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. 

From October 1, 2016, to December 31, 2016, our tripwire showed the Quartz Hill Contract Postal Unit (CPU) in Lancaster, CA reported $2,049 for postage label refunds. The national average for postage label refunds issued by CPUs during the same time period was $69. 

A CPU is a retail unit located inside a private business under contract with the Postal Service. It provides postal services to the public and is operated by non-postal employees. CPUs use meters to print paid postage on labels or mail pieces, such as cards or envelopes. When postage meter labels are not legible or damaged, the CPU must re-print the label and submit the unused postage for a refund. Refund requests must include the original damaged or spoiled label or entire mail piece. 

Each CPU has a Post Office responsible for verifying its daily financial transactions. A postmaster at the Post Office processes the CPU refund requests and provides training to CPU employees. 

The objective of this audit was to determine whether internal controls were in place and effective for issuing postage label refunds at the Quartz Hill CPU. 

What the OIG Found

We determined that the Quartz Hill CPU issued more postage label refunds compared to other CPUs because the unit had a defective postage meter. We verified 192 spoiled or damaged postage label refunds valued at $2,049 were processed during our scope period. 

However, internal controls over postage label refunds needed improvement. Specifically, we determined all 192 refunds were processed without complete supporting documentation. We referred this information to the OIG’s Office of Investigation for further review. 

The CPU manager was not aware of the requirements for submitting refund requests; she stated she did not receive training. The postmaster stated he was not aware of his responsibility to provide financial reporting training to CPU employees. Also, he incorrectly adopted the refund review process he learned from his predecessor. 

If postage label refunds are not properly completed and verified, there is an increased risk of theft and incorrect financial reporting. 

On January 27, 2017, management replaced the defective postage meter. 

What the OIG Recommended

We recommended, the manager, Sierra Coastal District, instruct the postmaster to attend and provide financial reporting training to CPU employees at the office and verify all required supporting documentation is submitted with applications for refunds before processing.