Coin and Currency Production: Issues Concerning Who Should Provide Security
Published: 2003-07-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The U.S. Mint and the Bureau of Engraving and Printing (BEP), which produce the nation's coins and currency, provide their own security and have experienced some problems with theft by employees. Although security is necessary to carry out the agencies' missions, their primary function is producing money. In light of these thefts, a congressional committee asked GAO whether the Mint and BEP should continue to provide their own security or whether the United States Secret Service should provide their security. Among the issues that GAO was asked to address were (1) how do the Mint, BEP, and other organizations that produce or handle large amounts of cash provide their security; (2) what thefts have occurred at the Mint and BEP and what steps have they taken to prevent thefts from recurring; and (3) what are the potential benefits and costs of having the Secret Service provide Mint and BEP security? The Mint said it generally agreed with the findings and conclusions that applied to the Mint. BEP and the Secret Service provided technical comments regarding the report, which GAO incorporated where appropriate, but had no overall comments on the report.
section_title: What GAO Found
paragraphs: The Mint and BEP use their own police forces to provide security. Eight of the 12 coin and currency organizations in the other G7 nations responded to our requests for information. Four organizations reported that they only used their own security forces; 2 organizations said they used their own security forces supplemented with contractor personnel; 1 organization said it used an outside agency to supplement its own security force; and 1 organization said that it used an outside agency to provide its security. Private businesses that handle large amounts of cash, such as banks and casinos, that we contacted said they used either their own security staff or contractor staff. The Mint and BEP have experienced some thefts by employees over the last decade. The Mint, which did not have records of security incidents that occurred more than 5 years ago, reported 74 incidents of theft involving about $93,000 from 1998 though 2002, while BEP reported 11 incidents of theft from 1993 through 2002 involving about $1.8 million. Both the Mint and BEP had threat assessments made of their facilities and processes and took corrective action to enhance security. The Secret Service said that if its Uniformed Division were charged with the responsibility of protecting the Mint and BEP, the two agencies could benefit from the Secret Service's expertise in protection and criminal investigations. However, unlike Secret Service police officers, Mint and BEP security personnel are already familiar with the coin and currency production processes, which is a benefit in identifying security risks in these manufacturing facilities. Further, if the Secret Service protected the Mint and BEP, the government could incur additional costs because the Secret Service requires more training for its officers than the Mint and BEP police. The Secret Service police officers also are provided more costly retirement benefits than the Mint and BEP police.

section_title: Letter
paragraphs: The U.S. Mint and the Bureau of Engraving and Printing (BEP)— Department of the Treasury agencies that produce the nation’s coins and  currency—have experienced some thefts in the last decade by their  employees, including the theft of about $1.6 million in test currency from  BEP in 1994. The government’s money producing facilities are also  considered by law enforcement officials to be potential terrorist targets  because of their symbolic importance and role in the U.S. economy. During  fiscal year 2002, the Mint produced and shipped about 15 billion circulating  coins, and BEP produced and shipped about 7.1 billion Federal Reserve  notes. Although the primary mission of the Mint and BEP is to produce  money, they also provide their own security.
In light of these thefts by Mint and BEP employees, you asked us to review  (1) how security is provided at the Mint and BEP and how that compares  with the security arrangements at coin and currency producing  organizations in other countries and at businesses that handle large  amounts of money, (2) what thefts have occurred at the Mint and BEP in  recent years and what steps have been taken to prevent thefts from  recurring, and (3) what are the potential benefits and costs of having the  United States Secret Service provide Mint and BEP security?
To address these questions, we obtained and reviewed Mint, BEP, and  Secret Service police job classifications, application and training  requirements, and salaries and benefits; thefts that occurred from 1998 through 2002 at the Mint and from 1993 through 2002 at BEP; crimes that  occurred and arrests that were made from 1993 through 2002 at buildings  protected by the Secret Service’s Uniformed Division; and government and  consultant security assessments of Mint and BEP security. We sought  information from the other G7 nations (Canada, France, Germany, Italy,  Japan, and the United Kingdom) regarding the security arrangements at  their 12 money producing facilities and received responses from 8  organizations in those countries. Further, we verified whether  recommendations for security improvements at the Mint and BEP had been  implemented. In addition, we interviewed officials from the Mint, BEP,  Secret Service, and the Federal Reserve System and representatives from  selected businesses, such as banks and casinos, that handle a large amount  of cash about their security arrangements. We did our work in Washington,  D.C.; Philadelphia, Pennsylvania; and Ft. Knox, Kentucky, in accordance  with generally accepted government auditing standards and investigative  standards established by the President’s Council on Integrity and Efficiency  from July 2002 through June 2003. Our detailed scope and methodology are  contained in appendix I.
subsections: section_title: Background
paragraphs: The Mint and BEP, which are part of the Treasury Department, produce the  nation’s coins and currency. The Mint primarily produces circulating coins  in Denver, Colorado, and Philadelphia. It also makes numismatic coins and  medals and stores over $100 billion in government precious metals at  facilities in Denver; Fort Knox; Philadelphia; San Francisco, California;  Washington, D.C.; and West Point, New York. BEP produces (1) the nation’s  currency for the Federal Reserve System, (2) many security documents  that the federal government issues, and (3) some postage stamps. Its  production facilities are in Washington, D.C., and Ft. Worth, Texas. During  fiscal year 2002, the Mint produced and shipped about 15 billion circulating  coins at a cost of $430.9 million, including $47.2 million for security. BEP  produced and shipped about 7.1 billion Federal Reserve notes in 2002 at a  cost of $376.7 million, including $33.2 million for security.
