DEPARTMENT OF THE TREASURY 

UNITED STATES MINT 

Annual Report 

September 30, 2005
Table of Contents 

Page 

Director’s Letter.................................................................................................................................................. 1
 

Message from the Chief Financial Officer.......................................................................................................... 3 

Management’s Discussion and Analysis............................................................................................................. 5 

Operational Overview................................................................................................................................... 6 

Performance Section................................................................................................................................... 19
 

Limitations to the Financial Statements............................................................................................................ 25
 

Independent Auditors’ Report on Financial Statements.................................................................................... 26 

Financial Statements ......................................................................................................................................... 28
 

Notes to the Financial Statements ..................................................................................................................... 34
 

Independent Auditors’ Report on Internal Control over Financial Reporting .................................................. 49
 

Exhibit I – Reportable Condition ...................................................................................................................... 51 

Exhibit II – United States Mint Response to the Draft Auditors’ Reports........................................................ 55
 

Independent Auditors’ Report on Compliance and Other Matters.................................................................... 56
 
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2
3
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MANAGEMENT’S DISCUSSION & ANALYSIS 

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, comprised of the 

circulating, numismatic, and protection programs. This Management’s Discussion and Analysis 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 these indicators 

follows the discussion of the financial results. 

MISSION 

The United States Mint was established in 1792 and became a bureau of the Department of the Treasury (Treasury) 

in 1873. The United States Mint is the world’s largest coin manufacturer with operations in California, Colorado, 

Kentucky, New York, Pennsylvania and Washington, D.C. The United States Mint’s mission is to apply world-class 

business practices in manufacturing, selling and protecting the nation’s coinage and assets. 

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 system and the sale 

of numismatic and bullion coins and other products to customers worldwide are the sole sources of funding for 

United States Mint operations. This includes funding for costs associated with the production of circulating and 

numismatic coins and coin-related products and protective services. Revenues in excess of costs are returned to the 

United States Treasury General Fund. 

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OPERATIONAL OVERVIEW 

MANAGEMENT PRIORITIES: 

The United States Mint continually seeks to be a model government agency that matches world-class business 

practices through higher yields, lower costs, proper use of technology, efficient production, timely delivery of 

products and exceptional customer service throughout its operations. Management’s priorities in FY 2005 included 

growing revenue, improving efficiency and fostering a model workplace. 

GROWING REVENUE 

The United States Mint’s goal is to design, sell and deliver quality products to the American people. Our objectives 

are to provide quality products and services that are responsive to our customer’s needs and desires; provide 

excellent customer service, meeting best in business standards for customer service; and redesign America’s coinage 

and medals by researching and adopting innovative state of the art manufacturing technology, techniques and 

processes. 

NEW PRODUCTS AND PROGRAMS: 

•	 2005-DATED NICKELS: On March 1, 2005, the United States Mint released the 2005-dated “American 

Bison” nickel -- the third nickel design in the United Kudos from the President of the United States: States Mint’s Westward Journey Nickel SeriesTM and first In a letter to former Director Henrietta Holsman Fore 

design of 2005. This nickel bears a new image of President dated March 31, 2005, President George W. Bush

Thomas Jefferson on its obverse (heads) side and a side commended Director Fore and United States Mint 

view of a grazing American Bison, on the reverse (tails) employees for their success in bringing the design of the

new 2005 “American Bison” nickel to fruition. (The side. “American Bison” nickel was ceremonially launched in 

March 2005.) 

The “American Bison” Nickel 

On June 20, 2005, the United States Mint began producing the 2005-dated “Ocean in View” nickel -- the 

fourth nickel design in the United States Mint’s Westward Journey Nickel SeriesTM. The 2004-dated nickels in 

the series are the “Peace Medal” and the “Keelboat” nickels. The new design features a scene of the Pacific 

Ocean and an inscription reflecting an excited entry in the journal of Captain William Clark on November 7, 

1805, believing he had finally reached the Pacific Ocean after so many months of arduous travel. The “Ocean 

in View” reverse design replaces the reverse design on the American Bison nickel. The United States Mint 

held the launch ceremonies for the “Ocean in View” nickel in early August in Washington and Oregon. The 

Federal Reserve Bank released the “Ocean in View” nickel in August 2005. 

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The “Ocean in View” Nickel 

•	 CHIEF JUSTICE JOHN MARSHALL SILVER DOLLAR: Public Law 108-290 authorized 

a maximum mintage of 400,000 Chief Justice John Marshall Silver Dollars to commemorate the 250th 

anniversary of the birth of John Marshall on September 24, 1755, and to pay tribute to his service to the 

Supreme Court of the United States and to our Nation. A portion of the proceeds from the sale of each coin is 

authorized to be paid to the Supreme Court Historical Society. Both the proof and uncirculated versions of the 

coin are minted at the United States Mint at Philadelphia and carry the “P” mint mark. 

Designed by United States Mint sculptor-engraver John Mercanti, the obverse of the Silver Dollar features a 

rendition of a portrait of John Marshall originally painted by Charles-Balthazar-Julien Fevret de Saint-Memin 

in March 1808. The reverse, by United States Mint sculptor-engraver Donna Weaver, features a view of the 

Old Supreme Court Chamber, located inside the Capitol, on the side which now houses the United States 

Senate. 

The 2005 Chief Justice John Marshall Silver Dollar 

•	 THE 2005 MARINE CORPS 230TH ANNIVERSARY SILVER DOLLAR: From the 

battlefields of the American Revolution, to the perilous streets of Baghdad, U.S. Marines have stood in tireless 

defense of America, her people and her freedom. As authorized by Public Law 108-291, this year, the United 

States proudly acknowledges them for serving with honor, courage and commitment. The United States Mint 

worked with the Marine Corps Heritage Foundation and launched the Marine Corps 230th Anniversary Silver 

Dollar in Quantico, Virginia on July 20, 2005. The coins went on sale the same day in four different product 

options: 1) a proof silver dollar; 2) an uncirculated silver dollar; 3) The Marine Corps Coin & Stamp Set, 

which includes a Marine Corps 230th Anniversary Uncirculated Silver Dollar and an uncancelled 1945 Iwo 

Jima stamp, and is limited to 50,000 units; and 4) the 2005 United States Mint American Legacy CollectionTM, 

which includes proof versions of both the Marine Corps 230th Anniversary Silver Dollar and the Chief Justice 

John Marshall Silver Dollar as well as proof versions of all eleven 2005-dated circulating coins. This set is 

limited to 100,000 units. 

The Marine Corps 230th Anniversary Silver Dollar bears the likeness of what is believed to be the most 

reproduced image in the history of photography. The image of six Marines raising the American flag on 

volcanic Mt. Suribachi on the island of Iwo Jima has become one of the most recognizable symbols in the 

history of warfare. It is emblematic of Marine tenacity, determination, courage and commitment. Iwo Jima 

means “sulfur island” in Japanese, and the name fits the horrific battle that was fought and won only two 

months before the end of World War II. 

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A surcharge from the sale of each coin is authorized to go to the Marine Heritage Center in Quantico, 

Virginia, which is currently being developed through a partnership between the Marine Corps Heritage 

Foundation and the United States Marine Corps. 

The Marine Corps 230th Anniversary Silver Dollar 

SPEEDING THE DEVELOPMENT OF NEW PRODUCTS: The United States Mint is working to 

speed the introduction of new products to the market. Speeding the process to bring coins from legislation or 

authorization to the market leads to increased revenues and profits. Less time and money are spent on activities that 

occur before the United States Mint receives revenues from sales to customers. Customers are presented with 

increased product offerings, available more times throughout the year. At the beginning of FY 2005, it took an 

average of 395 days to bring a new product to market. It now takes 195 days but our goal is to accomplish this in 

less than 100 days. To achieve this goal, a digital design process for coins and medals was developed in order to 

improve the product planning and development process. As a result of our focus on production planning and 

reducing time to market, all of our 2005 annual products were released one and a half to five and a half months 

earlier than the 2004 versions. 

IMPROVING EFFICIENCY 

SALES, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: These are the overhead, 

marketing and advertising costs of running the United States Mint. In a production-oriented agency like the United 

States Mint, the focus is on minimizing SG&A costs where practicable to improve financial performance and to 

return more funds to the Treasury General Fund. In FY 2005, SG&A costs increased by $2.9 million to $165.5 

million from $162.6 million in FY 2004, a 1.8 percent increase. The FY 2005 amount includes a one-time charge 

from a legal settlement of $9.0 million. 

OFFICE SPACE: The United States Mint started to consolidate office space in FY 2004 to cut costs. By 

subleasing about 135,000 square feet of headquarters office space in Washington, DC, the United States Mint saved 

more than $5.5 million during FY 2004, and approximately $6.5 million in FY 2005. 

SHARED SERVICES: 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 consider migrating 

to a designated COE such as the Bureau of Public Debt’s (BPD) Administrative Resource Center (ARC). In FY 

2005, the United States Mint began work to transfer to ARC many transactional functions associated with Travel, 

Human Resources and Procurement, and will continue to work with BPD to see that these functions are successfully 

transferred in FY 2006. 

