The sale of domestic and internal money orders represents over $100 million in revenue annually for the U.S. Postal Service. In fiscal year (FY) 2012, revenue generated from sales of these money orders was $129 million. As a control to identify errors, the Postal Service each month performs a reconciliation of the cashed amount and the face value of a sold money order. During FYs 2010 through 2012, reconciliation differences averaged $2.1 million annually. We initiated an audit to determine whether money order controls are sufficient to detect fraud in a timely manner.
In January 2013, the Postal Service initiated a Lean Six Sigma project in response to our audit to review the money order process for mitigating fraud and analyzing questionable activity. It is designing a program to improve the reconciliation process and better detect fraud. The Postal Service plans to communicate results of the program to postal management and the U.S. Postal Service Office of Inspector General (OIG).
Our audit revealed that a postal accounting service center notified postal retail units of expenses resulting from unreconciled money order differences. However, postal management received no further analysis or communication to evaluate the differences for potential fraud. OIG auditors noted that 25 postal districts contain one or more offices with recently completed or ongoing money order investigations. During FY 2010 through FY 2012, OIG investigators completed 136 money order embezzlement cases resulting in the removal, arrest, and/or prosecution of Postal Service employees. In the report to the Postal Service, OIG auditors asserted that without adequate monitoring of money order transactions, abuses, errors, and misappropriation of Postal Service assets might go undetected.