tration of the silver regulations issued under the act of July 6, 1939 (31 U.S.C. 316c), and the act of July 31, 1946 (31 U.S.C. 316d), including the purchase of newly mined domestic silver, (3) refining deposits of gold and silver (31 U.S.C. 361), and (4) manufacturing proof coins (31 U.S.C. 369), coins for foreign countries (31 U.S.C. 367), and medals of a national character as well as special medals for other Government agencies (31 U.S.C. 368).

The Bureau of the Mint consists of the Office of the Director, Washington, D.C., and six field institutions: mints in Philadelphia, Pennsylvania, Denver, Colorado, and San Francisco, California; an assay office in New York, N. Y.; and bullion depositories, one at Fort Knox, Kentucky, for the storage of gold, and another at West Point, New York, for the storage of silver. In March 1955 coining operations were suspended at the San Francisco Mint. The only activities currently carried on in San Francisco are those related to the purchase, sale, and storage of gold and silver bullion and the storage of coins.

The management of the Bureau is vested in the Director of the Mint who is appointed by the President with the consent of the Senate for a term of 5 years. An Assistant Director is appointed by the Secretary of the Treasury in accordance with civil service rules and regulations. The occupants of these positions at June 30, 1958, were:

Director: William H. Brett, appointed July 9, 1954.

Assistant Director: Leland Howard, appointed January 17, 1941.

Each mint and the New York Assay Office has a superintendent and an assayer appointed by the President with the consent of the Senate for no fixed term. On June 30, 1958, one person occupied both positions at the San Francisco Mint. An engraver at the Philadelphia Mint is appointed also by the President with the consent of the Senate for no fixed term. The affairs of the gold bullion depository at Fort Knox are administered by an officer in charge appointed by the Secretary of the Treasury. The silver bullion depository at West Point is operated as an adjunct of the New York Assay Office.

At June 30, 1958, the Bureau of the Mint had a total of 799 employees at the following locations:

Washington, D.C., Office of the Director

Philadelphia Mint

Denver Mint_

San Francisco Mint..

New York Assay Office.

West Point Depository

Fort Knox Depository.

Total.....

FINANCING COIN MANUFACTURING AND RELATED OPERATIONS

Difficulty of forecasting coin demand

50

255

218

36

191

19

30

799

The main function of the Bureau of the Mint is to manufacture coins in quantities and denominations sufficient to meet the day-to-day demands of the monetary system. For budgetary purposes, these demands and the funds necessary for the related production are estimated about 2 years in advance of the year needed. In recent years, particularly in fiscal years 1956 and 1957, estimating coin demand has been especially difficult as a result of changing business activity, and appropriation limitations have not provided sufficient flexibility to adapt production plans to unanticipated needs.

Some of the factors which recently have had a pronounced effect on coin demand are as follows:

1. General upward trend of business activity.

2. Increase in the types of retail sales subject to tax.

3. Increase in use of vending machines.

4. Increase in volume of business during Christmas and Easter shopping

seasons.

5. Increase in travel and patronage of winter and summer resorts.

The following table shows by denomination the production estimated to meet coin demand, the coins actually produced, and the coins delivered during the periods under review.

From a production planning viewpoint, limiting coinage operations to appropriations based on estimates prepared as much as 2 years in advance is undesirable. To meet urgent demands for specific denominations, overtime operations are sometimes required and this, along with more frequent production changes from one denomination to another, tends to disrupt operations.

In years when the actual demand exceeds the estimated demand, coin inventories are depleted, as in fiscal year 1956 when inventories reached unusually low levels. During the latter part of the year coins were shipped as rapidly as they were produced.

The following table shows the coin inventories at June 30 for the last 4 years.

1 Coin inventories were high at the close of fiscal year 1958 in comparison with fiscal years 1956 and 1957 because of a reduced demand. Demand later increased.

Financing operations

Operations of the Bureau of the Mint are financed through annual appropriations by the Congress, by the Bureau's authority to expend from several funds, and by revenues from reimbursable operations such as those from the sale of proof coins and medals and the manufacture of foreign coins. The Silver Profit Fund and the Minor Coinage Profit Fund, from which the Bureau is authorized to pay certain expenses, arise from seigniorage, the difference between the face value and the cost of the monetary metals in coins produced. Fees for handling, refining, and processing gold and silver bullion in connection with purchases are deposited into the Treasury as miscellaneous receipts.

Seigniorage, except that necessary to finance the Silver and Minor Coinage Profit Funds, is deposited into the general fund of the Treasury from time to time, at least twice each year (31 U.Š.C. 335 and 31 U.S.C. 340).

Seigniorage for the last 3 fiscal years is shown in the following table:

Annual appropriations are made by the Congress for the following activities: 1. Manufacturing of coins.

