UNITED S T A TES MINT

2006

ANNUAL REPORT
The United States Mint applies

world-class business practices in

making, selling, and protecting our

Nation's coinage and assets.

MISSION STATEMENT

Together, we will provide value 

to the American people, ensure

integrity in our commitments and

communications, and achieve

world-class performance.

UNITED STATES MINT

VISION
TABLE OF CONTENTS

DIRECTOR’S LETTER . . . . . . . . . . . .4

MESSAGE FROM THE CHIEF FINANCIAL OFFICER . . . . . . . . . . . .6

MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . .8

Operational Overview . . . . . . . . . . . . . . . . . .9

Financial and Program Analysis . . . . . . . . . . . . . . . . . .17

Performance Goals, Objectives, and Results . . . . . . . . . . . . . . . . .25

Current and Future Challenges . . . . . . . . . . . . . . . . .28

Analysis of Systems, Controls, and Legal Compliance . . . . . . . . . . . . . . . . .30

LIMITATIONS OF THE FINANCIAL STATEMENTS . . . . . . . . . . .32

INDEPENDENT AUDITORS' REPORT . . . . . . . . . . .33

FINANCIAL STATEMENTS . . . . . . . . . . .35

NOTES TO THE FINANCIAL STATEMENTS . . . . . . . . . . .41

REQUIRED SUPPLEMENTARY INFORMATION . . . . . . . . . . .59

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL . . . . . . . . . . .61

Exhibit I - Reportable Condition . . . . . . . . . . . . . . . . .63

Exhibit II - United States Mint's Response to the Auditors' Reports . . . . . . . . . . . . . . . .67

INDEPENDENT AUDITORS' REPORTS ON COMPLIANCE AND OTHER MATTERS . . .68

GLOSSARY OF TERMS . . . . . . . . . . .70
• 4 •

Dear Collectors, Customers and Colleagues,

In the closing month of Fiscal Year (FY) 2006, I had the honor 

of being sworn in as the 38th Director of the United States Mint.

I am both pleased and fortunate to begin my tenure at the helm

of a venerable, 214-year old American institution that is widely

recognized as the world’s premier manufacturer of coins. While

the United States Mint has a long and rich history, let me assure

you that we are also strongly positioned to fulfill the needs of the

nation now and in the future.

During FY 2006, we focused our efforts on three key areas —

revenue growth, increased efficiency, and commitment to our

employees. I am proud to report to you that we made progress

in each of these areas. Key achievements for the year included:

• Transferring $750 million to the Treasury General Fund;

• Producing 16.2 billion coins for circulation;

• Serving the needs of our collectors by launching several exciting new products and recording $1.04 

billion in numismatic sales;

• Improving our efficiency by transferring some human resource, procurement and e-travel functions and 

setting the stage for transferring some transactional activities in accounting to a Center of Excellence 

shared service provider — the Administrative Resource Center of the Bureau of the Public Debt;

• Increasing the safety of the work environment for our employees by reducing lost-time accidents by 22 

percent;

• Achieving a top ranking in the American Customer Satisfaction Survey for the seventh consecutive year.

We are also very proud of the new products we launched in FY 2006. The beautiful designs and expert workmanship were extremely well received by the public, a testament to the care and dedication of all United

States Mint employees. The new products included:

• The 24-Karat American Buffalo Gold Coin — the first pure gold coin ever produced by the United 

States Mint;

• American Eagle Anniversary Sets — gold and silver coin sets celebrating the 20th anniversary of the 

American Eagle Coin Program;

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

WASHINGTON, D.C. 20220

DIRECTOR

OF THE

MINT December 8, 2006
• The 50 State Quarters® Program coins for West Virginia, Nevada, Nebraska, Colorado and 

North Dakota;

• The last 5-cent coin in the Westward Journey Nickel SeriesTM — “Return to Monticello”; and

• The Benjamin Franklin Commemorative Silver Dollars honoring the tercentenary of the birth of one of 

our nation's founding fathers.

FY 2006 was not without its challenges — by the fourth quarter, steeply rising metal prices had pushed the

cost of manufacturing the one-cent and 5-cent coins above face value. Although circulating coin production

actually increased over the previous year, there remains continuing uncertainty on future demand levels for

circulating coinage. FY 2006 also heralded the beginning of an organization-wide restructuring effort to

reorient our workforce to the business requirements of the future and refocus on mission-critical objectives. 

We will be facing these challenges for some years into the future, and we remain fully committed to fulfilling

our mission to the nation. We will continue our efforts to modernize our coin production materials and 

technology; increase the flexibility and future capability of our workforce; and respond to the opportunities

presented to greatly expand our numismatic business.

We look forward to a busy and exciting FY 2007 at the United States Mint as we prepare for the launch of

five new 50 States Quarters coins; commemorative coins honoring the San Francisco Old Mint, the

Jamestown 400th Anniversary, and the Little Rock Central High School Desegregation 50th Anniversary;

and new products authorized by the Presidential $1 Coin Act of 2005. These include circulating $1 coins

honoring the Presidents of the United States, featuring four coins each year minted in the order that they

served. The year 2007 will feature Presidents Washington, Adams, Jefferson and Madison. The Act also

authorizes the mintage of complementary gold bullion coins and bronze medals honoring the spouses of the

presidents.

Our FY 2006 successes included continuing to meet the demands for circulating coinage, delivering 

beautiful products to our customers, and achieving exceptional results for the American people. These 

successes are a result of the outstanding contributions of our workforce. We stand ready to provide the

nation with an even stronger FY 2007.

Sincerely,

Edmund C. Moy

Director

United States Mint

• 5 •
• 6 •

December 8, 2006

I am pleased to present the United States Mint’s financial statements as an integral part of the Fiscal Year

(FY) 2006 Performance and Accountability Report. Our independent auditors rendered an unqualified 

opinion with no material weaknesses for FY 2006. The United States Mint continues to achieve superior 

performance and make considerable improvements in its system of financial management control. The

United States Mint makes it a priority to ensure that the highest quality financial data is reported. As a result,

the agency received an unqualified opinion on its financial statements for the 13th consecutive year. This

record demonstrates discipline and accountability in the execution of our fiscal responsibilities to the

American people.

The United States Mint had no material weaknesses from prior years that carried over to FY 2006. However,

we did continue to address issues that were identified in prior years that warranted further attention. While

not considered material weaknesses, we have taken deliberate steps to develop and implement numerous

management control improvements addressing proper segregation of duties and sufficient supporting 

documentation.

In FY 2006, using the OMB Circular A-123 “Management’s Responsibility for Internal Control,” we implemented a substantial program for assessing the effectiveness of the internal controls over financial reporting.

We evaluated controls over the Treasury designated consolidated financial statement line items, for which the

United States Mint contributes 10% or greater, including accounts payable, accounts receivable, inventory

and fixed assets. We were able to report as of June 30, 2006, no material weaknesses were found in the

design or operation of the internal control over our financial reporting. In FY 2007, we are expanding our

A-123 program to be a full scope review. We are in the initial stage of execution and we are on schedule with

our project plan. We continue to be involved with the Treasury Chief Financial Officer’s Council Internal

Controls Work Group to coordinate efforts with the Department to ensure compliance and adequate support

for the Department's assertion on internal controls.

The United States Mint is actively engaged in developing and implementing management controls designed

to support designated program results; maintain consistent use of resources; eliminate program waste, fraud

and mismanagement; promote adherence to laws and regulations; reduce improper or erroneous payments;

foster reliable performance information; ensure system security compliance with all relevant requirements;

and ensure financial system compliance with federal financial systems standards. Strong financial management control is a strategic focus of the United States Mint, and the stewardship and safeguarding of agency

resources remain high priorities.

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

WASHINGTON, D.C. 20220

MESSAGE FROM THE CHIEF FINANCIAL OFFICER
• 7 •

During FY 2006, the United States Mint’s management was devoted to creating initiatives to “get to green”

on the scorecard for the President's Management Agenda (PMA), where “green” signals success. The PMA

is the President’s strategy to improve the management of the federal government. Under the Office of

Management and Budget's Line of Business Initiative, all federal agencies are now expected to provide 

certain shared services as a Center of Excellence (COE) or migrate to a designated COE such as the Bureau

of the Public Debt's Administrative Resource Center (ARC). Embracing this initiative intended to reduce

duplicate systems and capital expenditures and promote standardization within the federal government, the

United States Mint transferred many transactional functions associated with travel, human resources and

procurement to ARC in FY 2006.

The United States Mint prepared its financial statements based on accounting standards issued by the Federal

Accounting Standards Advisory Board, which was designated by the American Institute of Certified Public

Accountants as the standard-setting body for financial statements of federal government entities, with respect

to the establishment of United States Generally Accepted Accounting Principles.

We closed a fiscal year continuing our tradition of delivering exceptional products and results to the

American people and our collectors.

Patricia M. Greiner

Chief Financial Officer
OVERVIEW

The United States Mint’s financial statements are prepared in accordance with the Chief Financial Officer’s

(CFO) Act of 1990. The financial statements represent the operations of the entire United States Mint, 

comprising the circulating, numismatic, bullion, and protection programs. The Management’s Discussion

and Analysis section provides an operational overview and serves to explain the financial statements as well

as to explain program performance. The United States Mint uses a set of key performance indicators to 

manage operations. An analysis of the United States Mint's success in achieving these performance goals is

included in this section.

MISSION OF THE UNITED STATES MINT

The United States Mint applies world-class business practices in manufacturing, selling and protecting the

nation’s coinage and protecting the nation’s assets.

ORGANIZATIONAL STRUCTURE

• 8 •

MANAGEMENT'S DISCUSSION AND ANALYSIS

2006 UNITED S TATES MINT ANNUAL REPORT

DIRECTOR

DEPUTY DIRECTOR

CHIEF 

FINANCIAL

OFFICER

SALES &

MARKETING

CHIEF

INFORMATION

OFFICER

WORKFORCE

SOLUTIONS

CHIEF

COUNSEL

FORT KNOX SAN FRANCISCO

MINT

DENVER 

MINT

PHILADELPHIA

MINT

WEST POINT

MINT

PROTECTION MANUFACTURING

UNITED STATES MINT
OPERATIONAL OVERVIEW

Since FY 1996, the United States Mint has been operating under the United States Mint's Public Enterprise

Fund (PEF). As authorized by Public Law 104-52 (31 U.S.C. § 5136), the PEF eliminates the need for 

appropriations to the United States Mint. Proceeds from the sale of circulating coins to the Federal Reserve

Banks and to the public, and the sale of numismatic products and bullion coins to customers worldwide are

the only sources of funding for United States Mint operations. Revenues in excess of costs are transferred to

the United States Treasury General Fund.

MANAGEMENT STRATEGIC PRIORITIES

The United States Mint continually seeks to be a model government agency that applies modern business

practices resulting in higher yields, lower costs, proper use of technology, efficient production, timely 

delivery of products and exceptional customer service. Management's strategic priorities in the FY 2006 to

FY 2011 time period include:

• Be a model government agency that matches world-class business practices

• Value and communicate with the American people

• Design, sell, and deliver quality products

• Foster a model workplace

BE A MODEL GOVERNMENT AGENCY THAT MATCHES WORLD-CLASS 

BUSINESS PRACTICES

The United States Mint is committed to continually improving the efficiency of its operations. During FY

2006, the United States Mint focused on six key areas: 1) keeping sales, general and administrative (SG&A)

expenses as low as possible while maintaining the quality that the public and customers expect from our

products; 2) reducing our facilities costs by completing office consolidation efforts; 3) transferring some of

our human resources, procurement, and e-travel functions to a shared services provider; 4) beginning the

process of transferring many transactional functions in accounting and procurement to a shared service

provider; 5) completing the implementation of business process improvements in the manufacturing facilities and in Sales and Marketing to increase the efficiency of the production process; and 6) reducing the costs

of maintaining a strong and efficient program to protect the assets of the United States Mint and the nation.

Sales, General and Administrative (SG&A) Expenses: These are the overhead costs associated with operating the United States Mint. In a production-oriented agency like the United States Mint, emphasis is placed

on minimizing SG&A costs while ensuring compliance with statutory requirements. Minimizing SG&A costs

allows us to keep our circulating and numismatic production costs as low as possible, which, in turn, also

allows us to keep our numismatic product prices low. Ultimately, the result is greater transfers to the

Treasury General Fund. FY 2006 proved to be a challenging year as SG&A expenses rose as a result of costs

associated with implementation efforts to transfer many of the United States Mint's human resource, procurement, finance and accounting functions to the Administrative Resource Center, the Bureau of the Public

Debt's Center of Excellence along with the operation of its Enterprise Resource Planning system. In FY 2006,

SG&A costs increased to $177.5 million from $165.5 million in FY 2005, a 7.3 percent increase. The FY

2006 amount includes $17.2 million associated with the implementation of shared service agreements.

• 9 •

2006 UNITED S TATES MINT ANNUAL REPORT
Facilities Management: The United States Mint essentially completed its Washington, DC headquarters office

consolidation effort in FY 2006. As of the end of FY 2006, the United States Mint had subleased approximately 185,138 square feet of headquarters office space in Washington, DC. This resulted in leasing cost 

savings of approximately $7.9 million in FY 2006 and more than $6.5 million in FY 2005.

Shared Services: Under the Office of Management and Budget’s Line of Business Initiative, federal agencies

are expected to either provide certain shared services as a Center of Excellence, or consider migrating to 

a designated Center of Excellence such as the Bureau of the Public Debt's Administrative Resource Center.

In FY 2006, the United States Mint transferred some of its human resource, procurement, and e-travel 

functions to the Bureau of the Public Debt’s Administrative Resource Center (ARC). This concept is designed

to take advantage of economies of scale and other business improvements resulting from increased standardization and transparencies of a shared services environment. In FY 2007, the United States Mint will 

transfer many of its finance and accounting functions to ARC along with the operation of its Enterprise

Resource Planning system. 

Improved Business Processes: In FY 2006, the United States Mint completed training for many managers 

in Manufacturing on “Lean Manufacturing” processes and in Sales and Marketing on effective project 

management skills. This continual process improvement in Manufacturing and Sales and Marketing will

serve to eliminate unnecessary or redundant practices and should lead to substantial improvements in plant

productivity and reductions in controllable operating costs.

Protection of Assets: In FY 2006, the United States Mint developed a strategic approach and plan to reduce

our Protection costs. We have identified the use of automation to replace certain functions currently 

performed by our police officers. We have developed and are installing electronic systems to verify identity,

and scan for weapons and explosives upon entry to each facility. We have also developed an automated 

exit scanning procedure to prevent the unauthorized removal of valuables from our facilities. Presently, 

this process is conducted by police officers. By automating the entry and exit searches, the United States 

Mint will reduce positions, and improve the effectiveness of the scanning process. Protection costs rose by 

$5.4 million from FY 2005 levels attributable to expenses associated with technological upgrades.

VALUE AND COMMUNICATE WITH THE AMERICAN PEOPLE

During FY 2006, the United States Mint continued to improve its communications with its stakeholders, its

customers, and with the American public. This included continuing the innovative and critically acclaimed

United States Mint H.I.P. Pocket Change educational website and conducting a number of open collector

forums around the nation.

United States Mint H.I.P Pocket Change (HPC) Website: During FY 2006, the final set of Westward Journey

Nickel SeriesTM lesson plans (“Return to Monticello”) were produced and made available for free download

to teachers, parents and students of all ages. We achieved a record number of downloads during FY 2006

for the Westward Journey Nickel Series and the 50 State Quarters® Program. In addition, visits to the 

website reached record numbers, and outreach efforts continued as members of the HPC team staffed a booth

at key education conferences.

Collector Forums: In FY 2006, the United States Mint hosted five collector forums where collectors and the

members of the general public could see our newest products and pose questions and ideas to United States

Mint officials related to coin programs. The forums were held the evening before each quarter launch,

including West Virginia (10/13/05), Nevada (1/30/06), Nebraska (4/6/06), Colorado (6/13/06) and North

Dakota (8/29/06).

• 10 •

2006 UNITED S TATES MINT ANNUAL REPORT
American Customer Satisfaction Index (ACSI): The United States Mint ranked as the #2 federal agency on

the University of Michigan's American Customer Satisfaction Index (ACSI) for calendar year 2005. The

United States Mint's score of 88 was the second highest score earned by a federal agency in FY 2006.

Also, based on information we gathered and analyzed, using the ACSI methodology, the United States Mint’s

scores of 80 in the e-commerce/transactions category and 76 in the portals/main sites category during the

third quarter of FY 2006 outpaced the average government score of 73.7 and the overall private sector 

e-commerce score of 79.6.

