U.S. CURRENCY

Coin Inventory 

Management Needs 

Better Performance 

Information

Report to Congressional Requesters

October 2013

GAO-14-110

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-110, a report to 

congressional requesters

October 2013

U.S. CURRENCY

Coin Inventory Management Needs Better

Performance Information

Why GAO Did This Study

Efficiently managing the circulating 

coin inventory helps ensure that 

enough coins are available to meet

public demand while avoiding 

unnecessary production and storage 

costs. The Federal Reserve fulfills the 

coin demand of the nation’s depository 

institutions (e.g., commercial banks 

and credit unions) by managing 

Reserve Bank inventory and ordering 

new coins from the U.S. Mint. GAO 

was asked to review this approach.

This report examines (1) how the 

Federal Reserve manages the 

circulating coin inventory and the 

related costs, (2) the extent to which 

the Federal Reserve follows key

practices in managing the circulating 

coin inventory, (3) actions taken to 

respond to potential changes in 

demand for coins and notes, and (4) 

actions taken with regard to the 

circulation of the $1 coin. GAO 

interviewed federal and foreign 

officials, experts, and industry 

representatives; reviewed documents 

and data on coin inventories; and 

compared the Federal Reserve’s coin 

inventory management practices to key 

practices in supply chain management. 

What GAO Recommends

Among other things, the Federal 

Reserve should (1) develop a process 

to assess factors influencing coin 

operations costs and identify practices 

that could lead to cost-savings and (2)

establish additional performance goals 

and metrics relevant to coin inventory

management. The Federal Reserve 

generally agreed with the report’s 

recommendations.

What GAO Found

In 2009, the Federal Reserve centralized coin management across the 12 

Reserve Banks, established national inventory targets to track and measure the 

coin inventory, and in 2011 established a contract with armored carriers that 

store Reserve Bank coins in their facilities. However, according to Federal 

Reserve data, from 2008 to 2012, total annual Reserve Bank coin management 

costs increased by 69 percent and at individual Reserve Banks increased at 

rates ranging from 36 percent to 116 percent. The Federal Reserve’s current

strategic plan calls for using financial resources efficiently and effectively and 

monitoring costs to improve cost-effectiveness. However, the agency does not 

monitor coin management costs by each Reserve Bank—instead focusing on 

combined national coin and note costs—thus missing potential opportunities to 

improve the cost-effectiveness of coin-related operations across Reserve Banks.

In managing the circulating coin inventory, the Federal Reserve followed two of 

five key practices GAO identified and partially followed three. For example, the 

Federal Reserve follows the key practice of collaboration because it has

established multiple mechanisms for sharing information related to coin inventory 

management with partner entities. The Federal Reserve has developed some 

performance metrics in the form of upper and lower national coin inventory 

targets. However, it has not developed other goals or metrics related to coin 

supply-chain management. One key practice is for agencies to identify goals, 

establish performance metrics, and measure progress toward those goals.

Establishing goals and metrics, such as those related to coin management costs,

could aid the Federal Reserve in using information and resources to identify 

additional efficiencies. 

To collect information on potential changes in the demand for currency (coins 

and notes), the Federal Reserve has conducted studies and outreach, including 

developing a long-term strategic framework beginning in 2010 to consider 

changes in demand and implications for operations. While the magnitude of 

potential changes in the demand for currency is inherently uncertain, the Federal 

Reserve anticipates a gradual decline in currency use, and officials reported such 

changes could likely be accommodated by the current system. While Federal 

Reserve studies and data indicate electronic payments have increased over time, 

currency usage has remained strong. For example, from 2009 to 2012, the value 

of currency in circulation rose about 26 percent.

Starting in 2007, the Federal Reserve took actions to overcome barriers to 

circulation of the $1 coin, such as holding regular meetings with depository 

institution representatives to gather feedback about demand for $1 coins. The 

Federal Reserve manages the $1 coin inventory as it does for all other coin 

denominations—overseeing distribution and ensuring sufficient supply is 

available to meet demand nationwide. Reserve Banks currently hold 

approximately $1.4 billion in $1 coins, an amount that, according to the Federal 

Reserve, is sufficient to meet demand for more than 40 years. Reserve Bank 

officials, depository institution representatives, and coin terminal operators stated 

that $1 coins are readily available to the public throughout the country, but there 

is very low public demand for these coins.

View GAO-14-110. For more information, 

contact Lorelei St. James at (202) 512-2834 

or stjamesl@gao.gov.
Page i GAO-14-110 U.S. Currency

Letter 1

Background 4

Inventory Management Has Been Centralized; Rising Costs Have 

Not Been Analyzed 9

The Federal Reserve Follows Some Key Practices in Managing the 

Circulating Coin Inventory but Lacks Performance Information 

for Additional Metrics and Forecasting 20

Demand for Currency Expected to Decline Gradually in the Near 

Term, but a Variety of Factors Make Predicting Longer-Term 

Change Difficult 27

The Federal Reserve Is Managing the Existing $1 Coin Inventory, 

Took Steps to Meet Demand for Circulation, and Plans No 

Future Action 32

Conclusions 37

Recommendations for Executive Action 38

Agency Comments 38

Appendix I Objectives, Scope, and Methodology 41

Appendix II Data and Figures on Coin and Note Inventory, Orders, 

and Circulation 46

Appendix III Discussion of Key Practices for Managing the Coin Inventory 57

Appendix IV Comments from the Federal Reserve 63

Appendix V GAO Contact and Staff Acknowledgments 64

Tables

Table 1: Key Practices for Managing the Circulating Coin 

Inventory 20

Table 2: Organizations and Individuals Interviewed 42

Table 3: Collaboration and Supporting Characteristics 58

Contents
Page ii GAO-14-110 U.S. Currency

Table 4: Risk Management and Supporting Characteristics 59

Table 5: Performance Metrics and Supporting Characteristics 60

Table 6: Forecasting Demand and Supporting Characteristics 61

Table 7: System Optimization and Supporting Characteristics 62

Figures

Figure 1: Map of Federal Reserve Bank Districts and Offices that 

Provide Coin Services 5

Figure 2: Production and Circulation of Coins 7

Figure 3: Reserve Bank Coin Inventory, 2008–2012 11

Figure 4: The CPO’s Process for Developing Monthly Coin Orders 14

Figure 5: Value of New Coin Orders by Denomination, 2008–2012 15

Figure 6: Reserve Bank Costs Related to Coin and Notes, 

2008–2012 18

Figure 7: Currency in Circulation and Examples of Changes in 

 Non-Currency Payments 29

Figure 8: $1 Coin Inventory, Net Pay, and New Coin Orders, 

2007–2012 34

Figure 9: Reserve Bank Inventories of Quarters, 2009–2012, and 

National Inventory Targets, 2009–2013 46

Figure 10: Reserve Bank Inventory of Dimes, 2009–2012, and 

National Inventory Targets, 2009–2013 47

Figure 11: Reserve Bank Inventory of Nickels, 2009–2012, and 

National Inventory Targets, 2009–2013 48

Figure 12: Reserve Bank Inventory of Pennies, 2009– 2012, and 

National Inventory Targets, 2009– 2013 49

Figure 13: Monthly Reserve Bank Payments to and Receipts from 

 Depository Institutions for All Denominations, March 

 2009–March 2013 50

Figure 14: Reserve Bank Quarter Inventories, Net Pay, and New 

 Coin Orders, 2009–2012 51

Figure 15: Reserve Bank Dime Inventories, Net Pay, and New Coin 

 Orders, 2009–2012 52

Figure 16: Reserve Bank Nickel Inventories, Net Pay, and New 

 Coin Orders, 2009–2012 53

Figure 17: Reserve Bank Penny Inventories, Net Pay, and New 

Coin Orders, 2009–2012 54

Figure 18: Total Reserve Bank Coin Management Costs, 2009–2012 55

Figure 19: Number and Cost of Interbank Coin Shipments, 

 2009–2012 55

Figure 20: Value of Notes in Circulation, 2009–2012 56
Page iii GAO-14-110 U.S. Currency

Abbreviations

BEP Bureau of Engraving and Printing

COSO Committee of Sponsoring Organizations of the Treadway 

 Commission

CPO Cash Product Office

GPRA Government Performance and Results Act

GPRAMA GPRA Modernization Act of 2010

 

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-14-110 U.S. Currency

441 G St. N.W.

Washington, DC 20548

October 28, 2013

Congressional Requesters:

Efficiently managing the nation’s inventory of circulating coins helps to 

ensure that the coin supply meets the public’s demand while avoiding 

unnecessary production and storage costs. Efficient inventory 

management includes anticipating changes in future demand for coins 

and notes—collectively referred to as currency—in light of factors such as 

increased electronic payment options and changing economic conditions. 

The Federal Reserve System’s 12 Federal Reserve Banks (Reserve 

Banks) fulfill the coin demand of the nation’s depository institutions (e.g., 

commercial banks, federal savings associations, and credit unions) by 

managing coins held in inventory and ordering new coins from the United 

States Mint (U.S. Mint). In 2012, the U.S. Mint produced 9.1 billion coins. 

According to the Department of the Treasury (Treasury), coins worth 

approximately $42 billion were in circulation at the end of 2012. Reserve 

Banks hold a portion of these coins in storage, including approximately 

1.4 billion in $1 coins.1

In 2009 the Reserve Banks implemented a new, centralized approach to 

the management of the circulating coin inventory. You asked us to review 

the Federal Reserve’s management of the circulating coin inventory and 

future demand for coins and notes.2

 1

The total amount of coins in circulation is comprised of coins held by the Reserve Banks 

and coins in general circulation (e.g., coins held by businesses or the public). 

This report addresses the following 

questions: (1) How does the Federal Reserve manage the circulating coin 

inventory and what are the coin management costs? (2) To what extent 

does the Federal Reserve follow key supply-chain management practices 

in managing the circulating coin inventory? (3) What actions has the 

Federal Reserve taken to respond to potential changes in demand for 

coins and notes? (4) What actions has the Federal Reserve taken with 

regard to the circulation of the $1 coin, and what more, if anything, could 

it do?

2

For the purposes of this report, the term “Federal Reserve” refers to the Board of 

Governors of the Federal Reserve System as well as the Reserve Banks.
Page 2 GAO-14-110 U.S. Currency

To address the first question, we reviewed documentation from and 

interviewed officials from the Federal Reserve and U.S. Mint. We also 

met with industry stakeholders (e.g., depository institution representatives 

and coin terminal operators) and academic experts to discuss their views 

on the management of the circulating coin inventory. To assess 

management operations related to the circulating coin inventory, we used 

the Federal Reserve’s Strategic Framework 2012–2015 and the 

Committee of Sponsoring Organizations of the Treadway Commission’s 

(COSO) Internal Control—Integrated Framework.3

To address the second question, we developed and validated criteria to 

assess the Reserve Banks’ management of the circulating coin inventory 

with stakeholders’ and experts’ input. We worked with industry experts to 

identify a selection of key practices for supply chain management that are 

relevant to coin inventory management.

In addition, from the

Reserve Banks we obtained and analyzed coin inventory and production 

data from 2004 through 2012 and currency management cost data from 

2008 through 2012. We took steps to assess the reliability of data used, 

such as interviewing knowledgeable agency officials, and determined that 

the data were sufficiently reliable for the purposes of this report.

4 The five key practices we 

identified were collaboration, risk management, performance metrics, 

forecasting demand, and system optimization.

5

 3

Committee of Sponsoring Organizations of the Treadway Commission, Internal Control—

Integrated Framework (1992). COSO is a joint initiative of five professional associations 

dedicated to providing thought leadership through the development of frameworks and 

guidance on enterprise risk management, internal control, and fraud deterrence. 

Establishing, 

documenting, and following these practices is considered important to 

effective inventory management. For each of these key practices, we 

selected the individual supporting characteristics most relevant to coin 

inventory management. To understand the Federal Reserve’s coin 

inventory management practices, we interviewed Federal Reserve and 

4

While there are many other leading supply-chain management practices and supporting 

characteristics, we selected and validated a sample of those most relevant to our review. 

In addition, academic and industry experts in operations and supply chain management 

validated that the selected key practices, definitions, and supporting characteristics were 

relevant to coin inventory management. 

5

We reviewed supply-chain-management and operations-management leading practices, 

our past defense inventory management and Government Performance and Results Act 

reports, and academic literature to identify those practices applicable to the circulating 

coin inventory. Selected experts and foreign government officials reviewed and validated 

that the five key practices identified were relevant to coin inventory management. 
Page 3 GAO-14-110 U.S. Currency

U.S. Mint officials and industry stakeholders. We then compared the 

Federal Reserve’s coin-inventory management practices to the selected 

key supply-chain management practices. For each key practice, we 

assessed whether the Federal Reserve was following or substantially 

following the supporting characteristics (i.e., plans, policies, or processes 

have been developed and implemented properly for all or nearly all of the 

supporting characteristics), partially following (i.e., plans, policies, or 

processes have been developed and implemented properly for some of 

the supporting characteristics), or minimally or not following them (i.e., 

plans, policies, or processes are lacking for all or nearly all of the 

supporting characteristics). Thus, the individual assessments for each 

supporting characteristic served as the basis for the overall assessment 

for each key practice.

