President Theodore

Roosevelt, founder of the National Wildlife Refuge System. A portion of the

proceeds from sales of these medals will benefit the National Wildlife Refuge

System. The National Wildlife Refuge System Centennial Medals,which are the

Mint’s first products to bear laser frosting, were released through the Mint’s

subscription program in June 2003. This is the first silver commemorative medal

series ever offered by the Mint.

Frosting Techniques

Frosted Finish: The Mint used 

aluminum oxide in the President

George W.Bush Medal,as

opposed to the glass bead media

used in other medal dies.

Laser Frosting: The Mint

recently adopted a process to produce a “frosting”texture on our

proof coins. The method employs

a computer-controlled laser that

imprints about 3,000 craters per

second on our dies by vaporizing

the steel and producing a highly

polished field on the proof die,

which imparts a mirror-like image

on the medal. Conventionallyproduced dies rely on a 

grit-blasting process that yields a

more random finish and requires

higher magnification to observe

the features.

100

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CIRCULATING MANUFACTURING CYCLE TIME
United States Mint 2003 Annual Report 12

SALES AND MARKETING

The Mint’s Office of Sales and Marketing (SAM) provides our primary interface with

customers and the numismatic community. During FY 2003, SAM strengthened this

interface by improving customer service, launching an advertising campaign,

expanding our education initiatives, and helping to plan the Mint Directors

Conference (MDC). In addition, SAM contributed to a renaissance in coin design by

establishing an Artistic Infusion Program and participating in redesigning the nickel.

This year, SAM also sold popular proof coins, partnered with other federal

agencies to expand our product offerings,and launched a new commemorative coin.

CUSTOMER SERVICE 

Survey Results: The Mint outranked all other federal agencies on the American

Customer Satisfaction Index (ACSI) for calendar year 2002. The ACSI is an annual

survey conducted by the University of Michigan. The year 2002 marks the seventh

consecutive year that the Mint has ranked among the top scorers on the ACSI.

The Mint scored 84 on a 1-to-100 scale on the ACSI for 2002. This score places the

Mint among the top 10 private sector companies for the second year in a row – an

unprecedented achievement for a federal agency.

Customer Service: During FY 2003, the Mint sold $235 million worth of coins (this

figure excludes sales of American Eagle Bullion coins) and coin related products via

the Internet, hard copy mail, phone and other methods. This year’s customer 

service successes include reducing the Customer Service Hotline’s abandon rate –

the percentage of callers who hang up before reaching an operator – to 3 percent.

EDUCATION

During FY 2003, SAM extended the reach, improved the quality and reduced the

costs of its educational projects by consolidating them under its Mint Education

Initiative (MEI). Current MEI projects include:

• Managing the Mint’s educational website. This website is called H.I.P. Pocket

ChangeTM and is posted at www.usmint.gov/kids. H.I.P. Pocket Change features

coin-related games, lesson plans and fun facts for teachers, parents, and children.

The site has received more than 2.5 million visits since its launch in 1999. During

FY 2003 alone, H.I.P. Pocket Change received more than 930,000 visits – up by 38

percent since FY 2002.

• Posting on H.I.P. Pocket Change new lesson plans targeting K through 6th graders

as each new state quarter is launched. During FY 2003, these free lesson plans

were downloaded more than 770,000 times. Because of the popularity of these

lesson plans, MEI will soon post lesson plans for 7th through 12th graders on H.I.P.

Pocket Change, as well.

#1 In Customer Service in

the Federal Government

How did the United States

Mint climb to the top of the

American Customer

Satisfaction Index? Part of

the secret of our success is

that we continuously solicit

feedback from customers 

over our Website, and quickly

incorporate this feedback into

our business practices. Our

success also reflects our:

• High-quality products, which

consistently meet or exceed

customer expectations.

• Fast, hassle-free service via

telephone, the Internet and

hard-copy mail.

• State-of-the-art e-commerce

systems that support our

user-friendly website and 

on-line catalogue.

• Subscription service that

eliminates the need for 

repetitive ordering.

• Strict guidelines for 

maintaining the security of

customers’ identity and 

financial information.
United States Mint 2003 Annual Report 13

• Sponsoring a “Coins In The Classroom” lesson plan contest that will reward the

creators of innovative coin-centric lesson plans, and then publicize winning lesson

plans.

• Coordinating educational and community outreach activities for the Mint’s field

facilities.

• Collaborating with government organizations, such as the U.S. Department of

Education’s Federal Interagency Committee on Education.

MINT DIRECTORS CONFERENCE

The Mint Directors Conference (MDC) is an international body composed of 

national and private mints. During the last forty years, the MDC has been devoted

almost exclusively to manufacturing issues.

During FY 2003, Director Henrietta Holsman Fore served as Vice President of the

MDC. In this capacity, she has been directing the planning of the XXIII MDC, which

will be held in San Francisco in March 2004. Marking a watershed for the MDC, the

agenda of the XXIII MDC will devote as much attention to marketing issues as to

manufacturing issues. This expanded focus is designed to help mints pursue new 

markets for their products in order to accommodate worldwide declines in coin

demand. Immediately following the XXIII MDC in San Francisco, Director Fore will

become President of the XXIV MDC.

Acclaim For Mint Website

The United States Mint’s 

educational H.I.P. Pocket Change

website was named “Editor’s

Pick” by NEA Today,the journal

of the National Education

Association,the largest teachers

union in the United States.

An Award-Winning

Advertising Program

The United States Mint’s 

commercial advertisements

won three First Place Aegis

Awards for 2002; these are

among the most sought-after

awards in the advertising

industry. The United States

Mint also won three Telly

Awards for 2003; the Telly

Award competition is the only

national video competition

that features peer judging.

The United States Mint’s 

advertising campaign helped

the Mint gain about 200,000

new customers and about

100,000 new subscriptions

during FY 2003.

20000

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02Q3

02Q4

03Q1

03Q2

03Q3

03Q4

THE UNITED STATES MINT H.I.P. POCKET CHANGE

WEB SITE VISITORS BY QUARTER
14

“A beautiful country like ours

deserves equally beautiful coinage.”

-- President Theodore Roosevelt

RENAISSANCE IN COIN DESIGN

Artistic Infusion Program: During FY 2003, the Mint established an Artistic

Infusion Program that is designed to enrich and invigorate the designs of coins and

medals produced by the Mint. This program will create a pool of up to 20

accomplished sculptors, engravers, design experts (Master Designers) and up to

20 college-level or graduate-level art students (Associate Designers) who will be

invited to submit drawings of new designs for selected projects.

Laying the groundwork for the Artistic Infusion Program will involve distributing

a “Call for Artists” to trade publications, arts organizations, universities and the

media; developing application procedures; establishing procedures for evaluating

applicants; and entering into a partnership with the National Endowment for the

Arts (NEA) that will enable NEA to help evaluate artists’ applications.

All artists who participate in the Artistic Infusion Program will enter into a oneyear, renewable agreement with the Mint that includes legal provisions for the

assignment of rights for submitted designs. In addition, they will attend an orientation

and symposium that will highlight the history of the design of United States coins

and medals and introduce upcoming design opportunities.

Coin Redesign: The Mint is pleased that the American 5-Cent Coin Design

Continuity Act of 2003 was enacted. This historic act authorizes the Secretary

of the U.S.Treasury to change the design of the 5-cent coin (the nickel), which has

remained unchanged since 1938. In accordance with the act, the Mint will

introduce the first in a series of new nickel reverses in 2004 that will honor the

bicentennial of the Louisiana Purchase and the subsequent Lewis and Clark

expedition into the Louisiana Territory. In 2006, the design of the nickel’s reverse

will return to an image of Monticello.

The American 5-Cent Coin Design Continuity Act of 2003 also created the Citizens

Coinage Advisory Committee (CCAC),an 11-member board that advises the Secretary

of the Treasury on designs for circulating coins, bullion coins, commemorative coins and

medals,and mintage levels.

COMMEMORATIVE COINS 

United States Military Academy Bicentennial Commemorative Silver

Dollar: This coin honors the 200th Anniversary of the founding of the United States

Military Academy (USMA). It was available from March 16, 2002 to March 16, 2003.

About $3.9 million,which was generated from sales of USMA Bicentennial coins,was

paid to the Association of Graduates to help support the education and training of

USMA cadets.

United States Mint 2003 Annual Report
United States Mint 2003 Annual Report 15

The First Flight Centennial Commemorative Coins: A $10 gold coin, a 

one-dollar silver coin and a half-dollar clad coin honor the 100th anniversary of the

Wright Brothers’ historic flight near Kitty Hawk, North Carolina on December 17,

1903. Released on August 1, 2003, these coins will be available until July 31, 2004. A

portion of proceeds generated from sales of First Flight coins is authorized to help

pay for the upkeep of the Wright Brothers Monument and the Wright Brothers

National Memorial Park in North Carolina.

2002 Olympic Winter Games Commemorative Coins: A gold five-dollar

coin and a silver dollar honor the 2002 Olympic Winter Games in Salt Lake City,

Utah. These coins were available throughout calendar year 2002 (which includes the

first quarter of FY 2003). About $3.4 million was generated from sales of Olympic

Winter Games Commemorative Coins. This sum was paid to the Salt Lake

Organizing Committee and the United States Olympic Committee.

AMERICAN EAGLE BULLION COIN SALES

A bullion coin is valued by its weight of a specific precious metal. By contrast,

commemorative or numismatic coins are valued by limited mintage, rarity, condition,

and age. American Eagle Bullion coins, which are only produced by the Mint, are 

typically purchased by investors seeking a simple, tangible means to own and invest

in the gold, silver, and platinum markets. During FY 2003, sales of American Eagle

Bullion coins totaled about $235 million – up by 26 percent from FY 2002.

AMERICAN EAGLE COIN SALES

The Mint produces proof versions of American Eagle coins for collectors. The term

"proof" refers to a specialized minting process that produces softly frosted, detailed

images on a mirror-like field. During FY 2003, proof sales totaled $61 million – up by

8 percent from FY 2002.

American Eagle Proof coins sold briskly throughout FY 2003. Particularly noteworthy

were sales of one-ounce 2003-dated American Eagle Gold Proof coins,which sold out

only seven weeks after their introduction – a full month faster than the 2002-dated

version of this product. In addition, sales of all denominations of 2003-dated

American Eagle Gold Proof coins exceeded sales of 2002-dated versions of these

products. Furthermore, American Eagle Silver Proof coins sold at a record pace.

Also during FY 2003, the prices of American Eagle Platinum and Gold Proof coins

increased for the first time since FY 2000 and FY 1998, respectively. These increases

compensated for increased platinum and gold prices.

LICENSING/PARTNERSHIPS

During FY 2003,the Mint also established an Office of Licensing in the Office of Sales

and Marketing. The Office of Licensing's mission includes protecting the integrity and

the image of the intellectual property of the Mint; building and enhancing the United

States Mint brand; administering the selective issuance of intellectual property 
United States Mint 2003 Annual Report 16

licenses for the purposes of developing products, services, and programs that provide value for Mint customers and the American public; ensuring consistency and

fairness in the issuance of intellectual property licenses; and generating revenue for

deposit into the Public Enterprise Fund (PEF).

During FY 2003, the Mint developed a first-ever partnership with the United States

Postal Service that produced new products. These products include sets that pair

state quarters from the 50 State Quarters® Program with their counterpart stamps,

two of the world’s most popular types of collectables. Also during FY 2003, the Mint

teamed with the Bureau of Engraving and Printing to sell new, uncut sheets of $1, $2

and $5 bills through the Mint Annual Collection and award-winning online catalog.

The Mint is currently exploring additional possibilities for partnering with other

federal agencies to develop new products that celebrate our national heritage. For

example, the Lewis and Clark Coin and Currency Set will be released in FY 2004

through the Mint’s partnership with the National Archives and Records

Administration (NARA).

PROTECTION

Twenty-four hours a day/seven days per week, the Mint Police protects more than

2,000 Mint employees and visitors, approximately $95.2 billion (market value at end

of FY 2003) worth of the nation’s gold and silver reserves, and hundreds of millions

of dollars worth of equipment. During FY 2003, the Mint Police enhanced security

at the Mint and supported the security efforts of other federal agencies.

ENHANCED SECURITY AT THE UNITED STATES MINT

During FY 2003, the Mint Police improved security at Mint facilities by:

• Strengthening the Mint Police by establishing a competitive pay structure that is

reducing turnover. In the wake of the terrorist attacks of September 11, 2001,

many federal security programs, such as the Federal Air Marshals Program,

initiated aggressive recruiting campaigns. As a result, turnover within the Mint

Police reached 41 percent during FY 2002. The Mint Police’s new pay structure

was designed to mitigate this high turnover rate.

• Improving the physical security of Mint facilities by expanding its force by 10 full

time employees in order to secure Mint Headquarters, upgrading intrusion

systems, detection systems and state-of-the-art communications systems,

increasing capabilities to detect Weapons of Mass Destruction (WMD), and

continuously conducting threat assessments.

• Advancing intergovernmental collaboration on security and intelligence

networking. This effort has involved sharing information about potential threats and

Then: Reactive Policing

The Mint Police was established 

in 1792,when night watchmen

were hired to guard the

Philadelphia Mint,the first

United States Mint. The United

States Mint Police is one of the

nation’s oldest federal law

enforcement agencies.

The Mint Police’s early security

efforts were primarily based

upon patrols and physical 

barriers. The techniques and

technology of the period did not

encourage proactive crime 

prevention activities.