Coin Users Group Forum: In accordance with Public Law 109-145, the United States is honoring our

nation's presidents by issuing $1 circulating coins featuring their images, in order of their periods of service,

beginning in 2007. The United States Mint will issue four Presidential $1 Coins per year, and each shall have

a reverse design featuring a striking rendition of the Statue of Liberty. In addition to authorizing these new

coins, the law requires the Board of Governors of the Federal Reserve System and the Secretary of the

Treasury to take steps to ensure that an adequate supply of $1 coins is available for commerce and collectors

at such places and in such quantities as are appropriate by consulting with a coin users group to secure stakeholder ideas for the efficient distribution and circulation of $1 coins as well as all other circulating coins. To

this end, the first coin users group forum, hosted jointly by the United States Mint and the Federal Reserve

Board, was held on June 8, 2006 at the United States Mint's Washington, DC location.

DESIGN, SELL, AND DELIVER QUALITY PRODUCTS

The United States Mint continually seeks to provide quality products and services that are responsive to our

customer’s needs and desires and, at the same time, provide excellent customer service that meets best in 

business standards. FY 2006 was no exception. 

FY 2006 NEW PRODUCTS AND PROGRAMS

American Buffalo 24-Karat Gold Bullion and Proof Coins:

The United States Mint introduced its new line of 24-karat gold

coins. Production of these highly anticipated coins is authorized by Title II of Public Law 109-145, also known as the

Presidential $1 Coin Act of 2005. 

The new American Buffalo gold coin’s obverse and

reverse feature images originally executed by noted sculptor James Earle Fraser. The Buffalo, or Indian Head,

nickel debuted in 1913 and, during its production through

1938, became one of our nation's best-loved circulating

coins. The specific image used for this new 24-karat gold bullion coin is known to collectors as Fraser’s 1913 Type I design.

American Buffalo Gold Bullion Coins are the first .9999 fine 24-karat gold

coins ever struck by the United States Mint and are offered for sale through a

network of Authorized Purchasers. These $50 denomination gold coins are available to members of the public seeking a simple and tangible means to own and invest in 24-karat gold in the

form of legal tender coins whose content and purity are guaranteed by the United States Government.

American Buffalo Gold Bullion Coins are available at many coin and precious metals dealers as well as many

brokerage houses and participating banks. Pricing for precious metal investment grade or “bullion” coins

typically depends on the market price of the metal.

• 11 •

2006 UNITED S TATES MINT ANNUAL REPORT
The United States Mint also produces proof versions of these coins for collectors. These coins are sold 

directly to the public through United States Mint sales channels. At the end of FY 2006, the United States

Mint had sold 266,600 ounces of bullion coins to Authorized Purchasers and 208,700 units of proof coins

directly to the public.

AMERICAN EAGLE UNCIRCULATED COINS

In FY 2006, the United States Mint launched a new collector product category consisting of American Eagle

gold and silver uncirculated coins featuring the “W” (West Point Mint) mintmark. This year the coins were

released only in one-ounce versions and were sold as part of the American Eagle 20th Anniversary Sets.

American Eagle 20th Anniversary Coin Sets: To commemorate the 20th anniversary of the launch of the

American Eagle gold and silver programs, the United States Mint offered three American Eagle coin sets.

American Eagle 20th Anniversary Silver Coin Set: This coin set features uncirculated, proof, and reverse

proof versions of the one-ounce American Eagle Silver $1 denomination coins.

American Eagle 20th Anniversary Gold & Silver Set: This coin set features uncirculated versions of the oneounce American Eagle Silver $1 denomination coin and the one-ounce American Eagle Gold $50 Coin.

American Eagle 20th Anniversary Gold Coin Set: This coin set features uncirculated, proof, and reverse

proof versions of the one-ounce American Eagle Gold $50 denomination coins.

• 12 •

2006 UNITED S TATES MINT ANNUAL REPORT
THE 50 STATE QUARTERS® PROGRAM (a 10-year celebration of our

national heritage)

A significant portion of United States Mint operations is dedicated to the 

50 State Quarters® Program, which was launched in 1999 to commemorate

each of the 50 states over a ten-year period. Five new commemorative 

quarter-dollar coins are produced each year. Each quarter-dollar coin

reverse celebrates one of the 50 states with a design honoring that state's

unique history, traditions and symbols. The quarter-dollars are released 

in the order in which the states ratified the United States Constitution or

were admitted into the Union. In FY 2006, the United States Mint issued

quarter-dollars commemorating West Virginia, Nevada, Nebraska,

Colorado, and North Dakota.

FY 2006 50 STATE QUARTERS RELEASES

West Virginia: The first quarter-dollar coin released in FY 2006 commemorated the State of West Virginia. On June 20, 1863, the “Mountain State”

became the 35th state to be admitted into the Union, making this the 35th

coin to be issued in the United States Mint's 50 State Quarters Program. This

coin captures the scenic beauty of the State with its depiction of the New

River and the New River Gorge Bridge. The coin bears the inscription “New

River Gorge.”

Nevada: The second quarter-dollar coin released in FY 2006 commemorated

Nevada, and is the 36th coin in the United States Mint's 50 State Quarters

Program. Nevada, nicknamed “The Silver State,” was admitted into the

Union on October 31, 1864, becoming our Nation’s 36th state. Nevada’s

quarter depicts a trio of wild mustangs, the sun rising behind snow-capped

mountains, bordered by sagebrush and a banner that reads “The Silver

State.” The coin also bears the inscriptions “Nevada” and “1864.”

Nebraska: The third quarter-dollar coin released in FY 2006 commemorated

Nebraska, and is the 37th coin in the United States Mint’s 50 State Quarters

Program. Nebraska, nicknamed the “Cornhusker State,” was admitted 

into the Union on March 1, 1867, becoming our Nation’s 37th state.

Nebraska’s quarter depicts an ox-drawn covered wagon carrying 

pioneers in the foreground and Chimney Rock, the natural wonder that rises

from the valley of North Platte River, measuring 445 feet from base to tip.

The sun is in full view behind the wagon. The coin also bears the inscriptions “Nebraska,” “Chimney Rock” and “1867.” 

Colorado: The fourth quarter-dollar coin released in FY 2006 commemorated Colorado, and is the 38th coin

in the United States Mint’s 50 State Quarters Program. The Colorado quarter depicts a sweeping view of the

state’s rugged Rocky Mountains with evergreen trees and a banner carrying the inscription “Colorful

Colorado.” The coin also bears the inscriptions “Colorado” and “1876.”

North Dakota: The fifth and final quarter-dollar coin released in FY 2006 commemorated North Dakota,

and is the 39th coin in the United States Mint's 50 State Quarters Program. On November 2, 1889, North

Dakota was admitted into the Union, becoming our Nation's 39th state. The North Dakota quarter depicts

a pair of grazing American bison in the foreground with a sunset view of the rugged buttes and canyons that

help define the State’s Badlands region in the background. The coin's design also bears the inscriptions

“North Dakota” and “1889.”

• 13 •

2006 UNITED S TATES MINT ANNUAL REPORT
2006 “RETURN TO MONTICELLO” 5-CENT COIN

In FY 2006, the United States Mint released the final issue

in the extremely popular Westward Journey Nickel

SeriesTM: “Return to Monticello.” The reverse of the 2006

5-cent coin features the classic, familiar rendition of

Monticello, President Thomas Jefferson’s Virginia home,

originally executed by artist Felix Schlag and first chosen

to adorn the coin’s reverse in 1938. The obverse of the

2006 5-cent coin depicts a portrait of Thomas Jefferson

completed during 1800. 

FY 2006 COMMEMORATIVE COINS

2006 Benjamin Franklin Commemorative Coin Program:

The United States honored the tercentenary of the

birth of Benjamin Franklin, one of this nation’s

original scientists, thinkers and founding fathers,

with two commemorative silver dollars

designed and produced by the United States

Mint and minted at the Philadelphia facility.

The Benjamin Franklin Commemorative

Coin Program comprised two silver dollars —

“Scientist” and “Founding Father” — in both

proof and uncirculated conditions.

“The Scientist” recreates Benjamin Franklin’s

legendary kite experiment. This coin’s reverse

features a recreation of Franklin’s “Join, or Die”

political cartoon, which was published in the

Pennsylvania Gazette on May 9, 1754. “The Founding

Father” features a familiar image of Franklin in his

later years that is based on a bust by JeanAntoine Houdon. This coin’s reverse honors

Franklin’s contributions to the development of

the United States coinage and currency; it

shows a replica of the 1776 Continental

Currency dollar — a design that is attributed

to Franklin.

Authorized by Public Law 108-464, each coin

was limited to a maximum mintage of 250,000.

All associated products for this program sold out

during FY 2006. Surcharges from the program are

authorized to be paid to the Franklin Institute for 

purposes of the Benjamin Franklin Tercentenary Commission, 

a non-profit alliance established by Congress to commemorate

the tercentenary and to educate the public about Franklin's legacy. 

• 14 •

2006 UNITED S TATES MINT ANNUAL REPORT
2006 San Francisco Old Mint Commemorative Coin Program:

The second United States commemorative coin program of

2006 pays tribute to the San Francisco Old Mint, celebrating the instrumental role it played in the recovery

and rebuilding of a great American city, on the 100th

anniversary of the San Francisco earthquake.

Public Law 109-230 calls for the production and

release of two commemorative coins (a $5 denomination gold coin and a $1 denomination silver

coin) to honor the history and legacy of the building

that became known as the “Granite Lady.” Both

coins will be available in proof and uncirculated 

qualities, all minted at the San Francisco facility. The $5

coin will be limited to a mintage of 100,000 and the $1 coin

will be limited to a mintage of 500,000.

The obverse design of the $5 gold coin is a rendition of

the Old Mint modeled on the original 1869 construction drawing by A.B. Mullett. The reverse design is

a replica of the 1906 Half-Eagle Coronet Liberty

eagle reverse, designed by Christian Gobrecht.

The obverse design of the silver dollar is a rendition of the San Francisco Old Mint, originally prepared for the San Francisco Mint Medal by Sherl J.

Winter. The reverse design is a replica of the 1904

Morgan Silver Dollar eagle reverse, designed by

George T. Morgan. 

Surcharges collected through the sale of these commemorative

coins are authorized to be paid to the San Francisco Museum and Historical

Society for the purposes of rehabilitating the Historic Old Mint in San Francisco

as a city museum and an American coin and gold rush museum. Although production of these coins began in FY 2006, shipping is expected to commence in December of 2006. Revenue for

this program will not accrue until FY 2007.

• 15 •

2006 UNITED S TATES MINT ANNUAL REPORT
FOSTERING A MODEL WORKPLACE

EEO/Diversity: We have continued to focus on communications and employee engagement, building 

trust, and promoting an environment in which people are treated fairly and respectfully. These efforts have 

resulted in a significant decrease in the number of formal EEO complaints. In FY 2006, there were 20 

formal complaints, down from 22 in FY 2005 and 34 in FY 2004.

Workforce Planning Initiative: In 2006, the United States Mint began its workforce planning to better 

position itself to meet future challenges. As part of this effort, the United States Mint developed “roadmaps”

to successfully position the organization for the future. These roadmaps will lead the way to an 

organization that can meet the circulating coinage needs more efficiently while offering new products to grow

numismatic operations.

Safety: The safety and well-being of our employees are of the utmost importance at the United States 

Mint. Over the past few years the United States Mint has devoted a great amount of attention and work to

upgrading working conditions in our manufacturing facilities and maintaining an extremely safe working

environment at our Headquarters location. Last year, our Philadelphia facility was singled out by OSHA as

a model for safety improvement. This attention to safety continued during FY 2006 as we reduced lost time

accident rate (LTA) to 0.79, down from 0.94 in FY 2005.

• 16 •

2006 UNITED S TATES MINT ANNUAL REPORT
FINANCIAL AND PROGRAM ANALYSIS

OPERATING RESULTS

Beginning with the FY 2005 financial statements, the United States Mint no longer includes the cost of 

protecting the nation's gold and silver reserves as an offset against “Other Financing Sources” (seigniorage).

Therefore, the Protection Program, which represents the cost of protecting the nation's gold and silver

reserves, reflects a loss on the Statement of Net Cost, and the Circulating Program reflects a zero net cost

because revenue equals total costs. The cost of securing United States Mint facilities, staff, and assets is

included in the cost of production and is a proper charge to the Circulating Program. This change was made

as part of the conversion to a government United States Generally Accepted Accounting Principles (USGAAP)

presentation of the FY 2005 financial statements. 

TOTAL EARNED REVENUE AND OTHER

FINANCING SOURCES (SEIGNIORAGE)

In FY 2006, the United States Mint's earned revenue

increased to $1,641.1 million plus other financing sources

(seigniorage) of $682.4 million totaling $2,323.5 million.

This compares with FY 2005 amounts of $1,048.3 million

for earned revenue plus $722.7 million for other financing

sources, totaling $1,771.0 million.

CIRCULATING COINAGE SHIPPED 

TO THE FEDERAL RESERVE BANKS

The United States Mint produces the circulating coins used

to conduct commercial transactions across the nation.

Coins are shipped to the Federal Reserve Bank (FRB) 

as they are needed to replenish inventory and fulfill 

commercial demand. The FRB pays the United States Mint

face value for the coins when they are shipped. 

CIRCULATING EARNED REVENUE AND OTHER

FINANCING SOURCES

Earned revenue from circulating coinage equals the costs

(metal, manufacturing and transportation) incurred to

make and distribute the coin, while “other financing

sources” (also known as seigniorage) represents the difference between the cost to make the coin and the face value

received from the Federal Reserve Bank. Circulating earned

revenue from coins shipped to the Federal Reserve Bank of

$603.4 million plus the circulating other financing sources

of $668.5 million increased to $1,271.9 million in FY 2006.

This compares with $445.4 million in earned revenue plus

$699.4 million from other financing sources totaling

$1,144.8 million in FY 2005. 

• 17 •

2006 UNITED S TATES MINT ANNUAL REPORT

Total Earned Revenue and 

Other Financing Sources

2,323.5

1,771.0

1,641.1

1,048.3

682.4

722.7

-

500

1,000

1,500

2,000

2,500

FY 2006 FY 2005

Earned Revenue Other Financing Sources

Circulating Earned Revenue and 

Other Financing Sources

1,271.9 1,144.8

603.4 445.4

668.5 699.4

-

500

1,000

1,500

FY 2006 FY 2005

Other Financing Sources

Earned Revenue (Gross Circulating Cost)

Circulating Earned Revenue and 

Other Financing Sources

1,271.9 1,144.8

603.4 445.4

668.5

699.4

-

500

1,000

1,500

FY 2006 FY 2005

Other Financing Sources

Earned Revenue (Gross Circulating Cost)
CIRCULATING COIN COSTS

FY 2006 was a particularly challenging year given significant increases in the prices of nickel, zinc and 

copper — the three primary components of our circulating coinage. The conversion cost per 1000 coin equivalents increased slightly to $7.55, a two percent increase over the FY 2005 conversion cost of $7.42. During

the fourth quarter of FY 2006, increases in the prices of zinc and nickel raised the costs of production for the

one-cent and 5-cent coins above their face values.

• 18 •

2006 UNITED S TATES MINT ANNUAL REPORT

CIRCULATING EARNED REVENUE & OTHER FINANCING SOURCES (OFS) (in Millions)

FOR THE YEAR ENDED SEPTEMBER 30, 2006

One-cent 5-cent Dime Quarter Half Dollar

Mutilated & 

Other Total

Revenue & OFS $85.0 $72.6 $301.9 $751.1 $1.0 $60.3 $0.0 $1,271.9

Cost of Goods Sold 103.3 87.1 87.6 203.5 0.4 2.4 0.0 484.3

Selling, General & Administrative 0.0 0.1 24.5 63.3 0.0 6.7 0.0 94.6

Other Costs and Expenses 0.0 0.0 2.3 5.9 0.0 0.6 15.7 24.5

Other Financing Sources -$18.3 -$14.6 $187.5 $478.4 $0.6 $50.6 -$15.7 $668.5

CIRCULATING EARNED REVENUE & OTHER FINANCING SOURCES (in Millions)

FOR THE YEAR ENDED SEPTEMBER 30, 2005

One-cent 5-cent Dime Quarter Half Dollar

Mutilated & 

Other Total

Revenue & OFS $72.2 $70.9 $266.9 $663.9 $0.8 $70.1 $0.0 $1,144.8

Cost of Goods Sold 69.9 68.3 59.3 133.9 0.2 4.6 0.0 336.2

Selling, General & Administrative 0.3 0.2 22.0 56.4 0.1 6.9 0.0 85.9

Other Costs and Expenses 0.0 0.0 2.5 6.4 0.0 0.8 13.6 23.3

Other Financing Sources $2.0 $2.4 $183.1 $467.2 $0.5 $57.8 -$13.6 $699.4

UNIT COST OF PRODUCING AND DISTRIBUTING COINS

FOR THE YEAR ENDED SEPTEMBER 30, 2006

One-cent 5-cent Dime Quarter Half Dollar

Cost of Goods Sold $0.0119 $0.0592 $0.0294 $0.0681 $0.1729 $0.0495

General & Administrative 0.0000 0.0001 0.0081 0.0211 0.0000 0.1092

Distribution to FRB 0.0002 0.0004 0.0003 0.0015 0.0020 0.0008

Total Expenses $0.0121 $0.0597 $0.0378 $0.0907 $0.1749 $0.1595

UNIT COST OF PRODUCING AND DISTRIBUTING COINS

FOR THE YEAR ENDED SEPTEMBER 30, 2005

One-cent 5-cent Dime Quarter Half Dollar

Cost of Goods Sold $0.0095 $0.0478 $0.0219 $0.0491 $0.1091 $0.0655

General & Administrative 0.0000 0.0002 0.0083 0.0212 0.0429 0.0992

Distribution to FRB 0.0002 0.0004 0.0003 0.0014 0.0019 0.0007

Total Expenses $0.0097 $0.0484 $0.0305 $0.0717 $0.1539 $0.1654
NUMISMATIC PRODUCTS SOLD TO THE PUBLIC

The United States Mint also produces and sells a variety of numismatic products directly to the public, and

precious metal (gold, silver and platinum) investment grade bullion coins to pre-qualified Authorized

Purchasers for resale to the public. Total numismatic revenue plus other financing sources, and numismatic

revenue plus other financing sources as a proportion of total United States Mint revenue have been growing

over the past three fiscal years. In FY 2006 numismatic revenue plus other financing sources represented 45

percent of total United States Mint revenue, up from 35 percent in FY 2005. This trend is expected to 

continue into the foreseeable future as demand for circulating coinage stabilizes or diminishes.

