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entitled 'U.S. Currency: Coin Inventory Management Needs Better 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

October 2013: 

U.S. Currency: 

Coin Inventory Management Needs Better Performance Information: 

GAO-14-110: 

GAO Highlights: 

Highlights of GAO-14-110, a report to congressional requesters. 

Why GAO Did This Study: 

Efficiently managing the circulating coin inventory helps ensure that 
enough coins are available to meet public demand while avoiding 
unnecessary production and storage costs. The Federal Reserve fulfills 
the coin demand of the nation’s depository institutions (e.g., 
commercial banks and credit unions) by managing Reserve Bank inventory 
and ordering new coins from the U.S. Mint. GAO was asked to review 
this approach. This report examines (1) how the Federal Reserve 
manages the circulating coin inventory and the related costs, (2) the 
extent to which the Federal Reserve follows key practices in managing 
the circulating coin inventory, (3) actions taken to respond to 
potential changes in demand for coins and notes, and (4) actions taken 
with regard to the circulation of the $1 coin. GAO interviewed federal 
and foreign officials, experts, and industry representatives; reviewed 
documents and data on coin inventories; and compared the Federal 
Reserve’s coin inventory management practices to key practices in 
supply chain management. 

What GAO Found: 

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. 

In managing the circulating coin inventory, the Federal Reserve 
followed two of five key practices GAO identified and partially 
followed three. For example, the Federal Reserve follows the key 
practice of collaboration because it has established multiple 
mechanisms for sharing information related to coin inventory 
management with partner entities. The Federal Reserve has developed 
some performance metrics in the form of upper and lower national coin 
inventory targets. However, it has not developed other goals or 
metrics related to coin supply-chain management. One key practice is 
for agencies to identify goals, establish performance metrics, and 
measure progress toward those goals. Establishing goals and metrics, 
such as those related to coin management costs, could aid the Federal 
Reserve in using information and resources to identify additional 
efficiencies. 

To collect information on potential changes in the demand for currency 
(coins and notes), the Federal Reserve has conducted studies and 
outreach, including developing a long-term strategic framework 
beginning in 2010 to consider changes in demand and implications for 
operations. While the magnitude of potential changes in the demand for 
currency is inherently uncertain, the Federal Reserve anticipates a 
gradual decline in currency use, and officials reported such changes 
could likely be accommodated by the current system. While Federal 
Reserve studies and data indicate electronic payments have increased 
over time, currency usage has remained strong. For example, from 2009 
to 2012, the value of currency in circulation rose about 26 percent. 

Starting in 2007, the Federal Reserve took actions to overcome 
barriers to circulation of the $1 coin, such as holding regular 
meetings with depository institution representatives to gather 
feedback about demand for $1 coins. The Federal Reserve manages the $1 
coin inventory as it does for all other coin denominations—overseeing 
distribution and ensuring sufficient supply is available to meet 
demand nationwide. Reserve Banks currently hold approximately $1.4 
billion in $1 coins, an amount that, according to the Federal Reserve, 
is sufficient to meet demand for more than 40 years. 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. 

What GAO Recommends: 

Among other things, the Federal Reserve should (1) develop a process 
to assess factors influencing coin operations costs and identify 
practices that could lead to cost-savings and (2) establish additional 
performance goals and metrics relevant to coin inventory management. 
The Federal Reserve generally agreed with the report’s recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-14-110]. For more 
information, contact Lorelei St. James at (202) 512-2834 or 
stjamesl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Inventory Management Has Been Centralized; Rising Costs Have Not Been 
Analyzed: 

The Federal Reserve Follows Some Key Practices in Managing the 
Circulating Coin Inventory but Lacks Performance Information for 
Additional Metrics and Forecasting: 

Demand for Currency Expected to Decline Gradually in the Near Term, 
but a Variety of Factors Make Predicting Longer-Term Change Difficult: 

The Federal Reserve Is Managing the Existing $1 Coin Inventory, Took 
Steps to Meet Demand for Circulation, and Plans No Future Action: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Data and Figures on Coin and Note Inventory, Orders, and 
Circulation: 

Appendix III: Discussion of Key Practices for Managing the Coin 
Inventory: 

Appendix IV: Comments from the Federal Reserve: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Key Practices for Managing the Circulating Coin Inventory: 

Table 2: Organizations and Individuals Interviewed: 

Table 3: Collaboration and Supporting Characteristics: 

Table 4: Risk Management and Supporting Characteristics: 

Table 5: Performance Metrics and Supporting Characteristics: 

Table 6: Forecasting Demand and Supporting Characteristics: 

Table 7: System Optimization and Supporting Characteristics: 

Figures: 

Figure 1: Map of Federal Reserve Bank Districts and Offices that 
Provide Coin Services: 

Figure 2: Production and Circulation of Coins: 

Figure 3: Reserve Bank Coin Inventory, 2008-2012: 

Figure 4: The CPO's Process for Developing Monthly Coin Orders: 

Figure 5: Value of New Coin Orders by Denomination, 2008-2012: 

Figure 6: Reserve Bank Costs Related to Coin and Notes, 2008-2012: 

Figure 7: Currency in Circulation and Examples of Changes in Non-
Currency Payments: 

Figure 8: $1 Coin Inventory, Net Pay, and New Coin Orders, 2007-2012: 

Figure 9: Reserve Bank Inventories of Quarters, 2009-2012, and 
National Inventory Targets, 2009-2013: 

Figure 10: Reserve Bank Inventory of Dimes, 2009-2012, and National 
Inventory Targets, 2009-2013: 

Figure 11: Reserve Bank Inventory of Nickels, 2009-2012, and National 
Inventory Targets, 2009-2013: 

Figure 12: Reserve Bank Inventory of Pennies, 2009-2012, and National 
Inventory Targets, 2009-2013: 

Figure 13: Monthly Reserve Bank Payments to and Receipts from 
Depository Institutions for All Denominations, March 2009-March 2013: 

Figure 14: Reserve Bank Quarter Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

Figure 15: Reserve Bank Dime Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

Figure 16: Reserve Bank Nickel Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

Figure 17: Reserve Bank Penny Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

Figure 18: Total Reserve Bank Coin Management Costs, 2009-2012: 

Figure 19: Number and Cost of Interbank Coin Shipments, 2009-2012: 

Figure 20: Value of Notes in Circulation, 2009-2012: 

Abbreviations: 

BEP: Bureau of Engraving and Printing: 

COSO: Committee of Sponsoring Organizations of the Treadway Commission: 

CPO: Cash Product Office: 

GPRA: Government Performance and Results Act: 

GPRAMA: GPRA Modernization Act of 2010: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

October 28, 2013: 

Congressional Requesters: 

Efficiently managing the nation's inventory of circulating coins helps 
to ensure that the coin supply meets the public's demand while 
avoiding unnecessary production and storage costs. Efficient inventory 
management includes anticipating changes in future demand for coins 
and notes--collectively referred to as currency--in light of factors 
such as increased electronic payment options and changing economic 
conditions. The Federal Reserve System's 12 Federal Reserve Banks 
(Reserve Banks) fulfill the coin demand of the nation's depository 
institutions (e.g., commercial banks, federal savings associations, 
and credit unions) by managing coins held in inventory and ordering 
new coins from the United States Mint (U.S. Mint). In 2012, the U.S. 
Mint produced 9.1 billion coins. According to the Department of the 
Treasury (Treasury), coins worth approximately $42 billion were in 
circulation at the end of 2012. Reserve Banks hold a portion of these 
coins in storage, including approximately 1.4 billion in $1 coins. 
[Footnote 1] 

In 2009 the Reserve Banks implemented a new, centralized approach to 
the management of the circulating coin inventory. You asked us to 
review the Federal Reserve's management of the circulating coin 
inventory and future demand for coins and notes.[Footnote 2] This 
report addresses the following questions: (1) How does the Federal 
Reserve manage the circulating coin inventory and what are the coin 
management costs? (2) To what extent does the Federal Reserve follow 
key supply-chain management practices in managing the circulating coin 
inventory? (3) What actions has the Federal Reserve taken to respond 
to potential changes in demand for coins and notes? (4) What actions 
has the Federal Reserve taken with regard to the circulation of the $1 
coin, and what more, if anything, could it do? 

To address the first question, we reviewed documentation from and 
interviewed officials from the Federal Reserve and U.S. Mint. We also 
met with industry stakeholders (e.g., depository institution 
representatives and coin terminal operators) and academic experts to 
discuss their views on the management of the circulating coin 
inventory. To assess management operations related to the circulating 
coin inventory, we used the Federal Reserve's Strategic Framework 2012-
2015 and the Committee of Sponsoring Organizations of the Treadway 
Commission's (COSO) Internal Control--Integrated Framework.[Footnote 
3] In addition, from the Reserve Banks we obtained and analyzed coin 
inventory and production data from 2004 through 2012 and currency 
management cost data from 2008 through 2012. We took steps to assess 
the reliability of data used, such as interviewing knowledgeable 
agency officials, and determined that the data were sufficiently 
reliable for the purposes of this report. 

To address the second question, we developed and validated criteria to 
assess the Reserve Banks' management of the circulating coin inventory 
with stakeholders' and experts' input. We worked with industry experts 
to identify a selection of key practices for supply chain management 
that are relevant to coin inventory management.[Footnote 4] The five 
key practices we identified were collaboration, risk management, 
performance metrics, forecasting demand, and system optimization. 
[Footnote 5] Establishing, documenting, and following these practices 
is considered important to effective inventory management. For each of 
these key practices, we selected the individual supporting 
characteristics most relevant to coin inventory management. To 
understand the Federal Reserve's coin inventory management practices, 
we interviewed Federal Reserve and U.S. Mint officials and industry 
stakeholders. We then compared the Federal Reserve's coin-inventory 
management practices to the selected key supply-chain management 
practices. For each key practice, we assessed whether the Federal 
Reserve was following or substantially following the supporting 
characteristics (i.e., plans, policies, or processes have been 
developed and implemented properly for all or nearly all of the 
supporting characteristics), partially following (i.e., plans, 
policies, or processes have been developed and implemented properly 
for some of the supporting characteristics), or minimally or not 
following them (i.e., plans, policies, or processes are lacking for 
all or nearly all of the supporting characteristics). Thus, the 
individual assessments for each supporting characteristic served as 
the basis for the overall assessment for each key practice. 

To address our third and fourth questions, we obtained perspectives on 
potential changes in coin and note demand, as well as the availability 
and use of $1 coins from officials from the Federal Reserve and U.S. 
Mint, and Bureau of Engraving and Printing (BEP) as well as industry 
stakeholders and academic experts. In addition, we interviewed 
government officials in Australia, Austria, and Canada to obtain their 
perspectives on the leading practices in coin inventory management and 
potential changes in future coin and note demand. We selected these 
countries for illustrative purposes because they had replaced low 
denomination notes with coins and implemented coin-inventory 
management process improvements. These countries are not intended to 
be used for direct comparisons to the Federal Reserve's management of 
the circulating coin inventory. For more detailed information on our 
objectives, scope, and methodology, see appendix I. 

We conducted this performance audit from March 2013 through October 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

Roles and Responsibilities: 

The Federal Reserve System is composed of an independent government 
agency--the Board of Governors (Board)--and 12 regional Reserve Banks, 
each of which is located in a Federal Reserve district. (See figure 
1.) The Board is responsible for maintaining the stability of 
financial markets, supervising financial institutions such as bank 
holding companies and the U.S. operations of foreign banking 
organizations, and supervising the operations of the Reserve Banks. 
Unlike the Board, the Reserve Banks are not federal agencies. Each 
Reserve Bank is a federally-chartered corporation with a board of 
directors. Unlike federal agencies funded through congressional 
appropriations, the Board and Reserve Banks are self-funded entities 
that engage in a variety of activities that generate revenue, such as 
earnings from lending to financial institutions.[Footnote 6] The 
Federal Reserve deducts its costs from these revenues and transfers 
the remaining amount to the General Fund of the U.S. Treasury (General 
Fund). [Footnote 7] In 2012, the Federal Reserve transferred $88.4 
billion to the General Fund. Federal Reserve revenues contribute to 
total U.S. government revenues, and therefore, if its costs can be 
reduced--such as through more efficient coin-inventory management--
more of its revenue could potentially be contributed to the General 
Fund. 

Figure 1: Map of Federal Reserve Bank Districts and Offices That 
Provide Coin Services: 

[Refer to PDF for image: illustrated U.S. map] 

District 1: Federal Reserve Bank of Boston: 
Offices that provide coin services: 
Boston. 

District 2: Federal Reserve Bank of New York: 
Offices that provide coin services: 
East Rutherford. 

District 3: Federal Reserve Bank of Philadelphia: 
Offices that provide coin services: 
Philadelphia. 

District 4: Federal Reserve Bank of Cleveland: 
Offices that provide coin services: 
Cincinnati; 
Cleveland. 

District 5: Federal Reserve Bank of Richmond: 
Offices that provide coin services: 
Baltimore; 
Richmond. 

District 6: Federal Reserve Bank of Atlanta: 
Offices that provide coin services: 
Atlanta; 
Miami; 
New Orleans. 

District 7: Federal Reserve Bank of Chicago: 
Offices that provide coin services: 
Chicago; 
Detroit. 

District 8: Federal Reserve Bank of St. Louis: 
Offices that provide coin services: 
Memphis; 
St. Louis. 

District 9: Federal Reserve Bank of Minneapolis: 
Offices that provide coin services: 
Helena; 
Minneapolis. 

District 10: Federal Reserve Bank of Kansas City: 
Offices that provide coin services: 
Denver; 
Kansas City. 

District 11: Federal Reserve Bank of Dallas: 
Offices that provide coin services: 
Dallas; 
El Paso; 
Houston. 

District 12: Federal Reserve Bank of San Francisco: 
Offices that provide coin services: 
Los Angeles; 
Phoenix; 
Salt Lake City; 
San Francisco. 

Source: Federal Reserve and GAO. 

[End of figure] 

The Reserve Banks carry out a variety of functions for the Federal 
Reserve, including ensuring that coins and notes are available in 
quantities sufficient to meet the public's needs. The 12 Reserve Banks 
provide coins and notes to depository institutions, among other 
responsibilities. The Federal Reserve's Cash Product Office (CPO) 
manages the Reserve Banks' coin inventory from a national perspective, 
working closely with the Reserve Banks. For example, CPO places 
monthly orders for new coins with the U.S. Mint on behalf of the 
Reserve Banks. 

