Audit Reports

Objective

Our objective was to determine whether the U.S. Postal Service’s Supply Management review and approval controls over the contract invoice payment process are effective.

Postal Service Supply Management is responsible for important components of the contract invoice payment process, which includes invoice submission, certification, and approval for payment. Suppliers can submit invoices manually or electronically as specified in the contract. Prior to payment, invoices must adhere to submission requirements and be certified. If the invoice does not meet submission requirements, the invoice certifier is required to reject it.

The Postal Service is subject to the Prompt Payment Act, which requires payment of an invoice subject to the contract payment terms after receipt of goods and services. Payment terms specifying the timeframe for making payments are included in Postal Service contracts.

In fiscal year 2020, Supply Management was organized across five portfolios: (1) Transportation, (2) Mail and Operational Equipment, (3) Technology Infrastructure, (4) Facilities, and (5) Commercial Products and Services. Supply Management paid about 18 million invoices for $14.1 billion in spend across the five portfolios. We determined that the Postal Service paid for 111,493 invoice transactions totaling about $52 million across the five portfolios on September 30, 2020. We selected September 30, since it was the last day of the fiscal year and limited the possibility of selecting sampled invoice transactions that were stored in a replaced electronic payment system. From this universe, we selected a judgmental sample of 147 invoice transactions, totaling about $49 million in spend.

Findings

Supply Management review and approval controls over the contract invoice payment process were not always effective for the reviewed invoice transactions. We determined that 31 of 147 reviewed invoice transactions (21 percent) did not comply with invoice submission, certification, or payment term requirements. Specifically, of the 147 transactions we identified that:

• Nine (6 percent) did not meet invoice submission requirements.
• Eighteen (12 percent) were not properly certified.
• Four (3 percent) were not paid in accordance with payment terms.

These issues occurred because employees who review and certify invoices did not exercise due diligence by rejecting those that did not meet all submission requirements. When invoices do not meet submission and certification requirements, the Postal Service is at risk that goods and services invoiced may not have been received or met contract requirements. When invoices are paid later than payment terms, the Postal Service is at risk of processing late payments and incurring interest.

Supply Management’s contracting officer’s representatives (COR) did not always complete required training or have signed appointment letters. Specifically, for contracts with sampled invoice transactions, eight of 76 CORs (11 percent) did not have the required training, and 20 of 76 CORs (26 percent) did not have a properly signed appointment letter or were missing an appointment letter for reviewed invoice transactions. These issues occurred due to lack of contracting officer (CO) oversight to validate prospective COR training and ensure appointment letters were properly signed and issued. The Postal Service also does not require refresher training to ensure CORs are aware of appointment requirements and responsibilities. When CORs are not properly trained and appointed, the Postal Service is at risk of having personnel managing the receipt of goods and services without understanding their defined responsibilities. If CORs do not take refresher training, they may not be aware of changes in responsibilities and appointment letter requirements.

We also found that the Postal Service’s design and construction purchasing guidance is outdated. Specifically, the commodity guidance for construction contracts references Handbook P-2, Design and Construction Purchasing Practices, which has not been updated since January 2005, and it contains additional references which were superseded by updates to the Supplying Principles & Practices. Supply Management officials stated that they have discussed possible updates to the handbook over several years and had planned to update it in 2015, but never did mainly due to a lack of time and resources. Personnel referencing outdated purchasing practices may lead to mistakes in contract administration.

During the audit, management partially implemented corrective actions to address the issues we identified by requesting that two CORs complete the required training course and by requiring COs to reissue four COR appointment letters that were missing required information.

We questioned $34.5 million in invoice transactions that did not comply with invoice submission, certification, or payment terms as well as invoice transactions certified by CORs who were not appointed in accordance with requirements.

Recommendations

We recommended the Vice President, Supply Management:

• Reiterate policy to reject invoices that do not meet submission requirements and process invoices in accordance with contract payment terms.
• Reiterate requirements for contracting officers to verify prospective contracting officer’s representatives completed required training and to issue appointment letters.
• Establish and implement refresher contracting officer’s representatives training requirements.
• Update the Commodity-Specific Practices for Design and Construction Purchasing within the Supplying Principles & Practices to reflect current procedures and references.