American Eagle Bullion Coins: American Eagle bullion

coins are typically purchased by investors seeking a simple,

tangible means to own and invest in precious metals. These

coins are made in gold (22K), silver and platinum.

American Eagle silver bullion sales increased to 11.2 million

fine troy ounces (FTOs) and revenue increased to $130.5

million in FY 2006 compared with 8.5 million FTOs sold

and $70.7 million in revenue in FY 2005. While American

Eagle gold bullion sales decreased to 395.0 thousand FTOs

in FY 2006, revenue increased to $222.9 million because of

the higher prices of precious metals. This compares with

411.5 thousand FTOs sold and $185.0 million in revenue in

FY 2005. American Eagle platinum bullion sales decreased

to 14.5 thousand ounces while revenue increased to $15.5

million in FY 2006. This compares with 16.5 thousand

ounces sold and $15.0 million in revenue in FY 2005. Total

American Eagle bullion revenues increased to $368.9 

million compared with $270.7 million in FY 2005.

American Eagle Proof Programs with Uncirculated Coins

and 20th Anniversary Sets: American Eagle Proof coins are

made in gold (22K), silver and platinum. FY 2006 proved

to be a very good year for sales of American Eagle Gold

Proof products. American Eagle Gold Proof coin sales

increased to 166.6 thousand units and revenue increased 

to $55.2 million in FY 2006. This compares with 140.7

thousand units sold and $43.9 million in revenue in FY

2005. American Eagle Silver Proof sales decreased to 818.7

thousand units sold and $22.6 million in revenue in FY

2006. This compares with 855.8 thousand units sold and

$25.2 million in revenue in FY 2005. American Eagle

Platinum Proof sales fell to 32.8 thousand units and $22.2

million in revenue in FY 2006. This compares with 36.6

thousand units sold and $24.1 million in revenue in FY

2005. American Eagle Proof net program revenues

decreased to $16.4 million in FY 2006 from $16.8 million in FY 2005. The American Eagle 20th

Anniversary Set coin sales were 20.4 thousand gold coins and 8.9 thousand silver coins. The 20th

Anniversary Sets net program revenues were $1.1 million for a program total of $17.5 million. Although

the American Eagle Uncirculated coins were made available for sale in late FY 2006, shipping will not 

commence, and revenue will not be realized until FY 2007.

• 19 •

2006 UNITED S TATES MINT ANNUAL REPORT

American Eagle Bullion Cost and Net 

Program Revenue

368.9

270.7

359.7

265.2

9.2

5.5

-

100

200

300

400

FY 2006 FY 2005 Gross Numismatic Cost Net Program Revenue

-

50

100

FY 2006 FY 2005

American Eagle Proof, Uncirculated, 

and Anniversary Cost and Net 

Program Revenue

117.5

93.2

100.0 76.4

17.5

16.8

-

50

100

FY 2006 FY 2005

Gross Numismatic Cost Net Program Revenue
American Buffalo Gold Bullion Coins: FY 2006 marked

the debut of the American Buffalo Gold Bullion Coin. This

is the first pure gold (24-karat) coin produced by the United

States Mint. In accordance with Title II of Public Law 109-

145 (Presidential $1 Coin Act of 2005), as codified at 31

U.S.C. § 5112(a)(11) & (q), the coin is produced only in a

one-ounce weight with a $50 denomination. In FY 2007,

the United States Mint plans to introduce one-half ounce,

one-quarter ounce and one-tenth ounce 24-karat gold coins

under the Secretary's authority at 31 U.S.C. § 5112(i)(4).

The launch of the American Buffalo Gold Bullion Coin

resulted in sales of 266.5 thousand ounces in FY 2006 generating $167.7 million in net program revenue. Net program revenues for FY 2006 were $3.0 million and the net

program revenue ratio was 1.8 percent.

American Buffalo Gold Proof Coins: FY 2006 also marked

the debut of the American Buffalo 24-karat Gold Proof

Coin. This extremely popular collectible product was sold

in one-ounce units and generated sales of 208.7 thousand

units and $166.7 million in earned revenue in FY 2006.

Notably, almost 53,000 units representing approximately

$42 million in earned revenue were sold in the first 24

hours after launch. Net program revenues for FY 2006

were $15.9 million.

Commemorative Coins: Commemorative revenue (less surcharges paid to recipient organizations) increased to $24.9

million in FY 2006 from $20.8 million in FY 2005.

Congress authorized the issuance of the Chief Justice John

Marshall Silver Dollar and the 2005 Marine Corps 230th

Anniversary Silver Dollar commemorative coins, which

were released in March 2005 and July 2005, respectively.

Sales continued into FY 2006, through December 31, 2005.

The Chief Justice John Marshall Commemorative Coin

Program generated $2.3 million in revenue and $.6 million

in surcharges for the designated beneficiary organization in

FY 2006. The Marine Corps 230th Anniversary

Commemorative Coin Program generated $10.1 million in

revenue and $3.8 million in surcharges for the designated

recipient organization in FY 2006.

For 2006, Congress authorized the Benjamin Franklin

Commemorative Coin Program. All product options sold

out for this program in FY 2006. The Benjamin Franklin

Commemorative Coin Program generated $12.5 million in

revenue and $4.5 million in surcharges for the designated recipient organization. Congress also authorized

the issuance of the 2006 San Francisco Old Mint Commemorative Coin Program. Since this program was

signed into law late in the fiscal year, coins will not be shipped and revenue will not accrue until FY 2007.

Net program revenue for FY 2006 was $4.8 million and surcharges collected for the designated recipients

totaled $8.9 million. Surcharges paid to recipient organizations totaled $11.2 million in FY 2006.

• 20 •

2006 UNITED S TATES MINT ANNUAL REPORT

American Buffalo Gold Bullion Cost 

and Net Program Revenue

167.7

164.7

3.0

140

150

160

170

180

FY 2006

Gross Numismatic Cost Net Program Revenue

American Buffalo Gold Proof Cost 

and Net Program Revenue

166.7

150.8

15.9

-

50

100

150

200

FY 2006

Gross Numismatic Cost Net Program Revenue

Commemorative Coins Cost and Net 

Program Revenue

24.9

20.8

20.1 18.0

4.8

2.8

-

5

10

15

20

25

30

FY 2006 FY 2005

Gross Numismatic Cost Net Program Revenue
Recurring Programs: Recurring programs include Proof

Sets, Silver Proof Sets, Uncirculated Sets, 50 State Quarters

Proof SetsTM, 50 State Quarters Silver Proof SetsTM, and

other miscellaneous products. Revenue from recurring 

programs decreased to $181.4 million in FY 2006 from

$203.5 million in FY 2005. Net program revenues

decreased to $35.1million in FY 2006 compared with $53.6

million in 2005. The recurring net revenue ratio decreased to

19.3 percent in FY 2006 from 26.3 percent in FY 2005.

NUMISMATIC SALES OF CIRCULATING COINAGE

With the introduction of the 50 States Quarters® Program,

the Golden Dollar and the 5-cent coin redesigns, there has

been an increase in collector demand for circulating quality

coins that have not yet been circulated. These coins are 

typically sold by the United States Mint in bags and rolls.

Sales in this category represent the face value of the coins

sold. All additional revenue above the face value, or above

the production cost, whichever is higher and any additional

expenses incurred in selling these products are included in

the Numismatic Recurring Programs in the previous section.

Total numismatic earned revenue from the sale of circulating

coinage plus other financing sources decreased to $24.4 

million in FY 2006 as compared with $37.9 million in FY

2005. Higher FY 2005 sales reflected the two different 

5-cent coin designs of the popular Westward Journey Nickel

SeriesTM issued that year. As in the case of circulating coins

sold to the FRB, the portion of the other financing sources

from the numismatic sales of circulating coinage transferred

to the Treasury General Fund represents off-budget receipts.

NUMISMATIC COST, EARNED REVENUE, AND NET

PROGRAM REVENUE 

Earned revenue for numismatic sales to the public (net of

surcharges paid to recipient organizations) of $1,027.1 

million, plus earned revenue for numismatic sales of circulating coinage of $10.5 million increased to a total of

$1,037.6 million in FY 2006. Increases in numismatic

earned revenue were largely a result of the release of new

numismatic products — particularly the American Buffalo

24-karat Gold Proof coin. This compares with earned 

revenue of $588.2 million for numismatic sales to the 

public, plus earned revenue of $14.6 million from numismatic sales of circulating coinage that totaled $602.8 million

in FY 2005. The total net program revenue on the sale of

numismatic products increased to $85.5 million in FY 2006

compared with $78.7 million in FY 2005. 

2006 UNITED S TATES MINT ANNUAL REPORT

Recurring Coin Products Cost and 

Net Program Revenue

181.4

203.5

146.3 149.9

35.1 53.6

-

50

100

150

200

250

FY 2006 FY 2005

Gross Numismatic Cost Net Program Revenue

Numismatic Cost, Earned Revenue, 

and Net Program Revenue

1,037.6

941.6 602.8

509.5

10.5

14.6

85.5

78.7

400

600

800

1,000

FY 2006

FY 2005 Gross Numismatic Cost Earned Revenue

Net Program Revenue

FY 2006

Numismatic Sales of Circulating 

Coins

24.4

37.9

10.5 14.6

13.9

23.3

-

10

20

30

40

50

FY 2006 FY 2005

Earned Revenue Other Financing Sources

• 21 •
The following charts show total numismatic revenue and net program revenue for FY 2006 compared with

FY 2005 results, and show costs and net program revenue by major product lines.

PROTECTION OPERATIONS

The United States Mint Office of Protection maintains a professional police force with the tools and resources

needed to respond to the changing threats of today’s environment. The Office of Protection is committed to

recruiting and retaining the highest caliber of law enforcement personnel and to maintaining a competitive

compensation structure.

The Office of Protection secures approximately $148.8 billion in market value of the nation’s gold and 

silver reserves and protects the United States Mint's assets while safeguarding our employees against 

potential threats at our facilities across the country. In FY 2006, the Protection Program had a net cost of

$42.8 million, an increase from a net cost of $37.4 million in FY 2005. This increase in net cost resulted

from expenses related to the completion of security upgrades.

CAPITAL INVESTMENTS

Each year, the United States Mint commits funds for capital projects to maintain, upgrade or acquire 

equipment, physical structures, physical security systems, and information technology systems. Funds obligated for capital projects totaled approximately $20.2 million in FY 2006. This included approximately

$14.4 million for manufacturing projects, $3.6 million for security improvement projects, and $2.2 million

for information technology projects. The United States Mint's capital projects are focused on improving

• 22 •

2006 UNITED S TATES MINT ANNUAL REPORT

NUMISMATIC NET PROGRAM REVENUE (in Millions)

FOR THE YEAR ENDED SEPTEMBER 30, 2006

American 

Eagle 

Bullion

American 

Eagle Proof, 

Uncirculated 

 & 20th 

Anniversary

American 

Buffalo Gold 

Bullion

American 

Buffalo Gold 

Proof Commem. Recurring Total

Revenue (less surcharges & commissions) $368.9 $117.5 $167.7 $166.7 $24.9 $181.4 $1,027.1

Cost of Goods Sold 358.7 83.8 164.2 136.9 14.6 100.4 $858.6

Selling, General & Administrative 0.9 15.7 0.5 13.5 5.4 44.8 $80.8

Other Cost 0.1 0.5 0.0 0.4 0.1 1.1 $2.2

Net Program Revenue $9.2 $17.5 $3.0 $15.9 $4.8 $35.1 $85.5

Net Program Revenue Ratio 2.5% 14.9% 1.8% 9.5% 19.3% 19.3% 8.3%

NUMISMATIC NET PROGRAM REVENUE (in Millions)

FOR THE YEAR ENDED SEPTEMBER 30, 2005

American 

Eagle 

Bullion

American 

Eagle Proof

American 

Buffalo Gold 

Bullion

American 

Buffalo Gold 

Proof Commem. Recurring Total

Revenue (less surcharges & commissions) $270.7 $93.2 $0.0 $0.0 $20.8 $203.5 $588.2

Cost of Goods Sold 264.3 62.4 0.0 0.0 13.1 92.8 432.6

Selling, General & Administrative 0.8 13.8 0.0 0.0 4.9 56.3 75.8

Other Cost 0.1 0.2 0.0 0.0 0.0 0.8 1.1

Net Program Revenue $5.5 $16.8 $0.0 $0.0 $2.8 $53.6 $78.7

Net Program Revenue Ratio 2.0% 18.0% N/A N/A 13.5% 26.3% 13.4%
processes, developing new coin design and production capabilities, and expanding information handling.

These investments are planned to reduce costs, shorten the overall time from product concept to production,

and achieve greater flexibility to respond to market demands.

TOTAL UNITED STATES MINT NET PROGRAM REVENUES AND 

OTHER FINANCING SOURCES

• 23 •

2006 UNITED S TATES MINT ANNUAL REPORT

Consolidated Net Program Revenue and Other 

Financing Sources

1,466.0

929.3

541.1 650.2 725.1 764.0

-

500

1,000

1,500

2,000

2,500

3,000

2006 2005 2004 2003 2002 2001 2000

Net Revenue Ratio

43.1%

31.2%

0%

10%

20%

30%

40%

50%

60%

2006 2005

The net program revenues plus other financing sources decreased to $725.1 million in FY 2006 from $764.0

million in FY 2005. The total net revenue ratio1 decreased to 31.2% compared to 43.1% in the prior year

due to a significant rise in the prices of the metals that are used in the fabrication of coins. 

TRANSFERS TO THE TREASURY GENERAL FUND

The Public Enterprise Fund (PEF) legislation permits the United States Mint to operate in a business-like 

manner, allowing the United States Mint flexibility to adjust spending to adapt to ever-changing economic

and business conditions. As required by Public Law 104-52, the United States Mint transfers all profits to the

Treasury General Fund, retaining only the amount required by the PEF to support United States Mint 

operations and programs. 

In FY 2006, the United States Mint

transferred $750 million to the

Treasury General Fund. This total comprised $666 million in net operating

results from the sale of circulating coins

either to the Federal Reserve Bank

(FRB) or through numismatic channels

(off-budget), and $84 million from

profits on numismatic collectible and

bullion sales (on-budget). In comparison, $775 million ($730 million offbudget and $45 million on-budget) was

transferred to the Treasury General

Fund in FY 2005. 

1

Net Revenue Ratio compares net program revenue to total program revenue. It indicates how much net revenue a company makes for every $1 it generates

in total revenue. The United States Mint's net revenue ratio refers to net program revenue plus other financing sources as a percentage of total program 

revenue plus other financing sources.

($ Millions)

Transfers to the Treasury General Fund

587 467 562

1,018

1,383

1,030

600 665 750 775

2,281

-

500

1,000

1,500

2,000

2,500

2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996
The amounts transferred to Treasury are directly related to the sales of United States Mint products. The

total face value of circulating coins shipped to the Federal Reserve or sold through numismatic channels

increased from the previous year. In a stable cost environment, an increase in circulating shipments would

normally result in a larger source of funds available for transfer. However, rising metal prices during FY 2006

increased the overall costs of circulating coins resulting in reduced funds available for transfer off-budget in

comparison to FY 2005. The $84 million on-budget transfer occurred in the first quarter of FY 2006 and

reflects the numismatic net income for FY 2005. This lag in the transfer of on-budget funds is necessary pending completion of the financial statements audit. Accordingly, the on-budget transfer in the first quarter in

FY 2007 will reflect the audited profits from the sale of numismatic products in FY 2006.