Other entities, including the U.S. Mint, coin terminal operators--
armored carrier companies such as Brink's and Dunbar, that hold both 
Reserve Bank and other customers' coins in their facilities--and 
depository institutions play a role in issuing or managing the 
circulation and distribution of coins. (See figure 2.) For coins, the 
Treasury's U.S. Mint is the issuing authority. The U.S. Mint is 
financed through a revolving fund and generates revenue through 
various means including the sale of circulating coins at face value to 
the Reserve Banks.[Footnote 8] Revenue in excess of costs--including 
all costs allocable to the U.S. Mint's circulating coin program--is 
transferred to the General Fund.[Footnote 9] U.S. Mint facilities in 
Philadelphia and Denver produce and ship new coins for circulation to 
Reserve Bank offices and coin terminals. Approximately 170 coin 
terminals are operated by 15 armored carrier companies. Coin terminal 
operators receive deposits from and fulfill orders of coins for 
depository institutions on behalf of the Reserve Banks and other 
customers. As we have previously reported, coin terminals operate at 
no cost to the government because while they maintain Reserve Bank 
coin inventories at no charge, they earn revenue from other customers--
depository institutions--from the coin transportation and wrapping 
services they provide.[Footnote 10] Depository institutions order 
coins from the Reserve Banks--through an online ordering system called 
FedLine operated by the Reserve Banks--to meet retailers' and the 
public's demand; depository institutions' coin orders are fulfilled 
with new and circulated coins held at Reserve Bank offices or coin 
terminals. Depository institutions can deposit coins with Reserve 
Banks when they have more coins than needed to fulfill demand. 
Depository institutions contract with armored carriers to wrap and 
deliver the coins to them, ultimately providing these coins to 
retailers and the general public. 

Figure 2: Production and Circulation of Coins: 

[Refer to PDF for image: illustrated process] 

Fedline: Online coin ordering and inventory monitoring system: 

Federal Reserve Cash Product Office: Coin orders to: 

U.S. Mint: New coins to: 

Federal Reserve Banks: coins stored; New coins to: 

Coin Terminal Operators: coins stored; New and circulating coins to: 

Depository Institutions: New and circulating coins to: 
Retailers and Public. 

Retailers: Circulating coins to and from Public. 

Retailers and Public: Circulating coins to: 

Depository Institutions: Circulating coins to: 

Coin Terminal Operators: Circulating coins to: 

Federal Reserve Banks: coins stored. 

Source: GAO. 

[End of figure] 

The circulating coin inventory consists of coins held by Reserve 
Banks--both in Reserve Bank offices and coin terminals--and those 
coins in general circulation for public use.[Footnote 11] In 2012, 
Reserve Banks held about 5 percent ($2.1 billion) of the circulating 
coin inventory, and 95 percent ($42 billion) of the inventory was in 
general circulation. As of December 2012, the 28 Reserve Bank offices 
held about 50 percent of the Reserve Banks' total coin inventory of 
pennies, nickels, dimes, and quarters and about 92 percent of the 
Reserve Banks' total coin inventory of $1 coins. The 170 coin 
terminals held the remainder of the Reserve Bank's coin inventory. 

Based on the Board's statutory authorities, it is responsible for note 
issuance, distribution, and processing.[Footnote 12] For example, the 
Board is the issuing authority for notes and is also responsible for 
distributing and authenticating notes. The Treasury's BEP produces 
notes to meet the Board's annual note order. According to the 
Treasury, at the end of 2012, approximately $1.1 trillion in notes 
were in circulation and approximately $228 billion in notes were held 
by the Reserve Banks. In 2012, BEP production accounted for about 32 
percent of the circulating note inventory. This is due, in part, to 
the amount of new notes that need to be replaced each year because 
they are worn or no longer fit for circulation. The Reserve Banks 
manage the note inventory through 28 note-processing centers and 10 
note distribution locations. CPO also has a role in providing note 
services, including processing. Similar to the distribution process 
for coins, depository institutions order notes from the Reserve Banks 
through FedLine, and then place these notes in circulation to meet the 
demand of retailers and the public. The Federal Reserve also contracts 
with armored carriers to transport notes for circulation or storage. 
When notes are returned by depository institutions as deposits to the 
Reserve Banks, each note is processed to determine its quality and 
authenticity; coins do not undergo similar processing. During 
processing, worn and counterfeit notes are removed from circulation, 
and the rest are wrapped for storage or re-circulation. 

$1 Coin: 

The Reserve Banks are responsible for ensuring the efficient 
distribution and circulation of coins, including the $1 coin, which co-
circulates with the $1 note. Legislation has been introduced in 
Congress to eliminate the $1 note and replace it with the $1 coin. 
[Footnote 13] In 2012, we reported that the federal government would 
receive $4.4 billion net benefits over 30 years if Congress decided to 
replace the $1 note with the $1 coin.[Footnote 14] This most recent 
savings estimate is lower than the results of our previous similar 
analyses, in part, because the life of the $1 note has increased. 
[Footnote 15] The Presidential $1 Coin Act of 2005 requires the 
Federal Reserve and the Secretary of the Treasury to assess and submit 
an annual report to the Congress on the obstacles to the efficient and 
timely circulation of $1 coins, among other things.[Footnote 16] As we 
have previously found, while Congress sought to increase the 
circulation of the $1 coin in recent years, circulation has remained 
limited, in part, because the $1 note has remained in circulation. 
[Footnote 17] 

Inventory Management Has Been Centralized; Rising Costs Have Not Been 
Analyzed: 

Coin Inventory Management: 

Since 2009, the Federal Reserve has made changes to its coin inventory 
management that includes centralizing the coin management system and 
establishing a contract with coin terminal operators.[Footnote 18] 

Centralized Coin Management: 

Introduced in 2009, the National Coin Inventory Management program 
centralized the management of the circulating coin inventory under the 
CPO so that the coin inventory would be consistently managed across 
the 12 Reserve Bank districts. Previously, each Reserve Bank office 
set and managed its own inventory levels, resulting in varying levels 
of inventory held relative to demand. Under the centralized approach, 
CPO manages the distribution of coin inventory, orders new coins, and 
acts on behalf of the Reserve Banks in working with stakeholders. 

The centralized approach to coin inventory management was set up to 
increase the efficiency of the coin distribution process. Since 2009, 
Reserve Bank inventories for pennies, nickels, dimes, and quarters 
have decreased due in part to the centralized program. In particular, 
from 2008 through 2012, the combined inventory for pennies, nickels, 
dimes, and quarters decreased 43 percent.[Footnote 19] (See figure 3.) 
CPO officials have attributed these decreases in inventory and coin 
orders to the 2009 introduction of CPO management of the coin 
inventory but other factors may have also contributed to the decrease, 
such as the 2007-2009 financial crisis and recession, which may have 
affected the public's demand for coins. 

Figure 3: Reserve Bank Coin Inventory, 2008-2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2008; 
Quarters: $828 billion; 
Dimes: $127.5 billion; 
Nickels: $38.7 billion; 
Pennies: $25.6 billion. 

Year: 2009; 
Quarters: $944.4 billion; 
Dimes: $79.2 billion; 
Nickels: $31.8 billion; 
Pennies: $23.9 billion. 

Year: 2010; 
Quarters: $811.4 billion; 
Dimes: $69.9 billion; 
Nickels: $25.3 billion; 
Pennies: $23.4 billion. 

Year: 2011; 
Quarters: $659.7 billion; 
Dimes: $50.5 billion 
Nickels: $26.5 billion; 
Pennies: $20.5 billion. 

Year: 2012; 
Quarters: $456.6 billion; 
Dimes: $80.5 billion; 
Nickels: $25.8 billion; 
Pennies: $16.5 billion. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

As part of the centralized approach to inventory management, in 2009, 
CPO established national upper and lower inventory targets for 
pennies, nickels, dimes, and quarters to track and measure the coin 
inventory. CPO officials noted that these targets help meet their 
primary goal in managing the nation's coin inventory: ensuring a 
sufficient supply of all coin denominations to meet the public's 
demand. The upper national inventory target serves as a signal for CPO 
to reduce future coin orders from the U.S. Mint to avoid the risk of 
approaching coin-storage capacity limits and the lower national 
inventory target serves as a signal to CPO that there is a need to 
increase future coin orders to avoid shortages.[Footnote 20] According 
to CPO officials, they view falling below the lower targets as more 
problematic than exceeding the higher targets because the lower 
targets are designed to guard against the more serious risk of not 
having enough coin to meet demand. We analyzed national inventory 
targets from 2009 to 2012 and found that in most cases the national 
inventory targets were met. However, inventory exceeded the upper 
inventory targets in 2009 for nickels and quarters; in 2010 for 
nickels, dimes, and quarters; and in 2011 for quarters.[Footnote 21] 
In addition, the national inventory for pennies was 7 percent below 
the lower targets in 2012.[Footnote 22] See appendix II for additional 
information on coin inventories, orders, and circulation. 

In addition to considering nationwide coin inventory, CPO reviews the 
daily inventories of the 200 Reserve Bank offices and coin terminals 
and has established upper and lower inventory levels to ensure there 
is a sufficient but not an excessive supply of coins at each location. 
Given that the coin supply at each location differs depending on that 
location's typical volume of coin payments and receipts, each Reserve 
Bank office and coin terminal is required to hold a minimum 2 weeks of 
"payable days" and a maximum 3 weeks of payable days in 
inventory.[Footnote 23] Prior to 2009, there were no required 
inventory levels for distribution locations and coin shortages and 
excesses occurred in specific locations.[Footnote 24] Since CPO has 
centralized the management Reserve Banks' coin inventory, coin 
terminal operators we spoke with said coin shortages are less common 
and that they are better able to manage their inventory and provide 
depository institutions with the denominations they need to fulfill 
public demand. 

In managing the coin inventory, CPO determines if coins should be 
transferred from an area with more coins than needed to fulfill 
current and future demand or if additional coins should be ordered 
from the U.S. Mint. (See figure 4.) To make this determination, CPO 
uses a proprietary inventory management system that collects data on 
inventory, receipts, and payments from the approximately 200 coin 
distribution locations and forecasts expected changes in coin demand 
for each location. Before transferring coins from one region to 
another, CPO considers whether a region's future demand is expected to 
change and considers typical seasonal shifts in coin demand and local 
market factors such as coin-recycling operations that could affect the 
flow of coins. These transfers, known as interbank transfers, 
according to CPO officials, are the only direct coin transportation 
cost to Reserve Banks because armored carriers provide local coin 
transportation and delivery of new coins is provided by the U.S. Mint. 
[Footnote 25] Coins are also transferred between Reserve Bank offices 
and coin terminals within a region when distribution locations need 
additional coin supply or have excess coin inventory. For example, 
coins could be moved via interbank transfer from Reserve Bank offices 
in Seattle or Minneapolis to support distribution locations in Helena, 
Montana, and coins could be transferred among three distribution 
locations in Helena, a Reserve Bank of Minneapolis office, and two 
coin terminals. If there is an insufficient supply of coins to meet 
demand and transferring coins would not be cost effective, CPO orders 
new coins from the U.S. Mint. 

Figure 4: The CPO's Process for Developing Monthly Coin Orders: 

[Refer to PDF for image: process illustration] 

1. Obtain and analyze inventory data: 
CPO uses a proprietary inventory management system to collect data 
from FedLine orders and coin inventory, payments, and receipts from 
all 200 distribution locations. This analysis determines whether there 
is sufficient supply to meet current and future demand in each 
distribution location and how coin may be moved regionally to meet 
demand. 

2. Forecast demand: 
Inventory data is used by coin forecasting software to develop a 12-
month rolling forecast of demand and projected new coin orders. New 
coin order projections are designed to keep inventory levels within 
the upper and lower national inventory targets. 

3. Order new coins: 
CPO sends monthly coin orders to the U.S. Mint based on the 2-month 
portion of the rolling 12-month forecast (e.g. CPO submits the August 
order sometime in June). After submitting the order to the U.S. Mint, 
CPO continues to update the order based on shifts in inventory and 
demand, by submitting adjustments to the U.S. Mint. 

4. Distribute new coins: 
Using forecasted receipts and payments from each distribution location 
and considering local market factors, CPO determines, by denomination, 
which Reserve Bank districts will receive new coin and instructs U.S. 
Mint on delivery locations. The U.S. Mint ships new coin to Reserve 
Banks based on CPO's order and any subsequent adjustments. 

5. Manage inventory locally: 
Reserve Banks manage inventory levels at the distribution locations-–
coin terminals–-to meet depository institutions demand within each 
market. 

Return to step 1. 

Source: GAO based on Federal Reserve information. 

[End of figure] 

CPO orders new coins each month from the U.S. Mint based on its 2-
month rolling forecast of expected demand, as shown above in figure 4. 
CPO provides a monthly order to the U.S. Mint about 2 months prior to 
expected delivery (e.g., CPO submits the August order in June), and to 
help the U.S. Mint prepare for potential future orders, CPO provides 
estimates of projected demand and new coin orders for up to the next 
12 months. After submitting orders to the U.S. Mint, CPO may increase 
an order or defer shipments to later months based on updated 
information. In part to respond to these changes, each month the U.S. 
Mint produces a safety stock of coins. If this stock is not applied to 
the current order, it is used to fill future orders.[Footnote 26] 
After the new coins are produced, based on expected demand, CPO 
determines which Reserve Bank will receive new coins, and then Reserve 
Banks determine which offices and coin terminals will receive them. 
From 2008 to 2009, new coin orders for pennies, nickels, dimes, and 
quarters decreased by 79 percent; however, since 2010 new coin orders 
have increased annually.[Footnote 27] (See figure 5.) According to CPO 
officials, the 2009 introduction of centralized coin management led to 
the reduction in coin inventories and the more recent increases in 
coin orders reflect a return to a more normal ordering pattern that is 
closely aligned with payments to circulation and receipts from 
circulation. However, other factors may have also contributed to 
decreased new coin orders in 2009, such as the 2007-2009 financial 
crisis and recession, which may have affected the public's demand for 
coins. 

Figure 5: Value of New Coin Orders by Denomination, 2008-2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2008; 
Quarters: $615.8 million; 
Dimes: $110.8 million; 
Nickels: $31.1 million; 
Pennies: $52.4 million. 

Year: 2009; 
Quarters: $128 million; 
Dimes: $10.6 million; 
Nickels: $4.1 million; 
Pennies: $27.7 million. 

Year: 2010; 
Quarters: $49.1 million; 
Dimes: $121.3 million; 
Nickels: $26.9 million; 
Pennies: $38.1 million. 

Year: 2011; 
Quarters: $86.9 million; 
Dimes: $142.2 million; 
Nickels: $46.6 million; 
Pennies: $46.6 million. 

Year: 2012; 
Quarters: $131.2 million; 
Dimes: $168.9 million; 
Nickels: $50.1 million; 
Pennies: $59.6 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Contract with Coin Terminal Operators: 

In 2011, on behalf of Reserve Banks, CPO developed and negotiated a 
contract with coin terminal operators, which standardized procedures 
and internal controls for the storage and handling of coins across all 
Reserve Bank districts. Prior to this contract, each Reserve Bank 
negotiated its own contract with coin terminal operators that operated 
in its district. We spoke with 5 of the 15 coin terminal operators, 
and they reported satisfaction and efficiency gains with the 
standardized contract and CPO's centralized management. For example, 
one coin terminal operator told us that the Federal Reserve's 
centralized approach allows coin terminal operators to manage their 
business proactively rather than reactively. Among other things, the 
contract requires coin terminals to use FedLine to order new coins and 
track changes to Reserve Bank coin inventory held by the coin 
terminal. Coin terminal operators have told us that FedLine works more 
effectively than the earlier ad-hoc communications to order coin and 
track inventory that preceded it. 

