Honest Money Gold & Silver Report

Introduction

The last audit of our gold reserves was in 2005, just one year ago. Nevertheless, many citizens are concerned that a thorough audit of our gold reserves has not been properly performed, and consequently, warrants attention. Some individuals claim that a complete physical audit has not been done since 1954.

As this paper illustrates, there seems to be a difference of opinion between what We The People consider to constitute a full disclosure and transparent audit of our gold reserves, as compared to what the various government agencies and other third party entities involved appear to consider appropriate.

The following discussion is offered to help promote a better awareness of the most important points concerning the fairly complex subject of our gold reserves – to all parties concerned.

A proactive approach is the preferred vehicle to develop an open dialog between the people and our elected officials, thus informing and enabling them to better represent and serve our goals in Congress.

Please note that all bold type was added by author for highlighting purposes and were not in the original documents quoted.

Audit of What

KPMG LLP, an independent public accountant, performed the audit of the Mint’s Fiscal Year 2005 financial statements.

Notice what the above says: an audit of the financial statements. It doesn’t say an audit of the physical gold. Is there a difference?

According to what follows, KPMG LLP never saw any physical gold. They never went to Fort Knox. Then what did they audit?

Apparently they audited the reports that the Treasury Department and the Mint gave them via the Deputy Assistant Inspector General for Financial Management and Information Technology Audits Report.

In other words they audited statements and reports from William H. Pugh Deputy Assistant Inspector General for Financial Management and Information Technology Audits that he supplied to the Treasury and the Mint.

The report also contains a disclaimer by the Treasury Department that the audit did not include Treasury gold held by the Federal Reserve.

Now why is that? Is it the Treasury’s Gold, or the Federal Reserve’s Gold, or We The People’s Gold? And why is the Federal Reserve holding it? More unanswered questions.

Deep Storage

Also worth noting is the recent change from gold held in reserve to gold in deep storage. What does that mean – deep storage?

Is there a difference between gold held in reserve and gold held in deep storage? And if so, what is the difference, and why the sudden change? What precipitated the change and exactly what does it accomplish?

Which brings to mind the question: where’s all the gold that was confiscated from We The People in 1933-34 by President Roosevelt? Is it in Fort Knox? Is it held in reserve or in deep storage? Is it in coin form or has it been melted down into bullion?

As is readily apparent – there are a whole lot of questions that have not ever been answered, although perhaps they have never been asked. Perhaps it is time to ask them.

Below is the audit (in part) for the year 2005. It was taken from the Treasury website that can be accessed at the below blue link, which states that the audit is in the public domain: (click blue date).

MEMORANDUM FOR DAVID A. LYBRIK, ACTING DIRECTOR UNITED STATES MINT

FROM: William H. Pugh Deputy Assistant Inspector General for Financial Management and Information Technology Audits.

SUBJECT: Audit of the United States Mint’s Schedule of Custodial Gold and Silver Reserves as of September 30, 2005 and 2004.

The attached report presents the results of our audits of the United States Mint’s (Mint) Schedule of Custodial Gold and Silver Reserves (Custodial Schedule) as of September 30, 2005 and 2004. The Custodial Schedule is the responsibility of the Mint. We conducted our audits in accordance with Government Auditing Standards, issued by the Comptroller General of the United States.

We rendered an unqualified opinion on the Custodial Schedule as of September 30, 2005 and 2004. In addition, our report contains no reportable conditions related to internal control, and no instances of noncompliance with laws and regulations that could have a direct and material effect on the Custodial Schedule.

The results of our audits will be used by KPMG LLP, an independent public accountant, who is performing the audit of the Mint’s Fiscal Year 2005 financial statements. In addition, copies of our report are being provided to the Secretary of the Treasury, the Treasurer of the United States, and the Department of the Treasury’s Chief Financial Officer.” [1]

Who’s Who

Who is “we”? We is the “FROM: William H. Pugh Deputy Assistant Inspector General for Financial Management and Information Technology Audits who audited the United State’s Mint’s Schedule of Custodial Gold and Silver Reserves (custodial schedule).” [2]

Notice that all that was given was an unqualified opinion of the custodial schedule. This is opposed to a qualified opinion. Also note there were no internal controls examined. In other words it seems that only an external audit was done – not an internal audit.

“The results of our audits will be used by KPMG LLP, an independent public accountant, who is performing the audit of the Mint’s Fiscal Year 2005 financial statements.” [3]

The above strongly alludes that all that KPMG LLP audited was the report submitted by the Deputy Assistant Inspector General for Financial Management and Information Technology Audits, who only audited the custodial schedule of the U.S. Mint.

To the Acting Director of the United States Mint:

We have audited the accompanying Schedule of Custodial Gold and Silver Reserves (Custodial Schedule) of the United States Mint (Mint) as of September 30, 2005 and 2004.

This report presents our unqualified opinion on this Custodial Schedule. Our audit disclosed no material weaknesses and no instances of reportable noncompliance with laws and regulations.

In planning and conducting our audit of the Mint’s Custodial Schedule, we considered internal control over financial reporting. Specifically, we obtained an understanding of the design of the Mint’s internal control related to the Custodial Schedule, determined whether these internal controls had been placed in operation, assessed control risk, and performed tests of controls in order to determine our auditing procedures for the purpose of expressing our opinion on the Custodial Schedule and not to provide assurance on the internal control over financial reporting. Consequently, we do not provide an opinion on such control.

As part of obtaining reasonable assurance about whether the Custodial Schedule is free of material misstatement, we performed tests of the Mint’s compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of Custodial Schedule amounts. We limited our tests of compliance to these provisions and we did not test compliance with all laws and regulations applicable to the Mint. We caution that noncompliance may occur and not be detected by these tests and that testing may not be sufficient for other purposes. Providing an opinion on compliance with laws and regulations was not an objective of our audit and, accordingly, we do not express such an opinion.

Internal control is a process, affected by management and other personnel, designed to provide reasonable assurance that the following objectives are met:

• Reliability of financial reporting - transactions are properly recorded, processed, and summarized to permit the preparation of the Custodial Schedule in accordance with accounting principles generally accepted in the United States of America, and the safeguarding of assets against loss from unauthorized acquisition, use, or disposition; and 

• Compliance with applicable laws and regulations that could have a direct and material effect on the Custodial Schedule.

Because of limitations inherent in any internal control, errors or fraud may occur and not be detected. Also, projection of any evaluation of internal control to future periods is subject to the risk that internal control may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.

Our consideration of internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting related to the Custodial Schedule that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by errors or fraud in amounts that would be material in relation to the Custodial Schedule being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the internal control over financial reporting related to the Custodial Schedule and its operation that we consider to be material weaknesses as defined above. [4]

The above is what was submitted to:

                 KPMG LLP [5]

The Audit by KPMG LLP:

All of the following up to quotation number 6 is from the same Audit of the Mint as footnoted and referenced above:

The accompanying notes are an integral part of this Schedule.

The above is the end of quote # [6] from the Audit referenced above. As the quoted material states, an audit of the mint’s custodial reserve schedule was performed.

The schedule and the actual physical gold are two different entities. The first is a piece of paper; the second is the actual physical gold reserves.

The Federal Reserve

Next is information taken from the Federal Reserve Act of 1913 and the U. S. Code. All of the information is footnoted and concerns the various pertinent issues that involve the Federal Reserve and gold, both according to its written Act, and the U.S. Code, and how it relates to the topics under review.