USPS OIG Report: Payments to Contract Postal Unit and Village Post Office Suppliers


Our objective was to determine if the Postal Service timely terminated payments to Contract Postal Unit (CPU) and Village Post Office (VPO) suppliers when services were no longer provided.

The Postal Service fulfills its universal service obligation partly through its Alternate Access Channels programs, which offer postal products and convenient mail services where customers live, work, and shop. These programs include CPUs and VPOs. All CPUs and VPOs provide Postal services as required by contract with the Postal Service in a supplier-owned or supplier-leased facility.

CPUs are facilities that suppliers operate under contract with the Postal Service. CPU contract compensation types include:

  • Firm-Fixed Price: The Postal Service pays the supplier a set amount monthly.
  • Performance-Based: The Postal Service pays the supplier an agreed upon percentage of sales.

Regular CPUs generally operate as an extension of the Post Office, offering similar products and services. Community Post Offices (CPO) operate the same as a regular CPU, except they are located in rural communities where independent post offices have been discontinued and are usually compensated through firm-fixed price contracts.

VPOs are community businesses that partner with the Postal Service to sell stamps and offer prepaid packaging materials. They are compensated through firm-fixed price contracts.

All CPU and VPO contracts are established for an indefinite period until terminated. Contracts can be terminated upon a time-specific notice from either the supplier or the Postal Service based on the termination clause. The host administrative office is responsible for managing and overseeing CPUs and VPOs, but both are ultimately the responsibility of the district manager.

The Postal Service does not require CPU or VPO suppliers to submit invoices. Invoices are generated from a web-based system that captures data from retailer and supplier locations and are automatically sent for payment. This process increases the risk that the Postal Service could pay suppliers who stopped providing services.

The Postal Service paid CPU, CPO, and VPO suppliers $194,826,151 from fiscal year (FY) 2017 through FY 2019. We identified 1,082 payments totaling $785,304 during that time frame to 766 regular CPUs, CPOs, and VPOs after the prescribed contract termination dates. We determined 369 of the payments totaling $423,536 for performance-based contracts were valid based on the percentage of prior month’s revenue or outstanding payments for actual services rendered prior to the effective date of the termination. Therefore, we excluded them from further analysis. We reviewed the remaining 713 payments for firm-fixed price contracts totaling $361,768.


Payments to CPU and VPO contract suppliers were not always terminated timely when services were no longer provided. We identified 173 overpayments totaling $67,311 to 57 suppliers with firm-fixed price contracts. Of the 57 suppliers, overpayments were made to eight regular CPUs, six CPOs, and 43 VPOs. Specifically, we found that host administrative office representatives were not always aware that VPOs stopped providing services; therefore, the representatives did not notify district personnel to initiate the termination process in a timely manner and automatic payments continued. We found that 25 of the 43 overpaid VPOs had discontinued services but their contracts were not terminated until five to 13 months later. Further, responsible district, area, and headquarters personnel did not always initiate or complete CPU or VPO termination procedures timely. We reviewed termination notification forms for 30 of the 57 suppliers who were overpaid and found 34 instances where responsible personnel either did not initiate termination procedures or did not sign termination documentation timely.

These issues occurred because host administrative office and district personnel performing CPU and VPO functions did not always carry out their duties or maintain required contract documentation. In addition, postmasters stated they were unaware of the resources available to them, such as online operational guides and web-based system reporting tools. Further, the manual process of obtaining signatures and routing the termination notification forms to and from different levels of approval compounded the delays.

We also found host administrative offices and district personnel did not always pursue collection of supplier overpayments. Of the 30 districts where overpayments occurred, we identified only two that collected overpayments in full and one that collected a partial overpayment. This occurred because the Postal Service did not have policies and procedures to collect overpayments on terminated contracts. Collection of supplier overpayments was at the district’s discretion. Additionally, host administrative offices and district officials were unclear about their responsibilities and did not know how to manage overpayments.

We confirmed that as of August 6, 2020, the Postal Service recovered only $5,790 of the $67,311 in overpayments.


We recommended management:

  • Reiterate CPU and VPO program requirements to host administrative office and district personnel and certify that they are aware of their responsibilities and available tools to manage CPU and VPO operations.
  • Streamline contract termination procedures by implementing systems enhancements, such as automating approval signatures and generating system or email notifications to next approvers.
  • Recover $61,521 in overpayments identified in this report.

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Source: USPS Office of Inspector General

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