Internal Controls Over Segmented Inventory – Bayport Post Office, Bayport, MN
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 Bayport Post Office in Bayport, MN, 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 (RAs). 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 Bayport Post Office were accurately presented and whether internal controls were in place and effective.
What the OIG Found:
Accounting records for segmented inventory at the Bayport Post 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 reported on April 7, 2016. However, a count reported on July 14, 2016, recorded an overage of $14. We conducted an independent count on July 19, 2016, and identified retail floor stock had a shortage of stamps valued at $54.
The postmaster stated that during his on-the-job training 4 years earlier he was told to always make sure the inventory count results were perfect. Therefore, he incorrectly adjusted the inventory records to match the retail system totals.
In addition, we determined the postmaster did not adequately secure the keys to compartments within the vault that stored items such as cash, stamps, and money orders. Also, the postmaster did not close out the cash account for a retail associate no longer working at the office, as required, and improperly conducted two counts of the employee’s cash drawer without a required designated witness.
Further, three of four employee passwords maintained on the duplicate key and password envelope used by the postmaster to access and count the cash drawer when the retail associate is not present were expired. The fourth employee did not have a password on file.
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 closed the cash account for the retail associate; located and created the required envelopes to secure the keys and passwords; and secured the keys in a locked drawer within the vault.
What the OIG Recommended:
We recommended management implement procedures to maintain security over accountable items stored in the Post Office’s vault and reiterate the counting process to ensure employees conduct counts with a witness.