To address our third and fourth questions, we obtained perspectives on 

potential changes in coin and note demand, as well as the availability and 

use of $1 coins from officials from the Federal Reserve and U.S. Mint, 

and Bureau of Engraving and Printing (BEP) as well as industry 

stakeholders and academic experts. In addition, we interviewed 

government officials in Australia, Austria, and Canada to obtain their 

perspectives on the leading practices in coin inventory management and 

potential changes in future coin and note demand. We selected these 

countries for illustrative purposes because they had replaced low 

denomination notes with coins and implemented coin-inventory 

management process improvements. These countries are not intended to 

be used for direct comparisons to the Federal Reserve’s management of 

the circulating coin inventory. For more detailed information on our 

objectives, scope, and methodology, see appendix I.

We conducted this performance audit from March 2013 through October 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Page 4 GAO-14-110 U.S. Currency

The Federal Reserve System is composed of an independent 

government agency—the Board of Governors (Board)—and 12 regional 

Reserve Banks, each of which is located in a Federal Reserve district. 

(See fig. 1.) The Board is responsible for maintaining the stability of 

financial markets, supervising financial institutions such as bank holding 

companies and the U.S. operations of foreign banking organizations, and 

supervising the operations of the Reserve Banks. Unlike the Board, the 

Reserve Banks are not federal agencies. Each Reserve Bank is a 

federally-chartered corporation with a board of directors. Unlike federal 

agencies funded through congressional appropriations, the Board and 

Reserve Banks are self-funded entities that engage in a variety of 

activities that generate revenue, such as earnings from lending to 

financial institutions.6 The Federal Reserve deducts its costs from these 

revenues and transfers the remaining amount to the General Fund of the 

U.S. Treasury (General Fund).7

 6

Funds derived from assessments imposed by the Board are not to be considered 

governmental funds or appropriated monies. 12 U.S.C. § 244. 

In 2012, the Federal Reserve transferred 

$88.4 billion to the General Fund. Federal Reserve revenues contribute to 

total U.S. government revenues, and therefore, if its costs can be 

reduced—such as through more efficient coin-inventory management—

more of its revenue could potentially be contributed to the General Fund.

7

The General Fund refers to Treasury accounts that hold federal receipts not allocated by 

law for a specific purpose and includes money collected from taxes, customs duties, and 

revenues generated by government agencies. 

Background

Roles and Responsibilities
Page 5 GAO-14-110 U.S. Currency

Figure 1: Map of Federal Reserve Bank Districts and Offices That Provide Coin Services

The Reserve Banks carry out a variety of functions for the Federal 

Reserve, including ensuring that coins and notes are available in 

quantities sufficient to meet the public’s needs. The 12 Reserve Banks 

provide coins and notes to depository institutions, among other 

responsibilities. The Federal Reserve’s Cash Product Office (CPO) 

manages the Reserve Banks’ coin inventory from a national perspective, 

working closely with the Reserve Banks. For example, CPO places 
Page 6 GAO-14-110 U.S. Currency

monthly orders for new coins with the U.S. Mint on behalf of the Reserve 

Banks.

Other entities, including the U.S. Mint, coin terminal operators—armored 

carrier companies such as Brink’s and Dunbar, that hold both Reserve 

Bank and other customers’ coins in their facilities—and depository 

institutions play a role in issuing or managing the circulation and

distribution of coins. (See fig. 2.) For coins, the Treasury’s U.S. Mint is the 

issuing authority. The U.S. Mint is financed through a revolving fund and 

generates revenue through various means including the sale of circulating 

coins at face value to the Reserve Banks.8 Revenue in excess of costs—

including all costs allocable to the U.S. Mint’s circulating coin program—is 

transferred to the General Fund.9 U.S. Mint facilities in Philadelphia and 

Denver produce and ship new coins for circulation to Reserve Bank 

offices and coin terminals. Approximately 170 coin terminals are operated 

by 15 armored carrier companies. Coin terminal operators receive 

deposits from and fulfill orders of coins for depository institutions on 

behalf of the Reserve Banks and other customers. As we have previously 

reported, coin terminals operate at no cost to the government because 

while they maintain Reserve Bank coin inventories at no charge, they 

earn revenue from other customers—depository institutions—from the 

coin transportation and wrapping services they provide.10

 8

The revolving fund of the U.S. Mint is financed through the U.S. Mint Public Enterprise 

Fund. The difference between the face value of minted circulating coins and the cost of 

their production, including the cost of metal used in the minting and the cost of 

transporting the coins to Reserve Banks for distribution to the public is referred to as 

“seigniorage.” 

Depository 

institutions order coins from the Reserve Banks—through an online 

ordering system called FedLine operated by the Reserve Banks—to meet 

retailers’ and the public’s demand; depository institutions’ coin orders are 

fulfilled with new and circulated coins held at Reserve Bank offices or coin 

terminals. Depository institutions can deposit coins with Reserve Banks

when they have more coins than needed to fulfill demand. Depository 

9

In its 2012 Annual Report, the U.S. Mint reported an on-budget transfer of $77 million to 

the General Fund for fiscal year 2012. However, the U.S. Mint did not make off-budget 

transfers to the General Fund in 2012 because it determined that amounts resulting from 

the sale of circulating coins were required to mitigate the risks of future economic 

uncertainty, impacts from continued penny and nickel losses, and loss of revenue from the 

suspension of $1 coin production. 

10GAO, U.S. Coins: The Federal Reserve Banks Are Fulfilling Coin Demand, but Optimal 

Inventory Ranges Are Undefined, GAO-08-401 (Washington, D.C.: Mar. 21, 2008).
Page 7 GAO-14-110 U.S. Currency

institutions contract with armored carriers to wrap and deliver the coins to 

them, ultimately providing these coins to retailers and the general public.

Figure 2: Production and Circulation of Coins

The circulating coin inventory consists of coins held by Reserve Banks—

both in Reserve Bank offices and coin terminals—and those coins in 

general circulation for public use.11

 11Circulating coins are available to the public (e.g., for general use in commerce), and are 

distinguished from coins produced and sold as collectibles. 

In 2012, Reserve Banks held about 5 

percent ($2.1 billion) of the circulating coin inventory, and 95 percent ($42 

billion) of the inventory was in general circulation. As of December 2012, 

the 28 Reserve Bank offices held about 50 percent of the Reserve Banks’

total coin inventory of pennies, nickels, dimes, and quarters and about 92 

percent of the Reserve Banks’ total coin inventory of $1 coins. The 170 

coin terminals held the remainder of the Reserve Bank’s coin inventory.
Page 8 GAO-14-110 U.S. Currency

Based on the Board’s statutory authorities, it is responsible for note 

issuance, distribution, and processing.12 For example, the Board is the 

issuing authority for notes and is also responsible for distributing and 

authenticating notes. The Treasury’s BEP produces notes to meet the 

Board’s annual note order. According to the Treasury, at the end of 2012, 

approximately $1.1 trillion in notes were in circulation and approximately 

$228 billion in notes were held by the Reserve Banks. In 2012, BEP 

production accounted for about 32 percent of the circulating note 

inventory. This is due, in part, to the amount of new notes that need to be 

replaced each year because they are worn or no longer fit for circulation. 

The Reserve Banks manage the note inventory through 28 noteprocessing centers and 10 note distribution locations. CPO also has a 

role in providing note services, including processing. Similar to the 

distribution process for coins, depository institutions order notes from the 

Reserve Banks through FedLine, and then place these notes in 

circulation to meet the demand of retailers and the public. The Federal 

Reserve also contracts with armored carriers to transport notes for 

circulation or storage. When notes are returned by depository institutions 

as deposits to the Reserve Banks, each note is processed to determine 

its quality and authenticity; coins do not undergo similar processing. 

During processing, worn and counterfeit notes are removed from 

circulation, and the rest are wrapped for storage or re-circulation.

The Reserve Banks are responsible for ensuring the efficient distribution 

and circulation of coins, including the $1 coin, which co-circulates with the 

$1 note. Legislation has been introduced in Congress to eliminate the $1 

note and replace it with the $1 coin.13 In 2012, we reported that the 

federal government would receive $4.4 billion net benefits over 30 years if 

Congress decided to replace the $1 note with the $1 coin.14

 1212 U.S.C. §§ 411 and 414.

This most 

recent savings estimate is lower than the results of our previous similar 

13S. 1105, the Currency Optimization, Innovation, and National Savings Act. 

14GAO, U.S. Coins: Benefits and Considerations for Replacing the $1 Note with a $1 Coin, 

GAO-13-164T (Washington, D.C.: Nov. 29, 2012). GAO-13-164T assumed a lower 

replacement ratio than past GAO reports assessing the impacts of replacing the $1 note.

In addition, the life of the note has increased with new processing equipment. 

$1 Coin
Page 9 GAO-14-110 U.S. Currency

analyses, in part, because the life of the $1 note has increased.15 The 

Presidential $1 Coin Act of 2005 requires the Federal Reserve and the 

Secretary of the Treasury to assess and submit an annual report to the 

Congress on the obstacles to the efficient and timely circulation of $1 

coins, among other things.16 As we have previously found, while 

Congress sought to increase the circulation of the $1 coin in recent years, 

circulation has remained limited, in part, because the $1 note has 

remained in circulation.17

Since 2009, the Federal Reserve has made changes to its coin inventory 

management that includes centralizing the coin management system and 

establishing a contract with coin terminal operators.18

Introduced in 2009, the National Coin Inventory Management program 

centralized the management of the circulating coin inventory under the 

CPO so that the coin inventory would be consistently managed across the 

12 Reserve Bank districts. Previously, each Reserve Bank office set and 

managed its own inventory levels, resulting in varying levels of inventory 

 15In commenting on this report, Federal Reserve officials noted that previous GAO 

analyses and the associated potential savings were due to increased seigniorage income 

and not to production costs savings. Additionally, they noted that other societal costs and 

benefits—such as costs related to transitioning to $1 coins—were not included in GAO’s 

analysis.

16Pub. L. No. 109-145, § 104, 119 Stat. 2664, 2670 (2005), codified at 31 U.S.C. § 

5112(p). 

17GAO, U.S. Coins: Replacing the $1 Note with a $1 Coin Would Provide a Financial 

Benefit to the Government, GAO-11-281 (Washington, D.C.: Mar. 4, 2011). 

18For more information on earlier Reserve Bank coin management practices see 

GAO-08-401. 

Inventory 

Management Has 

Been Centralized; 

Rising Costs Have Not 

Been Analyzed

Coin Inventory 

Management

Centralized Coin Management
Page 10 GAO-14-110 U.S. Currency

held relative to demand. Under the centralized approach, CPO manages 

the distribution of coin inventory, orders new coins, and acts on behalf of 

the Reserve Banks in working with stakeholders.

The centralized approach to coin inventory management was set up to 

increase the efficiency of the coin distribution process. Since 2009, 

Reserve Bank inventories for pennies, nickels, dimes, and quarters have 

decreased due in part to the centralized program. In particular, from 2008 

through 2012, the combined inventory for pennies, nickels, dimes, and 

quarters decreased 43 percent.19

 19From 2004 to 2008, Reserve Bank combined inventory for pennies, nickels, dimes, and 

quarters was on average about $700 million per year. Information on the inventory of $1 

coins is presented later in this report. 

(See fig. 3.) CPO officials have 

attributed these decreases in inventory and coin orders to the 2009 

introduction of CPO management of the coin inventory but other factors 

may have also contributed to the decrease, such as the 2007–2009 

financial crisis and recession, which may have affected the public’s 

demand for coins.
Page 11 GAO-14-110 U.S. Currency

Figure 3: Reserve Bank Coin Inventory, 2008–2012

As part of the centralized approach to inventory management, in 2009, 

CPO established national upper and lower inventory targets for pennies, 

nickels, dimes, and quarters to track and measure the coin inventory.

