Ms. CONDON. When we followed up on the results of the settlement, we were advised that most of the problem, at least with the commemorative coins, was in the paperwork. Certain accounting reports prepared at Mint headquarters had not been provided to San Francisco to credit their accounting records for coins that actually had been sold. So, there was a lot of double counting.

There were a number of months for which those reports had not been prepared. As a result, there would be an amount of time needed to complete that paperwork and then to reconcile the accounts. In the case of silver bullion, they ended up, physically, with more ounces of silver than was shown on the books. When we were finalizing our work, we were not aware of the results of that reconciliation, so I cannot really answer that part of the question. Mr. HUBBARD. I have no further questions. Chairman LEHMAN. Ms. Kaptur.

Ms. KAPTUR. Thank you, Mr. Chairman. I am sorry I was not here for the full presentation of the Director of the Mint as well as yours, but I have had the opportunity to ready the testimony. Mr. Steinhoff, I was interested in some of your remarks on page 8 where you say that inconsistencies and inaccuracies in reporting expenses affect the amount of profit the Mint reports for its numismatic programs.

You say they are unable to determine, for example, whether these programs meet legislative requirements to operate at no net cost to the Government. I had asked the Director of the Mint, and she had provided us with an explanation of various coins that had been issued and the amount of money that it cost and the amount of money I think that it made for the Government although I could not quite tell, mainly because I am not a cost accountant. I could not tell exactly. We were trying to figure out what the last column

meant.

So I thought they had provided me with that information. Could you expand a little bit about this, and what could be done about the various coins because I am trying to figure out myself which coin

Mr. STEINHOFF. OK.

Ms. KAPTUR. Looked like the John Wayne Coin made money. It looked like the Vietnam Veterans Coin made money, and many of the other ones did not. Now are you saying that some of that information may be inaccurate?

Mr. STEINHOFF. What we found in our review was that there were some problems in accounting for the cost of the coin programs. There were some inconsistencies in accounting. There were some errors. There were some omissions. What we are saying is that, while the Mint can provide a bottom line of what the net profit was for a coin program, and they varied, we could not place full reliance on those figures. We are saying that you cannot readily tell with the current system they have now, with some of the problems we noted, what the bottom line is.

I mentioned a few minutes ago that part of the crux of this is really the need to have a modern automated cost accounting system, and the Mint is now working to implement a new system, and we are hopeful that some of the problems we identified during our review will be corrected in future years.

Ms. KAPTUR. Could I provide you with the information that we were provided-

Mr. STEINHOFF. OK.

Ms. KAPTUR. By the Mint, and perhaps your staff could look to see whether these figures are fairly accurate, or how far off they really are? Could you make an attempt to do that by type of coin, or did your investigation not go into things that specifically?

Mr. STEINHOFF. We focused on the numismatic coin programs. Some of the other coins you may have mentioned, I believe, are medals. The John Wayne is a medal.

Ms. KAPTUR. Yes. Right, medals.

Mr. STEINHOFF. But, we could make an analysis or review, if you would like us to. It might be better for us to sit down with your staff and go through what you have there.

Ms. KAPTUR. All right.

Mr. STEINHOFF. Because, it is possible we can respond to some of that now.

Ms. KAPTUR. All right, very good. Thank you, Mr. Chairman. Chairman LEHMAN. Thank you. Were there any other questions of these witnesses? I want to thank the witnesses. Maybe you want to wait because we are going to have Ms. Pope come back up and ask her some questions.

I guess the most important question is how does the Mint intend to respond to the problems that have been outlined here?

Ms. POPE. Well, first of all, I think it has already been stated that we are on the way to responding to the major problems, and let me tell you, no one has ever denied that the Mint's accounting system needs a great deal of help, and as Mr. Steinhoff had indicated, as early as 1970 there were problems pointed out with accounting at the Mint. And that was at a time when the Mint was not having one commemorative coin after another with one starting up and one winding down. We are not Proctor & Gamble and making Tide constantly. One program comes on and one program is going away, and the Mint's accounting has been totally manual.

It has been difficult sometimes making management decisions when you have a manual system. I do want to just take this opportunity since I have got the microphone till you cut me off—— Chairman LEHMAN. Go ahead.

