The Act also required, among other things,  that the Secretary:  consider “actors relevant to the ease of use of and ability to co- circulate of new coinage materials, including the effect on vending  machines and commercial coin processing equipment and making  certain, to the greatest extent practicable, that any new coins work  without interruption in existing coin acceptance equipment without  modification;”  “include detailed recommendations for any appropriate changes to the  metallic content of circulating coins in such a form that the  recommendations could be enacted into law as appropriate;”  “to the greatest extent possible, may not include any recommendation  for new specifications for producing a circulating coin that would  require any significant change to coin accepting and coin-handling  equipment to accommodate changes to all circulating coins  simultaneously;” and submit a biennial report to Congress “analyzing production costs for  each circulating coin, cost trends for such production, and possible  new metallic materials or technologies for the production of circulating  coins.”
The Secretary of the Treasury issued the first biennial report in December  2012 and another in December 2014. Some industries sell products or  services through the use of coin machines, such as vending and coin- operated laundry machines. The U.S. Mint’s Analysis Indicates Potential for Government Savings from Changing the Composition of Coins

		The U.S. Mint’s Analysis of Viable Metal Alternatives Shows Potential for Savings

The U.S. Mint’s analysis estimates that the government could potentially  save from about $8 million to about $39 million per year through different  changes in coin composition to the nickel, dime, and quarter. According to the U.S. Mint, this  alternative would not require any changes to coin acceptance machines  and would not affect industry. A change to steel-based coins would require the coin industry to  make modifications to current coin acceptance machines to recognize  and accept both new and existing coins, because the new coins would  have a different weight and EMS than existing coins and would also be  magnetic. When including the quarter, the U.S. Mint  had estimated that the government could save $83 million per year by  changing the quarter, nickel, and dime to multi-ply plated steel. According to U.S. Mint officials, it is viable to  change the nickel and dime to multi-ply plated steel because these coins  are lower in value and therefore do not provide a similar incentive to  counterfeiters. The U.S. Mint’s Cost- Estimating Process Does Not Fully Align with Best Practices

Although these estimates can provide an understanding of the general  magnitude of potential government savings, our analysis found that the  U.S. Mint’s cost-estimating process and resulting analyses are limited  because they did not fully align with best practices for estimating costs, as  outlined in the Cost Guide. While  U.S. Mint officials discussed a sensitivity analysis, it was not  conducted. Also, when documenting estimates, the U.S. Mint used 2014  metal prices to determine its estimates. Such a change in  metal prices impacts the U.S. Mint’s costs and therefore can  significantly impact its savings estimates. For example, a 2012 Navigant  study that was commissioned by a supplier of coin material estimated that  the U.S. government could achieve savings of up to $207.5 million per  year by changing the current coin compositions of the nickel, dime, and  quarter to multi-ply plated steel, which is the same composition used in  Canadian coins. Industry Costs Could Be Significant, but Estimates May Be Overstated

		Industry Estimates Find Significant Costs Associated with Changes in Coin Composition

The six selected industry associations that provided cost estimates to the  U.S. Mint stated that there would be significant cost impacts ranging from  $2.4 billion to $10 billion. Specifically, these published  estimates assumed that the characteristics of the quarter would  change, but U.S. Mint officials have determined that it is not viable to  produce a steel-based quarter. First, the vending association reported in its 2014 written  response to the U.S. Mint that there were about 7-million food,  beverage, and product vending machines in the United States. Coin Compositions That Increase Government Savings Also May Increase Industry Costs

Although the estimates of potential government savings and industry cost  may not be precise, the estimates provide enough information to show  that metal compositions that increase the potential government savings  may also increase the potential industry costs. As discussed previously,  the U.S. Mint has determined that it is not viable to change the quarter to  a steel-based coin. Specifically, industries that only accept the quarter— such as the coin laundry and amusement industries— would not incur any  costs if the quarter did not change. The U.S. Mint estimates that  this option could save the government from $32 million to $39 million per  year. However, U.S. Mint officials told us that if and when the Department of  the Treasury makes any recommendations to Congress, the U.S. Mint  and Treasury officials will ensure that the recommendations are within the  framework of the Act. (2)  What is known about potential industry costs from changes to the metal  composition of coins? (3) How potential coin composition options could  affect government savings and industry costs? To determine what is known about the potential government savings from  changes to the metal composition of circulating coins, we reviewed  savings estimates reported by the U.S. Mint in its December 2012 and  2014 biennial reports to Congress, which were required by the Coin  Modernization, Oversight, and Continuity Act of 2010 Act (the Act). Appendix II: Summary Assessment of the U.S. Mint’s Cost-Estimating Process Compared to Best Practices