The authority of the Mint and BEP to establish police forces is derived from  40 U.S.C. § 1315, which provides the Mint and BEP police with powers to  enforce federal laws and regulations for the protection of individuals and  property, including making arrests and carrying firearms. Prior to the  enactment of the Homeland Security Act of 2002, the Administrator of the  General Services Administration (GSA), through GSA’s Federal Protective  Service (FPS), was responsible for policing government buildings under  GSA’s control and had delegated this responsibility to the Secretary of the  Treasury who redelegated it to the Mint and BEP. Although the Homeland  Security Act amended 40 U.S.C. § 1315 by transferring responsibility for  this policing authority to the Secretary of the Department of Homeland Security (DHS), the savings provisions in the act state that the existing  delegations will continue to apply.  Additional security legislation found in  Public Law 104-208 (1996) provides Mint and BEP police officers with the  authority to carry out their duties on Mint and BEP property and the  surrounding areas and while transporting coins, currency, and other agency  assets.
The primary mission of the Secret Service is to protect the President and  other individuals, enforce the nation’s counterfeiting laws, and investigate  financial crimes. In carrying out this mission, the Secret Service’s  Uniformed Division also protects the buildings in which the people it  protects are located, such as the White House complex, the Treasury  Department headquarters building and annex, the Vice President’s  residence, and foreign diplomatic missions. The Uniformed Division has  statutory authority to carry out its duties under 3 U.S.C. § 202 and 18 U.S.C.  § 3056, including the power to make arrests, carry firearms, and execute  warrants issued under the laws of the United States. The Secret Service’s  jurisdiction extends throughout the United States on mission-related work.
section_title: How Security Is Provided at the Mint, BEP, and Selected Other Organizations
paragraphs: The Mint and BEP use their own police forces to protect their facilities and  the money they produce. Eight of the 12 coin and currency organizations in  the other G7 nations responded to our requests for information. Four  organizations reported that they only used their own security forces; 2  organizations said they used their own security forces supplemented with  contractor personnel; 1 organization said it used an outside agency to  supplement its own security force; and 1 organization said that it used an  outside agency to provide its security. The six casino and banking  businesses that we contacted, which handle large amounts of cash, used  either their own security staff or contract staff. In general, the businesses  that used their own employees to provide security said they did so to  maintain greater control over their security operations, while the  businesses that used contract security personnel generally said they did so  because it was less costly.
Mint and BEP Police Forces As of March 2003, the Mint had 381 police officers. It also employed 38  people to provide administrative support for its security operations. BEP  had 209 police officers as of March 2003. It also employed 36 people to  provide administrative support for its security operations. In addition, BEP  employed 79 security specialists, investigators, and security managers who  BEP does not count as police officers, but who are licensed and trained to  carry firearms and can provide back-up for the police. BEP conducts most  of its own background investigations, while the Mint contracts out this  work.
The Mint and BEP police primarily provide security by guarding entry and  exit at the agencies’ facilities and conducting electronic surveillance. In  contrast to the Secret Service, which is concerned primarily with  protecting individuals and, as part of that mission, controlling public access  into protected facilities, the Mint and BEP police are focused on preventing  employees from taking coins and currency from the facilities. Both the  Mint and BEP police use outside experts to conduct threat assessments  regarding their facilities and to make recommendations for security  improvements.
The Mint and BEP police provide security for production facilities that are  not located in the same cities. The Mint police provide protection at the  primary coin production facilities in Denver and Philadelphia; the facilities  in San Francisco and West Point, which produce numismatic coins; the Ft.  Knox facility, where gold and other precious metals are stored; and the  Mint’s Washington, D.C., headquarters. The BEP police provide protection  at BEP’s Washington, D.C., headquarters and at currency production  facilities in Washington, D.C., and Ft. Worth.
Because both the Mint and BEP protect money producing facilities, the two  agencies have considered merging their police forces. According to the  Mint, a combined police force could exercise greater flexibility in  deploying security personnel in response to emergencies. However, the  Mint also said that (1) because of the geographic dispersion of the Mint’s  and BEP’s production facilities, the number of police positions that could  be eliminated through a merger of the police forces would be limited and  (2) all Mint and BEP police officers would have to be trained in the security  aspects of both the coin and currency production processes.
BEP management was opposed to merging the Mint and BEP police forces  because the centralization of the forces would not necessarily lead to a  more effective security effort, and these officials raised questions regarding  managerial controls, allocation of resources and funds, and accountability.  BEP management noted that because Mint and BEP production facilities  are not located in the same cities, local supervision still would be needed at  each facility.
Although the Mint and BEP are not pursuing a merger of their police forces,  they are considering sharing certain security-related functions. In April  2003, Mint and BEP officials met to discuss the sharing of security-related  services and agreed to share intelligence information, and they are studying  the feasibility of jointly conducting drug testing and background  investigations.