Circa 1900
United States Mint 2003 Annual Report 17

vulnerabilities with domestic security agencies, such as the FBI Joint Terrorism Task 

Force, and with international law enforcement bodies, such as INTERPOL. The

Mint Police has also expanded its partnerships with local and state police forces

through various activities including entering into a Memorandum of

Understanding (MOU) with local enforcement agencies whose jurisdictions

cover Mint facilities. In addition, the Mint Police assumed a leadership role in the 

development of cooperative emergency evacuation procedures by the newly

formed Washington, D.C. Chinatown Emergency Preparedness Group. The Mint

Headquarters facility is located in Chinatown.

• Improving Mint Police Readiness, Response and Recovery (R3) operations. The

Mint Police is prepared to transfer Mint operations to alternative, secured sites if 

our facilities are disabled by a terrorist threat or damaged during an attack.

Further, the emergency responses of the Mint Police at all of our facilities are

synchronized and coordinated. The Mint Police also regularly leads drills for

employees in emergency response.

SUPPORT TO OTHER FEDERAL AGENCIES

During FY 2003, the Mint Police supported the security activities of other federal

agencies by:

• Providing contingency planning support to selected federal agencies. This effort 

involved securing some assets of other government agencies at Mint facilities. The 

availability of these secured assets will help enable these government agencies 

to continue operating if their own facilities are disabled by a terrorist threat or 

damaged by a terrorist attack.

• Deploying the Mint Police to high-profile special events including the Kentucky 

Derby in Louisville, Kentucky, the International Monetary Fund/World Bank 

meetings in Washington, D.C. and the dedication of the National Constitution 

Center in Philadelphia, Pennsylvania. In addition, the Mint Police participated in 

TOPOFF II (Top Officials) – a national-level domestic and international exercise 

series designed to produce a more effective,coordinated global response to WMD

terrorism.

• Advancing joint enforcement initiatives by entering into a Memorandum of

Agreement (MOA) with the U.S. Marshals Service to support Department of

Justice Programs and by providing support to other agencies, as requested.

Now: Strategic Policing

The Mint Police secures the 

United States Mint’s six

facilities with armed

patrols, electronic 

surveillance systems,

high-tech command and

control centers, and stateof-the-art information 

technology systems. The

Mint Police also contributes

to information gathering 

operations that are

designed to prevent 

attacks and manages 

comprehensive 

contingency plans.

Mint Police officers receive

intensive training in 

forensics, criminal law,

search and seizure,

communications,

interviewing, self-defense,

firearms and survival,

among other topics.
United States Mint 2003 Annual Report 18

OFFICE OF THE CHIEF FINANCIAL OFFICER

The Office of the Chief Financial Officer (OCFO) manages and reports the Mint’s

financial data; manages the Mint’s policies on human resources, procurement and

management controls; and provides overall management support to the Mint.

During FY 2003, OCFO adopted new administrative procedures and information

technology (IT) technologies that improved financial accounting and planning, check

processing procedures, human resources management, contracting, competitive

sourcing studies, property management, and overall management controls. In 

addition, OCFO’s release of the Mint’s new strategic plan reinforced the Mint Values

of accountability, leadership, trust/respect/integrity, teamwork and communication.

FINANCIAL ACCOUNTING AND PLANNING

FY 2003 marked the first year during which OCFO consistently closed its books

within two business days of the last day of each month. Furthermore, after closing

the Mint’s books each month, OCFO – following a “one report – one system”

management philosophy – quickly incorporated the Mint’s monthly financial data

into comprehensive reports of the Mint’s financial and operational performance.

Because these monthly financial/operational reports compare actual financial activity vs.

planned activity for individual offices as well as for the entire Mint, they are significantly

more comprehensive than financial reports produced during previous years.

Also throughout FY 2003, OCFO posted the Mint’s monthly financial/operational

reports on the Mint’s Intranet. These postings enabled all Mint managers – from the

highest-level executives to front-line managers – to easily access the same financial

information at the same time. OCFO thereby provided new tools that promoted

consistent and informed decision-making throughout the organization. In addition,

by updating the Mint’s financial and operational reports regularly and by broadening

their scope,OCFO encouraged more proactive,agile financial decision-making than

had been possible before. For example, during FY 2003, the Mint’s financial and

operational reports supported precedent-setting mid-year adjustments to spending

that accommodated fast-changing economic conditions.

AUTOMATED CHECK PROCESSING

During FY 2003, OCFO, together with the Office of the Chief Information Officer

(OCIO), transitioned the Mint to a Paper Check Conversion (PCC) system. This

PCC system converts paper checks into electronic debits to a check writer’s account

at the point of sale, and enables funds to be quickly transferred from the customer’s

account into the Mint’s account. Because the PCC system is automated, it increases

productivity and boosts the efficiency of collections and reporting processes. In

addition, because this system makes check processing as fast and hassle-free as

credit card transactions, it improves the Mint’s customer service and strengthens

anti-fraud efforts.

HUMAN RESOURCES MANAGEMENT

During FY 2003, OCFO implemented the U.S.Treasury Department’s HR Connect

– an enterprise-wide system that supports the automation of personnel actions. This

Creating a Model 

Workplace

The United States Mint is 

striving to create a model 

workplace where all employees

are treated with respect,dignity

and fairness.
United States Mint 2003 Annual Report 19

project involved purchasing Learning Management System (LMS) software, which

supports the automation of personnel development and performance tracking

actions and provides an interface to HR Connect. These capabilities are enabling the

Mint to translate business needs into workforce learning needs, and then to link

workforce learning needs with employee competencies.

The cost-effectiveness of LMS implementation was enhanced by OHR’s procurement

of the system through the Department of Transportation's Virtual University – a

government-wide e-learning initiative that capitalizes on the economies of scale

afforded by such a large program.

REENFORCING MINT VALUES

During FY 2003, OCFO released the United States Mint Strategic Plan 2002-2007 One

Team. One Vision. This plan defines the Mint’s values of accountability, leadership,

trust/respect/integrity, teamwork and communication. It also promotes these values

by establishing objective, measurable goals that help enhance safety and security,

safeguard the Mint’s integrity and authenticity, encourage collaboration with other

federal agencies, and facilitate benchmarking against best-in-business practices. By

setting forth these goals across the entire organization, this strategic plan advances

a unified, integrated approach that assigns responsibility to all Mint employees for

serving the American people, meeting the expectations of the numismatic community,

and pursuing excellence.

In addition, recognizing that Mint employees serve as the Mint’s backbone, the Mint’s

new strategic plan identifies strategies for improving internal communications,

accountability, and leadership; expanding training and career ladders; and creating a

learning organization. These strategies complement the Mint’s efforts to create a

model workplace.

CONTRACTING

OCFO’s accomplishments for FY 2003 include issuing a Mint-wide policy to

increase the use of performance-based service contracts. Such contracts benefit

the Mint because they are designed to encourage contractors to exceed minimum

requirements on timeliness and quality.

This new policy has significantly increased the use of performance-based service

contracts throughout the Mint. About 80 percent of all service contracts awarded

for OCIO during FY 2003 were performance based. This achievement is especially

significant because service contracts for OCIO account for the majority of the

Mint’s service contracts.

COMPETITIVE SOURCING

During FY 2003,the Office of Competitive Sourcing was established within OCFO

to manage all of the Mint’s competitive sourcing studies. By consolidating the

Mint’s competitive sourcing studies into a single office, the Mint is ensuring that all

Model Workplace 

Activities

During FY 2003,the United

States Mint:

• Reminded all employees of 

our zero tolerance for 

discrimination.

• Kicked-off an Ombudsman 

Program that provides 

confidential,impartial avenues

for resolving workplace 

problems.

• Issued a policy and provided 

Mint-wide training on 

Alternative Dispute Resolution

(ADR).

• Created an executive-led 

Solutions Team that resolves 

issues through the

coordinated efforts of our

Ombudsman, ADR Program 

and Equal Employment 

Opportunity (EEO) Program.

• Released a strategic plan that

identifies respecting/valuing 

our employees as a top

priority,and establishes new 

strategies for enhancing

communication,

recognizing employees,and 

expanding career

opportunities.

• Worked to identify model 

workplace best practices for 

implementation,and created 

a partnership with the Equal 

Employment Opportunity 

Commission (EEOC) to 

contribute to our ADR and 

EEO programs.
United States Mint 2003 Annual Report 20

of these studies receive adequate resources and are consistently conducted. The

Mint’s consolidated approach also clearly defines accountability for management

of these studies. Currently, the Human Resources and the Customer Care Center

are under study. Blanking, Annealing, and Upsetting; Powered Industrial Trucks;

and Accounts Payable are scheduled to be studied in FY 2004.

OCFO’s Office of Human Resources is complementing the Office of Competitive

Sourcing’s management of competitive sourcing studies by evaluating the potential

impacts of possible study results on the workforce. By advancing the Mint’s

competitive sourcing efforts, OCFO is helping the Mint cut costs, eliminate

operational inefficiencies, and comply with the President’s Management Agenda

(PMA), which includes competitive sourcing as a top priority.

PROPERTY MANAGEMENT

During FY 2003, OCFO automated the inventory and tracking of equipment,

furniture and other property through a personal property inventory management

program that uses a state-of-the-art Automated Data Collection System (ADCS).

This automation enhances the Mint’s ability to manage property and helps 

safeguard against theft.

OFFICE OF THE CHIEF INFORMATION OFFICER

The Office of the Chief Information Officer (OCIO) manages the Mint’s IT resources.

During FY 2003, OCIO expanded electronic government (e-Gov) resources,

improved its enterprise architecture, enhanced enterprise resource planning, and

strengthened IT security.

E-GOVERNMENT

During FY 2003, OCIO created several websites for Mint employees on emergency

preparedness, personnel matters, press coverage of Mint activities, and the schedules

of coin shipments from the Mint to the Federal Reserve. These innovations

improved the Mint’s internal communications and supported the goal of the PMA

of expanding e-government within the federal government.

ENTERPRISE ARCHITECTURE

OCIO continually works to more closely align the Mint’s enterprise architecture (EA)

with the Mint’s business practices. During FY 2003, the Mint advanced this effort by

analyzing the workflow processes of the Office of Sales and Marketing’s Electronic

Solutions Project (eSP), which is part of the Internet retail sales program.

Mint Earns High

Performance Assessment

Rating

The Office of Management and

Budget (OMB) uses a program

assessment rating tool known as

PART to evaluate the purpose,

management,and results of 

federal programs. During FY

2003,the Mint’s circulating coin

program scored 85 percent on

PART,which was among the

highest scores received by any

bureau within the Department

of the Treasury.

OCFO played a leadership role

in the PART review by working

with the Office of

Manufacturing to analyze the 

circulating coin program’s

strengths and to submit

answers to a lengthy OMB

questionnaire.
United States Mint 2003 Annual Report 21

ENTERPRISE RESOURCE PLANNING

During FY 2003, OCIO improved the enterprise resource planning (ERP) system

by:

• Resolving audit findings and addressing the security of ERP applications.

• Migrating the Mint’s stand-alone bullion coin ordering system to the ERP

system. This migration, which was completed jointly with the OCFO and the

Office of Manufacturing, is enabling the Mint to manage bullion orders in real

time and enhancing the security and access controls of the bullion coin 

ordering system. In addition, this migration marked the first time that the Mint

implemented a Public Key Infrastructure (PKI) encrypted and authenticated

communication into a business process. The PKI system is a cutting-edge 

technology that enhances the security of information that travels over the Internet.

• Implementing new interfaces to the Central Contractor Registration (CCR)

and National Finance Center (NFC). This project, which was completed jointly

with the OCFO, will enable the Mint to access the CCR’s data on vendors. This

access will help the Mint authenticate billing information from vendors and

thereby improve the Mint’s safeguards against vendor fraud. These new 

interfaces will also reduce duplication of vendor data and improve the 

efficiency of processing employees’ expenses for travel and other purposes

through the NFC.

INFORMATION SECURITY

During FY 2003,the Mint remained free of data losses,breaches of confidentiality and

compromises to data integrity from cyber-attacks and contamination from malicious

codes. The security of the Mint’s data was strengthened during this fiscal year by

OCIO’s development and implementation of a certification and accreditation

program for each major application and general support system used by the Mint.

These programs are designed to protect each application and system by controls that

are required by the Federal Information Security Management Act (FISMA) of 2002.

OCIO’s activities during FY 2003 also included developing a new Information

Technology Disaster Recovery Plan for each field facility, and updating the

Comprehensive Disaster Plan for Headquarters.

Mint Wins “Excellence in

Enterprise Architecture”

Award

In September 2003,the United

States Mint was presented with

the "Excellence in Enterprise

Architecture" award by the

Federal Enterprise Architecture

Certification (FEAC) Institute,

Federal Computer Week,and 

e-Gov. This award recognizes

best practices in the 

development and 

implementation of enterprise

architecture (EA).

The United States Mint’s EA

provides an infrastructure that

supports and integrates the

Mint’s business operations and

information technology systems.

It thereby improves information

access for decision-making,

supports reusability of 

information,reduces the need

for system maintenance,and

cuts maintenance costs.
United States Mint 2003 Annual Report 22

THE 50 STATE QUARTERS®PROGRAM

The 50 State Quarters Program® is an unprecedented 10-year initiative (1999

through 2008) that honors each state with a unique design for the reverse of its

state quarter; the obverse of all state quarters showcases an image of George

Washington. A new state quarter is released approximately every ten weeks, and

states are honored in the order in which they were accepted into the Union.

The Mississippi state quarter showcases the beauty and elegance of the state flower.

“The magnolia bloom on your state quarter represents your state’s natural

beauty...There is so much in Mississippi to be proud of, and coins like these are

one record of your history and pride that will be shared through generations.”

-- Director Fore with Mississippi Governor Ronnie Musgrove at Mississippi 

state quarter launch; Jackson, Mississippi; October 22, 2002

The Illinois state quarter depicts a young Abraham Lincoln surrounded by the outline of

the state. A farm scene and a city skyline appear on the left and right of the outline.