FOSTERING A MODEL WORKPLACE 

DEVELOPING SKILLS IN THE WORKFORCE: A model workplace is necessary to accomplish 

identified initiatives. The United States Mint continues to foster a model workplace in which all employees are 

treated with dignity and respect; work together harmoniously; are valued for their contributions; are rewarded fairly 

for their achievements and receive training and assignments for the future. Some of the model workplace 

achievements include: 

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 Improving communications between managers and employees by getting feedback from the employees 

via the United States Mint Employee Pulse-Check survey as well as having managers walk the work 

areas to personally speak with employees regarding any concerns they may have; 

 Improved communications to employees by delivering new informational materials, workshops and 

program events Mint-wide. Under Performance Management, Employee Labor Relations (ELR) staff 

fostered a new relationship between organizational performance management and individual performance 

management. Our progress and future commitments in the evolution of our Performance Management 

Program (PMP) helped the Department of Treasury earn a “GREEN” rating in the performance subelement of the President’s Management Agenda (PMA); 

 The Equal Employment Opportunity (EEO) office experienced a decrease in the number of formal 

complaint activities in FY 2005 – 22 formal complaints were filed, compared to 36 formal complaints 

filed in FY 2004. The informal complaint activity also decreased from 42 in FY 2004 to 41 in FY 2005. 

There were 41 Alternative Dispute Resolution (ADR) cases in FY 2005. This represents a 52 percent 

reduction in ADR cases since FY 2003, when the United States Mint had 86 cases; and 

 We implemented a Rotational Assignments initiative to broaden employee understanding of the 

organization – like those used by other Federal organizations and private companies to familiarize 

employees with other employees’ jobs. 

SAFETY: The well-being of our employees and the protection of our assets are essential in the world today. To 

strengthen our ability to deter and respond to all security threats, we are pursuing innovative threat assessment 

strategies, including collaboration with other law enforcement agencies, to effectively prevent and counteract any 

security threats against the United States Mint operations. 

Three years after the United States Mint at Philadelphia was cited for 81 safety violations (139 specific items), our 

largest coin manufacturing facility was recognized as one of the Philadelphia Mint receives OSHA Award: safest worksites in the country. The ceremony was held in front of 

the United States Mint building in downtown Philadelphia and paid “I am thrilled to be here today to join in 

tribute to a team of 500 employees, managers and union leaders who commending this facility for the significant strides 

it has made,” said Acting Deputy Secretary Arnie joined forces to combat workplace hazards and make our facility a Havens. “By working together, OSHA, model for safety. management, employees and union leaders 

established reforms that have led to meaningful 

At the close of the award ceremony, the Occupational Health and improvements in workplace safety.” 

Safety Administration’s (OSHA) Voluntary Protection Programs’ “The Philadelphia Mint’s success is the perfect 

example of what can happen when an organization (VPP) Star status flag was raised, symbolizing a triumphant moment fully commits to worker safety and health,” said for the facility. In 2002, the facility labored through a six-week Richard D. Soltan, regional administrator for 

suspension of production after former Director Henrietta Holsman OSHA in Philadelphia. 

Fore ordered a top-to-bottom review to address the safety issues.

OSHA’s Star status is the highest honor a worksite can achieve under 

the VPP safety program. 

LOOKING AHEAD 

Circulating coin shipments are forecasted to hold steady or grow moderately over the next few years. Although the 

economy is expected to grow at a steady pace, the increased use of electronic transactions, coin counting machines, 

and improved distribution will likely moderate demand for newly minted coins. Continued success will demand new 

products, new markets, new technologies, greater efficiencies and, most importantly, commitments to and from our 

people. 

Production of quality products and excellent customer services are paramount. In FY 2006, the United States Mint 

will focus on: 

HUMAN CAPITAL STRATEGY: To best position the United States Mint for the future, the United States 

Mint embarked on a major workforce planning effort led by the United States Mint Workforce Planning Steering 

Committee comprised of senior leaders and managers, which identified the organization’s human capital needs and 

workforce levels for the next five years. Workforce planning will be conducted on an on-going basis. The effort will 

result in: 

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	 Identification of the organization’s human capital needs and workforce levels over the next five years in 

the context of the United States Mint’s strategic plan and projected business environment and direction; 

	 Comparison of the agency’s current skill profile to its future skill needs and identify the gaps that result;

	 Recommended strategies that specifically address overcoming identified skill gaps; and

	 Forward-looking analysis of factors and expected trends affecting occupations specific to the United 

States Mint that may affect retention, recruitment and employee development. 

24-KARAT GOLD BULLION COINS: The new 24-karat gold bullion coins currently being developed 

by the United States Mint will complement the popular 22-karat gold American Eagle coins. The new coins will 

give investors a second option backed by the United States Government in the global precious metals market. 

PRESIDENTIAL $1 COIN ACT OF 2005: Public Law 109-145 provides for the manufacture of 24­

karat gold bullion coins in 2006, Presidential $1 coins with First Spouse gold bullion coins starting in 2007, and 

Lincoln cent designs in 2009. 

SUCCESSOR TO THE 50 STATE QUARTERS® PROGRAM: Through 2005, this program has 

returned $6 billion to the Treasury General Fund. The program will end in 2008. The United States Mint is working 

with Congress and Treasury to develop strategies for a successor program to the 50 State Quarters® Program. 

LEAN ENTERPRISE: Lean Enterprise is a process designed to bring about rapid, step-change improvements 

to the performance of an organization through an overhaul of the value stream. It is comprised of a comprehensive 

set of elements, rules and tools that focus on value, the elimination of waste, and continuous incremental 

improvement, including improved supplier partnerships to increase efficiency and cut costs. 

RESEARCH AND DEVELOPMENT PROGRAM: The United States Mint plans to nurture a small 

Research and Development (R&D) program that will explore new manufacturing, metal fabrication and finishing 

techniques that will improve its manufacturing operations and/or increase sales of its products. The program will 

not only explore what other mints are doing around the world, but will also explore new technologies developed by 

sister government agencies that might have application. We are also reviewing and considering cost effective 

alternative materials for circulating and numismatic coin denominations. The first comprehensive coinage material 

study was started in fiscal year 2005. 

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THE 50 STATE QUARTERS® PROGRAM: 

(A 10-YEAR CELEBRATION OF OUR NATIONAL HERITAGE) 

A significant facet of United States Mint operations is the 50 State Quarters® Program, which was launched in 1999 

to commemorate and honor each of the 50 States over a ten-year period. Five new commemorative quarter-dollar 

coins are produced each year. Each quarter’s reverse celebrates one of the 50 States with a design honoring that 

State’s unique history, traditions and symbols. The quarters are released in the same order that the states ratified the 

United States Constitution or were admitted into the Union. In FY 2005, the United States Mint issued quarters 

commemorating Wisconsin, California, Minnesota, Oregon and Kansas. 

United States Mint 50 State Quarters® released in FY 2005: 

Wisconsin: Engraver, Alfred Maletsky, depicts an agricultural theme featuring the head of a cow, 

a round of cheese and an ear of corn. The design also bears an inscription of the State motto, 

“Forward.” 

California: Entitled, “John Muir / Yosemite Valley,” was engraved by Don Everhart and depicts 

naturalist and conservationist John Muir admiring Yosemite Valley’s monolithic granite headwall 

known as Half Dome with a soaring California condor. 

Minnesota: Was engraved by Charles Vickers and depicts a tree-lined lake with two people 

fishing, a loon on the water and a textured outline of the state surrounding its nickname, “Lqand of 

10,000 Lakes.” 

Oregon: Was engraved by Donna Weaver and features a portion of “Crater Lake,” viewed from 

the south-southwest rim to include Wizard Island and Watchman and Hillman Peaks on the lake’s 

rim. 

Kansas: Entitled, “Buffalo and Sunflower,” and features a buffalo and sunflower motif. This was 

engraved by Norman Nemeth. 

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FINANCIAL AND PROGRAM ANALYSIS 

OPERATIONS 

Revenue and Other Financing Sources

(OFS) 

-

1,000 

2,000 

3,000 

4,000 

2000 2001 2002 2003 2004 2005 

($ millions) 

Revenue Other Financing Sources 

Net Profit and Other Financing Sources 

(OFS) 

(500) 

-

500 

1,000 

1,500 

2,000 

2,500 

3,000 

2000 2001 2002 2003 2004 2005 

($ millions) 

Net Profit Other Financing Sources 

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 Mint facilities, staff, and assets is included in the cost of production and is a proper charge to 

the Circulating and Numismatic Programs. This change was made as part of the conversion to a government GAAP 

presentation of the FY 2005 financial statements. The United States Mint’s total earned revenue of $1,048.3 million 

plus other financing sources (seigniorage) of $722.7 million increased to 

$1,771.0 million in FY 2005 from FY 2004 amounts of $1,006.3 million 

for earned revenue plus $644.1 million for other financing sources 

(seigniorage), which totals $1,650.4 million. Earned revenue from 

circulating coinage represents the costs incurred to make the coin. 

Circulating earned revenue from coins shipped to the Federal Reserve 

Bank (FRB) of $445.4 million plus the Circulating other financing sources 

(seigniorage) of $699.4 million increased to $1,144.8 million in FY 2005 

from $395.8 million earned revenue plus $597.7 million for other 

financing sources (seigniorage) for a total of $993.5 million in FY 2004. 

Other financing sources (seigniorage) from circulating coinage represents 

the difference between the face value of circulating coinage and the costs 

(which includes the metal, manufacturing, and transportation costs) to 

produce those coins. Numismatic sales (net of surcharges and 

commissions) to the public of $588.2 million plus numismatic sale of circulating coinage earned revenue of $14.6 

million decreased to $602.8 million in FY 2005 compared to $594.8 million for numismatic sales to the public plus 

$15.7 million numismatic sales of circulating coinage earned revenue which totaled $610.5 million in FY 2004. 

Total numismatic sales of circulating coinage earned revenue of $14.6 million plus other financing sources 

(seigniorage) of $23.3 million decreased to a total of $37.9 million in FY 2005 from $15.7 million and $46.4 million 

which totaled $62.1 million, respectively, in FY 2004. 