CPO officials noted that these targets help meet their primary goal in 

managing the nation’s coin inventory: ensuring a sufficient supply of all 

coin denominations to meet the public’s demand. The upper national 

inventory target serves as a signal for CPO to reduce future coin orders 

from the U.S. Mint to avoid the risk of approaching coin-storage capacity 

limits and the lower national inventory target serves as a signal to CPO 
Page 12 GAO-14-110 U.S. Currency

that there is a need to increase future coin orders to avoid shortages.20

According to CPO officials, they view falling below the lower targets as 

more problematic than exceeding the higher targets because the lower 

targets are designed to guard against the more serious risk of not having 

enough coin to meet demand. We analyzed national inventory targets 

from 2009 to 2012 and found that in most cases the national inventory 

targets were met. However, inventory exceeded the upper inventory 

targets in 2009 for nickels and quarters; in 2010 for nickels, dimes, and 

quarters; and in 2011 for quarters.21 In addition, the national inventory for 

pennies was 7 percent below the lower targets in 2012.22

In addition to considering nationwide coin inventory, CPO reviews the 

daily inventories of the 200 Reserve Bank offices and coin terminals and 

has established upper and lower inventory levels to ensure there is a 

sufficient but not an excessive supply of coins at each location. Given that 

the coin supply at each location differs depending on that location’s 

typical volume of coin payments and receipts, each Reserve Bank office 

and coin terminal is required to hold a minimum 2 weeks of “payable 

days” and a maximum 3 weeks of payable days in inventory.

See appendix II 

for additional information on coin inventories, orders, and circulation.

23 Prior to 

2009, there were no required inventory levels for distribution locations 

and coin shortages and excesses occurred in specific locations.24

 20The upper national inventory targets for 2013 are set based on the average peak 

Reserve Bank coin inventory from 2009 to 2010, and the lower national targets are set 

based on the 10 consecutive days from 2009 to 2012 when the most coin was paid to 

depository institutions. According to CPO officials, the lower target protects against the 

Federal Reserve’s running out of coin during an extended period of time without deposits 

(10 days) and temporary dips below the lower target should not be construed as not 

having enough coins to meet demand during normal conditions. 

Since 

21CPO officials attributed exceeding upper inventory targets for quarters to the end of the 

50 State Quarter Program, which increased Reserve Bank inventory of quarters, and to 

lower demand for quarters during the financial crisis. 

22CPO told us that in 2012 Reserve Banks had a sufficient supply of pennies to meet 

demand and attributed not meeting the lower targets to fluctuations in the payments and 

receipts of pennies. The lower inventory target for pennies was decreased by 

approximately 10 percent from 2012 to 2013. 

23A “payable day” is the amount of coin inventory needed to meet one day of expected 

payments to depository institutions. Some Reserve Bank offices provide long-term storage 

of excess inventory of quarters, half dollars, and $1 coins in addition to storing 

transactional levels of all denominations to support local demand. 

24In 1999 and 2000 shortages for quarters and pennies in certain parts of the country 

were reported.
Page 13 GAO-14-110 U.S. Currency

CPO has centralized the management Reserve Banks’ coin inventory, 

coin terminal operators we spoke with said coin shortages are less 

common and that they are better able to manage their inventory and 

provide depository institutions with the denominations they need to fulfill 

public demand.

In managing the coin inventory, CPO determines if coins should be 

transferred from an area with more coins than needed to fulfill current and 

future demand or if additional coins should be ordered from the U.S. Mint. 

(See fig. 4.) To make this determination, CPO uses a proprietary 

inventory management system that collects data on inventory, receipts, 

and payments from the approximately 200 coin distribution locations and 

forecasts expected changes in coin demand for each location. Before 

transferring coins from one region to another, CPO considers whether a 

region’s future demand is expected to change and considers typical 

seasonal shifts in coin demand and local market factors such as coinrecycling operations that could affect the flow of coins. These transfers, 

known as interbank transfers, according to CPO officials, are the only 

direct coin transportation cost to Reserve Banks because armored 

carriers provide local coin transportation and delivery of new coins is 

provided by the U.S. Mint.25

 25Between 2009 and 2012, the average cost of an interbank transfer was around $2,200. 

Our analysis of CPO and U.S. Mint data indicated that there were more interbank 

transfers in 2009 and 2010 than in 2011 and 2012. See figure 19 in appendix II. 

Coins are also transferred between Reserve 

Bank offices and coin terminals within a region when distribution locations 

need additional coin supply or have excess coin inventory. For example, 

coins could be moved via interbank transfer from Reserve Bank offices in 

Seattle or Minneapolis to support distribution locations in Helena, 

Montana, and coins could be transferred among three distribution 

locations in Helena, a Reserve Bank of Minneapolis office, and two coin 

terminals. If there is an insufficient supply of coins to meet demand and 

transferring coins would not be cost effective, CPO orders new coins from

the U.S. Mint.
Page 14 GAO-14-110 U.S. Currency

Figure 4: The CPO’s Process for Developing Monthly Coin Orders

CPO orders new coins each month from the U.S. Mint based on its 2-

month rolling forecast of expected demand, as shown above in figure 4. 

CPO provides a monthly order to the U.S. Mint about 2 months prior to 

expected delivery (e.g., CPO submits the August order in June), and to 

help the U.S. Mint prepare for potential future orders, CPO provides 

estimates of projected demand and new coin orders for up to the next 12 

months. After submitting orders to the U.S. Mint, CPO may increase an 

order or defer shipments to later months based on updated information. In 

part to respond to these changes, each month the U.S. Mint produces a 

safety stock of coins. If this stock is not applied to the current order, it is 

used to fill future orders.26

 26On a monthly basis, the U.S. Mint produces safety stock equivalent to the average 

deviation between past CPO initial orders and actual shipments. In addition to helping the 

U.S. Mint respond to changes in monthly coin orders, producing safety stock also helps 

the U.S. Mint respond to seasonal changes in coin demand. 

After the new coins are produced, based on 

expected demand, CPO determines which Reserve Bank will receive new 

coins, and then Reserve Banks determine which offices and coin 

terminals will receive them. From 2008 to 2009, new coin orders for 

pennies, nickels, dimes, and quarters decreased by 79 percent; however, 
Page 15 GAO-14-110 U.S. Currency

since 2010 new coin orders have increased annually.27

Figure 5: Value of New Coin Orders by Denomination, 2008–2012

(See fig. 5.) 

According to CPO officials, the 2009 introduction of centralized coin 

management led to the reduction in coin inventories and the more recent 

increases in coin orders reflect a return to a more normal ordering pattern 

that is closely aligned with payments to circulation and receipts from 

circulation. However, other factors may have also contributed to 

decreased new coin orders in 2009, such as the 2007-2009 financial 

crisis and recession, which may have affected the public’s demand for 

coins.

 27Between 2004 and 2007, more than $900 million worth of new pennies, nickels, dimes, 

and quarters were ordered each year. Information on orders of $1 coins is presented later 

in this report.
Page 16 GAO-14-110 U.S. Currency

In 2011, on behalf of Reserve Banks, CPO developed and negotiated a 

contract with coin terminal operators, which standardized procedures and 

internal controls for the storage and handling of coins across all Reserve 

Bank districts. Prior to this contract, each Reserve Bank negotiated its 

own contract with coin terminal operators that operated in its district. We 

spoke with 5 of the 15 coin terminal operators, and they reported 

satisfaction and efficiency gains with the standardized contract and 

CPO’s centralized management. For example, one coin terminal operator 

told us that the Federal Reserve’s centralized approach allows coin 

terminal operators to manage their business proactively rather than 

reactively. Among other things, the contract requires coin terminals to use 

FedLine to order new coins and track changes to Reserve Bank coin 

inventory held by the coin terminal. Coin terminal operators have told us 

that FedLine works more effectively than the earlier ad-hoc 

communications to order coin and track inventory that preceded it.

In 2012, Reserve Bank costs related to coin management were about $62 

million or 14 percent of the estimated $449 million that coins indirectly 

cost the U.S. government.28 These costs included CPO’s administration, 

coin handling, and interbank coin transfer costs.29 The remaining 86 

percent of U.S. government costs include about $387 million for the U.S. 

Mint’s production and distribution of new coins. In addition, the 

government earns a return on the issuance of coins to the extent that 

production and distribution costs are less than the face value of the coins 

put into circulation—this value to the government is known as 

seigniorage. The U.S. Mint reported that in 2012 the government received 

about $106 million in seigniorage because the face value of coins 

produced was $493 million, and the U.S. Mint’s cost of producing and 

distributing them was $387 million.30

 28These costs are indirect costs to the government because the Federal Reserve and U.S. 

Mint incur the costs and the amounts they remit to the U.S. Treasury are less the costs 

related to coins.

29In 2012 there were about 600 interbank transfers costing about $1.3 million. For more 

information on interbank transfer expenses see figure 19 in appendix II. 

30Since 2006, the costs of producing pennies and nickels have been above the face value 

of these coins. For example, in fiscal year 2012, the penny cost the U.S. Mint 2 cents to 

produce. This represents negative seigniorage because the face value was less than the 

cost of production for these denominations. 

Contract with Coin Terminal 

Operators 

Coin Management Costs
Page 17 GAO-14-110 U.S. Currency

The Federal Reserve’s 2012–15 strategic plan includes an objective to 

use financial resources efficiently and effectively.31 In addition, according 

to COSO, as part of the internal control process management should 

ensure that operations, such as managing an inventory, are efficient and 

cost effective, and this process includes monitoring costs and using this 

information to make operational adjustments.32 To monitor costs related 

to coin and note operations, CPO officials said they review currency 

management costs—which include costs related to both coins and 

notes—at the national level because individual Reserve Banks may vary 

in their accounting for operational costs related to coins and notes.33

When we reviewed currency management costs at the national level 

using data provided by CPO, we found that from 2008 through 2012 total 

annual Reserve Bank currency management costs increased by 23 

percent.34

 31Federal Reserve, Strategic Framework 2012-15 (2013). 

(See fig. 6.) Cost information for coins and notes is available 

separately; however, CPO does not separately monitor coin costs.

32Committee of Sponsoring Organizations of the Treadway Commission, Internal 

Control—Integrated Framework (1992). 

33Each Reserve Bank independently manages and is responsible for establishing and 

maintaining internal controls over its financial reporting and recording. The Federal 

Reserve’s cost accounting system allocates costs based on the percentage of time 

employees spend on an activity, and Reserve Banks may vary in their assignment of 

activity costs across locations within their districts. In addition, personnel allocate their 

time across activities such as note processing and destruction or coin paying, receiving, 

and verification, rather than directly charging specific time to a function such as coin 

management. According to CPO officials, the amount of time spent on an activity is 

determined through an annual employee survey that tracks the time employees spend on 

various activities. 

34In 2012, costs related to coins represented 11 percent of overall currency management 

costs, and currency management costs represented approximately 21 percent of Reserve 

Bank costs. From 2008 to 2012, Reserve Bank currency management direct costs 

increased by 10 percent and support costs increased 30 percent. In addition, from 2008 

through 2012, according to the Federal Reserve’s Annual Budget Reviews, overall 

Reserve Bank operation costs increased by 49 percent from $1.7 billion to $2.5 billion. 
Page 18 GAO-14-110 U.S. Currency

Figure 6: Reserve Bank Costs Related to Coin and Notes, 2008–2012

Our analysis of coin management costs, using CPO data, indicates that 

coin management costs increased by 69 percent from 2008 through 

2012. CPO officials attributed the increase in coin management costs to 

support costs, which increased by 80 percent during that time period, 

from $24.5 million in 2008 to $44.1 million in 2012.35

 35Between 2008 and 2012, similar to currency management costs, direct costs 

represented about 30 percent of coin management costs and support costs represented 

the remaining 70 percent.

(See fig. 18 in app. 

II.) Support costs include utilities, facilities, and information technology as 

well as other local and national support services such as CPO’s services. 

According to CPO officials, support costs are influenced by a variety of 

factors, including the number and size of operating units at each location.

Also, with the consolidation of some operating units, such as check 

processing, other operations, including coin management, have absorbed 
Page 19 GAO-14-110 U.S. Currency

a higher percentage of support costs, according to these same officials. 

They further explained that direct costs—which include personnel and 

equipment—represent their primary measure of Reserve Bank coin 

operation costs. We found that direct costs for coin operations increased 

by 45 percent during this period; about $5 million across the 28 Reserve 

Bank offices. According to CPO officials, the increase in direct costs can 

be largely attributed to an increase in personnel costs, which may be 

influenced by volume of coin bags handled onsite and the number of coin 

terminals serviced.36

In addition, we also reviewed coin management costs at each Reserve 

Bank and found that the rates of increasing coin-management costs differ 

across Reserve Banks. Using data provided by CPO on individual 

Reserve Banks’ costs, we found that from 2008 through 2012, coin 

management costs increased for all Reserve Banks with the increases 

ranging from a low of 36 percent to a high of 116 percent.

By not separately monitoring coin costs, the Federal 

Reserve may be missing opportunities to assess and improve the costeffectiveness of its coin operations.