Coin Management Costs: 

In 2012, Reserve Bank costs related to coin management were about $62 
million or 14 percent of the estimated $449 million that coins 
indirectly cost the U.S. government.[Footnote 28] These costs included 
CPO's administration, coin handling, and interbank coin transfer 
costs.[Footnote 29] The remaining 86 percent of U.S. government costs 
include about $387 million for the U.S. Mint's production and 
distribution of new coins. In addition, the government earns a return 
on the issuance of coins to the extent that production and 
distribution costs are less than the face value of the coins put into 
circulation--this value to the government is known as seigniorage. The 
U.S. Mint reported that in 2012 the government received about $106 
million in seigniorage because the face value of coins produced was 
$493 million, and the U.S. Mint's cost of producing and distributing 
them was $387 million.[Footnote 30] 

The Federal Reserve's 2012-15 strategic plan includes an objective to 
use financial resources efficiently and effectively.[Footnote 31] In 
addition, according to COSO, as part of the internal control process 
management should ensure that operations, such as managing an 
inventory, are efficient and cost effective, and this process includes 
monitoring costs and using this information to make operational 
adjustments.[Footnote 32] To monitor costs related to coin and note 
operations, CPO officials said they review currency management costs--
which include costs related to both coins and notes--at the national 
level because individual Reserve Banks may vary in their accounting 
for operational costs related to coins and notes.[Footnote 33] When we 
reviewed currency management costs at the national level using data 
provided by CPO, we found that from 2008 through 2012 total annual 
Reserve Bank currency management costs increased by 23 percent. 
[Footnote 34] (See figure 6.) Cost information for coins and notes is 
available separately; however, CPO does not separately monitor coin 
costs. 

Figure 6: Reserve Bank Costs Related to Coin and Notes, 2008-2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2008; 
Note costs: $395.3 million; 
Coin costs: $35.7 million. 

Year: 2009; 
Note costs: $433.5 million; 
Coin costs: $43.8 million. 

Year: 2010; 
Note costs: $469.6 million; 
Coin costs: $53.4 million. 

Year: 2011; 
Note costs: $459.2 million; 
Coin costs: $56.3 million. 

Year: 2012; 
Note costs: $471.7 million; 
Coin costs: $60.3 million. 

Source: GAO Analysis of Federal Reserve Data. 

[End of figure] 

Our analysis of coin management costs, using CPO data, indicates that 
coin management costs increased by 69 percent from 2008 through 2012. 
CPO officials attributed the increase in coin management costs to 
support costs, which increased by 80 percent during that time period, 
from $24.5 million in 2008 to $44.1 million in 2012.[Footnote 35] (See 
figure 18 in appendix II.) Support costs include utilities, 
facilities, and information technology as well as other local and 
national support services such as CPO's services. According to CPO 
officials, support costs are influenced by a variety of factors, 
including the number and size of operating units at each location. 
Also, with the consolidation of some operating units, such as check 
processing, other operations, including coin management, have absorbed 
a higher percentage of support costs, according to these same 
officials. They further explained that direct costs--which include 
personnel and equipment--represent their primary measure of Reserve 
Bank coin operation costs. We found that direct costs for coin 
operations increased by 45 percent during this period; about $5 
million across the 28 Reserve Bank offices. According to CPO 
officials, the increase in direct costs can be largely attributed to 
an increase in personnel costs, which may be influenced by volume of 
coin bags handled onsite and the number of coin terminals serviced. 
[Footnote 36] By not separately monitoring coin costs, the Federal 
Reserve may be missing opportunities to assess and improve the cost-
effectiveness of its coin operations. 

In addition, we also reviewed coin management costs at each Reserve 
Bank and found that the rates of increasing coin-management costs 
differ across Reserve Banks. Using data provided by CPO on individual 
Reserve Banks' costs, we found that from 2008 through 2012, coin 
management costs increased for all Reserve Banks with the increases 
ranging from a low of 36 percent to a high of 116 percent.[Footnote 
37] To account for variations in the volume of coins handled by 
individual Reserve Banks, we also reviewed the average cost per bag 
handled by Reserve Banks and found that in 2012 it ranged from about 
$2 to $57 per coin bag.[Footnote 38] CPO officials attributed 
variations in Reserve Bank coin management costs to different 
operational practices such as outsourcing coin handling to coin 
terminals and differences in direct and support costs.[Footnote 39] 
While outsourcing coin handling may decrease some costs as personnel 
are not required at the Reserve Bank location to perform these 
services, it may also increase other costs related to daily management 
and periodic auditing of these outsourced services. Without taking 
steps to identify and share cost-effective coin management practices 
across Reserve Banks, the Federal Reserve may be missing opportunities 
to support more efficient and effective use of Reserve Bank resources. 
Moreover, more efficient management of the coin inventory may 
contribute to cost savings and additional funds returned to the 
General Fund. 

The Federal Reserve Follows Some Key Practices in Managing the 
Circulating Coin Inventory but Lacks Performance Information for 
Additional Metrics and Forecasting: 

In managing the circulating coin inventory, we found that the Federal 
Reserve follows key practices for collaboration and risk management 
and partially follows key practices for performance metrics, 
forecasting demand, and system optimization. To effectively manage 
inventory, private and governmental organizations involved in 
production and distribution operations use supply-chain and operations-
management practices. We identified five key supply-chain practices--
collaboration, risk management, performance metrics, forecasting 
demand, and system optimization--and selected supporting 
characteristics applicable to coin inventory management to assess the 
Federal Reserve's management of the circulating coin inventory. 
[Footnote 40] (See table 1.) These key supply-chain management 
practices are closely related, and improvements or shortfalls in one 
practice may contribute to improvements or shortfalls in another 
practice. In addition, establishing, documenting, and following these 
practices and their supporting characteristics contribute to a more 
effective inventory management system. 

Table 1: Key Practices for Managing the Circulating Coin Inventory: 

Key practice: Collaboration; 
Definition and selected supporting characteristics: Maintain working 
relationships with partner entities across the supply chain by 
establishing policies, roles and responsibilities, and mechanisms for 
sharing information; 
* Develop and use policies or guidelines governing relationships with 
partner entities; 
* Establish agreed upon roles and responsibilities with partner 
entities; 
* Develop and use mechanisms for sharing information related to the 
circulating coin inventory with partner entities; 
GAO assessment: Key practice followed or substantially followed. 

Key practice: Risk management; 
Definition and selected supporting characteristics: Plan and prepare 
for risks related to unanticipated events that could disrupt the 
normal flow of the system; 
* Identify sources of potential disruptions; 
* Assess the potential impact of the risk; 
* Develop and use plans to mitigate the risk; 
GAO assessment: Key practice followed or substantially followed. 

Key practice: Performance metrics; 
Definition and selected supporting characteristics: Establish, track, 
and reevaluate goals or metrics to measure change or improvement in a 
process or performance area; 
* Develop and use reasonable metrics that are clearly defined, 
measurable, actionable, relevant, and timely; 
* Track progress against those metrics or targets; 
* Establish and implement a process to reevaluate metrics or targets; 
GAO assessment: Key practice partially followed. 

Key practice: Forecasting demand; 
Definition and selected supporting characteristics: Prepare for and 
estimate expected changes in future demand and plan and make decisions 
based on these estimates; 
* Have a process in place to forecast demand; 
* Use forecast results to plan and manage the circulating coin 
inventory; 
* Assess forecast accuracy; 
GAO assessment: Key practice partially followed. 

Key practice: System optimization; 
Definition and selected supporting characteristics: Consider, as a 
whole, the strategic interactions and operations of the entire supply 
chain or inventory process in developing process change; 
* Obtain access to information and resources from across the 
circulating coin supply chain; 
* Use information and resources to identify and implement efficiencies 
within the supply chain; 
GAO assessment: Key practice partially followed. 

Key practice: 
Key practice followed or substantially followed--plans, policies, or 
processes have been developed and implemented properly for all or 
nearly all of the supporting characteristics; 
Key practice partially followed--plans, policies, or processes have 
been developed and implemented properly for some of the supporting 
characteristics. 

Source: GAO analysis of literature and Federal Reserve practices. 

[End of table] 

Key Practices Followed: 

Collaboration: 

The Federal Reserve follows the key practice of collaboration through 
its relationships with supply chain stakeholders, including Reserve 
Banks, coin terminal operators, depository institutions, and the U.S. 
Mint. CPO has developed policies and guidelines governing 
relationships with each of its partner entities. For example, as 
previously discussed, in 2011 CPO introduced a contract with coin 
terminal operators, which includes a manual of operations that 
standardized procedures and internal controls for handling Reserve 
Bank coins. CPO has also agreed upon roles and responsibilities with 
partner entities. For example, U.S. Mint officials told us that as 
part of the coin supply chain, they deal almost exclusively with CPO 
to manage day-to-day operations and interbank coin transfers. The U.S. 
Mint arranges coin transportation across Reserve Banks, and CPO 
reimburses the U.S. Mint for the cost of this transportation. CPO has 
multiple mechanisms, such as stakeholder working groups, for sharing 
information related to the circulating coin inventory with partner 
entities. Reserve Banks, coin terminal operators, depository 
institutions, and the U.S. Mint reported to us that they are generally 
satisfied with their relationships with CPO. 

Risk Management: 

The Federal Reserve follows the key practice of risk management 
because it has identified sources of potential disruptions, assessed 
the potential impact of risk, and developed plans to mitigate risk at 
multiple levels of operations, including Reserve Bank, FedLine, and 
coin inventory management operations. For example, the lower national-
inventory targets are set based on the highest consecutive 10-day 
gross pay period from 2009 to 2012 because, according to CPO 
officials, the U.S. Mint can produce and deliver new coins within 10 
days. Therefore, the lower inventory target guards against a coin 
shortage if a disruption prevented circulating coin payments from 
depository institutions. In addition, risk management for the 
circulating coin inventory is built into the Federal Reserve's overall 
risk management and contingency protocols. For example, each Reserve 
Bank has a designated "buddy bank" to perform its functions--including 
coin circulation activities--if it is unable to operate due to a 
disruption. According to CPO officials, as soon as disruption is 
anticipated, they begin planning with stakeholders operating in the 
affected area, including Reserve Bank officials, coin terminal 
operators, and depository institutions. Continuity plans are also in 
place for Federal Reserve services such as FedLine. The FedLine 
website includes information on the types of potential disruptions, 
such as system outages or closures of Reserve Bank or coin terminal 
operations by inclement weather or other events, and what depository 
institutions and armored carriers should do in the event of a 
disruption. 

Key Practices Partially Followed: 

Performance Metrics: 

The Federal Reserve partially follows the key practice of performance 
metrics because its use of performance metrics is limited to inventory 
targets and it has not developed other goals or metrics related to 
coin-supply chain management. CPO has established, tracks, and 
annually reevaluates performance metrics in the form of upper and 
lower inventory targets for pennies, nickels, dimes, and quarters. In 
addition, CPO closely monitors "net pay" to measure how well they are 
meeting general demand nationwide and at individual locations. 
[Footnote 41] However, CPO has not established additional management 
goals or metrics to measure other aspects of its management such as 
costs because, as discussed earlier, CPO's primary goal is to ensure a 
sufficient supply of all coin denominations are available to meet the 
public's demand. Federal agencies have been required to develop 
performance goals and measure and report on their progress in 
achieving these goals since the Government Performance and Results Act 
(GPRA) was enacted in 1993.[Footnote 42] Although the Federal Reserve 
is not covered by GPRA, the Board has chosen to voluntarily comply 
with the spirit of the act. In addition, our previous work on managing 
results has shown that agencies should identify goals and establish a 
suite of performance metrics to determine whether they are meeting 
those goals.[Footnote 43] We have identified customer satisfaction, 
efficiency, and costs, among others, as performance metrics that can 
be used to measure an agency's progress towards its goals.[Footnote 
44] Moreover, costs are among the common performance measures used in 
supply chain management. The Australian, Austrian, and Canadian mint 
and central bank officials we interviewed have established multiple 
performance goals and metrics for their coin inventory management. 
[Footnote 45] For example, the Royal Australian Mint and its 
commercial bank partners have established targets to reduce coin 
holdings that will result in reducing the cost of freight and other 
related coin expenses. Further, the Royal Australian Mint tracks and 
monitors coin management costs to ensure that they are progressing 
towards their targets. 

Forecasting Demand: 

We found that the Federal Reserve partially follows the key practice 
of forecasting demand because it forecasts future coin demand and uses 
this information to make decisions, but does not systematically track 
the accuracy of its monthly forecasts compared to the final coin 
orders. As discussed previously, CPO has a process in place to 
forecast demand by tracking current inventory, payments, and receipts 
and using this information to calculate expected future demand. These 
forecasts are then used to plan and manage the circulating coin 
inventory, including decisions on coin transfers and new orders. CPO 
officials told us they review their annual forecasts, and have found 
their forecasts for payments and receipts are within 10 percent of 
actual orders for pennies, nickels, dimes, and quarters. However, CPO 
has taken minimal steps to assess monthly forecast accuracy.[Footnote 
46] CPO officials told us that they compare their initial coin orders 
to net pay, but do not track the accuracy of their monthly forecasts 
because seasonal shifts in coin demand make reviewing annual trends 
more useful for their purposes.[Footnote 47] Our analysis of initial 
monthly CPO coin orders and actual U.S. Mint coin shipments from 2009 
through 2012 indicates that initial orders were consistently less than 
the final orders (i.e., U.S. Mint shipments of new coin). APICS--an 
operations management industry association that offers professional 
certifications--recommends that forecasting results must be 
continuously monitored and a mechanism should be in place to revise 
forecasting models as needed and that if the forecast consistently 
exhibits a bias, the forecast should be adjusted to match the actual 
demand.[Footnote 48] According to the Logistics Management Institute, 
accurate forecasts result in effective and efficient inventories, 
whereas inaccurate forecasts often cause inventory excesses and 
shortfalls.[Footnote 49] In addition, inventory management experts 
told us that accurate forecasts would make the Federal Reserve better 
able to respond to changing trends in coin demand, as discussed later 
in this report. Taking additional steps to assess forecast accuracy 
could help CPO identify the factors influencing forecast accuracy and 
then adjust forecasts to improve accuracy. 

System Optimization: 

Although CPO has multiple systems that provide information from across 
the supply chain, we found that it partially follows the practice of 
system optimization because this information is not currently used to 
better understand some additional aspects of its coin management 
activities to optimize the efficiency of the circulating coin 
inventory. As discussed earlier, CPO has access to information and 
resources from across the circulating coin supply chain. This access 
includes information on actual and forecasted coin demand and Reserve 
Bank coin management costs, as well as information from stakeholders, 
such as new coin delivery information from the U.S. Mint. In addition, 
the Federal Reserve has taken some steps to identify areas where they 
could gain incremental efficiency improvements such as the centralized 
management of the coin inventory and note-processing efficiencies, 
which we discuss later. 