The net program profits plus other financing sources increased to $764.0 million in FY 2005 from $650.1 million in 

FY 2004. Total net profit margins1

 increased to 43.1 percent compared to 39.4 percent in the prior year despite a 

significant rise in the prices of the metals that are used in the fabrication of coins. The United States Mint was able 

1

 Net Profit Margin is a ratio that compares net profit to revenue. It tells you how much profit a company makes for 

every $1 it generates in revenue. The United States Mint’s net profit margin refers to net program profit plus other 

financing sources as a percentage of earned revenues plus seigniorage. 

Net Profit & Other Financing 

Sources Margins 

39.4% 43.1% 

0.0% 

10.0% 

20.0% 

30.0% 

40.0% 

50.0% 

FY 2005 FY 2004 

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to increase margins by shipping more coins, improving time to market and reducing manufacturing and Selling, 

General and Administrative (SG&A) costs. As a result of the improved operating results and profits, the United 

States Mint returned $775 million to the Treasury General Fund in FY 2005 compared with $665 million in FY 

2004. 

CIRCULATING COINAGE SHIPPED TO 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 reimburses the United States Mint at face value for the coins when they are shipped. 

Total circulating earned revenue from coins shipped to the FRB of 

$445.4 million plus other financing sources (seigniorage) of $699.4 

million increased to $1,144.8 million in FY 2005 from $395.8 

million earned revenue plus $597.7 million for other financing 

sources (seigniorage) for a total of $993.5 million in FY 2004. The 

increase in total earned revenue and other financing sources 

(seigniorage) reflects the increased volume of shipments to the 

FRB. The Westward Journey Nickel SeriesTM, featured two designs 

in FY 2005 commemorating the Louisiana Purchase and the Lewis 

and Clark Expedition. The obverse design features a contemporary 

image of President Jefferson, along with two new reverse designs -

the “American Bison” and the “Ocean in View.” Nickel collections 

increased to $70.9 million in FY 2005 from $69.6 million in FY 

2004. Quarter collections increased to $663.9 million in FY 2005 

from $560.4 million in FY 2004. In FY 2005, the United States 

Mint issued quarters commemorating Wisconsin, California, 

Minnesota, Oregon and Kansas. 

Other financing sources from circulating coinage increased to 

$699.4 million in FY 2005 from $597.7 million in FY 2004. The 

average market price of nickel, copper and zinc increased 13 

percent, 30 percent and 25 percent, respectively, over prior year 

prices. SG&A costs as a percentage of Circulating earned revenue 

and other financing sources decreased to 7.5 percent compared to 

8.9 percent in the prior year. The following tables show the COGS, 

SG&A and Distribution costs on a per unit basis for each 

denomination. 

Circulating Other Financing 

Sources

$699.4 

$0 

$100 

$200 

$300 

$400 

$500 

$600 

$700 

$800 

FY2005 FY2004 

($ Millions) 

Circulating Revenue & Other

Financing Sources

$1,144.8 $993.5 

$0 

$200 

$400 

$600 

$800 

$1,000 

$1,200 

FY2005 FY2004 

($ Millions) 

$597.7 

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

FOR THE YEAR ENDED SEPTEMBER 30, 2005

Mutilated & 

 Penny Nickel Dime Quarter Half Dollar 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 

Net Profit Margin 2.8% 3.4% 68.6% 70.4% 62.5% 82.5% 61.1% 

CIRCULATING REVENUE & OTHER FINANCING SOURCES (in Millions) 

FOR THE YEAR ENDED SEPTEMBER 30, 2004

Mutilated & 

Penny Nickel Dime Quarter Half Dollar Other Total 

Revenue & OFS $71.3 $69.6 $256.9 $560.4 $3.5 $31.8 $0.0 $993.5 

Cost of Goods Sold 65.7 62.7 55.1 106.9 0.8 3.2 0.0 294.4 

Selling, General & Administrative 1.0 0.8 25.6 57.6 0.4 3.5 0.0 88.9 

Other Costs and Expenses 0.0 0.0 0.0 0.0 0.0 0.0 12.5 12.5 

Other Financing Sources $4.6 $6.1 $176.2 $395.9 $2.3 $25.1 -$12.5 $597.7 

Net Profit Margin 6.5% 8.8% 68.6% 70.6% 65.7% 78.9% 60.2% 

Circulating Unit Costs 

UNIT COST OF PRODUCING AND DISTRIBUTING COINS 

FOR THE YEAR ENDED SEPTEMBER 30, 2005

 Penny Nickel 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 Cost Per Unit $0.0097 $0.0484 $0.0305 $0.0717 $0.1539 $0.1654 

UNIT COST OF PRODUCING AND DISTRIBUTING COINS 

FOR THE YEAR ENDED SEPTEMBER 30, 2004

 Penny Nickel Dime Quarter Half Dollar 

Cost of Goods Sold $0.0090 $0.0446 $0.0212 $0.0466 $0.1101 $0.0984 

General & Administrative $0.0001 $0.0006 $0.0100 $0.0257 $0.0569 $0.1114 

Distribution to FRB $0.0002 $0.0004 $0.0002 $0.0010 $0.0027 $0.0016 

Total Cost Per Unit $0.0093 $0.0456 $0.0314 $0.0733 $0.1697 $0.2114 

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 Strategic Stockpile of silver 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 2005 and FY 2004: 

 Quantity (FTO) Market Value

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

FY 2004 12,968,078.1850 $ 81,939,233.25

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NUMISMATIC SALES TO THE PUBLIC 

Total numismatic sales (less surcharges and commissions) to the public decreased to $588.2 million in FY 2005 

from $594.8 million in FY 2004. Bullion sales decreased to $270.7 million in FY 2005 from $315.7 million in FY 

2004. Non-bullion sales to the public increased to $317.5 million in FY 2005 from $279.1 million in FY 2004. Total 

numismatic profit margin increased to 13.4 percent in FY 2005 from 7.4 percent in FY 2004. Although numismatic 

sales decreased compared to the prior year, the United States Mint was able to increase profits by improving time to 

market and reducing Cost of Good Sold (COGS). 

Numismatic Revenue

$588.2 $594.8 

$0.0 

$100.0 

$200.0 

$300.0 

$400.0 

$500.0 

$600.0 

$700.0 

FY 2005 FY 2004 

($ Millions) 

Numismatic Net Profit 

$78.7 

$44.1 

$0.0 

$20.0 

$40.0 

$60.0 

$80.0 

$100.0 

FY 2005 FY 2004 

($ Millions) 

NUMISMATIC NET PROFIT (in Millions) 

FOR THE YEAR ENDED SEPTEMBER 30, 2005

American Eagle American 

Uncirculated Eagle Proof Commemoratives Recurring Total 

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

Cost of Goods Sold 264.3 62.4 13.1 92.8 432.6 

Selling, General & Administrative 0.8 13.8 4.9 56.3 75.8 

Other Cost 0.1 0.2 0.0 0.8 1.1 

Net Profit $5.5 $16.8 $2.8 $53.6 $78.7 

Net Profit Margins 2.0% 18.0% 13.5% 26.3% 13.4% 

NUMISMATIC NET PROFIT (in Millions) 

FOR THE YEAR ENDED SEPTEMBER 30, 2004 

American Eagle American 

Uncirculated Eagle Proof Commemoratives Recurring Total 

Revenue (less surcharges & commissions) $315.7 $75.2 $33.2 $170.7 $594.8 

Cost of Goods Sold 312.5 48.0 18.5 105.2 484.2 

Selling, General & Administrative 0.6 13.8 8.2 43.9 66.5 

Net Profit $2.6 $13.4 $6.5 $21.6 $44.1 

Net Profit Margins 0.8% 17.8% 19.6% 12.7% 7.4% 

15
 
American Eagle Uncirculated (Bullion) Coins 

American Eagle Uncirculated (Bullion) coins are typically purchased 

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

precious metals. Bullion sales decreased to $270.7 million in FY 

2005 from $315.7 million in FY 2004. 

American Eagle Proof Coins 

American Eagle Proof revenue increased to $93.2 million in FY 2005 

from $75.2 million in FY 2004 due to increased unit sales and time to 

market improvements. American Eagle Proof profits increased to 

$16.8 million in FY 2005 from $13.4 million in FY 2004 and profit 

margins increased to 18.0 percent from 17.8 percent in the prior year. 

Commemorative Coins 

Commemorative revenue (less surcharges and commissions) 

decreased to $20.8 million in FY 2005 from $33.2 million in FY 

2004. The Lewis and Clark and the Thomas A. Edison 

Commemorative Coins were released in FY 2004, as authorized by 

Congress. These two issuances totaled $8.8 million in revenues for 

FY 2005 and generated $1.5 million in surcharges and commissions 

for the beneficiary organizations designated by the authorizing 

legislation. Congress authorized the issuance of the Chief Justice John 

Marshal Silver Dollar and the 2005 Marine Corps 230th Anniversary 

Silver Dollar commemorative coins, which were released in March 

2005 and July 2005, respectively. Revenue from these two issuances 

totaled $17.7 million and generated $4.2 million in surcharges and 

commissions for the beneficiary organizations designated by 

authorizing legislation. 