“This design is one of the most distinctive of the series. It is the first U.S.

coin to feature a young Abraham Lincoln, and thus it is a numismatic first.”

-- Director Fore with Illinois First Lady Lura Lynn Ryan at Illinois quarter launch;

Chicago, Illinois; January 6, 2003

The Alabama state quarter features an image of Helen Keller, who was born in

Tuscumbia, Alabama. This coin also showcases Helen Keller’s name, which appears

in English and in a reduced-sized version of Braille. The Alabama state quarter is

the first circulating coin to feature Braille, the first circulating coin to feature a

disabled woman, and the third coin to feature the image of an historic woman

(rather than an image of an allegorical woman).

“This new quarter honors a citizen of Alabama whose exceptional courage

and commitment to education produce enduring inspiration to the world.”

-- Director Fore with Alabama Governor Bob Riley at Alabama quarter launch;

Tuscumbia, Alabama; March 24, 2003

The Maine state quarter depicts Pemaquid Point Light, which is among Maine’s

most popular tourist attractions, and a schooner at sea.

“The Maine state quarter is the first U.S.circulating coin to feature a lighthouse.

Not only does this design underscore Maine’s longstanding maritime tradition,it

embraces the natural beauty for which the state is world-famous.”

-- Director Fore with Maine Governor John Baldacci at Maine quarter launch;

New Harbor, Maine; June 9, 2003
United States Mint 2003 Annual Report 23

The Missouri state quarter depicts Lewis and Clark’s historic return to St. Louis

down the Missouri River, with the Jefferson National Expansion Memorial

(Gateway Arch) in the background.

“The Missouri quarter depicts the rich history and the spirit of adventure at

the heart of this great state and our Nation.”

-- Director Fore with Missouri Governor Bob Holden at Missouri State Fair;

Sedalia, Missouri; August 10, 2003

AMERICA LOVES THE 50 STATE QUARTERS® PROGRAM

State quarters are currently collected by about 130 million people – which equals

about one person per United States household. No other collectible product in 

history has ever achieved such popularity.

The 50 State Quarters® Program is completely self-supporting. Partly because of

this program, the Mint returned $600 million in results and profits to the United

States Treasury in FY 2003.

The Mint actively reaches out to all parts of the collectibles industry and 

consumers so that they may be treated fairly and can purchase the highest 

quality United States coins produced by the United States Government. As the only

government agency charged with the production of legal tender United States

coinage and collectible-grade coins whose weight and purity are guaranteed by the

United States Government, the Mint accompanies its coins and coin-based products

with Certificates of Authenticity that guarantee their legitimacy and keep the market

vibrant and collectors enthusiastic.

The unique design of each state quarter 

is developed through an approximately 

two-year collaboration between the state,

the United States Mint, the Citizens Coinage

Advisory Committee and the U.S. Commission 

on Fine Arts. To celebrate these collaborations

and to generate public interest in coin design 

and American history, the Director of the 

United States Mint unveils each new state

quarter at a launch event that is usually 

co-hosted by the governor of the state.

Attended by thousands of children and adults,

each launch event is located at a thematicallyrelevant location in the state. The agenda of 

each launch event salutes state culture,

geography, natural resources and pertinent 

historical events, and promotes coin collecting.

The festive atmosphere of each event is 

heightened by speeches from state luminaries.
United States Mint 2003 Annual Report 24

MANAGEMENT’S DISCUSSION &

ANALYSIS

OVERVIEW

The United States Mint’s (the Mint) financial results are prepared in accordance with

the Chief Financial Officer’s (CFO) Act of 1990. The consolidated financial statements

represent the operations of the entire Mint, including the circulating, numismatic,

and protection programs. Management’s discussion and analysis serves to explain the

consolidated financial statements as well as to explain program performance. The

Mint uses a set of key performance indicators to manage operations, and an analysis

of the results of these indicators follows the discussion of the financial results.

DISCUSSION & ANALYSIS OF CONSOLIDATED OPERATIONS

The major factor that affects the operations of the Mint is the state of the economy.

When the economy is weak, commercial activity declines and the demand for

circulating coinage falls. Weak economic conditions in FY 2003 caused

circulating collections and numismatic (non-bullion) revenue to decrease but

bullion revenue to increase. In addition, the Federal Reserve Bank (FRB) reduced

inventories by 22 percent in FY 2003, which further depressed circulating sales. As a

result, circulating coin collections decreased to $937.4 million in FY 2003 from

$1,364.2 million in FY 2002. Weak economic conditions also caused numismatic

non-bullion sales to decrease to $234.9 million in FY 2003 from $253.3 million in FY

2002. Bullion sales, however, increased to $235.4 million in FY 2003 from $186.7

million in FY 2002. We believe that demand for precious metals was largely driven

by volatility in the stock market and the Iraqi conflict. As a result,the Mint’s American

Eagle uncirculated (bullion) products,investment grade precious coins,benefited from

the increased demand.

Total circulating operating results and numismatic profit fell to $579.0 million in FY

2003 from $961.1 million in FY 2002. Margins declined for both circulating and

numismatic products. As a result, total margins before protection costs fell to 41

percent in FY 2003 from 53 percent in FY 2002. Circulating margins declined to 61

percent in FY 2003 from 68 percent in FY 2002 due to low sales and fixed costs being

spread over a smaller revenue base. The numismatic margins were also lower, falling

to 0.9 percent in FY 2003 from 7.6 percent in FY 2002. Higher sales of the lower

margin products in the American Eagle Bullion program and higher advertising

costs were the primary reasons for the decrease.

DISCUSSION & ANALYSIS OF CIRCULATING COINAGE OPERATIONS

The Mint produces the circulating coins used to conduct commercial transactions

across the nation. The Mint ships new coins to the FRB as they are needed to 

replenish inventory and fulfill commercial demand. The Federal Reserve reimburses

the Mint at face value for the coins when they are shipped. The costs to 

manufacture the coins are small relative to the face value of the coins. As a result,

the circulating coins, especially the higher value denominations, usually have high 

margins. The operating results are returned to the U.S.Treasury General Fund (for

more information on returns to the General Fund in FY 2003, see the section on

Transfers to the General Fund).
United States Mint 2003 Annual Report 25

Total circulating collections decreased 31 percent to $937.4 million in FY 2003 from

$1,364.2 million in the prior year. The circulating operating results decreased 38

percent to $574.8 million from $927.8 million in the prior year. The decrease in

coin demand was driven by a weak economy and high system-wide inventories. In

FY 2001-2002, the Federal Reserve built large stockpiles of coin inventory. In FY

2003, the FRB made an effort to reduce inventories by supplying the country’s

commercial coin demand from existing inventories, reducing the FRB’s orders from

the Mint. System-wide coin inventory decreased 22 percent to 7.3 billion pieces in

FY 2003 from 9.4 billion pieces in FY 2002. The 2.1 billion piece inventory reduction

reduced the Mint’s collections by over $200 million in FY 2003.

The weak economy and high system-wide inventory levels caused collections for all

denominations except for the half-dollar to decline. Penny, nickel, and dime

collections decreased to $289.9 million in FY 2003 from $403.6 million in FY 2002.

Quarter collections have steadily decreased the past four years from $1.5 billion in

FY 2000, to $1.4 billion in FY 2001, to $904.0 million in FY 2002, to $617.9 million

in FY 2003. Although decreasing, quarters continue to be the largest selling 

denomination due to the 50 State Quarters® Program’s collector appeal, comprising

66 percent of total circulating coin collections in both FY 2003 and FY 2002. As a

CIRCULATING COLLECTIONS AND OPERATING RESULTS (IN MILLIONS)

FOR THE YEAR ENDED SEPTEMBER 30, 2003

Mutilated

Penny Nickel Dime Quarter Half Dollar & Other Total

Collections $64.3 $37.2 $188.4 $617.9 $4.5 $25.1 $0.0 $937.4

Cost of 

Goods Sold 61.2 26.2 37.6 113.8 0.8 4.3 0.0 243.9

Selling, General 

& Administrative 2.1 2.1 23.0 76.7 0.5 3.5 0.0 107.9

Other Costs and

Expenses 0.0 0.0 0.0 0.0 0.0 0.0 10.8 10.8

Operating Results $1.0 $8.9 $127.8 $427.4 $3.2 $17.3 ($10.8) $574.8

Margin 1.6% 23.9% 67.8% 69.2% 71.1% 68.9% 61.3%

CIRCULATING COLLECTIONS AND OPERATING RESULTS (IN MILLIONS)

FOR THE YEAR ENDED SEPTEMBER 30, 2002

Mutilated

Penny Nickel Dime Quarter Half Dollar & Other Total

Collections $75.2 $65.1 $263.3 $904.0 $4.4 $52.2 $0.0 $1,364.2

Cost of 

Goods Sold 64.9 40.2 49.8 147.3 0.6 3.2 0.0 306.0

Selling, General 

& Administrative 1.5 3.0 23.5 86.8 0.4 7.2 0.0 122.4

Other Costs and

Expenses 0.0 0.0 0.0 0.0 0.0 0.0 8.0 8.0

Operating Results $8.8 $21.9 $190.0 $669.9 $3.4 $41.8 ($8.0) $927.8

Margin 11.7% 33.6% 72.2% 74.1% 77.3% 80.1% 68.0%
United States Mint 2003 Annual Report 26

result of the high quarter collections in FY 2000 and FY 2001, system-wide quarter

inventories are above historical averages. Demand for newly minted state quarters

is expected to remain low.

Circulating margins decreased to 61 percent in FY 2003 from 68 percent in FY 2002 due

to the decline in collections, resulting in fixed costs being spread over a smaller

collection base. Penny margins fell to 1.6 percent in FY 2003 from 11.7 percent in FY

2002 due to lower than anticipated production. The Mint produced 6 billion pennies in

FY 2003 compared to an average annual production of 11 billion from FY 1998 to FY

2002. The cost per unit increased because fixed costs were spread over a smaller

collection base. The low production volume also caused the cost of blanks to increase

because the Mint’s unit cost of blanks from the supplier decreases as volume increases.

Since orders from the supplier were less than anticipated, the cost of the blanks were

$0.0004 more than initially planned. Low collections, as well as equipment write-offs,

lead to decreased profit margins in all circulating denominations. The nickel’s margin

decreased to 24 percent from 34 percent in the prior year,the dime’s margin decreased

to 68 percent from 72 percent in the prior year, the quarter’s margin decreased to 69

percent from 74 percent in the prior year, the half-dollar’s margin decreased to 71 

percent from 77 percent in the prior year, and the dollar’s margin decreased to 69 

percent from 80 percent in the prior year.

Total Cost of Goods Sold (COGS) as a percentage of collections rose to 26 percent in

FY 2003 from 22 percent in FY 2002. Penny COGS increased to 95 percent of

collections from 86 percent in the prior year, nickel COGS increased to 70 percent of

collections from 62 percent in the prior year, dime COGS increased to 20 percent of

collections from 19 percent in the prior year,quarter COGS increased to 18 percent of

collections from 16 percent in the prior year, half-dollar COGS increased to 18

percent of collections from 14 percent in the prior year, and dollar COGS increased to

17 percent of collections from 6 percent in the prior year. The selling, general and

administrative (SG&A) costs associated with the circulating products also contributed to

the decreased margins. Circulating SG&A decreased to $107.9 million in FY 2003 from

$122.4 million in FY 2002. However, SG&A as a percent of collections increased to 12

percent in FY 2003 from 9 percent in FY 2002 as a result of the decline in collections.

The following charts show that COGS and SG&A increased for all denominations on a

per unit basis.

UNIT COST OF PRODUCING AND DISTRIBUTING COINS

FOR THE YEAR ENDED SEPTEMBER 30, 2003

Penny Nickel Dime Quarter Half Dollar

Cost of 

Goods Sold $0.0093 $0.0346 $0.0197 $0.0452 $0.0902 $0.1694

General & 

Administrative $0.0003 $0.0028 $0.0122 $0.0311 $0.0583 $0.1410

Distribution 

to FRB $0.0002 $0.0004 $0.0002 $0.0008 $0.0007 $0.0017

Total Expenses $0.0098 $0.0378 $0.0321 $0.0771 $0.1492 $0.3121
United States Mint 2003 Annual Report 27

DISCUSSION & ANALYSIS OF NUMISMATIC OPERATIONS

Total numismatic revenues increased to $470.3 million in FY 2003 from $440.0

million in FY 2002. The increase in total numismatic revenues was driven by high

demand for precious metals, which drove American Eagle uncirculated (bullion) sales

higher. Bullion sales comprised 50 percent of total numismatic revenue in FY 2003

compared to 42 percent in FY 2002. However, the total numismatic profit margin

decreased to 0.9 percent in FY 2003 from 7.6 percent in FY 2002 as bullion

constituted a higher percentage of total sales. The bullion is sold at a low margin

similar to other numismatic products worldwide. In contrast to the bullion program,

numismatic non-bullion revenues decreased to $234.9 million in FY 2003 from

$253.3 million in FY 2002. Numismatic non-bullion margins fell to 1.3 percent from

11.5 percent in FY 2002, despite an advertising campaign, due to weak retail

conditions and delayed introduction of key products.

