Working Together 

To Build An Efficient And Effective 

Postal Service

OFFICE OF INSPECTOR GENERAL 

1-877-OIG-HOTLINE
A Message from the

Inspector General

KARLA W. CORCORAN

Inspector General

I

am pleased to report that as our fifth year as an independent Office of

Inspector General (OIG) comes to an end, we have continued to provide

the Postal Service with the critical information it needs to improve its

operations and remain viable in an increasingly challenging environment. I

am particularly proud of our employees’ response in the wake of the terrorist

attacks of September 11 and recent cases of mail being used for bioterrorism.

Many Postal Service, Inspection Service, and OIG employees were among

those ordinary people who demonstrated extraordinary heroism in the aftermath of these attacks. The OIG has been working side-by-side with Postal

Service management and the Inspection Service to ensure the mail that

binds our nation together gets through—safely and securely—and that those

who misuse the mail are brought to justice. Inserted in this report is a copy

of our new Hotline poster, which incorporates the Postal Service’s United We

Stand stamp. This poster is symbolic of our commitment to assisting the

Postal Service, no matter how great the challenge.

These recent events, which have affected us all, emphasize the tremendous importance of accountability for government agencies. It is essential

that we be held to the highest standards, so we better serve the American

public. Based on the work we have completed since our inception and the

knowledge we have gained of the Postal Service, we have identified what we

believe are the most challenging issues it faces. These issues are discussed in

detail on pages 9 through 14.

To ensure accountability, we keep Congress, the Governors, and Postal

Service management informed of our work and alerted to potential areas

where the Postal Service could be more economical and efficient. During

this reporting period, we provided three written statements to Congress. In

these statements, we identified areas where the Postal Service could improve

its performance and accountability in the areas of strategic decision-making,

financial management, contracting, labor management, and computer security and privacy. In addition, we recommended that the Postal Service continue to address opportunities to improve its critical management practices.

We urged Congress to provide strategic direction about the Postal Service’s

role in the 21st century. 

The Postal Service experienced a change in leadership in June when

John E. Potter replaced William Henderson, becoming the 72nd Postmaster

General of the United States. We look forward to working with Mr. Potter,

and we thank Mr. Henderson for his leadership and support during his term. 

The OIG also experienced a change in leadership this reporting period.

Thomas Coogan was appointed Deputy Inspector General, replacing Sylvia

Owens, who retired; Wayne Goleski was appointed Assistant Inspector General for Internal Business; John Seeba was appointed Assistant Inspector

General for Financial Management; and Norman Hancock, an Assistant

Inspector General, retired after 33 years of federal service. The leadership of

our senior management will be key as we work with the Postal Service to

address its many challenges in the months ahead. 

Standing United with the Postal Service
This Semiannual Report to Congress sets forth the significant activities and accomplishments

of the OIG and the Inspection Service from April 1, 2001, through September 30, 2001. This report

details the efforts of the OIG toward combating fraud, waste, abuse, and mismanagement within

the Postal Service; and fulfills our reporting requirement under the Inspector General Act and

Inspection Service requirements under the Mail Order Consumer Protection Act. In this reporting period, the OIG issued 175 audit reports, 138 management advisory reports and other products,

and closed 57 investigations. Our efforts resulted in more than 370 written products to strengthen

Postal Service programs and operations.

We understand the significant challenges the Postal Service faces as a result of recent

events. The OIG is committed to supporting the Postal Service’s efforts to protect the public and

its employees and ensure the safety of the mail. We will continue to carry out our mission by providing critical information to Congress, the Governors, postal management, and postal stakeholders. I am confident that this information will allow the Postal Service to continue binding the

nation together by providing the public with the trusted service America has relied on for more

than 200 years.

Sincerely,

Karla W. Corcoran

October 31, 2001

PAGE2 A MESSAGE FROM THE INSPECTOR GENERAL

John E. Potter, a 23-year postal

employee, is sworn in as the 72nd

Postmaster General of the U.S. Postal

Service.
PAGE3

Table of Contents

EXECUTIVE SUMMARY............................................................................................5

MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE ............................9

PERFORMANCE REVIEWS......................................................................................15

Office of Inspector General ........................................................................16

◆ Accepting and Processing ......................................................................16

◆ Transportation..........................................................................................17

◆ Delivery ....................................................................................................18

◆ Marketing ................................................................................................19

◆ Legislative, Regulatory & Policy Reviews..............................................19

Inspection Service........................................................................................21

FINANCIAL MANAGEMENT REVIEWS ..................................................................23

Office of Inspector General ........................................................................24

◆ Financial-Related Reviews......................................................................24

◆ Contracting and Facilities Reviews........................................................25

◆ Legislative, Regulatory & Policy Reviews..............................................27

Inspection Service........................................................................................29

TECHNOLOGY REVIEWS ......................................................................................31

Office of Inspector General ........................................................................32

◆ Developmental Reviews..........................................................................32

◆ Information Systems................................................................................34

◆ Systems Development Reviews ..............................................................35

◆ eCommerce ..............................................................................................35

◆ Computer Intrusion Activities................................................................36

Inspection Service........................................................................................39

LABOR MANAGEMENT REVIEWS ........................................................................41

Office of Inspector General ........................................................................42

◆ Workplace Environment Reviews..........................................................42

◆ Human Resource Process Reviews ........................................................42

◆ Health Care Reviews ..............................................................................43

◆ Legislative, Regulatory & Policy Reviews..............................................44

Inspection Service........................................................................................45

OVERSIGHT OF THE INSPECTION SERVICE AND

OTHER SIGNIFICANT ACTIVITIES........................................................................47

Office of Inspector General ........................................................................48

◆ Oversight of the Inspection Service ......................................................48

◆ Other Significant Activities....................................................................49

Inspection Service........................................................................................51

CUSTOMER SERVICE ............................................................................................53

Office of Inspector General ........................................................................54

◆ External Communications ......................................................................54

◆ Specialized Services ................................................................................57

Inspection Service........................................................................................59
PAGE4 TABLE OF CONTENTS

GOALS AND STRATEGIES ....................................................................................61

Office of Inspector General ........................................................................62

Inspection Service........................................................................................66

ORGANIZATIONAL DYNAMICS ............................................................................67

Office of Inspector General ........................................................................68

◆ Notable OIG Achievements ..................................................................71

◆ Challenges Facing the OIG ....................................................................73

Inspection Service........................................................................................75

ORGANIZATIONAL STRUCTURE ..........................................................................77 

Office of Inspector General ........................................................................78 

◆ OIG Field Locations................................................................................82

Inspection Service........................................................................................83

APPENDICES ........................................................................................................85

Appendix A - Reports Issued to Postal Management ..............................86

Appendix B - Findings of Questioned Costs ............................................98

Appendix C - Recommendations That Funds Be Put to Better Use....100

Appendix D - Reports with Significant Recommendations Pending

Corrective Actions ..........................................................101

Appendix E - Investigative Statistics......................................................104

Appendix F - Summary of Postal Service Investigative Activities

Under 39 USC § 3013 ....................................................105

Appendix G - Closed Congressional and 

Board of Governors’ Inquiries ..........................................109

Appendix H - Inspector General Testimony, September 20, 2001 ......112
Executive Summary

PAGE 5

When was the OIG established for 

the Postal Service? 

Congress created the Office of Inspector General in

1996. Karla W. Corcoran was sworn in as the

Postal Service’s first independent Inspector General

on January 6, 1997. She has a 7-year appointment

in this position.

DID YOU 

KNOW?
EXECUTIVE SUMMARY

This Executive Summary provides a synopsis of the work reported during this 6-month

period. This issue of our Semiannual Report

addresses the major issues facing the Postal Service and the work performed by the OIG that

help improve postal operations. It also provides

a general overview of Inspection Service operations and specific examples of work related to

the detection and prevention of fraud, waste

and abuse.

The OIG is responsible for conducting all

audits of Postal Service programs and operations. In addition, the OIG, along with the

Inspection Service, conducts investigations to

prevent and detect fraud, waste, and abuse

affecting the Postal Service. Both conduct

investigations that play a vital role in helping

the Postal Service make improvements. Work

performed by the OIG and the Inspection

Service is included in this report in order to

present Congress and the Governors a unified

report of the Postal Service’s efforts to combat

fraud, waste, abuse, and mismanagement.

In this, the OIG’s tenth Semiannual

Report, the work has been categorized into six

subject areas: performance, financial management, technology, labor management, oversight

of the Inspection Service and other significant

reviews, and customer service. These six areas

include OIG work addressing the following 10

major management issues facing the Postal Service:

◆ physical security and safeguarding the

mail.

◆ maintaining customer confidence;

◆ resolving workforce and workplace issues;

◆ controlling costs;

◆ protecting revenues;

◆ managing acquisitions;

◆ leveraging technology;

◆ ensuring data integrity and reliability;

◆ maintaining information security and

customer privacy; and

◆ balancing public service and commercial

enterprise.

The following highlights the accomplishments of the OIG and Inspection Service under

the specific subject areas:

(1) Performance focuses on the critical core

business processes needed to succeed in a competitive environment. The OIG conducted 26

reviews in this area, including projects that will

help save the Postal Service about $25.9 -

million in current and future years. A few

examples of OIG work in this area included:

◆ Identifying inaccurate or unsupported

financial data and contractual vulnerabilities in a major transportation agreement. 

◆ Determining that the outsourced Mail

Transport Equipment Service Center

Network would cost the Postal Service

$1.1 billion more than current in-house

processing, rather than saving the Postal

Service $300 million as projected.

◆ Determining that the Postal Service

could save an additional $15.9 million

for its Bulk Fuel Purchase Plan by

bringing the fuel program in-house. 

◆ Identifying that the Postal Service could

save $10 million in stamp printing costs

by reducing FY 2002 requirements

projections by 3.5 billion stamps 

to meet demand. In addition, the Postal

Service destroyed about 462 million

stamps, costing $1.4 million to produce,

instead of redistributing them for sale at

other post offices. 

◆ Investigating several schemes used by

a presort mailer to defraud the Postal

Service, including bribery, postage meter

fraud, alteration of presort qualification

reports to reflect less postage owed to the

Postal Service, and hiding unqualified

mail in large quantity mailings. As a

result of the investigation, six owners

and managers of one of the largest

presort mailers in the New York Metro

Area were convicted on mail fraud and

racketeering charges.

PAGE6 EXECUTIVE SUMMARY

This Executive Summary highlights the

Office of Inspector General (OIG) and

Inspection Service accomplishments from

April 1, 2001, through September

30, 2001, that are contained in this Semiannual Report to Congress.

Management Committee and Deputies
PAGE7

The Inspection Service conducted numerous

investigations in the area of mail theft,

resulting in arrests of over 360 employees and

almost 2,550 non-employees or contractors.

(2) Financial management incorporates financial-related reviews, financial opinion work,

and contracting and facilities reviews. The

OIG completed 201 reviews and investigations

that identified over $167 million in questioned

costs. In addition, OIG investigations resulted

in 1 conviction, 2 indictments, and recoveries

and restitution of over $1.2 million, which

included:

◆ Identifying approximately $167 million

in contract costs that were questioned or

considered unsupported. 

◆ Identifying non-compliance with Postal

Service instructions and minor weaknesses in internal controls at 23 of 70 postal

facilities reviewed.

◆ Investigating a contractor that received

duplicate payments to operate a Postal

Service retail outlet. The contractor

agreed to an administrative settlement to

repay the Postal Service over $73,000.

◆ Identifying that the Postal Service

allowed contractors to remove almost $1

million in refrigerants without ensuring

that the refrigerants were credited to the

Postal Service’s stockpile account.

◆ Determining that a construction

company overcharged the Postal Service

approximately $228,000 by inflating

quantities of materials used in the

construction of Postal facilities. 

In addition to other work, the Inspection

Service reported:

◆ Revenue investigations that resulted in

33 arrests and 53 successful criminal

convictions.

◆ Initiating 370 employee embezzlement

investigations, which documented losses

of over $2.6 million.

(3) Technology encompasses reviews of developmental systems, computer security, electronic commerce, and computer intrusion detection activities. The OIG performed 23 reviews

and investigations in this area. Some of the

more significant OIG activities included:

◆ Determining that several major Postal

Service projects were not adequately

validated and were approved without

consideration of all test results. The audit

also disclosed that there was not adequate support for savings and costs

methodology, or complete cost estimates

for spare parts. 

◆ Determining that the work hour impact

of the Tray Management System did not

justify the cost of deployment and that

the total volume increases and work

hour reductions experienced were not

materially different than those at

comparable facilities without systems. 

◆ Initiating a comprehensive review to

examine four systems under development

by the Postal Service. This review

identified concerns about insufficient

planning and documentation, inadequate

requirements definition, lack of end-user

involvement throughout the process,

incomplete test plans, and lack of

validation testing.

◆ Identifying improvements to the

management and security of the Postal

Service’s website, USPS.com.

◆ Responding with the Postal Service

Computer Incident Response Team to

Code Red II worm infections of Postal

Service networks. 

◆ Conducting network vulnerability assessments that noted various weaknesses in

the security of 20 Postal Service systems. 

In addition to other work, the Inspection

Service reported it is:

◆ Continuing to review security clearance

requirements for all Postal Service new

electronic products, including: eBillPayTM, NetPostTM Mailing Online, and

NetPostTM Certified, and enterprise

public key infrastructure. 

◆ Evaluating the risks associated with

contractor employees having access to

sensitive customer information and the

appropriate security clearance for those

individuals.

(4) Labor management focuses on issues

related to violence in the workplace, workplace

climate, health care, and workplace safety.

During this reporting period, the OIG conDID YOU 

KNOW?

When was the first

postage stamp created? 

The world’s first postage

stamp, the Penny Black,

was introduced by Great

Britain in 1840. 
PAGE8

ducted 85 reviews and investigations in this

area, which included:

◆ Identifying tense and stressful work

environments at four postal locations,

which occurred because of abusive

management styles and aggressive

measures used by managers to improve

employee performance. 

◆ Identifying that employees remained

on administrative leave beyond 30 days,

resulting in $249,000 in unnecessary

costs. 

◆ Investigating several medical providers

engaged in widespread conspiracies to

defraud health care programs managed

by the federal government, resulting in

six convictions of physicians for violations related to health care fraud. 

◆ Identifying that supervisors did not

always request authorization before

providing leave benefits to employees

and staff did not always properly monitor

and accurately calculate this benefit for

employees. 

The Inspection Service work included assisting

the OIG in investigations of fraudulent claims

and receipt of workers’ compensation benefits

by individual employees. These investigations

resulted in 25 arrests and over $46 million in

cost savings.

(5) Oversight of the Inspection Service and

Other Significant Activities. In this area, the

OIG completed 13 reviews of the Inspection

Service, and 21 investigative efforts and

reviews of other significant issues related to

Postal Service operations, which included:

◆ Determining that the Postal Service

could put approximately $2 million

to better use over the next five years

by utilizing less costly non-criminal

investigative Postal Service personnel to

conduct service investigations that do

not involve criminal violations. 

◆ Identifying that the Inspection Service

investigations of fraudulent activity

directed at other government agencies

primarily benefited the other agencies

with little financial benefit to the Postal

Service. 

◆ Investigating a postal executive who

inappropriately used a government issued

credit card to make rent payments in

excess of $40,000, rent cars for approximately $13,000, and take roughly $3,500

in cash advances for personal use. 

◆ Confirming allegations of sexual harassment by a Postal Service executive. 

◆ Conducting background investigations

on several candidates for the position of

Postmaster General. 

The Inspection Service conducts numerous

investigations covering significant issues in the

areas of physical security; narcotics offenses and

trafficking; child exploitation; prohibited mail;

postal burglaries; and mail fraud including fraud

against consumers, fraud against businesses,

and fraud against government; and money

laundering.

(6) Customer service focuses on the OIG and

the Inspection Service efforts to provide customer service, including support functions to

enhance service to internal customers and

Hotline operations.

(7) Organizational dynamics focuses on the

OIG and the Inspection Service vision, values,

culture, and diversity.

(8) Organizational structure focuses on the

OIG and the Inspection Service headquarters

and field structure.

EXECUTIVE SUMMARY

Special Agents Aaron Jordan, Susan

Moats, Gary Cherry and Roger Holland

were named “Outstanding Law

Enforcement Officers of the Year” by

the U.S. District Attorney’s Office,

Southern District of Florida. 
Major Management Issues

Facing the Postal Service

Does the OIG do more than audits and investigations? 

Yes, the OIG does work in related areas such as management

consulting services. Consulting services may involve finding

answers to questions, developing solutions to problems,

recommending courses of action, or formulating an opinion.

Postal Service management may request consulting services

from the OIG at any time.

DID YOU 

KNOW?

PAGE 9
MAJOR MANAGEMENT

ISSUES FACING THE

POSTAL SERVICE

As the Postal Service entered FY 2002,

it projected a loss of $1.35 billion

following an FY 2001 estimated $1.65

billion loss. After the terrorist attacks of

September 11, 2001, and the anthrax bioterrorism threats, the Postal Service expects to incur

an additional $2 billion loss to its business

because of a significant decline in mail volume.

The Postal Service recently requested an appropriation from Congress to help them cover

additional expenses for mail sanitization, security equipment, and to replace lost or damaged

facilities and equipment. The Postal Service

took this action because it believes users of the

mail should not be burdened with these additional costs through higher postage rates.

Although the requested appropriation will assist

the Postal Service with operational costs in the

coming year, long term issues facing the Postal

Service from loss of mail volume, customer

confidence, and employee safety issues still need

to be addressed.

The OIG believes the ten major issues

facing Postal Service management at this time

are:

◆ physical security and safeguarding the

mail; 

◆ maintaining customer confidence;

◆ resolving workforce and workplace issues;

◆ controlling costs;

◆ protecting revenues;

◆ managing acquisitions;

◆ leveraging technology;

◆ ensuring data integrity and reliability;

◆ maintaining information security and

customer privacy; and

◆ balancing public service and commercial

enterprise.

These issues, their significance, and the key

OIG projects that address them are included in

this section. 

PHYSICAL SECURITY AND

SAFEGUARDING THE MAIL

Biohazardous material found in the mail

has made securing the nation’s postal system a

foremost concern. The Postal Service faces the

challenge of moving the mail efficiently and

economically while effectively safeguarding

postal employees and customers from hazardous

substances introduced into the mail stream. The

Postal Service must be proactive in gathering

and quickly sharing relevant information with

all stakeholders. The Postal Service has already

announced plans for a program to sanitize the

mail. This program will require procuring new

equipment and changing processes to accommodate its use. This will impact facility floor

plans and staffing requirements. To better protect its employees, the Postal Service must also

reassess its facility designs, especially the ventilation systems, maintenance practices, and

emergency response and evacuation procedures.

To assist the Postal Service address these

issues, the OIG will:

◆ Review the Postal Service’s emergency

response plan

◆ Evaluate the purchase and deployment of

equipment to sanitize mail

◆ Assess efforts to strengthen transportation security

MAINTAINING CUSTOMER

CONFIDENCE

The recent anthrax contamination of the

mail has threatened customer confidence in the

Postal Service’s ability to continue to provide

safe and secure mail services. This has occurred

at a time when the Postal Service is promoting

itself as the gateway to the American household, which is a unique asset that can be leveraged in the face of increasing competition.

Unless the Postal Service is able to develop

products and services that will ensure the public

that the mail can be delivered safely, mail volumes may continue to decrease. 

Any decline in customer confidence will

make it difficult for the Postal Service to maintain its position as a self-supporting provider of

universal postal services at reasonable rates.

Greater numbers of customers may seek services

other than traditional mail, such as electronic

PAGE10 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE

The Postal Service provided its employees with up-to-the-minute information

about the risks associated with anthrax

and the best methods for handling mail.

When was the last time the

Postal Service received tax

money to cover operating

expenses?

The Postal Service had not

received tax money for operating

expenses since 1982. However, it

recently requested an appropiation

to cover terrorism-related costs.

DID YOU 

KNOW?
PAGE11

delivery services, and the Postal Service will

need to balance its customer service with its

limited resources. To assist the Postal Service in

addressing this issue, the OIG:

◆ Is evaluating mail security and

sanitization procedures

◆ Evaluated certified mail handling and

scanning procedures

◆ Assessed Express Mail service

◆ Reviewed commercial air carrier

reliability 

RESOLVING WORKFORCE AND

WORKPLACE ISSUES

With almost 900,000 full and part-time

employees, work environment and labor relations improvements are key to maximizing

employee and organizational performance. The

issue of health and safety of employees is

particularly critical as the Postal Service works

to address the incidents of anthrax in the mail

stream. The efficiency and effectiveness of

Postal Service efforts to communicate with

employees and safeguard them against the

threats of anthrax could have a major impact on

worker morale and productivity, thus impacting

the Postal Service’s ability to effectively deliver

the mail. 

Further, the Postal Service has historically

had significant labor relations issues that

impeded its ability to efficiently manage their

operations. With responsibility for more than

38,000 facilities, major transportation networks,

and universal delivery, the Postal Service faces

significant challenges in the areas of health and

safety. In addition to the direct costs and loss of

productivity resulting from accidents and injury

compensation medical costs, the Postal Service

is now subject to citations and monetary penalties for noncompliance with the Occupational

Safety and Health Act. 

To assist the Postal Service in addressing

these issues, the OIG:

◆ Is auditing efforts to protect employees

from biohazards

◆ Is reviewing the Associate Supervisor

Program

◆ Is reviewing succession planning

◆ Is auditing the Postal Service’s

management of staffing complements

◆ Investigated allegations of provider

health care fraud

◆ Reviewed workplace environment issues

CONTROLLING COSTS

Even before the recent terrorist attacks, the

Comptroller General of the United States cited

the Postal Service’s deteriorating financial condition as one of the reasons for placing the

Postal Service on the General Accounting

Office’s High Risk List. He emphasized the

Postal Service’s need to control costs and

improve productivity. The terrorist attacks have

further stressed Postal Service’s abilities to meet

these challenges because of increased labor and

equipment costs associated with improved

safety and security measures. In addition, the

cost of maintaining and servicing a growing

universal delivery network has escalated. The

growth in workload has required considerable

expansion of the infrastructure necessary to

support the universal service mission. In addition, Postal Service faces increased costs as a

result of binding arbitration awards, cost of living adjustments, rising health care premiums,

and worker’s compensation claims. 

The recent softening economy has also had

a negative impact on postal finances.

Addressing this shortfall, the Postal Service

acted early in FY 2001 to freeze capital investments in needed new facilities and facility

improvements. However, deferring these

expenditures cannot be sustained over the long

term and cannot substitute for needed revenue

growth. The recent purchase and deployment of

new technology to sanitize the mail will also

place considerable strain on already scarce

postal resources.

To assist the Postal Service in addressing

this issue, the OIG:

◆ Is evaluating the reasonableness of

contractor costs to sanitize the mail

◆ Is evaluating the cost and productivity of

flats processing operations

◆ Assessed the bulk fuel purchase plan

◆ Audited stamp printing volumes

◆ Evaluated the Mail Transport Equipment

Postmaster General Jack Potter

speaks to OIG employees at the

September All-Hands Meeting.
Service Network

◆ Audited a major transportation

agreement

PROTECTING REVENUES

Before the terrorist attacks, the Postal

Service reported that revenue had been

impacted by the downturn in the economy.

After September 11, the Postal Service reported

a loss in revenues of $327 million, at a time

when the Postal Service depends on the Fall

mailing season to generate a majority of its

annual revenue. Even before the terrorist

attacks, the Postal Service was concerned about

a loss of revenue having ended FY 2001 with an

estimated loss of $1.65 billion. Losses of this

magnitude threaten affordable, high quality,

universal service on a self-sustaining basis. The

Postal Service has attempted to introduce new

products and services to increase revenues but

these efforts have not generated significant revenues. In addition, competitors have questioned

whether it is appropriate for a government

entity with monopoly protection to provide

nontraditional commercial products and services. 

To assist the Postal Service in addressing

this issue, the OIG:

◆ Is assessing the Postal Service processes

for responding to the recent crisis

◆ Is assessing the role of the marketing

group

◆ Is evaluating the profitability of postal

retail stores

◆ Is reviewing Postal Service sponsorship

programs

◆ Validated the Postal Service process for

reporting cost and revenue data

MANAGING ACQUISITIONS

The Postal Service administers over

$15 billion a year in contracts for essential goods

and services, including facilities, transportation,

mail processing equipment, and supplies. Over

the last four years, audits and investigations

disclosed that poor contracting practices have

resulted in more than $400 million in monetary

findings, including fraud, waste, abuse, mismanagement, and other recoveries on postal

contracting programs. 

These issues are particularly important, as

the Postal Service recently adopted expedited

procedures to award contracts to purchase

equipment and services to deal with the biohazard threat. In carrying out these expedited purchases, the Postal Service should attempt to

ensure the purchases are cost effective and that

its interests are otherwise protected. 

