- Revenues: We reviewed primarily revenues for months with high sales volume from the beginning of each program through June 30, 1987. We examined bank deposit slips, Treasury deposit confirmations, computer reports showing revenue received by type of product, customer order forms, reports to Treasury, and general ledger postings. We also reviewed revenue accounting policies and procedures, schedules supporting revenue figures, and adjustments made in consolidating revenue information. Further, we interviewed revenue accountants at the Mint's Lanham, Maryland, facility and Mellon Bank officials in Philadelphia. Expenses: We identified which field mints produced the various types of numismatic coins and incurred the most expense for these coins. Based on those field mints and numismatic programs identified, we selected revenue and expense data for examination. The data selected represent a significant portion of numismatic program expenses for individual field mints. The expense data we examined included non reimbursable vouchers2 used to bill headquarters for field mint production costs, cost ledger cards, contracts, vendor invoices, receiving reports for material purchased, labor time and attendance reports, vendor invoices for supplies and services, supplies-issued reports, depreciation schedules, engineering reports used as a basis for overhead allocations, and overhead allocation schedules. In addition, we examined expenses for material (metals) 2The vouchers are considered nonreimbursable because the production costs are covered by receipts from the sale of coins rather than by reimbursement from appropriated funds. In evaluating the Mint's funds control operations, we examined the Mint's funds control policies and procedures, financial plans, fiscal year-end financial status reports prepared for managers, and monthly reports prepared for the Office of Management and Budget. Our review of year-end status of obligations reports focused primarily on fiscal years 1986 through 1988. We also examined field mint financial plans and status of obligations reports for March, July, and September 1988. We interviewed field mint budget analysts and financial managers, as well as the headquarters Acting Budget Chief and his staff. Our assessment of the numismatic programs' fund structure included analyzing budget schedules for the Mint's salaries and expenses appropriation and other funds presented in the Budget of the United States Government for fiscal years 1988 through 1990. We also considered prior audit reports involving the Mint's fund structure and held discussions with an Office of Management and Budget official. As requested by the former Chairman and agreed with Subcommittee staff, we did not obtain official agency comments on this report. However, we discussed the results of our work with Mint officials throughout the review and incorporated their views where appropriate. We also discussed the results with Treasury Inspector General staff and with Treasury's Comptroller. We conducted our review between October 1987 and February 1989 in accordance with generally accepted government auditing standards. The remainder of this report is organized as follows. Chapter 2 discusses whether Statue of Liberty coins were shipped prior to the Mint's receiving payment. Internal control problems relating to dies and coins are reported in chapter 3. In chapter 4, we analyze numismatic program revenue and expense reports, while chapter 5 discusses why critical elements of the Mint's financial system should be modernized. Finally, chapter 6 assesses the need to establish a numismatic revolving fund. CHAPTER 2 INSIGNIFICANT NUMBERS OF STATUE OF LIBERTY COINS Legally, the Mint was prohibited from shipping Statue of Liberty coins to customers without first receiving payments or guarantees of payment. The Statue of Liberty-Ellis Island Commemorative Coin Act (Public Law 99-61) requires, in section 111(b), that no coin be issued unless the Secretary of the Treasury has received full payment, satisfactory security, or a guarantee of full payment from a federally insured financial institution. During the 1988 budget authorization hearings, the Mint advised the Subcommittee that 29,488 Statue of Liberty coins had been shipped to customers either without being paid for first or where payment was subsequently revoked through credit card chargebacks. These chargebacks can occur for various reasons after payments by credit cards have been made. For example, a dispute may arise later over the quality of the coins the customer received, or the customer may not receive the coins for which payment was made. The Subcommittee was concerned that the Mint was not complying with the act in making these shipments and that additional shipments in advance of payment might have been made. It also wanted us to determine whether making shipments based on payments received through credit card charges constituted compliance with the act and whether amounts due from consignment sales had been collected. Our review confirmed that Statue of Liberty coins had been shipped prior to payment or guarantee of payment. We were, however, unable to determine with certainty the number of coins involved in these shipments. Overall, our work suggested that instances of the Mint's noncompliance with section 