USPS OIG Report: Internal Controls Over Segmented Inventory at Carrollton, TX Main Office

oig-financial-controlsBackground
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 Carrollton Main Office in Carrollton, TX, reported perfect inventory counts for four quarters in a row 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 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 Carrollton Main Office were accurately presented and whether internal controls were in place and effective.

What the OIG Found
The accounting records for segmented inventory at the Carrollton Main Office were not always accurately presented and internal controls needed improvement.

We verified the unit did not conduct and report count results of retail floor stock from April 1, 2015, to March 31, 2016. On June 30, 2016, and July 26, 2016, management conducted counts and identified a significant retail floor stock overage of $99,116 and a shortage of $104,481. However, the count results were not properly recorded and the OIG was not notified of the significant overage or shortage as required.

We conducted an independent count of retail floor stock on August 3, 2016, and identified an overage of stamps valued at $1,397.

This occurred because there has not been a permanent manager of post office operations or postmaster at the unit since fiscal year 2013 to oversee the segmented inventory process. The acting officer-in-charge (OIC), currently responsible for overseeing the process, arrived at the unit 4 months prior to our audit and could not explain the shortages and overages. The acting OIC also stated he had higher priorities in delivery operations.

We also identified:

  • One of three RA cash drawers was over the allowed plus or minus $10 limit.
  • The acting OIC and RAs had missing or outdated duplicate key and password envelopes. Unit management uses the envelopes to access and count the cash drawers when the RAs are not present.
  • Unsecured keys to the registered mail cage and stamp stock left in the retail area overnight.
  • Three RAs still had access to the retail system and unit cash reserve after being separated from the unit.
  • The financial supervisor who monitored the unit’s financial transactions and inventory levels was also authorized in the retail system to sell postal products and accept payments. This dual responsibility was against policy

If controls over inventory and cash are not followed, there is an increased risk of undetected theft of cash, money orders, stamp stock, and items in the registered mail cage.

As a result of this audit, the acting OIC officially notified the OIG about the retail floor stock overage and shortages and removed the supervisor’s authorizations in the retail system.

Furthermore, as a result of our overall work regarding segmented inventory accountability, headquarters management advised they will issue an expectations letter to the field. They will also reissue the Financial Accountability Standard Operating Procedures and conduct a webinar to review them with applicable area and district managers. Finally, they 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 properly prioritize and timely execute their financial responsibilities over all segmented inventory, including count examination records, retail system roles, and duplicate keys and passwords. We also recommended unit management complete the process to close out the inactive cash drawers and implement procedures to maintain security and oversight of all postal funds, money orders, stamp stock, and the registered mail cage.

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Source: USPS Office of Inspector General

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