37 To account 

for variations in the volume of coins handled by individual Reserve Banks, 

we also reviewed the average cost per bag handled by Reserve Banks 

and found that in 2012 it ranged from about $2 to $57 per coin bag.38

CPO officials attributed variations in Reserve Bank coin management 

costs to different operational practices such as outsourcing coin handling

to coin terminals and differences in direct and support costs.39

 36From 2008 through 2012, across the 28 Reserve Bank locations personnel costs 

increased from about $9 million to about $13 million and the average number of personnel 

increased from about 110 to 135. 

While 

outsourcing coin handling may decrease some costs as personnel are not 

required at the Reserve Bank location to perform these services, it may 

also increase other costs related to daily management and periodic 

auditing of these outsourced services. Without taking steps to identify and 

share cost-effective coin management practices across Reserve Banks, 

37Costs related to centralized coin management—such as CPO operations—are 

distributed across the individual Reserve Banks.

38Federal Reserve coins are transported and distributed in standard-sized bags. These 

standard bags of loose coins (new and circulated coins) contain $50 in pennies, $200 in 

nickels, $1,000 in dimes, $1,000 in quarters, $1,000 in half dollars, and $2,000 in $1 coins. 

39According to CPO officials, two of the 28 Federal Reserve offices fully outsource coin 

services to coin terminals in their markets, and the other 26 Reserve Bank offices provide 

coin services on-site. 
Page 20 GAO-14-110 U.S. Currency

the Federal Reserve may be missing opportunities to support more 

efficient and effective use of Reserve Bank resources. Moreover, more 

efficient management of the coin inventory may contribute to cost savings 

and additional funds returned to the General Fund.

In managing the circulating coin inventory, we found that the Federal 

Reserve follows key practices for collaboration and risk management and 

partially follows key practices for performance metrics, forecasting 

demand, and system optimization. To effectively manage inventory, 

private and governmental organizations involved in production and 

distribution operations use supply-chain and operations-management 

practices. We identified five key supply-chain practices—collaboration, 

risk management, performance metrics, forecasting demand, and system 

optimization—and selected supporting characteristics applicable to coin 

inventory management to assess the Federal Reserve’s management of 

the circulating coin inventory.40

Table 1: Key Practices for Managing the Circulating Coin Inventory

(See table 1.) These key supply-chain 

management practices are closely related, and improvements or 

shortfalls in one practice may contribute to improvements or shortfalls in 

another practice. In addition, establishing, documenting, and following 

these practices and their supporting characteristics contribute to a more 

effective inventory management system.

Key practice Definition and selected supporting characteristics

GAO 

assessment

Collaboration Maintain working relationships with partner entities 

across the supply chain by establishing policies, roles 

and responsibilities, and mechanisms for sharing 

information.

• Develop and use policies or guidelines governing 

relationships with partner entities.

• Establish agreed upon roles and responsibilities 

with partner entities.

• Develop and use mechanisms for sharing 

information related to the circulating coin inventory 

with partner entities.

●

 40For additional information on these key practices and supporting characteristics as well 

as our analysis for each supporting characteristic, see appendix III.

The Federal Reserve 

Follows Some Key 

Practices in Managing 

the Circulating Coin

Inventory but Lacks 

Performance 

Information for 

Additional Metrics 

and Forecasting
Page 21 GAO-14-110 U.S. Currency

Key practice Definition and selected supporting characteristics

GAO 

assessment

Risk 

management

Plan and prepare for risks related to unanticipated 

events that could disrupt the normal flow of the system.

• Identify sources of potential disruptions.

• Assess the potential impact of the risk.

• Develop and use plans to mitigate the risk.

●

Performance 

metrics

Establish, track, and reevaluate goals or metrics to 

measure change or improvement in a process or 

performance area.

• Develop and use reasonable metrics that are 

clearly defined, measurable, actionable, relevant, 

and timely.

• Track progress against those metrics or targets.

• Establish and implement a process to reevaluate 

metrics or targets.

◐

Forecasting 

demand 

Prepare for and estimate expected changes in future 

demand and plan and make decisions based on these 

estimates.

• Have a process in place to forecast demand.

• Use forecast results to plan and manage the 

circulating coin inventory.

• Assess forecast accuracy.

◐

System 

optimization

Consider, as a whole, the strategic interactions and 

operations of the entire supply chain or inventory 

process in developing process change.

• Obtain access to information and resources from 

across the circulating coin supply chain.

• Use information and resources to identify and 

implement efficiencies within the supply chain.

◐

● Key practice followed or substantially followed—plans, policies, or processes have 

 been developed and implemented properly for all or nearly all of the supporting 

 characteristics

◐ Key practice partially followed—plans, policies, or processes have been developed 

 and implemented properly for some of the supporting characteristics

○ Key practice minimally or not followed—plans, policies, or processes are lacking for all 

 or nearly all of the supporting characteristics

Source: GAO analysis of literature and Federal Reserve practices.
Page 22 GAO-14-110 U.S. Currency

The Federal Reserve follows the key practice of collaboration through its 

relationships with supply chain stakeholders, including Reserve Banks, 

coin terminal operators, depository institutions, and the U.S. Mint. CPO 

has developed policies and guidelines governing relationships with each 

of its partner entities. For example, as previously discussed, in 2011 CPO 

introduced a contract with coin terminal operators, which includes a 

manual of operations that standardized procedures and internal controls 

for handling Reserve Bank coins. CPO has also agreed upon roles and 

responsibilities with partner entities. For example, U.S. Mint officials told 

us that as part of the coin supply chain, they deal almost exclusively with 

CPO to manage day-to-day operations and interbank coin transfers. The 

U.S. Mint arranges coin transportation across Reserve Banks, and CPO 

reimburses the U.S. Mint for the cost of this transportation. CPO has 

multiple mechanisms, such as stakeholder working groups, for sharing 

information related to the circulating coin inventory with partner entities. 

Reserve Banks, coin terminal operators, depository institutions, and the 

U.S. Mint reported to us that they are generally satisfied with their 

relationships with CPO.

The Federal Reserve follows the key practice of risk management 

because it has identified sources of potential disruptions, assessed the 

potential impact of risk, and developed plans to mitigate risk at multiple 

levels of operations, including Reserve Bank, FedLine, and coin inventory 

management operations. For example, the lower national-inventory 

targets are set based on the highest consecutive 10-day gross pay period 

from 2009 to 2012 because, according to CPO officials, the U.S. Mint can 

produce and deliver new coins within 10 days. Therefore, the lower 

inventory target guards against a coin shortage if a disruption prevented 

circulating coin payments from depository institutions. In addition, risk 

management for the circulating coin inventory is built into the Federal 

Reserve’s overall risk management and contingency protocols. For 

example, each Reserve Bank has a designated “buddy bank” to perform 

its functions—including coin circulation activities—if it is unable to operate 

due to a disruption. According to CPO officials, as soon as disruption is 

anticipated, they begin planning with stakeholders operating in the 

affected area, including Reserve Bank officials, coin terminal operators, 

and depository institutions. Continuity plans are also in place for Federal 

Reserve services such as FedLine. The FedLine website includes 

information on the types of potential disruptions, such as system outages 

Key Practices Followed

Collaboration

Risk Management
Page 23 GAO-14-110 U.S. Currency

or closures of Reserve Bank or coin terminal operations by inclement 

weather or other events, and what depository institutions and armored 

carriers should do in the event of a disruption.

The Federal Reserve partially follows the key practice of performance 

metrics because its use of performance metrics is limited to inventory 

targets and it has not developed other goals or metrics related to coinsupply chain management. CPO has established, tracks, and annually 

reevaluates performance metrics in the form of upper and lower inventory 

targets for pennies, nickels, dimes, and quarters. In addition, CPO closely 

monitors “net pay” to measure how well they are meeting general demand 

nationwide and at individual locations.41 However, CPO has not 

established additional management goals or metrics to measure other 

aspects of its management such as costs because, as discussed earlier, 

CPO’s primary goal is to ensure a sufficient supply of all coin 

denominations are available to meet the public’s demand. Federal 

agencies have been required to develop performance goals and measure 

and report on their progress in achieving these goals since the 

Government Performance and Results Act (GPRA) was enacted in 

1993.42

 41The difference between payments to and receipts from depository institutions is referred 

to as “net pay” and is used by CPO to help determine general coin demand nationwide 

and at individual locations.

Although the Federal Reserve is not covered by GPRA, the Board 

has chosen to voluntarily comply with the spirit of the act. In addition, our 

previous work on managing results has shown that agencies should 

identify goals and establish a suite of performance metrics to determine 

42GPRA sought to focus federal agencies on performance by requiring agencies to 

develop long-term and annual goals—contained in strategic and annual performance 

plans—and measure and report on progress towards those goals on an annual basis 

(Pub. L. No. 103-62, 107 Stat. 285 (Aug. 3, 1993)). The GPRA Modernization Act of 2010 

(GPRAMA) enhances GPRA and provides important tools that can help inform 

congressional and executive branch decision making to address challenges the federal 

government faces (Pub. L. No. 111-352, 124 Stat. 3866 (Jan. 4, 2011)). Among other 

things, GPRAMA requires that agencies establish priority goals and metrics and report on 

them quarterly. These goals include performance and efficiency improvements to program 

activities, regulations, policies, and agency management. 

Key Practices Partially 

Followed

Performance Metrics
Page 24 GAO-14-110 U.S. Currency

whether they are meeting those goals.43 We have identified customer 

satisfaction, efficiency, and costs, among others, as performance metrics 

that can be used to measure an agency’s progress towards its goals.44

Moreover, costs are among the common performance measures used in 

supply chain management. The Australian, Austrian, and Canadian mint 

and central bank officials we interviewed have established multiple 

performance goals and metrics for their coin inventory management.45

We found that the Federal Reserve partially follows the key practice of 

forecasting demand because it forecasts future coin demand and uses 

this information to make decisions, but does not systematically track the 

accuracy of its monthly forecasts compared to the final coin orders. As 

discussed previously, CPO has a process in place to forecast demand by 

tracking current inventory, payments, and receipts and using this 

information to calculate expected future demand. These forecasts are 

then used to plan and manage the circulating coin inventory, including 

decisions on coin transfers and new orders. CPO officials told us they 

review their annual forecasts, and have found their forecasts for 

payments and receipts are within 10 percent of actual orders for pennies, 

nickels, dimes, and quarters. However, CPO has taken minimal steps to 

assess monthly forecast accuracy.

For example, the Royal Australian Mint and its commercial bank partners 

have established targets to reduce coin holdings that will result in 

reducing the cost of freight and other related coin expenses. Further, the 

Royal Australian Mint tracks and monitors coin management costs to 

ensure that they are progressing towards their targets.

46

 43GAO, Managing for Results: Executive Branch Should More Fully Implement the GPRA 

Modernization Act to Address Pressing Governance Challenges, 

CPO officials told us that they 

GAO-13-518

(Washington, D.C.: June 26, 2013). 

44GAO, Managing for Results: Enhancing Agency Use of Performance Information for 

Management Decision Making, GAO-05-927 (Washington, D.C.: Sep. 9, 2005) and GAO, 

Managing for Results: A Guide for Using the GPRA Modernization Act to Help Inform 

Congressional Decision Making, GAO-12-621SP (Washington, D.C.: June 15, 2012).

45In addition to producing and issuing coins, the Australian, Austrian, and Canadian mints 

are responsible for distributing coin and managing their circulating coin inventories.

46Various methods can be used to assess forecast accuracy. Examples of methods 

commonly used in operations management include mean absolute deviation, absolute 

percent of error, and tracking signal. Tracking signal can be used to assess bias in a 

forecast by measuring the variation between the forecast and demand for several 

consecutive periods.

Forecasting Demand
Page 25 GAO-14-110 U.S. Currency

compare their initial coin orders to net pay, but do not track the accuracy 

of their monthly forecasts because seasonal shifts in coin demand make 

reviewing annual trends more useful for their purposes.47 Our analysis of 

initial monthly CPO coin orders and actual U.S. Mint coin shipments from 

2009 through 2012 indicates that initial orders were consistently less than 

the final orders (i.e., U.S. Mint shipments of new coin). APICS—an 

operations management industry association that offers professional 

certifications—recommends that forecasting results must be continuously 

monitored and a mechanism should be in place to revise forecasting 

models as needed and that if the forecast consistently exhibits a bias, the 

forecast should be adjusted to match the actual demand.48 According to 

the Logistics Management Institute, accurate forecasts result in effective 

and efficient inventories, whereas inaccurate forecasts often cause 

inventory excesses and shortfalls.49

Although CPO has multiple systems that provide information from across 

the supply chain, we found that it partially follows the practice of system 

optimization because this information is not currently used to better 

understand some additional aspects of its coin management activities to 

optimize the efficiency of the circulating coin inventory. As discussed 

earlier, CPO has access to information and resources from across the 

circulating coin supply chain. This access includes information on actual 

and forecasted coin demand and Reserve Bank coin management costs, 

as well as information from stakeholders, such as new coin delivery 

information from the U.S. Mint. In addition, the Federal Reserve has taken 

some steps to identify areas where they could gain incremental efficiency 

In addition, inventory management

experts told us that accurate forecasts would make the Federal Reserve 

better able to respond to changing trends in coin demand, as discussed 

later in this report. Taking additional steps to assess forecast accuracy 

could help CPO identify the factors influencing forecast accuracy and 

then adjust forecasts to improve accuracy.