However, CPO could improve its use of information and resources to 
identify and implement efficiencies within the supply chain by using 
the range of information available to establish and track performance 
metrics to measure progress. For example, the U.S. Mint's monthly 
production of new coins could be more efficient with improvements to 
the accuracy of initial new coin orders. Currently, the U.S. Mint 
produces a safety stock, in part, to ensure it is able to produce 
enough coins to fulfill CPO's final, adjusted order.[Footnote 50] More 
accurate monthly forecasts and coin orders could lessen the need for 
the U.S. Mint to produce safety stock, and thus help to optimize the 
efficiency of the supply chain. In addition, if CPO used its 
information on Reserve Bank coin management costs and its knowledge of 
coin management operations across the 12 Reserve Banks, it could help 
to identify factors that have contributed to varying coin-management 
costs at individual Reserve Banks and opportunities for cost savings 
that could limit rising costs. Better information related to forecast 
accuracy and costs could also aid CPO in using its information and 
resources to identify inefficiencies and support system optimization. 
Further, optimizing U.S. Mint and individual Reserve Bank operations 
could potentially contribute to reducing U.S. Mint or Federal Reserve 
costs related to circulating coins, a reduction that could potentially 
increase the amount of money returned to the General Fund. 

Demand for Currency Expected to Decline Gradually in the Near Term, 
but a Variety of Factors Make Predicting Longer-Term Change Difficult: 

Potential Changes in Demand for Currency: 

To collect data and information on potential changes in the demand for 
currency, the Federal Reserve has conducted studies and outreach with 
groups such as depository institutions and merchants, and found a 
general consensus that the use of currency may decline slightly in the 
near term. According to the Federal Reserve, this expectation is due, 
in part, to an increase in alternative payment options. Federal 
Reserve officials we met with described how interrelated factors make 
it difficult to predict long-term (i.e., 5 to 10 years) currency 
demand. The factors the Federal Reserve identified as influencing 
currency demand and the mechanisms used to supply that demand include 
the relative costs and benefits of currency versus other forms of 
payment, the level of economic activity and other economic conditions, 
technological change, and regulations and policies. Federal Reserve 
officials explained that how these factors will play out in the years 
ahead is unknown, and therefore the magnitude of the change in demand 
for currency is uncertain. 

According to many agency officials, stakeholders, and foreign 
government officials we spoke to, while there may be changes in the 
use of various types of payments in the coming years, the effect on 
currency demand is likely a gradual decline. Thus far, Federal Reserve 
officials noted that their research indicates that the amount of 
currency in circulation continues to rise and currency usage is 
currently steady.[Footnote 51] Federal Reserve studies and data also 
indicate electronic payment options have increased over time. For 
example, in a 2010 study, the Federal Reserve reported that the number 
of non-currency payments--including credit card and debit card 
payments, among others--increased 4.6 percent per year from 2006 to 
2009.[Footnote 52] Since 2006, the debit card has surpassed the check 
as the most used non-currency payment method, with the number of debit 
card transactions increasing 14.8 percent per year from 2006 to 2009. 
Over the same period, check volume decreased 7.1 percent per year. 
Many stakeholders noted that even with changes in non-currency 
payments, the effect on currency demand is likely to be gradual. For 
example, BEP officials stated that the increasing use of electronic 
payments has not had a major impact on demand for currency. Further, 
these officials said demand for currency may even increase and that 
growing use of electronic and mobile payments will likely affect 
checks more than currency. Royal Australian Mint officials also stated 
that while the use of electronic payment methods is expected to 
increase as new technologies emerge, how fast and when such a change 
will occur is unclear. 

While data on credit card usage and electronic transactions are 
available, the volume of currency transactions is difficult to 
measure. Specifically, other data sources cannot be used to determine 
what portion of the currency in circulation is being used for 
transactions--for example, some currency in circulation are stored, as 
opposed to being deposited or used for commerce. As the use of non-
currency payment methods has increased, the quantity of notes in the 
economy has also grown. According to Federal Reserve data, the number 
of transactional notes (i.e., $1s, $5s, $10s, and $20s) in circulation 
has increased steadily from approximately 19.6 billion pieces in 2009 
to 21.8 billion pieces in 2012. During this period, the value of 
currency in circulation rose approximately 26 percent. (See figure 7.) 
Coin terminal operators noted that there will be a continued need and 
demand for coins and notes, particularly because there will always be 
some portion of the population who will only use currency, such as 
individuals without bank accounts, or "the unbanked." 

Figure 7: Currency in Circulation and Examples of Changes in Non-
Currency Payments: 

[Refer to PDF for image: stacked line graph] 

Notes in circulation: $ 

Year: 2003; 
Notes in circulation: $690 billion; 
Coins in circulation: $34 billion. 

Year: 2004; 
Notes in circulation: $719.9 billion; 
Coins in circulation: $34.9 billion. 

Year: 2005; 
Notes in circulation: $758.8 billion; 
Coins in circulation: $35.2 billion. 

Year: 2006; 
Notes in circulation: $783.5 billion; 
Coins in circulation: $36.6 billion. 

Year: 2007; 
Notes in circulation: $792.2 billion; 
Coins in circulation: $36.8 billion. 

Year: 2008; 
Notes in circulation: $853.6 billion; 
Coins in circulation: $36.2 billion. 

Year: 2009; 
Notes in circulation: $888.3 billion; 
Coins in circulation: $39.9 billion. 

Year: 2010; 
Notes in circulation: $942.0 billion; 
Coins in circulation: $40.7 billion. 

Year: 2011; 
Notes in circulation: $1.035 trillion; 
Coins in circulation: $41.3 billion. 

Year: 2012; 
Notes in circulation: $1.127 trillion; 
Coins in circulation: $42.0 billion. 

2003-2006: 
Debit card use increased: +17.5%; 
Check volume decreased: -6.4%; 
Electronic payments comprised 2/3 of all non cash payments by number 
but less than half by value. 

2006-2009: 
Debit card use increased: +14.8%; 
Check volume decreased: -7.1%; 
Electronic payments comprised 3/4 of all non cash payments by number 
and more than half by value. 

Source: GAO analysis of Treasury circulation estimates and 2007 and 
2010 Federal Reserve Payments Study data. 

Note: The Federal Reserve's 2013 Payments Study will include similar 
debit card, check volume, and electronic payment trends for the period 
from 2009-2012, but is not expected to be completed until late 2013. 

[End of figure] 

Addressing Changes in Demand for Currency: 

Federal Reserve officials expect that their current procedures and 
approach to managing the coin and note inventory--including their 
forecasting and monitoring of the coin inventory targets discussed 
previously--will allow the agency to accommodate gradual shifts in 
demand. For example, to respond to increasing or decreasing demand for 
coins and notes, CPO can decrease or increase coin orders from the 
U.S. Mint and the Board can decrease or increase note orders from BEP. 
Specifically, in 2012 the Federal Reserve assessed how notes received 
from circulation are processed and determined that current operations 
can handle a significant change in volume--either an increase or a 
decrease--without significant change to the operating model and 
staffing levels. Nonetheless, according to the officials, CPO is 
continually working to identify ways to streamline its processes to be 
more flexible and adaptable to changes. In addition, CPO and the 
Reserve Banks have established risk management plans and procedures to 
address the effects associated with a short-term, unexpected change in 
coin and note demand--such as from a natural disaster. 

Other experts and foreign officials agree that well-managed currency 
systems are capable of handling major trend-based changes. According 
to inventory management experts we consulted, a key to effectively 
managing a supply chain is dependable forecasts. Effective forecasts 
would take both trends and cyclical demand changes into account. 
Therefore, combining forecasts with continual tracking of demand and 
inventory levels should allow the Federal Reserve to be able to adapt 
to any major trend-based changes in coin and note demand. As discussed 
earlier, this makes accurate forecasting by the Federal Reserve even 
more important. Royal Australian Mint officials also stated that by 
routinely monitoring activities such as coin trades and transfers 
between and among institutions, any changes in these or other measures 
would give officials insight on specific ways in which demand was 
changing, which would ultimately allow for adjustments in the volume 
of coins being circulated, responding to public demand. 

While Federal Reserve officials we met with indicated their current 
processes should enable them to adapt to gradual changes in coin and 
note demand, a significant and unexpected change could affect the 
management of the coin and note inventories. According to Federal 
Reserve officials and some coin terminal operators we met with, the 
elimination of the $1 note for the $1 coin would be the type of event 
that could significantly affect demand for a specific coin 
denomination, and it would have implications for the overall 
management of both the coin and note inventory. For example, Federal 
Reserve officials stated that replacing the $1 note with the $1 coin 
would likely require increases in coin vault space and manpower as 
well as improvements in coin authentication technologies. CPO 
officials also said that if a large decline in coin usage occurs, they 
would adapt their management of the inventory in response. For 
example, if demand for coins were to decrease suddenly, leaving too 
many coins in circulation, the Federal Reserve would first stop 
ordering new coins from the U.S. Mint, and would then focus on storing 
the excess coin inventory. Coin attrition would reduce this inventory 
over time, and CPO officials anticipate that they would have 
sufficient storage capacity available to accommodate the excess coins. 
CPO officials told us that inventory levels would need to be well in 
excess of the existing targets before they would have an effect on 
storage capacity and related costs. Further, if public demand for 
coins decreased substantially, additional storage could be needed to 
accommodate and store the coins returned by depository institutions to 
the Reserve Banks. Coin terminal operators also did not expect a 
decrease in coin demand significant enough to exceed their storage 
capacity. 

In 2010, CPO began to develop a long-term strategic framework to 
consider potential changes to currency demand over the next 5 to 10 
years and how this change could affect CPO's operations. According to 
Federal Reserve officials, while the future is inherently uncertain, 
this framework is an internally focused effort to help them share 
information, refine internal operations, and monitor trends. The 
Federal Reserve has not established deadlines for completing this 
effort, but CPO officials said they continue to share what they are 
learning from data and other research, and they continue to assess 
current coin distribution and note-processing operations. The 
following activities are components of these efforts: 

* Engaging system stakeholders. As an initial step, CPO officials 
interviewed stakeholders such as depository institutions, armored 
carriers, equipment vendors, merchants, and alternative payment 
providers to collect information and perspectives on potential changes 
in currency demand. Groups such as the Customer Advisory Council and 
the Cash Advisory Group also continue to serve as a mechanism for the 
CPO to coordinate and collect data and information on currency 
activity nationwide. 

* Examining internal operations for coin distribution and note 
processing. CPO officials have sought to increase the efficiency of 
coin-distribution and note-processing operations to better position 
the agency to adapt to future changes in demand. For example, the 
Federal Reserve enhanced its note sensor technology in 2010, improving 
the efficiency of note processing operations by nearly 10 percent, 
according to CPO officials. CPO officials told us that they continue 
to look for other areas to incrementally improve and add additional 
flexibility in their operations. Incremental improvements such as 
those related to note processing activities could contribute to supply-
chain system optimization, as discussed earlier. 

* Conducting research. The Federal Reserve continues to conduct 
research and analysis related to Reserve Bank operations. For example, 
one Reserve Bank is conducting the most recent in a series of 
triennial payment studies, which it expects to complete later this 
year, to determine the current volume and composition of electronic 
and check payments, reporting trends in these payments since 2009. As 
part of a broader effort to look at trends in various payment types, 
another Reserve Bank is examining the detailed spending habits of a 
selection of consumers, who were asked to document their transactions 
and payment decisions over a period of time in a shopping "diary." 
Because, as previously noted, determining how much of the currency in 
circulation is being used for transactions is difficult--this type of 
study can help officials better understand currency use in the United 
States. The diary study is expected to be completed and published 
later this year, and CPO officials told us they plan to assess and 
incorporate relevant findings into their currency management 
operations. 

Australian, Austrian, and Canadian officials we interviewed are also 
exploring the potential impact of alternative payment technologies and 
continue to analyze past trends and to collect new data to inform 
these research efforts. For example, Austrian and Canadian officials 
have also conducted diary studies to better understand individuals' 
use of various payment options. Collecting detailed consumer payment 
information through these types of studies can help officials in these 
countries better understand consumers' payment and currency management 
habits. 

The Federal Reserve Is Managing the Existing $1 Coin Inventory, Took 
Steps to Meet Demand for Circulation, and Plans No Future Action: 

Management of the $1 Coin Inventory: 

The Federal Reserve manages the $1 coin inventory as it does all other 
coin denominations, overseeing the distribution of coins produced by 
the U.S. Mint and those already in circulation.[Footnote 53] The 
Federal Reserve's goal, based on its statutory responsibilities, is to 
ensure that sufficient supplies of coins are available to meet demand 
nationwide.[Footnote 54] According to Federal Reserve officials, from 
an operational perspective, the Federal Reserve fills all orders it 
receives and treats all denominations of coins and notes the same. 

Reserve Banks held approximately $1.4 billion in $1 coin inventory as 
of March 2013. According to the Federal Reserve's 2013 Annual Report 
to Congress, this inventory level is sufficient to meet the demand for 
$1 coins for more than 40 years assuming a continuation of the current 
level of demand. Federal Reserve officials told us the annual net 
demand for $1 coins was approximately $51 million per year from 2010 
through 2012. Inventory increased steadily with the issuance of the 
Presidential Coin series beginning in 2007, but has leveled off since 
the 2011 Treasury decision to cease production of new $1 coins for 
circulation (see figure 8).[Footnote 55] In addition, $1 coin payments 
to depository institutions have declined from $804 million in 2007 to 
$245 million in 2012, while receipts from depository institutions 
generally increased until 2012. In 2012, because there was less public 
demand for $1 coins than were in circulation, Reserve Banks received 
more $1 coins back than they paid out, as indicated by net pay in 
figure 8. 

Figure 8: $1 Coin Inventory, Net Pay, and New Coin Orders, 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2007; 
Inventory: $367.9 million; 
Net pay: $513.4 million; 
New coin orders: $816.5 million. 

Year: 2008; 
Inventory: $580.4 million; 
Net pay: $222.8 million; 
New coin orders: $427.5 million. 

Year: 2009; 
Inventory: $877.7 million; 
Net pay: $49.5 million; 
New coin orders: $346.5 million. 

Year: 2010; 
Inventory: $1136.8 million; 
Net pay: $85.1 million; 
New coin orders: $338.2 million. 

Year: 2011; 
Inventory: $1.42 billion; 
Net pay: $74.5 million; 
New coin orders: $362.3 million. 

Year: 2012; 
New coin orders: $1.43 billion; 
Net pay: -$6.9 million. 

Source: GAO analysis of Federal Reserve data. 

Note: Net pay is the difference between coin payments to depository 
institutions and coin receipts from depository institutions over a 
given period of time. 