The Postal Service needs to take aggressive

steps to ensure that appropriate monitoring and

oversight exist and that systems and data are

available to validate contractor charges for services rendered. Quality assurance, staffing, and

training of contracting officials impact the

Postal Service’s ability to properly monitor work

performed by contractors.

To assist the Postal Service in addressing

this issue, the OIG: 

◆ Is reviewing expedited contracts for

equipment and services needed to deal

with bioterrorism threats

◆ Is reviewing sole source contracting

practices

◆ Conducted 21 audits of proposed and

incurred costs

◆ Reviewed responsibilities of contracting

officers

◆ Evaluated contracting for consulting and

auditing services

◆ Recommended better practices to protect

Postal Service contracting actions from

fraud

LEVERAGING TECHNOLOGY

The Postal Service depends on technology

to help move the mail. Further, as the Postal

Service addresses the anthrax threats, it is identifying and deploying technology that best fits

its operational requirements, is compatible with

existing systems, and ensures the security and

safety of its delivery processes. 

The Postal Service also continues to seek

ways of leveraging technology to improve its

service, productivity, and profitability. The

Postal Service must position itself to quickly

adapt to each new wave of technology to maintain its competitive position. In particular, the

Postal Service must adapt to the evolution of an

Internet-familiar customer base and the impact

this will have on its business. Some customers

PAGE12 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE

Dr. Devosh Kanjarpane educating OIG

employees about anthrax at a special 

All-Hands meeting.
PAGE13

expect the Postal Service to transition its services to the point where most, if not all, services

can be carried out on personal computers at the

office or at home. To address changing customer

needs, the Postal Service has committed

resources to ongoing development of an “information platform” to help ensure better data

management, track mail piece information,

improve communications between the Postal

Service and its customers, and provide activitybased costing. 

The large size and diverse nature of the

Postal Service’s customer base demands that

technology-based solutions are accessible, easy

to use, and competitive. Given the projected

revenue downturn in the coming year, the

Postal Service must vigorously pursue cost

savings by efficiently redeploying resources

replaced by new technology. Finally, all decisions on technology investments must be

scrutinized more closely and be based on

information that is current, accurate, and reliable. This is particularly important as the Postal

Service reviews several technologies to identify

an efficient, effective and safe method to sanitize contaminated mail.

To assist the Postal Service in addressing

this issue, the OIG: 

◆ Is reviewing the Postal Service’s

approach to identify and deploy technology to sanitize contaminated mail

◆ Is reviewing the Automated Seamless

Dispatch System

◆ Evaluated the Tray Management System

post acceptance work-hour savings

◆ Reviewed the process used to approve

capital projects

◆ Assisted Postal Service management in

responding to virus and worm attacks on

postal networks

ENSURING DATA INTEGRITY

AND RELIABILITY

Changes in technology and the business

environment emphasize the need for providing

timely, accessible, and accurate data relevant to

Postal Service decision makers. In light of the

recent appropriation request, the reliability of

Postal Service data has become more critical.

However, in many instances, the OIG has

found that the Postal Service does not

adequately capture or track the data necessary

to support effective decision-making. Given the

importance of data quality to setting postal

rates, the Postal Service must continue demonstrating to Congress, the Postal Rate

Commission, stakeholders, and the public that

it is making progress in improving the quality of

its revenue, cost, and service measurements.

Accurate measurement of mail volume and

operations remains a key ingredient in the

Postal Service’s efforts to improve and sustain

service performance.

To assist the Postal Service in addressing

this issue, the OIG: 

◆ Is validating the Postal Service

appropriation request

◆ Is evaluating the quality of data

supporting the ratemaking process

◆ Is assessing the reliability of the

information in Retail Data Mart

◆ Is evaluating the reliability of financial

and performance data for postal retail

stores

◆ Reviewed FY 2001 Information System

Controls at the Eagan Accounting

Service Center

◆ Evaluated the accuracy of reported

supplier diversity accomplishments

MAINTAINING INFORMATION

SECURITY AND CUSTOMER

PRIVACY

As computers become indispensable to the

Postal Service and its partners and customers,

reliance on automated systems increases the risk

of fraud, inappropriate disclosure of sensitive

data, and disruption of critical operations and

services. As the recent anthrax attacks on the

Postal Service have demonstrated, postal systems, including computer systems, are part of

the country’s critical infrastructure and must be

protected. Attacks on both government and

private industry websites serve to emphasize the

damage a computer security breach can do to a

brand’s integrity and an organization’s revenue

stream. Congress recently reemphasized these

risks by enhancing government authority to

address hacker attacks on government computer systems through the recent passage of the

How does the OIG handle

requests for information? 

Public requests for OIG information are processed pursuant to the

Freedom of Information Act by

OIG staff. These requests may

be made in writing, or the public

can review reports and other

information posted on the OIG

website at www.uspsoig.gov.

DID YOU 

KNOW?
PAGE14 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE

anti-terrorism act. 

Furthermore, postal electronic commerce

initiatives on the Internet raise concerns about

the adequacy of security. Success in this arena

will depend on the level of protection afforded

sites such as www.usps.com and programs that

operate in this environment, such as eBillPay,TM

NetPost Certified,TM The Postal Store,TM and

PosteCS.TM Most importantly, the Postal

Service needs to protect consumer information

that is collected and the guarantee of privacy

implicit in such undertakings.

To assist the Postal Service in addressing

this issue, the OIG: 

◆ Is assessing third party agreements and

security of business partners

◆ Is working with the FBI on a counterterrorism task force, and at the National

Infrastructure Protection Center

◆ Is working with the Postal Service to

identify critical infrastructure and

potential threats

◆ Conducted tests of server vulnerabilities

◆ Reviewed security access controls at the

Memphis National Customer Center

◆ Continued working with Postal Service

management in conducting comprehensive tests of critical postal computer

systems

◆ Evaluated security and privacy requirements for the Postal Service’s online bill

presentment and payment system

◆ Reviewed Internet privacy and disaster

recovery plans

BALANCING PUBLIC SERVICE

AND COMMERCIAL ENTERPRISE

Since the 1970 Postal Reorganization Act,

the Postal Service has been mandated to operate in a businesslike manner and has not

requested appropriations in recent years.

However, since the recent terrorist attacks the

Postal Service has been forced to ask Congress

for appropriated funds to cover extraordinary

expenses related to these events. In addition,

like other businesses, rising costs and the soft

economy of the past year have affected the

Postal Service. Revenue and mail volumes lag

behind projections. 

Recognizing the Postal Service’s difficult

financial position, both Congress and the

General Accounting Office have asked for the

development of a comprehensive Transformation Plan to serve as a long-term

blueprint for the Postal Service’s future. This

plan takes on increased importance as recent

events have demonstrated that the nation

depends on the Postal Service to keep people in

touch and drive the economy. 

To assist the Postal Service in addressing

this issue, the OIG: 

◆ Is reviewing the Transformation Plan

◆ Reviewed various pieces of proposed

legislation impacting the Postal Service

◆ Reviewed executive compensation by

examining the shared loan appreciation

program offered to executives who 

relocate

◆ Evaluated revised rules governing

commercial mail receiving agencies
OFFICE OF INSPECTOR GENERAL

Accepting and Processing Reviews

Transportation Reviews

Delivery Reviews

Marketing and Enabling Reviews

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

PAGE 15

Performance Reviews
OFFICE OF INSPECTOR

GENERAL

To deliver world-class service, businesses

and government agencies must excel in

performing their core business processes.

For the Postal Service, these core business

processes and systems encompass accepting,

processing, transporting, and delivering the mail

as well as marketing postal products and

services. During the past six months, the OIG

has completed 26 reviews of key and emerging

issues relating to the Postal Service’s performance of core business processes. The reviews

identified almost $1.4 million in unrecoverable

costs and opportunities to save about $25.9 

million during current and future years.

ACCEPTING AND PROCESSING

REVIEWS

On average, over 660 million pieces of mail

are accepted each day by the Postal Service in a

variety of ways, including collections from more

than 300,000 blue collection boxes, as well as

residential and business collection mailboxes.

Express Mail, First-Class Mail, and some Priority

Mail and periodicals are sorted at more than

470 processing and distribution plants, while

Standard Mail is generally handled at the

21 bulk mail centers. In order to ensure timely

and accurate delivery of mail, accepting and

processing equipment must be state-of-the-art.

Situations that result in delayed mail processing

must be vigorously evaluated and the underlying

causes must be promptly resolved. The processing of mail has been greatly impacted by recent

terrorist activities. Temporary closure of the

Washington, DC, processing center and other

facilities as a result of the anthrax contamination has caused the Postal Service to divert mail

to protect employees and customers from bioterrorism. To address this situation, the Postal

Service plans to purchase specialized equipment

designed to sanitize the mail and reduce the

threat of anthrax contamination. In addition,

the Postal Service continues to explore ways to

enhance the acceptance and processing of mail

through innovative automation. During the

past six months, the OIG conducted audits and

investigations in the accepting and processing

area, four of which are highlighted below:

INVESTIGATION LEADS TO 

$35 MILLION CIVIL FALSE 

CLAIMS LAWSUIT

An OIG investigation of contractor fraud

could lead to penalties in excess of $35 million.

The investigation confirmed allegations that a

postal contractor charged the Postal Service

millions of dollars for products that were falsely

certified as complying with Postal Service contract requirements. The investigation found

that the company provided defective mail drop

units, sorting tables, and other equipment that

posed potential safety hazards. As a result of

information uncovered by the OIG, the Postal

Service issued a directive to repair or remove

the equipment from service. The Department of

Justice has filed a civil fraud suit against the contractor, which could result in penalties in excess

of $35 million. 

MULTIPLE CONVICTIONS

RENDERED IN PRESORT MAIL

VENDOR CASE 

A joint investigation by the OIG and the

Inspection Service resulted in the conviction of

six owners and managers of one of the largest

presort mailers in the New York Metro Area on

mail fraud and racketeering charges. The

scheme included bribes paid to a postal manager, postage meter fraud, alteration of presort

qualification reports to reflect less postage owed

the Postal Service, and hiding unqualified mail

in large quantity mailings. The postal manager,

along with several other defendants, pled guilty

and are awaiting sentencing. 

PAGE16 PERFORMANCE REVIEWS

This section highlights audits, reviews, and

investigations performed by the OIG and

Inspection Service activities in the Performance area. Report numbers are shown in

parentheses after the narrative, as appropriate. Also, the OIG legislative and regulatory reviews are included at the end of

this section. In order to differentiate the

work reported by the OIG and Inspection

Service, the pages containing the activities

reported by the Inspection Service have

been color screened.

DID YOU 

KNOW?

How did the Universal Postal

Union begin? 

Postmaster General Montgomery

Blair initiated an international

conference on postal problems.

The meeting led to the formation

of the Universal Postal Union.

With 189 member countries,

the Universal Postal Union is

the primary forum for cooperation between postal services and

helps to ensure a truly universal

network of up-to-date products

and services.
ACCESS TO DELIVERY DATA

IMPACTED BY OUTDATED

SCANNING EQUIPMENT

The OIG found that a Pacific Area processing and distribution center was using old

scanning equipment that precluded the center

from participating in the Signature Capture

Program, which was designed to capture customers’ signatures after they have signed for

important mail. This data supports the signature confirmation service which provides proof

of delivery. The OIG recommended and Postal

Service management agreed to reemphasize the

proper procedures for processing signature capture mail. (OIG AC-MA-01-002)

IMPROVEMENTS NEEDED IN

PLANNING FOR MOVING PRIORITY PROCESSING CENTER

NETWORK

The OIG evaluated postal plans for assuming Priority Mail Processing Network operations from a contractor. The audit disclosed that

transition plans could be improved to avoid disruptions in service. In addition, the audit determined that the Postal Service would incur more

costs than expected to assume operation of the

network. Postal Service management agreed to

improve the plan in the areas of facilities, equipment, employees, and transportation. Postal

Service management also agreed to revise its

report to the Governors to more accurately

reflect the financial impact of the network transition. (OIG MK-AR-01-003)

TRANSPORTATION REVIEWS

Transportation of mail is a vital part of the

Postal Service’s mission of binding the nation

together by providing prompt, reliable, efficient, and universal mail delivery. To fulfill this

mission, the Postal Service spends in excess of

$5 billion annually for air, highway, rail, and

water transportation. In addition, under the

January 2001 agreement with FedEx to transport Express, Priority, and First-Class Mail, the

Postal Service is expected to provide more

reliable service, reduce costs, and manage future

cost growth. Contractors provide most

transportation; however, the Postal Service

operates its own fleet of trucks for some highway

routes. As a result of the terrorist attacks on

September 11, the Postal Service has to rely

more heavily on highway and rail transportation because of restrictions on carrying certain

types of mail on commercial airlines. During the

past six months, the OIG completed eight

transportation-related audits. Significant transportation audits and investigations are highlighted below:

REVIEW OF A TRANSPORTATION

AGREEMENT CHALLENGES

EXPECTED COSTS AND BENEFITS

During this reporting period, the OIG

issued a series of reports to the Postal Service

management identifying inaccurate or unsupported financial data and contractual vulnerabilities in a transportation agreement. These

reports concluded:

◆ The savings anticipated by Postal Service

management may not be realized because

not all of the financial data was accurate

or adequately supported. Further, contrary to its own procurement practices,

the Postal Service entered into a transportation agreement without first independently validating the financial data

used to justify the decision. The OIG

recommended and Postal Service management agreed to validate all assumptions and data used in the cost model for

determining the financial viability of the

agreement. (OIG TR-LA-01-001 and

OIG TR-MA-01-002)

◆ Security risks were not adequately

addressed in the contract. The OIG recommended the Postal Service amend the

agreement to include appropriate security

provisions. Postal Service management

stated that while the contractor’s management was not willing to change the

agreement, they indicated they would

comply with Postal Service security

requirements. This verbal commitment,

however, may not be enforceable by the

Postal Service under the terms of the

agreement. (OIG TR-MA-01-003)

PAGE17

The OIG conducts reviews of Postal

Service domestic and international

transportation operations. In 1890, 

the Postal Service used horse-drawn

wagons to transport the mail.
DECISION TO OUTSOURCE

SERVICE CENTER EXCEEDS

ANTICIPATED COSTS BY 

$1.4 BILLION 

An OIG audit determined that, rather

than saving the Postal Service $300 million as

projected, the outsourced Mail Transport

Equipment Service Center Network would cost

the Postal Service $1.1 billion more than current in-house processing. The increase in cost

was attributable to the Postal Service underestimating its requirements for transportation and

facility space, as well as the costs of start-up and

continuing operations. The Postal Service

agreed to conduct analysis of the program and

notify the Board of Governors of changes since

the original project was approved. The Postal

Service also agreed to strengthen language in

the investment policies and procedures for this

type of project. (OIG TR-AR-01-003)

IMPROVED MANAGEMENT OF

BULK FUEL COULD SAVE NEARLY

$16 MILLION

An OIG audit determined that the Postal

Service could save an additional $15.9 million

for its Bulk Fuel Purchase Plan by bringing the

program in-house. Postal Service management

agreed to determine the financial impact of

bringing the program in house and explore centralizing the fuel management program.

(OIG TR-AR-01-004)

VIDEO REPORT DEMONSTRATES

MAJOR MAIL BACKLOG 

An OIG audit determined that a commercial airline allowed over 600,000 pounds of

First-Class Mail, Priority Mail, and Express Mail

to remain unsecured at the Atlanta airport for

up to 7 days. During this time, more than

8,000 flights departed with no mail on board. In

addition, the audit disclosed that the Postal

Service did not collect damages resulting from

the mail backlogs. Using video equipment, the

OIG documented these conditions and prepared a video and written report. Postal Service

management agreed with OIG recommendations to establish a back-up plan for transporting

the mail through alternative means; assess damages when air carriers cause major disruptions;

and enforce applicable liquidated damages.

(OIG TR-AR-01-005 and

OIG TR-VR-01-001) 

MANUAL PAYMENTS ON RAIL

TRANSPORTATION CONTRACTS

NOT TIMELY

An OIG audit disclosed that untimely

manual payments to rail transportation contractors could potentially subject the Postal Service

to Prompt Payment Act interest and penalties.

The OIG recommended and Postal Service

management agreed to expedite the processing

of claims, quickly notify carriers of inadequate

documentation, and improve training and guidance on filing payment claims. 

(OIG TR-AR-01-006)

CONTRACTOR ARRESTED AFTER

FLEEING THE COUNTRY WITH

$680,000 IN STOLEN POSTAL

FUNDS

Through OIG investigative efforts, New

Zealand authorities arrested the owner of an air

carrier company for stealing $680,000 in funds

related to a postal contract. The owner fled to

New Zealand after receiving the postal funds.

He was subsequently indicted on charges of

theft of government property and money laundering. The contractor is facing extradition

back to the United States for prosecution. 

DELIVERY REVIEWS

Universal service—delivering mail to

everyone, everywhere in America, at uniform

rates—is the cornerstone of the Postal Service’s

mission. To fulfill this mission, the Postal

Service developed a delivery network of approximately 230,000 mail routes that are serviced by

nearly 300,000 letter carriers and almost

180,000 delivery vehicles. During FY 2000, the

Postal Service delivered almost 208 billion

pieces of mail to 136 million homes and businesses—a yearly average of 1,500 pieces of mail

for every household and business in America.

Even after the September 11 tragedy, the Postal

Service remained committed to providing 

universal service. In fact, during the subsequent

two months, the Postal Service delivered 35 billion pieces of mail. During the last six months,

the OIG issued the following delivery-related

reports:

PAGE18 PERFORMANCE REVIEWS

An OIG audit determined that the

Postal Service could achieve additional

savings by bringing its Bulk Fuel

Purchase Plan in-house. 
PAGE19

EXPRESS MAIL DELAYS AT A

SOUTHEAST AREA FACILITY

SUBSTANTIATED

In response to Hotline allegations, the

OIG found that some Express Mail was not

timely delivered to customers when Express

Mail operations were moved to a new location.

After the OIG began audit work, local Postal

Service management moved Express Mail operations back to the original location. However,

even after the operations were returned to the

original location, some classes of Express Mail

were not delivered in a timely manner. In

response to OIG recommendations, Postal

Service management agreed to take actions to

improve delivery. (OIG DE-AR-01-003)

BETTER JUSTIFICATION NEEDED

FOR REVISING RULES 

An OIG audit found that the Postal

Service relied on requests from law enforcement

agencies without independently validating the

need for revised rules governing commercial

mail receiving agencies that compete with the

Postal Service. Specifically, the Postal Service

did not document the need for regulatory

change by providing statistical or scientific data

to support its claims of mail fraud conducted

through private mailboxes. In addition, it did

not demonstrate how the regulations would

curb fraud and did not record alternatives to

revising the rules. To avoid negative public

perception of proposed rule changes, the OIG

recommended that in the future Postal Service

management develop supporting justification

that addresses the magnitude of the problem

and the cost implications associated with the

proposed changes. (OIG DE-AR-01-002)

POSTAL SERVICE RECAPTURED

ITS INVESTMENT IN DELIVERY

JEEPS IN THE CAPITAL METRO

AREA

An OIG audit disclosed that the Postal

Service recaptured its investment in jeeps in the

Capital Metro Area because the jeeps had surpassed their life expectancy by an average of

14 years. The jeeps were placed in service in the

1970s and early 1980s and had a life expectancy

of approximately 8 years. 

(OIG DE-AR-01-004)

MARKETING REVIEWS 

The Postal Service operates in a competitive environment. The Postal Service’s ability

to maintain or increase its market share is

essential to provide universal service at affordable rates. Therefore, the Postal Service designs

its products and features to build customer

awareness and loyalty. The Postal Service also

wants to ensure that its services are available at

places where customers choose to do business.

During this reporting period, the OIG

completed two reviews of marketing operations,

one of which is highlighted below: 

REDUCED STAMP PRINTING

REQUIREMENTS COULD SAVE

$10 MILLION FOR FY 2002

An OIG audit found that the number of

stamps to be printed in FY 2002 exceeded projected demand by 3.5 billion stamps. Reducing

the printing requirement will save the Postal

Service $10 million. In addition, the OIG identified about 462 million saleable stamps, costing

$1.4 million, that were destroyed instead of

being redistributed for sale at other post offices.

Postal Service management agreed to establish

more accurate printing and redistribution

requirements. (OIG MK-AR-01-002)

LEGISLATIVE, REGULATORY &

POLICY REVIEWS

During this reporting period, the OIG

identified legislation, regulations, and policies

affecting Postal Service performance. Some of

the legislation and regulations reviewed are

highlighted below.

PROPOSED LEGISLATION

Semipostal Stamps

Four bills are pending to require the Postal

Service that would establish semipostal stamps

with special rates higher than the current FirstClass rate in order to generate revenue to promote certain causes. S. 1256 and H.R. 2725, the

Breast Cancer Research Stamp Act of 2001,

would provide for the reauthorization of the

breast cancer research stamp. H.R. 2317 would

make the breast cancer research stamp permanent. H.R. 2907, the September 11th Families

Stamp Act, would provide for the issuance of a

semipostal stamp for the benefit of victims of

the terrorist attacks against the United States

DID YOU 

KNOW?

Are other non-postal

organizations permitted

to issue stamps? 

The United Nations is the only

non-postal organization in the

world that is permitted to issue

postage stamps.
on September 11, 2001. 

Last year, Congress enacted the Semipostal

Authorization Act, authorizing the Postal

Service to issue and sell semipostal stamps to

promote causes the Postal Service considers to

be in the national public interest. These bills are

inconsistent with selection procedures established by the Postal Service pursuant to the

Semipostal Authorization Act. 

H. R. 1169

This bill would allow professional fundraisers to jointly use the mailing permits of nonprofit organizations. Professional fundraisers

would be able to take advantage of the lower

postage rates currently available only to nonprofits. Currently, such relationships are

prohibited. The OIG is currently examining the

Postal Service’s cooperative mailings rules and

the financial impact the proposed legislation

may have.

H.R. 2543

This bill would direct the Postal Service to

decrease the minimum number of flights

required per week for small air carriers to

provide mail service to remote points in Alaska.

Delivery to remote and rural areas is central to

the Postal Service’s universal service mandate.

The impact of this legislation on the finances

and operations of the Postal Service should be

considered. 

S. 1110 

This bill would require that each ZIP Code

be located entirely within a state. Because ZIP

Codes identify delivery areas and are not

intended to correspond to state boundaries, this

legislation could affect the efficiency of postal

delivery operations in certain areas.

S. 1397 

This bill would authorize the Postal

Service, in the exercise of its authority to contract with an air carrier for the transportation of

mail by aircraft, to require air carriers to accept

as mail any shipments of live birds and other

animals. However, it does not apply in the case

of any air carrier who commonly and regularly

refuses to accept any live animals as cargo. The

bill would authorize the Postal Service to assess

a reasonable surcharge as postage to compensate

air carriers for any additional expense incurred

in handling such shipments. 

FINAL REGULATIONS

Semipostal Stamp Program, final rule. 

This final rule, effective June 12, 2001,

creates implementation regulations for the

Semipostal Authorization Act, which authorizes the Postal Service to issue and sell semipostal postage stamps. The final regulations

relate to: selection procedures; decision-making

authorities; number of stamps to be sold; and

costs to be offset. These regulations also

addresses the OIG’s audit recommendation that

Postal Service management establish criteria for

offsetting the cost to postal ratepayers of

producing semipostal stamps.

PAGE20

The OIG audits Postal Service transportation

initiatives, such as the FedEx agreement.
PAGE21

INSPECTION SERVICE

P

ostal Inspectors investigate mail theft to

maintain the public’s confidence in the

Postal Service and preserve the sanctity

of the mail. Postal Inspectors are working with

major mailers to prevent mail theft and related

problems. During this reporting period, Postal

Inspectors arrested over 360 employees and

nearly 2,550 non-employees or contractors for

mail theft. Mail theft targets include not only

items of obvious value in the mail, such as jewelry, computers, cash, credit cards, and checks,

but also mail containing personal and financial

information.

DID YOU 

KNOW?

What is philately? 

It is the collecting and study of

postage stamps and related items,

such as first-day covers—stamped

envelopes postmarked with the

stamp issue date.
PAGE22
Financial Management

Reviews

OFFICE OF INSPECTOR GENERAL

Financial-Related Reviews

Contracting and Facilities Reviews

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

PAGE 23
PAGE24

OFFICE OF INSPECTOR

GENERAL

The Postal Service is a $65 billion business that relies on strong financial management controls to maximize revenue

and minimize costs. In the past six months, the

OIG has completed 201 financial management

reviews and investigations. These efforts identified almost $167 million in questioned costs. In

addition, OIG investigations resulted in 1 conviction, 2 indictments, and over $1.2 million in

recoveries and restitution. These projects add

value to the Postal Service by identifying

opportunities for cost savings and improving

financial management, contracting, and facilities practices, and detecting and deterring fraud,

waste, abuse, and mismanagement.