 47According to CPO officials, demand for coin fluctuates throughout the year based on 

seasonal changes in public demand and receipts from depository institutions and these 

fluctuations in coin demand can be volatile. For more information on seasonal fluctuations 

in coin demand see fig. 13 in appendix II. 

48APICS, Principles of Operations Planning: Demand Management (Chicago, IL: 2013). 

49Logistics Management Institute, Lifecycle Forecasting Improvement: Causative 

Research and Item Introduction Phase, Report DL920T1 (November 2010). 

System Optimization
Page 26 GAO-14-110 U.S. Currency

improvements such as the centralized management of the coin inventory 

and note-processing efficiencies, which we discuss later.

However, CPO could improve its use of information and resources to 

identify and implement efficiencies within the supply chain by using the 

range of information available to establish and track performance metrics 

to measure progress. For example, the U.S. Mint’s monthly production of 

new coins could be more efficient with improvements to the accuracy of 

initial new coin orders. Currently, the U.S. Mint produces a safety stock, in 

part, to ensure it is able to produce enough coins to fulfill CPO’s final, 

adjusted order.

50 More accurate monthly forecasts and coin orders could

lessen the need for the U.S. Mint to produce safety stock, and thus help 

to optimize the efficiency of the supply chain. In addition, if CPO used its 

information on Reserve Bank coin management costs and its knowledge 

of coin management operations across the 12 Reserve Banks, it could 

help to identify factors that have contributed to varying coin-management 

costs at individual Reserve Banks and opportunities for cost savings that 

could limit rising costs. Better information related to forecast accuracy and 

costs could also aid CPO in using its information and resources to identify 

inefficiencies and support system optimization. Further, optimizing U.S. 

Mint and individual Reserve Bank operations could potentially contribute 

to reducing U.S. Mint or Federal Reserve costs related to circulating 

coins, a reduction that could potentially increase the amount of money 

returned to the General Fund.

 50Producing “safety stock” also helps the U.S. Mint respond to seasonal changes in coin 

demand. The U.S. Mint can smooth production throughout the year rather than ramp 

production up or down in response to seasonal increases or decreases in demand. 

Regarding the use of safety stock for meeting adjustments in monthly orders, according to 

U.S. Mint officials, the costs related to storing this stock are less than the alternative of 

hiring additional staff or paying overtime to produce more coins if additional production 

was required to meet the final order. Thus, the benefit of holding safety stock relates both 

to promoting level-loading production over the course of time as well as helping to ensure 

that adequate stock is on hand even if final coin orders exceed initial forecasted orders.
Page 27 GAO-14-110 U.S. Currency

To collect data and information on potential changes in the demand for 

currency, the Federal Reserve has conducted studies and outreach with 

groups such as depository institutions and merchants, and found a 

general consensus that the use of currency may decline slightly in the 

near term. According to the Federal Reserve, this expectation is due, in 

part, to an increase in alternative payment options. Federal Reserve 

officials we met with described how interrelated factors make it difficult to 

predict long-term (i.e., 5 to 10 years) currency demand. The factors the 

Federal Reserve identified as influencing currency demand and the 

mechanisms used to supply that demand include the relative costs and 

benefits of currency versus other forms of payment, the level of economic 

activity and other economic conditions, technological change, and 

regulations and policies. Federal Reserve officials explained that how 

these factors will play out in the years ahead is unknown, and therefore 

the magnitude of the change in demand for currency is uncertain.

According to many agency officials, stakeholders, and foreign 

government officials we spoke to, while there may be changes in the use 

of various types of payments in the coming years, the effect on currency 

demand is likely a gradual decline. Thus far, Federal Reserve officials 

noted that their research indicates that the amount of currency in 

circulation continues to rise and currency usage is currently steady.51

 51Traditionally, as the economy and population grow, the demand for currency also grows. 

However, it is difficult to know whether this relationship might change in the future if, as 

expected, financial transactions become increasingly conducted electronically.

Federal Reserve studies and data also indicate electronic payment 

options have increased over time. For example, in a 2010 study, the 

Demand for Currency 

Expected to Decline 

Gradually in the Near 

Term, but a Variety of 

Factors Make 

Predicting LongerTerm Change Difficult

Potential Changes in 

Demand for Currency
Page 28 GAO-14-110 U.S. Currency

Federal Reserve reported that the number of non-currency payments—

including credit card and debit card payments, among others—increased 

4.6 percent per year from 2006 to 2009.52

While data on credit card usage and electronic transactions are available, 

the volume of currency transactions is difficult to measure. Specifically, 

other data sources cannot be used to determine what portion of the 

currency in circulation is being used for transactions—for example, some 

currency in circulation are stored, as opposed to being deposited or used 

for commerce. As the use of non-currency payment methods has 

increased, the quantity of notes in the economy has also grown. 

According to Federal Reserve data, the number of transactional notes 

(i.e., $1s, $5s, $10s, and $20s) in circulation has increased steadily from 

approximately 19.6 billion pieces in 2009 to 21.8 billion pieces in 2012. 

During this period, the value of currency in circulation rose approximately 

26 percent. (See fig. 7.) Coin terminal operators noted that there will be a 

continued need and demand for coins and notes, particularly because 

there will always be some portion of the population who will only use 

currency, such as individuals without bank accounts, or “the unbanked.”

Since 2006, the debit card has 

surpassed the check as the most used non-currency payment method, 

with the number of debit card transactions increasing 14.8 percent per 

year from 2006 to 2009. Over the same period, check volume decreased 

7.1 percent per year. Many stakeholders noted that even with changes in 

non-currency payments, the effect on currency demand is likely to be 

gradual. For example, BEP officials stated that the increasing use of 

electronic payments has not had a major impact on demand for currency. 

Further, these officials said demand for currency may even increase and 

that growing use of electronic and mobile payments will likely affect 

checks more than currency. Royal Australian Mint officials also stated that 

while the use of electronic payment methods is expected to increase as 

new technologies emerge, how fast and when such a change will occur is 

unclear.

 52Federal Reserve System, The 2010 Federal Reserve Payments Study (2011). This 

study includes the most recently available data on payment trends. The 2013 study will 

present similar data for 2009–2012 and is expected to be complete later this year.
Page 29 GAO-14-110 U.S. Currency

Figure 7: Currency in Circulation and Examples of Changes in Non-Currency 

Payments

Note: The Federal Reserve’s 2013 Payments Study will include similar debit card, check volume, and 

electronic payment trends for the period from 2009-2012, but is not expected to be completed until 

late 2013.

Federal Reserve officials expect that their current procedures and 

approach to managing the coin and note inventory—including their 

forecasting and monitoring of the coin inventory targets discussed 

previously—will allow the agency to accommodate gradual shifts in 

demand. For example, to respond to increasing or decreasing demand for 

coins and notes, CPO can decrease or increase coin orders from the U.S. 

Mint and the Board can decrease or increase note orders from BEP. 

Addressing Changes in 

Demand for Currency
Page 30 GAO-14-110 U.S. Currency

Specifically, in 2012 the Federal Reserve assessed how notes received 

from circulation are processed and determined that current operations 

can handle a significant change in volume—either an increase or a 

decrease—without significant change to the operating model and staffing 

levels. Nonetheless, according to the officials, CPO is continually working 

to identify ways to streamline its processes to be more flexible and 

adaptable to changes. In addition, CPO and the Reserve Banks have 

established risk management plans and procedures to address the 

effects associated with a short-term, unexpected change in coin and note 

demand—such as from a natural disaster.

Other experts and foreign officials agree that well-managed currency 

systems are capable of handling major trend-based changes. According 

to inventory management experts we consulted, a key to effectively 

managing a supply chain is dependable forecasts. Effective forecasts 

would take both trends and cyclical demand changes into account.

Therefore, combining forecasts with continual tracking of demand and 

inventory levels should allow the Federal Reserve to be able to adapt to 

any major trend-based changes in coin and note demand. As discussed 

earlier, this makes accurate forecasting by the Federal Reserve even 

more important. Royal Australian Mint officials also stated that by 

routinely monitoring activities such as coin trades and transfers between 

and among institutions, any changes in these or other measures would 

give officials insight on specific ways in which demand was changing, 

which would ultimately allow for adjustments in the volume of coins being 

circulated, responding to public demand.

While Federal Reserve officials we met with indicated their current 

processes should enable them to adapt to gradual changes in coin and 

note demand, a significant and unexpected change could affect the 

management of the coin and note inventories. According to Federal 

Reserve officials and some coin terminal operators we met with, the 

elimination of the $1 note for the $1 coin would be the type of event that 

could significantly affect demand for a specific coin denomination, and it 

would have implications for the overall management of both the coin and 

note inventory. For example, Federal Reserve officials stated that 

replacing the $1 note with the $1 coin would likely require increases in 

coin vault space and manpower as well as improvements in coin 

authentication technologies. CPO officials also said that if a large decline 

in coin usage occurs, they would adapt their management of the inventory 

in response. For example, if demand for coins were to decrease 

suddenly, leaving too many coins in circulation, the Federal Reserve 

would first stop ordering new coins from the U.S. Mint, and would then 
Page 31 GAO-14-110 U.S. Currency

focus on storing the excess coin inventory. Coin attrition would reduce 

this inventory over time, and CPO officials anticipate that they would have 

sufficient storage capacity available to accommodate the excess coins. 

CPO officials told us that inventory levels would need to be well in excess 

of the existing targets before they would have an effect on storage 

capacity and related costs. Further, if public demand for coins decreased 

substantially, additional storage could be needed to accommodate and 

store the coins returned by depository institutions to the Reserve Banks. 

Coin terminal operators also did not expect a decrease in coin demand 

significant enough to exceed their storage capacity.

In 2010, CPO began to develop a long-term strategic framework to 

consider potential changes to currency demand over the next 5 to 10 

years and how this change could affect CPO’s operations. According to 

Federal Reserve officials, while the future is inherently uncertain, this 

framework is an internally focused effort to help them share information, 

refine internal operations, and monitor trends. The Federal Reserve has 

not established deadlines for completing this effort, but CPO officials said 

they continue to share what they are learning from data and other 

research, and they continue to assess current coin distribution and noteprocessing operations. The following activities are components of these 

efforts:

• Engaging system stakeholders. As an initial step, CPO officials 

interviewed stakeholders such as depository institutions, armored 

carriers, equipment vendors, merchants, and alternative payment 

providers to collect information and perspectives on potential changes 

in currency demand. Groups such as the Customer Advisory Council 

and the Cash Advisory Group also continue to serve as a mechanism 

for the CPO to coordinate and collect data and information on 

currency activity nationwide.

• Examining internal operations for coin distribution and note 

processing. CPO officials have sought to increase the efficiency of 

coin-distribution and note-processing operations to better position the 

agency to adapt to future changes in demand. For example, the 

Federal Reserve enhanced its note sensor technology in 2010, 

improving the efficiency of note processing operations by nearly 10 

percent, according to CPO officials. CPO officials told us that they 

continue to look for other areas to incrementally improve and add 

additional flexibility in their operations. Incremental improvements 

such as those related to note processing activities could contribute to 

supply-chain system optimization, as discussed earlier.
Page 32 GAO-14-110 U.S. Currency

• Conducting research. The Federal Reserve continues to conduct 

research and analysis related to Reserve Bank operations. For 

example, one Reserve Bank is conducting the most recent in a series 

of triennial payment studies, which it expects to complete later this 

year, to determine the current volume and composition of electronic 

and check payments, reporting trends in these payments since 2009. 

As part of a broader effort to look at trends in various payment types, 

another Reserve Bank is examining the detailed spending habits of a 

selection of consumers, who were asked to document their 

transactions and payment decisions over a period of time in a 

shopping “diary.” Because, as previously noted, determining how 

much of the currency in circulation is being used for transactions is 

difficult—this type of study can help officials better understand 

currency use in the United States. The diary study is expected to be 

completed and published later this year, and CPO officials told us they 

plan to assess and incorporate relevant findings into their currency 

management operations.

Australian, Austrian, and Canadian officials we interviewed are also 

exploring the potential impact of alternative payment technologies and 

continue to analyze past trends and to collect new data to inform these 

research efforts. For example, Austrian and Canadian officials have also 

conducted diary studies to better understand individuals’ use of various 

payment options. Collecting detailed consumer payment information 

through these types of studies can help officials in these countries better 

understand consumers’ payment and currency management habits.