SUPPLEMENTAL INFORMATION PER PUBLIC LAW 107-201

Public Law 107-201 (July 23, 2002) authorized the United States Mint to purchase silver on the open 

market to mint coins when the silver in the Strategic and Critical Materials Stockpile was depleted. The law

requires an annual reporting of the amount of silver purchased on the open market by fiscal year. The 

following are purchases for FY 2006 and FY 2005:

QUANTITY (FTO) MARKET VALUE

FY 2006 17,036,321.0010 $ 178,226,186.41

FY 2005 15,462,284.6495 $ 110,164,958.01

• 24 •

2006 UNITED S TATES MINT ANNUAL REPORT
PERFORMANCE GOALS, OBJECTIVES AND RESULTS

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

of performance measures. As mandated by the Government Performance & Results Act (GPRA) of 1993,

agencies are to identify critical activities, devise pertinent performance measures and report on these 

activities to the President and Congress.

The United States Mint's strategic plan focuses on improving efficiency, ensuring integrity, valuing our

employees, and operating at the utmost performance level expected of a federal agency. To assess our efforts,

the United States Mint identified key performance measures that cut across the entire organization. Tied to

these performance measures are high-level targets coupled with initiatives enabling us to reach our goals.

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

critical set of measures we use to monitor and to manage our operations effectively. The following table 

identifies our performance measures, targets and year-end achievements.

BUDGET PERFORMANCE MEASURES

The following table shows the targets and results for performance measures presented as part of the FY 2007

Performance Budget.

• 25 •

2006 UNITED S TATES MINT ANNUAL REPORT

FY 2006 RESULT FY 2006 TARGET FY 2005 RESULT

Conversion cost per 1,000 coin $7.55 $6.62 $7.42

equivalents

Cycle-time 72 days 67 days 69 days

Order fulfillment 95% 95% 94%

Protection cost per square foot $32.49 $32.00 $32.43

Total losses $0 $15,000 $1,135

ANALYSIS OF BUDGET PERFORMANCE

MEASURES

CONVERSION COST PER 1,000 COIN EQUIVALENTS

The United States Mint’s costs vary by product, and the

product mix has been variable over time. This makes it

difficult to compare operating results from year to year.

The coin equivalent calculation converts the production

output to a common denominator based on the circulating quarter. Production costs, excluding metal and fabrication, are then divided by this standardized production level, thus resulting in “conversion costs per 1,000

coin equivalents.” This allows comparison of performance over time by negating the effects of changes in

the product mix. The conversion cost per 1,000 coin equivalents during FY 2006 is $7.55, an increase of

two percent from the FY 2005 result of $7.42. The performance measure did not meet the FY 2006 target

of $6.62. This target (stretch goal) was an 11 percent decrease from the FY 2005 actual results and was set

based on forecasted volume and cost estimates. 

Conversion cost per 1,000 coin 

equivalents

$7.55 $7.42 $7.93

$9.96

$5

$6

$7

$8

$9

$10

FY 2006 FY 2005 FY 2004 FY 2003
Coin equivalent production increased to 21.1 billion in FY 2006 compared with 19.9 billion in FY 2005, an

increase of six percent. The associated conversion cost increased to $159 million from $147 million in FY

2005, an increase of eight percent. The increase in conversion cost between FY 2006 and FY 2005 is the

result of rising energy costs, replenishment of shipping and packaging supplies, overtime to support new

numismatic products, and a 21 percent increase in depreciation expense. In FY 2006, the United States Mint

completed training for many manufacturing managers on lean manufacturing processes and for sales and

marketing staff on project management techniques. This training will serve to eliminate unnecessary or

redundant practices and should lead to improvements in plant productivity and reductions in controllable

operating costs.

CYCLE-TIME

The cycle time measure assesses the time it takes material

to flow through the United States Mint’s processes from

raw material to order fulfillment. The United States

Mint's objective is to minimize the amount of time

required to process raw materials into finished goods by

eliminating non-value added steps from the processes and

reducing the amount of raw material in inventory. As of

September 2006, the United States Mint’s cycle-time was

72 days, an increase of 3 days from 69 days as of

September 2005. The targeted cycle-time was 67 days.

This performance goal was set at an approximate target

level, and the deviation from that level is slight. There was

no effect on the overall program or activity performance. 

The United States Mint plans to continue improving the cycle-time of the circulating coinage through further

implementation of lean manufacturing techniques. In FY 2006, the United States Mint completed training

for many manufacturing managers on lean manufacturing processes. This training will serve to eliminate

unnecessary or redundant practices and should lead to improvements in plant productivity. The Presidential

$1 Coin program will begin in FY 2007. This program will present challenges to reducing the cycle-time

from current levels, as four new presidential designs (one per quarter) will be introduced into circulation. To

address this challenge, Mint and Federal Reserve officials are working together to ensure that sufficient 

quantities of the new Presidential dollar coins will be ready to be distributed into circulation on each launch

date. The Federal Reserve has assigned one of its staff members with expertise in coin distribution and 

inventory control from its Washington headquarters to help coordinate the circulation plans.

ORDER FULFILLMENT

Order fulfillment is a measure that tracks the overall order

fulfillment for the circulating coins shipped to the Federal

Reserve and the numismatic coins sold to the public. Both

components are then weighted by their respective share of

the total revenues and other financing sources. Order fulfillment in FY 2006 was 95 percent, a slight increase from

the result of 94 percent in FY 2005. Essentially, this result

means that 95 percent of the United States Mint's revenue

and other financing sources during FY 2006 was earned

from products that were shipped to the customer in a timely

fashion. This result meets the target of 95 percent.

• 26 •

2006 UNITED S TATES MINT ANNUAL REPORT

Cycle-time

72 69

85

73

-

20

40

60

80

FY 2006 FY 2005 FY 2004 FY 2003

Order fulfillment

95% 94%

0%

20%

40%

60%

80%

100%

FY 2006 FY 2005 FY 2004 FY 2003

N/A N/A
PROTECTION COST PER SQUARE FOOT

Protection cost per square foot comprises the Office of

Protection’s total operating cost divided by the area of

usable space. Usable space is defined as 90 percent of 

the total square footage. The Office of Protection uses 

the cost per square foot to provide a measurement of 

efficiency over time. The square footage of usable space 

at the United States Mint is a stable figure and will only

change significantly with major events such as the addition

or removal of a facility. Protection cost per square foot 

for FY 2006 was $32.49, a slight increase from $32.43 

in FY 2005. This performance did not meet the target 

of $32.00. 

The United States Mint is identifying the use of automation to replace the functions currently performed 

by police officers. While these strategies may help reduce certain personnel and overtime costs, the ability 

to apply downward pressure on costs is taken with a long-term view and must be tempered by the level of

readiness necessary to fulfill the Protection mission.

TOTAL LOSSES

The United States Mint performs its protection function

by minimizing the vulnerability to theft and preventing

unauthorized access to critical assets. Total Losses measures the dollar amount of losses incurred due to the realization of threats against the United States Mint. Total

losses measures losses within three categories representing

cases that have been investigated and closed:

1. Financial Losses: intentional monetary losses, thefts

or fraud from metal reserves, produced coinage, 

retail sales and other administrative losses.

2. Cost of Intrusions: the cost of repair or recovery 

from an intentional intrusion into United States 

Mint systems and facilities either electronically 

or physically.

3. Productivity Losses: the cost of intentional damage

or destruction to production capabilities, including

related costs for continuity of operations.

Total losses as of the end of FY 2006 were $0 (zero) compared with $1,135 in FY 2005. This performance

exceeds the target of $15,000. Results are from cases that have been investigated and closed during the 

fiscal year. While the FY 2006 result represents the ideal performance, there are open cases that are still

under investigation that may be reported as losses at a future date. The protection of United States Mint

assets remains a high priority. Efforts to prevent losses include automating exit scanning procedures to scan

employees for valuable assets and error coins, and installing electronic systems to verify identity and scan for

weapons and explosives upon entry to each facility.

• 27 •

2006 UNITED S TATES MINT ANNUAL REPORT

Protection cost per square foot

$32.49 $32.43 $32.51

$-

$10

$20

$30

$40

FY 2006 FY 2005 FY 2004 FY 2003

N/A

Total losses

$0

$1,135

$3,109

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

FY 2006 FY 2005 FY 2004 FY 2003

N/A
CURRENT AND FUTURE CHALLENGES

The United States Mint is being challenged by a wide range of changes in the world around us — changes in

how people purchase goods and services, rapidly rising metal costs, and whether people collect coins as

hobby or investment. While we are not in a position to control these changes in the outside world, we are

in a position to control how we prepare for them and how we respond to them. We have chosen to take a

proactive approach in addressing them — working closely with our stakeholders, customers and vendors to

safeguard, to the greatest extent practicable, our ability to continue to effectively fulfill our mission for the

American public.

KEY CHALLENGES

RISING PRICES OF METAL LEADING TO HIGHER PRODUCTION COSTS

Perhaps the greatest challenge facing the United States Mint is the increased cost of producing circulating

coinage resulting from the dramatic increases in the prices of zinc, copper, and nickel. In fact, as of the end

of FY 2006, the costs of producing one-cent and 5-cent coins were exceeding the face value of these coins.

These increases in metal prices also detract from the seigniorage levels for other coin denominations. 

POTENTIAL DOWNWARD TREND IN DEMAND FOR CIRCULATING COINS

Over the past five years, the public's use of credit and debit cards, ePurses, stored value cards (like phone

cards), contactless transaction cards (like EZPass and SpeedPass), and other forms of electronic transactions

has increased substantially. This transformation of the economy toward more cash-free transactions might

have significant implications for the nation's demand for circulating coins in the future. To prepare for and

respond to this potential change, we need to reduce our costs and develop new initiatives. The numismatics

area offers us the flexibility to develop a wide range of new initiatives.

THE MOST POPULAR NUMISMATIC COIN PROGRAM IS COMING TO AN END

In recent years, there has been an increased demand for numismatic products — much of it because of the

popularity of our 50 State Quarters® Program. However, our recurring numismatic product line will shrink

dramatically when the 50 State Quarters Program ends in December 2008. The introduction of a 24-karat

program in FY 2006 and the launch of the Presidential $1 Coin Program in 2007 will boost our numismatics

revenue in the short term. However, history shows that initial surges of collector demand for new coin 

products slow significantly after two to three years, and this slowdown would coincide with the conclusion

of the 50 State Quarters Program.

VOLATILITY IN SHORT-TERM COIN PRODUCTION REQUIREMENTS

Introduction of the 24-Karat American Buffalo Gold Coin Program in FY 2006 and the Presidential $1 Coin

Program in FY 2007 requires significant escalation in production and packaging in all of our coin production facilities. However, these production increases in 2006-2008 will likely be followed by significant

declines in both circulating and numismatic production levels in 2009 — when the 50 State Quarters Program

ends. To prepare for and respond to these changes, we need to develop new numismatic initiatives, products,

and sales channels; restructure our production capacity; and reorient our workforce.

SKILL GAPS IN THE UNITED STATES MINT WORKFORCE

The United States Mint of 2011 will be very different from the United States Mint of 2006. To prepare for

and respond to this change, we need to implement lean manufacturing processes; we need to develop more

efficient, effective, and innovative business practices; we need to provide specialized training programs to

• 28 •

2006 UNITED S TATES MINT ANNUAL REPORT
enhance the skills of our existing workforce; and we need to attract employees with the skills to meet the

needs of the future. The result will be a smaller but more technically proficient workforce in the areas of

marketing, finance, information technology, and production — a workforce that is focused on achieving 

mission-critical strategic objectives.

THREATS TO UNITED STATES MINT PEOPLE, OPERATIONS, AND ASSETS

We also need to continue building our ability to provide the utmost in security and safety for our people,

operations, and assets. Although we have made a great deal of progress — both in providing physical 

security and in creating a safer workplace — these challenges will continue. To meet these challenges, we will

invest in proven new technologies designed to effectively identify and thwart potential threats.

• 29 •

2006 UNITED S TATES MINT ANNUAL REPORT
ANALYSIS OF SYSTEMS, CONTROLS AND LEGAL COMPLIANCE

INTERNAL CONTROLS PROGRAM

The United States Mint management is responsible for establishing and maintaining effective internal 

controls, which includes safeguarding of assets and compliance with applicable laws and regulations.

Therefore, the United States Mint has made a conscientious effort during FY 2006 to meet the internal 

control requirements of the Federal Managers’ Financial Integrity Act (FMFIA), the Federal Financial

Management Improvement Act (FFMIA), Office of Management and Budget (OMB) Circular A-123, and the

Government Performance and Results Act (GPRA) of 1993.

The systems of management controls for the United States Mint are designed to ensure that:

a) Programs achieve their intended results;

b) Resources are used consistent with overall mission;

c) Programs and resources are free from waste, fraud, and mismanagement;

d) Laws and regulations are followed;

e) Controls are sufficient to minimize any improper or erroneous payments;

f) Performance information is reliable;

g) Systems security is in substantial compliance with all relevant requirements;

h) Continuity of operations planning in critical areas is sufficient to reduce risk to reasonable levels; and

i) Financial management systems are in compliance with Federal financial systems standards.

The United States Mint has assessed its internal controls and, for all its responsibilities, we hereby provide

reasonable assurance that the above listed management control objectives, taken as a whole, were achieved

by the United States Mint during FY 2006. Specifically, this assurance is provided relative to Sections 2 and

4 of FMFIA. We further assure that our financial management systems are in substantial compliance with

the requirements imposed by FFMIA. These assurances are as of September 30, 2006.

The United States Mint has assessed the effectiveness of the internal controls over financial reporting on the

Treasury designated financial line items in accordance with OMB Circular A-123, Management's

Responsibility for Internal Control. The United States Mint evaluated controls over the Treasury designated

consolidated financial statement line items, for which the United States Mint contributes 10% or greater,

including accounts payable, accounts receivable, inventory and fixed assets. Based on the results of this 

evaluation, the United States Mint can provide reasonable assurance that internal controls over financial

reporting on the Treasury designated consolidated financial statement line items and internal financial reports

produced for the United States Mint were, as of June 30, 2006, operating effectively and no material 

weakness was found in the design or operation of the internal control over such financial reporting.

The FY 2006 assessment performed in accordance with OMB Circular A-123 was conducted by obtaining

and documenting an understanding of the policies, processes and procedures in effect, determining the 

significant control mechanisms and performing detail tests of transactions to ascertain the effectiveness of the

identified controls. Each control tested was considered in light of the associated and/or mitigating controls

that were in effect. The overall result was considered and conclusions obtained as to the overall effectiveness

of the controls in place. 

• 30 •

2006 UNITED S TATES MINT ANNUAL REPORT
FMFIA SECTION 2 MATERIAL WEAKNESS

There are no Material Weaknesses to report on.

FMFIA SECTION 4 - MATERIAL NONCONFORMANCE

There is no Material Nonconformance to report on.

LEGAL COMPLIANCE

The United States Mint was found not to be in full compliance with FFMIA in that at the transactional level,

the United States Governmental Standards General Ledger is not fully adopted. This will be remedied with

the migration of the United States Mint's general ledger to an enterprise-wide automated accounting system

serviced by the Bureau of the Public Debt's Administrative Resource Center in October of 2006.

• 31 •

2006 UNITED S TATES MINT ANNUAL REPORT
The principal financial statements have been prepared to report the financial position and results of operations of the United States Mint, pursuant to the requirements of 31 U.S.C. § 3515(b). While the statements

have been prepared from the books and records of the United States Mint in accordance with U.S. generally

accepted accounting principles for Federal entities and the formats prescribed by OMB, the statements are in

addition to the financial reports used to monitor and control budgetary resources which are prepared from

the same books and records. The statements should be read with the realization that they are for a component of the U.S. Government.

• 32 •

LIMITATIONS OF THE FINANCIAL STATEMENTS

2006 UNITED S TATES MINT ANNUAL REPORT
• 33 •

INDEPENDENT AUDITORS' REPORT

Inspector General

United States Department of the Treasury:

Director

United States Mint:

We have audited the accompanying balance sheets of the United States Mint (Mint) as of September 30, 

2006 and 2005, and the related statements of net cost, changes in net position, financing, custodial activity,

and the combined statements of budgetary resources (hereinafter referred to as “financial statements”) for

the years then ended. These financial statements are the responsibility of the Mint's management. Our

responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of

America; the standards applicable to financial audits contained in Government Auditing Standards, issued 

by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 

No. 06-03, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin No.