Ms. POPE. To say that I have objected to the characterization of Mint management being lax. The top management has not been lax. I have never been accused of being lax, and I have not been lax on this accounting problem for the last many years. Mr. Steinhoff did say that we had been quite aware of the problems prior to their audit. And that is very true.

We have been trying to bring on a cadre of qualified accountants for many years, and I plead with you if you have a cadre of qualified accountants who would like to come and work at the Mint, I will do my best to put them there. It is very difficult to get a cadre of qualified accountants working in a Government agency.

Chairman LEHMAN. In that regard, when did the Mint hire an outside consulting firm to examine its accounting problems?

Ms. POPE. It was about 11⁄2 years ago. I had mentioned doing it often over the course of the years, but we were trying to fix it inhouse by bringing on additional people, some higher level people,

creating a senior executive service position to oversee that. The prior chairman of the coinage committee had a violent and adamant aversion to bringing on outside consultants and keeping that in mind, I was not anxious to bring another problem down upon our head. And so we continued to try to fix it in-house until it became apparent that it was impossible to do that.

So it was about 11⁄2 years ago that I made motions toward Grant Thornton and it was about the same time or shortly thereafter that the previous chairman had asked for the review. I do not think the Mint should be exempt from providing Congress businesslike statements. I think we should be required to. I think the various funding mechanisms in the Mint are not appropriate for a commercial enterprise, but it is not within our purview to change that.

There are admittedly problems at the Mint. However, there are also some things in the report that we do not agree with or we do not understand how the conclusion was arrived at. The bottom line on profit, if you look at the profits that we have made, is that they are considerable. I hesitate to bet my salary on the fact, but I think I will, that certainly we have made a profit, and it is, I think Congresswoman Kaptur said, reasonably accurate. I think they are reasonably accurate given the tools with which we have had to work, which by the way is a problem, as has been said throughout the Government.

We are moving on the right track. I am pleased with the outside people we have working with us, and I would like the Mint to be a flagship for other agencies in Government in this regard because it is a problem that seems to be just coming to light. And you heard Mr. Steinhoff repeat that it has only been within the last couple of years that actual movement has been going on to standardize various things.

One of our consulting firms has informed me that the insistence that the Government use GSA and GAO recommended systems has also slowed down some of the progress because what is good for one agency may not be good for another, particularly a production facility. Private industry has spent hundreds of millions of dollars trying to customize systems toward their production and for their accounting systems, and the Government really is no different. And the Government has unfortunately always lagged behind the private sector in that regard.

As I have said, and Mr. Steinhoff has said, it does cost money. It should be given priority. Because of the way that we are funded, often on our appropriated side, we never know when or where cuts are going to come. We have tried to run a tight ship at the Mint and always have tried never to have a coin shortage, and so when cuts come we cut everywhere but the manufacture of coins. And that also means that we are not bringing on outside consultants or getting the latest in automated systems.

That has to change now, particularly if Congress is going to continue with commemorative coin programs year after year because that is really what brought the problem to light and it cannot continue the way it is.

Chairman LEHMAN. On page 40 of the report, getting back to this issue of the automated cost accounting system, it says for the past 5 years the Secretary's Report-I take it that is Secretary of the

Treasury-has indicated that this problem would be corrected through automated cost accounting to enhance the quality and timeliness of reporting. However, the targeted completion date has been consistently postponed, and now stands at 1993.

How do you justify that postponement?

Ms. POPE. Because as I have stated, we simply did not have the people who could dedicate the time to do it, and it has only been now that we have brought in outside people who will dedicate their talents and their time. Quite frankly, at the Mint we have had some very dedicated people, but also some just flat-out unwilling to change, to put it very bluntly. And there are others willing to change but not having the horses with which to do it.

You cannot ask people to devote full-time to this while carrying on all the other cost accounting duties. Well, I can, but it does not work.

Chairman LEHMAN. We can be confident that the 1993 date will be held to, not postponed again?

Ms. POPE. If I continue to have a say-so, you can count on it.
Chairman LEHMAN. OK.