UNIT COST OF PRODUCING AND DISTRIBUTING COINS

FOR THE YEAR ENDED SEPTEMBER 30, 2002

Penny Nickel Dime Quarter Half Dollar

Cost of 

Goods Sold $0.0085 $0.0306 $0.0187 $0.0400 $0.0664 $0.0607

General & 

Administrative $0.0002 $0.0023 $0.0089 $0.0229 $0.0433 $0.1049

Distribution 

to FRB $0.0002 $0.0003 $0.0002 $0.0008 $0.0013 $0.0011

Total Expenses $0.0089 $0.0332 $0.0278 $0.0637 $0.1110 $0.1667

NUMISMATIC PROFIT AND LOSS (IN MILLIONS)

FOR THE PERIOD ENDED SEPTEMBER 30, 2003

American American 

Eagle Eagle 

Uncirculated Proof Commemoratives Recurring Total

Revenue 

(less surcharges) $235.4 $61.0 $7.3 $166.6 $470.3

Cost of 

Goods Sold 232.8 41.9 5.5 114.9 395.1

Selling, General 

& Administrative 1.4 17.4 1.8 50.4 71.0

Profit (Loss) $1.2 $1.7 $0.0 $1.3 $4.2

Profit Margin 0.5% 2.8% 0.0% 0.8% 0.9%
United States Mint 2003 Annual Report 28

AMERICAN EAGLE UNCIRCULATED (BULLION)

American Eagle Bullion sales increased to $235.4 million in FY 2003 from $186.7

million in FY 2002. The American Eagle Bullion Program has historically had increased

sales when the stock market is declining as investors migrate to precious metals as a

defensive investment. The chart below shows the relationship between gold prices

and the Standard & Poor’s (S&P) 500 Index. From 1994 to 1997, the quarterly gold

prices remained at a stable level as the stock market grew at a moderate pace. When

the technology boom began in 1997,gold prices fell as investors put more money in the

stock market. Gold prices remained low from 1997 to 2000 as the S&P 500 Index

continued to rise. Accordingly, sales of American Eagle Bullion were relatively low

as investors sought out higher-yielding investments. In 1999, gold prices rose briefly

because of uncertainty surrounding the year 2000 change. When the equities 

markets began to decline dramatically in calendar year 2000, gold prices increased

again as investors reallocated their portfolios to more diversified investments. Gold

prices have remained relatively high the past two years as the equities markets have

remained relatively low and volatile,driving American Eagle Bullion sales higher. In FY

2003, American Eagle Bullion sales were higher than anticipated due to the Iraqi

conflict, which suppressed the stock market. As a result of the increased demand for

precious metals, the Mint revised the American Eagle Bullion sales plan in FY 2003

from $165 million to $300 million. At the conclusion of Operation Iraqi Freedom,

however, the stock market began to rise and American Eagle Bullion sales slowed.

NUMISMATIC PROFIT AND LOSS (IN MILLIONS)

FOR THE YEAR ENDED SEPTEMBER 30, 2002

American American 

Eagle Eagle 

Uncirculated Proof Commemoratives Recurring Total

Revenue 

(less surcharges) $186.7 $56.6 $21.9 $174.8 $440.0

Cost of 

Goods Sold 181.0 35.3 12.3 118.4 347.0

Selling, General 

& Administrative 1.6 11.2 6.1 40.8 59.7

Profit (Loss) $4.1 $10.1 $3.5 $15.6 $33.3

Profit Margin 2.2% 17.8% 16.0% 8.9% 7.6%
United States Mint 2003 Annual Report 29

AMERICAN EAGLE PROOF

American Eagle Proof revenues increased to $61.0 million in FY 2003 from $56.6

million in FY 2002 due to increased marketing efforts and higher selling prices.

Advertising expenses for American Eagle Proof programs increased to $5.3 million in

FY 2003 from $1.1 million in FY 2002, and the average selling prices of American

Eagle Proof products increased 10 percent from the prior year. However, the

increased advertising effort and higher sales prices did not generate enough

additional revenue to increase profits. As a result, American Eagle Proof profits

declined to $1.7 million in FY 2003 from $10.1 million in FY 2002 and profit margins

fell to 2.8 percent from 17.8 percent in the prior year. The 2003 American Eagle

Platinum Proof Program was released in FY 2004 and,therefore,is not included in FY

2003 revenues.

COMMEMORATIVE COINS

Commemorative revenue (less surcharges) dropped to $7.3 million in FY 2003 from

$21.9 million in FY 2002. Typically, Congress authorizes the issuance of two

commemorative coin programs per year. Congress only authorized the issuance of

the First Flight Centennial Commemorative Coins in 2003 compared to two coin

programs authorized in the prior year. The First Flight Centennial Commemorative

Coins were released in September 2003. Therefore, most of the revenue from the

First Flight coins will be realized in FY 2004. First Flight sales totaled $6.3 million in

FY 2003. Commemorative revenues in FY 2003 also include residual sales of the U.S.

Military Academy ($748,000) and 2002 Winter Olympic ($279,000) Commemorative

Coins, which were authorized by Congress for issuance in 2002. The $10 gold,

one-dollar silver and half-dollar clad First Flight Centennial Commemorative Coins

commemorate the 100th anniversary of the Wright Brothers’ historic flight near

Kitty Hawk, North Carolina on December 17, 1903. Maximum mintages of 100,000

gold, 500,000 silver and 750,000 clad First Flight Centennial Commemorative Coins

are authorized by law. Surcharges of $35 on the sale of each gold coin, $10 on the

sale of each silver coin, and $1 on the sale of each clad coin are authorized to be

300

600

900

1200

1500

250

270

330

370

410

SP500 Gold Spot Price

1993:4

1994:3

1995:2

1996:1

1996:4

1997:3

1998:2

1999:1

1999:4

2000:3

2001:2

2002:1

2002:4

2003:3

Gold Spot PricesLondon Fix

S&P 500

Quarter

QUARTERLY GOLD PRICES V. S&P 500 INDEX
United States Mint 2003 Annual Report 30

directed to the First Flight Centennial Foundation for the purposes of repairing,

refurbishing and maintaining the Wright Brothers Monument and other facilities at

the Wright Brothers National Memorial Park in Kitty Hawk, North Carolina.

RECURRING PROGRAMS

Recurring programs include proof sets, silver proof sets, uncirculated sets, 50 State

Quarters® proof sets, 50 State Quarters® bags and rolls, and other 

miscellaneous products. Revenue from recurring programs decreased to $166.6

million in FY 2003 from $174.8 million in FY 2002 despite increased advertising

efforts. Advertising expenses increased to $10.8 million in FY 2003 from $4.1 

million in FY 2002, but did not generate additional revenue over the prior year due

to the weak economy and delayed introduction of products. As a result, proof set

revenues decreased to $45.1 million from $49.7 million in the prior year, silver proof

revenues decreased to $31.8 million from $38.8 million, uncirculated set revenue

decreased to $16.9 million from $18.5 million, and 50 State Quarters® bags and

rolls revenue decreased to $25.6 million from $34.6 million. The increased 

advertising effort had a significant impact on the 50 State Quarters® proof program,

however, as revenue increased to $18.1 million from $11.7 million in the prior year.

The combination of the weak economy, fixed costs being spread over a smaller 

revenue base, higher advertising expenses, and product introduction delays reduced

recurring program profits to $1.3 million in FY 2003 from $15.6 million in FY 2002

and profit margins fell to 0.8 percent from 8.9 percent.

DISCUSSION AND ANALYSIS OF PROTECTION OPERATIONS

The Office of Protection maintains a highly professional police force with the tools

and resources needed to respond to changing threats. The Mint secures

approximately $95.2 billion in market value of the nation’s gold and silver

reserves. Additionally, the Mint Police safeguards thousands of employees

against threats at our facilities across the country.

Protection costs increased to $37.8 million in FY 2003 from $31.8 million in FY 2002.

The increase in protection costs is a result of higher threat levels attributable to the

September 11, 2001 terrorist attacks and efforts to recruit and retain a high quality

police force. In a major effort to retain our police workforce, and be able to recruit

high quality personnel, we were successful in obtaining a pay increase for our security

force. We believe that higher pay will help retain trained officers rather than seeing

them depart for new opportunities created by higher security needs nationwide, and

improve the candidate pool for prospective officers. As a result of the pay increases,

the average salary and benefits for protection personnel increased 14 percent over

the prior year.
United States Mint 2003 Annual Report 31

CAPITAL INVESTMENTS

Investment in capital is crucial to the Mint’s ability to meet commercial demand for

coinage, sell numismatic products to the public, and protect facilities and assets.

Proper capital planning and effective investment management is part of our efforts to

become a world-class manufacturing organization.

We are transforming our operations through the implementation of Total Productive

Manufacturing (TPM) concepts. A strategic approach to achieve our goal of becoming a

model government agency that matches world-class business practices,TPM is a

production philosophy that encourages continuous and rapid improvement

through the use of employee involvement and clear measures of performance. TPM

focuses on maintaining a safe and clean working environment, upgrading and

standardizing equipment and processes, and employee involvement through

training and team-based problem solving. As part of TPM, we are reviewing our

operating procedures and processes as well as the entire supply chain configuration to determine the capital investments necessary for the Mint to become an

efficient and effective world-class coin manufacturer.

During FY 2003, the Mint made significant strides toward becoming a Lean and Agile

(L&A) manufacturing organization. Our accomplishments include:

• Conducted L&A training sessions at the Philadelphia, Denver, San Francisco, and

West Point operations. Diversified groups of employees at each plant participated

in L&A workshops, process and value stream mapping, brainstorming, and

developing new plant and equipment layouts to maximize production efficiencies.

• Commenced implementation of new plant layouts in Philadelphia and Denver.

Beginning in 2004, a new plant layout is scheduled to be implemented in

San Francisco along with process and workflow improvements for the West

Point plant.

• Held Supply Chain Management workshops for material suppliers, Mint personnel,

and FRB personnel to educate them on how the Mint will be ordering 

materials, converting materials to finished goods, controlling work-in-process and

finished goods inventories, and supplying finished goods to distribution channels.

Other manufacturing capital investments included:

• Equipment replacements such as coin presses, to maintain our basic production

capacity.

• Health and safety improvements, including replacing the motor control centers

within the Philadelphia Mint, which brings this facility into compliance with the

National Electric Code (NEC).
United States Mint 2003 Annual Report 32

• Mint security was enhanced by capital investments to upgrade detection and

surveillance capabilities, install access control devices at all locations and position

physical barriers at all our field facilities.

• Mint information technology investments in FY 2003 included the implementation

of an electronic records management (ERM) application and continued work on

upgrading our enterprise resource planning (ERP) system.

TRANSFERS TO THE TREASURY GENERAL FUND

The Public Enterprise Fund (PEF) legislation permits the Mint to operate in a

business-like manner allowing the Mint flexibility to adjust spending to adapt to ever

changing economic and business conditions. The Mint transfers circulating results to

the Treasury General Fund on a quarterly basis and numismatic profits on an annual

basis. The amount of the deposit depends on cash flows and is determined by the

level of Mint sales and projected future expenditures.

In FY 2003, the Mint contributed $600 million to the Treasury General Fund. This

total consisted of $567 million from circulating operations (off-budget) and $33

million from numismatic operations (on-budget). In comparison, over $1 billion

($990 million from circulating operations and $40 million from numismatic

operations) was transferred to the Treasury General Fund in FY 2002. The

transfer from numismatic operations occurred in the first quarter of FY 2003

and reflects the numismatic profit for FY 2002. The amounts transferred to

Treasury are directly related to the sales of Mint products. Weak circulating coin

collections and numismatic sales generated smaller operating results and profits,

respectively, and therefore smaller transfers to the General Fund in FY 2003 relative

to FY 2002.

PERFORMANCE SECTION

One of the most effective means of determining how well an organization is

performing is through the use of performance measures. As described in Sections

4 and 5 of the Government Performance & Results Act (GPRA), agencies are to

identify critical activities, devise pertinent performance measures, and report on

these activities to the President and Congress.

The Mint’s strategic plan focuses on adding value, ensuring integrity, and realizing

world-class performance. To direct our efforts, the Mint devised key performance

measures that cut across our organization. Tied to these performance measures are

world-class targets and substantive initiatives to reach our goals. These measures are

presented as bureau-wide strategic performance measures, which establish a single,

critical set of measures to manage our operations effectively. In addition to being the

critical measures used by management, many of these key measures can be broken

out at the program level. Highlighted below are these measures:
United States Mint 2003 Annual Report 33

LOST TIME ACCIDENT RATE

The Mint values its employees. Consistent with those values, the Mint strives to

maintain a work environment that promotes the safety and well-being of employees

on the job at all times. Lost Time Accidents (LTAs) are work-related accidents that

lead to an employee missing at least one day of work. The LTA rate is the number

of LTAs for every 200,000 hours worked. The LTA rate improved dramatically

to 1.48 in FY 2003 from 2.27 in FY 2002, just missing the target rate of 1.44. Driven

by heightened awareness on safety issues and process improvements at the plants,

the LTA rate has decreased three years in a row. The Mint will continue to implement comprehensive, aggressive safety programs to search for, identify, and correct

safety issues in all of our facilities in order to continue the positive trend and reach

our ultimate goal of zero LTAs.

EMPLOYEE SATISFACTION (PULSE CHECK SURVEY)

The Mint values its employees and strives to be an employer of choice where

employees are motivated and enthusiastic about coming to work. The Employee

Satisfaction Survey is a 14-question survey designed to assess the attitudes of the

Mint’s employees concerning their work environment. It is administered each

quarter to 25 percent of the Mint’s permanent workforce. Mint management

reports to employees the findings from the employee satisfaction question on the

survey, which captures the percentage of employees who are satisfied with their jobs.

At the end of FY 2003, 60 percent of the employees who took part in the survey

were satisfied with their jobs compared to a 65 percent industry benchmark. While

individual responses are kept confidential, reports are created that allow analysis across

broad categories for more detail. The Mint’s management team has meticulously

UNITED STATES MINT KEY PERFORMANCE MEASURES
United States Mint 2003 Annual Report 34

reviewed these reports and is working to implement workplace improvements to

address job satisfaction gaps identified by the survey. Prior year data is not

available as the Mint began tracking this measure in FY 2003.

