Internal Controls Over Segmented Inventory – Laughlin Post Office, Laughlin, NV
Background
The U.S. Postal Service Office of Inspector General (OIG) uses tripwires to identify financial anomalies. Tripwires are analytic tools that look at specific behaviors and patterns that are strong indicators of improper activity. The OIG's Perfect Count Tripwire identified that the Laughlin Post Office in Laughlin, NV, reported three consecutive retail floor stock perfect inventory counts from April 1, 2015, to March 31, 2016. Perfect count means the Postal Service did not report any overages or shortages.
Segmented inventory consists of retail floor stock (stamps sold on the retail floor), unit reserve stamp stock (stamps used to replenish those sold on the retail floor), cash, money orders, and stamps assigned to retail associates (RA). Inventory can be transferred between segments; therefore, we counted each accountability segment. Postal Service managers are responsible for timely and proper counts of all segmented inventory.
The objectives of this audit were to determine whether accounting records for segmented inventory at the Laughlin Post Office were accurately presented and whether internal controls were in place and effective.
What the OIG Found
Accounting records for segmented inventory at the Laughlin Post Office were not always accurately presented and internal controls needed improvement.
We verified the unit reported three perfect counts of retail floor stock from April 1, 2015, to March 31, 2016. On August 9, 2016, we conducted an independent count of the retail floor stock and identified an overage of $68.65.
Our review of the perfect count details revealed a high variance between expected quantities and recorded count quantities, by stock item. The percentage of counted items that did not match the expected count ranged from 64 to 79 percent.
Inventory count documentation for our scope period listed the postmaster as one of the two independent counters, yet the postmaster was on a temporary detail assignment and was not on site for the counts. Also, the documentation did not identify a second independent counter, and we could not locate the required completed count sheets from a second counter.
We also determined the unit did not always perform the required quarterly retail floor stock, unit reserve stock, and unit cash reserve counts. There were no counts performed in fiscal year 2015, Quarter 4, and the unit cash reserve count was not performed in fiscal year 2016, Quarter 1.
The officer in charge acknowledged that he independently performed the counts by using the postmaster's logon while the postmaster was not on site. The postmaster stated she shared her logon and password information with the officer-in-charge, she did not establish retail floor stock count procedures for her unit, and she did not monitor operations. The postmaster also advised that she changed her password in April 2016, and no longer shares it with others.
Finally, the unit did not always properly maintain and update Retail Systems Software roles and maintain and secure passwords. Specifically:
One RA, the lead sales and services associate, had roles in the Retail Systems Software that allowed him to sell postal products and maintain the unit's inventory after his officer in charge detail ended.
Four of five RAs were missing the required duplicate key and password envelope used to access and count the cash drawer when the RA is not present.
If controls over inventory and cash are not followed, there is an increased risk of undetected theft of money orders, stamp stock, and cash.
As a result of this audit, management created the required envelopes to secure employees' keys and passwords.
Furthermore, as a result of our overall work regarding segmented inventory accountability, headquarters management advised they will issue an expectations letter to the field. They will also reissue the Financial Accountability Standard Operating Procedures and conduct a webinar to review them with applicable area and district managers. Finally, they will conduct unannounced random field financial audits using the Sarbanes-Oxley Remediation Tool to measure improvement.
What the OIG Recommended
We recommended management establish controls to ensure the postmaster properly executes and documents inventory counts and monitors count completion, Retail Systems Software roles, and duplicate key and password envelopes.