Recurring Programs 

Recurring programs include proof sets, silver proof sets, uncirculated 

sets, 50 State Quarters® Proof Sets, 50 State Quarters Silver Proof 

SetsTM, and other miscellaneous products. Revenue from recurring 

programs increased to $203.5 million in FY 2005 from $170.7 million 

in FY 2004. 2005 Nickels added $15.2 million to FY 2005 recurring 

revenue, an increase from $4.2 million in FY 2004. The strong 

performance of recurring products was due to time to market 

improvements. As a result of the United States Mint focusing on 

production planning and reducing time to market, all of the 2005 

annual products were released one and one half to five and one half 

months earlier than the 2004 versions. Recurring profit margins 

increased to 26.3 percent in FY 2005 from 12.7 percent in FY 2004, a 

result of reducing COGS and improving time to market. 

16 

American Eagle Uncirculated 

Revenue & Net Profit 

$270.7 

$315.7 

$5.5 $2.6 

$0.0 

$50.0 

$100.0 

$150.0 

$200.0 

$250.0 

$300.0 

$350.0 

FY 2005 FY 2004 

($ Millions) 

Revenue Profit 

American Eagle Proof 

Revenue & Net Profit 

$93.2 

$75.2 

$16.8 $13.4 

$0.0 

$20.0 

$40.0 

$60.0 

$80.0 

$100.0 

FY 2005 FY 2004 

($ Millions) 

Revenue Profit 

Commemoratives Revenue & 

Net Profit 

$33.2 

$20.8 

$2.8 

$6.5 

$0.0 

$5.0 

$10.0 

$15.0 

$20.0 

$25.0 

$30.0 

$35.0 

FY 2005 FY 2004 

($ Millions) 

Revenue Profit 

Recurring Programs Revenue 

& Net Profit 

$203.5 

$170.7 

$53.6 

$21.6 

$0.0 

$40.0 

$80.0 

$120.0 

$160.0 

$200.0 

$240.0 

FY 2005 FY 2004 

($ Millions) 

Revenue Profit 
NUMISMATIC SALES OF CIRCULATING COINAGE

With the introduction of the 50 States Quarters® Program, the 

Golden Dollar and the nickel 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 and any additional expenses incurred in 

selling these products are included in the Numismatic Recurring 

Programs in the previous section. 

Numismatic Sales of Circulating 

Coinage Revenue & Other Financing 

Sources 

$37.9 

$62.1 

$23.3 

$46.4 

$0.0 

$10.0 

$20.0 

$30.0 

$40.0 

$50.0 

$60.0 

$70.0 

( $ M i l l i o n s ) 

Revenue & Other Financing Sources 

Other Financing Sources 

other financing sources for a total of $62.1 million in FY 2004. 

FY 2004 sales reflected an anomalous sale of 78 million backdated quarters to a predominant buyer. FY 2005 sales are more 

consistent with the numismatic circulating sales plan. The other 

financing sources of numismatic sales of circulating coinage 

decreased to $23.3 million in FY 2005 from $46.4 million in FY 

2004. As in the case of circulating coins sold to the FRB, the 

portion of the other financing sources transferred to the Treasury 

General Fund are off-budget receipts. 

FY 2005 FY 2004 

PROTECTION OPERATIONS

The Office of Protection maintains a highly professional police force with the tools and resources needed to respond 

to changing threats of today’s environment. The United States Mint Police is committed to recruiting and retaining 

the highest caliber of law enforcement personnel and has been very competitive in its compensation. 

The United States Mint Police secure approximately $117.5 billion in market value of the nation’s gold and silver 

reserves and protect the United States Mint’s assets while safeguarding thousands of employees against potential 

threats at our facilities across the country. In FY 2005, the Protection program had a net cost of $37.4 million, a 

decrease from a net cost of $38.0 million in FY 2004. 

In FY 2005, the United States Mint’s Protection Program received a 93 percent Program Assessment Rating Tool 

(PART) score. The PART is a program self assessment that the Office of Management and Budget (OMB) requires 

of every Federal program. PART measures how effective the agency is in the program’s purpose and design, 

strategic planning, program management and program results/accountability and holds programs to high standards. 

This is evidence that the United States Mint’s Protection Program is well managed and achieving its purpose. 

CAPITAL INVESTMENTS 

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

structures, equipment, physical security and information technology systems. Funds obligated for capital projects 

totaled approximately $18.1 million in FY 2005. This included approximately $8.9 million for manufacturing 

projects, $3.7 million for security improvement projects, $4.1 million for information technology and $1.4 million 

for miscellaneous projects. The United States Mint’s capital projects are focused on improving processes, 

developing new coin design 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 numismatic earned revenue from the sale of circulating 

coinage of $14.6 million plus other financing sources 

(seigniorage) of $23.3 million decreased to $37.9 million in FY 

2005 from $15.7 million in earned revenue plus $46.4 million in 

17
 
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. 

$-

$500 

$1,000 

$1,500 

$2,000 

$2,500 

1996

1997

1

1

2

2

2

2

2

2

998

999

000

001

002

003

004

005

Transfers to the Treasury General Fund 

In FY 2005, the United States Mint transferred 

$775 million to the Treasury General Fund. 

This total consisted of $730 million from the 

net operating results from the sale of 

circulating coins either to the FRB or through 

numismatic channels (off-budget) and $45 

million from profits on numismatic collectible 

and investment sales (on-budget). In 

comparison, $665 million ($661 million offbudget and $4 million on-budget) was 

transferred to the Treasury General Fund in FY 

2004. The amounts transferred to Treasury are 

directly related to the sales of United States Mint products. Stronger circulating collections in FY 2005 plus the 

numismatic profits on circulating-based coin products provided a greater source for off-budget transfers to the 

General Fund relative to FY 2004. The $45 million on-budget transfer occurred in the first quarter of FY 2005 and 

reflects the numismatic profit for FY 2004. This lag in the transfer of on-budget funds is necessary to ensure that the 

proper amount is transferred each year. Accordingly, the on-budget transfer in the first quarter in FY 2006 will 

reflect the profits from the sale of numismatic products in FY 2005. $ M illio n s 

18
 
PERFORMANCE SECTION 

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

performance measures. As prescribed 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 adding value, ensuring integrity and realizing world-class 

performance. To direct our efforts, the United States Mint identified key performance measures that cut across the 

entire organization. Tied to these performance measures are world-class targets and substantive initiatives to reach 

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

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

management, many of these key measures can be broken out at the program level. 

19
 
UNITED STATES MINT KEY PERFORMANCE MEASURES 

Measure September 30, 2005 FY 2005 Target September 30, 2004 

Lost Time Accident 

Rate 0.94 1.03 1.36 

Pulse Check Survey * 64% 66% 63% * 

Cycle-Time 69 53 85 

Yield 85.9% 97% 86.1% 

Machine availability 64% 66% 64% 

Inventory Turnover 2.35 4.20 2.48 

SG&A as a percent of 

Revenue & OFS 9.9% 10.0% 12.2% 

Cost per 1000 coin 

equivalents $7.42 $7.03 $7.93

Customer Service 

Index 91% 92% 78% 

Total Losses $1,135 $250,000 $3,109 

Protection Cost per 

Square Foot $32.43 $31.86 $32.51

Order Fulfillment 94% NA N/A

* The FY 2004 percentage in the Annual Report is based on 3rd quarter numbers.

20
 
Lost Time Accident Rate 

The United States Mint values its employees. Consistent with those 

values, the United States Mint strives to maintain a work 

environment that promotes the safety and well-being of employees 

on the job at all times. Lost Time Accidents (LTAs) are workrelated accidents that lead to an employee missing at least one day 

of work. The Lost Time Accident Rate is the number of LTAs for 

every 200,000 hours worked (or the LTAs per 100 employees 

during a full year). The LTA Rate in FY 2005 was 0.94, a 31 

percent improvement from 1.36 in FY 2004. The performance was 

better than the target rate of 1.03. The FY 2005 final result may be 

adjusted at a later date pending a review or dispute of each 

incident’s present classification. The LTA rate has decreased four 

years in a row and improvements are expected to continue. Safety 

at the workplace has been and will continue to be a focus for the 

United States Mint. 

Employee Satisfaction 

The United States Mint values its employees and strives to be an 

Lost Time Accident Rate 

1.36 

0.94 

0.00 

0.25 

0.50 

0.75 

1.00 

1.25 

1.50 

2005 2004 

employer of choice, where employees are motivated and 

enthusiastic about coming to work. The Pulse-Check Survey is a 

14-question survey designed to assess the attitudes of the United 

States Mint’s employees concerning their work environment. It is 

administered each quarter to 25 percent of the United States Mint’s 

permanent workforce. This measure captures the percentage of 

employees who are generally satisfied with their jobs. In FY 2005, 

64 percent of survey respondents reported favorable job 

satisfaction, compared to a 63 percent satisfaction rate in FY 2004. 

The Pulse Check Survey is below the FY 2005 target of 66 percent. 

For comparison, the United States Mint result is not significantly 

different than an industry normative benchmark of 65 percent 

(based on 2002 data from 1,068 full-time US employees in 

manufacturing organizations with less than 10,000 employees). 

While individual responses are kept confidential, reports are 

created that allow analysis across broad categories for more detail. 

The United States Mint’s management team reviews these quarterly 

reports to explore options for workplace improvements in order to 

improve the job satisfaction levels. 

Cycle Time 

The United States Mint wants to minimize the amount of time it 

Pulse Check Survey * 

64% 63% 

0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

2005 2004

takes to process raw materials into finished goods, eliminating nonvalue added steps from the processes and reducing the amount of 

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

it takes material to flow through the United States Mint's processes 

from raw material to order fulfillment. As of September 2005, the 

United States Mint’s cycle time was 69 days, an improvement of 16 

days from 85 days as of September 2004. The targeted cycle time 

was 53 days. The primary cause for not reaching the target is the 

size of the dollar coin inventory maintained by the United States 

Mint. No new production of dollar coins is taking place; demand is 

currently being met by existing inventory. Measured without the 

dollar coin, Cycle Time improved to 48 days in FY 2005, compared 

with 55 days in FY 2004. 

