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Sep
26
2016
Report Number:
FT-FM-16-006
Report Type:
Audit Reports
Category: Finance

Internal Controls Over Segmented Inventory - Orting Main Office, Orting, WA

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 Orting Main Office in Orting, WA, reported four (quarterly) perfect inventory counts from April 1, 2015, to March 31, 2016. Perfect count means the Postal Service did not report any overages or shortages of Retail Floor Stock.

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, all segments of inventory must be counted to determine whether perfect counts are accurate. 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 Orting Main Office were accurately presented and whether internal controls were in place and effective.

What the OIG Found:

The accounting records for segmented inventory at the Orting Main Office were not always accurately presented and internal controls needed improvement.

We verified the office reported four perfect counts of retail floor stock from April 1, 2015, to March 31, 2016. Another perfect count was posted on April 20, 2016. However, on July 19, 2016, we conducted an independent count and identified retail floor stock had a shortage of stamps valued at $146.

This occurred because one RA did not properly record exchanges for stamps in the retail system. When the postmaster conducted inventory counts, she incorrectly adjusted the totals to match the retail system totals.

In addition, we determined the postmaster did not properly record counts of other segments such as unit reserve stamp stock, cash drawers, and reserve cash or complete the process to return or destroy 500 obsolete money orders.

We also identified:

  • Excess cash retained at the unit in the amount of $97.
  • One RA missing the required duplicate key and password envelope used by the postmaster to access and count the cash drawer when the retail associate 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 updated the inventory records; destroyed the obsolete money orders; obtained appropriate district authorization to retain the cash with an extra cash drawer; and created both required envelopes to secure the key and password.

What the OIG Recommended:

We recommended management establish a process to ensure employees follow the required procedures for retail floor stock.