2. Processing deposits and issues of monetary metals and coins.

3. Protecting monetary metals and coins.

4. Refining gold and silver bullion.

5. Executive direction.

6. Equipment acquisitions.

The Bureau is permitted to manufacture coins for foreign countries, proof coins, and medals, and to deposit the revenues from the manufacture of these items to the credit of the appropriated funds. Generally, the revenues received as reimbursements for these operations are approximately equal to the related cost; however, in fiscal year 1957 revenues from proof coin sales were $881,868 in excess of the related recorded costs. These revenues contributed substantially to financing Bureau activities for that year. Beginning in fiscal year 1958, the Bureau was required to turn into the Treasury those proof coin revenues representing the excess over cost of producing such coins.

The amounts appropriated by the Congress for the years under review and the total recorded operating expenses on an accrued cost basis are summarized in the following table:

1 These amounts represent purchases from outside contractors and do not include any provision for depreciation.

Bullion fund

Purchases of gold and silver made by the Bureau are paid for by checks drawn on the Treasurer of the United States. These payments are charged to the Bullion Fund and the gold and silver purchased become assets in the accountability of the Treasurer. There is no limit on the amounts of gold and silver which can be purchased from this fund.

The following table shows the cost of the silver purchased from this fund and manufactured into subsidiary silver coins, the face value of the coins produced, and the resulting seigniorage for the periods under review.

Purchases of copper, nickel, tin, and zinc used in the production of the 1- and 5-cent coins are charged to the Minor Coinage Metal Fund. As minor coins are manufactured they are deposited with the coin inventories of the Bullion Fund. The amount of minor coinage metals on hand at any time is limited to $3,000,000 (31 U.S.C. 340).

The following table shows the cost of the metal manufactured into minor coins, the face value of the coins produced, and the resulting seigniorage for the periods under review.

Silver profit fund and minor coinage profit fund

Seigniorage arising from the coinage of silver is credited to the Silver Profit Fund to the extent necessary to pay estimated expenses from the fund. Paid out of the fund are the costs of silver lost in coining operations, the cost of alloy copper used in 10-, 25-, and 50-cent pieces, losses incurred in recoining worn silver coins, and the expenses of transporting silver coins distributed by the mints.

Seigniorage arising from the coinage of 1- and 5-cent pieces is credited to the Minor Coinage Profit Fund to the extent necessary to pay expenses from the fund. Paid out of the fund are the costs of copper, nickel, tin, and zinc lost in coinage operations, losses incurred in recoining minor coins, and the expenses of transporting minor coins distributed by the mints.

For budgetary purposes, transactions of these funds are not included in the regular Bureau activity records but are recorded and reported separately. Although expenditures from these funds are not appropriated by the Congress, they are subject to congressional review and to apportionment limitations imposed by the Bureau of the Budget.

An analysis of the activity related to the Silver Profit Fund for the periods under review is shown as follows:

An analysis of the activity related to the Minor Coinage Profit Fund for the periods under review is shown below:

Financing operations out of seigniorage and revenues Under the present method of financing coin manufacturing and processing operations, we believe that certain disadvantages exist as follows:

1. The several financing methods now in effect are subject to different types of congressional control. The Congress appropriates funds for manufacturing and other operations annually, and revenues from the sale of proof coins (to the extent of cost recoveries), foreign coins, and medals are deposited to the credit of the appropriated funds; the Bureau's estimates of expenditures from the profit funds for transportation costs and metal lost in coinage and recoinage operations are submitted annually to the Congress, but the limitation on expenditures is exercised only through apportionments by the Bureau of the Budget; and expenditures from the minor coinage metal fund are limited only to the extent that the amount of minor coinage metals on hand at any time may not exceed $3,000,000, by law. Moreover, not all of these activities of the Bureau are subject to the requirement of annual affirmative congressional action normally associated with the appropriation process.

2. The Bureau has not always been able to maintain an inventory of coins from which shipments could be made to meet fluctuating coin demands. As a result, production planning has been somewhat more complicated than necessary. 3. Expenses of alloy copper, transportation, recoinage losses, and wastages in operation are charged to the profit funds and, for budgetary purposes, are recorded and reported separately.

4. Revenues accruing from the processing of bullion are deposited into the general fund of the Treasury, but costs of this processing are paid from annual appropriations. The Bureau is required to handle all bullion presented for processing even though quantities presented deviate from estimates.

These four disadvantages could be overcome by financing all Mint operations, other than the activities of the Bullion Fund, directly out of seigniorage and revenues from reimbursable operations. As the amounts of seigniorage are far in excess of the amounts required to finance such operations, expenditures would have to be subject to certain limitations and annual reviews by the Bureau of the Budget and the Congress.

An improved method of financing these operations could be achieved through adopting a plan having the following features:

1. Require the Bureau of the Mint to estimate all obligations, expenditures, and costs in advance, except those of the Bullion Fund, for annual approval by the Congress and apportionment by the Bureau of the Budget. To achieve operating flexibility, permit the Bureau of the Mint to exceed the estimates approved by the Congress, with the prior approval of the Secretary of the Treasury and the Director, Bureau of the Budget. Require the excess, if any, to be reported to the Congress for approval at the time of the next presentation of an annual estimate. Any committees the Congress deems appropriate would have the opportunity to review and approve the estimates, to restrict or limit the extent to which these amounts may be exceeded in a future year, and to review estimated and actual costs and performance for the prior year along with explanations for any variances.