CYCLE TIME

The Mint wants to minimize the amount of time it takes to process raw materials

into finished goods, eliminating non-value added steps from the processes and reducing

the amount of raw material in inventory. The cycle time measure assesses the time

it takes material to flow through the Mint's processes, from raw material to order

fulfillment. Cycle time decreased to 73 days in September 2003 from 112 days in

September 2002 and surpassed the target of 150 days. The improvement in the

measure is attributable to the Mint’s efforts to reduce raw materials inventory. The

Mint eliminated feedstock inventory, reducing the amount of metal from 22 days

supply in September 2002, to 0 days supply in September 2003. This was

accomplished by only procuring fabricated coils and blanks from vendors and

eliminating Mint-owned raw material for circulating coins. The number of days 

supply of coils/blanks inventory decreased to 24 days in September 2003 from 36

days in September 2002.

YIELD

The Mint wants to minimize wasted material and transform as much of our materials

into finished goods as is feasible. Yield measures the percentage of raw materials used

that results in a finished product. Yield in FY 2003 increased slightly to 85.93 percent

from 85.86 percent in the prior year. The major impediment to higher yield is a

physical limitation in our production process for manufacturing blanks, as rectangular

strips of metal are converted into circular metal blanks. The resulting scrap that is

generated lowers the yield measure 10-15 percent depending on the mix of

products we are producing. The Mint will continue to look into innovative solutions

to improve yield. Improved machine maintenance and machine availability are expected

to improve the yield of our raw material inputs as well.

MACHINE AVAILABILITY

Machine availability measures the amount of time production equipment is available

to produce finished goods (excluding scheduled downtime). We want our machines

'at-the-ready' at all times to manufacture coins as warranted by the prevalent

demand. The Mint’s equipment was available for production 56 percent of the

time in FY 2003, which beat the target of 51 percent. Due to a combination of

maintenance,staff planning,and older equipment,the Mint has had an historically low

machine availability rate. Newer equipment, improved technology to schedule and

monitor maintenance, and improved production management are enabling the Mint

to have machines available more hours of the day. Total Productive Manufacturing 

initiatives described earlier will be focused on improving production scheduling and

processes, positively impacting machine availability.
United States Mint 2003 Annual Report 35

INVENTORY TURNOVER

Inventory is expensive. It costs money to store inventory while it waits to be sold or

converted to a finished good. The Mint seeks to minimize inventory of raw materials

and finished goods to reduce the associated costs. Inventory turnover is a

measure of how often, during the course of a year, the Mint sells and replaces

inventory of materials and final products. Inventory turnover improved to 1.96

in FY 2003 from 1.65 in FY 2002. However, the Mint did not achieve the target

of 2.40 turns per year. Inventory levels remain high and need further reductions.

Despite reductions in inventories, weak demand for coins has slowed the

improvement in inventory turnover. This measure will improve as revenues and

collections increase. The Mint will continue to reduce inventory to achieve 

the target.

SG&A AS A PERCENT OF REVENUE (EXCLUDING BULLION REVENUE)

Sales, General & Administrative (SG&A) expenses are the overhead, marketing,

and advertising costs of running the Mint. In a production-oriented, nonservice intensive type business like the Mint, the focus is on minimizing SG&A

costs where practicable to improve margins. The Mint cut overall SG&A costs to

$179 million in FY 2003 from $182 million in FY 2002. Although the Mint reduced

SG&A costs from the prior year, SG&A as a percent of revenue (excluding the 

bullion revenue) rose to 15.1 percent in FY 2003 from 11.2 percent in FY 2002

due to the decline in non-bullion revenues. The Mint is committed to achieving the

target of 7.7 percent and has launched initiatives to reduce planned SG&A spending,

including greater reliance on automation, and is working toward a one-report,

one-system type of operation.

CONVERSION COST PER 1000 COIN EQUIVALENTS

The Mint's costs vary by product, and the Mint's product mix has been variable over

time. Without a common unit of production, it is difficult to compare operating

results from year to year. Coin equivalents convert the Mint's entire 

production output to a common denominator (standardized from the quarter).

Production costs (less metal and fabrication) are then analyzed as a ratio of this

standard production level, thus “conversion costs per 1000 coin equivalents.” This

allows comparison of performance over time by negating the distortions of the Mint’s

financial results due to changes in the product mix. Conversion costs per 1000 coin

equivalents rose to $9.96 in FY 2003 from $8.69 in FY 2002, and matched the target

of $9.96. The rise in the measure was anticipated and was caused by low levels of

coin demand compared to recent history, which drove a reduction in coin 

production from the prior year. Generally,the cost per 1000 coin equivalents will rise

when production declines because more fixed costs such as depreciation and overhead

will be allocated to each unit produced.
United States Mint 2003 Annual Report 36

CUSTOMER SERVICE INDEX 

The Customer Service Index (CSI) is an indicator of quality of our product and

service to the customer. Production of quality products and excellent customer

service is paramount. The CSI contains three components: the percentage of

orders without returns, the percentage of phone calls answered within one

minute, and the percentage of orders fulfilled within seven days. The CSI was 87

percent in FY 2003, which easily beat the target of 70 percent. Although lower

sales eased the load on our customer service providing units, we are 

confident we would have met or exceeded the target if sales had been higher.

Prior year data is not available as the Mint began tracking this measure in FY 2003.

TOTAL LOSSES

The Mint performs its protection function by minimizing the vulnerability to theft

or unauthorized access to critical assets. Total losses measures the dollar amount

of losses incurred due to the realization of threats against the Mint. The Mint is

still developing an appropriate methodology for this measure. The proposed

methodology will be shared with our stakeholders in Treasury, OMB and

Congress for approval. We plan to be able to report on the total losses measure

for fiscal year 2004.
United States Mint 2003 Annual Report 37

UNITED STATES MINT

FMFIA / FFMIA ANNUAL ASSURANCE STATEMENT

FOR FISCAL YEAR 2003

The United States Mint has evaluated its systems of management control for the fiscal year ending

September 30, 2003, in accordance with procedures and standards prescribed by the Office of

Management and Budget and the General Accounting Office.

The Mint provides reasonable assurance that the objectives of Section 2 of the FMFIA were achieved during fiscal year (FY) 2003.

For FY 2003, the Mint provides reasonable assurance that the objectives of Section 4 of the FMFIA were

met. We took decisive action throughout FY 2003 to correct the single material weakness reported in

our FY 2002 Annual Assurance Statement that the Mint’s information systems controls needed

improvement. Some of the corrective actions taken included (a) establishing a process for ongoing

identification of potentially anomalous activity by development of high-risk indicators utilizing audit

logging; (b) completing certification and accreditation on nine of the Mint’s ten systems and major

applications; (c) improving software system controls for change management across the Mint, including

realignment of certain functional divisions (specifically,configuration management) to enhance segregation

of duties; and (d) developing a defined configuration management plan for all systems under the Mint’s

Certification and Accreditation (C&A) framework and a revised system development life cycle (SDLC) to

include a more comprehensive change management process.

For FY 2003, we have also addressed two second-tier issues reported in our FY 2002 Annual Assurance

Statement. First, the Mint needed to improve its management control in the areas of vendor payments

and the vendor master file, payroll processing, purchase card procedures, and temporary inventory

transfers. Again,the Mint took decisive actions during FY 2003 to correct the weaknesses identified. The

remaining second tier issue dealt with the need to establish clearly defined business processes and

controls for our e-commerce system. Accordingly, we initiated and completed a comprehensive pointto-point business process integration review to map the key business process control points associated

with our e-commerce system.

In all of its program activities, the Mint is actively engaged in developing and implementing management

controls designed to support designated program results, consistent use of resources, elimination of

program waste, fraud and mismanagement, adherence to laws and regulations, decrease improper or

erroneous payments, and ensure reliable performance information. The Mint has also prepared the

required Continuity of Operations (COOP) Plan. The Mint’s performance information is reliable as most

of it comes directly from the enterprise resource planning system.

The material weakness dealing with information systems as noted above was resolved during FY 2003.

Therefore, the Mint provides reasonable assurance that it was in substantial compliance with the

requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA) for FY 2003.

Henrietta Holsman Fore

Director 

United States Mint
United States Mint 2003 Annual Report 38

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS)

As of September 30,

2003 2002

ASSETS

Current assets

Fund balance with Treasury (Note 3) $ 293,279 $ 301,067 

Accounts receivable, net (Note 4) 10,315 17,956 

Operating inventories, net (Note 5) 310,358 336,194 

Advances and prepayments (Note 6) 19,029 4,677

Total current assets $ 632,981 $ 659,894

Non-current assets

Property, plant and equipment, net (Note 7) $ 300,128 $ 313,501 

Other assets (Note 8) 5,189 12,744 

Total non-current assets $ 305,317 $ 326,245 

Total assets $ 938,298 $ 986,139 

LIABILITIES AND NET POSITION

Current liabilities

Accounts payable - Federal (Note 9) $ 1,773 $ 2,985 

Accounts payable - Non-Federal 38,493 27,900 

Surcharges payable 2,402 8,396 

Unearned revenue 6,020 1,747 

Accrued salaries and benefits/unemployment insurance 7,960 4,120 

Total current liabilities $ 56,648 $ 45,148 

Non-current liabilities

Accounts payable - Federal (Note 9) $ 160,811 $ 163,959 

Accrued workers' compensation benefits 39,053 36,486 

Accrued annual leave 8,992 8,960 

Total non-current liabilities $ 208,856 $ 209,405 

Total liabilities $ 265,504 $ 254,553

NET POSITION

Fund balance $ 672,794 $ 731,586

Total liabilities and net position $ 938,298 $ 986,139 

CUSTODIAL GOLD AND SILVER RESERVES

United States' gold and silver reserves (Note 10) $ 10,364,687 $ 10,364,687 

Custodial liability to Treasury (Note 10) 10,364,687 10,364,687

Net custodial position $ 0 $ 0 

The accompanying notes are an integral part of these statements.
United States Mint 2003 Annual Report 39

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

STATEMENTS OF OPERATIONS AND CHANGES IN NET POSITION 

(IN THOUSANDS)

Years Ended September 30,

2003 2002

REVENUES AND FINANCING SOURCES

Circulating coin collections (Note 11) $ 937,394 $ 1,364,176 

Sales to the public (numismatic sales) 471,330 447,756 

Surcharges collected for beneficiary organizations (Note 12) (1,020) (7,741)

Imputed financing (Note 13) 11,143 8,854 

Less: Additional employee benefit expenses (Note 13) (11,143) (8,854)

Protection Revenue - 8 

Total revenues and financing sources $ 1,407,704 $ 1,804,199 

COSTS AND EXPENSES

Cost of goods sold (Note 14) $ 639,037 $ 652,999 

Selling, general and administrative expenses (Note 15) 178,861 182,042 

Other costs and expenses (Note 16) 10,848 8,033 

Protection costs 37,750 31,840 

Total costs and expenses $ 866,496 $ 874,914 

Net results $ 541,208 $ 929,285 

Net position, beginning of year $ 731,586 $ 832,301 

Transfers to Treasury's General Fund (600,000) (1,030,000)

Net position, end of year $ 672,794 $ 731,586 

The accompanying notes are an integral part of these statements.
United States Mint 2003 Annual Report 40

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

STATEMENTS OF CASH FLOWS (IN THOUSANDS)

Years Ended September 30,

2003 2002

CASH FLOWS FROM OPERATING ACTIVITIES:

Net results $ 541,208 $ 929,285 

Adjustments affecting operating cash flows:

Decrease (Increase) in accounts receivable $ 7,641 $ (10,448)

Decrease (Increase) in other assets 19,039 124,047 

Increase (Decrease) in accounts payable 6,233 4,285 

Increase (Decrease) in other liabilities 4,718 (7,329)

Increase (Decrease) in accumulated depreciation and amortization 34,615 34,815 

Total adjustments $ 72,246 $ 145,370

Net cash provided by operating activities $ 613,454 $ 1,074,655 

CASH FLOWS FROM INVESTING ACTIVITIES:

Increase (Decrease) in property, plant and equipment $ (21,242) $ (21,768)

Net cash used by investing activities $ (21,242) $ (21,768)

CASH FLOWS FROM FINANCING ACTIVITIES:

Funds transferred to Treasury $ (600,000) $ (1,030,000)

Net cash used by financing activities $ (600,000) $ (1,030,000)

Net cash provided (used) by operating, 

investing and financing activities $ (7,788) $ 22,887 

Fund balances with Treasury and cash at beginning of year $ 301,067 $ 278,180 

Fund balances with Treasury and cash at end of year $ 293,279 $ 301,067 
United States Mint 2003 Annual Report 41

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

NOTES TO THE FINANCIAL STATEMENTS

FOR FISCAL YEAR ENDED SEPTEMBER 30, 2003

(Dollars are in thousands except Fine Troy Ounce information)

NOTE 1 REPORTING ENTITY

Established in 1792, the United States Mint (Mint) is a bureau of the Department of the Treasury

(Treasury). The mission of the Mint is to manufacture coins for general circulation, to manufacture and

sell numismatic products for the benefit of the federal government and various beneficiary organizations,

and to protect certain federal assets in its custody. Numismatic products include medals, proof coins,

uncirculated coins, platinum, gold, and silver bullion coins, and commemorative coins. Custodial assets

consist of United States’ gold and silver metal reserves. These custodial reserves are often referred to as

“deep storage” and are reported in the custodial segment of the Statement of Financial Position.

Manufacture of numismatic products is financed principally through sales to the public. Manufacture of

circulating coinage is financed through sales of coins at face value to the Federal Reserve System. Activities

related to protection of federal custodial assets are funded by revenues and financing sources received by

the Mint’s Public Enterprise Fund (PEF).