Appendix II provides specific information regarding Mint and BEP police  forces in terms of the facilities they protect, job classifications, number of  police, application requirements, starting salaries, attrition rates, and  training requirements.
subsections: section_title: Security Arrangements at Money Producing Facilities in Other Countries
paragraphs: We sent questionnaires to both the coin and currency producing  organizations in the six other G7 nations (Canada, France, Germany, Italy,  Japan, and the United Kingdom) requesting information about who  provides their security and whether they had experienced thefts from 1993  through 2002. Eight of the 12 coin and currency producing organizations  responded to our requests for information. Four organizations reported  that they only used their own security forces; 2 organizations said they  used their own security forces supplemented with contractor personnel; 1  organization said it used its own security force and personnel from the  country’s customs agency; and 1 organization said that the country’s  Ministry of Defense provided its security.
Two of the 8 organizations reported that they had experienced thefts of  $1,000 or more over the last 10 years; 1 of those organizations was  protected by its own security force, and the other was protected by the  country’s Ministry of Defense. The organization that was protected by its  own security force reported experiencing two thefts. One incident involved  an employee’s theft of gold that was worth about $40,000. The other  incident involved two employees’ theft of error coins worth about $1,000 to  coin collectors. The second organization, which was protected by the  country’s Ministry of Defense, reported that currency worth about $40,200  was stolen from its facilities. The other 6 organizations that responded said  they had not experienced any thefts of $1,000 or more over the last 10  years.
section_title: Security Arrangements at Businesses that Handle Large Amounts of Cash
paragraphs: We contacted four banks and two casinos regarding who provides their  security and why because, like the Mint and BEP, these entities also handle  large amounts of cash. The security director for one banking company said  that it only uses its own security guards in its major cash vault facilities,  which may contain hundreds of millions of dollars. He said that from his  company’s assessment of risk factors and experiences, it appeared that its  own well-trained, well-paid security guards are more dependable, reliable,  and honest than contract guards. The security directors at the three other  banks we interviewed said that they used contract security personnel to  provide their security because of the cost advantages compared with hiring  in-house staff. Of those three companies that used contract guards, one  also used in-house staff to supervise contract personnel and to guard its  cash vault operations.
Security directors from two major casino companies both said that they  employ their own security staff, rather than using contract staff. The  security director of the first company said that using its own security staff  provides the company with more control, for example, by conducting  background investigations on staff to ensure their suitability. Similarly, the  security director of the second company said that it is difficult to maintain  supervisory control or take corrective actions over contract security  officers.
section_title: Security Arrangements at the Federal Reserve System
paragraphs: The Federal Reserve System, the nation’s central bank, employs its own  police force.  Security personnel were granted federal law enforcement  authority under the Uniting and Strengthening America by Providing  Appropriate Tools Required to Intercept and Obstruct Terrorism (USA  Patriot) Act of 2001.  A Federal Reserve security official said that the  Federal Reserve preferred to use its own police force because it is  important to (1) know the officers and their training and capabilities and  (2) have the police force under its management control. The Federal  Reserve reported that it had experienced 12 internal thefts by its employees  in the past 10 years totaling $516,080, of which $239,562 has been recovered  to date.
section_title: Thefts at the Mint and BEP and Steps They Have Taken to Prevent Such Incidents
paragraphs: We asked the Mint and BEP to provide information regarding thefts that  occurred over the last decade. We reviewed these incidents with Mint and  BEP security officials in terms of what happened, why, and how they  occurred, and what steps have been taken to prevent thefts from recurring.  According to Mint and BEP security officials, the thefts did not occur  because of deficiencies in the existing security forces, but were the result  of breaches of trust by employees. Further, both the Mint and BEP have  had threat assessments conducted regarding their facilities and have  generally implemented the recommendations that were made to improve  security. As a result, it does not appear that the Mint and BEP have major  security gaps that they are not currently addressing.
subsections: section_title: Thefts at the Mint
paragraphs: Although we requested that the Mint provide information on thefts that  occurred during the past 10 years, the Mint indicated that it did not have  records of thefts that occurred more than 5 years ago and provided records  regarding incidents that occurred from 1998 through 2002. The Mint’s  records indicated that about $92,862 of government property (primarily  coins) was stolen during that time, including $80,000 total market value of  coins with production errors (“error coins”) that a Mint employee stole  from 1998 through 2000. The records reflected 74 reports of theft that  occurred both inside and outside of Mint facilities. They also indicated that  two employees were convicted of stealing from the Mint; an employee who  stole 400 to 500 error coins was sentenced to prison, and another employee  who was caught stealing 35 1-dollar coins was sentenced to probation.
Mint records indicated that about $82,357 of property (primarily coins) was  reported stolen from inside Mint facilities from 1998 through 2002,  involving 28 incidents, including the following:  the theft by an employee of 400 to 500 coins, including error coins with a  total value to coin collectors of about $80,000, and  27 other incidents involving the theft of $2,357 of coins and government  property, such as office and production equipment, including 10  incidents involving coins found on employees or contractors with a face  value of at least $36.