[End of figure] 

According to Reserve Bank officials, depository institution 
representatives, coin terminal operators, and vending machine industry 
representatives we met with, $1 coins are readily available to the 
public throughout the country. Most of the officials and 
representatives told us that they do not have problems obtaining $1 
coins or supplying them to their customers, but emphasized that there 
is low public demand for these coins. For example, Reserve Bank 
officials in the Cash Advisory Group said that $1 coins are available 
at their locations nationwide and that they are able to fill 
customers' orders as needed. Depository institution representatives on 
the Customer Advisory Council told us their depository institutions 
routinely fill $1 coin orders for organizations with standing orders--
such as transit agencies or vending machine companies--but that 
requests from the general public are rare. A Federal Reserve coin 
terminal we visited also had an inventory of $1 coins, and officials 
there told us that while they generally receive $1 coin deposits, 
withdrawals are rare. In contrast, representatives from the Dollar 
Coin Alliance said that there is limited commercial and public access 
to the $1 coin and that some alliance members have had difficulty 
obtaining the coins from depository institutions. According to these 
representatives, the Federal Reserve's treatment of $1 coins--in 
particular, a limited ordering period for new $1 coins featuring a 
specific president--has hampered successful circulation.[Footnote 56] 
However, other depository institution and industry representatives we 
met with did not identify similar access or availability issues. 

Federal Reserve Actions to Overcome Barriers to Circulation: 

Beginning in 2007, in response to a requirement in the Presidential $1 
Coin Act of 2005, the Federal Reserve took steps to identify and 
overcome barriers to circulation of the $1 coin early in the 
Presidential $1 Coin program. The Presidential $1 Coin Act requires 
Treasury and the Federal Reserve to identify, analyze, and overcome 
barriers to the "robust circulation" of $1 coins, including improved 
methods of distribution and circulation, and improved public education 
and awareness campaigns.[Footnote 57] Beginning in 2007, the Federal 
Reserve met regularly with depository institution representatives to 
gather feedback about demand for $1 coins and identify potential 
barriers to circulation. In its 2007 Annual Report to Congress on the 
Presidential $1 Coin Program--a statutorily required annual report--
the Federal Reserve outlined actions it had taken to eliminate 
identified barriers, including developing $1 coin distribution plans, 
establishing a special ordering period for new coins along with 
special packaging and order sizes, and communications with industry 
and other federal agencies.[Footnote 58] In addition, the Federal 
Reserve and U.S. Mint conducted national and local outreach with coin 
user groups to gather input and help plan for the introduction of the 
new coins. According to Federal Reserve officials, most efforts began 
in 2007 and continued until the 2011 Treasury decision to cease 
production of the $1 coin for circulation. 

While the Federal Reserve took steps to overcome barriers to the 
circulation of the $1 coin to meet existing demand, according to 
Federal Reserve officials, it can do little else given the $1 coin is 
no longer produced for circulation and the agency's statutory 
responsibilities focus on ensuring $1 coins are available to meet 
demand, not on taking steps to change demand. The Federal Reserve's 
2007 Annual Report to Congress reported that the U.S. Mint and 
stakeholder feedback identified the co-circulation of the $1 coin with 
the $1 note as the most significant barrier to improved circulation of 
the $1 coin. In addition, many depository institutions, coin terminal 
operators, experts, and foreign officials we met with identified the 
$1 note as a barrier to the increased circulation of the $1 coin and 
mentioned that eliminating the $1 note would increase demand for the 
$1 coin. However, neither the 2007 Annual Report nor subsequent annual 
reports identified the $1 note as a barrier to the $1 coin. According 
to Federal Reserve Legal Division's attorneys, they do not consider 
the $1 note to be a barrier because they do not view co-circulation as 
limiting the circulation of the $1 coin. Rather, Federal Reserve 
officials noted the $1 note is an alternative to the $1 coin that the 
public freely chooses--that is, their view is that the $1 coin is 
fully available to the public and its circulation is thus at the level 
that the public demands. According to Federal Reserve officials, the 
Federal Reserve's authority does not extend to promotion, and 
therefore the agency is not likely to take unilateral action to 
promote wider circulation of the $1 coin. If this is the case, 
congressional actions would likely be the only feasible action that 
could replace the $1 note with the $1 coin. 

Consistent with the actions of other countries, we have previously 
recommended that the Congress replace the $1 note with a $1 coin due 
to the financial benefit the government would receive from the 
replacement. As we found in our prior work, other countries that have 
replaced a low-denomination note with a coin, such as Canada and the 
United Kingdom, stopped producing the note.[Footnote 59] Officials in 
these countries noted this step was essential to the success of their 
transition to the coin and that, with no alternative to the note, 
public resistance dissipated within a few years. Australian and 
Canadian Mint officials also explained that they took steps in advance 
of the issuance of their $1 coins to facilitate public adoption. For 
example, Royal Canadian Mint officials said that public outreach, 
stakeholder collaboration, and removing the $1 note from circulation 
were key elements of a successful transition to the $1 coin in Canada. 

In its 2011 Annual Report to Congress, the Federal Reserve stated that 
stakeholders and depository institution representatives reported 
through their routine meetings that the $1 coins continue to be easy 
to order and that its communications about the program have been 
effective, but that transactional demand for $1 coins has not 
increased since the start of the program and overall demand continues 
to come primarily from collectors. Federal Reserve officials told us 
they continue to discuss the $1 coin as necessary with groups such as 
the Customer Advisory Council, but that they do not intend to take any 
additional actions. The Board believes the suspension of the minting 
of the Presidential $1 coin for circulation makes the annual report no 
longer necessary and, in its 2012 Annual Report to Congress, proposed 
the elimination of the annual reporting requirement. 

Conclusions: 

Since 2009, on behalf of the Reserve Banks, the Federal Reserve has 
taken steps to standardize its management of the circulating coin 
inventory from a national perspective. Generally, these efforts have 
contributed to improvements, such as reductions in national coin 
inventories and orders, and stakeholder satisfaction with the Federal 
Reserve's new approach. The Federal Reserve's current strategic plan 
calls for the efficient and effective use of financial resources that 
could lead to more efficient operations and potentially cost savings. 
However, some issues remain. 

* Reserve Bank coin management costs have risen since 2008 and CPO has 
not taken steps to systematically assess factors influencing direct 
and support costs related to coin management and assess whether 
opportunities exist to isolate elements of their coin inventory 
management that could lead to cost savings across the Reserve Banks. 

* Interrelated key practices related to the Federal Reserve's 
management of the circulating coin inventory indicate opportunities to 
advance the use of performance information to establish and monitor 
additional performance goals and metrics and to improve processes for 
forecasting demand. For example, establishing goals and metrics and 
tracking progress toward those two will allow the Federal Reserve to 
better ensure that multiple aspects of its coin management activities 
are being monitored and will help agency officials identify and 
document other program impacts or to determine where additional 
efficiencies could be gained. 

* Taking steps to assess monthly forecasts to improve accuracy can 
also lead to overall improvements in the coin supply chain. Developing 
and tracking performance information and assessing forecasts--key 
practices used by private and governmental organizations to 
effectively manage their inventories--could ultimately help identify 
cost savings for Reserve Banks or improve the efficiency of U.S. Mint 
coin production, which may in turn result in more money returned to 
the General Fund, contributing to U.S. taxpayer savings. 

Recommendations for Executive Action: 

To ensure efficient management of the circulating coin inventory, we 
recommend that the Board of Governors direct CPO to take the following 
three actions: 

* develop a process to assess the factors that have influenced 
increasing coin operations costs and differences in costs across 
Reserve Banks and a process to use this information to identify 
practices that could lead to cost-savings; 

* establish, document, and annually report to the Board performance 
goals and metrics for managing the circulating coin inventory, (e.g., 
Reserve Bank coin management costs) and measure performance towards 
those goals and metrics; and: 

* establish and implement a process to assess the accuracy of 
forecasts for new coin orders and revise the forecasts as needed. 

Agency Comments: 

We provided a draft of this report to the Chairman of the Board of 
Governors of the Federal Reserve System and the Secretary of the 
Treasury for review and comment. In written comments, reproduced in 
appendix IV, the Federal Reserve generally agreed with the report's 
recommendations. Treasury had no comments. 

We are sending copies of this report to the appropriate congressional 
committees and the Federal Reserve, U.S. Mint, and BEP. In addition, 
the report is available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-2834 or stjamesl@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix V. 

Signed by: 

Lorelei St. James: 
Director, Physical Infrastructure: 

List of Requesters: 

The Honorable John B. T. Campbell, III: 
Chairman: 
Subcommittee on Monetary Policy and Trade: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Spencer Bachus: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Steve Stivers: 
Committee on Financial Services: 
House of Representatives: 

The Honorable David Schweikert: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report addresses the following questions: (1) How does the 
Federal Reserve manage the circulating coin inventory and what are the 
coin management costs? (2) To what extent does the Federal Reserve 
follow key supply-chain management practices in managing the 
circulating coin inventory? (3) What actions has the Federal Reserve 
taken to respond to potential changes in demand for coins and notes? 
(4) What actions has the Federal Reserve taken with regard to the 
circulation of the $1 coin, and what more, if anything, could it do? 

To address these questions we met with federal agency officials, 
foreign officials, industry and academic experts, and currency 
industry representatives. (See table 2.) We selected industry and 
academic experts with supply-chain or coin-inventory management 
expertise. We selected Australia, Austria, and Canada as countries 
with experiences relevant to our review--such as replacing low 
denomination notes with coins, or recent implementation of coin-
inventory management process improvements. These countries were 
selected for illustrative purposes and are not intended to be used as 
benchmarks for direct comparisons to the Federal Reserve's management 
of the circulating coin inventory. We obtained documents from and 
conducted interviews with Federal Reserve officials to obtain 
information about the agency's processes for managing the distribution 
of the circulating coin inventory. We also visited a Federal Reserve 
coin terminal in White Marsh, Maryland. In addition, we reviewed 
literature and our prior reports related to coin inventory management. 

Table 2: Organizations and Individuals Interviewed: 

Federal agencies: 
Bureau of Engraving and Printing; 
Federal Reserve Banks' Cash Advisory Group; 
Federal Reserve Board; 
Federal Reserve Cash Product Office; 
Federal Reserve Retail Payments Office; 
United States Mint. 

Foreign officials: 
Department of Finance Canada; 
Oesterreichische Nationalbank; 
Royal Australian Mint; 
Royal Canadian Mint. 

Industry and academic experts: 
APICS; 
Dr. Dean Croushore, University of Richmond; 
Dr. Neil Geismar and Dr. Chelliah Sriskandarajah, Texas A&M University. 

Industry representatives: 
American Bankers Association; 
Coinstar; 
Customer Advisory Council; 
Dollar Coin Alliance; 
Independent Armored Car Operators Association; 
Independent Community Bankers of America; 
National Armored Car Association (Brink's, Dunbar Armored, Loomis); 
National Automated Merchandising Association. 

Source: GAO. 

[End of table] 

To review the Federal Reserve's management of the circulating coin 
inventory and identify costs associated with managing this inventory, 
we interviewed Federal Reserve, United States Mint (U.S. Mint) 
officials, and industry representatives--such as National Armored Car 
Association members and depository institution representatives on the 
Cash Product Office's (CPO) Customer Advisory Council (a group 
established to provide input on coin and note operations). To assess 
management operations related to the circulating coin inventory, we 
used the Federal Reserve's Strategic Framework 2012-2015 and the 
Committee of Sponsoring Organizations of the Treadway Commission's 
(COSO) Internal Control--Integrated Framework.[Footnote 60] We also 
obtained and analyzed coin inventory and production data for 2004 
through 2012 from the Federal Reserve, U.S. Mint production data from 
2010 through March 2013, and Reserve Bank coin and note management 
cost data from 2008 through 2012. For example, we reviewed Federal 
Reserve data for monthly coin forecasts, annual coin inventory levels, 
analyzed data on monthly coin orders and shipments for bias, and 
compared the overall and individual Reserve Bank costs related to coin 
and note operations. 

To assess the extent to which the Federal Reserve follows key supply-
chain and inventory-management practices, we developed and validated 
criteria with stakeholder and expert input. To develop and define 
practices common to efficient supply chain and inventory management 
and applicable to the circulating coin inventory in the United States, 
we reviewed supply chain management and operations management 
literature on leading practices, our past defense inventory management 
and Government Performance and Results Act reports, and academic 
literature.[Footnote 61] We also worked with industry experts to 
identify a selection of supply-chain management practices relevant to 
coin inventory management. We identified five key practices: 
collaboration, risk management, performance metrics, forecasting 
demand, and system optimization. For additional information on these 
key practices, see appendix III. The supporting characteristics 
associated with the key practices were selected based on knowledge of 
circulating coin management. Selected academic and industry experts in 
operations and supply chain management and the circulating coin 
inventory as well as foreign mint or central bank officials from 
Australia, Austria, and Canada validated that the selected key 
practices, definitions, and supporting characteristics were relevant 
to coin inventory management. 

We compared the Federal Reserve's inventory management practices to 
the five key practices by assessing the extent to which the Federal 
Reserve met individual supporting characteristics for each practice. 
The individual assessments for the supporting characteristics served 
as the basis for the overall assessment for each key practice. 
Specifically, after we assessed the selected supporting 
characteristics, we made an overall assessment for each of the five 
practices using the following scale: 

* Followed or substantially followed--plans, policies, or processes 
have been developed and implemented properly for all or nearly all of 
the supporting characteristics. 

* Partially followed--plans, policies, or processes have been 
developed and implemented properly for some of the supporting 
characteristics. 

* Minimally or not followed--plans, policies, or processes are lacking 
for all or nearly all of the supporting characteristics. 

To determine the extent to which the Federal Reserve followed these 
key practices and supporting characteristics, we reviewed agency 
documents and interviewed officials from the Federal Reserve and U.S. 
Mint. We also met with industry stakeholders (e.g., depository 
institution representatives and coin terminal operators) and academic 
and industry experts to discuss their views on the Federal Reserve's 
management of the circulating coin inventory and working relationships 
with other entities in the circulating coin supply chain. 

To identify actions the Federal Reserve has taken to respond to 
potential changes in demand for coins and notes, we interviewed 
officials from the Federal Reserve, U.S. Mint, and Bureau of Engraving 
and Printing (BEP). We also interviewed depository institution 
representatives on the Customer Advisory Council, academic experts and 
industry representatives including coin terminal operators and 
Coinstar. We also interviewed government officials in Australia, 
Austria, and Canada to obtain their perspectives on potential changes 
in future cash demand. In addition, we reviewed Federal Reserve 
research and analysis pertaining to electronic and other payment 
methods including reports and documentation related to the CPO's long-
term strategic framework and the Retail Payment's Office triennial 
payments studies from 2007 and 2010. We also interviewed Federal 
Reserve officials who have worked on these studies and obtained 
information about additional research efforts underway related to 
examining and preparing for changes in future demand for coins, notes, 
and other payment methods. 