Pursuant to Public Law 104-52, the PEF was established to account for all revenues and expenses related

to production and sale of numismatic products and circulating coinage and protection activities. Expenses

accounted for in this fund include the cost of metals used in circulating coin production, the cost of

metals (gold, silver, platinum, cupro-nickel, magnesium and zinc) used in numismatic coin production,

fabrication and transportation costs for metals used in circulating coinage and numismatic products, and

costs of transporting circulating coinage between Mint production facilities and Federal Reserve Banks.

Other costs/expenses accounted for in this fund include costs related to research and development and

purchases of equipment, as well as capital improvements. P.L. 104-52 states that any amount in the PEF

that is determined to be in excess of the amount required by the PEF shall be transferred to the Treasury.

Treasury’s Bullion Fund (Bullion Fund) is used to account for United States gold and silver reserves. A

separate Schedule of Custodial Gold and Silver Reserves has been prepared for that portion of the

Treasury gold and silver reserves for which the Mint acts as custodian.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Mint has historically prepared its financial statements in accordance with accounting principles generally accepted in the United States of America (U.S.GAAP),based on accounting standards issued by the

Financial Accounting Standards Board (FASB),the private-sector standards-setting body. In October 1999,

the Federal Accounting Standards Advisory Board (FASAB) was designated by the American Institute of

Certified Public Accountants (AICPA) as the standards-setting body for financial statements of federal

government entities, with respect to the establishment of U.S. GAAP. FASAB has indicated, however, that

financial statements prepared based upon accounting standards published by the FASB may also be 

regarded as in accordance with U.S. GAAP for those federal entities, such as the Mint, that have issued

financial statements based upon FASB accounting standards in the past. Accordingly, consistent with

historical reporting,the Mint’s financial statements are presented in accordance with accounting standards

promulgated by the FASB.
Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis of accounting. Under the

accrual method, revenues are recognized when earned and expenses are recognized when a liability is

incurred,without regard to receipt or payment of cash. All intra-Mint transactions and balances have been

eliminated.

Revenues

Circulating Coinage: P.L. 104-52, establishing the PEF, provides for the sale of circulating coinage at face value

to the Federal Reserve System. Revenue from circulating coinage is recognized when the product is

shipped to the Federal Reserve Banks.

Numismatic Sales: Revenue is recognized when products are shipped to customers. Prices for numismatic

products are based on the product cost plus a reasonable profit. Bullion products are priced based on the

market price of the precious metals plus a market premium.

Unearned Revenues:These are amounts received from customers for which the numismatic products have

not been shipped.

Fund Balance with Treasury

All cash is maintained at the Treasury.

Accounts Receivable

An allowance for uncollectible customer accounts receivable was established for all accounts that are

older than 180 days. However,the Mint will continue collection action as specified by the Debt Collection

Improvement Act of 1996.

Operating Inventories

Inventories of circulating coinage and most numismatic products are valued at the lower of cost or

market value, with cost being determined by the average cost method. Absent historical cost records to

determine acquisition cost of the gold and silver over the decades, the statutory rates of $42.2222 per

fine troy ounce (FTO) of gold and $1.292929292 per FTO of silver are used. All work-in-process gold and

silver inventories have been included in the Mint’s financial statements.

Treasury allows the Mint to use its gold and silver as our working stock. This working stock is reported

as “Operating inventories,” with the exact amount offset in “Accounts payable – Federal.” Generally, the

Mint will replace its working stock when used in production with purchases of gold and silver on the open

market. In those cases where the gold and silver is not replaced, the Mint reimburses Treasury the

market value of the depleted gold and silver. That reimbursement would result in a reduction of the 

operating inventories, along with the Accounts payable – Federal at the statutory rates.

Advances and Prepayments

Payments in advance of the receipt of goods and services are recorded as advances and prepaid

expenses at the time of prepayment and are expensed when related goods and services are received.

United States Mint 2003 Annual Report 42
United States Mint 2003 Annual Report 43

Property, Plant and Equipment

Property, plant and equipment are valued at cost less accumulated depreciation. The Mint’s threshold

for capitalizing new property, plant and equipment is $25,000 for single purchases and $500,000 for

bulk purchases. Depreciation is computed on a straight-line basis over the estimated useful lives of

the related assets as follows:

ADP Software 2 to 10 years

Machinery and Equipment 7 to 20 years

Structures, Facilities and Leasehold Improvements 10 to 20 years

Depreciation of plant and equipment assets used jointly in numismatic and circulating coinage production

is allocated to each activity based on usage percentages.

Major alterations and renovations are capitalized over the shorter of a 20-year period or the remaining

useful life of the asset and depreciated on the straight-line method, while maintenance and repair costs

are charged to expense as incurred.

Surcharges

Legislation authorizing commemorative programs often requires that the PEF remit a portion of the sales

proceeds to beneficiary organizations. These amounts are defined as "surcharges." A surcharges payable

is established for surcharges received but not yet paid to the beneficiary.

P.L. 104-208, Omnibus Consolidated Appropriations for Fiscal Year 1997 (the Act) became law on

September 28, 1996 and changed the requirements of paying surcharges for commemorative coin

programs. Prior to the Act, any surcharges received were to be restricted to the benefiting organization.

However, the Act made the benefiting organizations full partners in bearing costs, risks and marketplace

realities of selling coins. Benefiting organizations cannot receive surcharge payments unless all of the Mint’s

operating costs of the coin program are fully recovered. The Mint may make interim surcharge payments

during a commemorative program if the benefiting organization meets the eligibility criteria in the Act, if

the profitability of the program is determinable, and, if the Mint is assured it is not at risk of a loss. P.L.

108-15 contains a provision that beneficiary organizations have two years from the end of the program

sales to meet the requirements of P.L. 104-208.

Financing Sources

Circulating coin collections derived from selling the circulating coins to the FRB is limited to the total cost

of manufacturing those coins. The difference between the face value of circulating coins sold to the FRB

and the total cost of manufacturing those coins is considered a Financing Source in accordance with

Department and FASAB guidelines. The Mint’s numismatic program treats all sales as earned revenue.

Shipping and Handling

Effective in FY 2003, the Mint reports shipping and handling cost as Cost of Goods Sold and not as part

of Selling or General and Administrative expenses. The Mint believes that shipping and handling of 

circulating and numismatic products is more appropriately reported as part of the manufacturing process.

General postage costs for handling administrative functions continue to be reported as part of the Mint’s

General and Administrative expenses.
Annual, Sick and Other Leave

Annual leave is accrued when earned and reduced as leave is taken. The balance in the accrued leave

account is calculated using current pay rates. Sick leave and other types of non-vested leave are charged

to operating costs as they are used.

Accrued Workers Compensation

A liability is recorded for estimated future payments to be made for workers compensation pursuant to

the Federal Employees' Compensation Act (FECA). The liability is based on the net present value of

estimated future payments. Estimated future payments to be made by the Treasury are calculated by the

Department of Labor, which tracks and pays the claims and is subsequently reimbursed by the Treasury. A

portion of Treasury's liability is allocated to the Mint based on prior claims payment experience.

Displays and Archives

The Mint has a display area at each of its facilities and maintains archives at its headquarters in

Washington, D.C. The displays and archives include valuable coins and commemoratives minted domestically

and internationally and other artifacts related to minting operations. Most of these items are not

included in balances reported in these financial statements. Records are maintained of all coins,

commemoratives and valuable artifacts. Physical inspections are performed to assure accountability.

Protection Costs

Virtually all of the Treasury’s gold and silver reserves are held by the Mint, which is responsible

for safeguarding the reserves in its custody. These costs are borne by the Mint, but are not

directly related to the circulating or numismatic coining operations of the Mint. Organizationally,

the Protection Strategic Business Unit is a separate line of business from coining operations.

Hedging

For FY 2003, the Mint is in compliance with Statement of Financial Accounting Standards No. 133, as

amended, and follows the accounting guidelines for “cash flow” hedging. Cash flows (gains or losses)

generated from the Mint’s hedging activities are accounted for in the Statement of Operations

during the accounting period in which the hedges are resolved. Gains and losses generated from

hedging activities in FY 2003 are not material. During FY 2002, the Mint closed out existing hedge

commitments. No new hedge commitments were entered into in FY 2003.

Reclassification

Certain FY 2002 balances have been reclassified to conform to the presentation in FY 2003.

United States Mint 2003 Annual Report 44
United States Mint 2003 Annual Report 45

NOTE 3 FUND BALANCE WITH TREASURY

Components of fund balance with Treasury at September 30 are as follows:

2003 2002

Revolving Fund $ 293, 279 $ 301,067

Total Fund Balance with Treasury $ 293,279 $ 301,067

At September 30, 2003 and 2002, revolving fund balances included $2.40 million and $8.40 million,

respectively, in restricted amounts for possible payment of surcharges to beneficiary organizations.

NOTE 4 ACCOUNTS RECEIVABLE

Components of accounts receivable at September 30 are as follows:

2003 2002

Accounts Receivable, Federal $ 3,946 $ -

Accounts Receivable, Non-Federal 6,743 18,563

Less Allowance for Doubtful Accounts (374) (607)

Total Accounts Receivable $ 10,315 $ 17,956

NOTE 5 OPERATING INVENTORIES

The components of operating inventories at September 30 are summarized below:

2003 2002

Operating components $ 283, 873 $ 313,509

Supplies 26,485 23,175

Allowance for program closeout - (490)

Total Operating Inventories $ 310,358 $ 336,194
Operating components of inventories include direct materials, direct labor and overhead for work-inprocess and finished goods inventories. Direct materials consist of metals, fabrication costs and transportation-in costs (costs related to the shipment of metals from fabricators and between Mint facilities). Direct labor consists of direct factory labor costs, and overhead consists of indirect labor costs,

indirect materials (including dies), utilities and depreciation. Costs of precious metals (without fabrication and transportation) in the operating components at September 30 are as follows:

2003 2002

Gold ($42.2222/FTO) $ 119,939 $ 118,681

Silver ($1.292929292/FTO) 16,670 17,740

Platinum (Lower of Cost or Market) 37,861 40,483

Total Cost of Precious Metals in 

Operating Components $ 174,470 $ 176,904

Gold and silver listed in the above chart is Treasury-owned gold and silver that the Mint uses as working stock. Although the gold and silver is Treasury-owned, it is listed as Mint “Operating inventories”

with the exact amount offset in “Accounts payable – Federal”. Platinum is a Mint asset that is not

owned by Treasury.

NOTE 6 ADVANCES AND PREPAYMENTS

The components of advances and prepayments at September 30, are summarized below:

2003 2002

Federal $ 18,977 $ 4,587

Non Federal 52 90

Total Advances and Prepayment $ 19,029 $ 4,677

Included in Advances-Federal is the amount of $2.23 million that the Mint pays into the Treasury

Working Capital Fund (the Fund), a revolving fund that operates as an accounting entity.

Also included are the progress payments (advances) for equipment and building improvements under

construction. The Mint initiated a Mint-wide security upgrade, which requires progress payments be

made to the construction contractors. As of September 30, 2003, the cumulative balance for such

payments is $9.90 million.

Advances-Non-Federal consists primarily of advances to employees for travel.

United States Mint 2003 Annual Report 46
United States Mint 2003 Annual Report 47

NOTE 7 PROPERTY, PLANT AND EQUIPMENT

Components of property, plant and equipment at September 30 are as follows:

2003 2002

Land $ 2,529 $ 2,529

Structures, Facilities and Leasehold Improvements 175,161 169,739

Computer Equipment 28,408 21,668

ADP Software 94,223 89,597

Machinery and Equipment 216,174 211,720

$ 516,495 $ 495,253

Less Accumulated Depreciation and Amortization (216,367) (181,752)

Total Property, Plant and Equipment, Net $ 300,128 $ 313,501

Mint facilities used to manufacture circulating coinage and numismatic products are owned by the Mint

and located in San Francisco, California; Philadelphia, Pennsylvania; Denver, Colorado; and West Point,

New York. In addition, the Mint owns the land and buildings at the Fort Knox Bullion Depository in

Kentucky.

Depreciation and amortization expense charged to operations for FY 2003 and FY 2002 were $50.25

million and $44.20 million, respectively.

NOTE 8 OTHER ASSETS

Other Assets consists primarily of a pending bankruptcy claim the Mint has against a silver refining 

vendor for the not-returned Mint silver. The statutory value of this silver is $3.44 million.

NOTE 9 ACCOUNTS PAYABLE – FEDERAL

Gold and silver is Treasury-owned gold and silver that the Mint uses as working stock. Although the

gold and silver is Treasury-owned, it is listed as Mint “Operating inventories” with the exact amount

offset in “Accounts payable – Federal.” Platinum is a Mint asset that is not owned by Treasury.

A summary of Accounts payable-Federal at September 30 are as follows:

2003 2002

Current:

Funds to be transferred to others $ 1,773 $ 2,985

$ 1,773 $ 2,985

Non-Current:

Metal used as working stock inventory $ 160,811 $ 163,959

$ 160,811 $ 163,959

Total Accounts Payable - Federal $ 162,584 $ 166,944

The funds to be transferred to others resulted from the sale of metal used in Mint products and other

amounts owed to federal entities, primarily the Treasury.
NOTE 10 CUSTODIAL GOLD AND SILVER RESERVES

The Mint is responsible for safeguarding much of the nation’s precious metals and is the custodian of

virtually all of the United States' gold and silver reserves. These resources are reported in the 

custodial segment of the Statement of Financial Position at the lower of cost or market value. Absent

historical cost records to determine the acquisition cost of the gold and silver over the decades,

statutory rates of $42.2222 per FTO of gold and $1.292929292 per FTO of silver are used to value

the entire custodial reserves held by the Mint. An offsetting custodial liability is also reported for these

assets. For purposes of comparison, the market value of these assets is disclosed below.

