Audit Reports

Background

The U.S. Postal Service Office of Inspector General (OIG) uses tripwires to identify financial anomalies. Tripwires are analytic tools combining specific behaviors that provide strong indicators of improper activity. The OIG's Perfect Count Tripwire identified that the Bronx Hillside Finance Station in Bronx, NY, reported six 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 ensure accuracy. Postal Service managers are responsible for timely and accurate counts of all segmented inventory.

An office with at least $100,000 in annual revenue and two 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 Bronx Hillside Station were accurately presented and whether internal controls were in place and effective.

What the OIG Found

The accounting records for segmented inventory at the Bronx Hillside Finance Station were not always accurately presented and internal controls needed improvement.

We verified that the office reported six perfect counts of retail floor stock from April 1, 2015, to March 31, 2016. The unit posted another perfect count on July 14, 2016. On August 17, 2016, we conducted an independent count and identified a shortage of stamps valued at $823.51.

This occurred because the unit supervisor recorded system-provided expected amounts instead of actual count amounts and adjusted amounts to eliminate variances. We also identified:

• Two cash drawers were not within tolerance, and a third was missing.

• The unit did not return six RA cash retained credits that were not active for at least 1 quarter.

• The unit did not properly record inventory counts. Specifically, files for retaining count data were absent or incomplete.

• The unit did not return or destroy 153 obsolete money orders, and five money orders were missing.

• The unit did not properly secure unit reserve stamp stock, non-saleable stamps, and cash or 384 domestic and international money orders from seven RA cash drawers.

• Neither of the two RAs assigned to the unit had the required duplicate key and password envelopes used to open an employee's cash drawer when the employee is not present.

• The unit did not reassign cash reserve custodians' roles following their separation from the unit.

• The unit did not always complete or maintain the required forms to accept and return stamp stock.

• The managing unit incorrectly accepted two stamp stock shipments not destined for the Bronx Hillside Finance Station.

Unit management was unaware of procedures for maintaining supporting documentation for inventory counts, destroying obsolete money orders, maintaining duplicate key combination and password envelopes, and reassigning roles in the Retail Systems Software. Management also stated other priorities prevented timely execution of financial responsibilities for stamp stock shipment files. If controls over inventory and cash are not followed there is an increased risk money orders, stamp stock, and cash will be stolen.

As a result of this audit, management placed all unit reserve inventory and non-saleable stamps in the vault. Further, as a result of our overall work regarding segmented inventory accountability, management advised it will issue an expectations letter to the field. It will also reissue the Financial Accountability Standard Operating Procedures and conduct a webinar to review them with applicable area and district managers. Finally, management will conduct unannounced random field financial audits using the Sarbanes-Oxley Remediation Tool to measure improvement.

What the OIG Recommended

We recommended management establish controls to ensure unit management:

• Is aware of and timely executes its financial responsibilities for inventory counts, destroying obsolete money orders, maintaining duplicate key combination and password envelopes, and reassigning roles in the Retail Systems Software.

• Properly prioritize and timely execute their financial responsibilities for stamp stock shipment files.

We also recommended management establish controls to ensure employees properly record inventory counts and discontinue the practice of adjusting amounts to eliminate variances; properly maintain all accountable items; and destroy all obsolete money orders and determine disposition of the five missing money orders.