Audit Reports

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 El Cerrito, CA, Main Post Office reported 12 perfect inventory counts from April 1, 2015, to March 31, 2016. A perfect count means the post office did not report any overages or shortages.

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). Postal Service managers are responsible for timely and proper counts of all segmented inventory.

Inventory can be transferred between segments; therefore, we counted each accountability segment. Also, the El Cerrito Main Post Office and the Fairmount Station, also located in El Cerrito, share employee resources, so we counted the unit cash reserves and cash drawers at both retail units.

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 El Cerrito, CA, Main 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 El Cerrito Main Post Office were not always accurately presented and internal controls needed improvement.

We verified the El Cerrito Main Post Office reported 12 perfect counts from April 1, 2015, to March 31, 2016. We conducted an independent count and identified the retail floor stock had a shortage of $6,341.29. The lead sales and services associate (LSSA) stated the shortage was due to off-sale stock that was not returned for destruction. We also identified:

• Unit cash reserve and cash drawer count differences at both locations that exceeded allowable amounts.

• Money order issues:

1. Seventy-nine money orders, valued at $2,860, were missing from the El Cerrito unit reserve stock.
2. Money orders located at the El Cerrito unit did not exist in the retail system, including some dating back to 2008.
3. Bait money orders were missing from cash drawers at both locations. Bait money orders help authorities track offenders in the event of a robbery.

• Inventory counts not properly recorded.

• Stamp stock issues at El Cerrito:

1. Stamp stock shipments were not always accepted or recorded timely.
2. Stamp stock, valued at nearly $7,600, and four international money orders that were obsolete and could not be sold at the unit (including some that went off sale in 2003), were commingled with the retail floor stock instead of returned or destroyed.

• Missing required or completed duplicate key and password envelopes used to open the cash drawer of an employee who is not present.

• Inadequate separation of duties and safeguarding of assets at the El Cerrito unit, including:

1. Roles in the retail system that allowed the acting LSSA to sell postal products, accept payments, and maintain the unit’s inventory.
2. The main door to the segmented inventory cage at the El Cerrito unit did not close properly and included instructions not to close the door, two of three safes containing cash drawers were open upon our arrival, and the cabinet with retail floor and non-saleable stock was unlocked.

If controls over inventory and cash are not followed, there is an increased risk of undetected theft and losses.

As a result of our overall work on segmented inventory accountability, Postal Service Headquarters management advised they will issue an expectations letter to the field. They will also reissue Financial Accountability Standard Operating Procedures and conduct a webinar to review them with applicable managers. Finally, they will conduct unannounced random field financial audits to measure improvement.

What the OIG Recommended

We recommended district management reiterate policies for segmented inventory counts, stamp shipments, duplicate key envelopes, bait money orders, separation of duties, and accountable items security.

We also recommended management determine the status of money orders at the unit but not included in the retail system and those that were included in the retail system but not at the unit; destroy obsolete stamp stock and money orders; and repair the safe door, change safe combinations, and provide combinations to appropriate personnel.