111(b) of the act were less than 1 percent of the total number of Statue of Liberty coins shipped under the program. We found that the number of coins the Mint reported to the Subcommittee was incorrect because in some categories, such as coins returned by customers, the Mint's figure included coins for which payments had been received. We determined, further, that coin shipments made for sales charged to credit cards, including those later cancelled through credit card chargebacks, were in compliance with the act. Under this program, sales were also made to consignment customers based upon guarantees or security of payments. Regarding these sales, we found that, while the Mint had difficulty collecting amounts owed under this program by some consignees, most of these amounts had been collected at the time of our review. STATUE OF LIBERTY COIN PAYMENT METHODS The Mint began production and coin shipments for the Statue of Liberty coin program in October 1985 and January 1986, respectively. Production of these coins ceased on December 31, 1986. As of the end of the program, the Mint sold a total of about 15.5 million Statue of Liberty coins with a sale value of over $289 million. These coins were sold primarily in two ways--direct customer sales and consignment sales. Payments for direct customer sales were made by either check or credit card charge. Consignment sales were made under contractual agreements, which secured or guaranteed payment, to consignees who submitted periodic payments. Customers generally mailed direct orders paid by check or credit card to lockboxes for the Mellon Bank in Philadelphia. The Mellon Bank notified the Mint of orders and payments received, and the Mint then shipped coins to the customers. Consignment sales were handled by the Statue of Liberty Task Force, which was established independently from the Mint. The Task Force managed the program through March 1987; its responsibilities included notifying the Mint to ship orders to consignment customers. Payments from consignees were also handled by Mellon Bank. DIRECT CUSTOMER SALES The figure that the Mint reported to the Subcommittee for Statue of Liberty coins shipped prior to payment being received and on which payments were subsequently revoked through credit card chargebacks was based on information from sales reports prepared by the Mint's Numismatic Reporting Division. These reports included cumulative figures for sales related to (1) nonsufficient funds checks that had been returned, (2) customer refunds for cancelled orders, (3) coins that had been returned by customers, and (4) credit card chargebacks. The 29,488 figure the Mint reported to the Subcommittee was based on the June 30, 1987, sales report's information for these sales. This number did not accurately represent coins for which shipment was made prior to payments. la lockbox is a rented postal box maintained to receive customer payments mailed to a bank or other establishment... - It is understated because it is based on coin purchase It is overstated by more than 21,000 coin purchase options that were either cancelled or returned for refunds. It is understated by an indeterminable number of coin purchase options which were paid for with nonsufficient funds checks but which were successfully redeposited after being returned to the bank the first time. The number reported by the Mint only included coin purchase options paid for by checks returned to the bank a second time. In the case of payments by check for Statue of Liberty coins, the Mint shipped the coins before it was sure that the customer's check had cleared its bank. Nonsufficient funds checks for less than $5,000 were routinely redeposited by the bank, operating under normal banking procedures. The Mint did not require its bank to provide notification when such redeposits occurred. An official of the Mellon Bank told us that about 80 percent of nonsufficient funds checks cleared on redeposit. The Mint's original policy on shipping numismatic coins was to hold shipments 10 days to ensure that checks had cleared the bank. However, because of customer complaints about delayed receipt of coins, it changed this policy in 1980 and began shipping coins immediately after being notified by the bank that orders and checks were received. We informed the Mint's managers responsible for sales operations that this change of policy had resulted in noncompliance with section 111(b) of the act. The Mint now requires that its bank not redeposit nonsufficient funds checks. Further, in February 1988 the Mint established a policy of holding coin shipments 15 days, which allows time for the bank to notify the Mint when checks have not cleared the bank. The figure presented by the Mint also included direct customer sales that were shipped based on credit card charges for which payment was later revoked through a credit card chargeback. Regarding credit card purchases by direct sales customers, the purchase of Statue of Liberty coins by credit card complied with the act because the Mint received the payments prior to shipping coins. Although some chargebacks occurred as a result of disputes over customer orders, credit card chargebacks do not constitute nonpayment for purposes of making coin shipments under section 111(b) of the act. Because sales involving credit card |