The Federal Reserve 

Is Managing the 

Existing $1 Coin 

Inventory, Took Steps 

to Meet Demand for 

Circulation, and Plans 

No Future Action
Page 33 GAO-14-110 U.S. Currency

The Federal Reserve manages the $1 coin inventory as it does all other 

coin denominations, overseeing the distribution of coins produced by the 

U.S. Mint and those already in circulation.53 The Federal Reserve’s goal, 

based on its statutory responsibilities, is to ensure that sufficient supplies 

of coins are available to meet demand nationwide.54

Reserve Banks held approximately $1.4 billion in $1 coin inventory as of 

March 2013. According to the Federal Reserve’s 2013 Annual Report to 

Congress, this inventory level is sufficient to meet the demand for $1 

coins for more than 40 years assuming a continuation of the current level 

of demand. Federal Reserve officials told us the annual net demand for 

$1 coins was approximately $51 million per year from 2010 through 2012. 

Inventory increased steadily with the issuance of the Presidential Coin 

series beginning in 2007, but has leveled off since the 2011 Treasury 

decision to cease production of new $1 coins for circulation (see fig. 8).

According to Federal 

Reserve officials, from an operational perspective, the Federal Reserve 

fills all orders it receives and treats all denominations of coins and notes 

the same.

55

 53Due to the December 2011 Treasury decision to cease production of new $1 coins for 

circulation, the Federal Reserve’s current management of the $1 coin inventory is focused 

on managing those $1 coins already in storage or circulation.

In addition, $1 coin payments to depository institutions have declined 

from $804 million in 2007 to $245 million in 2012, while receipts from 

depository institutions generally increased until 2012. In 2012, because 

there was less public demand for $1 coins than were in circulation, 

Reserve Banks received more $1 coins back than they paid out, as 

indicated by net pay in figure 8.

5412 U.S.C. § 418. 

55Although production of circulating Presidential $1 Coins was suspended in 2011, 

collectible versions continue to be available through the U.S. Mint’s website. The public 

and collectors are able to directly order Presidential $1 coin rolls, bags, and boxes. 

Management of the $1 

Coin Inventory
Page 34 GAO-14-110 U.S. Currency

Figure 8: $1 Coin Inventory, Net Pay, and New Coin Orders, 2007–2012 

Note: Net pay is the difference between coin payments to depository institutions and coin receipts 

from depository institutions over a given period of time.

According to Reserve Bank officials, depository institution 

representatives, coin terminal operators, and vending machine industry 

representatives we met with, $1 coins are readily available to the public 

throughout the country. Most of the officials and representatives told us 

that they do not have problems obtaining $1 coins or supplying them to 

their customers, but emphasized that there is low public demand for these 

coins. For example, Reserve Bank officials in the Cash Advisory Group 

said that $1 coins are available at their locations nationwide and that they 

are able to fill customers’ orders as needed. Depository institution 

representatives on the Customer Advisory Council told us their depository 

institutions routinely fill $1 coin orders for organizations with standing 

orders—such as transit agencies or vending machine companies—but 

that requests from the general public are rare. A Federal Reserve coin 

terminal we visited also had an inventory of $1 coins, and officials there 

told us that while they generally receive $1 coin deposits, withdrawals are 

rare. In contrast, representatives from the Dollar Coin Alliance said that 
Page 35 GAO-14-110 U.S. Currency

there is limited commercial and public access to the $1 coin and that 

some alliance members have had difficulty obtaining the coins from 

depository institutions. According to these representatives, the Federal 

Reserve’s treatment of $1 coins—in particular, a limited ordering period 

for new $1 coins featuring a specific president—has hampered successful 

circulation.56 However, other depository institution and industry 

representatives we met with did not identify similar access or availability 

issues.

Beginning in 2007, in response to a requirement in the Presidential $1 

Coin Act of 2005, the Federal Reserve took steps to identify and 

overcome barriers to circulation of the $1 coin early in the Presidential $1 

Coin program. The Presidential $1 Coin Act requires Treasury and the 

Federal Reserve to identify, analyze, and overcome barriers to the “robust 

circulation” of $1 coins, including improved methods of distribution and 

circulation, and improved public education and awareness campaigns.57

Beginning in 2007, the Federal Reserve met regularly with depository 

institution representatives to gather feedback about demand for $1 coins 

and identify potential barriers to circulation. In its 2007 Annual Report to 

Congress on the Presidential $1 Coin Program—a statutorily required 

annual report—the Federal Reserve outlined actions it had taken to 

eliminate identified barriers, including developing $1 coin distribution 

plans, establishing a special ordering period for new coins along with 

special packaging and order sizes, and communications with industry and 

other federal agencies.58

 56The U.S. Mint has issued $1 coins featuring Presidents in sequential order and every 

Reserve Bank office has had unmixed supplies of the coins available for a 6-week special 

ordering period to allow members of the public to order coins featuring a specific 

President. 

In addition, the Federal Reserve and U.S. Mint 

conducted national and local outreach with coin user groups to gather 

input and help plan for the introduction of the new coins. According to 

Federal Reserve officials, most efforts began in 2007 and continued until 

the 2011 Treasury decision to cease production of the $1 coin for 

circulation.

5731 U.S.C. §5112(p). 

5831 USC 5112(p)(3)(B). 

Federal Reserve Actions to 

Overcome Barriers to 

Circulation
Page 36 GAO-14-110 U.S. Currency

While the Federal Reserve took steps to overcome barriers to the 

circulation of the $1 coin to meet existing demand, according to Federal 

Reserve officials, it can do little else given the $1 coin is no longer 

produced for circulation and the agency’s statutory responsibilities focus 

on ensuring $1 coins are available to meet demand, not on taking steps 

to change demand. The Federal Reserve’s 2007 Annual Report to 

Congress reported that the U.S. Mint and stakeholder feedback identified 

the co-circulation of the $1 coin with the $1 note as the most significant 

barrier to improved circulation of the $1 coin. In addition, many depository 

institutions, coin terminal operators, experts, and foreign officials we met 

with identified the $1 note as a barrier to the increased circulation of the 

$1 coin and mentioned that eliminating the $1 note would increase 

demand for the $1 coin. However, neither the 2007 Annual Report nor 

subsequent annual reports identified the $1 note as a barrier to the $1 

coin. According to Federal Reserve Legal Division’s attorneys, they do 

not consider the $1 note to be a barrier because they do not view cocirculation as limiting the circulation of the $1 coin. Rather, Federal 

Reserve officials noted the $1 note is an alternative to the $1 coin that the 

public freely chooses—that is, their view is that the $1 coin is fully 

available to the public and its circulation is thus at the level that the public 

demands. According to Federal Reserve officials, the Federal Reserve’s 

authority does not extend to promotion, and therefore the agency is not 

likely to take unilateral action to promote wider circulation of the $1 coin. If 

this is the case, congressional actions would likely be the only feasible 

action that could replace the $1 note with the $1 coin.

Consistent with the actions of other countries, we have previously 

recommended that the Congress replace the $1 note with a $1 coin due 

to the financial benefit the government would receive from the 

replacement. As we found in our prior work, other countries that have 

replaced a low-denomination note with a coin, such as Canada and the 

United Kingdom, stopped producing the note.59

 59

Officials in these 

countries noted this step was essential to the success of their transition to 

the coin and that, with no alternative to the note, public resistance 

dissipated within a few years. Australian and Canadian Mint officials also 

explained that they took steps in advance of the issuance of their $1 coins 

to facilitate public adoption. For example, Royal Canadian Mint officials 

said that public outreach, stakeholder collaboration, and removing the $1 

GAO-11-281.
Page 37 GAO-14-110 U.S. Currency

note from circulation were key elements of a successful transition to the 

$1 coin in Canada.

In its 2011 Annual Report to Congress, the Federal Reserve stated that 

stakeholders and depository institution representatives reported through 

their routine meetings that the $1 coins continue to be easy to order and 

that its communications about the program have been effective, but that 

transactional demand for $1 coins has not increased since the start of the 

program and overall demand continues to come primarily from collectors. 

Federal Reserve officials told us they continue to discuss the $1 coin as 

necessary with groups such as the Customer Advisory Council, but that 

they do not intend to take any additional actions. The Board believes the 

suspension of the minting of the Presidential $1 coin for circulation makes 

the annual report no longer necessary and, in its 2012 Annual Report to 

Congress, proposed the elimination of the annual reporting requirement.

Since 2009, on behalf of the Reserve Banks, the Federal Reserve has 

taken steps to standardize its management of the circulating coin 

inventory from a national perspective. Generally, these efforts have 

contributed to improvements, such as reductions in national coin 

inventories and orders, and stakeholder satisfaction with the Federal 

Reserve’s new approach. The Federal Reserve’s current strategic plan 

calls for the efficient and effective use of financial resources that could 

lead to more efficient operations and potentially cost savings. However, 

some issues remain.

• Reserve Bank coin management costs have risen since 2008 and 

CPO has not taken steps to systematically assess factors influencing 

direct and support costs related to coin management and assess 

whether opportunities exist to isolate elements of their coin inventory 

management that could lead to cost savings across the Reserve 

Banks.

• Interrelated key practices related to the Federal Reserve’s 

management of the circulating coin inventory indicate opportunities to 

advance the use of performance information to establish and monitor 

additional performance goals and metrics and to improve processes 

for forecasting demand. For example, establishing goals and metrics 

and tracking progress toward those two will allow the Federal Reserve 

to better ensure that multiple aspects of its coin management 

activities are being monitored and will help agency officials identify 

Conclusions
Page 38 GAO-14-110 U.S. Currency

and document other program impacts or to determine where 

additional efficiencies could be gained.

• Taking steps to assess monthly forecasts to improve accuracy can 

also lead to overall improvements in the coin supply chain. 

Developing and tracking performance information and assessing 

forecasts—key practices used by private and governmental 

organizations to effectively manage their inventories—could ultimately 

help identify cost savings for Reserve Banks or improve the efficiency 

of U.S. Mint coin production, which may in turn result in more money 

returned to the General Fund, contributing to U.S. taxpayer savings.

To ensure efficient management of the circulating coin inventory, we 

recommend that the Board of Governors direct CPO to take the following 

three actions:

• develop a process to assess the factors that have influenced 

increasing coin operations costs and differences in costs across 

Reserve Banks and a process to use this information to identify 

practices that could lead to cost-savings;

• establish, document, and annually report to the Board performance 

goals and metrics for managing the circulating coin inventory, (e.g., 

Reserve Bank coin management costs) and measure performance 

towards those goals and metrics; and

• establish and implement a process to assess the accuracy of 

forecasts for new coin orders and revise the forecasts as needed.

We provided a draft of this report to the Chairman of the Board of 

Governors of the Federal Reserve System and the Secretary of the 

Treasury for review and comment. In written comments, reproduced in 

appendix IV, the Federal Reserve generally agreed with the report’s 

recommendations. Treasury had no comments.

We are sending copies of this report to the appropriate congressional 

committees and the Federal Reserve, U.S. Mint, and BEP. In addition, the 

report is available at no charge on GAO’s Web site at http://www.gao.gov.

Recommendations for 

Executive Action

Agency Comments
Page 39 GAO-14-110 U.S. Currency

If you or your staff have any questions about this report, please contact 

me at (202) 512-2834 or stjamesl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix V.

Lorelei St. James

Director, Physical Infrastructure
Page 40 GAO-14-110 U.S. Currency

List of Requesters

The Honorable John B. T. Campbell, III

Chairman, Subcommittee on Monetary Policy and Trade

Committee on Financial Services

House of Representatives

The Honorable Spencer Bachus

Committee on Financial Services

House of Representatives

The Honorable Steve Stivers

Committee on Financial Services

House of Representatives

The Honorable David Schweikert

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 41 GAO-14-110 U.S. Currency

This report addresses the following questions: (1) How does the Federal 

Reserve manage the circulating coin inventory and what are the coin 

management costs? (2) To what extent does the Federal Reserve follow 

key supply-chain management practices in managing the circulating coin 

inventory? (3) What actions has the Federal Reserve taken to respond to 

potential changes in demand for coins and notes? (4) What actions has 

the Federal Reserve taken with regard to the circulation of the $1 coin, 

and what more, if anything, could it do?