Ms. POPE. I think I should say also as long as Mr. Essner is there. He is a CPA and a prior Deputy Inspector General at the Treasury. Prior to that, he was with GAO. So he certainly has been watching the problems we have had and has tried to work with the staff as best as possible to get it corrected, but we just could not do it with what we had in-house.

Chairman LEHMAN. With regard to the problem at the San Francisco Mint, one of the things that comes out in the report is the difficulty with this annual inventory. Why did the Mint go from a quarterly inventory to an annual inventory?

Ms. POPE. I am not sure we ever had a quarterly inventory.
Mr. LEHMAN. It has always been annual?

Mr. ESSNER. I believe so.

Ms. POPE. Yes.

Mr. ESSNER. I am not sure.

Mr. LEHMAN. Is there any talk of changing that?

Ms. POPE. I have just asked my staff since someone mentioned that was in the report how long it takes to do one of the inventories, and I have not gotten the answer back, except they say it takes a lot of time to do it. So I think we have to look at the cost benefits in doing it. I have no idea exactly how long it takes to do it, but I have asked the staff to take a look at that.

Chairman LEHMAN. Mr. Hubbard.

Ms. POPE. Oh, I am being told that since I asked the question yesterday afternoon, the answer has come back-well, it was just yesterday afternoon that we got the report-I am told that the last inventory took about a month. So if you do them quarterly, you can see that you would almost be in constant review.

Mr. LEHMAN. Mr. Hiler.

Mr. HILER. Thank you, Mr. Chairman. You are referring to a complete physical inventory?

Mr. ESSNER. This was the die inventory.

Ms. POPE. The die inventory.

Mr. HILER. I think you had maybe told us at our last hearing on the possible change in our current coins that we have in the mar

ketplace. You gave me a number of how many dies you buy a year. Could you just repeat that again for the testimony?

Ms. POPE. One hundred and ten thousand.

Mr. HILER. One hundred and ten thousand. I would guess doing a complete physical inventory more than once a year might not be the best way to go. That is the type of thing that can be handled with the better accounting system I am sure could be handled a lot better. Mr. Chairman, I wonder if it might be-and maybe you did this earlier because I was a little bit late-but I wonder if it might be in line to ask the Mint to formally respond to the study. It was a little bit of an unusual procedure, I gather, in that the agency was not asked to respond as they quite often are in GAO studies, and maybe that would give the Director a chance to respond item by item in those areas that she agrees, disagrees, those areas where things are taking place.

I am not sure it works real well when she just got the report yesterday to be asked to respond to specific cites in the report. I am just not sure we are going to get the best information that way, and would it be possible to ask the Mint to formally respond and then maybe have another hearing in 3 or 4 weeks or when we come back in September just to go over each of the specific points?

Mr. LEHMAN. I certainly have no problem with that. I think it is a good suggestion. And we are going to be gone for the next month anyway. Why do we not give you 30 days to go over it and come back to us with a well thought out specific response. Any problem? Ms. POPE. We welcome the opportunity to do that. I might also take this time, with all due respect to Mr. Steinhoff, I do have to say that my last briefing was in October. They have worked a great deal with the staff since then. The gentleman who is the Acting Budget Officer and who was previously in the cost accounting division, tells me that the exit interview with him was 45 minutes the latter part of October. So I think there may be a difference in opinion on what "continual briefings" mean. So I really have not had the opportunity to know what would be going into this report or an opportunity to perhaps correct any misconceptions since last October.

Chairman LEHMAN. Well, we have Mr. Steinhoff saying that they gave detailed briefings over a long period of time. I have you saying from your perspective that might not be the case. I do not think we can really get into that here.

Ms. POPE. I can appreciate that. It is only because I heard Mr. Steinhoff say detailed briefings that I thought we should throw our side in.

Chairman LEHMAN. But we will give you the opportunity to respond.

Mr. HILER. I just have one further question, Mr. Chairman. Do you find that when you submit your budget and it is reviewed by OMB, do you find that others who look at your budget before it comes up here to the Hill that they are supportive of requests you might make to put more money and resources into developing internal accounting procedures that will make the Mint more efficient and accountable?

Or maybe a better way to ask the question is could they be more supportive as opposed to not being supportive?