FINANCIAL-RELATED REVIEWS

Financial-related audits examine areas that

have significant financial implications and offer

the Postal Service an opportunity to save

resources. The OIG has taken a proactive

approach to identify areas that offer potential

cost savings and improve postal operations. In

the past six months, the OIG has completed

103 financial related audits and 31 investigations. The most significant reviews and

investigations are highlighted below:

FINANCIAL OPINION WORK

CONTINUING

The OIG is continuing to conduct financial opinion work at three accounting service

centers and headquarters. These audits support

the independent public accounting firm’s

overall opinion of the Postal Service’s financial

statements. The results of the reviews will be

reported in the next Semiannual Report to

Congress. Since inception, the OIG served as

co-contracting officer’s representative with

Postal Service Finance for the work performed

by the independent public accounting firm.

However, beginning in FY 2003, the OIG will

be the sole contracting officer’s representative.

The OIG also continues to validate the

Cost and Revenue Analysis report used to allocate cost and revenue to classes of mail. As in

prior years, minor control issues were found.

CONTRACTOR EMPLOYEES PLEAD

GUILTY TO FRAUD 

As the result of an OIG investigation,

two former employees of a Postal Service contractor pled guilty to conspiracy, receiving

kickbacks, and tax evasion. Subcontractors paid

kickbacks in excess of $2 million to receive

subcontracts from the Postal Service, the

Department of Defense, and other government

agencies. Subcontractor invoices paid by the

government included approximately $800,000

in kickbacks remitted to a shell company. 

CONTRACTOR REPAYS POSTAL

SERVICE OVER $73,000

A contractor operating a Postal Service

retail outlet reimbursed the Postal Service for

over $73,000. This represented duplicate payments that were discovered by the Postal

Service Accounting Service Center and investigated by the OIG. The OIG found that after a

replacement contract was issued, payments for

the initial contract had not been cancelled,

resulting in overpayments.

INVESTIGATION SAVES

$120,000

A $150,000 claim was settled for $30,000

as a result of an OIG investigation. A private

citizen filed a tort claim lawsuit against the

Postal Service in connection with a broken

wrist sustained as a result of an accident on

postal property. The OIG investigation assisted

the Department of Justice in settling the claim

for a reduced amount. 

This section highlights audits, reviews,

and investigations performed by the OIG

and the Inspection Service in the financial

management area. Report numbers are

shown in parentheses after the narrative,

as appropriate. Also, the OIG legislative

and regulatory reviews are included at the

end of this section. In order to differentiate

the work reported by the OIG and Inspection Service, the pages containing the work

reported by the Inspection Service have

been color screened.

PAGE24 FINANCIAL MANAGEMENT REVIEWS

OIG employees review records during

a financial statement audit at a North

Carolina facility service office.
PAGE25

FY 2001 FINANCIAL

INSTALLATION AUDITS

The OIG conducted audits at 70 postal

facilities and found that financial information

was reasonably and fairly represented in the

accounting records, and internal controls were

generally in place and effective. However, at 

23 facilities, the OIG identified non-compliance with Postal Service instructions and minor

weaknesses in internal controls. The OIG

issued individual reports to address these issues

and will issue a summary report providing Postal

Service management with recommendations to

address systemic issues. (For specific reports see

Appendix A, page 87)

CONTRACTING AND FACILITIES

REVIEWS

The Postal Service manages approximately

$15 billion annually in contracts for essential

goods and services, including facilities, transportation, mail processing equipment, and supplies. This makes the Postal Service one of the

largest civilian contracting agencies in government. During FY 2001, postal purchases

included over $570 million in noncompetitive

contracts and over $310 million in credit card

purchases. The Postal Service is also one of

America’s largest owners, developers, and

managers of real estate, committing over

$320 million in FY 2001 for repair, renovation,

and construction of new facilities, and paying

over $920 million in rent. The planned commitment has been reduced from the prior fiscal

year because the Board of Governors requested

that the Postal Service management take

unprecedented action to immediately suspend

new construction, new leasing, and facility

expansion contract activity.

The OIG is responsible for contract audits

designed to assist Postal Service contracting

officers in determining fair and reasonable contract prices as well as providing them with

reviews of contractor financial systems. In the

past six months, the OIG conducted 46 reviews

of contracting and facilities-related issues with

the assistance of a contract audit agency, which

specializes in pre-award and post-award contract audits. Also, the OIG has many open

criminal investigations targeting fraud and

corruption in these areas. Highlights of the

most significant contracting and facilities

reviews are as follows:

CONTRACT AUDITS IDENTIFIED

OVER $167 MILLION IN

QUESTIONED COSTS

In the past six months, the OIG worked

with the Defense Contract Audit Agency to

complete 38 audits of contracts valued at over

$227 million. These audits resulted in approximately $167 million in questioned and

unsupported costs. The contract audits include:

incurred cost audits that evaluate the reasonableness of costs incurred by contractors; proposal audits that evaluate the reasonableness of

contractor cost estimates; defective pricing

audits that are performed to determine whether

contract prices significantly increased because

of defective contractor pricing data; and

contractor financial system audits, such as

accounting, estimating, and billing systems that

are reviewed to determine their adequacy to

account for contract costs. These audits which

are summarized in the graph in the margin

focused on whether contractors’:

◆ Proposed and incurred costs were

allowable and reasonable;

◆ Pricing data was accurate, complete,

and current; and 

◆ Accounting systems for allocating costs

to the Postal Service were adequate.

In addition to raising questions about cost,

the audits disclosed that a major contractor did

not have an adequate accounting system.

Inadequate accounting systems may affect the

accuracy of costs charged to Postal Service

contracts. Following is a summary of three significant contract audits completed in the last

six months:

◆ An audit questioned a contractor’s entire

price adjustment claim for over

$163 million. The audit disclosed

13 accounting and operating practices

that were inconsistent with what the

contractor initially proposed. The OIG

could not determine the impact of the

inconsistencies on the allowability and

reasonableness of the contractor’s costs

because the contractor did not provide

sufficient documentation. Because of the

absence of verifiable documentation to

support cost and pricing data, the OIG

questioned the entire claim amount.

Postal Service management has

Types and Number of Contract 

Audits Completed

OTHERS

SYSTEM REVIEWS

INCURED COSTS CLAIMS

PROPOSALS

16

9

6

5 2

The OIG completed 38 audits of contracts valued

at over $227 million
PAGE26

negotiated a settlement on this and other

claims litigated by the contractor.

(OIG CA-CAR-01-043)

◆An audit of a contractor’s $11.8 million

price adjustment proposal disclosed over

$1.6 million of questioned costs. In addition, the audit disclosed approximately

$340,000 of costs incurred and billed to

the Postal Service before a modification

was issued to allow such costs. The proposal is for installing equipment that will

collect, store, and analyze information

at 21 mail transport equipment service

centers. Even though the contractor’s

submitted cost or pricing data were

partially inadequate, the proposal was

acceptable for negotiating a fair and reasonable price. Postal Service contracting

officers are in the process of determining

whether to withhold questioned costs

identified by this audit. 

(OIG CA-CAR-01-049)

◆An audit of a contractor’s approximately

$7 million firm-fixed-price change proposal disclosed questioned costs of over

$708,000. The majority of the questioned costs were the result of applying a

10.4 percent reduction factor to proposed

subcontract cost based on historical savings achieved by the contractor in negotiations with its subcontractors. In addition, the subcontractor submitted an

updated proposal reflecting a lower price.

(OIG CA-CAR-01-069)

$1.1 MILLION RECOVERED FROM

CLASS ACTION SUIT

The Postal Service expects to recover millions of dollars in damages associated with

defective insulation applied to roofs of postal

facilities. To date, $1.1 million has been recovered through cooperation of the OIG and the

Postal Service. Two manufacturers concealed

the fact that certain roofing insulation corrodes

metal roofing decks. The Postal Service has

identified at least 58 facilities with defective

material installed on the roofs. 

REFRIGERANT VALUED AT 

$1 MILLION UNACCOUNTED FOR

An OIG audit found that the Postal

Service allowed contractors to remove almost

$1 million in refrigerants without ensuring that

the refrigerants were credited to the Postal

Service’s stockpile account. The report also

questioned the cost effectiveness of converting

additional units. The Postal Service has initiated actions to develop a more accurate inventory and assess the cost effectiveness of

converting additional units before expanding

the program. (OIG FA-AR-01-002)

POSTAL CONTRACTOR

WITHDRAWS $316,000 CLAIM

Claims of over $316,000 submitted by a

postal contractor were withdrawn following an

OIG investigation into overcharging. The

Postal contractor filed the claims for remodeling

an executive conference room at Postal Service

headquarters. In addition to withdrawing the

claim, the contractor agreed to pay False Claims

Act fines and penalties of over $89,000.

CONTRACTOR DEBARRED FOR

FRAUD

A construction contractor agreed to a 

3-year debarment from postal contracting following an OIG investigation. The construction

company overcharged the Postal Service

approximately $228,000 by inflating quantities

of materials used in the construction of postal

facilities. The company agreed to repay the

Postal Service for the cost of the investigation

but has subsequently filed for bankruptcy.

SUPPLIER DIVERSITY PROGRAM

STATISTICS UNRELIABLE

In response to a Governor’s request, the

OIG found that supplier diversity statistics for

FY 1999 were unreliable because prime-contracting dollars awarded to small, minority, and

woman-owned businesses were overstated, and

subcontracting statistics were unsupported and

unverified. Consequently, it was unclear

whether the Postal Service was achieving its

supplier diversity spending plans for FYs 1999

or 2000. Postal Service management agreed

with our recommendations to improve data

reliability and correct errors and the actions

they have taken or planned will address the

issues identified. (OIG CA-AR-01-005) 

POSTAL SERVICE REDUCES

SERVICE CONTRACTS

An OIG audit revealed that from

March 1999 until March 2001, the Postal

FINANCIAL MANAGEMENT REVIEWS

OIG investigative work aids Postal

Service efforts to recover millions of

dollars in damages associated with

defective insulation applied to roofs of

postal facilities. 
PAGE27

Service reduced consulting service contracts by

38 percent and associated costs by more than

$800 million. The OIG recommended and

Postal Service management agreed to promptly

revise the policies and procedures controlling

contracted services to ensure that as the Postal

Service reduces its workforce, it does not again

become overly reliant on contract services. 

(OIG CA-AR-01-004)

PURCHASING REGULATIONS

GENERALLY FOLLOWED

An OIG review found that most Postal

Service contracting officers’ representatives

were properly administering contracts.

However, the OIG found some isolated

instances where contracts were improperly

classified and managed. In addition, we found

in some instances contract work orders were

not issued, invoice certifications were not

performed as required, and contractors’ actual

performance periods exceeded the contract

completion dates. Further, the OIG found that

contracting officer’s representatives were insufficiently trained, improperly appointed and

terminated, and separation of duties was

inadequate. The OIG recommended and Postal

Service management agreed to make additional

improvements to the contract administrative

procedures with regard to transfer and management of contracts, and proper execution of

modifications, work orders, and invoice

certifications. (OIG CA-AR-01-002)

LEGISLATIVE, REGULATORY & 

POLICY REVIEWS

During this reporting period, the OIG

identified legislation, regulations, and policy

affecting Postal Service financial management.

Some of the legislation and regulations

reviewed are highlighted below. 

SUSPENSION AND DEBARMENT

OF CONTRACTORS

In testimony submitted to Congress during

the reporting period, the OIG noted postal policy and procedures regarding the suspension and

debarment of contractors for fraud need

improvement. Although the Postal Service

administers $15 billion in contracts and has had

numerous contractors convicted of fraud, only

three contractors are currently debarred. The

OIG believes this is caused, in part, because the

Postal Service requires a higher standard of evidence than is required anywhere else in the federal government. This elevated standard is not

required by law and inhibits the Postal Service

from protecting itself from fraudulent contractors. The OIG identified these problems to

Postal Service management over 2 years ago;

however, to date, no action has been taken to

revise the current procedures.

As a result of Congressional hearings held

over 20 years ago, federal laws and executive

orders were passed to ensure an effective and

uniform government-wide debarment system to

protect the government from contractors who

engage in fraud. The Postal Service does not

honor debarments by other federal agencies. As

a result, contractors who have been convicted

of defrauding other federal agencies, and have

been debarred from contracting with those

agencies, are free to contract with the Postal

Service. The OIG will continue to pursue this

matter with Postal Service management.

PROSECUTION OF KICKBACK

ACTIVITY

The OIG recommends that Congress

amend 41 U.S.C. §51 et seq., the AntiKickback Act, to include the Postal Service.

Recently, the OIG brought prosecution against

an individual who was engaging in kickback

activity on contracts involving the Postal

Service and various other agencies. The federal

agencies involved were able to prosecute this

individual under the Anti-Kickback Act. The

Postal Service, however, was limited to mail

fraud prosecution.

The substantial penalties assessed under

the anti-kickback statutes (10-year prison terms

and fines up to $250,000; $1,000,000 for business entities), would greatly help to deter kickbacks among prime contractors and their

subcontractors on postal-related contracts. The

significant fines would help to cover the costs

of obtaining convictions. The administrative

offsets authorized under the act would aid the

Postal Service in recovering inflated costs

charged by corrupt contractors to recoup

kickbacks.

The OIG will continue to pursue this matter and will make a formal recommendation to

Congress.

OIG auditors sample mail for cost and

revenue analysis tests.
PROPOSED LEGISLATION

H.R. 2547 — Erroneous Payments

Recovery Act of 2001

This bill would require certain executive

agencies to carry out a cost-effective program

for identifying any errors made in paying

contractors and for recovering any amounts

erroneously paid to contractors. The OIG

believes this legislation could be of benefit to

the Postal Service, however, as written, it would

not be applicable. The OIG is initiating work to

identify and recover erroneous payments. 

S. 1358 — Federal Facility Energy

Management Act of 2001

This act would revise Federal building

energy efficiency performance standards that

would require the Postal Service to become

more energy efficient. This bill incorporates the

Federal Energy Bank concept featured in S. 95,

which required the Postal Service and other

federal agencies to pay a percentage of its utility

payments to the Treasury to assist in financing

energy efficient projects. The act does not

require such payments from the Postal Service.

Unlike S. 95 it would not negatively affect

Postal Service finances. 

H.R. 2681— Davis-Bacon Enforcement

Act of 2001

The Davis-Bacon Act governs the wages

paid to workers contracted by the federal government to build or repair public buildings or

public works. This bill would amend the DavisBacon Act to provide that contractors who

have repeatedly violated the Act would have all

Federal contracts canceled, and be ineligible for

new contracts for a 10-year period. It would also

require disclosure of certain payroll information

under such contracts. 

The bill could provide the Postal Service

an additional tool for preventing this form of

fraud by debarring contractors who have

engaged in such activity. 

PAGE28 FINANCIAL MANAGEMENT REVIEWS
PAGE29

INSPECTION SERVICE

Within the financial management

area, the Inspection Service performs revenue investigations to

help ensure that Postal Service revenue is properly assessed and collected. Priority is given to

investigations of alleged schemes to avoid payment of postage and to identify, pursue, and

seek prosecutive actions against violators

through civil, administrative, and criminal

remedies.

Postal Inspectors focus on revenue investigations where there is customer intent to

defraud the Postal Service. In the last

six months, there were 33 arrests and 53 -

successful criminal convictions resulting from

revenue investigations.

Further, the Inspection Service investigates embezzlements involving employee theft

from cash drawers and schemes involving postal

money orders. Postal Inspectors initiated

370 investigations of employee embezzlement

this reporting period, which documented losses

of over $2.6 million. Examples of investigations

in this area are summarized below.

◆ A Kentucky mailer settled a false-claims

action with a $250,000 payment to the

Postal Service. Postal Inspectors found

the mailer had circumvented the Postal

Service’s verification procedures to hide

the fact that the mailer was not earning

the claimed postage discounts. The

mailer knew in advance which trays of

mail the Postal Service would test for

accuracy, giving the individual ample

opportunity to control the test results.

◆ A North Carolina Postmaster was convicted of embezzling more than $250,000

from five bulk mail accounts over a sixyear period. Customers had been paying

the Postmaster directly for mailings, and

the Postmaster was processing large mailings at no charge. The Postmaster

embezzled the difference in cash or

money orders, and used $10,000 in postal

funds to pay for medical bills and college

expenses.

◆ A Texas supervisor was sentenced to

one year and three months in prison,

three years’ probation and ordered to

make full restitution of over $137,000.

The supervisor directed clerks to issue

postal money orders to fake companies for

postage meter refunds. The money orders

were then cashed or placed in a bank

account under the supervisor’s control. How long has the Inspection

Service protected the US

mails? 

For over 200 years Postal

Inspectors have protected the mail

and US citizens to ensure that the

public’s confidence in the mail is

not undermined.

DID YOU 

KNOW?
PAGE30
OFFICE OF INSPECTOR GENERAL

Developmental Reviews

Information Systems Reviews

Systems Development Reviews

eCommerce Reviews

Computer Intrusion Investigation Activities

INSPECTION SERVICE

PAGE 31

Technology Reviews
PAGE32

The OIG evaluated the Tray Management

System, which was designed to automate the movement and staging of mail

in Postal Service processing and

distribution centers. 

OFFICE OF INSPECTOR

GENERAL

The Postal Service recognizes that technology, including electronic commerce,is key to productivity and affordability.

Through technology, the Postal Service is able

to handle more than 660 million pieces of mail

every day and maintain its network of over

38,000 post offices and facilities. Its technology

strategy is to provide convenient access to all

customers on a daily basis through increasingly

sophisticated retail systems, expansion in new

electronic access channels, and electronic linkages that integrate customer and postal

processes. In addition, the Postal Service is

using modern technology, such as NetPostTM

Mailing Online, NetPostTM Cardstore, and

eBillPayTM. These initiatives will improve and

build on its existing services and relationships

with customers and continue meeting traditional customer demands. 

The recent terrorist attacks have demonstrated how the postal infrastructure, including

information systems, are vulnerable to attacks.

Computer systems are a critical component of

every aspect of postal operations that must be

protected from potential cyber-terrorism to

prevent disruption in service. Technology

investments not only need to be scrutinized to

minimize the risk of disclosure or compromise,

but also to ensure that sound business decisions

are made. This is particularly important as the

Postal Service reviews several technologies to

identify an efficient, effective, and safe method

to sanitize mail. 

OIG reviews have covered developmental

systems, information systems, electronic commerce, and computer intrusion detection

activities. In the past six months, the OIG

performed 20 reviews in the technology area

which are highlighted below:

DEVELOPMENTAL REVIEWS

The Postal Service is developing business

systems and mail processing equipment to

improve performance, enhance service, and

reduce operating costs. The typical development process begins with the identification of a

business need. After the business need has been

identified, a solution is developed which is followed by the proof of concept or first article test

and final deployment. The OIG understands

the importance of reviewing these systems as

they are developed and has completed six audits

of major projects currently under development

during the reporting period. These reviews are

highlighted below:

DECISION ANALYSIS REPORT

PROCESS CAN BE IMPROVED

The Decision Analysis Report validation

process ensures projects are adequately justified

for approval. An OIG audit found that the

Postal Service generally followed the established capital project approval process for the

major projects reviewed. However, several projects were not adequately validated and were

approved without consideration of all test

results. In addition, there was not adequate

support for savings and costs methodology, or

complete cost estimates for spare parts. The

OIG also noted limitations in the mechanisms

for reporting project performance to Postal

Service management. The OIG recommended

and Postal Service management has taken

action to require complete documentation and

analysis for validating and monitoring project

performance; develop policies and procedures

for selecting and monitoring projects for cost

studies; and reassess the procedures to perform

cost studies. Postal Service management also

agreed to select effective performance measures

to report project performance. 

(OIG DA-AR-01-005) 

TECHNOLOGY REVIEWS

This section highlights audits, reviews,

and investigations performed by the OIG

and summarizes Inspection Service activities in the technology area. Report numbers are shown in parentheses after the

narrative, as appropriate. In order to 

differentiate the work reported by the

OIG and Inspection Service, the page

containing the activities reported by the

Inspection Service has been color

screened.
PAGE33

FURTHER DEPLOYMENT OF TRAY

MANAGEMENT SYSTEM SHOULD

BE REASSESSED

An OIG audit determined that the work

hour impact of the Tray Management System at

the nine facilities reviewed did not justify the

cost of deployment. An analysis of work hour

and volume changes at these facilities through

FY 2000 highlighted that the system had not

achieved projected labor savings. In addition,

the total volume increases and work hour

reductions experienced at the nine facilities

were not materially different than those at

comparable facilities without systems. The OIG

recommended and Postal Service management

agreed to reassess whether continued deployment of the Tray Management System was in

the best financial and operational interest of the

Postal Service. (OIG-DA-AR-01-007)

PostalOne! SYSTEM COULD BE

IMPROVED

An OIG audit found that although the

PostalOne! system is in its early stages of development, the Postal Service should rewrite the

business case to reflect current technology and

integration with the Information Platform. In

addition, the audit found that the Postal

Service should improve security measures and

communication with its mailer participants.

PostalOne! Business Customer Support Systems

Phase One is a key initiative the Postal Service

is developing under its Information Platform

and is intended to link the Postal Service and

its business mailers. The Information Platform

is designed to connect systems for the electronic

exchange of real time information between the

Postal Service, its customers, and postal facilities. The OIG identified nine areas for improvement and Postal Service management agreed

with all of the OIG’s findings and have taken

action to address the recommendations. 

(OIG DA-AR-01-004)

MERLIN IS AN IMPROVEMENT

OVER CURRENT MANUAL MAIL

PROCESSING

An OIG audit found the Mailing

Evaluation, Readability, and Lookup

Instrument, commonly known as MERLIN,

demonstrated the potential to be an effective

tool that could add value to the business mail

acceptance process. Based on observations of

machine performance and existing acceptance

techniques, the instrument is an improvement

over the current manual process. While the

OIG identified potential areas for improvement, none of these areas were critical to the

success of the program. Although the OIG

made no suggestions in the report, Postal

Service management has plans to enhance

system performance through software

improvements and operator training. 

(OIG DA-MA-01-002) 

POS ONE STAGE 3 REVIEW

IDENTIFIES OPPORTUNITIES

FOR IMPROVEMENT BEFORE

DEPLOYMENT

The OIG reviewed the Point of Service

ONE, commonly known as POS ONE Stage 3

to follow-up on issues relating to overall system

performance before its final deployment. The

POS ONE system is a Postal Service retail system intended to replace aging and outdated

integrated retail terminals at post office windows. The OIG did not observe any critical

issues with the system that would delay the program. However, the OIG identified two areas

where there is opportunity for improvement.

Specifically, the OIG found an increase in

system lockups that impacted customer service.

Also, Postal Service management did not

effectively communicate nor provide training

on the established standard policy to handle

help desk calls. Postal Service management is

working to complete corrective actions. 

(OIG DA-MA-01-003) 

SINGULATE, SCAN, INDUCTION

UNIT PRODUCTIVITY SAVINGS

ARE ATTAINABLE

The OIG concluded that increased productivity attributable to the Singulate, Scan,

Induction Unit should enable the Postal

Service to achieve significant work hour savings. The unit automates the processing of barcoded parcels onto bulk mail center sortation

equipment. In September 1999, the Postal

Service Board of Governors approved an

investment of approximately $103 million to

deploy the units in all 21 bulk mail centers to

process secondary parcel sorter volume. The

audit found 18 of 21 Bulk Mail Center sites are

An OIG audit found the Mailing Evaluation,

Readability, and Lookup Instrument commonly

known as MERLIN had the potential to be an

effective tool that could add value to the business mail acceptance process.
PAGE34

experiencing delays that will postpone approximately $9 million in savings and may reduce the

return on investment. In addition, first article

test results for the unit showed that certain

functional capabilities measured were not

achieved. Although certain areas did not meet

performance requirements, Postal Service

management granted conditional acceptance

and approved full deployment. The OIG recommended and Postal Service management

agreed to validate completion dates for the

remaining bulk mail center sites and update the

deployment schedule accordingly; recompute

labor savings and return on investments based

on the revised deployment schedule; and ensure

that senior management reevaluate capital

investments that are not meeting performance

expectations before continued deployment. 