06-03 require that we plan and perform the audits to obtain reasonable assurance about whether the 

financial statements are free of material misstatement. An audit includes consideration of internal control

over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the Mint's internal control over 

financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements, assessing the 

accounting principles used and significant estimates made by management, as well as evaluating the 

overall financial statement presentation. We believe that our audits provide a reasonable basis for our 

opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the 

financial position of the Mint as of September 30, 2006 and 2005, and its net costs, changes in net position,

budgetary resources, reconciliation of net costs to budgetary obligations, and custodial activity for the 

years then ended in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the financial statements, in fiscal year 2006, the Mint adopted the provisions of 

the Federal Accounting Standards Advisory Board's Statement of Federal Financial Accounting Standards

No. 27, Identifying and Reporting Earmarked Funds.

KPMG LLP, a U.S. limited liability partnership, is the U.S.

member firm of KPMG International, a Swiss cooperative.
• 34 •

The information in the Management's Discussion and Analysis and Required Supplementary Information

sections is not a required part of the financial statements, but is supplementary information required by 

U.S. generally accepted accounting principles and OMB Circular No. A-136, Financial Reporting

Requirements. We have applied certain limited procedures, which consisted principally of inquiries of 

management regarding the methods of measurement and presentation of this information. However, we 

did not audit this information and, accordingly, we express no opinion on it. 

In accordance with Government Auditing Standards, we have also issued our reports dated December 8,

2006, on our consideration of the Mint's internal control over financial reporting and our tests of its 

compliance with certain provisions of laws, regulations, contracts, and other matters. The purpose of those

reports is to describe the scope of our testing of internal control over financial reporting and compliance 

and the results of that testing, and not to provide an opinion on the internal control over financial reporting

or on compliance. Those reports are an integral part of an audit performed in accordance with Government

Auditing Standards and should be read in conjunction with this report in assessing the results of our audits.

December 8, 2006
• 35 •

2006 2005

ASSETS

Intragovernmental:

Fund Balance with Treasury (Note 3) $225,917 $279,387

Accounts Receivable, Net (Note 4) 0 58

Advances and Prepayments (Note 5) 3,948 4,114

Total Intragovernmental Assets 229,865 283,559

Custodial Gold and Silver Reserves (Note 6) 10,493,740 10,493,740

Accounts Receivable, Net (Note 4) 28,120 14,900

Inventory and Related Property (Notes 7 & 22) 253,329 185,630

Supplies 15,318 13,193

Property, Plant and Equipment, Net (Note 8) 233,394 271,581

Advances and Prepayments (Note 5) 1,859 1,612

Total Non-Intragovernmental Assets 11,025,760 10,980,656

 

Total Assets (Notes 2 and 14) $11,255,625 $11,264,215

Heritage Assets (Note 9)

LIABILITIES

Intragovernmental:

Accounts Payable $1,183 $313

Accrued Workers' Compensation and Benefits 6,541 6,805

Total Intra-governmental Liabilities 7,724 7,118

Custodial Liability to Treasury (Note 6) 10,493,740 10,493,740

Accounts Payable 52,436 40,513

Surcharges Payable (Note 3) 8,361 10,678

Accrued Payroll and Benefits 14,923 14,996

Other Actuarial Liabilities 31,482 33,855

Unearned Revenues 3,362 5,791

Total Non-Intragovernmental Liabilities 10,604,304 10,599,573

Total Liabilities (Notes 10 and 14) 10,612,028 10,606,691

Commitments and Contingencies (Notes 12 & 13)

NET POSITION

Cumulative Results of Operations - Earmarked Funds (Note 14) 643,597 657,524

Total Liabilities and Net Position $11,255,625 $11,264,215

As of September 30,

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

BALANCE SHEET

(In Thousands)

The accompanying notes are integral part of these financial statements.
• 36 •

2006 2005

NUMISMATIC PRODUCTION AND SALES

Gross Cost $952,150 $524,072

Less Earned Revenue (1,037,620) (602,796)

Net Program Revenue (85,470) (78,724)

CIRCULATING PRODUCTION AND SALES 

Gross Cost 603,352 445,446

Less Earned Revenue (Note 16) (603,352) (445,446)

Net Program Revenue - -

Net Revenue Before Protection of Assets (85,470) (78,724)

PROTECTION OF ASSETS

Protection Costs 42,886 37,543

Less Earned Revenue (59) (107)

Net Cost of Protection of Assets 42,827 37,436

Net Revenue from Operations (Notes 14 and 15) ($42,643) ($41,288)

DEPARTMENT OF THE TREASURY

For The Years Ended September 30, 

(In Thousands)

STATEMENT OF NET COST

UNITED STATES MINT

The accompanying notes are integral part of these financial statements.
• 37 •

2006 2005

CUMULATIVE RESULTS OF OPERATIONS

NET POSITION, Beginning of Year - Earmarked Funds (Note 14) $657,524 $657,797

FINANCING SOURCES:

Transfers to the Treasury General Fund On-Budget (84,000) (45,000)

Transfers to the Treasury General Fund Off-Budget (666,000) (730,000)

Other Financing Sources (Seigniorage) (Note 16) 682,480 722,686

Imputed Financing Sources (Note 11) 10,950 10,753

Total Financing Sources (56,570) (41,561)

Net Revenue from Operations 42,643 41,288

Net Position, End of Year - Earmarked Funds (Note 14) $643,597 $657,524

For The Years Ended September 30, 

UNITED STATES MINT

DEPARTMENT OF THE TREASURY

(In Thousands)

STATEMENT OF CHANGES IN NET POSITION

The accompanying notes are integral part of these financial statements.
• 38 •

The accompanying notes are integral part of these financial statements.

2006 2005

Budgetary Resources

Unobligated Balance, 

brought forward, October 1 $112,870 $130,290

Spending Authority from Offsetting Collections

 Earned

 Collected 1,650,475 1,041,625

 Change in Receivable from Federal Sources (58) (4,363)

 Subtotal 1,650,417 1,037,262

Permanently Not Available (84,000) (45,000)

TOTAL BUDGETARY RESOURCES $1,679,287 $1,122,552

Status of Budgetary Resources

Obligations Incurred 

 Reimbursable (Note 18) $1,638,738 $1,009,682

Unobligated Balances

 Apportioned 40,549 112,870

TOTAL STATUS OF BUDGETARY RESOURCES $1,679,287 $1,122,552

Change in Obligated Balances

Obligated balance, net

 Unpaid Obligations, brought forward, October 1 $160,848 $203,313

 Less: Uncollected customer payments from Federal (58) (4,422)

 Sources, Brought Forward, October 1

 Total unpaid obligated balance, net 160,790 198,891

Obligated Incurred, net (Note 18) 1,638,738 1,009,682

Gross Outlays 1,619,945 1,039,786

Change in uncollected customer payments from 

 Federal sources (58) (4,363)

Obligated balance, net, end of the period

 Unpaid obligations 179,561 160,848

 Uncollected customer payments from

 Federal sources 0 (58)

 Total, unpaid obligated balance, net end of period 179,561 160,790

Net Outlays

 Net outlays

 Gross outlays 1,619,945 1,039,786

 Collections (1,650,475) (1,041,625)

TOTAL OUTLAYS ($30,530) ($1,839)

DEPARTMENT OF THE TREASURY

For The Years Ended September 30, 

(In Thousands)

STATEMENT OF BUDGETARY RESOURCES

UNITED STATES MINT

 
• 39 •

The accompanying notes are integral part of these financial statements.

2006 2005

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred $1,638,738 $1,009,682

Less: Spending Authority from Offsetting Collections and Recoveries 1,650,417 1,037,262

Net Obligations (11,679) (27,580)

Other Resources

Transfers to the Treasury General Fund On-Budget (84,000) (45,000)

Transfers to the Treasury General Fund Off-Budget (666,000) (730,000)

Imputed Financing from Costs Absorbed by Others (Note 11) 10,950 10,753

Other Financing Sources (Seigniorage) (Note 16) 682,480 722,686

Net Other Resources Used to Finance Activities (56,570) (41,561)

Total Resources Used to Finance Activities (68,249) (69,141)

Resources Used to Finance Items Not Part of the Net Cost of Operations

Change in Budgetary Resources Obligated for Goods, Services and Benefits 

Ordered but Not Yet Provided 13,456 (10,520)

Resources that Finance the Acquisition of Assets or Liquidation of Liabilities 99,315 73,419

Other (84,000) (45,000)

Total Resources Used to Finance Items Not Part of the Net Cost of Operations 28,771 17,899

Total Resources Used to Finance the Net Cost of Operations (97,020) (87,040)

Components Requiring or Generating Resources in Future Periods

Increase in Exchange Revenue Receivable from the Public (13,219) 591

Total Components of Net Cost of Operations that will Require or 

 Generate Resources in Future Periods (13,219) 591

Components not Requiring or Generating Resources in the Current Period

Depreciation and Amortization 56,666 44,396

Revaluation of Assets 11,068 2,853

Other (138) (2,088)

Total Components of Net Revenue from Operations that will not require or 

Generate Resources 67,596 45,161

Total Components of Net Revenue from Operations that will not require or 

GenerateResources in the Current Period 54,377 45,752

Net Revenue from Operations ($42,643) ($41,288)

For The Years Ended September 30, 

DEPARTMENT OF THE TREASURY

UNITED STATES MINT

STATEMENT OF FINANCING

(In Thousands)
• 40 •

The accompanying notes are integral part of these financial statements.

For The Years Ended September 30, 

2006 2005

Revenue Activity

 Sources of Cash Collections:

Sale of Treasury Silver (Note 21) $0 $52,745

Total Revenue Received 0 52,745 

Disposition of Custodial Revenue & Collections

 Transferred to the General Fund 0 52,745 

 Total Disposition of Custodial Revenue 0 52,745 

 

Net Custodial Activity $0 $0

(In Thousands)

STATEMENT OF CUSTODIAL ACTIVITY

UNITED STATES MINT

DEPARTMENT OF THE TREASURY
DEPARTMENT OF THE TREASURY

UNITED STATES MINT

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2006 

(Dollars are in thousands except Fine Troy Ounce information)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY

Established in 1792, the United States Mint is a bureau of the Department of the Treasury (Treasury). The

mission of the United States Mint is to manufacture coins for general circulation, to manufacture and sell

numismatic products for the benefit of the Federal Government and various recipient 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 the

United States' gold and silver metal reserves. These custodial reserves are often referred to as “deep storage”

and “working stock” and are reported on the Balance Sheet.

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

United States Mint Public Enterprise Fund (PEF).

Pursuant to Public Law 104-52, Treasury Postal Service and General Government Appropriation Bill for FY

1996, as codified at 31 U.S.C § 5136, 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, manganese 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 the United States Mint production facilities and 

Federal Reserve Banks (FRB). Other costs/expenses accounted for in this fund include costs related to

research and development and purchases of equipment, as well as capital improvements and protection costs.

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 the “deep storage” portion of

the Treasury gold and silver reserves for which the United States Mint acts as custodian.

BASIS OF ACCOUNTING AND PRESENTATION

The accompanying Financial Statements were prepared in conformity with the reporting format promulgated

by the Office of Management and Budget (OMB) Circular A-136, “Financial Reporting Requirements” and

in accordance with accounting standards issued by the Federal Accounting Standards Advisory Board

(FASAB). The United States Mint’s financial statements have been prepared to report the financial position,

net cost of operations, changes in net position, budgetary resources, reconciliation of net costs to budgetary

obligations, and custodial activity, as required by the Chief Financial Officers Act of 1990. 

• 41 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities,

and the reported revenues and expenses. Actual results could differ from those estimates. Accounts subject

to estimates include depreciation, imputed costs, payroll and benefits, accrued worker's compensation, and

unemployment benefits.

The accompanying financial statements have been prepared on the accrual basis of accounting. Under the

accrual method, revenues and other financing sources are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. All intra-United States Mint

transactions and balances have been eliminated.

EARNED REVENUES AND OTHER FINANCING SOURCES (SEIGNIORAGE)

Circulating Sales: P.L. 104-52, establishing the PEF, provides for the sale of circulating coinage at face value

to the Federal Reserve System. Revenue from the sale of circulating coins is recognized when the product is

shipped to the FRB.

Revenue from the sale of circulating coins to the FRB and numismatic sales of circulating coins is limited to

the recovery of the cost of manufacturing those coins. Coins are sold at face value. The difference between

the face value of circulating coins sold and the total cost of producing those coins is considered a financing

source in accordance with FASAB guidelines.

Other Financing Sources (Seigniorage) is the face value of newly minted coins less the cost of production

(which includes the cost of the metal, manufacturing, and transportation). Seigniorage is the profit from

coining money. Seigniorage adds to the government’s cash balance, but unlike the payment of taxes or other

receipts, it does not involve a transfer of financial assets from the public. Instead, it arises from the exercise

of the Government’s power to create money and the public’s desire to hold financial assets in the form of

coins. Therefore, the President’s Budget excludes Seigniorage from receipts and treats it as a means of financing. The President's Budget also treats profits resulting from the sale of gold as a means of financing, because

the value of gold is determined by its value as a monetary asset rather than as a commodity. Other financing sources (Seigniorage) is recognized when coins are shipped to the FRB in return for deposits.

Numismatic Sales: Revenue from numismatic sales to the public is recognized when products are shipped 

to customers. Prices for numismatic products are based on the product cost plus a reasonable net program

revenue. Bullion products are priced based on the market price of the precious metals plus a premium to

cover manufacturing costs.

Rental Revenue: The United States Mint receives rental revenue from floor space that is subleased in two

United States Mint facilities located in Washington, D.C. The space is subleased to other federal government

entities. For the purpose of presentation, rental revenue is combined with numismatic sales on the statement

of net cost. 

Protection Revenue: This is derived from revenue received from the FRB for protection services provided

after hurricane Katrina.

FUND BALANCE WITH TREASURY

All cash is maintained at the Treasury. Fund Balance with Treasury is the aggregate amount of the United

States Mint’s cash accounts with the U.S. Government’s central accounts from which the United States Mint

is authorized to make expenditures and pay liabilities. It is an asset because it represents the United States

Mint’s claim to the U.S. Government resources.

• 42 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
ACCOUNTS RECEIVABLE

Accounts receivable are amounts due to the United States Mint from the public and other federal agencies.

An allowance for uncollectible customer accounts receivable from the public is established for all accounts

that are more than 180 days past due. However, the United States Mint will continue collection action on

those accounts that are more than 180 days past due as specified by the Debt Collection Improvement Act

of 1996.

INVENTORIES AND RELATED PROPERTY

Inventories of circulating and numismatic coinage that do not contain either gold or silver are valued at the

lower of cost or market. Cost of the metal and fabrication components of the inventories are determined

using a weighted average inventory methodology. Conversion costs, i.e., the cost to convert the fabricated

blank into a finished coin, are valued using a standard cost methodology.

Numismatic coinage containing Treasury gold or silver does not include the value of the Treasury gold or 

silver because this is a non-entity asset. Those costs appear as “Custodial Gold and Silver Reserves” and are

valued at the statutory rate of $42.2222 per fine troy ounce (FTO) gold and $1.292929292 per FTO silver.

United States Mint owned platinum and silver are valued at the lower of cost or market using a weighted

average inventory methodology. 

CUSTODIAL GOLD AND SILVER RESERVES

Custodial gold and silver reserves consist of both “deep storage” and “working stock” gold and silver.

Deep Storage is defined as that portion of the U.S. Government-owned gold and silver Bullion Reserve which

the United States Mint secures in sealed vaults. Deep Storage gold comprises the vast majority of the Reserve

and consists primarily of gold bars.

Working Stock is defined as that portion of the U.S. Government-owned gold and silver Bullion Reserve

which the United States Mint uses as the raw material for minting congressionally authorized coins. Working

stock gold comprises only about one percent of the Gold Bullion Reserve and consists of bars, blanks, unsold

coins, and condemned coins. 

Treasury allows the United States Mint to use some of its gold and silver as working stock. Generally, the

United States 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 or silver is not replaced, the United States Mint reimburses

Treasury the market value of the depleted gold or silver. 

SUPPLIES

Supplies are items that are not considered inventory and are not a part of the finished product. These items

include plant engineering and maintenance supplies. Supplies are accounted for using the consumption

method, whereby supplies are recognized as assets upon acquisition and expensed as they are consumed. 

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.

• 43 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are valued at cost less accumulated depreciation. The United States 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:

Computer Equipment 3 to 5 years

ADP Software 2 to 10 years

Machinery and Equipment 7 to 20 years

Structures, Facilities and Leasehold Improvements 10 to 30 years

Major alterations and renovations are capitalized over the shorter of a 20-year period or the remaining 

useful life of the asset and depreciated using the straight-line method, while maintenance and repair costs are

charged to expense as incurred. There are no restrictions on the use or convertibility of general property,

plant and equipment.

HERITAGE ASSETS

Heritage assets are items that are unique because of their historical, cultural, educational, or artistic importance. These items are collection type assets that are maintained for exhibition and are preserved indefinitely.