Outside of Mint facilities, about $10,505 in government property was  reported stolen, involving 46 incidents, including the following:  33 reports from Mint customers who claimed that they did not receive  coins sent through the mail, valued at $6,357;   9 reports of other stolen property, such as coins, coin blanks (coins that  have not yet been stamped), and office equipment, valued at $1,356;  3 reports of penny blanks that were stolen from rail cars in 1999 and  2000, valued at about $592; and  1 report of $2,200 in nickels that were stolen while being transported by  truck in 2000.
We asked the Mint Police Chief whether the thefts occurred due to  deficiencies in the police force and what has been done to prevent thefts  from recurring. The Police Chief said that the incidents occurred because  of an abuse of trust by employees, which he said that no police force could  prevent. Regarding the most serious incident—the theft of 400 to 500 coins  by a Mint employee from 1998 through 2000—the Police Chief said that this  occurred when the Mint was producing a high volume of coins and new  production equipment was installed at the Philadelphia facility, which  began producing large numbers of error coins. He said that thousands of  error coins were on the production floor during this period. He also said  that because the first coin made in a batch was not being checked before  continuing a production run, many error coins were produced before  corrections were made to the equipment. The Police Chief said that the  employee was able to take the coins out of the Mint facility over that 3-year  period because he did not exceed the threshold set to trigger the metal  detectors.
The steps that the Mint took to prevent thefts from recurring did not  involve improvements to the police force, but concerned improved internal  controls and production procedures. For example, to prevent thefts of  error coins, the Mint has required that the first coin produced in a batch be  checked for errors; that new equipment be used to quickly destroy error  coins once they are made, rather than having them brought to the metal  fabricator to be melted; that a report be prepared and provided to the  police chief each time an error coin is produced; and that error coins be  locked up. The Mint also is in the process of sealing off the production  areas from the rest of the production facility. In addition, the Mint is  considering requiring production employees to wear uniforms, which  would not have pockets or pants cuffs where coins could be hidden.
Regarding the coins that Mint customers purchased, but claimed that they  did not receive, the Mint’s Police Chief said the Mint has joined the U.S.  Postal Service’s interagency fraud group, which helps to identify postal  addresses that could be used to fraudulently order coins. Regarding the  theft of coins while being transported, the Mint Police Chief said that coins  are transported by contractors and that the government is fully insured for  their loss. The Police Chief said that the Mint tries to minimize thefts by  employees by having background investigations conducted on personnel  hired and by severely punishing those who are caught stealing.
The Mint indicated that it conducts threat assessments of its facilities every  5 years. In December 2000, Sandia National Laboratories assessed Mint  facilities and made 42 recommendations to improve security in its report.  None of these recommendations pertained to improvements in the police  force, for example, in terms of the officers’ training or skills.
In February and March 2003, we visited the Mint’s Philadelphia and Ft.  Knox facilities and found that 9 of the 13 recommendations contained in  the Sandia report pertaining to those facilities were fully implemented. Of  the 4 recommendations that had not been implemented, the Mint indicated  that it plans to implement 3 of them. The fourth recommendation had not  been implemented because the Mint believed, and we agreed, that it  detracted from, rather than enhanced, security. The Mint is also in the  process of conducting other security reviews in connection with  countering possible terrorist threats. To avoid possibly compromising  security, we are not discussing in this report the specific subjects of the  ongoing reviews or the specific security recommendations contained in  past assessments.
We also contacted two coin dealers who specialize in buying and selling  error coins to ask about the recent circulation of such coins. The head of  one firm said that the number of error coins that he has seen has dropped  significantly since the spring of 2001. The head of the other firm said that  he is now seeing the fewest number of error coins in decades.
section_title: Thefts at BEP
paragraphs: BEP reported 11 incidents of theft from 1993 through 2002 involving about  $1.8 million. According to BEP, seven employees were convicted of theft  in connection with these incidents, including one employee who was  sentenced to prison, and about $1.5 million of the stolen money was later  recovered.  The incidents included the theft of   $1,630,000 in test $100 bills from BEP’s Advanced Counterfeit  Deterrence Vault by a program manager in 1994 ($1.3 million of the  stolen money was later recovered);   $60,000 from a Federal Reserve vault inside BEP facilities by three BEP   $30,000 in blank, engraved $100 bills in 2001 by the former BEP currency   $20,960 worth of stamps by a postage stamp worker in 1996, which was   $2,000 (100, $20 notes) by a machine operator in 1993 (most of which  were later recovered);   a 32-note sheet of $10 blank engraved notes by a contract cleaning  employee in 1993; and  $25 in worn and soiled currency in 1999 by a currency examiner, who  also admitted to taking $250 on one occasion and $400 on two other  occasions.
No suspects were identified with respect to four other security incidents.  Three of the four incidents involved $5,500 in currency that was reported  missing from BEP facilities in 1997 and 1998. The fourth incident involved  the recovery from Atlantic City casinos in 1996 and 1997 of $16,000 in  unfinished notes produced by BEP.
