A recently released General Accounting Office investigative report
suggests the 1.4 billion dollar coins in Federal Reserve Bank
inventories are sufficient to meet demand for the next 40 years.
Dated Oct. 28, 2013, the 70-page GAO report — “U.S. Currency: Coin
Inventory Management Needs Better Performance Information” — was
publicly released Nov. 27. The performance audit was conducted by the
GAO from March through October 2013.
The report can be found at www.gao.gov/products/GAO-14-110.
According to the introduction of the report: “In 2009, the Federal
Reserve centralized coin management across the 12 Reserve Banks,
established national inventory targets to track and measure the coin
inventory, and in 2011 established a contract with armored carriers
that store Reserve Bank coins in their facilities. However, according
to Federal Reserve data, from 2008 to 2012, total annual Reserve Bank
coin management costs increased by 69 percent and at individual
Reserve Banks increased at rates ranging from 36 percent to 116 percent.
“The Federal Reserve’s current strategic plan calls for using
financial resources efficiently and effectively and monitoring costs
to improve cost-effectiveness. However, the agency does not monitor
coin management costs by each Reserve Bank — instead focusing on
combined national coin and note costs — thus missing potential
opportunities to improve the cost-effectiveness of coin-related
operations across Reserve Banks,” according to the report.
Since the Fed collects combined currency (coin and paper money)
management costs by individual facility and not separate coin and
paper money costs, the GAO “worked with the Fed to estimate what coin
expenses would be based on their aggregate data,” according to a spokeswoman.
The costs related to centralized coin management — which includes
Cash Product Office operations — are distributed across the individual
Reserve Banks. The Cash Product Office manages the Federal Reserve
Banks’ coin inventory nationwide.
The Federal Reserve System is composed of an independent
government agency — the Board of Governors — and 12 regional Reserve
Banks. The Reserve Banks are not federal agencies. Each Reserve Bank
is a federally chartered corporation with its own board of directors.
In her written response to the findings in the report, Louise L.
Roseman, the Fed’s director of the Division of Reserve Bank Operations
and Payment Systems, said opportunities will be evaluated to improve
the accuracy of forecasts for new coin orders.
Roseman said options will also be reviewed for cost savings
associated with coin inventory management.
GAO report examines Fed
The GAO report examines the Federal Reserve’s management of cents,
5-cent coins, dimes, quarter dollars and dollars. Kennedy half
dollars, struck in circulation quality but not for circulation, are
not addressed in the report.
The Federal Reserve orders coins from the U.S. Mint, which strikes
the coins and sells them to the Mint at face value. The Fed is
responsible for distributing the coins into circulation. The Fed also
projects future coinage demand.
Federal Reserve officials expect that their current procedures and
approaches to managing coin and note inventory — including forecasting
and monitoring of coin inventory targets — will allow the Fed to
accommodate gradual shifts in demand.
The Federal Reserve’s Cash Product Office can increase or decrease
orders with the Mint and the Federal Reserve Board can increase or
decrease note orders from the Bureau of Engraving and Printing,
Federal Reserve officials cite in the GAO’s Oct. 28 report.
Managing coin inventories
Approximately 170 coin terminals operated by 15 armored carrier
companies are under contract with the 12 Federal Reserve Banks and the
Fed’s sub-district facilities, according to the GAO report.
In addition to storing Federal Reserve Bank inventories, the coin
terminals receive deposits from and fulfill coin orders for depository
institutions on behalf of the Federal Reserve Banks and other customers.
According to the GAO report, in 2012, the 28 Federal Reserve Bank
offices held approximately 92 percent of the FRB total coin inventory
of dollar coins, with the remainder held by the contracted armored
carriers at their terminals.
In 2011, the CPO negotiated a contract with all of the contracted
terminals to standardize controls for handling and storing coins.
Previously, the contracts with the coin terminals were executed with
the individual Federal Reserve Banks.
Dollar coin experiences
Beginning in 2007, the year the Presidential $1 Coin Program was
inaugurated, Fed officials staged regular meetings with
representatives of depository institutions in order to gauge and
forecast future public demand to overcome barriers to dollar coin circulation.
According to the Oct. 28 GAO report, “Reserve Bank officials,
depository institution representatives, and coin terminal operators
stated that $1 coins are readily available to the public throughout
the country, but there is very low public demand for these coins.”
Vending machine operators also reported to the GAO no obstacles in
acquiring dollar coins.
However, representatives from the Dollar Coin Alliance reported to
the GAO that there is limited commercial and public access to the
dollar coin and some alliance members have had difficulty obtaining
the coins from depository institutions.
Production of dollar coins in circulation quality for circulation
was suspended in December 2011 because of the reported glut then of
nearly 1.3 billion dollar coins and climbing in the inventories of
Federal Reserve Banks and their contracted armored carriers.
More dollar coins were returned to the Federal Reserve in 2012
than were paid out because public demand for dollar coins was low.
It is unknown how many dollar coins are placed into circulation by
collectors who, having hoarded the coins over the years, may be
spending or depositing portions of their accumulation.
Another failed experiment
Efforts to circulate a small dollar coin — Anthony dollars,
Sacagawea and Native American dollars, and Presidential dollars — have
proven to be less than stellar, since none of the proposals have
included successful components of co-circulation with the $1 Federal
Reserve note or elimination of the $1 note altogether.
The Sacagawea dollar was introduced into circulation in 2000 to
replace the Anthony dollar, whose production was resurrected in 1999
after a nearly two decade hiatus.
In 2000, the U.S. Mint introduced into circulation through the
Federal Reserve Banks the Sacagawea dollar, whose 2000-dated
production for circulation totaled 1,286,056,000 coins.
When use of the coin did not increase, fewer coins were struck in
subsequent years. Only 133,407,500 2001 Sacagawea dollars were
produced for circulation. Sacagawea dollars struck from 2002 through
2008 in circulation quality were not released into circulation through
the Federal Reserve. All were offered for sale to the public at premiums.
The Presidential $1 Coin Program was introduced in 2007. George
Washington dollar coin production has been the highest for the
program, with 341,360,000 coins reportedly struck for circulation.
Except for popular presidents such as Abraham Lincoln, annual output
of Presidential dollars has declined annually.
Starting in 2012, Presidential dollar coins continue to be struck
in circulation quality, but only for sale in bags, rolls and boxes of
rolled coins as collector products.
In 2009, the Native American dollar coin was introduced as
required by Congress. It retains the portrait from the Sacagawea
dollar obverse and pairs it with a reverse whose design changes annually.
Since the suspension in 2011 of Presidential dollar coin
production for circulation, Native American dollar coin production in
circulation quality has been restricted to numismatic sales. ■