(OIG DA-AR-01-006)

INFORMATION SYSTEMS

REVIEWS

The Postal Service relies on a massive

computer infrastructure to accomplish and

streamline operations, manage one of the

largest civilian workforces in the world, and

move billions of pieces of mail each year. The

Postal Service has initiated several information

technology projects to enhance efficiency and

increase revenue. However, computer security

needs to be maintained and improved to reduce

the risk of fraud, inappropriate disclosure of sensitive data, unauthorized disclosure of customer

information, and disruption of critical operations and services. The OIG has initiated

reviews of Postal Service information systems

under development, a major telecommunications review and an annual assessment of general controls at major processing centers. The

most significant reviews are highlighted below:

SERVER TESTS IDENTIFY

VULNERABILITIES

The OIG issued nine technical reports on

the results of vulnerability tests of selected networks within the Postal Service network infrastructure. The OIG noted various weaknesses in

the server systems that required remedial action

to reduce security risks. As requested by Postal

Service managers, OIG categorized the risks

into high, medium, and low vulnerabilities to

help management focus its resources for corrective actions. The reports contain a CD-ROM

with detailed information on the vulnerabilities

identified for each server, and the potential

impacts if the security exposures are exploited.

The reports will assist managers and system

administrators in locating weaknesses, establishing priorities for corrective actions, making

immediate repairs, and evaluating the completeness of baseline security model for the

selected servers. Postal Service management is

using this information to strengthen network

security. (OIG IS-CS-01-005 through 

OIG IS-CS-01-013)

TELECOMMUNICATIONS

NETWORK IMPROVEMENTS

NEEDED

The OIG and contractor personnel conducted network vulnerability assessments from

the Internet and the Postal Service’s Intranet

(its internal network). The tests could not penetrate the Postal Service’s telecommunications

network from the Internet. The OIG made

recommendations for policy clarification,

employee training, and strengthening server

security. The OIG also recommended that

telecommunications controls be improved.

Postal Service management agreed with our

recommendations and proposed a comprehensive corrective action plan. 

(OIG IS-AR-01-001)

CONTROLS OVER OPERATING

SYSTEM COULD BE

STRENGTHENED

An OIG review of UNIX operating system

controls at a Postal Service Data Information

Technology and Accounting Service Center

determined that access and password controls

need to be strengthened to prevent unauthorized access to financial information. The

review focused on two major systems. Postal

Service management agreed with our recommendations to strengthen access controls.

Specific recommendations included disabling

user accounts that do not have passwords, and

assigning security parameters to age all passwords. Additionally, periods of inactivity will be

measured and dormant accounts will be

disabled or deleted. Appropriate authorizing

documentation will be obtained before establishing new accounts. (OIG IS-AR-01-002)

TECHNOLOGY REVIEWS

An OIG review concluded that the

Singulate, Scan, Induction Unit, which

automates the processing of bar-coded

parcels onto bulk mail center sortation

equipment, should enable the Postal

Service to achieve significant work

hour savings. 
PAGE35

COMPUTER SECURITY

WEAKNESSES IDENTIFIED 

An OIG audit of security access controls at

a Customer Support Center found weaknesses

in the implementation and maintenance of the

computer security software used to protect

Postal Service resources. The OIG also identified control weaknesses over user access to

critical Postal Service products and services,

and with the site’s disaster recovery plan. Postal

Service management agreed with our recommendations and have planned or taken actions

to strengthen the weaknesses identified.

(OIG IS-AR-01-003)

SYSTEMS DEVELOPMENT 

REVIEWS

Reviewing systems during the development process provides an opportunity to identify potential development cost and time

savings, and a greater assurance that appropriate

internal controls will be included in the completed system. Best practices show that it is 50

to 100 times more costly to make changes after

a system is placed into production. The OIG

has initiated a comprehensive review examining four systems under development including

the eServices Registration, Delivery Unit

Notification System, Facilities Database, and

Vehicle Operations Information System. The

OIG has completed the initial fieldwork on

these systems and has identified concerns

including insufficient planning and documentation, inadequate requirements definition, lack

of end-user involvement throughout the

process, incomplete test plans, and lack of validation testing. Within three days of fieldwork

completion, the OIG provided officials with the

preliminary results on the first system, eServices

Registration, which was scheduled for implementation in October 2001. As a result, Postal

Service management agreed to suspend the

implementation of the system until immediate

corrective actions could be made to address the

findings. The OIG will continue to conduct

these reviews over the next several months, and

report the results for immediate action.

eCOMMERCE REVIEWS

The Postal Service continues to provide

customers with new online products and services to enhance customers’ personal and business lives. Some of the newer services available

through the website www.USPS.com include

MoversGuide, new features under USPS

eBillPayTM, and NetPostTM Cardstore. In addition, the Postal Service continues to improve

the performance and usability of its web presence to ensure secure access and the protection

of customer privacy. eCommerce initiatives

have been consolidated under the Products

Development group, reporting to the Chief

Marketing Officer. The reorganization will help

the Postal Service focus on those initiatives

supporting the core products and contribute to

revenue.

The OIG is committed to helping the

Postal Service meet the eCommerce challenge.

OIG efforts during this period focused on the

security and management of USPS.com as well

as identity theft and customer privacy. Two of

these efforts are highlighted below:

USPS.COM MANAGEMENT AND

SECURITY CAN BE ENHANCED

The OIG evaluated the management and

security of the Postal Service’s website,

USPS.com. The audit evaluated whether the

required pre-implementation security review

was prepared, contractor access to USPS.com

was restricted, and a plan to migrate USPS.com

to a contractor site had been prepared. The

OIG recommended and Postal Service management agreed to complete the certification and

accreditation review for the contractor-hosted

portion of USPS.com and ensure security

requirements are met for applications housed on

it, and strictly control and monitor remote

access to the production environment. Postal

Service management also agreed to enforce

Postal Service policy, which requires all

eBusiness initiatives to follow the change management process and prepare a comprehensive

migration plan. (OIG EC-AR-01-003)

EFFORTS TO PREVENT IDENTITY

THEFT

Based on a request from a Governor, the

OIG assessed whether the Postal Service is subject to identity theft. Identity theft refers to

crimes in which an individual wrongfully

obtains and uses another’s personal data, such as

names, Social Security numbers, home

addresses, and credit card numbers, for ecoThe OIG audits the Information Platform and its

core systems: PostalOne, Delivery Operations

Information System, Processing Operations

Information Systems and Surface-Air

Management System. These reviews provide

the Postal Service valuable information for

systems developement.

The OIG produced a series of technical

reports on server vulnerabilities that

enabled postal managers to take timely

action.
PAGE36 TECHNOLOGY REVIEWS

nomic gain. The OIG prepared a report that

highlighted identity theft issues. In one review,

the OIG identified the theft of Postal Service

employees’ health care insurance information,

which was utilized to obtain over $900,000 in

fraudulent payments. In another review, the

OIG identified vulnerabilities in Postal Service

network servers that assisted Postal Service

management in improving their network infrastructure. The OIG also evaluated eCommerce

systems and recommended stronger controls

over personal information and will continue to

investigate identity theft as it relates to health

care insurance fraud. The Postal Service

appointed a chief privacy officer and a chief

information security officer, and in

November 2000, the Board of Governors

approved additional funds for a project to

further strengthen security and privacy.

(OIG EC-MA-01-001)

COMPUTER INTRUSION 

ACTIVITIES

The OIG Computer Intrusion Team

investigates criminal violations of state and

federal laws enacted to protect the authenticity,

privacy, integrity, and availability of electronically stored and transmitted information.

Rapidly expanding eCommerce ventures make

the protection of postal information systems

critical to the financial viability of the Postal

Service. Because such ventures involve connectivity between postal systems and eCommerce

partners, the Computer Intrusion Team conducts investigations of attacks upon the security

of those systems in order to maintain the

integrity of eCommerce information. The team

informs Postal Service management and

eCommerce partners regarding emerging

threats to information systems, and assists them

in identifying and eliminating potential vulnerabilities. These efforts include recommending

best practices relating to security policies,

information systems, and eCommerce procedures. During this reporting period the OIG has

completed a number of investigations and

provided technical assistance to the Postal

Service. Some of these efforts are highlighted

below.

OIG JOINS POSTAL SERVICE

COMPUTER INCIDENT RESPONSE

TEAM

At the recommendation of the OIG, the

Postal Service advanced its computer security

efforts through the establishment of the Postal

Service Computer Incident Response Team.

This team consists of members of the OIG

Computer Intrusion Unit, postal network

administrators, and security professionals who

have received special training in the handling of

computer incidents. The mission of the Postal

Service Computer Incident Response Team is

to enable the Postal Service to achieve its business and risk management goals by responding

to computer incidents as quickly and effectively

as possible. The OIG agent assigned to the team

provides investigative assistance regarding computer incidents that are of a criminal nature and

coordinates computer crime investigations with

other law enforcement agencies.

OIG COMPUTER INTRUSION

UNIT AND POSTAL SERVICE

COMPUTER INCIDENT RESPONSE

TEAM RESPONDS TO 

CODE RED II WORM

The OIG, operating in concert with the

Postal Service Computer Incident Response

Team, successfully responded to Code Red II

worm infections of Postal Service networks.

These malicious self-propagating programs,

which operate on the Internet and compromise

vulnerable computer systems, spread across the

entire postal network and degrade network

capabilities. The spread of the worms was

quickly contained and efforts to eradicate it

from postal networks were immediately initiated. The source of the infection was traced to a

computer with a modem being utilized in conjunction with a commercial Internet Service

Provider while also attached to the postal internal network. This dual interfaced computer was

the gateway utilized by the Code Red II worm to

infest the postal network. The Postal Service

estimates costs associated with this incident to

exceed one million dollars.

What is computer “hacking”? 

Computer hacking occurs when

someone within or outside the

Postal Service illegally attempts

to gain entry into the Postal

Service computer systems.

The OIG’s computer intrusion

unit detects and investigates

hacking attempts on Postal

Service computer systems. 

DID YOU 

KNOW?
PAGE37

VULNERABILITY ASSESSMENTS

IDENTIFY NETWORK

WEAKNESSES

The OIG conducts network vulnerability

assessments to assist the Postal Service in identifying and correcting information technology

security weaknesses. The OIG completed five

assessments and issued reports that noted various

weaknesses in the security of 20 systems. The

reports provided information on the vulnerabilities identified, the potential impacts if the security exposures are exploited, and the avenues for

corrective action. The reports will assist Postal

Service managers in establishing priorities for

corrective actions, making immediate repairs,

and evaluating the completeness of security for

the selected systems. Postal Service management

is using this information to strengthen network

security.

OIG COMMENTS ON INTERNET

POLICIES

Working with the Postal Service’s Chief

Privacy Officer, the OIG commented on the

Postal Service’s Web Privacy Commitment

Statement. The OIG recommended the policy

address prohibited web collection devices and

address web banners and buttons, and the need

for clearer data access and data rights contract

clauses. Additionally, the OIG provided comments on the draft of Publication 361, United

States Postal Service Certificate Policy for

Electronic Identity Certifications. They recommended the Postal Service conduct periodic

reviews of this program, separate from the OIG

oversight role.

OIG WORKS WITH POSTAL

MANAGEMENT TO PROTECT

CRITICAL INFRASTRUCTURE

Former President Clinton issued Presidential

Decision Directive 63 on May 22, 1998, to

ensure that all critical national infrastructure

assets – both physical and cyber – were protected

against terrorist or criminal attack by the year

2003. When the directive was first issued, there

was some confusion among many agencies,

including the Postal Service, as to whether the

directive applied to them. Since that time, the

OIG and the Postal Service Law Department

have examined the directive and determined

that although the Postal Service is generally

exempt from executive orders or other directives

pertaining to executive agency or administrative

functions, it is subject to those reflecting the

President’s inherent constitutional authority in

the area of national security. Because the directive is a national security directive, it applies to

the Postal Service. Postal Service management is

working to comply with the requirements of the

directive.

The Critical Infrastructure Assurance

Office of the Department of Commerce was created by the directive to assist government agencies to identify and protect critical infrastructure

assets and systems. Because universal mail service is a vital national asset, the OIG recommended that the Postal Service work with the

Critical Infrastructure Assurance Office to identify postal systems essential to the operation of

the federal government, assess the vulnerabilities

of these systems, and implement appropriate

protective measures.

The tragic events at the World Trade

Center, the Pentagon, and the recent anthrax

attacks highlighted our nation’s vulnerability to

terrorism, and demonstrated the impact such

events can have on government and commercial

operations on a national scale. In light of the

increased threat, the Postal Service must devote

heightened attention to protecting its important

transportation, communications, computer networks, and other critical operations and systems

from terrorist and criminal attacks.

ENHANCEMENT OF POSTAL

SERVICE COMPUTER SECURITY 

In a September 2000 report on computer

security in the Postal Service, the OIG

identified that existing postal policy was

inadequate to provide sufficient protection for

the Postal Service’s computer systems. Postal

Service management agreed with this finding

and had already initiated analysis and revision

of the Administrative Support Manual and

Computer Security Handbook to address this

concern. The OIG met informally with Postal

Service management and staff throughout the

revision process to provide input. In May 2001,

the OIG provided formal comments and made

several suggestions to improve Postal Service

policy on matters of computer security some of

which included:

The OIG evaluates vital mail systems, such as

the Automated Flat Sorting Machine, which

automates processing of mail larger than a

letter by incorporating on-site barcode

technology. 

The OIG performs information systems

reviews and penetration tests of Postal

Service network servers. 
◆Clarifying the roles and duties of those

officials responsible for computer security;

◆Ensuring that appropriate computer

security clauses are included in contracts

or agreements with third parties, and; 

◆Enhancing existing controls and the

authority of appropriate postal officials

to monitor or limit access to postal

computer systems.

The Postal Service plans to issue the

revised computer security policy soon. The

OIG will continue to work with Postal Service

management to strengthen Postal Service

policy in this area.

PAGE38 TECHNOLOGY REVIEWS
PAGE39

INSPECTION SERVICE

The Inspection Service plays an important

role in the support of Postal Service

eCommerce initiatives and technical applications. The Inspection Service evaluates the

need for and processes security clearances of

employees and contractors accessing postal

systems or sensitive information. The

Inspection Service also evaluates all Postal

Service new electronic products, including:

eBillPayTM, NetPostTM Mailing Online, and

NetPostTM Certified, and enterprise public key

infrastructure. The Inspection Service also monitors and reviews the physical security of individual systems before and after implementation.
PAGE40
OFFICE OF INSPECTOR GENERAL

Workplace Environment Reviews

Human Resource Process Reviews

Health Care Reviews

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

PAGE 41

Labor Management

Reviews
PAGE42 LABOR MANAGEMENT REVIEWS

OFFICE OF INSPECTOR

GENERAL

The Postal Service has characterized

labor management as one of the most

important challenges in achieving its

goals in the 21st century. With almost 900,000

full and part-time employees working at more

than 38,000 facilities nationwide, the Postal

Service recognizes that to operate effectively, in

a rapidly changing environment, it needs to

give employee issues a higher priority and

enhance each employee’s contribution to organizational performance. Additionally, in light of

recent terrorist attacks, including cases involving the transport of anthrax through the mail,

the Postal Service must take every precaution to

ensure the safety and well being of its employees. The OIG supports the Postal Service in its

overall goal of fostering an inclusive and welcoming workplace consistent with the Postal

Service values of fairness, opportunity, safety,

and security. The labor management area

includes issues involving workplace environment, human resource processes, and health

care. While the OIG has worked diligently and

closely with the Postal Service and Congress to

address these issues, reviewing labor management areas continues to be one of the OIG’s

greatest challenges. The OIG has received over

3,300 individual labor management complaints

since 1997. During this reporting period, the

OIG conducted 74 reviews and 11 investigations in the labor management area. 

WORKPLACE ENVIRONMENT

REVIEWS

The Postal Service believes that signs of

workplace stress are present and that comprehensive steps are needed to improve the workplace environment, including aligning human

resources with business requirements. During

this reporting period, the OIG completed 69

reviews of workplace environment issues. While

reviews indicate problems at individual locations, they are not necessarily indicative of the

nationwide Postal Service work environment. 

WORKPLACE ENVIRONMENT

NEEDED IMPROVEMENT

OIG audits found tense and stressful work

environments at four postal locations, which

occurred because of abusive management styles

and aggressive measures used by managers to

improve employee performance. To correct

these problems, the OIG recommended, and

Postal Service management agreed, to:

◆ Reassign abusive managers at one of the

locations.

◆ Provide training to managers on human

relations, conflict management, and

communication skills at all four

locations.

◆ Conduct formal climate assessments at

three locations.

(OIG LB-LA-01-003, OIG LB-LA-01-018, 

OIG LB-AR-01-017, and 

OIG LB-AR-01-019)

IMPROVEMENTS UNDERWAY IN

VIOLENCE PREVENTION AND

RESPONSE PROGRAMS

An OIG summary report disclosed 25

Postal Service districts generally followed

established criteria when reacting to incidents

of violence, but did not fully implement preventive strategies. Postal Service management

took action to conduct the required annual

security reviews, provide required violence

awareness training, and ensure that customized

crisis management plans were on site at district

facilities. (OIG LB-AR-01-020)

HUMAN RESOURCE PROCESS

REVIEWS

Postal Service managers are responsible for

preserving and protecting official records and

privacy information. In addition, managers

must avoid conflicts of interest, which could

affect both the public’s trust and confidence in

This section highlights audits, reviews, and

investigations performed by the OIG and

the Inspection Service in the labor management area. Report numbers are shown in

parentheses after the narrative, as appropriate. Also, the OIG legislative and regulatory reviews are included at the end of

this section. In order to differentiate the

work reported by the OIG and Inspection

Service, the page containing the work

reported by the Inspection Service has been

color screened.

DID YOU 

KNOW?

Which Postmaster General

initiated the free city mail

delivery? 

Montgomery Blair, President

Abraham Lincoln’s Postmaster

General, introduced free city

mail delivery service on July 1,

1863. On that date, 449 letter

carriers started to deliver mail in

49 cities. Prior to free mail

delivery the customer had to

take a letter to the post office to

mail it, and the addressee had to

pick up the letter at the post

office, unless he or she lived in

one of about 40 big cities where

a carrier would deliver it to the

home address for an extra penny

or two.
PAGE43

A multi-agency OIG investigation resulted in

arrests for health care fraud. 

human resource processes. Postal Service managers are also responsible for complying with

existing policies and procedures regarding sexual harassment, overtime, leave, compensation

and benefits, and training. The OIG has completed several audits to assess controls over

these processes, some of which are highlighted

below:

TIMELY ACTION TAKEN TO

CONTROL ADMINISTRATIVE

LEAVE ABUSE

An OIG audit resulted in estimated

savings of about $3 million concerning administrative leave for calendar year 2001. The audit

found that employees in two Pacific Area districts remained on administrative leave beyond

30 days resulting in $249,000 in unnecessary

costs. In response to OIG recommendations,

Postal Service management took quick action

to remove other employees from administrative

leave, as appropriate; clarify policies for administering and overseeing administrative leave

use; and ensure that all leave slips are accurately

completed. Postal Service management also

committed to ensuring there was a sound

business reason for having any employee on

administrative leave beyond 30 days. 

(OIG LC-AR-01-008)

PROHIBITED HIRING AND

EMPLOYMENT PRACTICES

FOUND IN A SOUTHWEST 

AREA DISTRICT

The OIG determined that personnel

actions approved in a Southwest Area district

caused employees to question the fairness of the

selection process when members of a manager’s

family applied for vacant positions. The review

also noted that 20 members of the same family

were employed in the district, 10 of whom

worked in stations that reported directly or indirectly to the postmaster to whom they were

related. The OIG recommended and Postal

Service management agreed to establish controls to help avoid the appearance of unfairness

and to determine whether management’s

actions in a Southwest Area district violated

Postal Service and statutory nepotism

prohibitions. (OIG LC-AR-01-007)

HEALTH CARE REVIEWS

In FY 2001, the Postal Service paid over

$730 million for employee injury claims, a

$60 million increase over the $670 million paid

in FY 2000. Controlling injury claims costs continues to be key to the Postal Service’s financial

well being because the Postal Service is selfinsured for workers’ compensation costs and

makes payments out of operating funds, which

directly affects the Postal Service’s net income.

The OIG assists in protecting the health

and welfare of the Postal Service’s workforce by

conducting audits and investigations to prevent

and detect fraud, waste, abuse, and mismanagement related to Postal Service health care

program costs. In the past six months, the OIG

completed two audits and five investigations in

this area. As part of its investigative program,

the OIG initiated projects to identify improper

billing practices, such as false claims and false

statements by health care providers. During this

reporting period, OIG health care fraud

investigations have resulted in 7 arrests,

4 indictments, and 11 convictions. Some activities are highlighted below:

◆ A two-year multi-agency undercover

investigation resulted in 6 convictions of

physicians for violations related to health

care fraud. They were subsequently

debarred from the Department of Labor,

Office of Workers’ Compensation

Program. The investigation identified

several medical providers engaged in

widespread conspiracies to defraud health

care programs managed by the federal

government. The medical providers routinely submitted claims for services not

rendered, inflated fees to maximize reimbursements regardless of medical necessity, and misrepresented services rendered

through widespread billing manipulation,

including workers’ compensation fraud. 

◆ Another two-year multi-agency investigation identified several individuals who

collected more than $20 million dollars

in fraudulently obtained insurance payments. The investigation disclosed that

patient information, including that of

Postal Service employees, was illegally

obtained to submit false medical bills to

various medical insurance plans from

fictitious medical providers. The
PAGE44 LABOR MANAGEMENT REVIEWS

investigation resulted in over $500,000

in restitution to various medical

providers, 6 arrests, and 2 convictions. 

IMPROVEMENTS NEEDED IN

ADMINISTERING LEAVE BENEFITS

Two OIG audits identified opportunities

for improving the process of administering leave

benefits received after a traumatic workplace

injury. Specifically, the OIG found that supervisors did not always request authorization before

providing leave benefits. In addition, staff did

not always monitor and accurately calculate this

benefit for employees. The OIG recommended

and Postal Service management agreed to issue

policy requiring advanced authorization of this

benefit; perform weekly reconciliation of

employees’ receiving this benefit; and provide

training on how to accurately calculate leave

benefits. (OIG HC-AR-01-001 and 

OIG HC-AR-01-002)

LEGISLATIVE, REGULATORY &

POLICY REVIEWS

During this reporting period, the OIG

identified legislation, regulations, and policies

affecting Postal Service labor management.

One policy reviewed during this period is highlighted below.

WHISTLEBLOWER PROTECTION

When a Postal Service employee contacts

the OIG to report waste, fraud, and abuse, it is

imperative that they can do so without reprisal.

The OIG has worked closely with the Postal

Service and Congress since its inception to

address this issue. In May 2001, former

Postmaster General William J. Henderson

signed a directive that enhanced existing Postal

Service whistleblower protection for all postal

employees to make it similar to federal government employee safeguards under the

Whistleblower Protection Act. The Postal

Service agreed to change its whistleblower protection policies and procedures to provide for

the investigation of reprisal complaints, and resolution by an independent decisionmaker if the

parties cannot resolve the complaint. The OIG

provided comments to the Postal Service

regarding revisions to its Employee and Labor

Relations Manual, designed to implement

whistleblower protection. However, these and

other needed changes have not yet been made,

and the OIG is concerned that the delay in time

may affect employees’ willingness to bring issues

to the OIG’s attention.
PAGE45

INSPECTION SERVICE P

ostal Inspectors investigate a number of

labor management relations areas,

including workplace safety, postal

robberies, drugs in the workplace, and workers’

compensation investigations. 

Postal Inspectors also partnered with Postal

Service management and employee groups in

early interventions and other efforts to prevent

violence in the workplace. During this period

there were 187 arrests and 142 convictions for

assaults and threats and 29 arrests and 30 convictions related to robberies. In addition, 11

individuals were arrested and 15 convicted for

the sale of drugs on postal property. Also, 25

individuals were arrested and 19 were convicted

for workers’ compensation fraud. Examples of

workers’ compensation fraud are highlighted

below: ◆ As a result of a seven-year investigation,

a former Ohio letter carrier was sentenced to two years in prison, with the

court ordering restitution of over

$190,000, and a $1,200 special assessment for providing false statements to

obtain federal employees’ compensation

benefits. The former letter carrier

alleged he was totally physically disabled

and claimed he could not lift over 10

pounds, bend, stand on concrete and

must nap four hours per day. The investigation disclosed that the former

employee, who was involved in power

lifting since 1987, misled physicians

about true physical abilities. The investigation further revealed that the

claimant power lifted 5 - 6 times per

week and was involved in powerlifting

competitions lifting over 400 pounds.

◆ A former Minnesota letter carrier was

sentenced to eight months in prison with

work release privileges, three years’ probation and ordered to pay over $55,000

in restitution for providing false statements to obtain federal employees’ compensation benefits. The former employee concealed employment as a high

school coach and misrepresented physical abilities.

When was the Postmaster

General position created? 

The Postal Service is the

second oldest department or

agency of the present United

States of America. On July 26,

1775, members of the Second

Continental Congress, meeting in

Philadelphia, agreed “... that the

Postmaster General be appointed

for the United States, who shall

hold his office at Philadelphia,

and shall be allowed a salary of

$1,000 per annum...”