We asked BEP’s Security Chief whether the thefts occurred because of  deficiencies in the police force and what has been done to prevent thefts  from recurring. The Security Chief said that the incidents did not occur  because of deficiencies in the police force, but were due to a breach of  trust by employees. Further, he said that bags and purses that employees  carry with them to work are subject to search when leaving the facilities  without first establishing probable cause, but that BEP police need to  establish probable cause before searching an employee. Further, he  pointed out that in some cases, the currency and postage stamps that  employees attempted to steal did not leave BEP facilities because the  police were effective in preventing removal of the items.
BEP’s Security Chief said that the measures taken to prevent the  recurrence of thefts include implementing the video surveillance of  production staff, reducing the amount of money in the vault where $1.6  million was stolen in 1994, increasing the number of layers of wrap  surrounding the currency after it is produced, rewrapping currency in the  presence of security personnel when the original wrap has been damaged  due to handling, increasing the number of police patrols in certain areas,  having currency transported by a least two authorized personnel, and  having the word ‘TEST’ imprinted on test currency.
In June 1994, following a BEP employee’s theft of $1.6 million in test  currency from BEP’s Washington, D.C., production facility, the Treasury  Department directed that steps be taken to improve the security and  internal controls at BEP, including an in-depth physical security review to  be conducted by the Secret Service. In December 1994, the Secret Service  completed its review and recommended 343 security improvements at BEP.  Also, BEP contracted with KPMG Peat Marwick to review internal controls  at BEP’s production facilities. In January 1995, KPMG made 134  recommendations for internal control improvements. Further, in  September 1999, BEP contracted with the consulting firm Kelly, Anderson & Associates to review, evaluate, and document security and internal  control corrective actions taken by BEP. Kelly Anderson reported in  February 2000 that 19 of the Secret Service’s recommendations and 7 of the  KPMG recommendations needed additional effort. In February and March  2003, we found that BEP had fully implemented 14 of the 19 Secret Service  recommendations and is in the process of implementing another. BEP  indicated that it did not intend to fully implement the other 4  recommendations (3 of the 4 were partially implemented) for cost and  other reasons, which we did not believe to represent major gaps in security.  We selected a random sample of 20 other Secret Service recommendations  that were identified as being high risk and KPMG recommendations  pertaining to that facility and verified that they had been implemented.
Three of the Secret Service recommendations directly pertained to the  police force. Two of the recommendations were to improve police training,  and the third was to improve background checks on police before they are  hired. Kelly Anderson reported in 2000 that these recommendations were  fully implemented.
BEP’s Security Chief said that, in addition to the agency’s ongoing  assessments of terrorist-related threats, BEP is planning to have a  contractor further assess terrorist threats and possible countermeasures.  To avoid possibly compromising security, we are not discussing in this  report what the future threat assessment would encompass or the specific  security recommendations contained in past assessments.
section_title: Potential Benefits and Costs of Having the Secret Service Provide Mint and BEP Security
paragraphs: According to the Secret Service, if it were given the responsibility of  protecting the Mint and BEP, those agencies could benefit from the Secret  Service’s expertise in protection and criminal investigations. However,  unlike the Secret Service’s Uniformed Division, the Mint and BEP police  are already familiar with the coin and currency production processes,  which is an advantage in identifying security risks. In addition, the  government would incur additional costs for the initial training of police  and retirement benefits if the Secret Service assumed responsibility for  protecting the Mint and BEP.
subsections: section_title: Secret Service’s Uniformed Division
paragraphs: The Secret Service’s Uniformed Division consists of police officers whose  duties are focused on the agency’s protective responsibilities, which are to  protect the President and other individuals. As of February 2003, the  Uniformed Division had 1,106 officers. The Secret Service requires  Uniformed Division officers to obtain top-secret security clearances and  submit to a polygraph test, which the Mint and BEP do not. The Secret  Service also requires its officers to receive more initial training than the  Mint and BEP police, and the Secret Service’s training is focused on its  protective mission. Appendix III provides Uniformed Division data  regarding facilities that the Secret Service officers protect, number of  police, application requirements, starting salaries, attrition rates, and  training requirements.
We asked the Secret Service to provide data on the number and types of  crimes and arrests that had occurred at the White House complex (which  includes the White House, the Eisenhower Executive Office Building, and  the New Executive Office Building) and the adjacent Treasury Department  headquarters building and annex during the last 10 years. It reported an  average of 1,574 incidents each year at these facilities from 1993 through  2002. The Secret Service reported, for example, in 2002, 34 arrests, 30 bomb  threats, 5 demonstrations, 177 incidents of weapons (not firearms) found  during magnetometer checks, 3 fence jumpers and unlawful entries, and 44  suspicious packages and vehicles. We also asked the Secret Service to  break down the types of arrests that were made at the White House  complex and the Treasury Department headquarters and annex during the  past 10 years. The data indicated that from 1993 through 2002, the Secret  Service made 72 arrests for unlawful entry, 66 of which were in the White  House complex, and 25 arrests for theft in the area surrounding the White  House complex (none of the arrests for thefts were reported as having  occurred within the White House complex or the Treasury Department  building).
