Due to a recent Freedom of Information Act request, we are now posting this previously withheld audit report.

Background

Postage may be purchased through a number of electronic methods, including PC Postage over the Internet and ePostage (a part of the Electronic Verification System (eVS). PC Postage and eVS have grown rapidly. The U.S. Postal Service generated about $3.6 and $5.1 billion in revenue from these payment systems in fiscal years (FY) 2011 and 2012 respectively.

Revenue assurance controls for postage rely on automated processes such as the use of processing machinery optical character readers backed up by employee inspection of individual parcels. Our objective was to evaluate the internal control requirements for electronic parcel payment systems, including PC Postage and the eVS.

What the OIG Found

Internal controls were inadequate to identify shortpaid and unpaid postage for PC Postage and eVS. Specifically, [redacted] of the [redacted] parcels that we mailed with shortpaid or unpaid postage were delivered with no additional postage assessed. [Redacted]

In addition, when shortpaid eVS mail was identified, the Postal Service’s methodology for calculating the postage due from mailers was flawed. [Redacted]

For PC Postage parcels, we estimate the Postal Service did not collect [redacted] million in shortpaid and unpaid postage in FY 2012. We identified about $1.6 billion in revenue at risk related to the Postal Service’s methodology for calculating shortpaid eVS mail.

What the OIG Recommended

We recommended the Postal Service form a taskforce comprised of the various Postal Service functions and mailer representatives to identify and implement automated controls. [Redacted] Further, the Postal Service should modify the statistical sampling calculation for shortpaid parcels and implement software changes to the eVS to correctly validate destination entry rates.

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