DID YOU 

KNOW?
PAGE46
Oversight of the

Inspection Service and

Other Significant

Activities

PAGE 47

OFFICE OF INSPECTOR GENERAL

Oversight Reviews

Other Significant Activities

INSPECTION SERVICE
PAGE48 OVERSIGHT OF THE INSPECTION SERVICE AND OTHER SIGNIFICANT ACTIVITIES

OFFICE OF INSPECTOR

GENERAL

OVERSIGHT REVIEWS

One of the primary reasons the OIG was

established within the Postal Service

was to provide oversight of all

Inspection Service activities. The Inspector

General Act, as amended, provides for the OIG

to conduct, supervise, coordinate, and provide

policy direction for investigations, including

those of the Inspection Service relating to the

programs and operations of the Postal Service.

In addition, the 1996 amendment of the

Inspector General Act provided specific “oversight responsibility for all activities of the

Inspection Service, including any internal

investigations performed by the Inspection

Service.” This additional authority means that

any and all activities of the Inspection Service

are subject to the OIG’s scrutiny and review,

except as it may be limited by the Governors,

for specific reasons and with notification to

Congress.

The OIG provides independent and objective information and analyses regarding

Inspection Service operations. In addition, the

OIG keeps the Governors, Congress, and postal

stakeholders fully informed of Postal Service law

enforcement efforts to detect and prevent fraud,

waste, abuse, and mismanagement, by reporting

the activities of the OIG and the Inspection

Service.

As a law enforcement agency, it is essential

that the Inspection Service be held to the highest standards of conduct to maintain the public’s

trust and the Postal Service’s reputation of reliability. During the last six months, the OIG

completed 13 oversight reviews that identified

potential savings of about $2 million, as well as

numerous monitoring activities, some of which

are highlighted below:

SERVICE INVESTIGATIONS COULD

BE DONE MORE ECONOMICALLY

An OIG audit found that the Postal

Service could put approximately $2 million to

better use over the next five years by utilizing

non-law enforcement Postal Service personnel

to conduct service investigations. These reviews

are neither criminal in nature nor investigations. Rather, they are observations of mail conditions and verifications of mail statistics

reported to Postal Service management. These

reviews are currently more expensive because

they are conducted by criminal investigators,

who receive premium pay. The Inspection

Service justifies these reviews, stating that

investigators assigned to them devote at least 

50 percent of their time to law enforcement

duties, including assessing security issues. 

Postal Service management disagreed with

the OIG’s recommendation to use non-investigative personnel for these reviews, stating that

Postal Service customers want the Inspection

Service to monitor mail conditions, and that

they provide a level of independence and credibility not provided by others. However, the

OIG determined that the vast majority of Postal

Service customers did not know the Inspection

Service conducted the reviews and had no

objection to other Postal Service personnel,

who are not criminal investigators, conducting

the work. These disagreements are being

addressed by the Governors through the audit

resolution process. The OIG maintains that utilizing non-law enforcement personnel to conduct these reviews would allow Postal Inspectors

to devote their time to important criminal

investigations, such as anthrax in the mail.

(OIG OV-AR-01-003)

INVESTIGATIONS DO NOT

DIRECTLY SUPPORT FINANCIAL

GOALS

The Inspection Service investigates frauduThis section highlights audits, reviews,

and investigations performed by the OIG

in conducting its oversight of the Inspection Service. This section also highlights

reviews and investigations performed by

the OIG and summerizes Inspection Service activities in other significant areas.

Report numbers are shown in parentheses after the narrative, as appropriate.

In order to differentiate the work reported

by the OIG and Inspection Service, the

page containing the activities reported by

the Inspection Service has been color

screened. 

DID YOU 

KNOW?

What are the OIG’s values? 

The OIG’s core values are

teamwork, leadership, creativity,

communication, and

conceptualization (TLC3). 
PAGE49

lent activity directed at other government

agencies to ensure the sanctity and security of

the mail. An OIG audit revealed that these

investigations, which are funded by postal

ratepayers, primarily benefit other agencies,

with little financial benefit to the Postal

Service. Only $2.9 million of the $491 million

in reported fines and restitution was actually

owed to the Postal Service.

The OIG recommended, and the Chief

Postal Inspector agreed, that Inspection Service

management fully document investigative

activity conducted on these investigations and

ensure that arrest and conviction statistics are

only reported when the Inspection Service

materially contributes to the investigation. The

Chief Postal Inspector did not agree with the

OIG recommendation that the Inspection

Service separately report fines and restitution

owed to the Postal Service. The OIG is pursuing this disagreement through the audit resolution process. (OIG OV-AR-01-004)

RESPONSE TO WORKPLACE

VIOLENCE COULD BE MORE

EFFECTIVE

An OIG audit disclosed that Inspection

Service support to Postal Service threat assessment teams could be more effective. These

teams were developed to assist the Postal

Service in its challenge to prevent and respond

to workplace violence. The OIG found that

Postal Inspectors generally supported preventive efforts to reduce workplace violence.

However, Postal Inspectors did not always agree

to respond to threat assessment teams’ requests

because the criteria were not clear on when

Postal Inspectors should be involved. The OIG

recommended, and Postal Service management

agreed, to update the Threat Assessment Team

Guide to clearly identify Inspection Service

responsibilities. (OIG OV-AR-01-002)

REVIEW OF COMPLAINTS

REGARDING THE INSPECTION

SERVICE

The OIG’s oversight of the Inspection

Service provides customers, employees, and

other interested persons with an independent

avenue to address their complaints regarding

the Inspection Service. At the same time, the

OIG provides the Inspection Service with an

unbiased review of accusations that, if left

unresolved, could harm its reputation as a

professional law enforcement agency and the

public’s confidence in the Postal Service. Over

the past six months, the OIG closed

10 Congressional inquiries and 26 Hotlines

related to the Inspection Service. The inquiries

resulted from complaints made by Postal

Service and Inspection Service employees, and

the general public concerning a variety of

issues, including the inadequate conduct and

selection of investigations. For example, the

OIG reviewed several Hotline allegations that

the Inspection Service was inappropriately

using their health examination process to force

Postal Inspectors into retirement. Based in part

on these allegations, the OIG is conducting an

audit of the Inspection Service’s Health

Examination Program.

INSPECTION SERVICE INTERNAL

INVESTIGATIONS

The OIG conducts investigations of misconduct by senior Inspection Service personnel,

and monitors the conduct of internal investigations of other Inspection Service employees.

These investigations are conducted when allegations of employee misconduct affect the performance of duties or when managers have

information of employee misconduct.

The OIG receives information regarding

Inspection Service internal investigations,

including conclusions reached and recommended actions. Inspection Service internal

investigations for this period included allegations of mishandling of evidence, and falsification of information, and the arrest of an off duty

Inspection Service employee. At the beginning

of the reporting period, the Inspection Service

had 42 open internal investigations. During the

reporting period, 24 cases were closed, and 33

new cases were opened. As of September 30,

2001, 51 cases remain open.

OTHER SIGNIFICANT ACTIVITIES

The OIG is responsible for reviewing allegations involving senior-level Postal Service

executives for criminal violations and misconduct, including retaliation against individuals

who have previously provided the OIG with

information about possible fraud, waste, abuse,

and mismanagement. During this reporting

period, the OIG completed 21 investigative

efforts and reviews of other significant issues

The OIG Hotline poster should be posted in all

Postal facilities. 
PAGE50 OVERSIGHT OF THE INSPECTION SERVICE AND OTHER SIGNIFICANT ACTIVITIES

related to Postal Service operations, some of

which are highlighted below:

MISUSE OF GOVERNMENT

CREDIT CARD 

Postal Service management issued a notice

of proposed removal to a postal executive for

credit card misuse. The OIG investigation

revealed that the executive inappropriately

used the government-issued credit card to make

rent payments in excess of $40,000, rent cars for

approximately $13,000, and take roughly

$3,500 in cash advances for personal use. Final

administrative action is pending in this case. 

EXECUTIVE INVESTIGATED FOR

SEXUAL HARASSMENT

The OIG completed an investigation on

allegations of sexual harassment by a Postal

Service executive. The OIG issued a report

concerning these allegations and is awaiting

Postal Service management’s response.

EXECUTIVE SUSPENDED FOR

MISUSE OF A POSTAL SERVICE

VEHICLE 

After an OIG investigation, a postal executive received a 30-day suspension and was

required to reimburse the Postal Service

$12,000 for use of postal vehicles and toll passes

for personal use. 

EXECUTIVE RETIRES FOLLOWING

INVESTIGATION

A Postal Service executive retired after an

OIG investigation disclosed the executive used

postal vehicles for unofficial travel over a period

of four years.

BACKGROUND INVESTIGATIONS

OF POSTMASTER GENERAL

CANDIDATES

At the request of the Governors, the OIG

conducted full-field background investigations

on several candidates for the position of

Postmaster General within four days. These

investigations provided the Governors with an

increased level of assurance of the integrity and

character of the potential candidates.
PAGE51

Are all Hotline complaints

confidential? 

The identities of the people who

make complaints or provide

information regarding alleged

wrongdoing are kept confidential

unless the individual gives

permission for the disclosure

or disclosure is required.

INSPECTION SERVICE

The Inspection Service conducts investigations and reviews of significant issuesrelated to: physical security; narcotics

offenses and trafficking; child exploitation; prohibited mail; postal burglaries; mail fraud

including fraud against consumers, fraud against

businesses, and fraud against government; and

money laundering. The Inspection Service considers investigations of biohazardous material

sent through the U.S. mail among its highest

priorities. The Inspection Service also devotes

significant resources to prevent crimes by conducting employee and customer awareness

training programs and implementing security

measures. 

DID YOU 

KNOW?

This Inspection Service poster alerts parents 

of the dangers of child exploitation over the

internet.
PAGE52
Customer Service 

OFFICE OF INSPECTOR GENERAL

External Communications

Specialized Services

INSPECTION SERVICE

PAGE 53
PAGE54 CUSTOMER SERVICE

OFFICE OF INSPECTOR

GENERAL

EXTERNAL COMMUNICATIONS

The OIG is responsible for keeping members of Congress and the Governorsfully and currently informed. The OIG

keeps Congress informed by issuing Semiannual

Reports to Congress, testifying at oversight and

other hearings, and briefing members and their

staffs on issues related to the Postal Service.

The OIG also regularly provides synopses of its

audit and management advisory reports to

Congressional committees and subcommittees

with oversight interest in the Postal Service.

The OIG keeps the Governors informed

through regular briefings at monthly Board

meetings, activity reports from the Inspector

General, and responses to requests for information. The OIG also provides the Governors

with copies of audit and management advisory

reports.

CONGRESSIONAL TESTIMONY

Each year, since its inception, the Inspector

General has testified before Congress on various

matters. During this reporting period, the OIG

provided written statements to Congress on

April 4, May 15, and September 20, 2001. These

three statements can be found in their entirety

on the OIG’s website at http://www.uspsoig.gov.

In addition, the full text of the September

testimony is included in Appendix H of this

Semiannual Report. 

In these statements, the OIG highlighted

opportunities to capitalize on existing revenue,

resources, and personnel while improving

accountability and public trust. The OIG also

suggested that the Postal Service could benefit

from strategic direction from Congress about its

role in the 21st century and urged Congress to

consider fundamental questions, including

whether the Postal Service should be a quasigovernmental agency or private corporation;

maintain universal service in the age of the

Internet; have a rate making process or marketbased pricing; have limited product lines or

more product flexibility; and have binding arbitration or unfettered labor negotiation.

The statements also highlighted significant

OIG work, such as:

◆ Reviews that identified areas for

improvement in the control and oversight of contracting practices. For example, as a result of an OIG investigation

and with the cooperation of Postal

Service management, the Postal Service

recovered over $12 million from a major

telecommunications contractor and will

be able to avoid an additional $58 million in erroneous billings;

◆ Reviews of Postal Service automated

mail processing and computerized retail

equipment investments totaling over

$1.9 billion, which concluded the Postal

Service could improve its return on

investment, better account for program

costs, and improve performance tracking;

◆ Reviews of seven projects, representing

over $800 million in postal expenditures,

which disclosed the Postal Service could

improve the validation of test results and

the accuracy of estimated savings before

project approval;

◆ Reviews of violence prevention and

response programs at 25 Postal Service

Districts, which disclosed areas for

improvement in the implementation of

controls designed to reduce the potential

for violence;

◆ Reviews at a major Postal Service data

center that identified security vulnerabilities involving network servers. If

exploited, these vulnerabilities could

compromise the confidentiality, integrity,

and availability of postal operations, and

harm its reputation as a trusted business

partner; and 

This section describes the OIG and

Inspection Service’s efforts to provide

customer service, including initiatives by

support functions to enhance service to

internal customers. Customer satisfaction and service is the underlying creed 

of most successful organizations and businesses. In order to differentiate work

reported by the Inspection Service, pages

concerning the Inspection Service have

been color-screened.

OIG press releases keep the media,

postal stakeholders, and the public

informed of the latest OIG information.
PAGE55

◆ Reviews identifying areas for improvement in the security, privacy, and access

language of eBusiness agreements. These

areas need to be strengthened to protect

the Postal Service and its commercial

partners and customers. 

RESPONDING TO REQUESTS

FROM CONGRESS AND THE

POSTAL SERVICE GOVERNORS

One of the OIG’s highest priorities is to

provide accurate and timely responses to

Congress and the Postal Service Governors.

The OIG responds to many of these requests by

conducting audits and investigations. However,

the OIG does not normally perform an audit or

investigation when an inquiry involves an individual employee issue that can be resolved

through contractual grievance-arbitration procedures or the Equal Employment Opportunity

process. Instead, the OIG incorporates individual concerns into a database to identify systemic

issues for review. When systemic issues have

been identified, the OIG conducts independent

audits or investigations of Postal Service programs and operations to help ensure their economy, efficiency, effectiveness, and integrity.

During this 6-month reporting period, the

OIG completed 106 Congressional and

Governors inquiries. Appendix G of this report

lists the OIG responses to these inquiries by subject area. Some examples of OIG work in

response to Congressional and Governors’

requests are highlighted below:

◆ An OIG review confirmed allegations of

delays in the delivery of certified mail at

several locations. These delays exceeded

delivery standards by as much as 38 days.

Inadequate planning, staffing, and supervision of mail processing operations were

the primary factors contributing to the

delay. The problem was compounded by

the lack of a standard system to report

certified mail that arrived late due to

transportation delays.

◆ An OIG review helped alleviate concerns about the Postal Service’s relocation of mail processing activities in the

Western Area, the impact of floods on

operations, and the potential effect the

move could have on local businesses and

members of the community. The OIG

found that the Postal Service conducted

pre-tests that revealed comparable service would be maintained, and that contingency plans were developed in the

event roads are closed for floods or snow. 

◆ Allegations that a Postal Service supervisor harassed and retaliated against

employees prompted the OIG to request

a climate assessment involving 14

employees, which determined that the

workplace environment needed improvement. District management took a number of pro-active steps, including

conducting discussions with each

employee in the district, requiring the

supervisor to develop a communication

improvement plan addressing employee

concerns raised in the climate assessment

and to conduct bi-weekly meetings with

these employees.

◆ The OIG provided briefings to Senate

and House oversight committees on OIG

audit results of the Postal Service’s FedEx

transportation agreement and provided

copies of audit reports that were issued to

Postal Service management. In addition,

the OIG provided a second set of reports

to share with the public in which proprietary information was withheld in accordance with the Freedom of Information

Act. 

◆ The OIG frequently receives requests

from individual members of Congress to

provide timely and valuable information.

In one instance, the OIG was able to

provide an on-the-spot briefing of an

audit that enabled the member to conduct a television interview one hour

later. 

◆ Members of Congress can be a valuable

source of information concerning postal

operations. For example, the OIG had an

ongoing nationwide review of sexual

harassment when it received information

from a member of Congress. After

validating the information received, the

OIG targeted the Northeast Area for

review.

OIG HOTLINE PROVIDES A VITAL

AND CONFIDENTIAL

COMMUNICATIONS LINK

The OIG Hotline provides a vital and

OIG Reports with white covers (above)

contain restricted information.

OIG Reports with blue covers (above) are

available to the public.
PAGE56

confidential communication link between the

OIG and individuals who contact the Hotline

to report allegations of fraud, waste, abuse, and

mismanagement.

RESPONDING TO HOTLINE

INQUIRIES

The Hotline receives complaints from

employees, customers, and the general public

concerning alleged violations of laws, rules, or

regulations; mismanagement; waste of funds;

abuse of authority; and danger to public health

and safety. Complaints and allegations received

by the Hotline are analyzed to identify systemic

issues affecting the Postal Service, and referred

for appropriate action. The OIG considers

Hotline contacts when planning audits and projects.

During this reporting period the Hotline

received over 11,000 contacts, some of which

were addressed by the OIG on issues such as

waste, fraud, abuse, mismanagement, deficient

postal operations, personnel matters, and other

concerns. In addition:

◆ Twenty percent were addressed by the

Inspection Service and involved criminal

issues such as mail theft, assaults and

threats, and workers’ compensation fraud;

◆ Sixteen percent were addressed by the

Postal Service’s Office of Consumer

Advocate involving complaints related

to customer service issues, particularly

mail delivery;

◆ Forty-four percent were related to miscellaneous requests for information such as

ZIP Codes, postage meters, and other

Postal Service-related matters; and

◆ Five percent were related to operational

and human resource issues that were

referred to Postal Service management.

The OIG Hotline is staffed from 7 a.m. to

7 p.m., Eastern Standard Time, Monday

through Friday (except federal holidays). Calls

can be made 24 hours a day, 7 days a week.

Threats and any other potentially violent work

situations are routed immediately to the Postal

Police Control Center for action 24 hours a day

either by an OIG Hotline analyst or through a

caller-directed menu system. Anyone interested

in contacting the Hotline can call toll-free,

1-888-USPS-OIG (1-888-877-7644) or 

1-866-OIG-TEXT (1-866-644-8398) for the

hearing impaired; write to the United States

Postal Service, OIG, ATTN: Hotline,

1735 North Lynn Street, Arlington, VA 22209-

2020; e-mail the OIG at hotline@uspsoig.gov;

or fax information toll-free to (866) 756-6741.

PROPOSED LEGISLATION AND

REGULATIONS

As required by the Inspector General Act,

the OIG monitors existing and proposed legislation and regulation to advise Congress and the

Governors of the impact of such legislation and

regulations on Postal Service programs and

operations. During the 6-month reporting

period, the OIG evaluated 24 legislative proposals and 23 regulatory initiatives. Some highlights of the legislative and regulatory proposals

are included at the end of the appropriate section that describes the OIG and Inspection

Service reviews performed in the last six

months.

FREEDOM OF INFORMATION

REQUESTS

The OIG is committed to making all 

final audit and management advisory reports

available to the public, unless the law prohibits

disclosure. The OIG website, http://www.-

uspsoig.gov, contains all releasable final audit

and management reports. A list of all reports,

including those that are not releasable, is also

included on the web page. 

Before posting a report on the web page,

the OIG reviews each report in accordance with

the Freedom of Information Act, the Privacy

Act, and the Postal Reorganization Act. The

OIG may coordinate its review with Postal

Service management and attorneys. In deciding

what information to release, the OIG balances

the public right to access federal agency records

with the Postal Service’s need to safeguard certain protected information, such as those affecting business needs and employee privacy. As a

result, OIG reports may be withheld in whole or

in part to protect privacy as well as proprietary

or confidential information. 

The OIG responds to many written

requests for reports and other information under

the Freedom of Information Act (FOIA). In

this reporting period, the OIG received 71

FOIA requests, which were handled as follows:

CUSTOMER SERVICE

DID YOU 

KNOW?

Does the Postal Service

follow federal government

statutes and regulations? 

Except for certain statutes and

regulations expressly made

applicable to the Postal Service,

most federal laws of governmentwide applicability do not apply to

the Postal Service. This permits

the Postal Service to operate in a

business-like manner.
PAGE57

◆ 8 were answered in full, 9 were answered

stating no OIG documents existed, 5

were withheld totally, 19 were partially

withheld, 9 were referred outside the

OIG, 19 are pending, and 2 were closed

because the requestor’s return address was

not available. Of the 71 FOIA requests, 3

were appealed. One appeal was upheld by

the Postal Service, and 2 are still

pending. 

A former Postmaster and three other managers had filed suit challenging the OIG’s decision to withhold or redact certain documents

from a completed OIG review. Although the

OIG released many documents pursuant to

their initial request, some documents were withheld or redacted under applicable FOIA exemptions. In September 2001, the U.S. District

Court, District of South Carolina Anderson/

Greenwood Division upheld the OIG’s decision

to withhold or redact certain documents pursuant to a FOIA request.

INSPECTOR GENERAL

SUBPOENAS 

The OIG is authorized under the Inspector

General Act to issue subpoenas for documents.

The subpoenas are usually issued to persons outside of the Postal Service, such as contractors,

customers, and financial institutions, who may

have information that is relevant to ongoing

audits and investigations. Many subpoenas to

financial institution are issued under procedures

set forth in the Right to Financial Privacy Act.

The OIG also issues subpoenas at the request of

the Inspection Service to support investigations

such as workers’ compensation fraud that are in

support of the OIG mission. 

In the last 6 months, the OIG issued 142

subpoenas; 129 supporting Inspection Service

investigations and 13 supporting OIG investigations. From time to time, the subpoenas are

challenged in federal district court. To date,

the OIG has successfully enforced every subpoena that has been challenged in court. Some

examples of court challenges are provided

below:

◆ A court enforced a subpoena issued to a

bank for a Postal Service employee’s

financial records. The employee, who

was being investigated for inappropriate

conduct, challenged the OIG’s right to

access the records under the Right to

Financial Privacy Act. The OIG and the

Inspection Service worked together to

successfully argue before the court that

access to the records was necessary for

this investigation. The U.S. District

Court ruled that the subpoena was a

legitimate exercise of authority and permitted access to the employee’s financial

records.

◆ In another case involving a challenge to

an OIG subpoena, the federal Fourth

Circuit Court of Appeals upheld a subpoena directed to a bulk mailer under

investigation for suspected fraud involving non-profit mailing rates. The bulk

mailer alleged that the subpoena was

issued solely for harassment purposes, and

not for a legitimate investigation. The

Court of Appeals held that the investigation was appropriate, and directed the

mailer to comply with the subpoena. 

SPECIALIZED SERVICES

COMPUTER FORENSICS

Specialists trained and certified in the

seizure of computers and the recovery of electronic evidence staff the OIG Computer

Forensics Team. The team’s mission is to provide technical support to extract data to help

identify individuals who use computers for criminal purposes, generally in one of three ways.

First, a computer may be the target of the

offense. In these cases, the criminal’s goal is to

steal information or cause damage to a computer. Second, the computer may be a tool of

the offense. This occurs when an individual uses

a computer to facilitate some traditional offense,

such as fraud. Third, computers are sometimes

incidental to the offense but significant to law

enforcement because they contain evidence of a

crime.

During this reporting period, the Computer

Forensics Team: 

◆ Seized and examined electronic evidence

from a postal contractor who attempted

to hack into the postal network and

other commercial sites from within the

postal network; 

◆ Assisted in the investigation and

recovery of several thousand e-mails

deleted by suspects in the course of an

investigation;
PAGE58

◆ Examined computer data that disproved a

postal employee’s allegations of misconduct and harassment by Postal Inspectors;

and

◆ Examined computer evidence that proved

a postal employee used their position to

extort money from a postal equipment

supplier. 

POLYGRAPH SERVICES

The OIG polygraph program aids criminal

investigators and is an effective tool to assist in

proving guilt as well as innocence. OIG polygraph examiners represent the OIG within the

polygraph community and on the Federal

Polygraph Executive Committee. During this

reporting period the Department of Defense

Polygraph Institute conducted a Quality

Assurance Inspection of the OIG polygraph

program. The OIG polygraph program was

found to comply with the standards required of

a federal government polygraph program.

During the inspection, 118 criteria in nine primary areas were inspected. No recommendations were made during this inspection. The

OIG polygraph program is only the third federal

polygraph program to have no recommendations made as a result of an inspection.

COMPUTER ASSISTED

ASSESSMENT TECHNIQUES

The OIG’s Computer Assisted Assessment

Techniques Team uses automated methods and

tools to extract and analyze electronic data

located in over 900 postal systems in support of

OIG audit and investigative efforts. The team

has achieved success by developing programming techniques to independently access the

large database systems in both San Mateo and

Minneapolis, as well as numerous remote

Oracle database systems throughout the postal

network. This team has supported several significant OIG efforts during this reporting period,

including:

◆ Developing complex computer programs

to extract data from the Facilities

Management System and other Postal

Service computer systems to identify

Postal Service facilities that contained

defective roofing material. This effort has

resulted in the identification of

397 postal facilities that are eligible for

$7 to $8 million in potential recoveries,

of which $1.1 million has been received

to date.