In providing the data regarding the number of security incidents that  occurred at facilities protected by the Secret Service, the Secret Service  emphasized that the Uniformed Division has a different mission than the  Mint and BEP. The Secret Service said that the Uniformed Division is  concerned primarily with protecting individuals and, as part of that  mission, controlling public entry into its protected facilities. By  comparison, the Mint and BEP police forces are concerned primarily with  the theft of coins and currency by their agencies’ own employees from their  respective facilities. According to the Secret Service, this difference  between the missions of the Uniformed Division and the Mint and BEP is  substantial and unique, and to compare data regarding the number of  security incidents that occurred at facilities protected by the Uniformed  Division and the Mint and BEP would result in an unfair analysis of the  abilities and actions of the Uniformed Division. We are not implying that  these data are similar or comparable; we present these data to illustrate the  differences between the types and number of security incidents that are  handled by the Secret Service and the Mint and BEP, which reflect their  different missions, and to show that facilities protected by the Secret  Service are not crime-free.
The Chief of the Uniformed Division said that assuming the additional  responsibility of protecting the Mint and BEP would result in the dilution of  the Secret Service’s core protective responsibilities. He said that giving the  Secret Service responsibility for the security of Mint and BEP facilities  would divert from the agency’s core protective mission and would cause a  staffing shortage. Further, he said that it would not be in the Secret  Service’s best interests to take on the additional responsibility of providing  security for the Mint and BEP at a time when the effect of transferring the  Secret Service from the Treasury Department to DHS is undetermined.
Mint and BEP officials were opposed to having an outside law enforcement  agency assume responsibility for their security functions because they said  that security is best accomplished by their own employees who are familiar  with the agencies’ internal operations and the coin and currency  production processes. Mint and BEP officials also said that their police  officers have opportunities for advancement through promotion to  supervisory positions. BEP also said that police are encouraged to transfer  into career security positions, such as general investigator and security  specialist. However, they also said that a larger agency such as the Secret  Service may offer more opportunities for advancement. We asked the  Secret Service to provide data on the number of Uniformed Division  officers who had become special agents at the agency from fiscal years  1998 to 2002 and found that relatively few officers had become agents.  (Duties of special agents include investigation and protection, while the  mission of Uniformed Division officers is focused on protection.)  The data  indicated that an average of 21 officers had become special agents each  year during that 5-year period out of an average Uniformed Division  workforce of about 1,040 officers, or about 2 percent.
If the Mint and BEP police became part of the Uniformed Division and  there was a rotation of duties, the Secret Service’s mission of protecting the  president and providing security at national special security events could  be more appealing to some police officers, compared with the routine  nature of protecting Mint and BEP facilities. The Mint’s Police Chief said  that, to provide variety in the work of Mint police officers and to increase  morale, up to 50 Mint police officers a year help the Uniformed Division  perform duties at special events—for example, at the Olympics.
section_title: Potential Costs Associated with Having the Secret Service Protect the Mint and BEP
paragraphs: If the Secret Service protected the Mint and BEP, the government could  incur additional costs because the Secret Service requires more initial  training for its officers than the Mint and BEP police, Uniformed Division  officers can retire with less government service than the Mint and BEP  police, and the Secret Service would have to increase management and  overhead to handle the additional workforce. Further, it is unknown how  many Mint and BEP police officers would be able to meet the Secret  Service’s hiring standards or what the costs would be of absorbing these  officers into the Secret Service’s retirement system.
The Uniformed Division provides new hires with 6 more weeks of initial  training than the Mint police and 1 more week of training than the BEP  police. The Uniformed Division spends an average of $20,033 per officer for  initial training, compared with $16,306 per officer at the Mint and $18,791  per officer at BEP.
The government also could be expected to incur higher retirement costs if  the Secret Service protected the Mint and BEP because Uniformed Division  officers receive federal law enforcement retirement benefits, which allows  them to retire after 20 years of service at age 50 or at any age with 25 years  of service. By comparison, Mint and BEP police receive standard  retirement benefits for federal employees, which generally allow them to  retire after 30 years of service at age 55 if covered by the Civil Service  Retirement System (CSRS) or after 30 years of service under the Federal  Employees Retirement System (FERS). Agency contributions for  employees receiving federal law enforcement retirement benefits are 31.4  percent for employees in CSRS and 22.7 percent for employees in FERS. By  comparison, agency contributions for employees receiving standard  retirement benefits are 17.4 percent for employees in CSRS and 10.7  percent for employees in FERS. Further, because employees receiving  federal law enforcement retirement benefits may retire sooner than those  who do not receive such benefits, it is likely that there would be higher  turnover in the police force, resulting in the need to train more officers and,  thus, in higher training costs over time.
If the Secret Service assumed responsibility for protecting the Mint and  BEP and added 590 officers to its Uniformed Division to carry out that  responsibility, the size of the Uniformed Division’s police force of 1,106  officers would increase by about 50 percent. Such an increase would likely  require the Secret Service to add additional overhead and resources to  manage the additional workforce. However, there also could be an offset by  reducing or possibly eliminating similar positions at the Mint and BEP. It  was not possible to estimate during our review what additional people and  facilities would be needed or what cost would be incurred.
