Mint’s poor planning results in too much downtown office space, report says

Unused office space in the Mint's headquarters is the result of poor planning and careless management, according to a new report from the Treasury Department's inspector general.

The agency did not follow its original acquisition plan and failed to keep complete records of its business transactions when it leased two buildings in downtown Washington in the late 1990s, according to a March report by the agency's inspector general. The Mint now has 33,800 extra square feet worth an estimated $13.9 million.

"The Mint's leasing activities lacked proper planning, in-house leasing expertise, adequate documentation to show the basis for decisions made, sound internal controls, and managerial oversight," said the IG's report, "The Mint Leased Excessive Space For Its Headquarters Operation" (OIG-02-074). The 33,800 extra square feet equals the size of the first floor of one of the leased buildings, the report says. The Mint plans to sublease some of that space to a tenant and use the remainder for an agency museum.

Congress passed legislation in 1995 (Public Law 104-52) exempting the Mint from certain provisions of law and the Federal Acquisition Regulation, which oversees government procurement and public contracts. The statute also gave the Mint the authority to lease office space independently, instead of using the General Services Administration, which usually acts as the government's landlord.

In 1996, the Mint decided to acquire more office space and move all headquarters personnel into one building. The Mint is headquartered in Washington and has production facilities in Philadelphia, Denver, San Francisco and West Point, N.Y.

Under a plan approved by the Treasury Department, the Mint sought to acquire 125,000 total square feet for up to 400 employees. The management plan, which allotted about 342 square feet per person, estimated that the agency's staff would grow about 1 percent each year.

But by 2001, the Mint's headquarters workforce had swelled to more than 700 employees, exceeding the agency's original estimate. The agency eventually leased approximately 382,000 square feet in two new buildings in downtown Washington-about 257,000 more square feet than it initially planned. The Mint subleased approximately 150,000 square feet to the IRS and the Customs Service. But even with the new tenants and the remaining space occupied by more staff, the Mint still has far too much space, according to the IG's report.

"While the growth in personnel would explain the need for more space than planned for in 1996, it does not explain why the Mint leased as much space as it did," the report said.

The agency should have adjusted the original leasing plan approved by Treasury with sufficient data before changing it, the report said. The IG also criticized the agency for failing to fully explore its options before entering into a lease arrangement. "Had it performed such an analysis, the Mint may have found it less expensive to purchase the 801 9th Street building rather than lease it, or may have been able to negotiate better lease terms," the report said.

The Mint could not provide the IG with enough documentation to support its decision- making process for the lease transactions, according to the report. "Lack of documentation supporting procurement transactions was a pervasive problem."

The Mint agreed with the report's recommendations to reevaluate its need for office space and improve recordkeeping and employee training. But the agency took issue with the tone of the report and the IG's "excessively negative" portrayal of the Mint's leasing transactions.

"Equally frustrating is that there is virtually no credit given for all the substantive changes the Mint has already accomplished to date," Mint Director Henrietta Holsman Fore said in written comments. The Mint began reevaluating its space needs for headquarters staff before the audit and has taken "significant steps" to improve management controls, according to Fore.

Fore also defended the context of the agency's decision to lease more space than the original plan intended. "The 1997-1999 period was one of major expansion for the Mint," Fore wrote. During that period, the Mint introduced its 50 State Quarters program and the Golden Dollar, which helped the agency generate $5.1 billion in profits over the last three years--"the three most profitable years in the history of the Mint," Fore said.

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