◆ Working in concert with an audit team,

conducted in-depth analysis of various

Postal Service databases to identify data

related to bulk fuel and storage tank data.

This review was conducted to determine

the validity of the Postal Service’s plan to

purchase fuel in bulk. This effort resulted

in the recommendation to bring the

Postal Service’s Bulk Fuel Program “inhouse,” to achieve savings of $15.9 million over a 5-year period.

◆ Developing new, automated tools for

continuous monitoring of fraud indicators, thereby expanding the OIG’s data

analysis effectiveness and scope. For

example, an automated analysis of all

lease payment schedules has been created

to ensure adequate separation of duties.

This automated tool will determine

whether the creator of a payment schedule was also the approver of the schedule.

◆ Using original and creative methods to

identify and extract data during the

review of the Postal Stamp Printing

Quantities process. This effort resulted in

the determination that the Postal Service

could save $10 million by reducing their

printing requirements. In addition, the

data extracted identified 462 million

stamps with a retail value of $99.4 million that were destroyed instead of being

returned to inventory for redistribution.

CUSTOMER SERVICE
PAGE59

INSPECTION SERVICE

The Inspection Service has adopted

numerous initiatives to improve customer service. The Inspection Service

alerts consumers and businesses to current

crimes by attracting media attention to postal

crime trends, publicizing positive law enforcement accomplishments, circulating media

releases, and hosting crime prevention presentations. The Inspection Service is responsible for

communicating its law enforcement and crime

prevention achievements to the American public, Congress, the Postal Service, and the law

enforcement community.

In an effort to maintain the integrity of the

mail and to ensure the confidence and trust that

government agencies, businesses, and customers

place in the Postal Service, the Inspection

Service conducts mail fraud investigations that

focus on a variety of complex schemes. In order

to promote consumer protection, the Inspection

Service utilizes specialized investigative tools

and techniques such as criminal forensic laboratories, technical surveillance and communications, polygraph examiners, and digital

evidence recovery units to solve crimes committed against the public.
PAGE60
Goals and Strategies

Must the Postal Service comply with the

Government Performance and Results Act? 

Yes. The Postal Service was specifically included

in the Act and submitted its third annual 

performance plan in January 2001.

DID YOU 

KNOW?

PAGE 61
PAGE62

How does the Postal Service

transport mail? 

The Postal Service uses a wide

variety of transportation methods

to ensure mail delivery to every

Postal Service customer. It uses

commercial airline flights, overthe-road vehicles, railroad lines,

boats, and even a mule train.

OFFICE OF INSPECTOR

GENERAL

STRATEGIC GOALS

The OIG is committed to the principles

of the Government Performance and

Results Act, which reviews government

agencies to develop plans for operating more

efficiently and effectively. To ensure long-term

success, it is necessary for the Postal Service and

the OIG to plan appropriately. Planning

includes defining strategic goals and developing

strategies to achieve those goals. In addition,

performance measures are established to

evaluate how well the agency is achieving its

goals. These measures provide a “report card” on

agency performance and results. 

The OIG’s planning process analyzes relevant information; establishes goals, strategies,

and measures based on its analyses; and measures how effectively and efficiently it is

performing to meet these goals. This strategic

planning process has four steps. First, the OIG

determines major management issues facing the

Postal Service. Second, the OIG assesses Postal

Service operations and activities, broadly

defines realistic goals, sets priorities in line with

business vision, and develops effective strategies

and action plans. This second step is to align the

OIG’s activities to help the Postal Service

improve its effectiveness and efficiency. Third,

the OIG measures progress in meeting those

goals. And fourth, the OIG updates and revises

goals, strategies, and measures to align its efforts

with Postal Service needs and to drive OIG

organizational efforts. 

In March 2001, the OIG issued a revised

Five-Year Strategic Plan, which is designed to

address the Postal Service’s strategic direction

and objectives outlined in its Strategic Plan for

FYs 2001-2005. The Postal Service’s strategic

direction and objectives reflect a growing

GOALS AND STRATEGIES

This section describes the OIG and

Inspection Service vision and goals for

assisting the Postal Service in achieving its

operational, performance, and financial

goals in the 21st century. In addition, this

section describes the process by which the

OIG translates its vision into an annual

performance plan. In order to differentiate

between the OIG and Inspection Service,

the pages concerning the Inspection

Service have been color-screened.

Office of Inspector General

FY2001 Goals and Strategies

DID YOU 

KNOW?

GOALS STRATEGIES GOALS STRATEGIES

The OIG will be the 

independent voice that 

provides our stakeholders 

with timely, accurate, and 

relevant information 

that contributes to the 

success of the Postal Service.

 Annually identify major 

 management challenges 

 and independently develop 

 work priorities that assist 

 the Postal Service in 

 addressing major 

 management challenges.

 Independently provide 

 the right information to 

 the right people at the 

 right time.

 Independently manage 

 and optimize OIG 

 resources, including 

 leveraging cutting-edge 

 technology.

 Maintain a TLC3 values-

 based organization that 

 attracts, develops, and 

 retains a talented and 

 diverse workforce.

The OIG is an independent 

entity that maximizes 

resources, leverages cuttingedge technology, and 

provides a healthy 

organizational culture and 

environment.
PAGE63

uncertainty about the future impact of emerging

technologies, changing customer requirements,

and competitors’ actions on mail volume and

postal revenues. The OIG’s Five-Year Strategic

Plan consists of two overarching goals and four

strategies to meet these goals.

PERFORMANCE RESULTS

The OIG continuously monitors its performance and seeks ways to improve. By maintaining objective data on key performance

areas, the OIG is able to periodically measure

and assess its progress in achieving goals.

Annually, the OIG establishes performance

measures to emphasize program objectives, promote teamwork, and encourage innovation

throughout the OIG. These measures are linked

to a team award that is structured to reward

commitment to the strategic priorities of the

OIG and to reinforce the importance of providing high-quality and value-added services that

contribute to the success of the Postal Service.

During FY 2001, the OIG accomplished over

86 percent of its ten performance goals.

OIG PLANNING PROCESS

The OIG provides timely and accurate

information to Postal Service management. As

part of its planning process, the OIG asks key

stakeholders to identify risk areas and emerging

issues that would benefit from the OIG’s review.

These stakeholders include Postal Service managers, the Postal Rate Commission, Congress,

Board of Governors, employee unions, management associations, and major mailers. Their

suggestions are considered during the annual

planning process, and to the extent practical,

are given priority consideration for inclusion in

this section. This process creates a unique

opportunity for the OIG to provide independent analysis and information that will assist

Postal Service management officials in fulfilling

their responsibilities.

The OIG planning process has three interrelated components: the project universe, the

annual performance plan, and the annual audit

workload plan. Since its inception, the OIG has

identified a universe of over 1,800 projects for

consideration. Projects from the universe are

selected on the basis of risk and OIG resources

available for the year. As part of the selection

process, the OIG considers the project’s potential impact on:

◆ Postal Service labor and capital resources

◆ Postal-wide operations and goals

◆ Public trust

The OIG selects the highest priority projects for inclusion in the annual performance

plan, the second component of the planning

process. The third component is the OIG

annual audit workload plan, which is based on

the annual performance plan. This audit workload plan is presented to the Postal Service

Board of Governors each year. The plan is

adjusted as the OIG’s work reveals new issues or

the Postal Service encounters new challenges.

OIG FY 2002 AUDIT WORKLOAD

PLAN

In the previous section of this Semiannual

Report, the ten major management issues facing

the Postal Service were discussed. The OIG

consolidated these issues into four major areas

along with the oversight of the Inspection

Service. These areas address the corporate priorities announced by the current Postmaster

General. 

In FY 2002, the OIG will focus its audit

attention on the following areas to help address

major issues facing the Postal Service: 

◆ maintaining customer confidence and

ensuring the viability of the postal

system; 

◆ improving the workplace climate and

labor relations; 

◆ maintaining affordability by controlling

costs; 

◆ leveraging technology to enhance

productivity; and

◆ overseeing the Inspection Service. 

The following presents each of the five areas

and the focus of our audit efforts.

Maintaining Customer Confidence and

Ensuring the Viability of the Postal

System

The recent anthrax contamination of the

mail has threatened customer confidence in the

Postal Service’s ability to continue to provide

safe and secure mail services. A decline in

OIG

POSTAL 

PROJECT

UNIVERSE

OIG

ANNUAL

PERFORMANCE

PLAN

AUDIT 

WORKLOAD

PLAN

AUDITS & AUDIT RELATED PROJECT

INVESTIGATIONS

OTHER PROJECTS

INTERNAL ENABLING FUNCTIONS

CONSULTING

QUICK RESPONSE

FACT-FINDINGS

AUDITS & AUDIT RELATED PROJECT

INVESTIGATIONS

OTHER PROJECTS

INTERNAL ENABLING FUNCTIONS

OIG

POSTAL 

PROJECT

UNIVERSE

OIG

ANNUAL

PERFORMANCE

PLAN

AUDIT 

WORKLOAD

PLAN

Planning System

Interrelationship
PAGE64

customer confidence will make it difficult for

the Postal Service to provide universal service

at reasonable rates. Customers may seek services other than traditional mail, which will

reduce volume and revenue. The Postal Service

must maintain customer confidence, develop

new products and services, and improve

customer service. The OIG will focus on the

following: 

◆ Safety and security of the mail

◆ Service performance and customer

satisfaction 

◆ Timeliness and reliability of service

◆ Measurement systems

◆ Postal rates

◆ Re-engineering

◆ Core business processes

◆ Strategic alliances

◆ Marketing

◆ Financial initiatives

◆ International mail

◆ New products and services

◆ Justification and approval

◆ Marketing and sales

◆ Return on investment

◆ Public trust 

◆ Brand integrity

◆ Employee integrity

Improving the Workplace Climate and

Labor Relations

The recent contamination of the mail has

threatened employee confidence in the Postal

Service’s ability to continue to provide a safe

and secure workplace. The effectiveness of the

Postal Service’s efforts to communicate with

and safeguard employees against the threats of

anthrax could have a major impact on worker

morale and productivity and the Postal Service’s

ability to effectively deliver the mail. Further,

the Postal Service has historically had significant labor relations issues that impeded its

ability to efficiently manage its operations. It is

important that OIG’s involvement in this area

be meaningful and positive. The OIG focuses

primarily on systemic issues and conducts

postal-wide reviews. These reviews are designed

to identify and prevent potential problems that

can detract from a healthy and productive work

environment. The OIG will focus on the

following: 

◆ Workplace climate 

◆ Occupational safety and health

◆ Conflict prevention and resolution

◆ Threat assessment programs

◆ Employee management 

◆ Training and development

◆ Succession planning

◆ Workforce planning

◆ Performance and compensation

◆ Diversity

Maintaining Affordability by

Controlling Costs

The terrorist attacks have resulted in cost

and business impacts that the Postal Service

could not have anticipated. In addition, the cost

of maintaining and servicing a growing universal delivery network has escalated. The Postal

Service needs strong controls and aggressive

efforts to ensure that contracts and programs are

effectively managed. The OIG will focus on the

following:

◆ Financial system integrity 

◆ Financial statements

◆ Field installations

◆ Cost and revenue analysis

◆ Treasury-related issues

◆ Budget 

◆ Planning

◆ Execution

◆ Systems

◆ Contracting activities 

◆ Fair and reasonable contract pricing

◆ Reasonableness and allowability of 

incurred costs

◆ Adequacy of contractor systems

◆ Contract administration

◆ Facilities and real estate 

◆ Justification, approval, and budgeting

GOALS AND STRATEGIES
PAGE65

OIG audit planning conference

establishes workload priorities

for the coming year.

◆ Construction management

◆ Logistics

◆ Transportation systems and operations

◆ Material management

◆ Health care 

◆ Workers’ compensation program 

administration

◆ Provider billing

Leveraging Technology to Enhance

Productivity

The Postal Service is seeking ways to

leverage technology to improve its service,

productivity, and profitability. While it depends

on technology to handle more than 660 million

pieces of mail every day, the Postal Service must

continue to maintain its competitive position

in the market. OIG efforts will focus on the

following: 

◆ Information systems 

◆ Information infrastructure and 

architecture

◆ System performance and integrity

◆ Systems development and 

implementation

◆ Computer security 

◆ Access

◆ Data protection

◆ Data integrity

◆ Developmental 

◆ Automation of core functions

◆ Process re-engineering

◆ eCommerce 

◆ Business partnerships and joint 

ventures

◆ Brand integrity

◆ Justification, cost, budgeting, and risk

Overseeing the Inspection Service

Legislation requires the OIG to conduct

oversight reviews of the Inspection Service in

addition to OIG’s audit and investigative

responsibilities over postal operations. OIG

efforts in this area will focus on the following:

◆ Public trust 

◆ Function and role

◆ Operational effectiveness

◆ Management controls

◆ Internal affairs
PAGE66

GOALS OBJECTIVES

Safety

Security

Integrity

• Eliminate the use of the nation’s mail system’s by 

 major organizations to transport illegal narcotics

• Reduce and deter the use of U.S. Postal Money Orders 

 to launder money by disrupting money-laundering operations

• Reduce and deter the use of the postal system to procure or 

 deliver materials that promote the sexual exploitation of children

• Reduce and deter employee on employee assaults and 

 credible threats 

• Reduce and deter robberies of postal employees and facilities

• Reduce and deter illegal drugs in the postal environment

• Reduce and deter volume mail theft in high theft areas

• Identify and resolve domestic and international in-transit 

 mail theft

• Reduce and deter embezzlements

• Reduce and deter criminal misuse of the Postal Service’s workers’ 

 compensation program

• Reduce and deter postage fraud schemes

• Reduce and deter multi-state domestic and international 

 telemarketing and deceptive mail operations Reduce Use of the Mail to Defraud Customers, Businesses, 

and Government Agencies

Ensure a Safe and Secure Drug-Free Work Environment

Reduce Theft of the Mail

Reduce and Deter Criminal Attacks of Postal Products, 

Services, and Assets

Reduce and Prevent the Use of the Postal System for 

Prohibited, Illegal, and Dangerous Mailings

INSPECTION SERVICE

The Inspection Service must supplement its reactive capability with proactive strategies to

deter and prevent criminal activity. To accomplish this, the Inspection Service has developed five

long-term strategic goals and related objectives. The new strategic plan begins with three critical

imperatives: safety, security, and integrity.

GOALS AND STRATEGIES

Inspection Service

FY2001 Goals and Objectives
Organizational Dynamics

If the OIG is the Postal Service “watchdog,” 

who watches over the OIG? 

To preserve its independence, the OIG can only be reviewed

by Congressional Oversight Committees, the General

Accounting Office, the President’s Council on Integrity and

Efficiency and peer reviews by another OIG.

DID YOU 

KNOW?

PAGE 67
OFFICE OF INSPECTOR

GENERAL

AN INDEPENDENT VOICE

The OIG is an independent agency

within the Postal Service and is under

the general supervision of the nine presidentially-appointed Postal Service Governors.

From 1988 until the establishment of the OIG

in 1996, the Chief Postal Inspector performed

dual roles as the Inspector General and Chief

Postal Inspector and reported to the Postmaster

General. In January 1997, Karla W. Corcoran

was sworn in as the first independent Inspector

General of the Postal Service. In carrying out

its responsibilities under the Inspector General

Act, the OIG:

◆ Provides Congress, the Governors, and

Postal Service management with timely,

objective, and complete information and

analysis of Postal Service operations.

◆ Conducts audits and investigations of all

Postal Service operations and activities,

including ratemaking, contract administration, labor management, accepting

and processing, transportation, delivery,

financial management, development,

information systems, computer intrusion,

electronic commerce, and marketing.

◆ Maintains oversight of Inspection Service

operations and performs independent

reviews of complaints against its

employees.

◆ Adds value to Postal Service operations,

contributes to a more efficient, economical and effective organization, and helps

the Postal Service maintain its integrity

through independent investigations,

audits, and reviews.

◆ Reviews computer security and conducts

computer intrusion activities to identify

vulnerabilities in postal systems.

◆ Serves as an objective venue for all

Postal Service employees and other

stakeholders to report fraud, waste, abuse,

mismanagement, and other improprieties

and concerns, with protection from

management retaliation.

◆ Identifies cost savings and recommends

improvements for contract and program

administration, employee integrity, and

program efficiency.

◆ Facilitates audit resolution, which provides a mechanism for resolving findings

and recommendations when the OIG

and Postal Service management disagree.

To improve Postal Service programs and

operations, the OIG provides independent and

objective information, analysis, and recommendations. The OIG is continuing to work with

Postal Service management to inform them of

the duties and responsibilities of the OIG and to

demonstrate how the OIG adds value to Postal

Service processes.

OIG VISION AND VALUES

The vision of the OIG is “A Constellation

of Talented People Making a Difference.” This

vision reflects the OIG’s mission to shed light

on Postal challenges and identify opportunities

for improvement by emphasizing five fundamental values:

◆ Teamwork—Diverse talents and levels

working cooperatively and collaboratively toward producing timely, relevant, and

quality work products and services that

add value to the Postal Service and the

OIG organization.

◆ Leadership—Encouraging each employee to be the best they can be regardless of

position or grade, understanding that all

levels of employees are expected to play a

role in developing and directing every

effort performed.

◆ Creativity—Cultivating fresh perspectives in the development of new processes and techniques that will improve OIG

Postal Service and our operations.

◆ Communication—Ensuring cross level

and cross functional sharing of all

PAGE68

The values make up the core of the

OIG’s culture and define how it does

its work.

ORGANIZATIONAL DYNAMICS

This section describes the OIG and the

Inspection Service organizational vision,

values, culture, and diversity that assist

with providing value added service to the

Postal Service. In order to differentiate

the work reported by the OIG and the

Inspection Service, the pages containing

the work reported by the Inspection Service

have been color-screened.
PAGE69

information as well as facilitating honesty, openness, respect, and consideration

of the contributions and opinions of

others.

◆ Conceptualization—Keeping one’s “eye

on the ball” and recognizing interrelationships to accomplish desired results.

RESPONDING TO CRISES

On September 11, 2001, America experienced the worst terrorist attack committed on

our nation’s soil. Shortly thereafter, the nation

suffered a bio-terrorist attack that had a major

impact on the American public and postal

operations. Many OIG employees joined the

countless others who dedicated their time and

efforts to help the country and Postal Service

deal with these crises.

On the day of the attacks many OIG staff

took quick action to provide rescue assistance

and security. Soon after, OIG agents quickly

assisted the law enforcement community in

response to these attacks.

In the days that followed, the OIG developed plans to assist the Postal Service in

addressing the challenges resulting from recent

bioterrorism attacks through the mail. In particular, the OIG is reviewing Postal Service’s

effectiveness in purchasing and deploying

equipment to sanitize the mail; communicating

and implementing operational and safety procedures for dealing with bioterrorism; and

ensuring that mail is free from contamination.

The quick reaction of OIG employees and

the OIG’s ability to refocus staff and priorities

is a direct result of the values the OIG

embraces. Below are some ways in which the

OIG provided assistance.

◆ On the morning of September 11, one

OIG agent was conducting surveillance

at the World Trade Center. After

witnessing the first explosion, the agent

immediately alerted federal authorities

of the attack. The agent then called his

wife, who worked in Tower 2, advising

her and her coworkers to evacuate the

building.

◆ An OIG team assisted the Port Authority of New York and New Jersey by maintaining a presence on Hudson River

ferries that evacuated victims from

Manhattan. The agents kept the numbers of riders to a manageable number so

the ferries would not capsize and cared

for children whose fearful parents handed

them over the fence and onto the ferries

so that the children would be safe. The

agents also helped the injured find

treatment.

◆ In Washington, DC, OIG employees

were also quick to respond. On the

day of the attack, an OIG employee

established and staffed the emergency

response center for his volunteer fire

department. Later that same day, he was

transferred to the Pentagon with one of

the fire department’s medic units as the

lead paramedic. On the following day,

the employee served as the liaison

between the Federal Emergency

Management Agency and the Arlington,

Virginia, fire commander.

◆ OIG agents worked at the Pentagon to

assist in evidence collection.

◆ An OIG employee performed armed

security duty at a military base as a

member of the Virginia Army National

Guard.

◆ Over 10 percent of the OIG investigative staff is supporting a variety of federal

law enforcement efforts to identify and

apprehend the terrorists.

◆ OIG agents and a computer specialist

are assisting the national infrastructure

protection center in monitoring and

decoding Internet traffic related to

terrorist activities.

◆ OIG agents staffed the Federal Bureau of

Investigation National Tip Line to gather

and assess incoming information.

◆ The OIG deployed agents to various

cities to assist on the investigations

related to the recent anthrax attacks.

The events of September 11 and recent

anthrax attacks through the mail have dramatically altered the environment in which

the Postal Service operates, and it faces new

challenges that would have been inconceivable six months ago. The OIG is committed

to helping the Postal Service meet these new

challenges.

After the September 11 attacks, OIG

investigators assisted the Port Authority

of New York and New Jersey by maintaining a presence on the ferry that was

evacuating victims from Manhattan.
PAGE70

OIG CULTURE AND EMPLOYEES

Enhancing the Work Environment

The OIG’s culture is defined by the diversity of its employees, who share the organization’s core values of teamwork, leadership,

creativity, communication, and conceptualization. The OIG is committed to creating and

maintaining a workplace that is enriched by the

talents, contributions, and full participation of

all of its employees and that reflects the

tremendous diversity of the Postal community.

Diversity is a tool for achieving the OIG’s

mission and enhancing its organizational

effectiveness by using the creative energies of

employees who contribute different approaches,

solutions, and innovations.

The OIG workforce is diverse in age, race,

ethnicity, gender, and background, as well as

education, professional accomplishments, work

experience, and work style. The OIG workforce

includes Certified Public Accountants,

Certified Internal Auditors, Certified Fraud

Examiners, Certified Information Systems

Auditors, Certified Government Audit

Professionals, and Certified Acquisition

Auditors. OIG employees also hold law

enforcement specialty certifications in areas

such as polygraph examinations. In addition,

many OIG employees have undergraduate or

advanced degrees, while other employees are

continuing to work towards professional and

academic achievements. OIG teams include

auditors, evaluators, criminal investigators,

lawyers, technicians, and administrative personnel formerly from federal and state government

agencies, private industry, non-profit organizations, and the Postal Service.

The OIG continues to carry out an aggressive hiring initiative to staff the organization

with highly skilled employees. As of September

30, 2001, the OIG had 703 employees, of

whom, 50 percent were women and 48 percent

were minorities. The senior staff is composed of

approximately 35 percent women and 29 percent minorities. Based on September 1999 U.S.

Office of Personnel Management Federal

Civilian Workforce estimates, the OIG workforce has exceeded the percentage of minority

representation in the federal civilian workforce

for all groups, except for Native Americans.

The federal civilian workforce is comprised

of executive branches, non Postal Service

employees. 

In the past six months, we increased our

outreach and recruitment efforts which contributed towards OIG reaching and exceeding

the Federal Civilian Workforce estimates for

Hispanics. We are committed to achieving the

same success with Native Americans. Because

Bureau of Labor Statistics census data is now

over 10 years old, and new census civilian labor

force data is not expected to be released until

2003, the OIG is using the more up-to-date

Federal Civilian Workforce data as a comparison.

ADHERING TO THE HIGHEST

PROFESSIONAL STANDARDS

The OIG reports to Congress and the nine

presidentially-appointed Governors. The

Inspector General is under the “general supervision” of these Governors and is not supervised

by the Postmaster General. This independence

from Postal management is crucial to the OIG’s

credibility and allows the OIG to objectively

conduct audits and investigations of program

operations and to report its findings to the

Governors and Congress. To help respond to

the challenges the Postal Service faces, the OIG

annually identifies major management issues

and independently develops work priorities that

assist the Postal Service in addressing these

challenges.

OIG work is performed in accordance with

a variety of professional standards, such as:

◆ The General Accounting Office’s

Government Auditing Standards; and

◆ The President’s Council on Integrity

and Efficiency’s Quality Standards for

Inspections and Quality Standards for

Investigations.

Each audit is subject to supervisory review

at each stage of the audit process and must

meet established standards for due professional

care, quality, and independence. Each report is

subject to review by the OIG’s statisticians,

attorneys, editors, and other experts, and is

independently referenced by individuals not

associated with the project. Draft reports are

submitted to Postal Service management,

which has the opportunity to provide written

comments in response to the report’s findings

and recommendations. These comments are

analyzed and incorporated in the final report. 