Cycle-Time 

85 

69 

0 

20 

40 

60 

80 

100 

2005 2004

(Days) 

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

implementation of lean manufacturing techniques. The United States Mint is currently working with the Federal

21
 
Reserve Banks, the armored carrier industry and the commercial banking industry to reduce and balance coin 

inventories. Initiatives include improving circulating coin inventory management by implementing a coin supply 

chain pilot with the Cleveland Federal Reserve district and taking a broad look at opportunities to reengineer the 

manufacturing process and inventory handling. 

Yield 

The United States Mint wants to minimize wasted material and 

transform as much of our materials into finished goods as is feasible. 

Yield measures the percentage of raw materials used that results in a 

finished product. FY 2005 Yield was 85.9 percent which is slightly 

lower than the previous year of 86.1 percent. Performance is short of 

the target of 97 percent, a stretch goal designed to encourage broad 

thinking and suggestions for improvement from all personnel. The 

main impediment to reaching the target is that the target does not 

include an allowance for the webbing that results from stamping 

round blanks from rectangular sheets of metal. The resulting scrap 

that is generated lowers the yield measure by 10-15 percentage 

points, depending on the mix of products that are produced. The 

United States Mint makes every effort to maximize the yield given 

our current processes. Substantial improvement will require 

innovative solutions. 

Machine Availability 

Machine availability measures the amount of time production 

equipment is available to produce finished goods (excluding 

scheduled downtime). We want our machines 'at-the-ready' at all 

times to manufacture coins as warranted by the prevalent demand. 

As of September 2005, the United States Mint’s Machine 

Availability is 64 percent. This is level with FY 2004 performance, 

but falls short of the FY 2005 target of 66 percent. Newer 

equipment, improved technology to schedule and monitor 

maintenance and improved production management are enabling 

the United States Mint to have machines more available for 

production. The United States Mint plans to continue improving the 

machine availability through further implementation of lean 

manufacturing techniques. 

Inventory Turnover 

The United States Mint seeks to minimize inventory of raw 

materials and finished goods to reduce the associated carrying 

costs. Inventory turnover is a measure of how often, during the 

course of a year, the United States Mint sells and replaces inventory 

of materials and final products. Inventory turnover is calculated as 

the total cost of goods sold divided by the average inventory level 

over a given period. The Inventory Turnover ratio decreased to 2.35 

times in FY 2005 from 2.48 in FY 2004. While the Cost of Goods 

Sold remained level in FY 2005 compared with FY 2004, the 

average inventory increased during FY 2005 to $330.7 million from 

$317.3 million in FY 2004. The performance measure did not meet 

the target of 4.2 times. 

Yield 

85.9% 86.1% 

65.0% 

70.0% 

75.0% 

80.0% 

85.0% 

90.0% 

2005 2004

Machine Availability 

64% 64% 

0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

2005 2004 

Inventory Turnover 

2.35 2.48 

0.00 

0.50 

1.00 

1.50 

2.00 

2.50 

3.00 

2005 2004 

22
 
SG&A as a Percent of Revenue & OFS (Excluding Bullion Revenue) 

Sales, General and Administrative (SG&A) costs are the overhead, 

marketing and advertising costs of running the United States Mint. 

In a production oriented, non-service intensive type business like 

the United States Mint, the focus is on minimizing SG&A costs 

where practicable to improve profitability. In the case of the United 

States Mint, improving margins means that more funds will be 

returned to the Treasury General Fund as a result of operations. The 

reduction of SG&A expenses was a priority in FY 2005 and will 

continue to be in the future. SG&A as a percent of non-bullion 

revenue and other financing sources improved to 9.9 percent in FY 

2005 from 12.2 percent in FY 2004. This performance measure 

excludes rental income from subleased office space of $6.5 million 

and rental expenses because they are offsetting. The measure also 

excludes a one-time $9.0 million charge from a legal settlement 

This settlement was an anomalous expense resulting from previous 

years’ activities that was incurred by Headquarters on behalf of a

SG&A as a % of Revenue & 

Other Financing Sources 

12.2% 

9.9% 

0.0% 

2.0% 

4.0% 

6.0% 

8.0% 

10.0% 

12.0% 

14.0% 

2005 2004 

field facility. Performance exceeded the FY 2005 target of 10.0 percent, and the United States Mint will continue to 

make reductions in general and administrative costs a priority in order to approach a benchmark of 7.7 percent. 

Conversion Cost per 1000 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 1000 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 2005 was $7.42, an improvement 

of 6.4 percent from $7.93 in FY 2004. The performance measure 

did not meet the target of $7.03. This target (stretch goal) was an 11 

percent drop from the FY 2004 actual results and was set based on 

forecasted volume and cost estimates. Differences in the actual 

volume from the forecast may impact the achievement of specific targets in any given year. Coin equivalent 

production increased to 19.9 billion in FY 2005 compared with 17.8 billion in FY 2004 (12 percent). The associated 

conversion cost increased at a lesser rate (4 percent) to $147 million from $141 million in FY 2004 due to cost 

cutting and improved processes. The United States Mint plans to continue to reduce conversion costs for given 

production volumes through further implementation of lean manufacturing techniques at the manufacturing 

Cost Per 1000 CEs 

$7.42 $7.93 

$0.00 

$2.00 

$4.00 

$6.00 

$8.00 

$10.00 

2005 2004 

facilities. 

Customer Service Index 

The Customer Service Index is an indicator of the quality of our 

products and services to the customer. Production of quality products 

and excellent customer service is paramount. The Customer Service 

Index contains two components: the order satisfaction rate (total 

orders less returns) and the percentage of orders fulfilled within seven 

days. The overall Customer Service Index increased by 13 percentage 

points (a 16.7 percent increase) to 91 percent in FY 2005 from 78 

percent in FY 2004. The performance did not quite meet the target for 

FY 2005, which was 92 percent. 

Customer Service Index 

78% 

91% 

50% 

60% 

70% 

80% 

90% 

100% 

2005 2004

23
 
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 in FY 2005 were $1,135 compared with $3,109 in FY 

2004. This performance beat the target of $250,000. The United 

States Mint also keeps track of exposure, or the dollar amount of 

Total Losses 

$1,135 

$3,109 

$0 

$500 

$1,000 

$1,500 

$2,000 

$2,500 

$3,000 

$3,500 

2005 2004

open cases. As of September 2005, the exposure is $276,295. The United States Mint has revised its future targets to 

be more in line with the recent performance. 

Protection Cost per Square Foot 

Protection cost per square foot shows the Office of Protection’s total operating cost divided by the area of usable 

space. Usable space is defined as 90 percent of total square footage. The United States Mint Police use the cost per 

square foot to provide a measurement of efficiency over time. The 

square footage of usable area 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 in 

FY 2005 was $32.43, a slight improvement from $32.51 in FY 2004. 

FY 2005 performance is 2 percent higher than the targeted $31.86. 

Protection expenses are highly labor intensive, which results in 

continual upward pressure on costs. The Protection function requires 

that adequate staffing and coverage must be maintained at all times. 

The ability to apply downward pressure on cost must be tempered by 

level of readiness necessary to fulfill the protection mission. 

The United States Mint Protection office is analyzing future 

personnel needs and budgetary requirements in order to look for ways 

Protection Cost per Square 

Foot 

$32.51 $32.43 

$30.00 

$30.50 

$31.00 

$31.50 

$32.00 

$32.50 

$33.00 

2005 2004 

to keep costs manageable while maintaining adequate protection of assets and employees. Plans include efforts to 

leverage new technology to enhance security by automating entry and exit procedures at United States Mint 

facilities. 

Order Fulfillment 

Order Fulfillment is a new 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. The Order Fulfillment was 94 percent in 

FY 2005. Essentially, this means that 94 percent of the United 

States Mint’s revenue and other financing sources was earned from 

products that were shipped to the customer in a timely fashion. This 

is a new performance measure and will continue to be tracked for 

appropriateness and for setting future targets. 

Order Fulfillment 

94% 

0% 

20% 

40% 

60% 

80% 

100% 

2005 2004

24
 
LIMITATIONS OF THE FINANCIAL STATEMENTS 

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 31USC3515(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 

(GAAP) 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, a sovereign 

entity. 

25
 
KPMG LLP 

2001 M Street, NW 

Washington, DC 20036 

Independent Auditors’ Report on Financial Statements 

Inspector General 

United States Department of the Treasury: 

Director 

The United States Mint: 

We have audited the accompanying balance sheet of the United States Mint (Mint) as of 

September 30,2005 and the related statements of net cost, changes in net position, financing, and custodial 

activity, and the combined statement of budgetary resources, for the year 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 audit. 

We conducted our audit 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. 01-02, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin 

No. 01-02 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. An audit also includes 

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

evaluating the overall financial statement presentation. We believe that our audit provides 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 United States Mint as of September 30, 2005, and its net cost, change in net 

position, budgetary resources, reconciliation of net cost to budgetary obligations, and custodial activity, for 

the year then ended, in conformity with accounting principles generally accepted in the United States of 

America. 

