Internal Controls Report Cover

BACKGROUND:

The objective of this audit is to determine whether internal controls for issuing permit postage and fee refunds were in place and effective at the Palm Coast, FL, Branch.

The U.S. Postal Service Office of Inspector General (OIG) Field Financial Risk Model identified that the Palm Coast Branch refund and void amounts for fiscal year 2017 Quarters 3 and 4 exceeded $105,000, an increase of 110 percent from the same period last year. Of the $105,000 in refunds and voids, $96,551, or 92 percent, were recorded as refunds of permit postage and fees. We audited 100 percent of the permit postage and fee refunds based on this refund category having the highest dollar value refund activity between April 1 and September 30, 2017.

WHAT THE OIG FOUND:

Internal controls over the issuance of 47 business reply mail (BRM) permit postage and fee refunds valued at $96,551 were in place but not effective at the Palm Coast, FL Branch. We found:

  • Procedures for destruction of BRM with postage were not followed for all 47 refunds reviewed. Specifically, the bulk mail technician did not include a witness and a supervisor during the destruction process or obtain their certification signatures. The technician was not aware of the witness or certification requirements.
  • The bulk mail clerk computed BRM charge fees for refunds greater than $500 incorrectly. The employee stated he was not aware that the charge fee needed to be computed based on the actual hours it took to process the refunds. We were unable to determine whether the clerk overcharged or undercharged the customer because employees at the unit did not always document actual hours spent processing the refunds.
  • The unit delayed processing 27 of 47 BRM refunds by more than 30 days because the unit did not have sufficient coverage of employees trained in the process to cover during absences.
  • Unit personnel did not always properly perform the daily financial closeout procedures. Specifically, the lead sales and service associate (associate) did not reconcile information to the daily financial report, and the supervisor did not review the report for accuracy. Further, the associate could not provide documentation for four of the 47 refunds valued at $25,700. The associate stated she did not have time to perform the detailed procedures because of time constraints relating to preparing the bank deposit for pick-up. The associate could not explain the missing refund documentation.
  • A supervisor shared her logon identification and password to allow another employee to approve refunds when the supervisor was unavailable. We referred this issue to the OIG Office of Investigations.

When internal controls are not effective, the Postal Service has an increased risk of:

  • Not being able to substantiate the validity of BRM refunds.
  • Issuing incorrect or unauthorized BRM refunds.
  • Damaging the Postal Service image and customer loyalty.
  • As a result of our audit, management:
  • Assigned two new employees to serve as witnesses during BRM destruction and instructed the bulk mail technician to train them on the BRM refund procedures.
  • Created a spreadsheet to log and track actual BRM refund work hours.
  • Reinforced the requirement for the supervisor to be onsite to certify the destruction of postage affixed on BRM refunds.
  • Streamlined the refund process at the unit from initiation through issuance by eliminating additional handling of the form, which caused processing delays.
  • Changed the bank deposit dispatch time.
  • Provided “Unit 1412 Closeout Training” to the associate and two other retail associates.
  • Adjusted the supervisor work hours to allow adequate time to verify the daily financial report.
  • Implemented a new filing system for the daily financial report and support documentation.
  • Instructed the supervisor to change her password and not to share it again.

Therefore, we are not making recommendations related to training on BRM refunds, including tracking actual BRM refund work hours, properly computing charge fee amounts, processing refunds timely, completing the daily financial closeout procedures, and protecting passwords.

WHAT THE OIG RECOMMENDED:

We recommend management provide BRM refresher training for destroying BRM with postage affixed to the bulk mail technician.

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