To address these questions we met with federal agency officials, foreign 

officials, industry and academic experts, and currency industry 

representatives. (See table 2.) We selected industry and academic 

experts with supply-chain or coin-inventory management expertise. We 

selected Australia, Austria, and Canada as countries with experiences 

relevant to our review—such as replacing low denomination notes with 

coins, or recent implementation of coin-inventory management process 

improvements. These countries were selected for illustrative purposes 

and are not intended to be used as benchmarks for direct comparisons to 

the Federal Reserve’s management of the circulating coin inventory. We 

obtained documents from and conducted interviews with Federal Reserve 

officials to obtain information about the agency’s processes for managing 

the distribution of the circulating coin inventory. We also visited a Federal 

Reserve coin terminal in White Marsh, Maryland. In addition, we reviewed 

literature and our prior reports related to coin inventory management.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 42 GAO-14-110 U.S. Currency

Table 2: Organizations and Individuals Interviewed

Federal agencies

Bureau of Engraving and Printing

Federal Reserve Banks’ Cash Advisory Group

Federal Reserve Board

Federal Reserve Cash Product Office

Federal Reserve Retail Payments Office

United States Mint

Foreign officials

Department of Finance Canada

Oesterreichische Nationalbank 

Royal Australian Mint

Royal Canadian Mint

Industry and academic experts

APICS

Dr. Dean Croushore, University of Richmond

Dr. Neil Geismar and Dr. Chelliah Sriskandarajah, Texas A&M University

Industry representatives

American Bankers Association

Coinstar

Customer Advisory Council 

Dollar Coin Alliance

Independent Armored Car Operators Association

Independent Community Bankers of America

National Armored Car Association (Brink’s, Dunbar Armored, Loomis)

National Automated Merchandising Association

Source: GAO.

To review the Federal Reserve’s management of the circulating coin 

inventory and identify costs associated with managing this inventory, we 

interviewed Federal Reserve, United States Mint (U.S. Mint) officials, and 

industry representatives—such as National Armored Car Association 

members and depository institution representatives on the Cash Product 

Office’s (CPO) Customer Advisory Council (a group established to 

provide input on coin and note operations). To assess management 

operations related to the circulating coin inventory, we used the Federal 
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-14-110 U.S. Currency

Reserve’s Strategic Framework 2012-2015 and the Committee of 

Sponsoring Organizations of the Treadway Commission’s (COSO) 

Internal Control—Integrated Framework.1

To assess the extent to which the Federal Reserve follows key supplychain and inventory-management practices, we developed and validated 

criteria with stakeholder and expert input. To develop and define practices 

common to efficient supply chain and inventory management and 

applicable to the circulating coin inventory in the United States, we 

reviewed supply chain management and operations management 

literature on leading practices, our past defense inventory management 

and Government Performance and Results Act reports, and academic 

literature.

We also obtained and analyzed 

coin inventory and production data for 2004 through 2012 from the 

Federal Reserve, U.S. Mint production data from 2010 through March 

2013, and Reserve Bank coin and note management cost data from 2008 

through 2012. For example, we reviewed Federal Reserve data for 

monthly coin forecasts, annual coin inventory levels, analyzed data on 

monthly coin orders and shipments for bias, and compared the overall 

and individual Reserve Bank costs related to coin and note operations.

2

 1

Committee of Sponsoring Organizations of the Treadway Commission, Internal Control—

Integrated Framework (1992).

We also worked with industry experts to identify a selection of 

supply-chain management practices relevant to coin inventory 

management. We identified five key practices: collaboration, risk 

management, performance metrics, forecasting demand, and system 

optimization. For additional information on these key practices, see 

appendix III. The supporting characteristics associated with the key 

practices were selected based on knowledge of circulating coin 

management. Selected academic and industry experts in operations and 

supply chain management and the circulating coin inventory as well as 

foreign mint or central bank officials from Australia, Austria, and Canada 

validated that the selected key practices, definitions, and supporting 

characteristics were relevant to coin inventory management.

2

For example, GAO, Defense Inventory: Actions Underway to Implement Improvement 

Plan but Steps Needed to Enhance Efforts, GAO-12-493 (Washington, D.C.: May 3, 2012)

and Managing for Results: Executive Branch Should More Fully Implement the GPRA 

Modernization Act to Address Pressing Governance Challenges, GAO-13-518

(Washington, D.C.: June 26, 2013).
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-14-110 U.S. Currency

We compared the Federal Reserve’s inventory management practices to 

the five key practices by assessing the extent to which the Federal 

Reserve met individual supporting characteristics for each practice. The 

individual assessments for the supporting characteristics served as the 

basis for the overall assessment for each key practice. Specifically, after 

we assessed the selected supporting characteristics, we made an overall 

assessment for each of the five practices using the following scale:

• Followed or substantially followed—plans, policies, or processes have 

been developed and implemented properly for all or nearly all of the 

supporting characteristics.

• Partially followed—plans, policies, or processes have been developed 

and implemented properly for some of the supporting characteristics.

• Minimally or not followed—plans, policies, or processes are lacking for 

all or nearly all of the supporting characteristics.

To determine the extent to which the Federal Reserve followed these key 

practices and supporting characteristics, we reviewed agency documents 

and interviewed officials from the Federal Reserve and U.S. Mint. We 

also met with industry stakeholders (e.g., depository institution 

representatives and coin terminal operators) and academic and industry 

experts to discuss their views on the Federal Reserve’s management of 

the circulating coin inventory and working relationships with other entities 

in the circulating coin supply chain.

To identify actions the Federal Reserve has taken to respond to potential 

changes in demand for coins and notes, we interviewed officials from the 

Federal Reserve, U.S. Mint, and Bureau of Engraving and Printing (BEP). 

We also interviewed depository institution representatives on the 

Customer Advisory Council, academic experts and industry 

representatives including coin terminal operators and Coinstar. We also 

interviewed government officials in Australia, Austria, and Canada to 

obtain their perspectives on potential changes in future cash demand. In 

addition, we reviewed Federal Reserve research and analysis pertaining 

to electronic and other payment methods including reports and 

documentation related to the CPO’s long-term strategic framework and 

the Retail Payment’s Office triennial payments studies from 2007 and 

2010. We also interviewed Federal Reserve officials who have worked on 

these studies and obtained information about additional research efforts 

underway related to examining and preparing for changes in future 

demand for coins, notes, and other payment methods.
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-14-110 U.S. Currency

To identify actions taken by the Federal Reserve regarding the circulation 

of the $1 coin, we obtained perspectives on the availability and use of $1 

coins from Federal Reserve and Reserve Bank officials. We also met with 

industry stakeholders and coin user groups—including depository 

institution representatives, the National Automated Merchandising 

Association, the Dollar Coin Alliance, Coinstar, and selected industry 

experts. We reviewed Federal Reserve and U.S. Mint responsibilities 

related to the circulation of the $1 coin, including those outlined in the 

Presidential $1 Coin Act of 2005 and Native American $1 Coin Act. To 

identify actions taken to identify, analyze, and overcome barriers to the 

circulation of the $1 coin, we reviewed the Federal Reserve’s Annual 

Reports to Congress on the Presidential $1 Coin Program for 2007 

through 2013 and interviewed Federal Reserve officials. In addition, we 

interviewed selected foreign government officials from Australia, Austria, 

and Canada to identify examples of actions taken to promote low 

denomination coins and to enhance the circulation of these coins in other 

countries. We also analyzed Federal Reserve data on $1 coin inventories, 

U.S. Mint orders, payments, and receipts from 2007 through 2012.

We assessed the reliability of data used in this report by (1) performing 

electronic testing of required data elements, (2) reviewing existing 

information about the data and the system that produced them, and (3) 

interviewing agency officials knowledgeable about the data. We 

determined that the data were sufficiently reliable for the purpose of this 

report.

We conducted this performance audit from March 2013 through October 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 46 GAO-14-110 U.S. Currency

In 2009, the Federal Reserve’s Cash Product Office (CPO) established 

national upper and lower inventory targets for pennies, nickels, dimes, 

and quarters to track and measure the coin inventory. National upper and 

lower inventory targets are reviewed and updated annually. In 2013, the 

upper national inventory targets were set based on the average peak 

Reserve Bank coin inventory from 2009 to 2012, and the lower national 

targets were set based on the 10 consecutive days from 2009 to 2012 

with the most coin payments to depository institutions. Figures 9 through 

12 present the Reserve Bank inventories of quarters, dimes, nickels and 

pennies from 2009 through 2012 and upper and lower national inventory 

targets from 2009 through 2013.1

Figure 9: Reserve Bank Inventories of Quarters, 2009–2012, and National Inventory 

Targets, 2009–2013

 1

2012 annual Reserve Bank inventory data on quarters, dimes, nickels and pennies and 

2013 national upper and lower inventory targets was the most recent available.

Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Reserve Bank Coin 

Inventory and Inventory 

Targets
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 47 GAO-14-110 U.S. Currency

Figure 10: Reserve Bank Inventory of Dimes, 2009–2012, and National Inventory 

Targets, 2009–2013
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 48 GAO-14-110 U.S. Currency

Figure 11: Reserve Bank Inventory of Nickels, 2009–2012, and National Inventory 

Targets, 2009–2013 
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 49 GAO-14-110 U.S. Currency

Figure 12: Reserve Bank Inventory of Pennies, 2009– 2012, and National Inventory 

Targets, 2009– 2013 

Coin receipts from depository institutions and Reserve Bank payments to 

depository institutions fluctuate throughout the year—reflecting changes 

in the public’s spending patterns. (See fig. 13.) For example, in December 

2012, the Federal Reserve paid about $479 million in coins to depository 

institutions (payments) and received about $452 million in coins from the 

depository institutions (receipts); this difference between payments and 

receipts is also referred to as net pay.

Monthly Payments and 

Receipts for All 

Denominations
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 50 GAO-14-110 U.S. Currency

Figure 13: Monthly Reserve Bank Payments to and Receipts from Depository Institutions for All Denominations, March 2009–

March 2013

Net pay is the difference between coins paid to depository institutions and 

coins received from depository institutions over a given period of time. 

Net pay greater than zero (positive) indicates that the Federal Reserve 

paid more coins to depository institutions than it received from depository 

institutions during that period (e.g., month or year). In addition, positive 

net pay indicates that additional coins—coins transferred from areas with 

negative net pay or new coins—are needed to meet demand. CPO uses 

national data on net pay, inventory, and expected changes to demand to 

make inventory management decisions such as where to transfer coin 

within and between Reserve Bank districts. When coin payments to 

depository institutions are greater than coin receipts from depository 

institutions, CPO orders new coins or uses circulated inventory to meet 

demand. Figures 14 through 17 present annual data for net pay, 

Annual Net Pay, New Coin 

Orders, and Inventories for 

Quarters, Dimes, Nickels, 

and Pennies
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 51 GAO-14-110 U.S. Currency

inventory, and new coin orders for quarters, dimes, nickels, and pennies 

from 2009 through 2012.2

Figure 14: Reserve Bank Quarter Inventories, Net Pay, and New Coin Orders, 2009–

2012

 2

These figures do not include coin payments made directly to circulation by the U.S. Mint. 

Information on net pay, coin orders, and inventory of $1 coins is presented in the body of 

this report.
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 52 GAO-14-110 U.S. Currency

Figure 15: Reserve Bank Dime Inventories, Net Pay, and New Coin Orders, 2009–

2012
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 53 GAO-14-110 U.S. Currency

Figure 16: Reserve Bank Nickel Inventories, Net Pay, and New Coin Orders, 2009–

2012
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 54 GAO-14-110 U.S. Currency

Figure 17: Reserve Bank Penny Inventories, Net Pay, and New Coin Orders, 2009–

2012

To manage the circulating coin inventory, Reserve Banks incur coin 

management costs and interbank transfer costs. The Reserve Banks’

coin management costs include direct costs and support costs. (See fig. 

18.) Direct costs are generally personnel costs such as salaries and 

benefits and support costs include utilities, protection, facilities, 

information technology, and other local and national support functions.

From 2009 through 2012, direct costs represented about 30 percent and 

support costs represented about 70 percent of total coin management 

costs. Interbank transfers are shipments of coins from one Reserve Bank 

office region to another to ensure demand is met. (See fig. 19.)

Reserve Bank Costs 

Related to Coin
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 55 GAO-14-110 U.S. Currency

Figure 18: Total Reserve Bank Coin Management Costs, 2009–2012

Figure 19: Number and Cost of Interbank Coin Shipments, 2009–2012
Appendix II: Data and Figures on Coin and 

Note Inventory, Orders, and Circulation

Page 56 GAO-14-110 U.S. Currency

From 2009 through 2012, the value of notes in circulation has increased 

by 27 percent from about $888 billion in 2009 to over $1,127 billion in 

2012. (See fig. 20.)

Figure 20: Value of Notes in Circulation, 2009–2012

Note: This represents the total face value of notes used as a medium of exchange that are in 

circulation. It includes some old and current notes that no longer circulate.