As discussed in Note 1 to the financial statements, the Mint changed its method of preparing its financial 

statements to be in accordance with the accounting standards issued by the Federal Accounting Standards 

Advisory Board in fiscal year 2005. Prior to fiscal year 2005, the Mint presented its financial statements in 

accordance with the accounting standards issued by the Financial Accounting Standards Board. As a result 

of the lack of comparability, the fiscal year 2004 financial statements have not been presented with the 

fiscal year 2005 financial statements. 

26 

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

member firm of KPMG International, a Swiss cooperative. 
The information in the Management Discussion and Analysis section is not a required part of the financial 

statements, but is supplementary information required by accounting principles generally accepted in the United 

States of America or OMB Circular No. A-136, Financial Reporting Requirements, Part A, Form and Content of 

the Performance and Accountability Report. 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 reports dated June 16, 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 audit. 

June 16, 2006, except as to note 19, which is dated November 3, 2006. 

27
 
DEPARTMENT OF THE TREASURY
 

UNITED STATES MINT
 

BALANCE SHEET
 

AS OF SEPTEMBER 30, 2005
 

(In Thousands) 

ASSETS 

Intragovernmental: 

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

Accounts Receivable (Note 4) 58 

Advances and Prepayments (Note 5) 4,114 

Total Intragovernmental Assets 283,559 

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

Accounts Receivable, Net (Note 4) 14,900 

Inventory and Related Property (Note 7) 185,630 

Supplies 13,193 

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

Advances and Prepayments (Note 5) 1,612 

Total Non-Intragovernmental Assets 10,980,656 

Total Assets $11,264,215 

LIABILITIES 

Intragovernmental: 

Accounts Payable $313 

Accrued Workers' Compensation 6,805 

Total Intra-governmental Liabilities 7,118 

Custodial Liability to Treasury 10,493,740 

Accounts Payable 40,513 

Surcharges payable (Note 3) 10,678 

Accrued Payroll and Benefits 14,996 

Other Actuarial Liabilities 33,855 

Unearned Revenues 5,791 

Total Non-Intragovernmental Liabilities 10,599,573 

Total Liabilities 10,606,691 

Commitments and Contingencies (Note 11 & 12) 

NET POSITION 

Cumulative Results of Operations 657,524 

Total Liabilities and Net Position $11,264,215 

The accompanying notes are an integral part of these financial statements. 

28 
DEPARTMENT OF THE TREASURY
 

UNITED STATES MINT
 

STATEMENT OF NET COST
 

FOR THE YEAR ENDED SEPTEMBER 30, 2005
 

(In Thousands)
 

NUMISMATIC PRODUCTION AND SALES 

Gross Cost $524,072
 

Less Earned Revenue (602,796)
 

Net Program Revenue (78,724) 

CIRCULATING PRODUCTION AND SALES 

Gross Cost 445,446 

Less Earned Revenues (Note 14) (445,446) 

Net Program Revenue -

Net Revenue Before Protection of Assets (78,724) 

PROTECTION OF ASSETS 

Protection Costs 37,543
 

Less Earned Revenue (107)
 

Net Cost of Protection of Assets 37,436 

Net Revenue from Operations ($41,288) 

The accompanying notes are an integral part of these financial statements. 

29
 
DEPARTMENT OF THE TREASURY
 

UNITED STATES MINT
 

STATEMENT OF CHANGES IN NET POSITION
 

FOR THE YEAR ENDED SEPTEMBER 30, 2005
 

(In Thousands)
 

CUMULATIVE RESULTS OF OPERATIONS 

NET POSITION, Beginning of Year $657,797 

FINANCING SOURCES: 

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

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

Other Financing Sources (Seigniorage) (Note 14) 722,686 

Imputed Financing Sources (Note 10) 10,753 

Total Financing Sources (41,561) 

Net Revenue from Operations 41,288 

Net Position, End of Year $657,524 

The accompanying notes are an integral part of these financial statements. 

30 
DEPARTMENT OF THE TREASURY
 

UNITED STATES MINT
 

STATEMENT OF BUDGETARY RESOURCES
 

FOR THE YEAR ENDED SEPTEMBER 30, 2005
 

(In Thousands) 

Budgetary Resources 

Unobligated Balance:

Beginning of the Period $130,290 

Spending Authority from Offsetting Collections:

Earned:

Collected 1,091,486

Receivable from Federal Sources (4,363)

Subtotal 1,087,123 

Permanently Not Available (45,000) 

TOTAL BUDGETARY RESOURCES $1,172,413 

Status of Budgetary Resources 

Obligations Incurred: 

Reimbursable (Note 16) $1,048,090 

Unobligated Balances:

Apportioned 124,323 

TOTAL STATUS OF BUDGETARY RESOURCES $1,172,413 

Relationship of Obligations to Outlays 

Obligated Balance, Net, Beginning of Period $198,891 

Obligated Balance, Net, End of Period:

Accounts Receivable (58)

Undelivered Orders 47,898

Total Liabilities 112,951 

Outlays:

Disbursements 1,089,647

Collections (Note 19) (1,091,486) 

NET OUTLAYS ($1,839) 

The accompanying notes are an integral part of these financial statements. 

31 
DEPARTMENT OF THE TREASURY
 

UNITED STATES MINT
 

STATEMENT OF FINANCING
 

FOR THE YEAR ENDED SEPTEMBER 30, 2005
 

(In Thousands) 

Resources Used to Finance Activities: 

Budgetary Resources Obligated 

Obligations Incurred $1,048,090 

Less: Spending Authority from Offsetting Collections and Recoveries 1,087,123 

Net Obligations (39,033) 

Other Resources 

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

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

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

Other Financing Sources (Seigniorage) (Note 14) 722,686 

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

Total Resources Used to Finance Activities (80,594) 

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 (10,520) 

Resources that Finance the Acquisition of Assets or Liquidation of Liabilities 8,034 

Other 7,314 

Total Resources Used to Finance Items Not Part of the Net Cost of Operations 4,828 

Total Resources Used to Finance the Net Cost of Operations (85,422) 

Components not Requiring or Generating Resources in the Current Period 

Depreciation and Amortization 44,396 

Revaluation of Assets 2,853 

Other (3,115) 

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

 Resources 44,134 

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

Resources in the Current Period 44,134 

Net Revenue from Operations ($41,288) 

The accompanying notes are an integral part of these financial statements. 

32
 
DEPARTMENT OF THE TREASURY
 

UNITED STATES MINT
 

STATEMENT OF CUSTODIAL ACTIVITY
 

FOR THE YEAR ENDED SEPTEMBER 30, 2005
 

(In Thousands) 

Revenue Activity

Sources of Cash Collections:

Sale of Treasury Silver (Note 20) $52,745 

Total Revenue Received 52,745 

Disposition of Custodial Revenue & Collections

Transferred to the General Fund 52,745

Total Disposition of Custodial Revenue 52,745 

Net Custodial Activity $0 

The accompanying notes are an integral part of these financial statements. 

33
 
DEPARTMENT OF THE TREASURY 

UNITED STATES MINT 

NOTES TO THE FINANCIAL STATEMENTS 

FOR THE YEAR ENDED SEPTEMBER 30, 2005 

(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 beneficiary organizations, and to protect certain federal assets in its custody. 

Numismatic products include medals, proof coins, uncirculated coins, platinum, gold, and silver bullion coins, and 

commemorative coins. Custodial assets consist of United States’ gold and silver metal reserves. These custodial reserves are 

often referred to as “deep storage” and “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, 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.” The United States Mint has 

historically prepared its financial statements in accordance with accounting principles generally accepted in the United States 

of America (US GAAP), based on accounting standards issued by the Financial Accounting Standards Board (FASB), the 

private-sector standards-setting body. However, during FY 2005, the United States Mint converted to preparing its financial 

statements based on accounting standards issued by the Federal Accounting Standards Advisory Board (FASAB), which was 

designated by the American Institute of Certified Public Accountants (AICPA) as the standard-setting body for financial 

statements of federal government entities, with respect to the establishment of US GAAP. 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. 

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. 

34 (Continued) 
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. The difference between the face value of circulating coins sold and the total cost of 

metals, manufacturing and transportation of 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). Other financing sources (Seigniorage) results from the sovereign power 

of the Government to directly create money and, although not an inflow of resources from the public, does increase the 

Government's net position in the same manner as an inflow of resources. Because it is not demanded, earned, or donated, it is 

an other financing source rather than revenue. 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 profit. Bullion products are priced based on the market 

price of the precious metals plus a premium to cover manufacturing costs and profit. 

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 for the storage of goods for other federal entities and 

reimbursement 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. 

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 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 since 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. 

Mint owned platinum and silver is valued at the lower of cost or market using a weighted average inventory methodology. 

35 (Continued) 
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 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 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 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. 

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. 

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 

beneficiary organizations. These amounts are defined as "Surcharges." A surcharges payable is established for surcharges 

received but not yet paid to the beneficiary. 

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

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 beneficiary 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 beneficiary 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. 

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 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. 

Displays and Archives 

The United States Mint has a display area at each of its facilities and maintains archives at its headquarters in Washington, 

D.C. The displays and archives include valuable coins and commemoratives minted domestically and internationally and other 

artifacts related to minting operations. Most of these items are not included in balances reported in these financial statements. 

Records are maintained of all coins, commemoratives and valuable artifacts. Physical inspections are performed to assure 

accountability. 

Protection Costs 

Virtually all of the Treasury’s gold and silver reserves are 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. 

37 (Continued) 
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 two vendors at 

competitive market prices. 

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 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, which the United States Mint does not obligate until 

apportioned by OMB. These apportionments are considered budgetary resources. The United States Mint’s Budgetary 

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

amounts temporarily or permanently not available. 