Amounts and values of custodial gold and silver in the custody of the Mint at September 30 

are as follows:

2003 2002

Gold:

Inventories (FTO) 245,262,897 245,262,897

Market Value ($ per FTO) $ 388.00 $ 323.70

Market Value ($ in thousands) $ 95,162,004 $ 79,391,600

Statutory Value ($ in thousands) $ 10,355,539 $ 10,355,539

Silver:

Inventories (FTO) 7,075,171 7,075,171

Market Value ($ per FTO) $ 5.1150 $ 4.5325

Market Value ($ in thousands) $ 36,190 $ 32,068

Statutory Value ($ in thousands) $ 9,148 $ 9,148

Total MarketValue of Custodial Gold and

Silver Reserves ($ in thousands) $ 95,198,194 $ 79,423,668

Total StatutoryValue of Custodial Gold and

Silver Reserves ($ in thousands) $ 10,364,687 $ 10,364,687

NOTE 11 CIRCULATING COIN COLLECTIONS

Circulating coin collections are receipts from the sale of circulating coins. These receipts are 

comprised of “Financing Sources” as well as “Revenue” as defined in Note 2.

Revenue is limited to all costs associated with the production, administration and distribution of 

Circulating coins, payment by the Mint for mutilated and uncurrent coins as well as all of the Mint’s

Protection costs. Protection costs are those costs associated with protecting Mint property, Mint 

personnel and Treasury assets for which the Mint is custodian. The financing source is all additional

circulating coin collections over and above what has previously been defined as revenue.

United States Mint 2003 Annual Report 48
United States Mint 2003 Annual Report 49

The components of circulating coin collections as of September 30 are as follows:

2003 2002

Revenue $ 400,345 $ 468,170

Financing Sources 537,049 896,006

Total Circulating Coin Collections $ 937,394 $ 1,364,176

NOTE 12 SURCHARGES COLLECTED

The following chart shows surcharges collected by product and beneficiary organization for FY 2003

and FY 2002. The surcharge recipients of programs subject to the provisions of P.L. 104-208 must

meet certain requirements before the Mint can make surcharge payments. These requirements include

raising matching funds and providing audited financial statements.

Commemorative Sales Period

Program Beneficiary Organization 2003 2002 (Calendar Year)

American Buffalo Coin National Museum of the $ - $ 38 2001

American Indian/Smithsonian

Capitol Visitor Center Capitol Preservation Fund - 545 2001-2002

US Military Academy Association of Graduates, 276 3,639 2002-2003

Bicentennial US Military Academy

2002 Winter Olympics Salt Lake Organizing Committee 74 3,518 2002

for the Olympic Winter Games

of 2002 

U.S. Olympic Committee

First Flight First Flight Foundation 668 - 2003-2004

Commemorative Coins

Yosemite National Park National Park Foundation

Centennial Medal 2 1 opened 

ended

Total Surcharges Collected $ 1,020 $ 7,741

NOTE 13 RETIREMENT PLANS AND OTHER 

POST-EMPLOYMENT COSTS (IMPUTED FINANCING)

At the end of FY 2003, four hundred thirty one (431) Mint employees participated in the Civil Service

Retirement System (CSRS), to which the Mint contributes 25.0 percent of pay. On January 1, 1987,

the Federal Employees’ Retirement System (FERS) went into effect pursuant to P.L. 99-335. Most

employees hired after December 31, 1983 are automatically covered by FERS and Social Security.
Employees hired prior to January 1, 1984 elected to join FERS or remain in CSRS.

A primary feature of FERS is that it offers a savings plan to which the Mint automatically contributes

one percent of pay and matches any employee contributions up to an additional four percent of pay.

FERS employees are allowed a maximum annual contribution of 13 percent of salary to a maximum of

$12,000. Employees participating in FERS are covered by the Federal Insurance Contribution Act

(FICA) for which the Mint contributes a matching amount to the Social Security Administration.

Although the Mint contributes a portion for pension benefits and makes the necessary payroll 

deductions, it is not responsible for administering either CSRS or FERS. Therefore, the Mint does not

report CSRS or FERS assets, accumulated plan benefits or unfunded liabilities, if any, applicable to Mint

employees. Reporting such amounts is the responsibility of the Office of Personnel Management

(OPM). OPM has provided the Mint with certain cost factors that estimate the cost of providing the

pension benefit to current employees. The cost factors of 25.0 percent of basic pay for CSRS-covered

employees and 12.0 percent of basic pay for FERS-covered employees were in use for FY 2003. In FY

2002, the cost factors were 24.2 percent of basic pay for CSRS-covered employees and 11.5 percent

of basic pay for FERS-covered employees.

The amounts that the Mint contributed to the retirement plans and social security as of September 30

are as follows:

2003 2002

Social Security System $ 8,190 $ 7,826

Civil Service Retirement System 2,106 2,623

Federal Employees’ Retirement System

(Retirement & Thrift Savings) 13,838 12,945

Total Retirement Plans and Other Post-employment Costs $ 24,134 $ 23,394

The Mint is also recognizing its share of the future cost of post-retirement health benefits and life

insurance for employees while they are still working with an offset classified as imputed financing. OPM

continues to report the overall liability of the federal government and make direct recipient payments.

OPM has also provided certain cost factors that estimate the true cost of providing the 

post-retirement benefit to current employees. The cost factor relating to health benefits is $3,766 and

$3,473 per employee enrolled in the Federal Employees Health Benefits Program in FY 2003 and FY

2002, respectively. The cost factor relating to life insurance is two-one hundredths percent (.02%) of

basic pay for employees enrolled in the Federal Employees Group Life Insurance Program for FY 2003

and FY 2002.

The amounts of imputed cost incurred by the Mint for FY 2003 and FY 2002 are as follows (before the

offset for imputed financing):

2003 2002

Health Benefits $ 7,208 $ 5,885

Life Insurance 22 22

United States Mint 2003 Annual Report 50
United States Mint 2003 Annual Report 51

Pension Expense 3,913 2,947

Total Imputed Cost $ 11,143 $ 8,854

NOTE 14 COST OF GOODS SOLD

Components of cost of goods sold as of September 30 are as follows:

2003 2002

Finished Goods, Beginning $ 75,937 $ 74,880

Cost of Goods Manufactured:

Work-In-Process, Beginning 262,354 390,924

Direct Labor 11,868 11,703

Manufacturing Overhead 599,236 513,783

Work-In-Process, Ending (250,190) (262,354)

Total Cost of Goods Manufactured $ 623,268 $ 654,056

Cost of Goods Available for Sale $ 699,205 $ 728,936

Finished Goods, Ending (60,168) (75,937)

Total Cost of Goods Sold $ 639,037 $ 652,999

NOTE 15 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Following are components of selling, general and administrative expenses as of September 30:

2003 2002

Selling Expenses:

Marketing $ 31,716 $ 33,731

Advertising (including postage to mail brochures) 16,230 12,134

$ 47,946 $ 45,865

General and Administrative:

Labor/Benefits/Benefits to Former Personnel $ 52,403 $ 43,255

Travel/Transportation 1,076 861

Rent/Communications/Utilities less Postage Mail Drop 16,611 17,806

Printing less Other Print/Report/Advertising 81 96

Services less Product Advertising 47,611 60,762

Supplies 2,183 1,628

Non-Capitalized Equipment 611 1,659

Insurance Claims/Interest & Dividends 9 8

Depreciation 10,330 10,102

$ 130,915 $ 136,177

Total Selling, General and Administrative Expenses $ 178,861 $ 182,042
NOTE 16 OTHER COSTS AND EXPENSES

These consist primarily of returns of mutilated or uncurrent coins to the Mint. The Mint reimburses

the entity that sent in the coins for the face value of these coins if the coins are individually identifiable. If the coins have melted (as in a fire), the Mint reimburses the entity an amount based on the

metal content of the melted mass.

NOTE 17 LEASE COMMITMENTS

The Mint leases space in two buildings in Washington, D.C. and office and warehouse space near other

Mint facilities. Space in Denver and San Francisco is leased from the General Services Administration

(GSA), which charges a fee approximating the commercial rental rates for similar properties. The

remaining buildings are leased from private sources.

Total rental expense was $16.52 million and $17.92 million in FY 2003 and FY 2002, respectively.

Operating Leases

Schedule of Minimum Future Rental Payments (in thousands)

2004 $ 16,343

2005 15,921

2006 15,563

2007 15,651

2008 15,741

After 2008 111,993

Total Minimum Future Rental Payments $ 191,212

NOTE 18 CONTINGENCIES

The Mint is subject to legal proceedings and claims which arise in the ordinary course of its business.

Judgments, if any, resulting from pending litigation against the Mint generally would be satisfied from the

Department of Treasury Judgment Fund. In the opinion of management, the ultimate resolution of

these actions will not materially affect the Mint’s financial position or the results of its operations.

The Mint has a pending bankruptcy claim for about $13 million against a silver refining vendor for

United States Government silver that was not returned to the Mint. The bankrupt vendor presently

asserts about $18 million in preference claims against the Mint for silver returned to the Mint within

90 days prior to the vendor’s filing for bankruptcy protection.

The Mint also is the subject of a class complaint alleging employment discrimination at its Denver Mint

United States Mint 2003 Annual Report 52
United States Mint 2003 Annual Report 53

facility. If certified, the maximum liability for compensatory damages will be about $32 million.

NOTE 19 RELATED PARTIES

Related parties who were paid at least $100,000 as of September 30 are as follows:

2003 2002

Office of Personnel Management $ 21,582 $ 21,055

Department of Labor 13,745 11,683

United States Postal Service 10,622 8,846

Social Security Administration 8,190 7,826

Treasury Departmental Offices 2,978 3,899

General Services Administration 1,325 1,144

Internal Revenue Service 364 373

Department of Justice 301 -

Department of the Army 268 210

Department of Health and Human Services 226 181

Department of Agriculture 207 624

Department of Defense (DFAS) 124 -

General Accounting Office - 250

Federal Law Enforcement Training Center - 198

Department of Energy - 136

Total Related Parties $ 59,932 $ 56,425

The Mint is subject to management control by the Secretary of the Treasury.

The Mint shipped approximately $917 million in coins to the Federal Reserve Board in FY 2003. This

amount represents a 31 percent decrease over FY 2002 shipments.

Numismatic orders, checks and credit card orders are processed by a commercial bank. Fees associated with these services are absorbed by the Treasury and are not reflected in the Mint’s financial

statements.
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57
58
59
SUPPLEMENTAL FINANCIAL INFORMATION

United States Mint 2003 Annual Report 60

In this Supplemental Section of the Report, we provide additional information related to the financial

condition of the U.S. Mint (Mint). Each section provides its own additional insight.

SUPPLEMENTAL INFORMATION PER PUBLIC LAW 106-445 

The following supplemental schedules were prepared in compliance with the reporting requirement

of Public Law 106-445 (Section 5134(e)(2) of title 31, United States Code, amended in FY 2000), which

required the Mint to include in its annual report specific information regarding the costs and expenses

for producing, marketing, and distributing circulating coinage – both in gross and on a per-unit basis

– as well as gross revenue from the sales of each denomination.

The first two schedules provide the information detailing the costs and expenses for the production,

marketing, and distribution of each denomination of circulating coins produced by the Mint during FY

2003 and FY 2002 as well as the gross circulating collections derived from the sales of each such

denomination of coins. The second set of schedules provides the information for the per-unit cost of

producing and distributing each denomination of such coins.

CIRCULATING COLLECTIONS AND OPERATING RESULTS (IN MILLIONS)

FOR THE YEAR ENDED SEPTEMBER 30, 2003

Mutilated

Penny Nickel Dime Quarter Half Dollar & Other Total

Collections $64.3 $37.2 $188.4 $617.9 $4.5 $25.1 $0.0 $937.4

Cost of 

Goods Sold 61.2 26.2 37.6 113.8 0.8 4.3 0.0 243.9

Selling, General

& Administrative 2.1 2.1 23.0 76.7 0.5 3.5 0.0 107.9

Other Costs 

and Expenses 0.0 0.0 0.0 0.0 0.0 0.0 10.8 10.8

Operating Results $1.0 $8.9 $127.8 $427.4 $3.2 $17.3 ($10.8) $574.8

CIRCULATING COLLECTIONS AND OPERATING RESULTS (IN MILLIONS)

FOR THE YEAR ENDED SEPTEMBER 30, 2002

Mutilated

Penny Nickel Dime Quarter Half Dollar & Other Total

Collections $75.2 $65.1 $263.3 $904.0 $4.4 $52.2 $0.0 $1,364.2

Cost of 

Goods Sold 64.9 40.2 49.8 147.3 0.6 3.2 0.0 306.0

Selling, General

& Administrative 1.5 3.0 23.5 86.8 0.4 7.2 0.0 122.4

Other Costs 

and Expenses 0.0 0.0 0.0 0.0 0.0 0.0 8.0 8.0

Operating Results $8.8 $21.9 $190.0 $669.9 $3.4 $41.8 ($8.0) $927.8
UNIT COST OF PRODUCING AND DISTRIBUTING COINS 

FOR THE YEAR ENDED SEPTEMBER 30, 2003

Penny Nickel Dime Quarter Half Dollar

Cost of 

Goods Sold $0.0093 $0.0346 $0.0197 $0.0452 $0.0902 $0.1694

General & 

Administrative $0.0003 $0.0028 $0.0122 $0.0311 $0.0583 $0.1410

Distribution 

to FRB $0.0002 $0.0004 $0.0002 $0.0008 $0.0007 $0.0017

Total Expenses $0.0098 $0.0378 $0.0321 $0.0771 $0.1492 $0.3121

UNIT COST OF PRODUCING AND DISTRIBUTING COINS 

FOR THE YEAR ENDED SEPTEMBER 30, 2002

Penny Nickel Dime Quarter Half Dollar

Cost of 

Goods Sold $0.0085 $0.0306 $0.0187 $0.0400 $0.0664 $0.0607

General & 

Administrative $0.0002 $0.0023 $0.0089 $0.0229 $0.0433 $0.1049

Distribution 

to FRB $0.0002 $0.0003 $0.0002 $0.0008 $0.0013 $0.0011

Total Expenses $0.0089 $0.0332 $0.0278 $0.0637 $0.1110 $0.1667

SUPPLEMENTAL RECONCILIATION OF 

FINANCIAL STATEMENTS TO BUDGETARY REPORTS

Public Law 102-390 requires that the Mint’s annual financial statements include a reconciliation of

the financial statements to the budget reports of the Fund. The following supplemental schedule

reconciles the expenses from the Mint’s Total Costs and Expenses on its Statement of Operations and

Changes in Net Position to the SF-133, Report on Budget Execution and Budgetary Resources.