LIABILITIES

Liabilities represent actual and estimated amounts likely to be paid as a result of transactions or events that

have already occurred. All liabilities covered by budgetary resources can be paid from revenues received from

the United States Mint PEF. 

SURCHARGES

Legislation authorizing commemorative programs often requires that the PEF remit a portion of the sales 

proceeds to recipient organizations. These amounts are defined as “Surcharges.” A surcharges payable is

established for surcharges received but not yet paid to the designated recipient organization.

Pursuant to the P.L. 104-208, Omnibus Consolidated Appropriations for Fiscal Year 1997 (the Act), 

recipient organizations cannot receive surcharge payments unless all of the United States Mint’s operating

costs of the coin program are fully recovered. The United States Mint may make interim surcharge payments

during a commemorative program if the recipient organization meets the eligibility criteria in the Act, if the

profitability of the program is determinable and if the United States Mint is assured it is not at risk of a loss.

P.L. 108-15, American 5-Cent Coin Design Continuity Act of 2003, contains a provision that recipient

organizations have two years from the end of the program sales to meet the requirements of P.L. 104-208.

If the requirements are not met within two years, the surcharges collected are to be deposited in the Treasury

as miscellaneous receipts. Additionally, P.L. 108-15 changed the fund raising requirement for recipient

organizations from an amount equal to the maximum surcharges possible based on the maximum mintage

to an amount equal to the surcharges actually collected based on sales.

EARMARKED FUNDS

The United States Mint implemented the Statement of Federal Financial Accounting Standards No. 27,

Identifying and Reporting Earmarked Funds in FY 2006, which required separate identification of the earmarked funds on the Balance Sheet, Statement of Net Position, and selected footnotes.

• 44 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
Earmarked funds are financed by specifically identified revenues, often supplemented by other financing

sources, which remain available over time. These specifically identified revenues and other financing sources

are required by statute to be used for designated activities or purposes, and must be accounted for separately

for the government's general revenues.

Pursuant to P. L. 104-52, the PEF was established to account for all revenue and expenses related to the 

production and sale of numismatic products and circulating coinage and protection activities. Thus, the

United States Mint's PEF is considered to be entirely earmarked (see Note 14).

UNEARNED REVENUES

These are amounts received from customers for which the numismatic products have not been shipped.

RETURN POLICY

If for any reason a customer is dissatisfied, the entire product must be returned within 30 days of receiving

the order to receive a refund or replacement. Shipping charges are not refunded. Further, the United States

Mint will not accept partial returns nor issue partial refunds. Historically, the United States Mint receives

very few returns, which are immaterial. Therefore, no reserve for returns is considered necessary.

SHIPPING AND HANDLING

The United States Mint reports shipping and handling cost as Cost of Goods Sold and not as part of Selling

or General and Administrative expenses. General postage costs for handling administrative functions are

reported as part of the United States 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 AND OTHER ACTUARIAL LIABILITIES

The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to 

cover federal civilian employees injured on the job, employees who have incurred a work-related injury or

occupational disease, and to pay beneficiaries of employees whose deaths are attributable to job-related

injuries or occupational disease. The FECA program is administered by the United States Department of

Labor (DOL), which pays valid claims and subsequently seeks reimbursement from the United States Mint

for these paid claims. 

The FECA liability is based on two components. The first component is based on actual claims paid by DOL

but not yet reimbursed by the United States Mint. There is generally a two-to three-year time period between

payment by DOL and reimbursement to DOL by the United States Mint. The second component is the 

actuarial liability, which estimates the liability for future payments as a result of past events. The actuarial

liability includes the expected liability for death, disability, medical, and miscellaneous cost for approved

compensation cases.

PROTECTION COSTS

Virtually all of the Treasury’s gold and majority of the silver reserves are in the custody of the United States

Mint, which is responsible for safeguarding the reserves. These costs are borne by the United States Mint,

but are not directly related to the circulating or numismatic coining operations of the United States Mint.

Organizationally, the Protection Strategic Business Unit is a separate line of business from coining operations.

• 45 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
OTHER COST AND EXPENSES (MUTILATED AND UNCURRENT)

These consist primarily of returns of mutilated or uncurrent coins to the United States Mint. Coins that are

chipped, fused, and not machine-countable are considered mutilated. The United States Mint reimburses the

entity that sent in the mutilated coins at the face value of these coins if the coins are individually identifiable.

If the coins have melted (as in a fire), the United States Mint reimburses the entity an amount based on the

metal content of the melted mass. Uncurrent coins are worn, but machine-countable, and their genuineness

and denomination are still recognizable. Uncurrent coins are replaced with new coins of the same denomination by the FRB. All mutilated or uncurrent coins received by the Mint are melted, and the metal is shipped

to a fabricator to be recycled in the manufacture of coinage strip.

TAX EXEMPT STATUS

As an agency of the Federal Government the United States Mint is exempt from all income taxes imposed by

any governing body, whether it is a federal, state, commonwealth, local, or foreign government.

CONCENTRATIONS

The United States Mint purchases all of the coil used in the production of its circulating products from three

vendors at competitive market prices.

RECLASSIFICATIONS

Certain fiscal year 2005 amounts have been reclassified to conform to current year presentation.

TRANSFERS TO THE TREASURY GENERAL FUND

The United States Mint transfers to the Treasury General Fund amounts in the PEF determined to be in excess

of the amounts required for United States Mint operations and programs. These amounts are generated from

the other financing sources (Seigniorage) derived from the sale of circulating coins and from net revenues 

generated from the sale of numismatic products. Protection costs, except those costs allocated to circulating

coin production, are deducted from amounts generated from the sale of numismatic coins.

Excess amounts generated from other financing sources (Seigniorage) are off budget and deposited in the

Treasury General Fund. Off budget means that these funds cannot be used to reduce the annual budget

deficit. Instead they are used as a financing source; i.e., they reduce the amount of cash that Treasury has to

borrow to pay interest on the national debt.

Excess amounts from revenues generated from the sale of numismatic products less protection costs are on

budget and deposited in the Treasury General Fund. Unlike Seigniorage, the numismatic transfer is available

as current operating revenue or can be used to reduce the annual budget deficit. 

BUDGETARY RESOURCES

The United States Mint receives all of its financing from the public and receives an apportionment from the

OMB. This apportionment is considered a budgetary authority. The United States Mint's Budgetary

Resources consist of unobligated balances, transfers, and spending authority from offsetting collections,

which is net of amounts that are permanently not available. “Permanently not available” funds are numismatic transfers to the General Fund. 

• 46 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 2 NON-ENTITY ASSETS

Components of Non-entity Assets at September 30 are as follows:

2006 2005

Custodial Gold Reserves (Deep Storage) $10,355,539 $10,355,539 

Custodial Silver Reserves (Deep Storage) 9,148 9,148 

Custodial Gold Reserves (Working Stock) 117,514 117,514 

Custodial Silver Reserves (Working Stock) 11,539 11,539 

Total Non-entity Assets 10,493,740 10,493,740

Total Entity Assets 761,885 770,475

Total Assets $11,255,625 $11,264,215

Entity assets are assets that the reporting entity has authority to use in its operations. The United States

Mint management has legal authority to use entity assets to meet entity obligations. However, all assets in

the possession of the United States Mint are not entity assets. Treasury allows the United States Mint to use

some of its gold and silver as working stock in the production of coins. The United States Mint must replace

the working stock or pay the Treasury General Fund for the used portion. Thus, Treasury deep storage and

working stock gold and silver are all considered non-entity assets.

NOTE 3 FUND BALANCE WITH TREASURY

Fund Balance with Treasury at September 30 consist of:

2006 2005

Revolving Fund $225,917 $279,387

Total Fund Balance with Treasury $225,917 $279,387 

Status of Fund Balance with Treasury

Unobligated Balance $40,549 $112,870 

Obligated Balance, Not Yet Disbursed 185,368 166,517

Total $225,917 $279,387

The United States Mint does not receive appropriated budget authority. The fund balance with Treasury is

entirely available for use to support the United States Mint operations. At September 30, 2006 and 2005,

the revolving fund balance included $8.4 million and $10.7 million, respectively, in restricted amounts for

possible payment of surcharges to recipients organizations. 

• 47 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 4 ACCOUNTS RECEIVABLE, NET

Components of accounts receivable are as follows:

September 30, 2006

Gross Receivables Allowance Net Receivables 

Intragovernmental $0 $0 $0

With the Public 28,317 (197) 28,120 

Total Accounts Receivable $28,317 ($197) $28,120 

September 30, 2005

Gross Receivables Allowance Net Receivables

Intragovernmental $58 $0 $58

With the Public 15,030 (130) 14,900 

Total Accounts Receivable $15,088 ($130) $14,958 

At September 30, 2006, there were no intragovernmental accounts receivable compared to $58 thousand at

September 30, 2005. Such balances would normally represent amounts due from other federal agencies for

products or services provided by the United States Mint. Receivables with the public at September 30, 2006,

primarily consist of $21 million receivable from metal scrap and webbing sold to fabricators. At September

30, 2005, receivables with the public primarily consist of $10 million from metal scrap and webbing. 

NOTE 5 ADVANCES AND PREPAYMENTS

The components of advances and prepayments at September 30 are as follows:

2006 2005

Intragovernmental $3,948 $4,114

With the Public 1,859 1,612

Total Other Assets $5,807 $5,726 

Intragovernmental advances and prepayments at September 30, 2006 and 2005, include $1.9 million and

$1.6 million, respectively, that the United States Mint paid the Treasury Working Capital Fund, for a variety

of centralized services. Also included in intragovernmental advances are the progress payments (advances)

for equipment and building improvements under construction. The United States Mint initiated an entitywide security upgrade, which requires progress payments be made to other federal agencies for construction

and other related services. As of September 30, 2006 and 2005, the balances for such payments were $1.1

million and $2.2 million, respectively. The remaining balance of approximately $900 thousand represents

payments made to the United States Postal Service for product delivery services at September 30, 2006 

compared to $346 thousand paid at September 30, 2005.

Advances and Prepayments with the public consist primarily of advances for freight forwarding.

• 48 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 6 CUSTODIAL GOLD AND SILVER RESERVES

As custodian, the United States Mint is responsible for safeguarding much of the nation’s gold and silver

reserves, which include Deep Storage and Working Stock. The asset and the custodial liability to Treasury

are reported on the Balance Sheet at statutory rates. In accordance with 31 U.S.C. § 5117 (b) and 31 U.S.C.

§ 5116 (b) (2) statutory rates of $42.2222 FTO of gold and $1.292929292 per FTO of silver are used to

value the entire custodial reserves held by the United States Mint.

The market value for gold and silver at September 30 is determined by the London Gold Fixing (PM) rate.

Amounts and values of custodial gold and silver in the custody of the United States Mint at September 30 

are as follows:

2006 2005

Gold - Deep Storage:

Inventories (FTO) 245,262,897 245,262,897 

Market Value ($ per FTO) $599.25 $473.25 

Market Value ($ in thousands) $146,973,791 $116,070,666 

Statutory Value ($ in thousands) $10,355,539 $10,355,539 

Gold - Working Stock:

Inventories (FTO) 2,783,219 2,783,219 

Market Value ($ per FTO) $599.25 $473.25 

Market Value ($ in thousands) $1,667,844 $1,317,158 

Statutory Value ($ in thousands) $117,514 $117,514 

Silver - Deep Storage:

Inventories (FTO) 7,075,171 7,075,171 

Market Value ($ per FTO) $11.55 $7.53 

Market Value ($ in thousands) $81,718 $53,276 

Statutory Value ($ in thousands) $9,148 $9,148 

Silver - Working Stock:

Inventories (FTO) 8,924,829 8,924,829 

Market Value ($ per FTO) $11.55 $7.53 

Market Value ($ in thousands) $103,082 $67,204 

Statutory Value ($ in thousands) $11,539 $11,539 

Total Market Value of Custodial Gold and

Silver Reserves ($ in thousands) $148,826,435 $117,508,304 

Total Statutory Value of Custodial Gold and

Silver Reserves ($ in thousands) $10,493,740 $10,493,740 

• 49 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 7 INVENTORY AND RELATED PROPERTY

The components of inventories and related property at September 30 are summarized below:

2006 2005

Raw Materials $113,827 $50,434 

Work-In-Process 61,324 46,384 

Inventory held for current sale 56,671 66,857 

Inventory held in reserve for future sale 21,507 21,955 

Total Inventory and Related Property $253,329 $185,630 

Raw materials consist of unprocessed materials and byproducts of the manufacturing process and the metal

value of unusable inventory such as scrap or condemned coins that will be recycled into a usable raw material. In addition, the inventory includes $39 million in fair value silver hedge activity of which additional

information can be found in note 22. Work-in-process consists of semi-finished materials. Inventory held

for current sale is finished goods inventories and inventory held in reserve for future sale consist of golden

dollar coil. 

NOTE 8 PROPERTY, PLANT AND EQUIPMENT, NET

Components of property, plant and equipment are as follows:

September 30, 2006

Accumulated Total Property, 

Asset Cost Depreciation and Plant and 

Amortization Equipment, Net

Land $2,529 $0 $2,529 

Structures, Facilities and Leasehold Improvements 198,181 (116,363) 81,818 

Computer Equipment 30,593 (24,287) 6,306 

ADP Software 92,188 (81,648) 10,540 

Construction-In-Progress 8,496 0 8,496 

Machinery and Equipment 220,401 (96,696) 123,705 

Total Property, Plant and Equipment, Net $552,388 ($318,994) $233,394 

• 50 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
September 30, 2005

Accumulated Total Property, 

Asset Cost Depreciation and Plant and 

Amortization Equipment, Net

Land $2,529 $0 $2,529 

Structures, Facilities and Leasehold Improvements 184,892 (99,778) 85,114 

Computer Equipment 38,956 (23,938) 15,018 

ADP Software 96,493 (73,108) 23,385 

Construction-In-Progress 27,982 0 27,982 

Machinery and Equipment 210,532 (92,979) 117,553 

Total Property, Plant and Equipment, Net $561,384 ($289,803) $271,581 

United States Mint facilities used to manufacture circulating coinage and numismatic products are owned by

the United States Mint and located in San Francisco, California; Philadelphia, Pennsylvania; Denver,

Colorado; and West Point, New York. In addition, the United States Mint owns the land and buildings at

the Fort Knox Bullion Depository in Kentucky.

Depreciation and amortization expenses charged to operations during the years ended September 30, 2006

and 2005, were $56.7 million and $44.4 million, respectively.

NOTE 9 HERITAGE ASSETS

One mission of the United States Mint is to manufacture coins for circulation and numismatic sales. Assets

classified as heritage assets are predominately coins manufactured in prior years that are held for historical

archival purposes. These coins are examples of the various coins produced by the United States Mint over

the years. Also included in heritage assets are selected artifacts (e.g., balances/scales, obsolete manufacturing

equipment, examples of daily activity, etc.) that were used in years past. Some of the coins and artifacts are

priceless while most are relatively common, but the United States Mint generally does not place a value on

the heritage assets. However, the assets are accounted for and controlled for protection and conservation

purposes.

NOTE 10 LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

Components of Liabilities Not Covered by Budgetary Resources at September 30 are as follows:

2006 2005

Custodial Gold Reserves (Deep Storage) $10,355,539 $10,355,539 

Custodial Silver Reserves (Deep Storage) 9,148 9,148 

Working Stock Inventory-Gold 117,514 117,514 

Working Stock Inventory-Silver 11,539 11,539 

Total Liabilities Not Covered by Budgetary Resources $10,493,740 $10,493,740 

Total Liabilities Covered by Budgetary Resources 118,288 112,951 

Total Liabilities $10,612,028 $10,606,691 

• 51 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
Liabilities not covered by budgetary resources represent amounts owed in excess of available funds, other

amounts or custodial liabilities to Treasury that are entirely offset by custodial gold and silver reserves held

by the United States Mint on behalf of the Federal Government. 

NOTE 11 RETIREMENT PLANS AND OTHER POST-EMPLOYMENT COSTS

(IMPUTED FINANCING)

At the end of FY 2006, three hundred and one (301) United States Mint employees participated in the 

Civil Service Retirement System (CSRS), to which the United States Mint contributes seven percent of basic

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 United States Mint automatically 

contributes one percent of basic pay and matches any employee contributions up to an additional four 

percent of basic pay. In FY 2005, FERS employees were allowed a maximum annual contribution of 15 

percent of salary to a maximum of $14,000. In January of FY 2006, limits on percentage contributions were

eliminated. Employees can now contribute any dollar amount or percentage of their basic pay as long as the

annual dollar total does not exceed the Internal Revenue Code limit of $15,000 for FY 2006. Employees

participating in FERS are covered by the Federal Insurance Contribution Act (FICA) for which the United

States Mint contributes a matching amount to the Social Security Administration.

