Our objective was to determine whether controls over unit reserve stamp stock accountability were adequately designed and operating effectively.
We received a hotline allegation regarding suspicious fraudulent transactions involving stolen stamps from the North Kenner, LA, Station. An initial investigation confirmed that a Postal Service unit manager had access to large quantities of postage stamp inventory. Further, the manager circumvented controls and manipulated data records for unit reserve stock and sold stamps on eBay® at reduced prices. Unit reserve stock consists of all stamps, stamped paper, and philatelic products in a postal retail unit that has not been assigned to other areas within the unit.
The unit reserve stock at this retail unit fluctuated from just over $50,000 in April 2017 to over $630,000 by September 2018. The growth of this unit’s stamp stock reserve was inconsistent with normal post office operations as it indicated ordering of large volumes of stamps disproportionate with the sale of those stamps. Because of his position, preventive controls that were circumvented, and inadequate monitoring of stamp stock, the manager was able to manipulate data records to avoid detection of the improper activity.
Due to the issues identified at this unit, we evaluated whether controls designed to address unit reserve stamp stock accountability for all the nearly 35,000 postal retail units were appropriate to reduce the risk of improper activity, and whether control gaps existed.
What the OIG Found
Controls over unit reserve stamp stock accountability were not always adequately designed and operating effectively. We found management did not:
- Monitor and manage through to resolution, units with excess (stamp stock greater than the unit’s authorized stock limit) and excludable (Christmas, philatelic, unsaleable and redeemed) stamp stock.
- Review orders that exceeded authorized stock limits as required.
- Monitor units that placed more than the maximum allowed of three stock orders per month.
This occurred because controls were not established to require these actions. In addition, from January 2017 to September 2018, we found the manager at the North Kenner Station:
- Accepted stock shipments without a witness to confirm receipt of the stamp stock as required. This occurred because management was not required to review the stock shipment forms to verify they included witness signatures.
- Conducted 27 unit reserve stock counts between April 27, 2017, and September 21, 2018, when only one count was required annually. Further, these counts were conducted without a second individual as required. This occurred because a supervisor shared his password with the manager, who used it inappropriately to falsify count verifications.
As a result, the manager at the North Kenner, LA, Station knowingly and willfully converted, for his own use, postage stamps valued at more than $636,000. The manager pleaded guilty to misappropriation of postal funds. He was sentenced to 30 months imprisonment and ordered to pay over $600,000 in restitution to the Postal Service.
We evaluated Postal Service stamp stock records to determine whether there were other units with questionable stamp stock levels. The data identified 17 additional postal retail units with $2.5 million in excess stamp stock, and nine additional units with $1.7 million of questionable levels of excludable stamp stock. Although we did not validate the data for these 26 sites, the additional inventory provides an opportunity for theft to occur without raising suspicion or detection.
In October 2018, Postal Service management researched how the manager manipulated controls over unit reserve stamp stock and continues to evaluate options to address identified control gaps. They started monitoring units with excludable stamp stock while exploring other initiatives, including elimination of the unit reserve excludable stamp stock category from stamp stock reports. Effective May 15, 2019, management implemented a follow-up process for units with questionable levels of excess or excludable stamp stock. Additionally, they began developing a control to review and approve stock orders that exceed authorized limits.
While their initial actions start to address the missing policies over unit reserve stamp stock, additional opportunities exist for management to enhance controls.
What the OIG Recommended
We recommended management:
- Periodically evaluate the effectiveness of the newly implemented procedures for excess and excludable stamp stock and implement additional changes as necessary.
- Implement controls to require approvals for stamp stock orders that exceed authorized dollar and number limits.
- Establish a control to require management outside the unit’s stock accountability process to monitor that stock shipments are verified with a witness.
- Monitor and determine reasonableness of units that conduct excessive stock counts and notify the U.S. Postal Service Office of Inspector General when appropriate to investigate potential fraud, waste, and abuse.
- Define in Handbook F-101, Field Accounting Procedures, how retail employees are held accountable for password sharing and communicate it to all employees with retail responsibilities.
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Source: USPS Office of Inspector General