ORGANIZATIONAL DYNAMICS

Comparison of

OIG/Federal Civilian 

Workforce

0

10%

20%

30%

40%

50%

60%

70%

WHITE BLACK HISPANIC ASIAN NATIVE AMERICAN

OIG 2001

Federal Workforce 1999

OIG exceeds minority representation in

every category, except Native Americans.
PAGE71

In addition, the OIG ensures the highest

ethical standards by performing full security

background investigations of its employees.

Nearly all OIG employees are required to provide annual financial disclosure statements for

review to determine potential conflicts of interest. All employees are required to complete

ethics training each year and meet the OIG’s

established standards for continuing professional education.

Further, the OIG ensures its own

compliance with professional, legal, and ethical

standards through established processes. Every

three years, the OIG is selected for a peer review

of its audit processes by another Inspector

General organization. The OIG also has an

effective quality assurance function that evaluates processes, programs, and work performed.

Complaints against senior OIG management

officials are handled pursuant to Executive

Order and are investigated by the Integrity

Committee of the President’s Council on

Integrity and Efficiency, headed by a highranking official of the Federal Bureau of

Investigation. 

NOTABLE OIG ACHIEVEMENTS

OIG SENIOR EXECUTIVES JOIN

RANKS OF SENIOR EXECUTIVE

SERVICE

The Office of Personnel Management formally recognized the OIG’s top executives as

employees who met the standards of the federal

Senior Executive Service. The Senior

Executive Service is a special personnel classification for senior executive managers throughout the federal government. Competitive

selection into the service requires a demonstration of extensive qualifications in high-level

management skills. This new recognition will

further enhance the OIG’s ability to recruit

senior managers from the Senior Executive

Service and enable OIG executives to serve in

Senior Executive Service positions at other

federal agencies. 

FOUR OIG AGENTS NAMED

“OUTSTANDING LAW

ENFORCEMENT OFFICERS OF 

THE YEAR”

For their outstanding contributions to law

enforcement, four OIG special agents were

named “Outstanding Law Enforcement Officers

of the Year” by the U.S. Attorney’s Office,

Southern District of Florida. The special agents

were recognized for their successful prosecution

of two former postal employees, a married

couple, who embezzled over $3 million from the

Postal Service. As a result of the agents’

diligent casework, the couple was sentenced to

almost 6 years in prison, fined over $30,000,

and ordered to make joint restitution of over

$3 million to the Postal Service.

OIG RECEIVES AWARDS OF

EXCELLENCE

The OIG received 14 Awards of

Excellence and one Career Achievement

Award from the President’s Council on

Integrity and Efficiency and Executive Council

on Integrity and Efficiency. The OIG was

recognized for excellence in the areas of audits,

investigations, law and legislation and multiple

disciplines. A few of the awards included:

◆ outstanding management of complex

audits of claims totaling over $870

million;

◆ successful investigation and prosecution

of two high-ranking Postal Service

managers for defrauding the Postal

Service of approximately $3.2 million;

◆ reviewing and identifying safety and

security issues of the Postal Service

leased trailer fleet and for identifying

$17.5 million in cost savings; and

◆ identifying defective mail sorting units

that compromised employee safety and

operating efficiency.

These awards represent nearly one-fifth of

the total awarded to the entire OIG community

and were more than one-half of those awarded

to the Executive Council on Integrity and

Efficiency community.

OIG COMMITMENT TO

DIVERSITY CITED

The OIG’s commitment to diversity

extends beyond traditional characteristics such

as gender and race. The many dimensions of

diversity that the OIG embraces — education,

experience, perspective, and occupation —

enable the organization to more efficiently meet

customer needs and achieve business goals. To

Inspector General Karla Corcoran signs

the memorandum formally recognizing

the OIG’s top executives as employees

who met the standards of the federal

Senior Executive Service. She is

joined by representatives from the

Office of Personnel Management and

OIG employees who were instrumental in

developing the agreement.
PAGE72

this end, the OIG was featured in the May 2001

issue of the Diversity Monitor publication of the

Institute for Corporate Diversity for its diversity

actions and achievements.

OIG PROVIDES INFORMATION

TECHNOLOGY LEGAL TRAINING 

The OIG, along with the Council of

Counsels to Inspectors General, the National

Aeronautics and Space Administration Office

of Inspector General, and the Department of

Justice Criminal Division sponsored a two-day

course on a variety of legal issues associated with

information technology. Over 200 representatives from more than 50 government organizations attended the training. The course

provided intensive training in the areas of online investigative techniques, workplace

searches of computers and data, search warrant

requirements, electronic surveillance, the use of

policies to secure consent to monitoring, penetration testing and vulnerability assessment,

incident response, and network crimes and

penalties. The course was designed for

Inspector General counsels, as well as information systems auditors and evaluators, and criminal investigators who conduct computer crime

investigations.

OIG WORKS TO STRENGTHEN

RELATIONSHIP WITH POSTAL

SERVICE

The OIG launched a major outreach effort

to Postal Service management associations during the summer of 2001 by making members of

its leadership team available as speakers at association conventions. OIG speakers provided an

overview of the OIG’s mission, roles, and

responsibilities and how OIG audits and investigations help the Postal Service. To date, OIG

staff has addressed 15 association conventions

which represent over 2,500 members of the

National Association of Postmasters for the

United States, the National League of

Postmasters of the United States, and the

National Association of Postal Supervisors.

The OIG appreciates the invitation to attend

such meetings and the support from the

Association and their members.

OIG ASSISTS IN DEFINING ROLE

OF FORENSICS LABORATORY

Last year, Congress amended the Inspector

General Act to create an Inspector General

Forensic Laboratory. The OIG, a frontrunner in

the field of computer intrusion, computer

forensics, and computer penetration testing,

participated in a group formed to study potential

uses for the laboratory. In April 2001, the group

recommended to the President’s Council on

Integrity and Efficiency that the laboratory train

Inspector General personnel throughout the

community on penetration testing of federal

agency computer networks. Penetration tests

are automated tools used by auditors and

investigators to test computer security. 

OIG EMPLOYEES DETAILED TO

WEBSTER COMMISSION

The OIG detailed two employees to a special commission led by former Central

Intelligence Agency and Federal Bureau of

Investigation director William Webster. The

Webster Commission is studying the adequacy

of the Federal Bureau of Investigation’s security

program in the wake of the Robert Hanssen

espionage case. The Commission requested and

the OIG assigned an employee who had prior

experience with Presidential Commissions to

serve as its administrative assistant. The OIG

also assigned a special agent who specializes in

computer intrusion investigations to evaluate

the security of the FBI’s information systems.

The details are expected to last approximately

six months. The Inspection Service also has

detailed two Postal Inspectors to the

Commission.

OIG SUPPORTS FEDERAL

INFRASTRUCTURE PROTECTION

EFFORTS

During this period, the OIG provided

ongoing support to the National Infrastructure

Protection Center. The National Infrastructure

Protection Center provides timely warnings of

international threats, comprehensive analysis

and law enforcement investigation and

response. An OIG special agent, with expertise

in conducting computer intrusion investigations, has been detailed to the National

Infrastructure Protection Center at the Federal

Bureau of Investigation headquarters. This

agent provides assistance in a multitude of areas

focused on the defense of assets comprising the

nation’s critically important infrastructure.

ORGANIZATIONAL DYNAMICS

As part of orientation, OIG employees get

an up-close view of a Postal Service

processing and distribution center.
PAGE73

Since the September 11th terrorist attack on

our nation, a second agent and a computer

specialist were also detailed to the National

Infrastructure Protection Center Crisis Action

Team to assist in the ongoing terrorism

investigation.

OIG ESTABLISHES

ADMINISTRATIVE ADVISORY

COUNCIL

In a continuing effort to ensure a productive, high-quality, and positive workplace for its

employees, OIG management recently established an Administrative Advisory Council.

While the OIG’s Employee Advisory Council

serves as a link between management and staff,

OIG management also wanted to ensure that

the concerns of support staff were not being

overlooked. The primary purpose of the

Administrative Advisory Council is to provide

a link between support staff and management.

The Council will achieve this goal by exemplifying the agency’s core values; providing an

effective forum for identifying and addressing

administrative employees’ issues; serving as a

channel of communication to exchange administrative employees ideas, provide advice, input,

and recommendations; and collaborating with

OIG management to foster and maintain a

superior workplace for all OIG employees.

EQUAL EMPLOYMENT OPPORTUNITY COUNSELING ENHANCED

The OIG promotes an environment that

celebrates diversity and the principles of Equal

Employment Opportunity, and recently

enhanced its counseling program by adding

more employees to its team of counselors.

There are now 15 counselors, who are located

at both headquarters and the field offices.

During April, the newly-appointed counselors

were trained and certified to carry out this

important role. These counselors are responsible for working closely and on a confidential

basis with employees as neutral facilitators. By

using these counselors, the OIG believes it can

address most Equal Employment Opportunity

issues quickly and informally; help preserve positive working relationships among employees;

maintain the most productive work environment possible; enhance communication among

employees; and minimize costly and lengthy

formal complaints.

CHILDREN LEARN WHAT IT’S LIKE

TO BE AN OIG EMPLOYEE ON

“TAKE OUR CHILDREN TO WORK

DAY”

In April, the OIG and Postal Service participated in “Take Our Children to Work Day.”

More than 50 children teamed with their parents at OIG headquarters and field offices.

Children in Rosslyn attended an observance at

Postal Service headquarters and also attended

events at OIG headquarters, such as an information technology expo and a forensics and

technical services demonstration. The children

also received a welcome message from the

Inspector General. The day concluded with an

ice-cream social, where the Deputy Inspector

General and Assistant Inspector General for

Internal Business visited with the children and

their families to share their day’s experiences.

OIG TEAMS TOGETHER AT THE

POSTAL STAMP-EDE

On April 25, the OIG and Postal Service

participated in the 2001 Postal Stamp-ede, a

3.1-mile walk on the mall in Washington, D.C.

OIG teams won awards for “Best Team Spirit”

and “Best Team Chant.” This annual event was

an opportunity for OIG employees to show

their team spirit, demonstrate pride in their

workplace, interact with Postal Service employees in an informal environment, and promote

their health, fitness, and well-being.

CHALLENGES FACING THE OIG

As the OIG moves forward in its efforts to

help the Postal Service maintain and enhance

its position as best in the world, the OIG must

address several external and internal challenges.

These include:

◆ Responding to the recent terrorist

attacks on the Postal Service;

◆ Getting timely notification and

information about major Postal 

Service initiatives;

◆ Convincing Postal Service management

to improve acquisition controls;

◆ Guarding OIG independence;

◆ Continuing to provide stakeholders with

meaningful information;

◆ Managing resources to accommodate

changing priorities;

Over 200 representatives from more

than 50 government organizations

attended a course on legal issues

associated with information technology

co-sponsored by the OIG.
◆ Maintaining a healthy organizational

culture and environment;

◆ Educating stakeholders on the OIG’s

role; and

◆ Balancing the OIG’s responsibility to

report its findings with the Postal

Service’s competitive needs for

nondisclosure.

More information about the OIG can be

found on our website www.uspsoig.gov.

PAGE74

Which Postmaster initiated

the free rural delivery? 

In 1896 Postmaster General John

Wanamaker instituted rural free

delivery. Prior to free rural

delivery, individuals had to pick

up mail at a post office, often

involving a day’s travel, roundtrip. A farmer might delay picking up mail for days, weeks, or

even months until the trip could

be coupled with one for supplies,

food, or equipment.

ORGANIZATIONAL DYNAMICS

DID YOU 

KNOW?
PAGE75

INSPECTION SERVICE

The Inspection Service, the traditional

law enforcement arm of the Postal

Service, is a highly specialized, professional organization that performs investigative

and security functions essential to a stable and

sound postal system. Through its security and

enforcement functions, the Inspection Service

provides assurance to businesses for the safe

exchange of funds and securities through the

U.S. mail; to postal customers of the “sanctity of

the seal” in transmitting correspondence and

messages; and to postal employees of a safe work

environment.

Postal Inspectors are federal law enforcement officers who carry firearms, make arrests,

execute federal search warrants, and serve

subpoenas. Postal Inspectors work closely with

U.S. Attorneys, other law enforcement agencies, and local prosecutors to investigate postal

cases and prepare them for court. There are

approximately 1,900 Postal Inspectors stationed

throughout the United States who enforce over

200 federal laws covering investigations of

crimes that adversely affect or fraudulently use

the U.S. mail and postal system.

To assist in carrying out its responsibilities,

the Inspection Service maintains a security

force staffed by over 1,400 uniformed Postal

Police Officers, who are assigned to critical

postal facilities throughout the country. The

officers provide perimeter security, escort highvalue mail shipments, and perform other

essential protective functions.

The Inspection Service operates five forensic crime laboratories, strategically located in

cities across the country. The laboratories are

staffed with forensic scientists and technical

specialists who assist Postal Inspectors in analyzing evidentiary material needed for identifying and tracking criminal suspects and in

providing expert testimony for cases brought to

trial.

The Inspection Service’s 900 professional

and technical employees also include program

analysts, financial analysts, information technology experts, and others who play a vital role

in supporting the criminal investigation and

security functions of the Inspection Service.

They perform a wide variety of tasks, including

developing, maintaining and continually

upgrading management systems; developing,

procuring and deploying electronic security and

surveillance equipment; publishing policy

handbooks and consumer awareness guides and

brochures; supplying photography and video

services; and facilitating direct communications

with Congress and the public.

The Office of Inspections operates with a

staff of 12 Postal Inspectors, an Inspector in

Charge, 4 support employees and 33 Postal

Police Officers, and has a three-fold mission.

First, it ensures integrity and excellence within

the Inspection Service by conducting independent internal investigations of its employees.

Second, the office also oversees the quality and

thoroughness of Inspection Service operations

by conducting reviews at field divisions and

headquarters units. Finally, it protects the safety

of postal employees and customers by providing

security and preventive services at national

Headquarters.

The Office of Counsel provides legal

advice and services in support of Inspection

Service investigations, programs and goals, and

processes requests for access to Inspection

Service records. The Counsel’s office is composed of 20 inspector-attorneys and a support

staff of paralegal specialists, information

disclosure specialists, a labor relations specialist,

a program specialist, and an administrative

support specialist.

The Inspection Service’s national

information technology infrastructure supports

about 4,300 users at more than 220 sites

nationwide. Inspection Service offices are

linked nationally via a dedicated frame-relay

network, with online connections to the Postal

Service, the National Crime Information

Center, the National Law Enforcement

Telecommunications System, and the Internet.

The Inspection Service extends full

cooperation to all federal, state, and local

investigative and prosecutorial authorities in

law enforcement matters to ensure greater

protection to the public. Working with other

agencies, Postal Inspectors regularly participate

in joint task force cases aimed at curtailing wide

spread criminal acts of an organized nature.

More information on the Inspection Service

canbe found at http://www.usps.com/postalinspectors.

Inspection Service seal and badges
PAGE76
Organizational Structure

What is the background of the OIG’s staff? 

The OIG staff consists of auditors, criminal

investigators, evaluators, lawyers, experts,

technicians, and administrative personnel from

federal and state government agencies, private

industry, nonprofit organizations, and the 

Postal Service.

DID YOU 

KNOW?

PAGE 77
PAGE78 ORGANIZATIONAL STRUCTURE

INVESTIGATIONS

AUDITS

INTERNAL BUSINESS

Assistant 

Inspector General

Deputy AIG for 

Resources

Administrative Services

Human Resources

Internal Quality

Workplace Enhancement

Deputy AIG for Technology

Communications & Policy 

Experts

Information Technology

Assistant Inspector General

Audit Operations & Follow-up

AIG for Financial Management

Contracting & Facilities

Financial Field 

Financial Statement

AIG for Core Operations

Accepting & Processing

Labor Management

Transportation & Delivery

AIG for eBusiness

Consulting & Quick Response

Developmental

eCommerce/Marketing

Information Systems

Assistant Inspector General

Investigative Operations

Deputy AIG for Financial Investigations

Financial Crimes / Contracting & Facilities

Health Care Fraud

Executive Investigations & Retaliation

Deputy AIG for Non-Financial 

Investigations

Computer Intrusion/Forensic 

 & Tech Services

Hotline & Security

Non-Financial Crimes 

 & Corruption

General Counsel & 

AIG for Congressional, 

Oversight & Legal 

Services

Deputy AIG for

Congressional, 

Oversight & Legal

Services

Congressional & 

 Public Relations 

Legal Services

Oversight 

CONGRESSIONAL, OVERSIGHT

&

L

E

GAL

ARLINGTON

◆

ATLANTA ◆ BOSTON ◆ FIELD OFFICES: NEW YORK ◆ PITTSBURGH

◆ RALEIGH

◆

TAMPA

◆ CH CI AGO

◆

◆

ST. LOU SI ◆

SAN MATEO ◆ PORTLAND ◆ MINNEAPOLIS ◆ LOS ANGELES ◆ DENVER ◆

DALLAS

Executive Representatives 

for Field Liaison 

East & West

Field Offices

Inspector General

Deputy 

Inspector General

Quality Assurance & Internal Affairs

Strategic Planning

Office of Inspector General

Organizational Structure
PAGE79

OFFICE OF INSPECTOR

GENERAL

The OIG is a unique, nontraditional,

diverse organization that conducts audits, evaluations, investigations, and other core functions

identified by the Inspector General Act of 1978,

as amended.

The OIG’s values of teamwork, leadership,

communication, creativity, and conceptualization are demonstrated by teams that focus on

improving Postal Service business processes and

overall organizational achievement. The OIG

implemented a reorganization of its headquarters structure in September 2001 to better

reflect the Postal Service’s recent reorganization; more clearly define audit and investigative

functional areas and responsibilities; and clarify

lines of communication, resulting in a more efficient and effective organization. The following

section describes the OIG organizational structure as of September 30, 2001.

DEPUTY INSPECTOR GENERAL

Thomas Coogan

QUALITY ASSURANCE & INTERNAL

AFFAIRS TEAM

Director, George Davis - conducts internal

reviews of OIG operations and procedures to

ensure that they are effective and appropriate,

and reviews allegations against OIG employees.

STRATEGIC PLANNING

Director, Steve Spratt - incorporates current

and future Postal Service changes into OIG

operations, prepares and updates the OIG

strategic plan, develops and monitors the OIG

annual performance measures, and completes

strategic studies as needed.

EXECUTIVE REPRESENTATIVES FOR

FIELD LIAISON

Colleen McAntee (West) and Ronald

Merryman (East) - provides senior-level

communication links between the OIG Headquarters and its 15 field offices, and all Postal

Service field operations.

◆ East Offices: Arlington, New York,

Atlanta, Pittsburgh, Boston, Raleigh,

Tampa

◆ West Offices: Chicago, Los Angeles,

Dallas, Minneapolis, St. Louis, Denver,

Portland, San Mateo

Audit Directors, Darrell Benjamin

(West) and Debbie Pettitt (East) - plan

and coordinate staffing for audits and reviews as

initiated by Headquarters and responsible for

overall audit field staff development.

Investigative Directors, William

Hencken and Carl Puricelli (West) and

Gwen Johnson and Dennis Riley (East) -

plan and direct investigations in coordination

with Headquarters staff and responsible for

overall investigative field staff development.

GENERAL COUNSEL & ASSISTANT

INSPECTOR GENERAL FOR

CONGRESSIONAL, OVERSIGHT, 

AND LEGAL SERVICES

Kirt West

Deputy Assistant Inspector General 

Vacant

LEGAL SERVICES TEAM

Director, Gladis Griffith - provides legal

advice to the Inspector General and OIG staff

in all areas of criminal, civil, and administrative

law; processes subpoenas; manages ethics program; and reviews existing and proposed legislation, regulations, and policies affecting the

economy and efficiency of the Postal Service.

CONGRESSIONAL & PUBLIC 

RELATIONS TEAM

Director, Laura Whitaker - serves as liaison

and responds to requests from Congress, the

Board of Governors, and the media; coordinates Congressional testimony and presentations; and responds to all Freedom of Information Act requests.

OVERSIGHT TEAM

Director, Cathleen Berrick - provides

oversight of Inspection Service functions and

operations through audits, inspections, reviews,

monitoring, and coordination, including

assessing criminal investigative programs and

operations.

This section describes the organization of

the OIG and the Inspection Service. In

order to differentiate between the OIG and

the Inspection Service, the page concerning

the Inspection Service has been color

screened.

When were adhesive stamps

authorized in the United

States? 

In 1847, the Congress authorized

the use of adhesive postage

stamps. Two denominations went

on sale in New York City on 

July 1, 1847, a 5-cent stamp bearing

Benjamin Franklin’s portrait in a

bronze tint, and a 10-cent stamp

of George Washington in a black

tint. 

DID YOU 

KNOW?
ASSISTANT INSPECTOR GENERAL

FOR AUDIT

Debra Ritt 

AUDIT OPERATIONS AND FOLLOW-UP

TEAM

Director, Joyce Hansen - provides support,

services, and coordination of audit activities;

facilitates the development of audit reporting

policy and procedures; develops and oversees

implementation of the audit workload plan;

manages the closure of significant audit recommendations and audit resolution process; and

analyzes statistical audit data to accomplish the

OIG’s audit mission.

ASSISTANT INSPECTOR GENERAL

FOR FINANCIAL MANAGEMENT

John Seeba

FINANCIAL TEAMS

Director- Financial Statements, Bennie

Cruz and Director, Financial Field,

Sheila Bruck - plan and direct work in support of the independent public accounting

firm’s annual financial audit opinion and conduct other financial-related audits to identify

areas for improvement.

CONTRACTS & FACILITIES TEAM

Director, Lorie Siewert - plans and directs

audits and reviews of purchasing and contracting activities, as well as all aspects of postal

facility repair, renovation, and new construction.

ASSISTANT INSPECTOR GENERAL

FOR CORE OPERATIONS

Ronald Stith

ACCEPTING & PROCESSING TEAM

Director, Larry Chisley - plans and directs

audits and reviews focusing on the economy,

efficiency, and effectiveness of mail acceptance,

collection, and processing operations, as well as

logistics activities supporting these operations.

TRANSPORTATION & DELIVERY TEAM

Director, Joe Oliva – plans and directs audits

and reviews focusing on delivery, and domestic

and international transportation operations,

specifically addressing economy, efficiency, and

effectiveness of Postal Service fleet operations

and contracts for air, highway, and rail services.

LABOR MANAGEMENT TEAM

Director, Chris Nicoloff - plans and directs

audits and reviews focusing on labor relations,

management, and health care issues within the

Postal Service to assist in maintaining a healthy

and safe organizational climate for employees

and improving operational economy, efficiency,

and effectiveness.

ASSISTANT INSPECTOR GENERAL

FOR eBUSINESS

Bob Emmons

DEVELOPMENTAL TEAM

Director, Tracy LaPoint - plans and directs

audits and reviews of new or redesigned Postal

Service systems, programs, and operations that

are under development.

eCOMMERCE & MARKETING TEAM

Director, Robert Batta - plans and directs

audits and reviews of electronic commerce,

marketing programs, stamp services, retail operations, international business, and support

operations. 

INFORMATION SYSTEMS TEAM

Director, Dave Berran - plans and directs

audits and reviews of major Postal Service

information systems to determine whether general and application controls are properly established and systems are designed to be secure and

provide accurate data to management. 

CONSULTING & QUICK RESPONSE

TEAM

Director, Kim Stroud - assists Postal Service

management by identifying best practices for

improving Postal Service operations and advises on critical, time sensitive issues.

ASSISTANT INSPECTOR GENERAL

FOR INVESTIGATIONS

Billy Sauls

INVESTIGATIVE OPERATIONS TEAM

Director, Russ Barbee - provides support

and coordination to field and headquarters

investigative programs; facilitates the development of investigative policy and procedures;

compiles and analyzes statistical investigative

data and results to accomplish the OIG’s investigative mission.

PAGE80 ORGANIZATIONAL STRUCTURE

OIG employees work in diverse teams to

address Congressional inquiries.
PAGE81

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR FINANCIAL

INVESTIGATIONS 

Daniel O’Rourke

FINANCIAL CRIMES, CONTRACTING &

FACILITIES TEAM

Director, Anthony Cannarella - identifies

and coordinates investigations related to the

expenditure of Postal Service funds; supports

investigations of purchasing activities and

operations as well as all aspects of postal facility repair, renovation, and new construction.

HEALTH CARE FRAUD TEAM

Director, Mimi Band - identifies and coordinates investigations of wrongdoing by medical providers under contract with the Postal

Service and medical providers that have falsely

billed the Postal Service for work-related injury

claims.

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR NON-FINANCIAL

INVESTIGATIONS 

Vacant

NON-FINANCIAL CRIMES &

CORRUPTION TEAM

Director, Michael Shiohama - identifies

and coordinates investigations of bribery,

kickbacks, conflict of interest, fraudulent tort

claims, impact card fraud, indemnity claims

fraud, and cases involving expenditures and

contract fraud dealing with product

substitution.