Although the United States 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 United States Mint

does not report CSRS or FERS assets, accumulated plan benefits or unfunded liabilities, if any, applicable to

the United States Mint employees. Reporting such amounts is the responsibility of the Office of Personnel

Management (OPM). OPM has provided the United States 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 2006.

These cost factors remain unchanged from FY 2005.

The amounts that the United States Mint contributed to the retirement plans and social security for the year

ended September 30 are as follows:

2006 2005

Social Security System $8,249 $8,456 

Civil Service Retirement System 1,515 1,524 

Federal Employees Retirement System

(Retirement & Thrift Savings Plan) 14,883 14,987 

Total Retirement Plans and Other Post-employment Cost $24,647 $24,967 

The United States 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 factors relating to health benefits are $5,229 and $4,903 per employee enrolled

in the Federal Employees Health Benefits Program in FY 2006 and FY 2005, respectively. The cost factor

• 52 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
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 2006 and FY 2005. 

The amount of imputed cost incurred by the United States Mint for the year ended September 30 is as 

follows (before the offset for imputed financing):

2006 2005

Health Benefits $8,266 $8,050 

Life Insurance 22 22 

Pension Expense 2,662 2,681 

Total Imputed Cost $10,950 $10,753 

NOTE 12 LEASE COMMITMENTS

The United States Mint as Lessee: The United States Mint leases office and warehouse space from commercial vendors and the General Services Administration (GSA). In addition, the agency leases copier and other

office equipment from commercial vendors and vehicles from GSA. With the exception of the commercial

leases on two office buildings in Washington, DC, all leases are one-year, or one-year with renewable option

years. The two building leases have terms of 20- and 10-years, respectively. Because all of the United States

Mint's leases are considered cancelable, there are no minimum lease payments due.

The United States Mint as Lessor: The United States Mint sub-leases office space to several other federal

entities in the two leased buildings in Washington, DC. The leases vary from one-year with option years to

multiple year terms. As of September 30, 2006, the United States Mint sub-leased in excess of 185,000

square feet in two leased buildings. As of September 30, 2006, tenants include: the Internal Revenue Service,

the Treasury Executive Institute, the Bureau of the Public Debt, the U.S. Customs Service and Border

Protection, the Federal Consulting Group and the U.S. Marshals Service. All of the subleases are operating

leases.

Future Projected Receipts:

(In Thousands)

Fiscal Year Land and Buildings

2007 $4,045 

2008 176 

2009 180 

2010 183 

2011 187 

After 2011 47 

Total Future Operating

Lease Receivables $4,818 

• 53 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 13 CONTINGENCIES

The United States 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 United States Mint generally would

be satisfied from the Public Enterprise Fund. Likewise, under the Notification and Federal Employee

Antidiscrimination and Retaliation Act of 2002 (No FEAR Act, Public Law 107-174), settlements and judgments related to acts of discrimination and retaliation for whistleblowing are the responsibility of the United

States Mint and will be paid from the PEF. In the opinion of management, the ultimate resolution of these

actions will not materially affect the United States Mint's financial position or the results of its operations.

Asserted and pending legal claims for which loss is reasonably possible were estimated to range from 

$0 million to $1.7 million at September 30, 2006. The United States Mint is subject to various other 

legal proceedings and claims. In management's opinion, the ultimate resolution of other actions will not

materially affect the United States Mint's financial position or net cost.

NOTE 14 EARMARKED FUNDS

The United States Mint receives revenues and other financing sources from the sale of numismatic and 

bullion coins, the sale of circulating coins to the FRB, and the sale of a variety of related products to 

customers worldwide. The sales of circulating products less the cost of production (which includes the cost

of the metal, manufacturing, and transportation) are considered other financing sources, which result from

the sovereign power of the government to directly create money. These resources increase the government’s

net position in the same manner as an inflow of resources.

Public Law 104-52 provides that “all receipts from United States Mint operations and programs, including

the production and sale of numismatic items, the production and sale of circulating coinage at face value to

the FRB, the protection of government assets, and gifts and bequests of property, real or personal shall be

deposited into the PEF and shall be available to fund its operations without fiscal year limitations.” The PEF

eliminates the need for appropriations from the U.S. Government to the United States Mint. 

There has been no change to the PEF legislation during or subsequent to the reporting period or before the

issuance of the United States Mint’s financial statements.

Because the entire PEF is the United States Mint and the entire entity is earmarked, thus the disclosure

requirements related to earmarked funds are the financial statements themselves.

NOTE 15 INTRAGOVERNMENTAL COSTS AND EARNED REVENUE

Intragovernmental costs and earned revenue reflect transactions where both the buyer and seller are federal

entities. Revenue with the public reflects transactions for goods or services with a non-federal entity.

However, if a federal entity purchases goods or services from another federal entity and sells those goods to

the public, the revenue would be classified as “with the public,” but the related expense would be classified

as “intragovernmental.” The purpose for this classification is to enable the Federal Government to prepare

consolidated financial statements. The following table provides earned revenues, gross cost, and net program

revenue.

• 54 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NUMISMATIC PRODUCTION AND SALES 2006 2005

Cost:

Intragovernmental:

Selling, General and Administrative $31,662 $22,405 

Imputed Costs 2,190 1,075 

Total Intragovernmental Costs 33,852 23,480 

Public:

Cost of Goods Sold 866,961 443,409 

Selling, General and Administrative 51,337 57,183 

Total Public Cost 918,298 500,592 

Gross Cost 952,150 524,072 

Revenue:

Intragovernmental:

Rent Revenues 7,852 6,533 

Other Intragovernmental Revenues 139 93 

Total Intragovernmental Revenue 7,991 6,626 

Public 1,029,629 596,170 

Total Earned Revenue 1,037,620 602,796 

Net Program Revenue $ (85,470) $ (78,724)

CIRCULATING PRODUCTION AND SALES 

Cost:

Intragovernmental:

Selling, General and Administrative 42,227 32,529 

Imputed Costs 8,760 9,678 

Total Intragovernmental Costs 50,987 42,207 

Public:

Cost of Goods Sold 484,324 336,209 

Selling, General and Administrative 52,319 53,412 

Other Costs and Expenses (Mutilated and Uncurrent) 15,722 13,618 

Total Public Cost 552,365 403,239 

Gross Cost 603,352 445,446 

Revenue:

Public 603,352 445,446 

Total Earned Revenues 603,352 445,446 

Net Program Revenue - - 

Net Revenue Before Protection of Assets $ (85,470) $ (78,724)

PROTECTION OF ASSETS

Public:

Protection Cost 42,886 37,543 

Total Earned Revenues (59) (107)

Net Cost of Protection of Assets $ 42,827 $ 37,436 

Net Revenue from Operations $ (42,643) $ ($41,288)

• 55 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 16 EARNED REVENUES AND OTHER FINANCING SOURCES

(SEIGNIORAGE)

Earned revenues and other financing sources (Seigniorage) whether from the FRB or from the public are 

recognized upon the shipment of circulating coins and numismatic sales of circulating coins. A portion of

the earned revenue from circulating production and sales displayed on the United States Mint's Statement of

Net Cost is generated by goods and services provided to the public or to other federal entities. Revenue is

limited to the recovery of all costs associated with the production, administration and distribution of

Circulating coins (both to the FRB and to the public), and payment by the United States Mint for mutilated

and uncurrent coins. The difference between the face value of coins and cost is other financing sources

(Seigniorage). A portion of other financing sources (Seigniorage) is returned to the Treasury General Fund

as an off-budget receipt. The United States Mint transfers to the Treasury General Fund amounts in the PEF

determined to be in excess of amounts required to finance operations and programs. All costs are recovered

from numismatic sales from which a slight profit is made and returned to the Treasury General Fund as an

on-budget receipt.

The components of circulating coins and numismatic sales of circulating coins for the year ended 

September 30 are as follows:

2006 2005

Revenue-FRB $603,352 $445,446 

Other Financing Sources (Seigniorage)-FRB 668,506 699,398 

Total Circulating Coins $1,271,858 $1,144,844 

Revenue-with the public $10,459 $14,575 

Other Financing Sources (Seigniorage)-with the public 13,974 23,288 

Total Numismatic Sales of Circulating Coins $24,433 $37,863 

NOTE 17 RELATED PARTIES

The United States Mint is subject to management control by the Secretary of the Treasury.

The United States Mint shipped approximately $1.3 billion and $1.1 billion in coins to the Federal Reserve

Banking System in FY 2006 and 2005, respectively.

NOTE 18 APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

The United States Mint receives apportionments of its resources from OMB. An apportionment is a plan,

approved by the OMB, to spend resources provided by law. All United States Mint obligations are classified

as reimbursable as they are financed by offsetting collections received in return for goods and services provided. OMB usually uses one of two categories to distribute budgetary resources. Category A apportionments distribute budgetary resources by fiscal quarters. Category B apportionments typically distribute

budgetary resources by activities, projects, objects or a combination of these categories. The United States

Mint has only category B apportionments.

• 56 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
Details of Obligations Incurred as of September 30 are as follows:

(in thousands)

2006 2005

Reimbursable:

Category B

Total Operating Expenses $1,618,526 $990,132

Numismatic Capital 11,162 5,744 

Circulating and Protection Capital 9,050 13,806 

Total Apportionment Categories of Obligations Incurred $1,638,738 $1,009,682 

NOTE 19 EXPLANATION OF DIFFERENCES BETWEEN THE 

STATEMENT OF BUDGETARY RESOURCES AND THE BUDGET OF 

THE UNITED STATES GOVERNMENT

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other Financing

Sources and Concepts for Reconciling Budgetary and Financial Accounting, requires an explanation of

material differences between budgetary resources available, the status of those resources, and outlays as 

presented in the Statement of Budgetary Resources to the related actual balances published in the Budget of

the United States Government (President’s Budget). The President's Budget with actual numbers for fiscal

year 2006 is expected to be published in February 2007 and made available through OMB.

Prior to FY2005, the United States Mint used the proprietary method of accounting to replicate the Statement

of Budgetary Resources. This methodology ignored obligations and undelivered orders. When an item

became a liability under FASB, the “obligation” was reported. The primary difference between the Statement

of Budgetary Resources and what has been reported in the Budget of the United States Government is the

undelivered order balance both at the beginning of FY2005 and the end of FY2005.

September 30, 2005 

Statement of

Budgetary President's

United States Mint Public Enterprise Fund Resources Budget

Total Budgetary Resources $1,122,552 $1,051,255 

Status of Budgetary Resources:

Obligations Incurred 1,009,682 989,369 

Unobligated Balances-available 112,870 61,886 

Total Status of Budgetary Resources $1,122,552 $1,051,255 

Net Outlays ($1,839) ($1,839)

• 57 •

2006 UNITED S TATES MINT ANNUAL REPORT

(continued)
NOTE 20 LEGAL ARRANGEMENTS AFFECTING USE OF 

UNOBLIGATED BALANCES

United States Mint PEF establishes that all receipts from United States Mint operations and programs,

including the production and sale of numismatic items, the production and sale of circulating coinage, the

protection of Government assets, and gifts and bequests of property, real or personal shall be deposited into

the United States Mint PEF and shall be available without fiscal year limitations. Any amount that is in

excess of the amount required by the United States Mint to cover obligations shall be transferred to the

Treasury for deposit as miscellaneous receipts. At September 30, 2006 and 2005, the United States Mint

transferred excess receipts to the Treasury General Fund of $750 million and $775 million, respectively.

NOTE 21 CUSTODIAL ACTIVITY

In FY 2006, the United States Mint had no custodial activity to report. However, in FY 2005, the United

States Mint paid $52.7 million to the Department of the Treasury for 8,790,913.21 FTO of Treasury’s silver

that was purchased by the United States Mint to be used in the production of coins. The United States Mint

paid Treasury six dollars an ounce for the silver. 

At the end of FY05, the United States Mint owed Treasury 4,457,229.59 FTO’s for silver that was sold and

not replaced. Part of the purchase was to reimburse Treasury for that silver used as opposed to the United

States Mint purchasing the silver on the open market. In addition, Treasury decided that an additional

4,333,683.62 FTO’s was not needed to be held by Treasury. Therefore, this silver was purchased and became

United States Mint owned silver as opposed to Treasury silver. At the end of FY05, the amount of Treasury

owned silver held by the United States Mint as Custodian was exactly 16 million FTO's.

NOTE 22 HEDGING PROGRAM

The United States Mint has adopted a hedging program in FY 2006 to avoid fluctuation in silver costs as a

result of the volatile changes in market prices. The United States Mint purchases silver in large quantities

and sells an interest in that silver to a trading partner, while maintaining physical custody and title of the 

silver. Sales of silver to the trading partner are made at the same spot price that the United States Mint paid

to obtain the silver on the open market. The partner’s interest in Mint silver is reduced as finished silver coins

are sold to approved purchasers (AP's). Repurchases of the trading partner’s interest in the silver occurs

upon sale of coins by the Mint. Repurchases are made on the same day as sales, in the same quantity sold,

and using the same spot price as was used for the sale to the AP. Each sale to and from the purchaser 

carries a small transaction fee, the selling and buying fees net to a cost of one half cent per ounce. To date,

the United States Mint has incurred $41 thousand in hedging fees causing minimal impact on the statement

of net cost.

The $39 million in hedging activity included in inventory represents the value of the silver sold to the 

trading partner and not yet sold by the United States Mint, and therefore not repurchased from the trading

partner. During the early phases of the program, silver from existing United States Mint inventory was sold

to the trading partner resulting in a $1.2 million gain to the United States Mint. 

• 58 •

2006 UNITED S TATES MINT ANNUAL REPORT
• 59 •

REQUIRED SUPPLEMENTARY INFORMATION

(UNAUDITED)

2006 UNITED S TATES MINT ANNUAL REPORT
DEPARTMENT OF THE TREASURY

UNITED STATES MINT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

FOR THE YEAR ENDED SEPTEMBER 30, 2006 

INTRODUCTION

This section provides the Required Supplemental Information as prescribed by the Office of Management and

Budget (OMB) Circular A-136, “Financial Reporting Requirements.”

HERITAGE ASSETS

The United States Mint is steward of a large, unique, and diversified body of heritage assets that are both

collection and non-collection in nature. These items include a variety of rare and semi precious coin collections and historical artifacts, and are held at various United State Mint locations. Some of these items are

placed in locked vaults within the United States Mint where access is limited to only special authorized 

personnel. Other items are on full display to the public requiring little if any authorization to view. Items

on display are accounted for and controlled for protection and conservation purposes.

The United States Mint has created two categories to account for the large and varied stock of heritage assets.

These categories include coin collections and historical artifacts. The table below summarizes the Unites

States Mint's collection and non-collection type heritage assets balance as of September 30, 2006. Overall,

the United States Mint heritage assets, both collection and non-collection type, are in good condition.

• 60 •

2006 UNITED S TATES MINT ANNUAL REPORT

Quantity of Items Held

Coin Collections September 30, 2006

Non Precious Metal Coin Collection 1

Silver Coin Collection 1

Gold and Extremely Rare Coin Collection 1

Total 3

Quantity of Items Held

Historical Artifacts September 30, 2006

Furniture Collections (includes antiques) 2

Equipment Collection 1

Total 3
• 61 •

KPMG LLP, a U.S. limited liability partnership, is the U.S.

member firm of KPMG International, a Swiss cooperative.

INDEPENDENT AUDITORS' REPORT 

ON INTERNAL CONTROL

Inspector General

United States Department of the Treasury:

Director

United States Mint:

We have audited the balance sheets of the United States Mint (Mint) as of September 30, 2006 and 2005 

and the related statements of net cost, changes in net position, financing, custodial activity, and the

combined statements of budgetary resources (hereinafter referred to as “financial statements”) for the years

then ended, and have issued our report thereon dated December 8, 2006. That report refers to the Mint’s

implementation of a new accounting standard in fiscal year 2006.

We conducted our audits in accordance with auditing standards generally accepted in the United States of

America; the standards applicable to financial audits contained in Government Auditing Standards, issued 

by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 

No. 06-03, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin No.

06-03 require that we plan and perform the audits to obtain reasonable assurance about whether the 

financial statements are free of material misstatement.

INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Mint is responsible for establishing and maintaining effective internal control. In

planning and performing our fiscal year 2006 audit, we considered the Mint's internal control over 

financial reporting by obtaining an understanding of the Mint’s internal control, determining whether 

internal controls had been placed in operation, assessing control risk, and performing tests of controls in

order to determine our auditing procedures for the purpose of expressing our opinion on the financial 

statements. We limited our internal control testing to those controls necessary to achieve the objectives

described in Government Auditing Standards and OMB Bulletin No. 06-03. We did not test all internal 

controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity 

Act of 1982. The objective of our audit was not to provide an opinion on the Mint's internal control over

financial reporting. Consequently, we do not provide an opinion thereon.