To identify actions taken by the Federal Reserve regarding the 
circulation of the $1 coin, we obtained perspectives on the 
availability and use of $1 coins from Federal Reserve and Reserve Bank 
officials. We also met with industry stakeholders and coin user 
groups--including depository institution representatives, the National 
Automated Merchandising Association, the Dollar Coin Alliance, 
Coinstar, and selected industry experts. We reviewed Federal Reserve 
and U.S. Mint responsibilities related to the circulation of the $1 
coin, including those outlined in the Presidential $1 Coin Act of 2005 
and Native American $1 Coin Act. To identify actions taken to 
identify, analyze, and overcome barriers to the circulation of the $1 
coin, we reviewed the Federal Reserve's Annual Reports to Congress on 
the Presidential $1 Coin Program for 2007 through 2013 and interviewed 
Federal Reserve officials. In addition, we interviewed selected 
foreign government officials from Australia, Austria, and Canada to 
identify examples of actions taken to promote low denomination coins 
and to enhance the circulation of these coins in other countries. We 
also analyzed Federal Reserve data on $1 coin inventories, U.S. Mint 
orders, payments, and receipts from 2007 through 2012. 

We assessed the reliability of data used in this report by (1) 
performing electronic testing of required data elements, (2) reviewing 
existing information about the data and the system that produced them, 
and (3) interviewing agency officials knowledgeable about the data. We 
determined that the data were sufficiently reliable for the purpose of 
this report. 

We conducted this performance audit from March 2013 through October 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Data and Figures on Coin and Note Inventory, Orders, and 
Circulation: 

Reserve Bank Coin Inventory and Inventory Targets: 

In 2009, the Federal Reserve's Cash Product Office (CPO) established 
national upper and lower inventory targets for pennies, nickels, 
dimes, and quarters to track and measure the coin inventory. National 
upper and lower inventory targets are reviewed and updated annually. 
In 2013, the upper national inventory targets were set based on the 
average peak Reserve Bank coin inventory from 2009 to 2012, and the 
lower national targets were set based on the 10 consecutive days from 
2009 to 2012 with the most coin payments to depository institutions. 
Figures 9 through 12 present the Reserve Bank inventories of quarters, 
dimes, nickels and pennies from 2009 through 2012 and upper and lower 
national inventory targets from 2009 through 2013.[Footnote 62] 

Figure 9: Reserve Bank Inventories of Quarters, 2009-2012, and 
National Inventory Targets, 2009-2013: 

[Refer to PDF for image: multiple line graph] 

Inventory target range is between upper and lower inventory targets. 

Year: 2009; 
Inventory: $944.5 million; 
Upper Inventory Target: $371.6 million; 
Lower Inventory Target: $247.7 million. 

Year: 2010; 
Inventory: $811.4 million; 
Upper Inventory Target: $148.6 million; 
Lower Inventory Target: $89.1 million. 

Year: 2011; 
Inventory: $659.7 million; 
Upper Inventory Target: $600 million; 
Lower Inventory Target: $225.2 million. 

Year: 2012; 
Inventory: $456.6 million; 
Upper Inventory Target: $600 million; 
Lower Inventory Target: $225.2 million. 

Year: 2013; 
Upper Inventory Target: $600 million; 
Lower Inventory Target: $203 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 10: Reserve Bank Inventory of Dimes, 2009-2012, and National 
Inventory Targets, 2009-2013: 

[Refer to PDF for image: multiple line graph] 

Inventory target range is between upper and lower inventory targets. 

Year: 2009; 
Inventory: $79.2 million; 
Upper Inventory Target: $93.9 million; 
Lower Inventory Target: $62.6 million. 

Year: 2010; 
Inventory: $82.6 million; 
Upper Inventory Target: $74.1 million; 
Lower Inventory Target: $44.5 million. 

Year: 2011; 
Inventory: $82.6 million; 
Upper Inventory Target: $93.6 million; 
Lower Inventory Target: $58.3 million. 

Year: 2012; 
Inventory: $80.7 million; 
Upper Inventory Target: $93.6 million; 
Lower Inventory Target: $58.3 million. 

Year: 2013; 
Upper Inventory Target: $94 million; 
Lower Inventory Target: $55 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 11: Reserve Bank Inventory of Nickels, 2009-2012, and National 
Inventory Targets, 2009-2013: 

[Refer to PDF for image: multiple line graph] 

Inventory target range is between upper and lower inventory targets. 

Year: 2009; 
Inventory: $31.8 million; 
Upper Inventory Target: $30.0 million; 
Lower Inventory Target: $20.0 million. 

Year: 2010; 
Inventory: $25.3 million; 
Upper Inventory Target: $22.2 million; 
Lower Inventory Target: $13.3 million. 

Year: 2011; 
Inventory: $26.5 million; 
Upper Inventory Target: $33.5 million; 
Lower Inventory Target: $18.0 million. 

Year: 2012; 
Inventory: $25.8 million; 
Upper Inventory Target: $33.5 million; 
Lower Inventory Target: $18.0 million. 

Year: 2013; 
Upper Inventory Target: $34 million; 
Lower Inventory Target: $18 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 12: Reserve Bank Inventory of Pennies, 2009-2012, and National 
Inventory Targets, 2009-2013: 

[Refer to PDF for image: multiple line graph] 

[Refer to PDF for image: multiple line graph] 

Inventory target range is between upper and lower inventory targets. 

Year: 2009; 
Inventory: $23.9 million; 
Upper Inventory Target: $28.4 million; 
Lower Inventory Target: $18.9 million. 

Year: 2010; 
Inventory: $23.4 million; 
Upper Inventory Target: $23.6 million; 
Lower Inventory Target: $14.2 million. 

Year: 2011; 
Inventory: $20.5 million; 
Upper Inventory Target: $27.7 million; 
Lower Inventory Target: $17.8 million. 

Year: 2012; 
Inventory: $16.5 million; 
Upper Inventory Target: $27.7 million; 
Lower Inventory Target: $17.8 million. 

Year: 2013; 
Upper Inventory Target: $28 million; 
Lower Inventory Target: $16 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Monthly Payments and Receipts for All Denominations: 

Coin receipts from depository institutions and Reserve Bank payments 
to depository institutions fluctuate throughout the year--reflecting 
changes in the public's spending patterns. (See figure 13.) For 
example, in December 2012, the Federal Reserve paid about $479 million 
in coins to depository institutions (payments) and received about $452 
million in coins from the depository institutions (receipts); this 
difference between payments and receipts is also referred to as net 
pay. 

Figure 13: Monthly Reserve Bank Payments to and Receipts from 
Depository Institutions for All Denominations, March 2009-March 2013: 

[Refer to PDF for image: multiple line graph] 

2009: 

Month: March; 
Total payments to circulation: $550.9 million; 
Total receipts from circulation: $501.6 million. 

Month: April; 
Total payments to circulation: $544.1 million; 
Total receipts from circulation: $530.9 million. 

Month: May; 
Total payments to circulation: $618.3 million; 
Total receipts from circulation: $479.8 million. 

Month: June; 
Total payments to circulation: $561.2 million; 
Total receipts from circulation: $529.9 million. 

Month: July; 
Total payments to circulation: $542.0 million; 
Total receipts from circulation: $603.6 million. 

Month: August; 
Total payments to circulation: $573.0 million; 
Total receipts from circulation: $546.4 million. 

Month: September; 
Total payments to circulation: $494.9 million; 
Total receipts from circulation: $533.7 million. 

Month: October; 
Total payments to circulation: $497.6 million; 
Total receipts from circulation: $535.2 million. 

Month: November; 
Total payments to circulation: $567.8 million; 
Total receipts from circulation: $480.3 million. 

Month: December; 
Total payments to circulation: $542.6 million; 
Total receipts from circulation: $562.0 million. 

2010: 

Month: January; 
Total payments to circulation: $400.5 million; 
Total receipts from circulation: $521.8 million. 

Month: February; 
Total payments to circulation: $498.1 million; 
Total receipts from circulation: $412.0 million. 

Month: March; 
Total payments to circulation: $615.1 million; 
Total receipts from circulation: $504.0 million. 

Month: April; 
Total payments to circulation: $562.9 million; 
Total receipts from circulation: $497.5 million. 

Month: May; 
Total payments to circulation: $589.7 million; 
Total receipts from circulation: $450.9 million. 

Month: June; 
Total payments to circulation: $579.3 million; 
Total receipts from circulation: $516.6 million. 

Month: July; 
Total payments to circulation: $530.5 million; 
Total receipts from circulation: $531.1 million. 

Month: August; 
Total payments to circulation: $575.9 million; 
Total receipts from circulation: $544.0 million. 

Month: September; 
Total payments to circulation: $511.1 million; 
Total receipts from circulation: $517.9 million. 

Month: October; 
Total payments to circulation: $517.4 million; 
Total receipts from circulation: $486.6 million. 

Month: November; 
Total payments to circulation: $598.8 million; 
Total receipts from circulation: $466.9 million. 

Month: December; 
Total payments to circulation: $507.3 million; 
Total receipts from circulation: $571.5 million. 

2011: 

Month: January; 
Total payments to circulation: $404.4 million; 
Total receipts from circulation: $470.0 million. 

Month: February; 
Total payments to circulation: $507.4 million; 
Total receipts from circulation: $420.5 million. 

Month: March; 
Total payments to circulation: $598.9 million; 
Total receipts from circulation: $488.8 million. 

Month: April; 
Total payments to circulation: $554.2 million; 
Total receipts from circulation: $463.2 million. 

Month: May; 
Total payments to circulation: $604.8 million; 
Total receipts from circulation: $462.0 million. 

Month: June; 
Total payments to circulation: $570.1 million; 
Total receipts from circulation: $533.4 million. 

Month: July; 
Total payments to circulation: $500.1 million; 
Total receipts from circulation: $500.6 million. 

Month: August; 
Total payments to circulation: $610.7 million; 
Total receipts from circulation: $560.7 million. 

Month: September; 
Total payments to circulation: $503.6 million; 
Total receipts from circulation: $533.6 million. 

Month: October; 
Total payments to circulation: $532.2 million; 
Total receipts from circulation: $477.1 million. 

Month: November; 
Total payments to circulation: $610.2 million; 
Total receipts from circulation: $479.5 million. 

Month: December; 
Total payments to circulation: $493.1 million; 
Total receipts from circulation: $540.4 million. 

2012: 

Month: January; 
Total payments to circulation: $425.7 million; 
Total receipts from circulation: $542.2 million. 

Month: February; 
Total payments to circulation: $516.5 million; 
Total receipts from circulation: $453.8 million. 

Month: March; 
Total payments to circulation: $585.3 million; 
Total receipts from circulation: $468.1 million. 

Month: April; 
Total payments to circulation: $559.7 million; 
Total receipts from circulation: $442.8 million. 

Month: May; 
Total payments to circulation: $616.4 million; 
Total receipts from circulation: $484.7 million. 

Month: June; 
Total payments to circulation: $544.6 million; 
Total receipts from circulation: $477.6 million. 

Month: July; 
Total payments to circulation: $539.1 million; 
Total receipts from circulation: $492.5 million. 

Month: August; 
Total payments to circulation: $556.2 million; 
Total receipts from circulation: $544.0 million. 

Month: September; 
Total payments to circulation: $429.0 million; 
Total receipts from circulation: $444.4 million. 

Month: October; 
Total payments to circulation: $530.8 million; 
Total receipts from circulation: $470.4 million. 

Month: November; 
Total payments to circulation: $534.0 million; 
Total receipts from circulation: $437.7 million. 

Month: December; 
Total payments to circulation: $479.2 million; 
Total receipts from circulation: $451.6 million. 

2013: 

Month: January; 
Total payments to circulation: $444.3 million; 
Total receipts from circulation: $513.8 million. 

Month: February; 
Total payments to circulation: $460.3 million; 
Total receipts from circulation: $413.5 million. 

Month: March; 
Total payments to circulation: $548.9 million; 
Total receipts from circulation: $420.1 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Annual Net Pay, New Coin Orders, and Inventories for Quarters, Dimes, 
Nickels, and Pennies: 

Net pay is the difference between coins paid to depository 
institutions and coins received from depository institutions over a 
given period of time. Net pay greater than zero (positive) indicates 
that the Federal Reserve paid more coins to depository institutions 
than it received from depository institutions during that period 
(e.g., month or year). In addition, positive net pay indicates that 
additional coins--coins transferred from areas with negative net pay 
or new coins--are needed to meet demand. CPO uses national data on net 
pay, inventory, and expected changes to demand to make inventory 
management decisions such as where to transfer coin within and between 
Reserve Bank districts. When coin payments to depository institutions 
are greater than coin receipts from depository institutions, CPO 
orders new coins or uses circulated inventory to meet demand. Figures 
14 through 17 present annual data for net pay, inventory, and new coin 
orders for quarters, dimes, nickels, and pennies from 2009 through 
2012.[Footnote 63] 

Figure 14: Reserve Bank Quarter Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2009; 
Inventory: $944.5 million; 
Net pay: $13.2 million; 
New Coin Orders: $128 million. 

Year: 2010; 
Inventory: $811.4 million; 
Net pay: $193.6 million; 
New Coin Orders: $49.1 million. 

Year: 2011; 
Inventory: $659.7 million; 
Net pay: $248.1 million; 
New Coin Orders: $86.9 million. 

Year: 2012; 
Inventory: $456.6 million; 
Net pay: $331 million; 
New Coin Orders: $131.2 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 15: Reserve Bank Dime Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2009; 
Inventory: $79.2 million; 
Net pay: $54.0 million; 
New Coin Orders: $10.6 million. 

Year: 2010; 
Inventory: $69.9 million; 
Net pay: $18.6 million; 
New Coin Orders: $121.3 million. 

Year: 2011; 
Inventory: $50.2 million; 
Net pay: $61.8 million; 
New Coin Orders: $142.2 million. 

Year: 2012; 
Inventory: $80.5 million; 
Net pay: $8.0 million; 
New Coin Orders: $168.9 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 16: Reserve Bank Nickel Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2009; 
Inventory: $31.8 million; 
Net pay: $8.8 million; 
New Coin Orders: $4.1 million. 

Year: 2010; 
Inventory: $25.3 million; 
Net pay: $34.5 million; 
New Coin Orders: $26.9 million. 

Year: 2011; 
Inventory: $26.5 million; 
Net pay: $45.5 million; 
New Coin Orders: $446.6 million. 

Year: 2012; 
Inventory: $25.8 million; 
Net pay: $51.6 million; 
New Coin Orders: $50.1 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 17: Reserve Bank Penny Inventories, Net Pay, and New Coin 
Orders, 2009-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2009; 
Inventory: $23.9 million; 
Net pay: $27.5 million; 
New Coin Orders: $27.5 million. 

Year: 2010; 
Inventory: $23.4 million; 
Net pay: $39.1 million; 
New Coin Orders: $38.2 million. 

Year: 2011; 
Inventory: $20.5 million; 
Net pay: $49.8 million; 
New Coin Orders: $46.7 million. 

Year: 2012; 
Inventory: $16.5 million; 
Net pay: $64.1 million; 
New Coin Orders: $59.6 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Reserve Bank Costs Related to Coin: 

To manage the circulating coin inventory, Reserve Banks incur coin 
management costs and interbank transfer costs. The Reserve Banks' coin 
management costs include direct costs and support costs. (See figure 
18.) Direct costs are generally personnel costs such as salaries and 
benefits and support costs include utilities, protection, facilities, 
information technology, and other local and national support 
functions. From 2009 through 2012, direct costs represented about 30 
percent and support costs represented about 70 percent of total coin 
management costs. Interbank transfers are shipments of coins from one 
Reserve Bank office region to another to ensure demand is met. (See 
figure 19.) 

