The U.S. Postal Service Office of Inspector General (OIG) maintains four risk models containing 41 risk elements related to Post Office™ operations. The OIG uses these risk elements, which measure financial, operational, and human resources activity, to evaluate overall risk. The OIG periodically shares the evaluations with senior U.S. Postal Service officials.
We judgmentally selected 11 elements from the risk models that captured the most important aspects of monitoring Post Office operations, including refunds, cash balances, grievances, and overtime. Additionally, we selected two important risk elements related to Post Office Box and caller service management that were identified in previous audits as high risk areas. We tested these elements as they applied to Southern Area operations for the period October 1, 2008, through December 31, 2013.
Our objective was to determine whether the Southern Area effectively monitors risk related to the 13 selected operational elements.
What the OIG Found
The Southern Area is effectively monitoring 12 of the 13 risk elements we reviewed. However, we found area and district managers did not continuously monitor refunds.
We found that for calendar years 2011 through 2013, refunds increased by $3.6 million (from $9.9 million to $13.5 million, or 36.6 percent), while associated revenue increased by about $7.7 million (from $838.4 million to $846.1 million, or 0.9 percent). Area and district personnel were not continuously monitoring refunds because they are not required to do so under current Postal Service policy and they consider the financial risk from errors to be low.
Without refund monitoring, there is an increased opportunity for refund fraud against the Postal Service. Specifically, the Postal Service issues refunds when labels or meter strips are damaged or printed in error and voided. Falsifying refunds would provide employees the opportunity to convert Postal Service funds for personal use.
What the OIG Recommended
During the audit, the Southern Area Controller established a quarterly variance report to identify units with a high percentage of refunds to total revenue. As a result of this process, from January through June in calendar years 2013 and 2014, the Southern Area’s refunds decreased by $1.1 million (from $6.9 million to $5.8 million, or about 15.9 percent). Therefore, we will not be making a recommendation