USPS OIG Report: Internal Controls Over Segmented Inventory at Jacksonville, NC 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 Jacksonville Main Office in Jacksonville, NC, had perfect inventory counts for four quarters in a row from April 1, 2015, to March 31, 2016. Perfect count means the unit 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, we counted each accountability segment. 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 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 Jacksonville 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 Jacksonville Main Office were not always accurately presented, and internal controls needed improvement.

We verified the office reported four perfect counts of retail floor stock from April 1, 2015, to March 31, 2016. Subsequent counts, posted on May 1, 2016, and July 15, 2016, reported minor shortages. On August 16, 2016, we conducted an independent count and identified the retail floor stock had an overage valued at $4,089. We also identified:

  • A mobile Point of Sale stock shortage of $75.
  • A unit reserve stock overage of $7,587, including $4,384 of unassigned stock and 112 money orders.
  • A unit cash reserve overage of $287.
  • Two RAs’ cash drawer shortages of $12.94 and $18.35, respectively, and one cash drawer overage of $57.62.
  • A locked cash drawer assigned to an RA no longer at the unit containing $106 in cash, three international money orders, and 36 domestic money orders.
  • The unit did not establish and maintain a file to record counts for any of the segmented inventory.
  • The unit did not have the required bait money orders for [redacted]. Bait money orders, when stolen and cashed, help law enforcement identify and apprehend criminals.
  • The postmaster, supervisor, and four of five RAs were missing required duplicate key and password envelopes used to open the cash drawer of an employee who is not present.
  • The safe used to store the stock was unlocked, open, and accessible to all employees and the public. Also, the door between the customer lobby and the retail unit was open, providing public access to the retail floor stock and mobile Point of Sale inventory.
  • A former supervisor no longer assigned to the office still had active roles in the retail sales system.
  • The unit did not promptly record stock shipped by the Stamp Distribution Center.

The postmaster stated he was unaware of his financial responsibilities. If controls over inventory and cash are not followed, there is an increased risk of undetected theft and losses. We referred these issues to the OIG’s Office of Investigations for further review.

As a result of our audit, management established all required accountability files; assigned bait money orders; created envelopes to secure the key and password; instructed unit personnel to secure the retail counter and store mobile Point of Sale inventory in the vault each night; and deactivated inactive employee roles in the retail system. Management also informed us that the Capital Metro Area Remediation Team was on site to ensure all identified deficiencies will be addressed.

Furthermore, as a result of our overall work regarding segmented inventory accountability, management advised us 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 a process to ensure postmasters are aware of their financial responsibilities for retail floor stock, including stamp stock shipments, and other accountability segments; implement procedures to maintain security over accountable items stored in the Post Office’s vault, and ensure RAs accept credit or debit card payments only for mobile Point of Sale transactions.

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