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MINT BUDGET AUTHORIZATION (H.R. 2931)

Tuesday, August 1, 1989

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CONSUMER AFFAIRS AND COINAGE,

COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS,
Washington, DC.

The subcommittee met, pursuant to notice, at 10:10 a.m., in room 2222, Rayburn House Office Building, Hon. Richard H. Lehman [chairman of the subcommittee] presiding.

Present: Chairman Lehman, Representatives Hubbard, Kaptur, Price and Hiler.

Chairman LEHMAN. We will go ahead and call the meeting to order. Mr. Hiler is not here yet, but we expect him momentarily. Mr. Wylie is down meeting with the President, so we do not expect him this morning.

The Subcommittee on Consumer Affairs and Coinage meets today to consider the U.S. Mint's budget authorization. H.R. 2931, authored by Mr. Hiler and myself at the request of the Treasury Department, contains the Department's request for the authorization of $50.735 million for the Mint for fiscal year 1990 and an open-ended authorization for fiscal year 1991.

[The text of H.R. 2931 follows:]

(1)

101ST CONGRESS 1ST SESSION

H. R. 2931

To authorize appropriations for the United States Mint for fiscal years 1990 and 1991, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JULY 19, 1989

Mr. LEHMAN of California (for himself and Mr. HILER) (both by request) introduced the following bill; which was referred to the Committee on Banking, Financing and Urban Affairs

A BILL

To authorize appropriations for the United States Mint for fiscal years 1990 and 1991, and for other purposes.

1

Be it enacted by the Senate and House of Representa

2 tives of the United States of America in Congress assembled,

3 That section 5132(a) of title 31, United States Code, is

4 amended by—

5

6

(1) revising paragraph (2) to read as follows:

"(2) Not more than $50,735,000 may be appropriated 7 to the Secretary for the fiscal year ending September 30, 8 1990, and such sums as may be necessary for the fiscal year 9 ending September 30, 1991, to pay costs of the mints."; and

2

(2) adding at the end thereof a new paragraph (3)

1

2

as follows:

3 "(3) For the fiscal year ending September 30, 1991, and 4 for each fiscal year thereafter, there are authorized to be ap5 propriated to the Department of the Treasury for salaries of 6 employees of the United States Mint such additional sums as 7 may be necessary for increases in salary, pay, retirement, 8 and other employee benefits authorized by law and for other 9 nondiscretionary costs.".

We will hear testimony today from Ms. Donna Pope, Director of the U.S. Mint, and then from Jeffrey Steinhoff, Director for the Financial Management Systems Issues at the General Accounting Office. Mr. Steinhoff is here to summarize a report on the U.S. Mint requested by the previous subcommittee chairman, Mr. Annunzio.

This report has just recently been completed, and I am releasing it publicly today. It indicates to me that there are major problems in the operations of the Mint. In the cover letter to the report sent to me by Acting Assistant Comptroller General Brian Crowley, I was told that the Mint does not have controls sufficient to protect its coins and dies from being lost or stolen. I was also told that the Mint's cost accounting and funds control systems do not produce reliable information, and that Mint information reports are not of a quality to support decisions by management.

These findings underscore to me the importance of this subcommittee's careful and regular review not only of the Mint's budget request, but also of its operations and activities. I am anxious to hear Mr. Steinhoff explain the GAO findings and also to hear what measures the Mint has taken or plans to undertake to correct the situation found by the GAO auditors. After we hear from other Members of the subcommittee, and there are not any here so we will just proceed, I would ask Ms. Pope to give us her testimony first. I would like to have Mr. Steinhoff follow after Ms. Pope, and then ask Mrs. Pope to return for questions when we have completed so that everybody has an equal shot at this.

I would also announce at the beginning that we had planned to mark this bill up this morning. I think what we are going to do instead is just have the hearing, and then I will go to full committee and discharge this committee's responsibility and any amendments to be done will be offered in the full committee at such time. So there will not be a markup following the hearing today.

We will also be submitting a list of written questions to both the Mint and the GAO. Any Members of this committee have the right to be included in submitting those questions so there will be an opportunity for those Members not present to ask questions as well. With that, I would like to call forward and recognize the distinguished Director of the Mint, Ms. Donna Pope.

STATEMENT OF DONNA POPE, DIRECTOR, UNITED STATES MINT, ACCOMPANIED BY EUGENE H. ESSNER, DEPUTY DIRECTOR OF THE MINT

Ms. POPE. Thank you, Mr. Chairman. It is a pleasure to be here to discuss the Mint's authorization for 1990. Here at the table with me is the Deputy Director of the Mint, Eugene Essner. Before I summarize our 1990 request, I would like to highlight a few of the 1988-1989 activities. I have summarized some portions of my statement, and with your permission I would like to enter the complete statement into the record.

Chairman LEHMAN. Without objection, so ordered.

Ms. POPE. The highlights of our 1988 and 1989 activities include the fact that we produced 14.7 billion circulating coins in 1988 which resulted in seigniorage to the Federal Government of $468

million. This fiscal year we are budgeted to produce 18 billion coins which will result in an estimated $540 million in seigniorage.

The Bicentennial of the Congress Coin Program was launched on June 14 and surcharges through July 26 from the sale of those coins are $9.4 million. The 1988 U.S. Olympic Coin Program raised approximately $23 million in surcharges for the United States Olympic Committee, and the silver for the Olympic program came from the strategic stockpile, and the profit to the Defense Logistics Agency stockpile from that Olympic program is $6 million on the sale of silver.

The American Eagle Gold Bullion Program continues into its third year of operation. During 1988 and 1989 to date, we have sold approximately 1.2 million ounces of gold bullion uncirculated coins, and 383,000 ounces of gold bullion proof coins, valued at over $779 million. Profits for this period on the American Eagle Uncirculated Program are approximately $3.4 million. The profits on the Eagle Gold Proof Program are about $30 million.

Total profits for 1988 and 1989 for the American Eagle Silver Uncirculated and Proof Programs exceed $16 million. You may be interested to know that the Silver Eagle sales since the start of the program have resulted in profits to DLA of approximately $132 million on the sale of silver. In addition, profit on the sale of Mint annual proof and uncirculated sets exceeded $13 million for that period.

The Mint is also required by law to sell 2.5 million ounces of silver bullion for each year for 3 years starting this year. We have already had two sales totaling the 2.5 million ounces for this year, and that resulted in approximately $9 million in profit to the General Fund of the Treasury.

Now I would like to say just a few words regarding the GAO accounting review. Prior to 1981 the primary Mint activity was the production of circulating coin and the annual proof and uncirculated coin sets. That was basically it. The cost accounting system at the Mint was done manually similar to some private sector industries at that time. With the advent of commemorative and bullion coin programs each year came innumerable complexities. The manual system was obviously not keeping up. In-house attempts over the past years at updating accounting systems and procedures were not making much headway.

So we sought an independent accounting firm to look at cost distribution and to update accounting manuals and procedures. At about the same time, as you mentioned, GAO was asked by the previous coinage chairman to look at the Mint's system. After the Mint received recommendations from the accounting firm, Grant Thornton, and with some very preliminary assessments from GAO, we brought in the firm of Booz Allen and Hamilton to assist in implementing a more businesslike and automated manufacturing cost accounting system.

It is my hope that future Mint directors will have more consistent and detailed information more readily available. However, as has been experienced by other Government agencies, it is not inexpensive. I would like to comment more on the GAO report, but as you know, it has not been until very recently that we received a copy of the report from your office, Mr. Chairman. A very cursory

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