We developed the GAO Cost Estimating and Assessment Guide in order  to establish a consistent methodology that is based on best practices and  that can be used across the federal government for developing,  managing, and evaluating program cost estimates.
Why GAO Did This Study

The U.S. Mint, a bureau of the Treasury, produced about 13 billion coins in 2014. Since 2006, metal prices have risen to where the unit costs of a penny and nickel exceed their face value. The U.S. Mint was directed by statute to develop and evaluate the use of new metals that would reduce the costs of coin production while minimizing the impact on coin accepting equipment. Treasury is authorized to recommend coin changes to Congress based on the U.S. Mint's analysis and has not yet done so. GAO was asked to examine the U.S. Mint's efforts.
This report examines (1) what is known about potential government savings from changes to the metal composition of coins; (2) what is known about potential industry costs from changes to the metal composition of coins; and (3) how potential coin composition options could affect government savings and industry costs. GAO reviewed legislative provisions and U.S. Mint estimates of government savings; compared the U.S. Mint's estimating process to best practices; and reviewed cost estimates from associations that represent selected businesses that submitted estimates to the U.S. Mint, such as the vending and laundry industries. GAO interviewed U.S. Mint officials and industry representatives to understand how their estimates were developed.
GAO is not making recommendations in this report. In comments, the U.S. Mint questioned GAO's use of the Cost Guide to assess the U.S. Mint's estimates. GAO continues to believe it is appropriate to use the Cost Guide to assess the U.S. Mint's estimates.

What GAO Found

The U.S. Mint estimated that the government could potentially save between $8 million and $39 million per year by changing the metal composition of the nickel, dime, and quarter. The estimated savings of $8 million would come from slightly changing the current metal in coins, which would decrease metal costs and retain the characteristics of existing coins. The savings of $39 million would come from changing the nickel and dime to a plated steel coin, which would change the coin's weight and other characteristics. While the U.S. Mint previously estimated potential savings of $83 million per year by changing the nickel, dime, and quarter to a plated steel-based coin, the U.S. Mint determined that it was not viable to change the quarter because less-valuable foreign coins would have similar characteristics to a steel quarter and could be used as counterfeit quarters. GAO found that the U.S. Mint's cost-estimating process does not fully align with best practices outlined in the GAO Cost Estimating and Assessment Guide ( Cost Guide ) and as such may not result in precise estimates. For example, U.S. Mint officials discussed but did not conduct a sensitivity analysis—a best practice— that would have allowed them to know how savings estimates could be affected by changes in metal prices. However, the U.S. Mint's estimates can provide insight into the general magnitude of potential savings.
Associations representing selected industries that use coin acceptance machines estimated a cost impact ranging from $2.4 billion to $10 billion to modify an estimated 22-million coin machines, such as vending machines, to accommodate steel-based coins. According to these associations, these costs would be incurred because coin machines would require modifications to accept new coins while continuing to accept current coins. However, GAO found that these estimates may be overstated for several reasons. For example, the vending industry assumed 7-million vending machines would require modification, but a 2015 industry study estimated that there are 4.5-million vending machines in the United States. Second, the cost estimates assumed steel changes to all coins, but the U.S. Mint has determined it is not viable to change the quarter. Therefore, machines that only accept quarters (such as coin laundry machines) would not require modification. However, any change in coin composition that requires changes to coin acceptance machines will result in some industry costs.
Although government savings and industry cost estimates may not be precise indicators of savings and costs, they nonetheless show that metal compositions that would increase government savings also increase industry costs. U.S. Mint estimates show that one change could result in no industry costs but show a savings of only $8 million annually. In contrast, changing the nickel and dime to multi-ply plated steel coins could save $39 million annually but result in substantial industry costs. The Coin Modernization, Oversight, and Continuity Act of 2010 requires that any new coins work in existing machines that accept coins “to the greatest extent practicable.” U.S. Mint officials have not yet analyzed whether the options they are considering meet these criteria for making recommendations to Congress. U.S. Mint officials said when and if the Department of the Treasury (Treasury) makes recommendations to Congress, they will ensure that recommendations are within the framework of the Act.