RECONCILIATION OF FINANCIAL STATEMENTS TO BUDGET REPORTS

FOR THE YEAR ENDED SEPTEMBER 30, 2003 (IN THOUSANDS)

Obligations Incurred per SF 133 $834,084

Expended Authority - Unpaid ($10,951)

Change in Assets and Liabilities 43,363

Total 32,412

Total Cost and Expenses per the Statement of

Operations and Changes in Net Position $866,496

United States Mint 2003 Annual Report 61
United States Mint 2003 Annual Report 62

RECONCILIATION OF FINANCIAL STATEMENTS TO BUDGET REPORTS

FOR THE YEAR ENDED SEPTEMBER 30, 2002 (IN THOUSANDS)

Obligations Incurred per SF 133 $ 737,820

Expended Authority - Unpaid $ 3,044

Change in Assets and Liabilities 134,050

Total 137,094

Total Cost and Expenses per the Statement of

Operations and Changes in Net Position $ 874,914
United States Mint 2003 Annual Report 63

REPORT OF THE OFFICE OF THE INSPECTOR GENERAL

THE DEPARTMENT OF THE TREASURY

To the Director of the United States Mint:

We have audited the accompanying Schedule of Custodial Gold and Silver Reserves (Custodial

Schedule) of the United States Mint (U.S. Mint) as of September 30, 2003 and 2002. This report presents our unqualified opinion on this Custodial Schedule. Our audit disclosed no material weaknesses

and no instances of reportable noncompliance with laws and regulations.

Management’s Responsibilities 

Management is responsible for:

• Preparing the Custodial Schedule in conformity with accounting principles generally 

accepted in the United States of America.

• Establishing and maintaining internal control. In fulfilling this responsibility, estimates and 

judgments by management are required to assess the benefits and related costs of internal 

control policies and procedures.

• Complying with laws and regulations applicable to the U.S. Mint’s custodial responsibilities for 

the Gold and Silver Reserves.

Scope of Audits 

We conducted our audits in accordance with the standards applicable to financial audits contained in

Government Auditing Standards, issued by the Comptroller General of the United States and 

applicable provisions of the Office of Management and Budget (OMB) Bulletin No. 01-02, Audit

Requirements for Federal Financial Statements.Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the Custodial Schedule is free of material 

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and 

disclosures in the Custodial Schedule. An audit also includes assessing the accounting principles used

and significant estimates made by management, as well as evaluating the overall custodial schedule

presentation. Our responsibility is to express an opinion on the Custodial Schedule based on our

audits. We believe that our audits provide a reasonable basis for our opinion.

In planning and conducting our audit of the Custodial Schedule, we considered internal control over

financial reporting and compliance with laws and regulations. Specifically, we obtained an understanding of the design of the U.S. Mint’s internal controls, determined whether these controls had been

placed in operation, assessed control risk, and performed tests of controls in order to determine our

auditing procedures for the purpose of expressing our opinion on the Custodial Schedule and not to

provide assurance on the internal control over financial reporting and compliance with laws and 

regulations. Consequently, we do not provide an opinion on such controls.

As part of obtaining reasonable assurance about whether the Custodial Schedule is free of material

misstatement, we performed tests of the U.S. Mint’s compliance with certain provisions of laws and

regulations, noncompliance with which could have a direct and material effect on the determination

of Custodial Schedule amounts. We limited our tests of compliance to these provisions and we did

not test compliance with all laws and regulations applicable to the U.S. Mint. Providing an opinion on

compliance with laws and regulations was not an objective of our audit and, accordingly, we do not

express such an opinion.
Results of Audits 

Opinion on the Custodial Schedule 

In our opinion, the accompanying Custodial Schedule presents fairly, in all material respects, the 

balance of the United States’ Gold and Silver Reserves in the custody of the U.S. Mint as of September

30, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of

America.

Consideration of Internal Control 

The objectives of internal control are the following:

• Financial reporting: Transactions are properly recorded, processed, and summarized to permit 

the preparation of the Custodial Schedule in conformity with accounting principles generally 

accepted in the United States of America, and assets are safeguarded against loss from 

unauthorized acquisition, use, or disposition.

• Compliance with applicable laws and regulations: Transactions are executed in accordance with 

laws and regulations that could have a direct and material effect on the Custodial Schedule.

Our consideration of internal control over financial reporting would not necessarily disclose all 

matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control

components does not reduce to a relatively low level the risk that errors, fraud, or noncompliance in

amounts that would be material in relation to the Custodial Schedule being audited may occur and not

be detected within a timely period by employees in the normal course of performing their assigned

functions. For those controls we tested, we found no material weaknesses in internal control over

financial reporting and compliance with applicable laws and regulations.

Because of the limitations inherent in any internal control, errors or fraud may occur and not be

detected. Also, projection of any evaluation of internal control to future periods is subject to the risk

that internal control may become inadequate because of changes in conditions or that the 

effectiveness of the design and operation of policies and procedures may deteriorate.

Compliance with Laws and Regulations 

Our test of compliance with selected provisions of laws and regulations disclosed no instances of noncompliance that are required to be reported in accordance with the standards applicable to financial

audits contained in Government Auditing Standards, issued by the Comptroller General of the United

States or applicable OMB audit guidance. We caution that noncompliance may occur and not be

detected by these tests and that such testing may not be sufficient for other purposes.

This report is intended solely for the information and use of the management of the U.S. Mint, and the

U.S. Department of the Treasury, OMB, the Congress, and Urbach, Kahn & Werlin, LLP, and is not

intended to be and should not be used by anyone other than these specified parties. However, this

report is available to the public as a matter of public record.

United States Mint 2003 Annual Report 64
United States Mint 2003 Annual Report 65

Your staff has reviewed our report, and has no comments. Should you or a member of your staff have

any questions, please contact me at (202) 927-5768, or Louis King, Director, Information Technology

Audits, at (202) 927-5774. We appreciate the cooperation and the courtesies extended to our staff.

William H. Pugh 

Deputy Assistant Inspector General for Financial Management 

and Information Technology Audits 

October 10, 2003 
DEPARTMENT OF THE TREASURY 

UNITED STATES MINT 

SCHEDULE OF CUSTODIAL GOLD AND SILVER RESERVES 

AS OF SEPTEMBER 30, 2003 AND 2002 (IN THOUSANDS) 

Custodial Gold and Silver Reserves 2003 2002

United States gold and silver reserves (Note 2) $10,364,687 $10,364,687

Liability to Treasury (Note 2) $10,364,687 $10,364,687

Net Gold and Silver Reserves Custodial Position $ 0 $ 0

The accompanying notes are an integral part of this schedule

NOTES TO THE SCHEDULE OF CUSTODIAL 

GOLD AND SILVER RESERVES AS OF SEPTEMBER 30, 2003 AND 2002

Note 1. Summary of Significant Accounting Policies 

A. Reporting Entity 

The United States Mint (U.S. Mint), established in 1792, is an integral part of the Department of the

Treasury.The mission of the U.S. Mint is to manufacture coins for general circulation. In addition to

manufacturing circulating coins, the U.S. Mint manufactures numismatic products, including medals,

proof coins, uncirculated coins, bullion coins (gold, platinum, and silver), and commemorative coins.

These manufacturing operations are reported in the manufacturing segment of the U.S. Mint’s 

consolidated financial statements. The U.S. Mint is also the custodian of a significant portion of the

United States’ gold and silver reserves, which are presented in the reserves segment of the U.S. Mint’s

Statements of Financial Position. The U.S. Mint uses the term custodial to identify gold and silver

reserves held for the U.S.Treasury. The custodial reserves are not assets of the U.S. Mint, but are assets

of the U.S.Treasury.

The U.S. Mint’s custodial activities, including the protection of the United States’ gold and silver

reserves, are funded by the U.S. Mint’s Public Enterprise Fund (PEF).

B. Basis of Presentation 

This Schedule has been prepared to report the gold and silver reserves custodial position of the U.S.

Mint.The books and records of the U.S. Mint have served as the source of the information contained

herein.The Schedule has been prepared in accordance with accounting principles generally accepted

in the United States of America (GAAP) and U.S. Mint accounting policies.

This Schedule includes all gold and silver classified by the U.S. Mint as “custodial reserves” as defined

in Note 2. This Schedule does not include gold and silver withdrawn from the “custodial reserves” for

use in the operations of the U.S. Mint’s PEF. The U.S. Mint’s PEF is authorized to use gold and silver

from the custodial reserves to support its numismatic operations.This Schedule does not reflect any

United States’ gold and silver reported by the U.S. Mint in its operating inventory or any reserve

amounts due to be replenished by the PEF, nor does it include gold held at Federal Reserve Banks.

United States Mint 2003 Annual Report 66
United States Mint 2003 Annual Report 67

Note 2. Gold and Silver Reserves 

The gold and silver reserves reported in this Schedule are exclusive of the gold and silver reserves

considered to be operating inventory in the Mint’s financial records and of the Treasury gold held by

the Federal Reserve Banks. The custodial gold and silver reserves included in this Schedule are 

primarily in bar form, but may occasionally be in coin or other form. The custodial reserves also

include foreign gold coins that have been held by Treasury for many years.

The gold and silver reserves are reported in this Schedule at the lower of cost or market value.

Absent historical records to determine the acquisition cost of the gold and silver over the decades,

the reserves are valued at the rates stated in U.S. Code Title 31, Sections 5116 and 5117 (statutory

rates) which are $42.2222 per Fine Troy Ounce (FTO) of gold and $1.292929292 per FTO of silver.

An offsetting liability is also reported for these assets.

At September 30, 2003 and 2002, the market value of gold was $388.00 per FTO and $323.70 

per FTO respectively. Gold inventories consisted of the following at September 30:

FTO Statutory Value Market Value

2003 245,262,897.040 $10,355,539,091 $95,162,004,052

2002 245,262,897.040 $10,355,539,091 $79,391,599,772

At September 30, 2003 and 2002, the market value of silver was $5.1150 per FTO and $4.5325 

per FTO respectively. Silver inventories consisted of the following at September 30:

FTO Statutory Value Market Value

2003 7,075,171.14 $9,147,696 $36,189,500

2002 7,075,171.14 $9,147,696 $32,068,213

The combined gold and silver custodial reserves consisted of the following at September 30:

Statutory Value Market Value

2003 $10,364,686,787 $95,198,193,552

2002 $10,364,686,787 $79,423,667,985 

The PEF is responsible for either replenishing the custodial reserves with purchases of newly mined

gold or paying the Treasury General Fund for custodial reserves transferred to the PEF for numismatic

operations. There were no such transfers during 2003 and 2002.
GLOSSARY OF TERMS

AMERICAN EAGLE PROGRAM 

Gold, platinum, or silver coins issued in proof or uncirculated qualities. Gold and platinum coins are

issued with one-tenth, one-quarter, one-half or one ounce precious metal content. Silver coins are

issued with one ounce of silver metal content. The proof quality coins are considered numismatic

products and are sold directly to consumers either as individual coins or in various combinations of

sizes and metals. Uncirculated quality coins are considered investment-quality coins and are sold directly

to a limited number of precious metal dealers.

CIRCULATING COINS

The penny, nickel, dime, quarter-dollar, half-dollar, and one-dollar coins used in daily commerce. The

Federal Reserve System distributes circulating coins into the economy.

COMMEMORATIVE COIN PROGRAMS

Coins that Congress directs the Mint to produce and market based on legislation. These programs

generally honor significant people (e.g., Dolley Madison), events (e.g., the Olympic Games), or things

(e.g., the National Law Enforcement Officers Memorial). Commemorative coins are generally sold

for a 12-month period or as defined in the legislation.

NUMISMATIC PRODUCTS

The coins and coin-related products produced by or for the Mint for sale to the public. These products

are separate from the circulating coins sold to the Federal Reserve System.

PROOF QUALITY COINS

Coins that are struck multiple times with specially treated dies to produce a mirrored background,

sharp relief, and a frosted image on the finished coin. Coins offered as numismatic products are

produced in proof quality as well as uncirculated quality.

RECURRING OR ANNUAL COIN PROGRAMS

Proof and uncirculated quality sets of all circulating coins for a year that are specially packaged for

collectors. The uncirculated set includes coins of each denomination produced at both the Denver

and Philadelphia Mints. The annual and silver proof sets include one of each circulating coin and are

produced only at the San Francisco Mint. The silver proof set includes a silver dime, quarter-dollar(s),

and a half-dollar; the penny, nickel and dollar coins are their normal metal make-up.

UNCIRCULATED QUALITY COINS

Coins that are struck only once with regular coinage dies. Uncirculated coins have a satin finish versus

the mirrored background and frosted image of the proof coins.

United States Mint 2003 Annual Report 68