Included in temporarily and permanently not available are transfers to the General Fund. Temporarily not available are 

circulating coin transfers to the General Fund that have been specifically set aside for possible release by OMB, however the 

United States Mint has no intent on acquiring these funds. Permanently not available are Numismatic coin transfers to the 

General Fund. 

38 (Continued) 
Note 2 Non-Entity Assets 

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

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

Custodial Silver Reserves (Deep Storage) 9,148 

Custodial Gold Reserves (Working Stock) 117,514 

Custodial Silver Reserves (Working Stock) 11,539 

Total Non-entity Assets 10,493,740 

Total Entity Assets 770,475 

Total Assets $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 its working stock gold and silver 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, Custodial 

Gold and Silver Reserves and Treasury 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: 

Revolving Fund $279,387 

Total Fund Balance with Treasury $279,387 

Status of Fund Balance with Treasury 

Unobligated Balance $124,323 

Obligated Balance, Not Yet Disbursed 155,064 

Total $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, 2005, the revolving fund balance includes $10.7 

million in restricted amounts for possible payment of surcharges and commissions to beneficiary organizations. 

Note 4 Accounts Receivable, Net 

Components of accounts receivable at September 30 are as follows: 

Gross Receivable Allowance Net Receivables 

Intragovernmental 

With the Public

Total Accounts Receivable

$58

15,030

$15,088

-

(130)

($130)

$58

14,900

$14,958

Intragovernmental accounts receivable represent amounts due from other federal agencies for products or services. 

Receivables with the public primarily consist of circulating coin shipments to the FRB and metal scrap and webbing 

sold to fabricators. 

39 (Continued) 
Note 5 Advances and Prepayments 

The components of advances and prepayments at September 30 are as follows:

Intragovernmental $4,114 

With the Public 1,612

Total Other Assets $5,726 

Intragovernmental advances and prepayments include $1.6 million that the United States Mint paid the Treasury Working 

Capital Fund (the 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 the construction contractors, which are other federal 

agencies. As of September 30, 2005, the balance for such payments was $2.2 million. 

Advances and Prepayments with the public consist primarily of advances for freight forwarding.

40 (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 31USC5117(b) and 31USC5116(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. 

Amounts and values of custodial gold and silver in the custody of the United States Mint at September 30 

are as follows: 

Gold - Deep Storage: 

Inventories (FTO) 245,262,897 

Market Value ($ per FTO) $473.25 

Market Value ($ in thousands) $116,070,666 

Statutory Value ($ in thousands) $10,355,539 

Gold - Working Stock: 

Inventories (FTO) 2,783,219 

Market Value ($ per FTO) $473.25 

Market Value ($ in thousands) $1,317,158 

Statutory Value ($ in thousands) $117,514 

Silver - Deep Storage: 

Inventories (FTO) 7,075,171 

Market Value ($ per FTO) $7.53 

Market Value ($ in thousands) $53,276 

Statutory Value ($ in thousands) $9,148 

Silver - Working Stock: 

 Inventories (FTO) 8,924,829 

Market Value ($ per FTO) $7.53 

Market Value ($ in thousands) $67,204 

Statutory Value ($ in thousands) $11,539 

Total Market Value of Custodial Gold and

 Silver Reserves ($ in thousands) $117,508,304 

Total Statutory Value of Custodial Gold and

 Silver Reserves ($ in thousands) $10,493,740

Note 7 Inventory and Related Property 

The components of inventories and related property at September 30 are summarized below: 

Raw Materials $50,434 

Work-In-Process 46,384 

Inventory held for current sale 66,857 

Inventory held in reserve for future sale 21,955 

Total Inventory and Related Property $185,630 

Raw materials consist of unprocessed materials and byproducts of the manufacturing process. Work-in-process consist of semifinished materials. Inventory held for current sale is finished goods inventories and inventory held in reserve for future sale 

consist of golden dollar coil.

41 (Continued) 
Note 8 Property, Plant and Equipment, Net 

Components of property, plant and equipment at September 30 are as follows:

Accumulated Total Property, 

Depreciation and Plant and 

Asset Cost Amortization Equipment, Net 

Land $2,529 - $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 - 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 year ended September 30 were $44.4 million . 

Note 9 Liabilities Not Covered by Budgetary Resources 

Components of Liabilities Not Covered by Budgetary Resources at September 30 are as follows:

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

Custodial Silver Reserves (Deep Storage) 9,148 

Working Stock Inventory-Gold 117,514 

Working Stock Inventory-Silver 11,539 

Total Liabilities Not Covered by Budgetary Resources $10,493,740 

Total Liabilities Covered by Budgetary Resources 112,951 

Total Liabilities $10,606,691 

Liabilities covered by budgetary resources include liabilities for which congressional action is not needed before budgetary 

resources can be provided. Liabilities not covered by budgetary resources are custodial liabilities to Treasury that are entirely 

offset by custodial gold and silver reserves held on behalf of the federal government. 

Note 10 Retirement Plans and Other Post-employment Costs (Imputed Financing) 

At the end of FY 2005, three hundred eighteen (318) United States Mint employees participated in the Civil Service 

Retirement System (CSRS), to which the United States Mint contributes 25.0 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 FY2005, FERS 

employees were allowed a maximum annual contribution of 15 percent of salary to a maximum of $14,000. 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. 

42 (Continued) 
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 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: 

Social Security System $8,456 

Civil Service Retirement System 1,524 

Federal Employees Retirement System 

(Retirement & Thrift Savings Plan) 14,987 

Total Retirement Plans and Other Post-employment Cost $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 factor relating to health benefits 

is $4,903 per employee enrolled in the Federal Employees Health Benefits Program. The cost factor relating to life insurance is 

two-one hundredths percent (.02%) of basic pay for employees enrolled in the Federal Employees Group Life Insurance 

Program. 

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): 

Health Benefits $8,050 

Life Insurance 22 

Pension Expense 2,681 

Total Imputed Cost $10,753 

43 (Continued) 
Note 11 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. Since all of the United 

States Mint’s leases are considered cancelable, there are no minimum lease payments due, and no footnote disclosure on future 

lease payments is required. 

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, 2005, the Mint sub-leased in 

excess of 135,000 square feet in two leased buildings. As of September 30, 2005, tenants include: the Internal Revenue 

Service, the Treasury Executive Institute, the Bureau of the Public Debt, the U.S. Customs Service and Border Protection, and 

the U.S. Marshals Service. All of the subleases are operating leases. 

Future Projected Receipts: 

(In Thousands) 

Fiscal Year Land and Buildings 

2006 $4,453 

2007 416 

2008 176 

2009 180 

2010 183 

After 2010 234 

Total Future Operating 

Lease Receivables $5,642 

Note 12 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 PEF. 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. 

For the past few years, the United States Mint disclosed in the Notes to the Financial Statements a contingent liability 

estimated at $32 million related to a class action case alleging discrimination and harassment at the Denver Mint. In early 

2006, the agency and the class reached a proposed tentative settlement of two cases for $9.3 million which has been accrued 

and presented with accounts payables as of September 30, 2005. The tentative settlement for one of the cases totaling $8.99 

million was subject to a fairness review by the Equal Employment Opportunity Commission. On August 23, 2006, the EEOC 

Administrative Judge approved the settlement agreement as a fair and just resolution of the matter.

44 (Continued) 
Note 13 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 costs by program.” 

45 (Continued) 
NUMISMATIC PRODUCTION AND SALES

 Cost: 

Intragovernmental: 

Selling, General and Administrative $22,405 

Imputed Costs 1,075 

Total Intragovernmental Costs 23,480 

Public: 

Cost of Goods Sold 443,409 

Selling, General and Administrative 57,183 

Total Public Cost 500,592 

Gross Cost 524,072

 Revenue: 

Intragovernmental: 

Less Rent Revenues 6,533 

Less Other Intragovernmental Revenues 93 

Total Intragovernmental Revenue 6,626 

Public 596,170 

Total Earned Revenue 602,796 

Net Program Revenue (78,724) 

CIRCULATING PRODUCTION AND SALES

 Cost:

Intragovernmental: 

Selling, General and Administrative 32,529 

Imputed Costs 9,678 

Total Intragovernmental Costs 42,207 

Public:

Cost of Goods Sold 336,209 

Selling, General and Administrative 53,412 

Other Costs and Expenses (Mutilated) 13,618 

Total Public Cost 403,239 

Gross Cost 445,446

 Revenue: 

Public 445,446 

Total Earned Revenues 445,446 

Net Program Revenue -

Net Revenue Before Protection of Assets (78,724) 

PROTECTION OF ASSETS 

Public: 

Protection Cost 37,543 

Total Earned Revenues (107) 

Net Cost of Protection of Assets 37,436 

Net Revenue from Operations ($41,288) 

46 (Continued) 
Note 14 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 

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). Other 

financing sources (Seigniorage) is returned to the Treasury General Fund as an off-budget receipt. 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: 

Revenue-FRB $445,446 

Other Financing Sources (Seigniorage)-FRB 699,398 

Total Circulating Coins $1,144,844 

Revenue-with the public $14,575 

Other Financing Sources (Seigniorage)-with the public 23,288 

Total Numismatic Sales of Circulating Coins $37,863 

Note 15 Related Parties 

The United States Mint is subject to management control by the Secretary of the Treasury. 

The United States Mint shipped approximately $1.1 billion in coins to the Federal Reserve Banking System in FY 2005. 

Numismatic checks and credit card orders are processed by a commercial bank. Fees associated with these services are 

absorbed by the Treasury and are not reflected in the United States Mint’s financial statements. 

