Like Scrooge McDuck counting his riches, the federal government has more coins then it knows what to do with.
But unlike the cartoon character, the surplus stocks of coins aren’t making federal officials happy. In fact, costs to manage, organize and transport all the currency rose by 70 percent between 2008 and 2012, according to a new report by the Government Accountability Office.
“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,” the GAO said.
But “unnecessary production and storage costs” are still ticking upward as the government continues to mint more coins. In fact, banks in the Federal Reserve system have stockpiles of roughly $1.4 billion in $1 coins alone, an amount officials say will likely be sufficient for 40 years.
That’s why the Federal Reserve’s handling of coins wins this week’s Golden Hammer, a distinction awarded by The Washington Times to examples of missed savings, fiscal waste or fraud with taxpayer money.
The Federal Reserve did not return calls seeking comment, but in a response to the GAO’s report, officials said they recognized “there are opportunities for continuous improvement.
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“In recent years, the Federal Reserve has improved its coin inventory management and its collaboration with supply chain stakeholders,” the agency said. “We will evaluate the drivers of Reserve Bank costs related to coin and assess practices that could lead to further cost savings.”
The amount the Federal Reserve and its system of 12 banks are spending to support the coins rose about $20 million since 2008, reaching $62 million total in 2012. It’s not costing taxpayers money — but it is forgoing potential revenue.
The Federal Reserve system is largely self-funded and supports its own operations. But at the end of the year, any extra money it earns goes back to the U.S. Treasury and into federal coffers. In 2012 the agency contributed $88.4 billion to the government’s General Fund. Any savings in coin management would therefore be passed on to taxpayers in the form of additional revenues.
But investigators said the Federal Reserve needs to maximize the supply chain.
“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,” the GAO said.
The Federal Reserve has created a “very lumpy production” process wherein banks try to request the amount of coins they will need but have little coordination on just how many coins are needed or what to do with them, said Aaron Klein, a former Treasury Department official and now part of the Dollar Coin Alliance, which advocates for the use of $1 coins.
“If the goal of this conversation is to reduce costs to taxpayers for coin production management, the Fed ought to focus time and energy on improving its own internal coordination of coin requests,” Mr. Klein said.
The potential for greater revenue by cutting coin-handling costs was called out by Sen. Tom Coburn, an Oklahoma Republican and leading advocate for reducing government waste. The senator released a summary and report card in April on the GAO’s investigations into potential budget savings and waste reduction governmentwide.
“At the end of the day, there are no shortcuts around the hard work of oversight and identifying and eliminating waste,” Dr. Coburn said in a statement. “Congress, particularly the appropriations committees, has no excuse to not achieve these savings when GAO has already done much of Congress’ work for it.”
The surplus coins sitting in Federal Reserve vaults are part of a larger battle over the $1 coin. The U.S. government has made a number of attempts to make the coins a popular replacement to the dollar bill, starting with the Sacagawea dollar, first minted in 2000.
But public demand for the coins has been cool, and the most recent attempt at dollar coins — a series featuring one for each U.S. president that was supposed to be minted until 2016 — was canceled in 2011 and is now only available to collectors.
“The demand for each of the new Presidential $1 Coins usually drops significantly soon after they are introduced,” said a 2011 article written by former Deputy Treasury Secretary Neal S. Wolin that announced the cancellation of the series. “As a result, financial institutions have ended up returning a substantial amount of the $1 coins that were initially minted — about 40 percent — to Federal Reserve Banks.”
Questions to the U.S. Mint were directed to Mr. Wolin’s article, which stated that “minting $1 coins that ultimately end up sitting in Federal Reserve Bank vaults — and serve no useful purpose for businesses, financial institutions and consumers — is simply not a prudent use of taxpayer resources.”
The GAO estimates that the government could save nearly $5 billion over the next 30 years by switching to the $1 coin, in part because they are more durable and last longer than their dollar-bill counterparts. In the meantime, the coins sitting unused in bank vaults aren’t doing taxpayers much good while the government decides what to do.
• Phillip Swarts can be reached at pswarts@washingtontimes.com.
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