In addition, if the Secret Service assumed responsibility for protecting the  Mint and BEP, it is unknown how many of the Mint and BEP police would  qualify to become part of the Uniformed Division, considering that  applicants to become Uniformed Division officers are required to submit to  a polygraph test and obtain top-secret security clearances, which are not  required for Mint and BEP police. According to the Secret Service, for  example, a substantial number of applicants for the position of Uniformed  Division officer are rejected at the polygraph stage of the process. The  Secret Service also requires applicants to meet certain physical fitness  standards. Lastly, for those Mint and BEP police hired by the Uniformed  Division, there would be a cost of including them in the federal law  enforcement retirement plan. According to the Office of Personnel  Management, it could cost the government an estimated $72.7 million (in  present value dollars) if the entire existing Mint and BEP police forces  were given law enforcement retirement benefits. This computes to an  average of about $123,000 per officer. Because it was not possible to  determine how many of the existing Mint and BEP police officers would be  absorbed by the Uniformed Division, we could not estimate how much this  would cost.
An alternative regarding the Mint and BEP police forces would be to  transfer them to a new, separate unit of the Uniformed Division. Under this  alternative, the existing Mint and BEP police forces would become a  second tier of the Uniformed Division and would be trained, supervised,  and managed by the Secret Service. One potential advantage of this  arrangement would be that the separate unit possibly could be used as a  stepping-stone for Mint and BEP police who would like to become  Uniformed Division officers. Further, this arrangement could streamline  activities, such as procurement, training, and recruitment, that may save  the government money. For example, a unified police force could help  recruiting efforts by being able to offer a variety of duties and duty stations.  However, according to the Secret Service, because of the differences in the  hiring standards between the Uniformed Division and the Mint and BEP  police, the stepping-stone concept for the Mint and BEP police officers  would be impractical and the Secret Service would not use them in  fulfilling its other protective responsibilities. The Secret Service said that  this alternative offers no advantages to the Secret Service; would place  additional financial, manpower, and other administrative burdens on the  agency; and would dilute the Uniformed Division’s protective mission.  Further, Uniformed Division officers receive federal law enforcement  retirement benefits, while Mint and BEP police do not.
The Mint and BEP police are covered by the labor management and  employee relations provisions set forth in Chapter 71 of Title 5 of the  United States Code, while the Secret Service employees are exempt from  these provisions pursuant to 5 U.S.C. § 7103 (a)(3)(H). According to the  Secret Service, if the Mint and BEP forces became a separate unit of the  Uniformed Division, this would create animosity in the agency because the  Mint and BEP police would have collective bargaining rights while  Uniformed Division officers would not. The Mint said that because  Uniformed Division officers receive federal law enforcement retirement  benefits and the Mint and BEP police do not, the substantial disparity in the  compensation between the Mint and BEP police officers and the  Uniformed Division would create problems with morale and performance.  In addition, the Mint said that placing responsibility for security in a  separate agency that is not part of the Treasury Department could hinder  the responsiveness of the security personnel to the Mint and BEP.  According to BEP, because of the difference in hiring standards between  the Uniformed Division and the Mint and BEP police forces, the Mint and  BEP police forces comprising the second tier would always feel less than  equal, which would also affect morale and create poor job performance.
section_title: Agency Comments
paragraphs: We provided copies of a draft of this report to the Directors of the Mint,  BEP, and Secret Service for comment. On June 30, we received written  comments from the Director of the Mint, which are reprinted in appendix  IV. The Mint Director said that the Mint concurred with the findings and  conclusions that apply to the Mint. BEP and Secret Service liaisons with  GAO provided by E-mail technical comments regarding the draft report,  which we incorporated where appropriate, but did not provide overall  comments on the report.
We are sending copies of this report to the Chairmen and Ranking Minority  Members of the Senate Committee on Banking, Housing, and Urban Affairs,  the House Committee on Financial Services, and the House Select  Committee on Homeland Security; the Secretary of the Treasury; the  Secretary of the Department of Homeland Security; the Directors of the  Mint, BEP, and Secret Service; and other interested parties. We will also  make copies available to others upon request. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
Major contributors to this report were Bob Homan, John Baldwin, Paul  Desaulniers, and John Cooney. If you have any questions, please contact  me on (202) 512-2834 or at ungarb@gao.gov.
section_title: Scope and Methodology
paragraphs: To review how security is provided at the U.S. Mint and the Bureau of  Engraving and Printing (BEP) and how it compares with other  organizations, we interviewed Mint and BEP officials about their security  practices, responsibilities, and security threats. We collected information  about their police forces, including job classifications, number of police,  application requirements, starting salaries, retirement benefits, attrition  rates, training, and statutory authorities. In addition, we discussed with  Mint and BEP officials the feasibility of consolidating certain security- related functions and collected information on the number of personnel  who work on security at the two agencies, but who are not police officers.
We also asked the 12 coin and currency producing organizations in the six  other G7 nations (Canada, France, Germany, Italy, Japan, and the United  Kingdom); the Federal Reserve; and businesses that handle a large amount  of cash, such as banks and casinos, about who provides their security, why,  and whether they had experienced thefts of items in value of more than  $1,000 in each incident during the last 10 years. We chose to contact the  coin and currency producing organizations in the other G7 nations because  they were in other major industrialized, democratic countries. We received  responses from 8 of the 12 foreign coin and currency producing  organizations that we contacted regarding our requests for information.  The coin and currency producing organizations in 1 country did not  respond to our requests for information. The banks and casinos that we  contacted were selected by the American Bankers Association and the  American Gaming Association, which represent the banking and casino  industries. However, the selected banks and casinos do not represent the  views of the two industries.