Figure 18: Total Reserve Bank Coin Management Costs, 2009-2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2009; 
Direct Costs: $13.5 million; 
Support Costs: $30.3 million. 

Year: 2010; 
Direct Costs: $15.6 million; 
Support Costs: $37.9 million. 

Year: 2011; 
Direct Costs: $15.7 million; 
Support Costs: $40.6 million. 

Year: 2012; 
Direct Costs: $16.2 million; 
Support Costs: $44.1 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Figure 19: Number and Cost of Interbank Coin Shipments, 2009-2012: 

[Refer to PDF for image: combined vertical bar and line graph] 

Year: 2009; 
Number of shipments: 710; 
Cost of shipments: $1.58 million. 

Year: 2010; 
Number of shipments: 717; 
Cost of shipments: $1.61 million. 

Year: 2011; 
Number of shipments: 591; 
Cost of shipments: $1.36 million. 

Year: 2012; 
Number of shipments: 601; 
Cost of shipments: $1.34 million. 

Source: GAO analysis of Federal Reserve data. 

[End of figure] 

Notes in Circulation: 

From 2009 through 2012, the value of notes in circulation has 
increased by 27 percent from about $888 billion in 2009 to over $1,127 
billion in 2012. (See figure 20.) 

Figure 20: Value of Notes in Circulation, 2009-2012: 

[Refer to PDF for image: line graph] 

Year: 2009: $888.3 billion. 

Year: 2010: $942.0 billion. 

Year: 2011: $1.035 trillion. 

Year: 2012: $1.127 trillion. 

Source: GAO analysis of Treasury data. 

Note: This represents the total face value of notes used as a medium 
of exchange that are in circulation. It includes some old and current 
notes that no longer circulate. 

[End of figure] 

[End of section] 

Appendix III: Discussion of Key Practices for Managing the Coin 
Inventory: 

To effectively manage their inventory, private and governmental 
organizations involved in production and distribution operations use 
supply-chain and inventory-management practices. To assess the Federal 
Reserve's management of the circulating coin inventory we identified 
five key supply-chain management practices: collaboration, risk 
management, performance metrics, forecasting demand, and system 
optimization. Establishing, documenting, and following these practices 
and their supporting characteristics contributes to a more effective 
inventory management system. In addition, these supply-chain 
management practices are interrelated--as activities in one area may 
have implications in another--and can be used to achieve efficiency 
improvements and cost savings. For example, collaborative working 
relationships can improve risk management practices because 
information related to disruptions and actions to minimize or mitigate 
disruptions are more easily shared across the system. 

To assess elements of the five key supply-chain management practices, 
we selected 14 supporting characteristics based on their relevance to 
coin inventory management. Based on our review, we determined whether 
the Federal Reserve's management of the circulating coin inventory 
followed or substantially followed, partially followed, or minimally 
or not followed each supporting characteristic. Our assessment of the 
characteristics served as the basis for our overall assessment as to 
whether each key practice was followed or substantially followed, 
partially followed, or minimally or not followed. For example, if we 
found supporting evidence that two of the three characteristics of a 
practice were substantially followed but no evidence to support that 
the third characteristic was followed we would determine that the key 
practice was partially followed. 

Table 3: Collaboration and Supporting Characteristics: 

Key practice: Collaboration; 
Collaboration is based on maintaining working relationships with 
partner entities across the supply chain by establishing policies, 
roles and responsibilities, and mechanisms for sharing information. 
Collaboration can be broadly defined as any joint activity that is 
intended to produce more public value than could be produced when the 
organizations act alone. GAO best practices for collaborative working 
relationships include, among other characteristics, agreeing on agency 
roles and responsibilities; establishing compatible policies, 
procedures, and other means to operate across agency boundaries; and 
developing mechanisms to monitor, evaluate and report results of 
collaborative efforts. In addition, according to APICS, building 
strategic partnerships is an effective way to reduce costs and improve 
service in the supply chain; 
Overall assessment: Key practice followed or substantially followed. 

Characteristics and coin inventory management examples: 

Characteristic: Develop and use policies or guidelines governing 
relationships with partner entities; 
Example: The Federal Reserve's Cash Product Office (CPO), on behalf of 
Reserve Banks, negotiated a contract with coin terminal operators. The 
contract includes a coin terminal manual of operations, which 
standardized procedures and internal controls for the coin terminals' 
storage and handling of Reserve Bank coin across the 12 Reserve Bank 
districts; 
Assessment of characteristic: Key practice followed or substantially 
followed. 

Characteristic: Agree upon roles and responsibilities with partner 
entities; 
Example: For interbank coin transfers, the U.S. Mint arranges 
transportation of coins across Reserve Banks; CPO reimburses the U.S. 
Mint for the costs of this transportation; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Develop and use mechanisms for sharing information 
related to the circulating coin inventory with partner entities; 
Example: FedLine, an online tool created for Reserve Bank customers 
(depository institutions) to access payment services, also provides a 
communication link between CPO, Reserve Bank offices, coin terminals, 
and depository institutions; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Key practice followed or substantially followed--plans, policies, or 
processes have been developed and implemented properly for; all or 
nearly all characteristics. 

Source: GAO analysis of Federal Reserve information. 

[End of table] 

Table 4: Risk Management and Supporting Characteristics: 

Key practice: Risk management: 
Risk management is the planning and preparation for risks related to 
unanticipated events to help organizations respond to and maintain 
essential operations during events that could disrupt the normal flow 
of goods and materials within the supply chain. The Standard for 
Internal Control in the Federal Government and the Committee of 
Sponsoring Organizations of the Treadway Commission's (COSO) Internal 
Control--Integrated Framework require agencies to assess external and 
internal risks because conditions continually change, and to provide 
mechanisms to identify and deal with any special risks prompted by 
such changes. In addition, APICS recommends that supply chain 
management includes the management of risks surrounding unanticipated 
events that disrupt the normal flow of goods and materials within the 
supply chain; 
Overall assessment: Key practice followed or substantially followed. 

Characteristics and coin inventory management examples: 
Characteristic: Identify sources of potential disruptions; 
Example: Federal Reserve officials identified disruptions that could 
affect regional coin supply chains (e.g., terrorist events, national 
weather disasters, or temporary events that limit transportation in 
metropolitan areas); 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Assess the potential impact of the risk; 
Example: According to CPO officials, as soon as disruption is 
anticipated, they begin planning with stakeholders operating in the 
affected area, including Reserve Bank officials, coin terminal 
operators, and depository institutions. In addition, online resources 
are available for stakeholders to refer to; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Develop and use plans to mitigate the risk; 
Example: The 12 Reserve Banks have their own continuity of operations 
plans and each has a designated "buddy bank" to perform its functions, 
including coin circulation activities, in the event of a disruption. 
CPO will coordinate risk management efforts during a disruption for 
all Federal Reserve cash offices across the country; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Key practice followed or substantially followed--plans, policies, or 
processes have been developed and implemented properly for; all or 
nearly all characteristics. 

Source: GAO analysis of Federal Reserve information. 

[End of table] 

Table 5: Performance Metrics and Supporting Characteristics: 

Key practice: Performance metrics: 
Performance metrics involve the process of establishing, tracking, and 
reevaluating goals or metrics to measure change or improvement in a 
process or performance area. Performance goals and metrics should be 
clearly defined, measurable, actionable, relevant and timely, should 
be tracked to ensure that they are being met, and reevaluated 
periodically to ensure that they remain reasonable and useful. In 
addition, while it does not apply directly to the Federal Reserve, the 
GPRA Modernization Act of 2010 (GPRAMA) aims to ensure that federal 
agencies use performance information in decision making and holds them 
accountable for achieving results and improving government 
performance. We have previously reported that agencies should identify 
goals and establish a suite of performance metrics to determine 
whether they are meeting those goals; 
Overall assessment: Key practice partially followed. 

Characteristic: Develop and use reasonable metrics that are clearly 
defined, measurable, actionable, relevant and timely; 
Example: In 2009, the Federal Reserve established upper and lower 
inventory targets for pennies, nickels, dimes, and quarters to track 
and measure the national coin inventory and inventory at each Reserve 
Bank office and coin terminal. However, CPO does not have additional 
goals and metrics to measure other aspects of its management of the 
coin inventory; 
Assessment of characteristics: Key practice partially followed. 

Characteristic: Track progress against metrics or targets; 
Example: CPO tracks national and local inventory levels to ensure that 
the national coin supply and local inventories are within inventory 
targets; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Establish a process to reevaluate metrics or targets; 
Example: CPO reevaluates the national inventory targets annually; 
however, it has not established a process for reevaluating its 
methodology for setting local inventory levels; 
Assessment of characteristics: Key practice partially followed. 

Key practice: 
Key practice followed or substantially followed--plans, policies, or 
processes have been developed and implemented properly for; all or 
nearly all characteristics. 
Key practice partially followed--plans, policies, or processes have 
been developed and implemented properly for some; characteristics. 

[End of table] 

Source: GAO analysis of Federal Reserve information. 

Table 6: Forecasting Demand and Supporting Characteristics: 

Key practice: Forecasting demand: 
Planning and forecasting for demand involves preparing for and 
estimating expected changes in future demand and planning and making 
decisions based on these estimates. Forecasts are developed in order 
to better estimate future demand and planning decisions are based on 
these forecasts to meet the expected changes in demand. According to 
APICS, forecasting is attempting to predict or project future 
statistics--typically, demand or sales. It requires that all factors 
surrounding the decision-making process are recorded. Factors that 
affect forecasting include sales demand patterns, economic conditions, 
competitor actions, market research, product mixes, and pricing and 
promotional activities. Forecasts can be made at strategic, tactical, 
and operational levels. The forecasting process predicts demand and 
the use of products and services so that the right quantities are 
ordered in advance. In forecasting, either historical demand data are 
transformed into future projections or a subjective prediction of the 
future is made--or some combination of the two; 
Overall assessment: Key practice partially followed. 

Characteristics and coin inventory management examples: Have a process 
in place to forecast demand; 
Example: Since 2009, the Federal Reserve has used a proprietary 
inventory management system to track circulating coin inventory and 
forecast future needs; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Use forecast results to plan and manage the 
circulating coin inventory; 
Example: Information from the proprietary system is used to develop 
forecasts of expected coin payments, receipts, and inventory for each 
distribution location and this information is used to determine if new 
coins should be ordered from the U.S. Mint or shipped from one 
location to another; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Assess forecast accuracy; 
Example: CPO lacks a method to assess or track forecast accuracy 
related to monthly coin orders. According to CPO officials, they 
compare the U.S. Mint's actual coin shipment to their initial coin 
order by reviewing annual data, but they have not established or 
tracked any performance measures related to the accuracy of their 
monthly forecast; 
Assessment of characteristics: Key practice minimally or not followed. 

Key practice: 
Key practice followed or substantially followed--plans, policies, or 
processes have been developed and implemented properly for; all or 
nearly all characteristics. 
Key practice partially followed--plans, policies, or processes have 
been developed and implemented properly for some; characteristics. 
Key practice minimally or not followed--plans, policies, or processes 
are lacking for all or nearly all characteristics. 

Source: GAO analysis of Federal Reserve information. 

[End of table] 

Table 7: System Optimization and Supporting Characteristics: 

Key practice: System optimization: System optimization involves 
considering, as a whole, the strategic interactions and operations of 
the entire supply chain or inventory process in developing process 
change. According to APICS, optimizing the logistics network is the 
process of achieving the most efficient network to move materials and 
products from the supplier through the manufacturing process to the 
end user. For example, to improve its inventory management, the 
Department of Defense has taken steps to collect information from all 
tiers of its supply chain and use that information to make decisions 
on movements of inventory and has developed models to inform them of 
the optimal use of its inventories; 
Overall assessment: Key practice partially followed. 

Characteristic: Obtain access to information and resources from across 
the circulating coin supply chain (e.g., knowledge of coin production 
lead-time, inventory, demand and transportation); 
Example: CPO has multiple systems that provide information from across 
the supply chain and help make decisions based on current and expected 
changes to demand and inventory. This information includes coin 
management costs and actual and forecasted coin demand. Regular 
communications with key supply-chain stakeholder representatives from 
Reserve Banks, depository institutions, coin terminals, and the U.S. 
Mint provide CPO with information such as market changes that could 
influence changes in demand and challenges that could limit the 
efficient distribution of coins; 
Assessment of characteristics: Key practice followed or substantially 
followed. 

Characteristic: Use information and resources to identify and 
implement efficiencies within the supply chain; 
Example: CPO's use of information and resources is limited thereby 
making it difficult to track progress for continued improvement or 
understand the extent to which these strategic interactions optimize 
the overall efficiency of its management of the circulating coin 
inventory. For example, the U.S. Mint's production of new coin could 
be more efficient with improvements to the accuracy of new coin 
orders. Currently, the U.S. Mint produces a safety stock, in part, to 
ensure it is able to produce enough coins to fulfill CPO's final, 
adjusted order. Therefore, more accurate forecasts and coin orders 
could lessen the need for the U.S. Mint to produce safety stock. Key 
supply chain stakeholders can also act as a resource for the CPO to 
identify efficiencies within the supply chain; 
Assessment of characteristics: Key practice minimally or not followed. 

Key practice: 
Key practice followed or substantially followed--plans, policies, or 
processes have been developed and implemented properly for; all or 
nearly all characteristics. 
Key practice partially followed--plans, policies, or processes have 
been developed and implemented properly for some; characteristics. 
Key practice minimally or not followed--plans, policies, or processes 
are lacking for all or nearly all characteristics. 

Source: GAO analysis of Federal Reserve information. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Federal Reserve: 

Board Of Governors of The Federal Reserve System: 
Louise L. Roseman: 
Director: 
Division of Reserve Bank Operations and Payment Systems: 
Washington, D.C. 20551: 
Email: Louise.Roseman@frb.gov: 
Phone: (202) 452-2789: 
Fax: (202) 452-2746: 

September 26, 2013: 

Ms. Lorelei St. James: 
Director, Physical Infrastructure: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Ms. St. James: 

Thank you for the opportunity to comment on the GAO’s draft report 
entitled “U.S. Currency: Coin Inventory Management Needs Better 
Performance Information.” As noted in the report, in recent years the 
Federal Reserve has improved its coin inventory management and its 
collaboration with supply chain stakeholders. That said, we recognize 
there are opportunities for continuous improvement. We appreciate the 
GAO’s most recent review, generally agree with the report’s 
recommendations, and have already begun working with the Reserve Banks’
 Cash Product Office to implement them. In particular, we will 
evaluate the drivers of Reserve Bank costs related to coin and assess 
practices that could lead to further cost savings. In a related 
effort, we will work with the Cash Product Office to identify 
performance metrics and targets for Reserve Bank coin operations. We 
will also evaluate opportunities to further improve the accuracy of 
our forecasts for new coin orders. 

We would be pleased to update your staff periodically regarding the 
status of these efforts. 

Sincerely, 

Signed by: 

Louise L. Roseman: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov. 

