Coins and Currency: How the Costs and Earnings Associated with Producing Coins and Currency Are Budgeted and Accounted For Page: 2 of 45
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' GAO
Accountability- Integrity- Reliability
Highlights
Highlights of GAO-04-283, a report to the
Subcommittee on Domestic and
International Monetary Policy, Trade, and
Technology, Committee on Financial
Services, House of Representatives
Why GAO Did This Study
The government produces billions
of coins and currency notes each
year. Coins are made by the U.S.
Mint and issued by the Treasury
Department. Currency notes are
made by the Bureau of Engraving
and Printing and issued by the
Federal Reserve System (Fed). The
Fed buys coins from the Mint at
face value but pays the Bureau only
the costs of printing currency.
Coins on the books of the Fed are
assets that are issued by the Mint,
and notes are liabilities of the
Federal Reserve Banks. In recent
years congressional hearings have
highlighted the confusion over
differences in the budgetary and
accounting treatment of coins and
currency. In addition, the Treasury
Inspector General and others have
reported problems with Mint and
Bureau operations. GAO was asked
to review (1) how the costs and
earnings from coins and currency
are budgeted and accounted for
and (2) whether any operational
problems at the Mint and Bureau
need further action.
To comply with the purpose of the
reporting requirement of the Public
Enterprise Fund, GAO
recommends that the Secretary of
the Treasury ensure that the Mint
identifies whether amounts are
being retained in excess of the
estimated operating costs of the
following year and, if so, explains
how they will be used. In response
to Treasury's comments, GAO
revised its recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-04-283.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Bernard Ungar,
(202) 512-2834, or ungarb@gao.gov.COINS AND CURRENCY
How the Costs and Earnings Associated
with Producing Coins and Currency Are
Budgeted and Accounted For
What GAO Found
The earnings from issuing both coins and currency reduce government
borrowing costs; however, how these earnings are budgeted and accounted
for differs. Production costs of coins and currency are generally treated the
same in the budget and accounting statements. The difference between the
face value of coins and the costs of minting them results in earnings, called
seigniorage, which is shown in the budget as a reduction in needed
borrowing for the government, after the deficit or surplus for the year is
calculated. The budgetary impact of seigniorage is interest avoided from the
borrowing it displaces and is not visible because it is neither quantified nor
shown in the budget. The government also generates earnings by issuing
currency, but it is handled differently. The difference between the face value
of currency issued and its production cost goes to the Fed. The Fed buys
collateral, usually Treasury securities, to back up the currency issued. The
interest collected on those Treasury securities is used to pay for Fed costs,
and the remainder is returned to Treasury. The budgetary impact of issuing
currency comes from the interest returned by the Fed, which is shown as a
budgetary receipt and counted in the calculation of the deficit or surplus.
Production costs of both coins and currency are shown as costs of
operations in Treasury's financial statements. According to the Federal
Accounting Standards Advisory Board, seigniorage should be shown as a
source of financing in Treasury's statement of changes in net position,
whereas interest returned by the Fed for currency is shown as revenue in
Treasury's statement of custodial activity. Treasury has not been reporting
seigniorage this way but made the correction beginning with its fiscal year
2003 financial statements.
Both the Mint and the Bureau have had operational problems in recent years
in contracting and acquiring property and equipment. The Mint has also had
problems with forecasting demand, monitoring costs, and reporting to
Congress. The Mint and Bureau have generally taken or started to take
actions to address the problems. The Mint has clarified its first quarterly
report for 2004 to include more information on how retained funds will be
used. However, the Mint is still not explicitly stating whether the retained
amounts are in excess of the estimated operating costs for the following year
and, if so, it is not explaining how the retained earnings will be used, as
required by law.
Examples of Currency and CoinSources: U.S. Mint and Bureau of Engraving and Printing.
United States General Accounting Office
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United States. General Accounting Office. Coins and Currency: How the Costs and Earnings Associated with Producing Coins and Currency Are Budgeted and Accounted For, report, April 23, 2004; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc297868/m1/2/: accessed April 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.