Audit Reports

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 Mount Greenwood Station in Chicago, IL, reported 12 perfect inventory counts from April 1, 2015, to July 5, 2016. A perfect count means the Post Office 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. U.S. Postal Service managers are responsible for timely and proper counts of all segmented inventory.

An office with at least $100,000 in annual revenue and three employees overseeing segmented inventory is unlikely to go 12 consecutive months with no overage or shortage of retail floor stock.

The objectives of this audit were to determine whether accounting records for segmented inventory at the Mount Greenwood Station were accurately presented and whether internal controls were in place and effective.

What the OIG Found

Accounting records for segmented inventory at the Mount Greenwood Station were not always accurately presented and internal controls needed improvement.

We verified the Mount Greenwood Station reported 12 perfect counts from April 1, 2015, to July 5, 2016. We conducted an independent count and identified the retail floor stock valued at $16,214 had a $7,639 (47 percent) shortage. The shortage was due, in part, to an incomplete transfer from unit reserve stock, valued at $6,110. The supervisor initiated the transfer in the Retail Systems Software (RSS) but could not remember if he physically moved the stock. Management could not explain the remaining shortage. We also identified:

• A unit reserve stock count overage of $ 6,118.
•  A unit cash reserve count overage of $35. There is no authorized tolerance for unit cash reserve.
• One cash drawer with an overage of $13 and one with a shortage of $14. There is a $10 tolerance for each cash drawer. Also, two clerks no longer working at the unit still had assigned cash drawers.
• The unit could not locate $37,775 of inventory used to fulfill stamp orders received from customers by mail.
• Seven money orders were at the unit but not included in RSS. Also, 84 money orders were not at the unit but were included in inventory in RSS.
• None of the 10 cash drawers at the Chicago Mount Greenwood Station contained the required bait money orders to help authorities track offenders in the event of a robbery.
• The unit did not return or destroy non-saleable inventory items. It commingled non-saleable stamp stock with the unit reserve stock or stored it under a clerk’s desk. Also, 377 obsolete money orders were unsecured in the unit reserve safe.
• The unit did not properly record inventory counts and did not always accept or record stamp stock shipments timely. Also, two stamp stock shipments valued at $4,935 were missing.
• The unit did not have the required duplicate key combination and password envelopes used to access and count the cash drawer when the RA is not present. Also, the lead RA, customer service supervisor, and station manager shared passwords.
• The lead RA had roles in RSS that allowed her to sell postal products, accept payments, and maintain the unit’s inventory.
• The registered mail cage and four safes with cash, stamp stock, and high-valued letters or packages remained unlocked.

If controls over inventory and cash are not followed, there is an increased risk of undetected theft or loss.

As a result of this audit, management changed the combinations of three safes, replaced the locks of cash drawers with one key, moved one cash drawer from the retail area to the safe, and reviewed the unit’s segmented inventory after our audit, providing results to appropriate personnel for remediation.

Further, as a result of our overall work on segmented inventory accountability, Postal Service 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 managers. Finally, they will conduct unannounced random field financial audits to measure improvement.

We referred the missing stamps by mail and inventory shortage to the OIG’s Office of Investigations for review.

What the OIG Recommended

We recommended district management reiterate the requirement to protect and secure password information.

We also recommended unit management establish controls to ensure employees follow procedures for inventory counts, stamp shipments, duplicate key envelopes, and bait money orders, and to ensure adequate separation of duties; return or destroy obsolete items; and determine the status of missing stamp stock.