Staff Acknowledgments: 

In addition to the individual named above, Teresa Spisak, Assistant 
Director; Amy Abramowitz; Douglas Anderson; Patrick Dudley; Lawrance 
Evans, Jr.; David Hooper; Delwen Jones; Sara Ann Moessbauer; Colleen 
Moffatt Kimer; Constance Ify Onyiah; Josh Ormond; Jennifer Schwartz; 
and Maria Wallace made key contributions to this report. 

[End of section] 

Footnotes: 

[1] The total amount of coins in circulation is comprised of coins 
held by the Reserve Banks and coins in general circulation (e.g., 
coins held by businesses or the public). 

[2] For the purposes of this report, the term "Federal Reserve" refers 
to the Board of Governors of the Federal Reserve System as well as the 
Reserve Banks. 

[3] Committee of Sponsoring Organizations of the Treadway Commission, 
Internal Control--Integrated Framework (1992). COSO is a joint 
initiative of five professional associations dedicated to providing 
thought leadership through the development of frameworks and guidance 
on enterprise risk management, internal control, and fraud deterrence. 

[4] While there are many other leading supply-chain management 
practices and supporting characteristics, we selected and validated a 
sample of those most relevant to our review. In addition, academic and 
industry experts in operations and supply chain management validated 
that the selected key practices, definitions, and supporting 
characteristics were relevant to coin inventory management. 

[5] We reviewed supply-chain-management and operations-management 
leading practices, our past defense inventory management and 
Government Performance and Results Act reports, and academic 
literature to identify those practices applicable to the circulating 
coin inventory. Selected experts and foreign government officials 
reviewed and validated that the five key practices identified were 
relevant to coin inventory management. 

[6] Funds derived from assessments imposed by the Board are not to be 
considered governmental funds or appropriated monies. 12 U.S.C. § 244. 

[7] The General Fund refers to Treasury accounts that hold federal 
receipts not allocated by law for a specific purpose and includes 
money collected from taxes, customs duties, and revenues generated by 
government agencies. 

[8] The revolving fund of the U.S. Mint is financed through the U.S. 
Mint Public Enterprise Fund. The difference between the face value of 
minted circulating coins and the cost of their production, including 
the cost of metal used in the minting and the cost of transporting the 
coins to Reserve Banks for distribution to the public is referred to 
as "seigniorage." 

[9] In its 2012 Annual Report, the U.S. Mint reported an on-budget 
transfer of $77 million to the General Fund for fiscal year 2012. 
However, the U.S. Mint did not make off-budget transfers to the 
General Fund in 2012 because it determined that amounts resulting from 
the sale of circulating coins were required to mitigate the risks of 
future economic uncertainty, impacts from continued penny and nickel 
losses, and loss of revenue from the suspension of $1 coin production. 

[10] GAO, U.S. Coins: The Federal Reserve Banks Are Fulfilling Coin 
Demand, but Optimal Inventory Ranges Are Undefined, [hyperlink, 
http://www.gao.gov/products/GAO-08-401] (Washington, D.C.: Mar. 21, 
2008). 

[11] Circulating coins are available to the public (e.g., for general 
use in commerce), and are distinguished from coins produced and sold 
as collectibles. 

[12] 12 U.S.C. §§ 411 and 414. 

[13] S. 1105, the Currency Optimization, Innovation, and National 
Savings Act. 

[14] GAO, U.S. Coins: Benefits and Considerations for Replacing the $1 
Note with a $1 Coin, [hyperlink, 
http://www.gao.gov/products/GAO-13-164T] (Washington, D.C.: Nov. 29, 
2012). GAO-13-164T assumed a lower replacement ratio than past GAO 
reports assessing the impacts of replacing the $1 note. In addition, 
the life of the note has increased with new processing equipment. 

[15] In commenting on this report, Federal Reserve officials noted 
that previous GAO analyses and the associated potential savings were 
due to increased seigniorage income and not to production costs 
savings. Additionally, they noted that other societal costs and 
benefits--such as costs related to transitioning to $1 coins--were not 
included in GAO's analysis. 

[16] Pub. L. No. 109-145, § 104, 119 Stat. 2664, 2670 (2005), codified 
at 31 U.S.C. § 5112(p). 

[17] GAO, U.S. Coins: Replacing the $1 Note with a $1 Coin Would 
Provide a Financial Benefit to the Government, [hyperlink, 
http://www.gao.gov/products/GAO-11-281] (Washington, D.C.: Mar. 4, 
2011). 

[18] For more information on earlier Reserve Bank coin management 
practices see [hyperlink, http://www.gao.gov/products/GAO-08-401]. 

[19] From 2004 to 2008, Reserve Bank combined inventory for pennies, 
nickels, dimes, and quarters was on average about $700 million per 
year. Information on the inventory of $1 coins is presented later in 
this report. 

[20] The upper national inventory targets for 2013 are set based on 
the average peak Reserve Bank coin inventory from 2009 to 2010, and 
the lower national targets are set based on the 10 consecutive days 
from 2009 to 2012 when the most coin was paid to depository 
institutions. According to CPO officials, the lower target protects 
against the Federal Reserve's running out of coin during an extended 
period of time without deposits (10 days) and temporary dips below the 
lower target should not be construed as not having enough coins to 
meet demand during normal conditions. 

[21] CPO officials attributed exceeding upper inventory targets for 
quarters to the end of the 50 State Quarter Program, which increased 
Reserve Bank inventory of quarters, and to lower demand for quarters 
during the financial crisis. 

[22] CPO told us that in 2012 Reserve Banks had a sufficient supply of 
pennies to meet demand and attributed not meeting the lower targets to 
fluctuations in the payments and receipts of pennies. The lower 
inventory target for pennies was decreased by approximately 10 percent 
from 2012 to 2013. 

[23] A "payable day" is the amount of coin inventory needed to meet 
one day of expected payments to depository institutions. Some Reserve 
Bank offices provide long-term storage of excess inventory of 
quarters, half dollars, and $1 coins in addition to storing 
transactional levels of all denominations to support local demand. 

[24] In 1999 and 2000 shortages for quarters and pennies in certain 
parts of the country were reported. 

[25] Between 2009 and 2012, the average cost of an interbank transfer 
was around $2,200. Our analysis of CPO and U.S. Mint data indicated 
that there were more interbank transfers in 2009 and 2010 than in 2011 
and 2012. See figure 19 in appendix II. 

[26] On a monthly basis, the U.S. Mint produces safety stock 
equivalent to the average deviation between past CPO initial orders 
and actual shipments. In addition to helping the U.S. Mint respond to 
changes in monthly coin orders, producing safety stock also helps the 
U.S. Mint respond to seasonal changes in coin demand. 

[27] Between 2004 and 2007, more than $900 million worth of new 
pennies, nickels, dimes, and quarters were ordered each year. 
Information on orders of $1 coins is presented later in this report. 

[28] These costs are indirect costs to the government because the 
Federal Reserve and U.S. Mint incur the costs and the amounts they 
remit to the U.S. Treasury are less the costs related to coins. 

[29] In 2012 there were about 600 interbank transfers costing about 
$1.3 million. For more information on interbank transfer expenses see 
figure 19 in appendix II. 

[30] Since 2006, the costs of producing pennies and nickels have been 
above the face value of these coins. For example, in fiscal year 2012, 
the penny cost the U.S. Mint 2 cents to produce. This represents 
negative seigniorage because the face value was less than the cost of 
production for these denominations. 

[31] Federal Reserve, Strategic Framework 2012-15 (2013). 

[32] Committee of Sponsoring Organizations of the Treadway Commission, 
Internal Control--Integrated Framework (1992). 

[33] Each Reserve Bank independently manages and is responsible for 
establishing and maintaining internal controls over its financial 
reporting and recording. The Federal Reserve's cost accounting system 
allocates costs based on the percentage of time employees spend on an 
activity, and Reserve Banks may vary in their assignment of activity 
costs across locations within their districts. In addition, personnel 
allocate their time across activities such as note processing and 
destruction or coin paying, receiving, and verification, rather than 
directly charging specific time to a function such as coin management. 
According to CPO officials, the amount of time spent on an activity is 
determined through an annual employee survey that tracks the time 
employees spend on various activities. 

[34] In 2012, costs related to coins represented 11 percent of overall 
currency management costs, and currency management costs represented 
approximately 21 percent of Reserve Bank costs. From 2008 to 2012, 
Reserve Bank currency management direct costs increased by 10 percent 
and support costs increased 30 percent. In addition, from 2008 through 
2012, according to the Federal Reserve's Annual Budget Reviews, 
overall Reserve Bank operation costs increased by 49 percent from $1.7 
billion to $2.5 billion. 

[35] Between 2008 and 2012, similar to currency management costs, 
direct costs represented about 30 percent of coin management costs and 
support costs represented the remaining 70 percent. 

[36] From 2008 through 2012, across the 28 Reserve Bank locations 
personnel costs increased from about $9 million to about $13 million 
and the average number of personnel increased from about 110 to 135. 

[37] Costs related to centralized coin management--such as CPO 
operations--are distributed across the individual Reserve Banks. 

[38] Federal Reserve coins are transported and distributed in standard-
sized bags. These standard bags of loose coins (new and circulated 
coins) contain $50 in pennies, $200 in nickels, $1,000 in dimes, 
$1,000 in quarters, $1,000 in half dollars, and $2,000 in $1 coins. 

[39] According to CPO officials, two of the 28 Federal Reserve offices 
fully outsource coin services to coin terminals in their markets, and 
the other 26 Reserve Bank offices provide coin services on-site. 

[40] For additional information on these key practices and supporting 
characteristics as well as our analysis for each supporting 
characteristic, see appendix III. 

[41] The difference between payments to and receipts from depository 
institutions is referred to as "net pay" and is used by CPO to help 
determine general coin demand nationwide and at individual locations. 

[42] GPRA sought to focus federal agencies on performance by requiring 
agencies to develop long-term and annual goals--contained in strategic 
and annual performance plans--and measure and report on progress 
towards those goals on an annual basis (Pub. L. No. 103-62, 107 Stat. 
285 (Aug. 3, 1993)). The GPRA Modernization Act of 2010 (GPRAMA) 
enhances GPRA and provides important tools that can help inform 
congressional and executive branch decision making to address 
challenges the federal government faces (Pub. L. No. 111-352, 124 
Stat. 3866 (Jan. 4, 2011)). Among other things, GPRAMA requires that 
agencies establish priority goals and metrics and report on them 
quarterly. These goals include performance and efficiency improvements 
to program activities, regulations, policies, and agency management. 

[43] GAO, Managing for Results: Executive Branch Should More Fully 
Implement the GPRA Modernization Act to Address Pressing Governance 
Challenges, [hyperlink, http://www.gao.gov/products/GAO-13-518] 
(Washington, D.C.: June 26, 2013). 

[44] GAO, Managing for Results: Enhancing Agency Use of Performance 
Information for Management Decision Making, [hyperlink, 
http://www.gao.gov/products/GAO-05-927] (Washington, D.C.: Sept. 9, 
2005) and GAO, Managing for Results: A Guide for Using the GPRA 
Modernization Act to Help Inform Congressional Decision Making, 
[hyperlink, http://www.gao.gov/products/GAO-12-621SP] (Washington, 
D.C.: June 15, 2012). 

[45] In addition to producing and issuing coins, the Australian, 
Austrian, and Canadian mints are responsible for distributing coin and 
managing their circulating coin inventories. 

[46] Various methods can be used to assess forecast accuracy. Examples 
of methods commonly used in operations management include mean 
absolute deviation, absolute percent of error, and tracking signal. 
Tracking signal can be used to assess bias in a forecast by measuring 
the variation between the forecast and demand for several consecutive 
periods. 

[47] According to CPO officials, demand for coin fluctuates throughout 
the year based on seasonal changes in public demand and receipts from 
depository institutions and these fluctuations in coin demand can be 
volatile. For more information on seasonal fluctuations in coin demand 
see figure 13 in appendix II. 

[48] APICS, Principles of Operations Planning: Demand Management 
(Chicago, IL: 2013). 

[49] Logistics Management Institute, Lifecycle Forecasting 
Improvement: Causative Research and Item Introduction Phase, Report 
DL920T1 (November 2010). 

[50] Producing "safety stock" also helps the U.S. Mint respond to 
seasonal changes in coin demand. The U.S. Mint can smooth production 
throughout the year rather than ramp production up or down in response 
to seasonal increases or decreases in demand. Regarding the use of 
safety stock for meeting adjustments in monthly orders, according to 
U.S. Mint officials, the costs related to storing this stock are less 
than the alternative of hiring additional staff or paying overtime to 
produce more coins if additional production was required to meet the 
final order. Thus, the benefit of holding safety stock relates both to 
promoting level-loading production over the course of time as well as 
helping to ensure that adequate stock is on hand even if final coin 
orders exceed initial forecasted orders. 

[51] Traditionally, as the economy and population grow, the demand for 
currency also grows. However, it is difficult to know whether this 
relationship might change in the future if, as expected, financial 
transactions become increasingly conducted electronically. 

[52] Federal Reserve System, The 2010 Federal Reserve Payments Study 
(2011). This study includes the most recently available data on 
payment trends. The 2013 study will present similar data for 2009-2012 
and is expected to be complete later this year. 

[53] Due to the December 2011 Treasury decision to cease production of 
new $1 coins for circulation, the Federal Reserve's current management 
of the $1 coin inventory is focused on managing those $1 coins already 
in storage or circulation. 

[54] 12 U.S.C. § 418. 

[55] Although production of circulating Presidential $1 Coins was 
suspended in 2011, collectible versions continue to be available 
through the U.S. Mint's website. The public and collectors are able to 
directly order Presidential $1 coin rolls, bags, and boxes. 

[56] The U.S. Mint has issued $1 coins featuring Presidents in 
sequential order and every Reserve Bank office has had unmixed 
supplies of the coins available for a 6-week special ordering period 
to allow members of the public to order coins featuring a specific 
President. 

[57] 31 U.S.C. §5112(p). 

[58] 31 USC 5112(p)(3)(B). 

[59] [hyperlink, http://www.gao.gov/products/GAO-11-281]. 

[60] Committee of Sponsoring Organizations of the Treadway Commission, 
Internal Control--Integrated Framework (1992). 

[61] For example, GAO, Defense Inventory: Actions Underway to 
Implement Improvement Plan but Steps Needed to Enhance Efforts, 
[hyperlink, http://www.gao.gov/products/GAO-12-493] (Washington, D.C.: 
May 3, 2012) and Managing for Results: Executive Branch Should More 
Fully Implement the GPRA Modernization Act to Address Pressing 
Governance Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-13-518] (Washington, D.C.: June 26, 
2013). 

[62] 2012 annual Reserve Bank inventory data on quarters, dimes, 
nickels and pennies and 2013 national upper and lower inventory 
targets was the most recent available. 

[63] These figures do not include coin payments made directly to 
circulation by the U.S. Mint. Information on net pay, coin orders, and 
inventory of $1 coins is presented in the body of this report. 

[End of section] 

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