Notes in Circulation
Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory

Page 57 GAO-14-110 U.S. Currency

To effectively manage their inventory, private and governmental 

organizations involved in production and distribution operations use 

supply-chain and inventory-management practices. To assess the 

Federal Reserve’s management of the circulating coin inventory we 

identified five key supply-chain management practices: collaboration, risk 

management, performance metrics, forecasting demand, and system 

optimization. Establishing, documenting, and following these practices 

and their supporting characteristics contributes to a more effective 

inventory management system. In addition, these supply-chain 

management practices are interrelated—as activities in one area may 

have implications in another—and can be used to achieve efficiency 

improvements and cost savings. For example, collaborative working 

relationships can improve risk management practices because 

information related to disruptions and actions to minimize or mitigate 

disruptions are more easily shared across the system.

To assess elements of the five key supply-chain management practices, 

we selected 14 supporting characteristics based on their relevance to 

coin inventory management. Based on our review, we determined 

whether the Federal Reserve’s management of the circulating coin 

inventory followed or substantially followed, partially followed, or 

minimally or not followed each supporting characteristic. Our assessment 

of the characteristics served as the basis for our overall assessment as to 

whether each key practice was followed or substantially followed, partially 

followed, or minimally or not followed. For example, if we found 

supporting evidence that two of the three characteristics of a practice 

were substantially followed but no evidence to support that the third 

characteristic was followed we would determine that the key practice was 

partially followed.

Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory
Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory

Page 58 GAO-14-110 U.S. Currency

Table 3: Collaboration and Supporting Characteristics

Key practice: Collaboration Overall assessment

●

Collaboration is based on maintaining working relationships with partner entities across the supply chain by establishing policies, roles 

and responsibilities, and mechanisms for sharing information. Collaboration can be broadly defined as any joint activity that is 

intended to produce more public value than could be produced when the organizations act alone. GAO best practices for collaborative 

working relationships include, among other characteristics, agreeing on agency roles and responsibilities; establishing compatible 

policies, procedures, and other means to operate across agency boundaries; and developing mechanisms to monitor, evaluate and

report results of collaborative efforts. In addition, according to APICS, building strategic partnerships is an effective way to reduce 

costs and improve service in the supply chain. 

Characteristics and coin inventory management examples Assessment of characteristics

Characteristic: Develop and use policies or guidelines governing relationships with partner 

entities.

Example: The Federal Reserve’s Cash Product Office (CPO), on behalf of Reserve Banks, 

negotiated a contract with coin terminal operators. The contract includes a coin terminal manual of 

operations, which standardized procedures and internal controls for the coin terminals’ storage 

and handling of Reserve Bank coin across the 12 Reserve Bank districts.

●

Characteristic: Agree upon roles and responsibilities with partner entities.

Example: For interbank coin transfers, the U.S. Mint arranges transportation of coins across 

Reserve Banks; CPO reimburses the U.S. Mint for the costs of this transportation.

●

Characteristic: Develop and use mechanisms for sharing information related to the circulating coin 

inventory with partner entities.

Example: FedLine, an online tool created for Reserve Bank customers (depository institutions) to 

access payment services, also provides a communication link between CPO, Reserve Bank 

offices, coin terminals, and depository institutions.

●

● Key practice followed or substantially followed—plans, policies, or processes have been developed and implemented properly for 

 all or nearly all characteristics.

◐ Key practice partially followed—plans, policies, or processes have been developed and implemented properly for some 

 characteristics.

○Key practice minimally or not followed—plans, policies, or processes are lacking for all or nearly all characteristics.

Source: GAO analysis of Federal Reserve information.
Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory

Page 59 GAO-14-110 U.S. Currency

Table 4: Risk Management and Supporting Characteristics

Key practice: Risk management Overall assessment

●

Risk management is the planning and preparation for risks related to unanticipated events to help organizations respond to and 

maintain essential operations during events that could disrupt the normal flow of goods and materials within the supply chain. The 

Standard for Internal Control in the Federal Government and the Committee of Sponsoring Organizations of the Treadway 

Commission’s (COSO) Internal Control—Integrated Framework require agencies to assess external and internal risks because 

conditions continually change, and to provide mechanisms to identify and deal with any special risks prompted by such changes. In 

addition, APICS recommends that supply chain management includes the management of risks surrounding unanticipated events that 

disrupt the normal flow of goods and materials within the supply chain.

Characteristics and coin inventory management examples Assessment of characteristics

Characteristic: Identify sources of potential disruptions.

Example: Federal Reserve officials identified disruptions that could affect regional coin supply 

chains (e.g., terrorist events, national weather disasters, or temporary events that limit 

transportation in metropolitan areas).

●

Characteristic: Assess the potential impact of the risk.

Example: According to CPO officials, as soon as disruption is anticipated, they begin planning 

with stakeholders operating in the affected area, including Reserve Bank officials, coin terminal 

operators, and depository institutions. In addition, online resources are available for stakeholders 

to refer to. 

●

Characteristic: Develop and use plans to mitigate the risk.

Example: The 12 Reserve Banks have their own continuity of operations plans and each has a 

designated “buddy bank” to perform its functions, including coin circulation activities, in the event 

of a disruption. CPO will coordinate risk management efforts during a disruption for all Federal 

Reserve cash offices across the country.

●

● Key practice followed or substantially followed—plans, policies, or processes have been developed and implemented properly for 

 all or nearly all characteristics.

◐ Key practice partially followed—plans, policies, or processes have been developed and implemented properly for some 

 characteristics.

○ Key practice minimally or not followed—plans, policies, or processes are lacking for all or nearly all characteristics.

Source: GAO analysis of Federal Reserve information.
Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory

Page 60 GAO-14-110 U.S. Currency

Table 5: Performance Metrics and Supporting Characteristics

Key practice: Performance metrics Overall assessment

◐

Performance metrics involve the process of establishing, tracking, and reevaluating goals or metrics to measure change or 

improvement in a process or performance area. Performance goals and metrics should be clearly defined, measurable, actionable, 

relevant and timely, should be tracked to ensure that they are being met, and reevaluated periodically to ensure that they remain 

reasonable and useful. In addition, while it does not apply directly to the Federal Reserve, the GPRA Modernization Act of 2010 

(GPRAMA) aims to ensure that federal agencies use performance information in decision making and holds them accountable for 

achieving results and improving government performance. We have previously reported that agencies should identify goals and 

establish a suite of performance metrics to determine whether they are meeting those goals. 

Characteristics and coin inventory management examples Assessment of characteristics 

Characteristic: Develop and use reasonable metrics that are clearly defined, measurable, 

actionable, relevant and timely.

Example: In 2009, the Federal Reserve established upper and lower inventory targets for 

pennies, nickels, dimes, and quarters to track and measure the national coin inventory and 

inventory at each Reserve Bank office and coin terminal. However, CPO does not have 

additional goals and metrics to measure other aspects of its management of the coin inventory. 

◐

Characteristic: Track progress against metrics or targets.

Example: CPO tracks national and local inventory levels to ensure that the national coin supply 

and local inventories are within inventory targets. 

●

Characteristic: Establish a process to reevaluate metrics or targets.

Example: CPO reevaluates the national inventory targets annually; however, it has not 

established a process for reevaluating its methodology for setting local inventory levels.

◐

● Key practice followed or substantially followed—plans, policies, or processes have been developed and implemented properly for 

 all or nearly all characteristics.

◐ Key practice partially followed—plans, policies, or processes have been developed and implemented properly for some 

 characteristics.

○ Key practice minimally or not followed—plans, policies, or processes are lacking for all or nearly all characteristics.

Source: GAO analysis of Federal Reserve information.
Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory

Page 61 GAO-14-110 U.S. Currency

Table 6: Forecasting Demand and Supporting Characteristics

Key practice: Forecasting demand Overall assessment

◐

Planning and forecasting for demand involves preparing for and estimating expected changes in future demand and planning and 

making decisions based on these estimates. Forecasts are developed in order to better estimate future demand and planning 

decisions are based on these forecasts to meet the expected changes in demand. According to APICS, forecasting is attempting to 

predict or project future statistics—typically, demand or sales. It requires that all factors surrounding the decision-making process are 

recorded. Factors that affect forecasting include sales demand patterns, economic conditions, competitor actions, market research, 

product mixes, and pricing and promotional activities. Forecasts can be made at strategic, tactical, and operational levels. The 

forecasting process predicts demand and the use of products and services so that the right quantities are ordered in advance. In 

forecasting, either historical demand data are transformed into future projections or a subjective prediction of the future is made—or 

some combination of the two. 

Characteristics and coin inventory management examples Assessment of characteristics

Characteristic: Have a process in place to forecast demand.

Example: Since 2009, the Federal Reserve has used a proprietary inventory management system 

to track circulating coin inventory and forecast future needs. 

●

Characteristic: Use forecast results to plan and manage the circulating coin inventory.

Example: Information from the proprietary system is used to develop forecasts of expected coin 

payments, receipts, and inventory for each distribution location and this information is used to 

determine if new coins should be ordered from the U.S. Mint or shipped from one location to 

another.

●

Characteristic: Assess forecast accuracy.

Example: CPO lacks a method to assess or track forecast accuracy related to monthly coin orders. 

According to CPO officials, they compare the U.S. Mint’s actual coin shipment to their initial coin 

order by reviewing annual data, but they have not established or tracked any performance 

measures related to the accuracy of their monthly forecast.

○

● Key practice followed or substantially followed—plans, policies, or processes have been developed and implemented properly for 

 all or nearly all characteristics.

◐ Key practice partially followed—plans, policies, or processes have been developed and implemented properly for some 

 characteristics.

○ Key practice minimally or not followed—plans, policies, or processes are lacking for all or nearly all characteristics.

Source: GAO analysis of Federal Reserve information.
Appendix III: Discussion of Key Practices for 

Managing the Coin Inventory

Page 62 GAO-14-110 U.S. Currency

Table 7: System Optimization and Supporting Characteristics

Key practice: System optimization Overall assessment

◐

System optimization involves considering, as a whole, the strategic interactions and operations of the entire supply chain or inventory 

process in developing process change. According to APICS, optimizing the logistics network is the process of achieving the most 

efficient network to move materials and products from the supplier through the manufacturing process to the end user. For example, to 

improve its inventory management, the Department of Defense has taken steps to collect information from all tiers of its supply chain 

and use that information to make decisions on movements of inventory and has developed models to inform them of the optimal use of 

its inventories. 

Characteristics and coin inventory management examples Assessment of characteristics

Characteristic: Obtain access to information and resources from across the circulating coin supply 

chain (e.g., knowledge of coin production lead-time, inventory, demand and transportation).

Example: CPO has multiple systems that provide information from across the supply chain and 

help make decisions based on current and expected changes to demand and inventory. This 

information includes coin management costs and actual and forecasted coin demand. Regular 

communications with key supply-chain stakeholder representatives from Reserve Banks, 

depository institutions, coin terminals, and the U.S. Mint provide CPO with information such as 

market changes that could influence changes in demand and challenges that could limit the 

efficient distribution of coins.

●

Characteristic: Use information and resources to identify and implement efficiencies within the 

supply chain.

Example: CPO’s use of information and resources is limited thereby making it difficult to track 

progress for continued improvement or understand the extent to which these strategic interactions 

optimize the overall efficiency of its management of the circulating coin inventory. For example, the 

U.S. Mint’s production of new coin could be more efficient with improvements to the accuracy of 

new coin orders. Currently, the U.S. Mint produces a safety stock, in part, to ensure it is able to 

produce enough coins to fulfill CPO’s final, adjusted order. Therefore, more accurate forecasts and 

coin orders could lessen the need for the U.S. Mint to produce safety stock. Key supply chain 

stakeholders can also act as a resource for the CPO to identify efficiencies within the supply chain.

○

● Key practice followed or substantially followed—plans, policies, or processes have been developed and implemented properly for all 

 or nearly all characteristics.

◐ Key practice partially followed—plans, policies, or processes have been developed and implemented properly for some 

 characteristics.

○ Key practice minimally or not followed—plans, policies, or processes are lacking for all or nearly all characteristics.

Source: GAO analysis of Federal Reserve information.
Appendix IV: Comments from the Federal 

Reserve

Page 63 GAO-14-110 U.S. Currency

Appendix IV: Comments from the Federal 

Reserve
Appendix V: GAO Contact and 

Staff Acknowledgments

Page 64 GAO-14-110 U.S. Currency

Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov.

In addition to the individual named above, Teresa Spisak, Assistant 

Director; Amy Abramowitz; Douglas Anderson; Patrick Dudley; Lawrance 

Evans, Jr.; David Hooper; Delwen Jones; Sara Ann Moessbauer; Colleen 

Moffatt Kimer; Constance Ify Onyiah; Josh Ormond; Jennifer Schwartz; 

and Maria Wallace made key contributions to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(544193)
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