Our consideration of the internal control over financial reporting would not necessarily disclose all matters

in the internal control over financial reporting that might be reportable conditions. Under standards issued

by the American Institute of Certified Public Accountants, reportable conditions are matters coming to our

attention relating to significant deficiencies in the design or operation of the internal control over financial

reporting that, in our judgment, could adversely affect the Mint's ability to record, process, summarize, and

report financial data consistent with the assertions by management in the financial statements. Material

weaknesses are reportable conditions 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 misstatements caused by error or

fraud, in amounts that would be material in relation to the financial statements being audited, may occur
• 62 •

and not be detected within a timely period by employees in the normal course of performing their assigned

functions. Because of inherent limitations in internal control, misstatements due to error or fraud may 

nevertheless occur and not be detected.

In our fiscal year 2006 audit, we noted certain matters, discussed in Exhibit I, involving the internal control 

over financial reporting and its operation that we consider to be a reportable condition. However, the

reportable condition is not believed to be a material weakness. Management responses are included in 

Exhibit II.

INTERNAL CONTROLS OVER PERFORMANCE MEASURES

Under OMB Bulletin No. 06-03, the definition of material weaknesses is extended to other controls as 

follows. Material weaknesses are reportable conditions 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 misstatements caused

by error or fraud, in amounts that would be material to a performance measure or aggregation of related 

performance measures, may occur and not be detected within a timely period by employees in the normal

course of performing their assigned functions. Because of inherent limitations in internal control, 

misstatements due to error or fraud may nevertheless occur and not be detected. 

Our consideration of the design and operation of internal control over the existence and completeness 

assertions related to key performance measures would not necessarily disclose all matters that might be

reportable conditions.

As required by OMB Bulletin No. 06-03 in our fiscal year 2006 audit, with respect to internal control 

related to performance measures determined by management to be key and reported in the Management's

Discussion and Analysis, we obtained an understanding of the design of internal controls relating to the 

existence and completeness assertions and determined whether these internal controls had been placed in

operation. We limited our testing to those controls necessary to test and report on the internal control over

key performance measures in accordance with OMB Bulletin 06-03. However, our procedures were not

designed to provide an opinion on internal control over reported performance measures and, accordingly, 

we do not provide an opinion thereon. In our fiscal year 2006 audit, we noted no matters involving the 

design and operation of the internal control over the existence and completeness assertions related to key 

performance measures that we considered to be material weaknesses as defined above.

* * * * *

We noted certain additional matters that we have reported to management of the Mint in a separate letter

dated December 8, 2006.

This report is intended solely for the information and use of the Mint's management, the U.S. Department 

of the Treasury Office of Inspector General, OMB, the U.S. Government Accountability Office, and the 

U.S. Congress and is not intended to be and should not be used by anyone other than these specified 

parties. 

December 8, 2006
• 63 •

THE UNITED STATES MINT

REPORTABLE CONDITION

SEPTEMBER 30, 2006

Improvement is needed in Financial Accounting and Reporting (Repeat Condition)

Appropriate management controls should be integrated into each policy and procedure established by the

United States Mint (Mint) to direct and guide its operations. Management controls are the organization, 

policies, and procedures used by the Mint to reasonably ensure that: (i) programs achieve their intended

results; (ii) resources used are consistent with the Mint's mission; (iii) programs and resources are protected

from waste, fraud, and mismanagement; (iv) laws and regulations are followed; and (v) reliable and timely

information is obtained, maintained, reported and used for decision making. Management is responsible for

developing and maintaining effective internal control. Effective internal control provides assurance that 

significant weaknesses in the design or operation of internal control, that could adversely affect the Mint’s

ability to meet its objectives, would be prevented or detected in a timely manner.

The Federal Managers Financial Integrity Act of 1982 (FMFIA) establishes overall requirements with regard

to internal control. “The agency head must establish controls that reasonably ensure that: (i) obligations and

costs are in compliance with applicable law; (ii) funds, property, and other assets are safeguarded against

waste, loss, unauthorized use or misappropriation; and (iii) revenues and expenditures applicable to agency

operations are properly recorded and accounted for to permit the preparation of accounts and reliable

financial and statistical reports and to maintain accountability over the assets.”

The following paragraphs discuss weaknesses noted in the Mint’s internal control over financial reporting.

Assignment of Personnel Resources

Effective financial management requires sufficient human resources with appropriate skills and abilities. As

reported during fiscal year 2005, we noted that sufficient financial management personnel resources have not

been assigned to perform the many tasks needed to produce the financial statements and support the audit

process.

The Mint appointed an experienced management team to oversee the financial management function during

the third quarter in fiscal year 2006. This improved the Mint’s financial reporting process and ensured that

the annual audit was completed on schedule. Despite these improvements, we still noted that a small core

group assumed responsibility for preparing the interim and final financial statements, developing year-end

estimates and accruals, processing year-end adjustments, and providing most of the documentation, including explanations and justifications, needed to complete the audit in a timely manner. As a result, we experienced delays in receiving certain subsidiary information that reconciled to the general ledger and certain

supporting documentation requested during the audit.

While this small core group of personnel is to be commended for their high-quality work and dedication, the

Mint’s continuous reliance on the efforts of these individuals raises serious concerns about its ability to ensure

that future quarterly and annual financial statements will be submitted timely and the annual audit will be

completed on schedule.

Responsibility and accountability for compiling information and providing justification and explanations

related to the preparation of the Mint’s financial statements requires the involvement and input of many individuals and activities, both within and outside the Office of Corporate Accounting, including the other Mint

production facilities. Moreover, assigning the varied responsibilities to a broader group of individuals would

(continued)

EXHIBIT I
• 64 •

THE UNITED STATES MINT

REPORTABLE CONDITION

SEPTEMBER 30, 2006

better provide for the continuity of trained and knowledgeable personnel needed to prepare the financial

statements and support the audit process. It is also imperative that the Mint production facilities and department managers respond timely and accurately to data requests from the Office of Corporate Accounting.

Financial Management Oversight

Monitoring the effectiveness of internal control should occur in the normal course of business throughout the

year. In addition, periodic review, reconciliations or comparisons of data should be included as part of the

regular assigned duties of personnel. Periodic assessments should be integrated as part of management's

continuous monitoring of internal control, which should be ingrained in the Mint’s operations. 

As reported in fiscal year 2005, we noted that management does not exercise appropriate oversight over the

Mint production facilities to ensure that transactions are appropriately recorded. We noted that financial

management is decentralized at the Mint production facilities and the current organizational structure 

provides the production facilities with the authority to develop their own procedures. The policies and 

procedures performed varied between production facilities, and in some instances, were not performed in

accordance with Mint-wide policies and procedures. In addition, some Mint personnel were still not aware

of the related Mint-wide policies and procedures, or the Mint did not perform reviews to assess the sufficiency

of financial policies and procedures.

The Mint developed policies and procedure that require reconciliations to be signed-off by the preparer and

reviewer in the third quarter of fiscal year 2006. However, as noted in fiscal year 2005, there are no formal

policies and procedures that require journal entries to be signed-off by the preparer or reviewer. 

Property, Plant and Equipment Management

Internal control should be designed to provide reasonable assurance regarding prevention or prompt detection of unauthorized acquisition, use or disposition of assets. As reported in fiscal year 2005, the Mint 

conducted an annual physical inventory of property, plant and equipment, and was unable to physically

locate 301 items, primarily information technology equipment. Following our recommendation in fiscal

year 2005, the Mint performed an extensive physical inventory of its property, plant and equipment at all

facilities to identify assets without proper identification numbers during fiscal year 2006. However, based

on the results, we noted that improvement is still required to ensure that all property is adequately safeguarded and properly accounted for. Specifically, we noted the following:

• 130 property items physically inspected were not included in the Asset Management Module of 

PeopleSoft until after the physical inventory was completed. 

• The Mint was unable to physically locate 161 property items.

We noted that there was improvement in construction-in-progress (CIP), and items reviewed were appropriately classified in fiscal year 2006. However, the Mint did not implement policies and procedures that require

program managers to communicate information regarding CIP projects to the Office of Corporate

Accounting. 

(continued)

EXHIBIT I
• 65 •

THE UNITED STATES MINT

REPORTABLE CONDITION

SEPTEMBER 30, 2006

Further, we noted that the Mint did not establish an internal review process that requires a supervisor to

systematically review the transactions recorded in the Asset Management Module of PeopleSoft. All transactions are matched and approved in PeopleSoft by the same individuals, and thus adequate segregation of

duties for property transactions is compromised.

Budgetary Resources Accounting

As noted in fiscal year 2005, the Mint’s management elected to adopt and prepare its financial statements in

accordance with accounting standards issued by the Federal Accounting Standards Advisory Board, and this

required the Mint to account for and present transactions and balances on both a proprietary and budgetary

basis. The Mint’s general ledger system was implemented for presenting the financial statements in accordance with the Financial Accounting Standards Board, and accordingly does not include the budgetary

accounts in the United States Government Standard General Ledger that support accounting for the 

budgetary effects of transactions in compliance with the Federal Financial Management Improvement Act of

1996 (FFMIA). 

We were informed that the Mint implemented Oracle on October 1, 2006, and that certain financial reporting functions were outsourced to the Bureau of the Public Debt's Administrative Resource Center (ARC) 

during fiscal year 2007. However, for fiscal year 2006, we noted that the Mint still used a manual process to

determine the budgetary balances, as they do not have an integrated system to track and govern the status of

obligations. 

Funds control is a vital component of any Federal government operation. It requires that an obligation be

recorded prior to disbursement of funds. When a disbursement is processed, the financial management 

systems’ funds control function should compare the amount to be disbursed to the remaining amount of the

obligation to ensure funds remain available. The use of a manual process subjects the Mint's overall funds

control objective to significant control risk. 

Recommendations:

We continue to recommend that the Mint:

1. Evaluate the existing financial management organizational structure and make appropriate 

changes to ensure that the Office of Corporate Accounting is provided with sufficient staff 

resources with the requisite skills and abilities to maintain the Mint's accounting records and 

prepare timely financial reports. 

2. Establish procedures for performing periodic reviews to assess the sufficiency of financial 

policies and procedures and consistencies between production facilities.

3. Develop procedures for providing oversight and guidance to the Mint production facilities and 

all departments within the Mint that provide key financial information.

4. Implement formal policies and procedures that require all accounting records to be signed-off 

by both the preparer and a management level reviewer.

5. Implement adequate security and physical control procedures to ensure that all assets are 

adequately safeguarded and properly accounted for. 

(continued)

EXHIBIT I
• 66 •

THE UNITED STATES MINT

REPORTABLE CONDITION

SEPTEMBER 30, 2006

6. Strengthen the policies and procedures over purchasing assets to ensure that all assets are 

recorded in the Asset Management Module of PeopleSoft timely, when received at the 

relevant locations.

7. Implement policies and procedures requiring the program managers to communicate information

regarding the status of the CIP projects to the Office of Corporate Accounting at or near each 

period end, and perform timely follow-up procedures to ensure that the Mint's financial statements

reflect the most current project status.

8. Establish an internal review process that requires a supervisor to systematically review the 

transactions recorded in the Asset Management module of PeopleSoft timely. 

9. Develop Mint-wide policies and procedures for management to perform adequate review of all 

obligations. The policies and procedures should provide for central management control and 

review, to ensure adequate support for recorded amounts exists and that sufficient consideration 

is given to the legitimacy of unliquidated obligation amounts.

We recommend that the Mint work closely with ARC to ensure that:

10. The Oracle general ledger system fully uses the United States Government Standard General 

Ledger and will support accounting for the budgetary effects of transactions to ensure compliance

with FFMIA.

11. The Oracle system records obligations as incurred and manages funds control at the 

transaction level.

EXHIBIT I
DEPARTMENT OF THE TREASURY

UNITED STATES MINT

WASHINGTON, D.C. 20220

• 67 •

December 8, 2006

KPMG LLP

2001 M Street N.W.

Washington, DC 20036

Ladies and Gentlemen:

We have reviewed the fiscal year 2006 draft auditors' report and are in substantial agreement with the

reported observations. The United States Mint recognizes the need for strong internal controls and is 

taking corrective actions to address the noted deficiencies. We have made significant progress toward

resolving the reported issues and will continue to work with KPMG and the Office of Inspector General in

identifying the specific actions that will ensure we have adequately identified and have taken appropriate

corrective action.

Sincerely,

Patricia M. Greiner

Chief Financial Officer

EXHIBIT II
• 68 •

KPMG LLP, a U.S. limited liability partnership, is the U.S.

member firm of KPMG International, a Swiss cooperative.

INDEPENDENT AUDITORS' REPORT 

ON COMPLIANCE AND OTHER MATTERS

Inspector General

United States Department of the Treasury:

Director

United States Mint:

We have audited the balance sheets of the United States Mint (Mint) as of September 30, 2006 and 2005, 

and the related statements of net cost, changes in net position, financing, custodial activity, and the 

combined statements of budgetary resources (hereinafter referred to as “financial statements”) for the years

then ended, and have issued our report thereon dated December 8, 2006. That report refers to the Mint’s

implementation of a new accounting standard in fiscal year 2006.

We conducted our audits in accordance with auditing standards generally accepted in the United States of

America; the standards applicable to financial audits contained in Government Auditing Standards, issued 

by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 

No. 06-03, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin 

No. 06-03 require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

The management of the Mint is responsible for complying with laws, regulations, and contracts applicable

to the Mint. As part of obtaining reasonable assurance about whether the Mint’s financial statements are 

free of material misstatement, we performed tests of the Mint's compliance with certain provisions of laws,

regulations, and contracts, noncompliance with which could have a direct and material effect on the 

determination of the financial statement amounts, and certain provisions of other laws and regulations 

specified in OMB Bulletin No. 06-03, including certain provisions referred to in the Federal Financial

Management Improvement Act of 1996 (FFMIA). We limited our tests of compliance to the provisions

described in the preceding sentence, and we did not test compliance with all laws, regulations, and 

contracts applicable to the Mint. However, providing an opinion on compliance with those provisions was

not an objective of our audit, and accordingly, we do not express such an opinion.

The results of our tests of compliance with certain provisions of other laws and regulations discussed in the

third paragraph of this report, exclusive of those referred to in FFMIA, disclosed no instances of 

noncompliance or other matters that are required to be reported under Government Auditing Standards or

OMB Bulletin No. 06-03.

Under OMB Bulletin No. 06-03 and FFMIA, we are required to report whether the Mint’s financial 

management systems substantially comply with (1) Federal financial management systems requirements, 

(2) applicable Federal accounting standards, and (3) the United States Government Standard General 

Ledger (SGL) at the transaction level. To meet this requirement, we performed test of compliance with

FFMIA Section 803(a) requirements.
• 69 •

The results of our tests of FFMIA disclosed an instance, described below, where the Mint’s financial 

management systems did not substantially comply with the SGL at the transaction level.

In fiscal year 2005, the Mint’s management elected to adopt and prepare its financial statements in 

accordance with accounting standards issued by the Federal Accounting Standards Advisory Board 

(FASAB), and this required the Mint to account for and present transactions and balances on both a 

proprietary and budgetary basis. The Mint's general ledger system was implemented for presenting 

financial statements in accordance with the Financial Accounting Standards Board and not FASAB 

accounting standards, and accordingly it does not include budgetary accounts. We continue to recommend

that the Mint develop and implement a general ledger system that fully complies with the SGL at the 

transaction level and will support accounting for the budgetary effects of transactions to ensure compliance

with FFMIA.

This report is intended solely for the information and use of the Mint’s management, the U.S. Department 

of the Treasury Office of Inspector General, OMB, the U.S. Government Accountability Office, and the 

U.S. Congress and is not intended to be and should not be used by anyone other than these specified 

parties. 

December 8, 2006
AMERICAN BUFFALO GOLD PROOF AND BULLION COINS 

These are coins containing one-ounce of 24-karat gold (99.99 percent pure gold). The proof coins are sold

to the public and the bullion coins are sold directly to a limited number of precious metal dealers. 

AMERICAN EAGLE PROGRAM

Gold, platinum, or silver coins issued in proof and uncirculated versions for collectors and as bullion coins for

investors. The uncirculated version for collectors is new in 2006. The bullion coins are considered investment quality and are sold directly to a limited number of precious metal dealers. Gold and platinum coins are

issued with one-tenth, one-quarter, one-half, or one ounce of precious metal content. Silver coins are issued

only with one ounce of silver metal content. The gold coins are 22-karat, or 99.9 percent pure gold.

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. In 2006, the United States Mint introduced the “reverse

proof” finish on certain coin products. Reverse proof is what the name implies — the background is frosted

and the image on the coin is mirror-finished.

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 halfdollar; the penny, nickel and dollar coins are their normal metal make-up. In addition, various sets featuring the coins from the 50 State Quarters® Program are issued each year.

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.

• 70 •

GLOSSARY OF TERMS

2006 UNITED S TATES MINT ANNUAL REPORT