Audit Reports

Objective

Our objective was to determine if the Postal Service properly processed and supported online refund requests for Priority Mail Express (PME).

We conducted this audit in response to concerns raised by the U.S. Postal Inspection Service and our Office of Investigations. The concerns related to potential erroneous payments with online PME refunds issued by the Postal Service from October 1, 2018, through July 31, 2020.

The Postal Service provides customers the convenience of requesting refunds for domestic service failures (guaranteed delivery time commitment) for PME and applicable Extra Services online.

The Postal Service has an online refund application that works in coordination with their Product Tracking and Reporting system (system) in determining eligibility and issuing refunds to customers for Postal Service PME products.

There are several methods the Postal Service offers for customers to purchase postage for PME. One method is self-service kiosks (kiosk), placed in retail lobbies, allowing customers to ship packages, mail letters, and buy stamps. The goal of the kiosk program is to provide customers with a convenient self-service alternative to the full-service counter.

The Postal Service paid about $5.6 million for 177,596 online PME refunds from October 1, 2018, through July 31, 2020. We reviewed the top 12 customer addresses exceeding $60,000 in refunds paid, which accounted for 70,545 refunds, or 39.7 percent. Referrals were made to the Postal Inspection Service as appropriate.

Findings

The Postal Service did not always properly process and support online PME refunds paid to customers. Specifically:

• Refund requests from purchases made at a kiosk could potentially allow fraudulent claims to be processed through the online refund application.

• Online refund requests for PME purchases initiated at the kiosk, through commercial manifests or PC Postage customers can allow customers to receive an improper refund. The online refund uses a “Start the Clock” time event scan for PME when processing the refund even though the Postal Service does not necessarily have physical possession of the mailing.

• The online refund application does not require documentation of proof of postage paid, does not identify, or prevent [redacted] and does not provide correct [redacted] information.

• The system did not deny eligibility for refunds where the mailings were [redacted] or mailed between December 22 and 25.

We concluded that the conditions we observed occurred because the Postal Service did not implement adequate internal controls regarding kiosk and verifications for the online process for PME refunds. We estimate the Postal Service issued refunds that were not always warranted and incurred a revenue loss of about $1.9 million from October 1, 2018, to July 31, 2020.

Postal Service Headquarters took corrective action by adding additional wait time for online refund requests to be made during this audit. In addition, management updated the system to include a refund logic to assess refund eligibility for PME mailings mailed from December 22 through 25 (peak season mailing). However, additional opportunities exist to resolve the internal control deficiencies identified in the PME online application.

Recommendations

We recommended management:

• Validate the process between the Retail Systems Software and Product Tracking and Reporting system to confirm the amounts customers paid using the [redacted] option on the Self-Service Kiosks.

• Change the “Start the Clock” process for guaranteed service commitments to identify when the Postal Service has physical possession of the mail prior to permitting the processing of online Priority Mail Express refunds.

• Enhance the online refund application to provide automated edit checks and validate the requested amount submitted for refunds, create a report to identify [redacted] to be reviewed, and verify the accuracy of automatic responses to refund approvals or denials.

• Incorporate a schedule to verify all acceptance and possession scans are entered into Product Tracking and Reporting system prior to determining eligibility of refunds and enhance relevant systems to properly evaluate mailings to verify that they are eligible for refunds.