To determine what thefts have occurred at the Mint and BEP and whether  steps have been taken to address them, we asked the agencies to provide  information about thefts that have occurred at their facilities during the last  10 years.  We also reviewed relevant Department of the Treasury Office of  Inspector General reports, including investigative reports pertaining to  certain incidents of theft. We then discussed those incidents with the Mint  and BEP security officials, and we also discussed with the officials the  steps that were taken to prevent thefts from recurring and whether the  thefts were caused by deficiencies in the police forces.
Regarding Mint security, we also reviewed a 2000 Sandia National  Laboratories report, which contained 42 recommendations to improve  security, to determine whether its recommendations pertaining to the  Mint’s Philadelphia, Pennsylvania, and Ft. Knox, Kentucky, facilities had  been implemented. We visited those facilities because more  recommendations pertained to those facilities compared with other Mint  facilities. In addition, we contacted two coin dealers about the circulation  of “error coins.” These dealers were selected because they specialized in  the buying and selling of error coins.
Regarding BEP security, we reviewed a 1994 Secret Service report, a 1995  KPMG Peat Marwick report, and a 2000 Kelly, Anderson & Associates  report regarding recommendations to improve security at BEP facilities.  We determined whether the 19 United States Secret Service  recommendations and the 7 KPMG recommendations that Kelly Anderson  indicated had not been implemented in 2000 were implemented. We also  determined whether a random sample of 20 high-risk recommendations  contained in the Secret Service and KPMG reports, which Kelly Anderson  reported had been implemented, were actually implemented. We visited  BEP’s Washington, D.C., facility to check whether recommendations had  been implemented because the recommendations in the Secret Service and  KPMG reports pertained to that facility.
To determine the potential benefits and costs of having the Secret Service  provide Mint and BEP security, we asked the Mint, BEP, Secret Service, and  Treasury Department for their views on which agency would be most  effective regarding various security-relations functions. We also compared  the information that we collected regarding the Secret Service’s Uniformed  Division with the data collected regarding the missions, security forces,  training costs, retirement benefits, and security incidents at the Mint and  BEP.
Regarding retirement costs, we asked the Office of Personnel Management  (OPM) to estimate how much more it would cost the government if the  Mint and BEP police were given the same law enforcement retirement  benefits that the Uniformed Division officers receive. To calculate the  estimate, OPM asked us to provide data on the number of police at the Mint  and BEP who are in the Civil Service Retirement System and the Federal  Employees Retirement System and their average salaries. We also asked  the Mint, BEP, and Secret Service to provide their views on the advantages  and disadvantages of transferring the Mint and BEP police forces to a  second tier of the Uniformed Division. The scope of our work did not  include examining the advantages and disadvantages of contracting out  security services for the Mint and BEP.
We did our work in Washington, D.C.; Philadelphia; and Ft. Knox in  accordance with generally accepted government auditing standards and  investigative standards established by the President’s Council on Integrity  and Efficiency from July 2002 through June 2003.
section_title: Data Concerning the U.S. Mint and the Bureau of Engraving and Printing Police Forces
paragraphs: Mint facilities in Denver, Colorado; Ft. Knox,  Kentucky; Philadelphia, Pennsylvania; San  Francisco, California; West Point, New York;  and Washington, D.C.
BEP facilities in Ft. Worth, Texas; and  Washington, D.C.
Police Officer (job classification 0083)
Police Officer (job classification 0083)
One year of specialized experience as a police  officer or comparable experience (may be  substituted with a 4-year college degree in  Police Science or comparable field)
One year of specialized experience as a police  officer or comparable experience (may be  substituted with a 4-year college degree in  Police Science or comparable field)
Fiscal year 2002 police attrition rates 14 percentFiscal year 2001 police attrition rates  7 percent 10 weeks of basic training at the Federal Law  Enforcement Training Center (FLETC)
section_title: Data Regarding the United States Secret Service’s Uniformed Division
paragraphs: Secret Service’s Uniformed Division The White House complex, the Treasury Department headquarters building and  annex, the Vice President’s residence, and foreign diplomatic missions  According to Secret Service officials, pursuant to 5 U.S.C. § 5102 (c), the Uniformed  Division is exempt from the federal job classification system and, therefore, its  officers do not have the 0083 job classification that applies to the Mint and BEP  police.
Ages 21 to 36 at time of appointment Pass the National Police Officer Selection Test Pass a medical examination, drug screening, and background investigation Possess a high school diploma or equivalent Qualify for top-secret security clearance Must submit to a polygraph test 2003 starting salaries for police stationed in  Washington, D.C.
10 weeks of basic training at FLETC  11 weeks of specialized training after FLETC 22 hours of annual trainingThe Secret Service protects the people who occupy these facilities. assigned to, such as canine or counter-sniper.
section_title: Comments from the U.S. Mint
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