Note 16 Apportionment Categories of Obligations Incurred 

The United States Mint receives apportionments of its resources from the OMB. An apportionment is a plan, approved by 

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. The 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. 

Details of Obligations Incurred as of September 30 are as follows: 

(in thousands) 

Reimbursable:

 Category B

 Total Operating Expenses $1,028,540

 Numismatic Capital 5,744

 Circulating and Protection Capital 13,806 

Total Apportionment Categories of Obligations Incurred $1,048,090 

47 (Continued) 
Note 17 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 was published in February 2006 and made available through OMB. 

The President's Budget submission was based on estimates. The Mint prepared the Statement of Budgetary Resources based 

on actual documentation that better reflects the status of the Mint's budgetary resources. 

Statement of 

Budgetary President's 

United States Mint Public Enterprise Fund Resources Budget 

Total Budgetary Resources $1,172,413 $1,051,255 

Status of Budgetary Resources:

 Obligations Incurred 1,048,090 989,369

 Unobligated Balances-available 124,323 61,886 

Total Status of Budgetary Resources $1,172,413 $1,051,255 

Net Outlays ($1,839) ($1,839) 

Note 18 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. In FY 2005, the United States Mint transferred a total of 

$775 million in excess receipts to the Treasury General Fund. 

Note 19 Collections and Subsequent Events

Subsequent to year-end, circulating transfers of $730 million to the General Fund were excluded from collections in the 

Statement of Budgetary Resources and Statement of Financing to conform with and to be consistent with the Department of 

Treasury reporting of Seigniorage. 

Note 20 Custodial Activity 

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, that 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. 

48
 
KPMG LLP 

2001 M Street, NW 

Washington, DC 20036 

Independent Auditors’ Report on Internal Control over Financial Reporting 

Inspector General 

United States Department of the Treasury: 

Director 

The United States Mint: 

We have audited the accompanying balance sheet of the United States Mint (Mint) as of 

September 30, 2005 and the related statements of net cost, changes in net position, financing, and custodial 

activity, and the combined statement of budgetary resources, for the year then ended, and have issued our 

report thereon dated June 16, 2006, except as to note 19, which is dated November 3, 2006. We conducted 

our audit 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. 01-

02, Audit Requirements for Federal Financial Statements. 

In planning and performing our fiscal year 2005 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. 01-02. 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 assurance on the Mint’s internal control over 

financial reporting. Consequently, we do not provide an opinion thereon. 

Our consideration of 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, in amounts that 

would be material in relation to the financial statements being audited, 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 any internal control, misstatements due to error or fraud may occur and not be 

detected. 

49 

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

member firm of KPMG International, a Swiss cooperative. 
In our fiscal year 2005 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. 

Additional Required Procedures 

As required by OMB Bulletin No. 01-02, with respect to internal control related to performance measures 

determined by management to be key and reported in the Management Discussion and Analysis section, we 

obtained an understanding of the design of significant internal controls relating to the existence and 

completeness assertions. Our procedures were not designed to provide assurance on internal control over 

reported performance measures and, accordingly, we do not provide an opinion thereon.

* * * * * 

We noted certain additional matters that we reported to the management of the Mint in a separate letter 

dated November 3, 2006. 

This report is intended solely for the information and use of the Mint’s management, the U.S. Department 

of the Treasury’s Office of Inspector General, OMB, the 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. 

June 16, 2006 

50 
Exhibit I 

THE UNITED STATES MINT 

Reportable Condition 

September 30, 2005 

Improvement is needed in Financial Accounting and Reporting 

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. During 

our audit, 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. We noted that a small 

core group has assumed responsibility for preparing the interim and final financial statements, developing yearend 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 subsidiary information that reconciles to the general ledger and some 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 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 request from the Office of Corporate Accounting. 

51 (Continued) 
Exhibit I 

THE UNITED STATES MINT 

Reportable Condition 

September 30, 2005 

Financial Management Oversight 

Monitoring the effectiveness of internal control should occur in the normal course of business. 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. 

During our audit, 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 its 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. 

We also noted instances where the Mint incorrectly applied accounting standards (for example, revenue 

recognition for consignment sales and asset capitalization), due to inadequate oversight by individuals who have 

been assigned authority to perform management review functions. Also, there are no formal policies and 

procedures that require reconciliations and journal entries to be signed-off by the preparer or reviewer. In 

addition, some Mint personnel were 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 

Property, Plant and Equipment Management 

The Mint did not implement sufficient internal controls to ensure that property, plant and equipment were 

adequately safeguarded from loss and properly accounted for. Internal control should be designed to provide 

reasonable assurance regarding prevention or prompt detection of unauthorized acquisition, use or disposition of 

assets. 

During fiscal year 2005, we noted that the Mint conducted an annual physical inventory of property, plant and 

equipment, and was unable to physically locate 301 items totaling approximately $99,398, primarily information 

technology equipment, at Headquarters. 

We also noted that the current procedures and internal controls do not provide adequate assurance that all capital 

assets are properly reported in the financial statements. Specifically, we noted the following: 

•	 Construction-in-progress (CIP) includes certain research and development costs that should not be 

capitalized, and costs for projects that were determined to be completed. 

•	 “Assets held in stock” categories include certain assets that are actually in use and should be included in 

the appropriate property, plant and equipment category and depreciated. 

•	 Property, plant and equipment include assets that are not yet received and should be included in “Advances 

and Prepayments”. 

• Property, plant and equipment include certain transactions which should have been expensed (example, 

items below the capitalization threshold and repairs and maintenance items). 

52	 (Continued) 
Exhibit I 

THE UNITED STATES MINT 

Reportable Condition 

September 30, 2005 

•	 Property, plant and equipment include items which are no longer being used. 

•	 Property, plant and equipment include items that were not categorized in the proper category. 

•	 Assets physically inspected were not included in property, plant and equipment, as they did not have a 

property identification number. 

Budgetary Resources Accounting 

The Mint has historically used accounting standards issued by the Financial Accounting Standards Board 

(FASB) and not by the Federal Accounting Standards Advisory Board (FASAB) as the guidance for preparing its 

financial statements through fiscal year 2004. For fiscal year 2005, the Mint’s management elected to adopt and 

prepare its financial statements in accordance with FASAB accounting standards, 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 FASB accounting 

standards, 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 to ensure compliance with the 

Federal Financial Management Improvement Act of 1996 (FFMIA). 

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. For fiscal year 2005, the Mint had to use a manual process to determine the 

budgetary balances, as they do not have an integrated system to track and govern the status of obligations. 

However, the use of a manual process subjects the Mint’s overall funds control objective to significant control 

risk. Therefore, the Mint must have an automated funds control system to monitor and control the budgetary 

resources process. 

Recommendations: 

We 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 reconciliation and other 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. 

53	 (Continued) 
Exhibit I 

THE UNITED STATES MINT 

Reportable Condition 

September 30, 2005 

6.	 Perform an extensive physical inventory of its property, plant and equipment at all locations to identify 

assets without property identification number. Further, the policies and procedures over purchasing fixed 

assets should be strengthened to ensure that all assets are assigned a property identification number 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.	 Implement and follow existing Mint policies and procedures, including production facilities quality control 

procedures, to ensure that property, plant and equipment only includes costs for items meeting the 

definition of capitalizable general property, plant and equipment. 

9.	 Establish an internal review process that requires a supervisor to systematically review the transactions 

recorded in the Asset Management module of PeopleSoft timely. This will ensure that property, plant and 

equipment are properly capitalized and errors are identified and correctly timely.

10.	 Develop and implement a general ledger system that 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.	 Implement integrated systems controls as soon as it practical to record obligations as incurred and manage 

funds control at the transaction level. In the interim, the Mint should develop Mint-wide policies and 

procedures for management to perform adequate review of all obligations, which will help to ensure that 

balances are accurately and timely adjusted on a monthly basis. The process 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. 

54
 
Exhibit II

55
KPMG LLP 

2001 M Street, NW 

Washington, DC 20036

Independent Auditors’ Report on Compliance and Other Matters 

Inspector General 

United States Department of the Treasury: 

Director 

The United States Mint: 

We have audited the accompanying balance sheet of the United States Mint (Mint) as of 

September 30, 2005 and the related statements of net cost, changes in net position, financing, and custodial 

activity, and the combined statement of budgetary resources for the year then ended, and have issued our 

report thereon dated June 16, 2006, except as to note 19, which is dated November 3, 2006. We conducted 

our audit 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. 01-

02, Audit Requirements for Federal Financial Statements. 

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 fiscal year 2005 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 financial statement amounts, and certain provisions of other laws and 

regulations specified in OMB Bulletin No. 01-02, 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 laws, regulations, 

and contracts 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, regulations, and contracts 

discussed in the second 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. 01-02. 

Under OMB Bulletin No. 01-02 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 at the transaction level. To meet this requirement, we performed tests of compliance with FFMIA 

Section 803(a) requirements. 

56 

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

member firm of KPMG International, a Swiss cooperative. 
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 United States Government Standard General 

Ledger at the transaction level.

The Mint has historically prepared its financial statements in accordance with accounting standards issued 

by the Financial Accounting Standards Board (FASB). However, after fiscal year 2005, the Mint adopted 

and prepared its financial statements in accordance with accounting standards issued by the Federal 

Accounting Standards Advisory Board (FASAB). 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 FASB and not FASAB 

accounting standards and accordingly does not include budgetary accounts. We recommend that the 

United States Mint develop and implement a general ledger system that fully uses the United States 

Government Standard General Ledger 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’s Office of Inspector General, OMB, the 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. 

June 16, 2006 

57