COMPUTER INTRUSION AND FORENSIC & TECHNICAL SERVICES TEAM

Director, Howard Cox - detects and investigates computer hacking and other high-technology crimes involving Postal Service computers and telecommunications systems; and

provides technical support in such areas as surveillance, evidence recovery and computer

forensics.

HOTLINE AND SECURITY TEAM

Director, Tommy Hampton - operates the

OIG Hotline, providing a vital link for reporting fraud, waste, abuse and mismanagement;

and provides physical and personnel security

services within the OIG. 

ASSISTANT INSPECTOR GENERAL

FOR INTERNAL BUSINESS

Wayne Goleski

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR RESOURCES

Vacant

HUMAN RESOURCES TEAM

Director, Eufemia Lucero - provides fullservice human resource support to the OIG in

the areas of employee relations, pay and benefits, recruitment, retirement, awards, performance management, counseling, and training.

ADMINISTRATIVE SERVICES TEAM

Director, Stew Dorris - supports the OIG by

providing facility, procurement, financial, budget, and other internal services necessary to

accomplish the OIG’s mission.

WORKPLACE ENHANCEMENT TEAM

Director, Sharon Solomon - supports the

OIG by providing work life, organizational climate, diversity, Equal Employment Opportunity, and other workplace-related services.

INTERNAL QUALITY TEAM

Director, Bob Pemberton - develops programs and activities that promote the vision

and core values of the OIG—teamwork,

leadership, communication, creativity, and

conceptualization. 

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR TECHNOLOGY

Donna Edsall

INFORMATION TECHNOLOGY TEAM

Director, David Sidransky - supports the

OIG by providing computer operations,

telecommunications, agency wide information

systems, computer security and technical

support.

EXPERTS AND COMPUTER-ASSISTED

ASSESSMENT TECHNIQUES TEAM

This self directed team provides support to OIG

in the areas of statistical sampling; quantitative

and statistical methods; computer-assisted

assessment techniques for data retrieval and

analysis; economic forecasting; cost/benefit

analysis; estimation of monetary benefits; and

activity-based costing.

The OIG received 14 Awards of Excellence

and one Career Achievement Award from

the President’s Council on Integrity and

Efficiency and Executive Council on

Integrity and Efficiency. 
COMMUNICATIONS & POLICY TEAM

Director, Jim Nugent - supports the OIG by

providing writing, editorial, video, and graphic

services; coordinates and publishes OIG reports

as well as other documents for Congress, the

Governors, and Postal Service management;

and manages development of internal policies

and procedures.

OIG FIELD LOCATIONS

The OIG Headquarters is located in

Rosslyn, Virginia. In addition, the OIG has 15

field offices located in San Mateo and Los

Angeles, California; Denver, Colorado; Tampa,

Florida; Atlanta, Georgia; Chicago, Illinois;

Boston, Massachusetts; Minneapolis,

Minnesota; St. Louis, Missouri; New York, New

York; Portland, Oregon; Pittsburgh,

Pennsylvania; Raleigh, North Carolina; Dallas,

Texas; and Arlington, Virginia. OIG locations

are depicted in the chart below.

PAGE82

RALEIGH RALEIGH , NC , NC

NEW YORK, NY MINNEAPOLIS, MN NEW YORK, NY MINNEAPOLIS, MN

ST. LOUIS, MO ST. LOUIS, MO

ATLANTA, GA LOS ANGELES, CA ATLANTA, GA LOS ANGELES, CA

DALLAS, TX DALLAS, TX

ROSSLYN & ARLINGTON, VA CHICAGO, IL ROSSLYN & ARLINGTON, VA CHICAGO, IL

DENVER, CO DENVER, CO

SAN MATEO, CA SAN MATEO, CA

TAMPA, FL TAMPA, FL

BOSTON, MA BOSTON, MA

PITTSBURGH, PA PITTSBURGH, PA PORTLAND, OR PORTLAND, OR

RALEIGH, NC

NEW YORK, NY MINNEAPOLIS, MN

ST. LOUIS, MO

ATLANTA, GA LOS ANGELES, CA

DALLAS, TX

ROSSLYN, VA CHICAGO, IL

DENVER, CO

OIG Locations Nationwide 

SAN MATEO, CA

TAMPA, FL

BOSTON, MA

PITTSBURGH, PA

PORTLAND, OR

BOSTON, MA

NEW OFFICE

The OIG used its in-house video services

to produce a video audit report demonstrating backlogged mail at an Atlanta

airport. 
PAGE83

INSPECTION SERVICE

The national headquarters offices of the

Inspection Service are organized into functional

groups that report to Deputy Chief Inspectors

for Investigations, Security & Technology, and

Professional Standards & Resource

Development. The Inspection Service has 18

field divisions, which report directly to three

Deputy Chief Inspectors for field operations.

Five Inspection Service Operations Support

Groups support field offices. The Inspection

Service’s Executive Committee, which consists

of the six Deputy Chief Inspectors and the three

Inspectors in Charge who report directly to the

Chief Postal Inspector, establishes the direction

of the organization. The National Leadership

Team consists of the Deputy Chief Inspectors

and all Inspectors in Charge. 

Inspector in Charge

Information Technology

R. COCCIA

Inspector in Charge

Corporate Information

Management

R. LUERS

Inspector in Charge

Computer Crimes &

Commerce

J. EASLEY

Inspector in Charge

International Security

D. HILL

Inspector in Charge

Security

T. DENNENY

Inspector in Charge

Fraud, Child Expl., 

Asset Forfeiture & 

Money Laundering

L. MAXWELL

Inspector in Charge

Mail Theft & 

Violent Crimes

K. ROBERTS

Inspector in Charge

Revenue & Asset 

Protection Prog.

K. BOND

Inspector in Charge

Forensic & Tech. 

Services

R. GEFFEN

Inspector in Charge

Strategic Plng. & 

Management Process

J. STINCHFIELD

Inspector in Charge

Career Development 

Division

(VACANT)

Inspector in Charge

Finance & 

Adm. Services

M. MUNLEY

Manager

Human Resource

Performance

N. JOHNSON

Inspectors in Charge

Mid Atl. - 

A. CRAWFORD

NY Metro - 

J. SKIDMORE

No. Jersey/Caribbean - 

K. BURKE

Northeast - 

K. JONES

Philadelphia Metro - 

I. CARLE

Washington Metro - 

A. CLEMMONS

W. Allegheny - 

J. BIRCH

Inspectors in Charge

Michiana - 

A. DAVIDSON

Midwest - 

R. BOWDREN

No. Ca - 

A. KIEL

No. Illinois - 

I. GILLIS

Northwest - 

R. MORGAN

So. Ca - 

J. FREEMAN

Inspectors in Charge

Florida - 

J. BELZ

Gulf Coast -

R. DODD

Rocky Mountain - 

M. COBOS

Southeast - 

D. COLLINS

Southwest - 

A. HOLMES

Inspector in Charge

Office of Counsel

L. KATZ

Inspector in Charge

Office of Inspections

J. SOMERSET

Inspector in Charge

Congressional & 

Public Affairs

D. MIHALKO

Inspection Service Organizational Structure

Chief Postal Inspector

KEN C. WEAVER

Chief Postal Inspector 

Kenneth C. Weaver

Deputy Chief Inspector

Security/Technology

J. ROWAN

Deputy Chief Inspector

Investigations

K. NEWMAN

Deputy Chief Inspector

Professional Standards & Resource Development

D. WRIGHT

Deputy Chief Inspector

Field Operations - East

L. HEATH

Deputy Chief Inspector

Field Operations West

M. AHERN

Deputy Chief Inspector

Field Operations South

W. MITCHELL
PAGE84
PAGE 85

Appendices

DID YOU 

KNOW?

PAGE 85

Does OIG review Postal Service 

mail processes? 

Yes, the OIG has established review

teams to examine mail acceptance, processing delivery and transportation. This

is important because the Postal Service

delivers more than 660 million pieces of

mail every day and handles 41 percent of

the entire world’s mail volume.
APPENDIX A

Reports Issued to Postal Management

For the period April 1, 2001, through September 30, 2001

OVERVIEW

Office of Inspector General

The OIG audit teams are aligned to conduct performance and financial audits, evaluations and

other reviews to address the business processes of the Postal Service. Each team issues audit

reports (AR), letter advisory reports (LA), or management advisory reports (MA) in accordance

with the identified needs of the project.

Inspection Service

The Inspection Service provided Postal-wide attention in selected areas until September 30, 2000

when all audit functions were transitioned to the OIG. Inspection Service information is incorporated in appendices B, C and D, as appropriate.

SUMMARY

The following is a summary by principal area of reports issued to Postal Service management by 

the OIG.

Recommend Potential

Number of Questioned Unsupported Funds Put to Unrecoverable Additional

Principal Area Reports Issued Costs Costs1 Better Use Costs Revenue

Performance 14 $0 $0 $25,918,035 $1,363,198 $0

Financial Management 149 $166,564,281 $250,471 $0 $34,000 $17,081

Technology 20 $0 $0 $0 $0 $0

Labor Management 12 $0 $0 $12,407 $0 $0

Oversight 3 $0 $0 $2,049,307 $0 $0

Other Significant Reviews 9 $0 $0 $0 $0 $0

GRAND TOTAL 207 $166,564,281 $250,471 $27,979,749 $1,397,198 $17,081

PAGE 86 APPENDICES

Definitions

Questioned Costs - A cost that is

unnecessary, unreasonable, unsupported, or an alleged violation of

law, regulation, contract, etc.

Unsupported Costs - A cost that

is not supported by adequate documentation.

Funds Put to Better Use - Funds

that could be used more efficiently

by implementing recommended

actions.

Unrecoverable Costs - A cost that

perhaps should not have been

incurred and is not recoverable.

Potential Additional Revenue are

amounts from revenue generating

functions such as retail sales, rent,

leases, or fees that were underpaid

or not realized. 

1 Unsupported Costs are included with the amounts shown as Questioned Costs.

2 Represents unrecoverable costs.

3 Represents potential additional revenue. 
REPORT LISTING

The following is a list of each report grouped by core business processes and enabling functions.

OIG REPORTS

PERFORMANCE

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

ACCEPTING AND PROCESSING

AC-MA-01-002 Certified Mail Observations $0 $0 $0 $0 5/2/01

at the Los Angeles Processing

and Distribution Center

DELIVERY

DE-AR-01-002 Review of the Revised $0 $0 $0 $0 4/9/01

Rules Governing Commercial

Mail Receiving Agencies

DE-AR-01-003 Delayed Express Mail at a $0 $0 $0 $0 8/10/01

Tampa, Florida Facility

DE-AR-01-004 Disposal of Delivery Jeeps in $0 $0 $0 $0 8/30/01

the Capital Metro Area

MARKETING

MK-AR-01-002 Stamp Printing Quantities $0 $0 $10,000,000 $1,363,1982 9/28/01

MK-AR-01-003 Transition Planning for the $0 $0 $0 $0 9/28/01

Priority Mail Processing

Center Network

TRANSPORTATION

TR-AR-01-003 Mail Transport Equipment $0 $0 $0 $0 5/4/01

Service Center - Decision

Analysis Report Performance

and Financial Benefits

TR-AR-01-004 Bulk Fuel Purchase Plan $0 $0 $15,918,035 $0 7/27/01

TR-AR-01-005 Air Carrier Reliability $0 $0 $0 $0 8/2/01

TR-AR-01-006 Manual Payments on $0 $0 $0 $0 9/28/01

Rail Transportation Contracts

TR-LA-01-001 Review of a $0 $0 $0 $0 6/26/01

Transportation Agreement

TR-MA-01-002 Excise Taxes and Third Party $0 $0 $0 $0 8/8/01

Ground Handling Costs Under

a Transportation Agreement

TR-MA-01-003 Security Risks Associated with $0 $0 $0 $0 9/27/01

a Transportation Agreement

TR-VR-01-001 Video Report - Air Carrier Reliability $0 $0 $0 $0 9/7/01

PERFORMANCE TOTALS $0 $0 $25,918,035 $1,363,198

FINANCIAL MANAGEMENT

FINANCIAL-RELATED

FF-AR-01-009 Audit of Statistical Tests for $0 $0 $0 $0 4/4/01

Fiscal Year 2001 Cost

and Revenue Analysis - 

Capital District

FF-AR-01-010 Audit of Statistical Tests for $0 $0 $0 $0 4/3/01

Fiscal Year 2001 Cost and

Revenue Analysis Audit - 

Long Beach District

PAGE 87
FF-AR-01-011 Fiscal Year 2001 Financial $0 $0 $0 $0 4/10/01

Installation Audit - 

Central Florida District 

Accounting Office

FF-AR-01-012 Fiscal Year 2001 Financial $0 $0 $0 $0 4/11/01

Installation Audit - Pitt Station 

FF-AR-01-013 Fiscal Year 2001 Financial $0 $0 $0 $0 4/10/01

Installation Audit - 

South Georgia District 

Accounting Office

FF-AR-01-014 Fiscal Year 2001 Financial $0 $0 $0 $0 4/18/01

Installation Audit - Dallas 

Stamp Distribution Office

FF-AR-01-015 Fiscal Year 2001 Financial $0 $0 $0 $0 4/24/01

Installation Audit - Omaha 

Stamp Distribution Office

FF-AR-01-017 Fiscal Year 2001 Financial $0 $0 $0 $0 5/2/01

Installation Audit - Carol Stream 

Stamp Distribution Audit

FF-AR-01-018 Audit of Statistical Tests for $0 $0 $0 $0 5/3/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Central Florida District

FF-AR-01-019 Audit of Statistical Tests for $0 $0 $0 $0 5/3/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Honolulu District

FF-AR-01-020 Fiscal Year 2001 Financial $0 $0 $0 $0 5/7/01

Installation Audit - 

San Diego District 

Accounting Office

FF-AR-01-021 Fiscal Year 2001 Financial $0 $0 $0 $0 5/14/01

Installation Audit - 

Central Plains District 

Accounting Office

FF-AR-01-022 Audit of Statistical Tests for $0 $0 $0 $0 5/14/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

North Florida District

FF-AR-01-023 Fiscal Year 2001 Financial $0 $0 $0 $0 5/14/01

Installation Audit - 

Durham Post Office

FF-AR-01-024 Fiscal Year 2001 Financial $0 $0 $0 $0 5/14/01

Installation Audit - 

Denver Post Office

FF-AR-01-025 Fiscal Year 2001 Financial $0 $0 $0 $0 5/17/01

Installation Audit - 

Fort Lauderdale Business 

Mail Entry Unit

FF-AR-01-026 Fiscal Year 2001 Financial $0 $0 $0 $0 5/25/01

Installation Audit - 

Miami Beach Post Office

FF-AR-01-027 Fiscal Year 2001 Financial $0 $0 $0 $0 5/25/01

Installation Audit - Alabama 

Stamp Distribution Office

FF-AR-01-028 Fiscal Year 2001 Financial $0 $0 $0 $0 5/29/01

Installation Audit - Omaha 

Business Mail Entry Unit

PAGE 88 APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FF-AR-01-029 Fiscal Year 2001 Financial $0 $0 $0 $34,0002 5/31/01

Installation Audit - 

Norwood Park Station

FF-AR-01-030 Fiscal Year 2001 Financial $0 $0 $0 $0 5/31/01

Installation Audit - 

San Bernardino SelfService Postal Center

FF-AR-01-032 Audit of Statistical Tests for $0 $0 $0 $0 6/11/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Triboro District

FF-AR-01-033 Audit of Statistical Tests for $0 $0 $0 $0 6/11/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

San Jose District

FF-AR-01-034 Audit of Statistical Tests for $0 $0 $0 $0 6/11/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Northern Virginia District

FF-AR-01-035 Fiscal Year 2001 Financial $0 $0 $0 $0 6/11/01

Installation Audit - 

Blairs Post Office

FF-AR-01-036 Fiscal Year 2001 Financial $0 $0 $0 $0 6/13/01

Installation Audit - Fort Wayne 

Stamp Distribution Office

FF-AR-01-037 Fiscal Year 2001 Financial $0 $0 $0 $0 6/13/01

Installation Audit - Honolulu 

District Accounting Office

FF-AR-01-038 Fiscal Year 2001 Financial $0 $0 $0 $0 6/18/01

Installation Audit - Middlesex 

Essex Stamp Distribution Office

FF-AR-01-039 Fiscal Year 2001 Financial $0 $0 $0 $0 6/18/01

Installation Audit - Providence 

Stamp Distribution Office

FF-AR-01-040 Fiscal Year 2001 Financial $0 $0 $0 $0 6/15/01

Installation Audit - Clarksburg 

Business Mail Entry Unit

FF-AR-01-041 Audit of Statistical Tests for $0 $0 $0 $0 6/15/01

Fiscal Year 2001 Cost and 

Revenue Analysis -

Tennessee District

FF-AR-01-042 Fiscal Year 2001 Financial $0 $0 $0 $0 6/18/01

Installation Audit - Hampton 

Business Mail Entry Unit

FF-AR-01-043 Fiscal Year 2001 Financial $0 $0 $0 $0 6/26/01

Installation Audit - 

Martin Post Office

FF-AR-01-044 Fiscal Year 2001 Financial $0 $0 $0 $0 6/29/01

Installation Audit - 

Moscow Post Office

FF-AR-01-045 Fiscal Year 2001 Financial $0 $0 $0 $0 7/3/01

Installation Audit - 

Pilgrim Station

FF-AR-01-046 Fiscal Year 2001 Financial $0 $0 $0 $0 7/13/01

Installation Audit - 

Yadkinville Post Office

FF-AR-01-047 Fiscal Year 2001 Financial $0 $0 $0 $0 7/13/01

Installation Audit - Greenville 

Stamp Distribution Office

PAGE 89

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FF-AR-01-048 Fiscal Year 2001 Financial $0 $0 $0 $0 7/13/01

Installation Audit - Corinth 

Business Mail Entry Unit

FF-AR-01-049 Fiscal Year 2001 Financial $0 $0 $0 $0 7/13/01

Installation Audit - Greensboro 

Stamp Distribution Office

FF-AR-01-050 Audit of Statistical Tests for $0 $0 $0 $0 7/13/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Central New Jersey District

FF-AR-01-051 Fiscal Year 2001 Financial $0 $0 $0 $0 7/13/01

Installation Audit - Suncoast 

District Accounting Office

FF-AR-01-052 Audit of Statistical Tests for $0 $0 $0 $0 7/18/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Colorado/Wyoming District

FF-AR-01-053 Fiscal Year 2001 Financial $0 $0 $0 $0 7/18/01

Installation Audit - 

Oak Brook Branch

FF-AR-01-054 Fiscal Year 2001 Financial $0 $0 $0 $0 7/18/01

Installation Audit - Carol Stream 

Business Mail Entry Unit

FF-AR-01-055 Audit of Statistical Tests for $0 $0 $0 $0 7/17/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Rio Grande District

FF-AR-01-056 Fiscal Year 2001 Financial $0 $0 $0 $0 8/17/01

Installation Audit - 

Camp Hill Post Office

FF-AR-01-057 Fiscal Year 2001 Financial $0 $0 $0 $0 8/7/01

Installation Audit - 

Calverton Post Office

FF-AR-01-058 Fiscal Year 2001 Financial $0 $0 $0 $0 8/17/01

Installation Audit - 

Columbia Post Office

FF-AR-01-059 Fiscal Year 2001 Financial $0 $0 $0 $0 8/10/01

Installation Audit - 

Gravesend Station

FF-AR-01-060 Fiscal Year 2001 Financial $0 $0 $0 $0 7/27/01

Installation Audit - 

Bethesda Post Office

FF-AR-01-061 Fiscal Year 2001 Financial $0 $0 $0 $0 8/10/01

Installation Audit - Denver 

Business Mail Entry Unit

FF-AR-01-062 Fiscal Year 2001 Financial $0 $0 $0 $0 8/7/01

Installation Audit - 

Ossining Post Office

FF-AR-01-063 Fiscal Year 2001 Financial $0 $0 $0 $0 8/7/01

Installation Audit - 

Colonia Branch

FF-AR-01-064 Fiscal Year 2001 Financial $0 $0 $0 $0 8/17/01

Installation Audit - 

Central Village Post Office

FF-AR-01-065 Fiscal Year 2001 Financial $0 $0 $0 $0 8/17/01

Installation Audit - 

Warren Post Office

APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

PAGE 90
FF-AR-01-066 Fiscal Year 2001 Financial $0 $0 $0 $0 7/31/01

Installation Audit - Orange 

Business Mail Entry Unit

FF-AR-01-067 Fiscal Year 2001 Financial $0 $0 $0 $0 9/5/01

Installation Audit - Lancaster 

Business Mail Entry Unit

FF-AR-01-068 Fiscal Year 2001 Financial $0 $0 $0 $0 8/8/01

Installation Audit - Denver 

District Accounting Office

FF-AR-01-069 Fiscal Year 2001 Financial $0 $0 $0 $0 8/3/01

Installation Audit - Los Angeles 

Business Mail Entry Unit

FF-AR-01-070 Fiscal Year 2001 Financial $0 $0 $0 $0 8/31/01

Installation Audit - Olive Branch 

Business Mail Entry Unit

FF-AR-01-071 Fiscal Year 2001 Financial $0 $0 $0 $0 9/11/01

Installation Audit - Dyersburg 

Business Mail Entry Unit

FF-AR-01-072 Fiscal Year 2001 Financial $0 $0 $0 $0 8/31/01

Installation Audit - Nashville 

Business Mail Entry Unit

FF-AR-01-073 Fiscal Year 2001 Financial $0 $0 $0 $0 8/31/01

Installation Audit - Danville 

Business Mail Entry Unit

FF-AR-01-074 Audit of Statistical Tests for $0 $0 $0 $0 8/3/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Seattle District

FF-AR-01-075 Fiscal Year 2001 Financial $0 $0 $0 $0 8/3/01

Installation Audit - Lodi 

Contract Postal Unit

FF-AR-01-076 Audit of Statistical Tests for $0 $0 $0 $0 8/29/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Mid-Carolinas District

FF-AR-01-077 Audit of Statistical Tests for $0 $0 $0 $0 8/10/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

South Jersey District

FF-AR-01-078 Fiscal Year 2001 Financial $0 $0 $0 $0 9/18/01

Installation Audit - 

Floral Park Post Office

FF-AR-01-079 Fiscal Year 2001 Financial $0 $0 $0 $0 9/6/01

Installation Audit - 

Margaret B. Sellers 

Business Mail Entry Unit

FF-AR-01-081 Fiscal Year 2001 Financial $0 $0 $0 $0 8/24/01

Installation Audit - 

Manhattanville Station

FF-AR-01-082 Fiscal Year 2001 Financial $0 $0 $0 $0 9/18/01

Installation Audit - 

Station B Jamaica

FF-AR-01-084 Fiscal Year 2001 Financial $0 $0 $0 $11,3853 8/31/01

Installation Audit - Southern 

Maryland Business Mail Entry Unit

FF-AR-01-085 Fiscal Year 2001 Financial $0 $0 $0 $5,6963 8/30/01

Installation Audit - Naperville 

Business Mail Entry Unit

PAGE 91

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FF-AR-01-086 Audit of Statistical Tests for $0 $0 $0 $0 8/24/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Salt Lake City District

FF-AR-01-087 Audit of Statistical Tests for $0 $0 $0 $0 8/24/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Lakeland District

FF-AR-01-089 Fiscal Year 2001 Financial $0 $0 $0 $0 9/17/01

Installation Audit - Charleston 

Stamp Distribution Office

FF-AR-01-090 Fiscal Year 2001 Financial $0 $0 $0 $0 9/18/01

Installation Audit - 

Jericho Post Office

FF-AR-01-091 Fiscal Year 2001 Financial $0 $0 $0 $0 9/5/01

Installation Audit - 

New Brunswick Business 

Mail Entry Unit

FF-AR-01-094 Audit of Statistical Tests for $0 $0 $0 $0 9/6/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Alaska District

FF-AR-01-095 Fiscal Year 2001 Financial $0 $0 $0 $0 9/18/01

Installation Audit - 

Valley Stream Post Office

FF-AR-01-096 Fiscal Year 2001 Financial $0 $0 $0 $0 9/18/01

Installation Audit - 

Hagerstown Post Office

FF-AR-01-097 Fiscal Year 2001 Financial $0 $0 $0 $0 9/11/01

Installation Audit - Martinsburg 

Business Mail Entry Unit

FF-AR-01-098 Audit of Statistical Tests for $0 $0 $0 $0 8/30/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Richmond District

FF-AR-01-099 Audit of Statistical Tests for $0 $0 $0 $0 8/29/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Fort Worth District

FF-AR-01-101 Fiscal Year 2001 Financial $0 $0 $0 $0 9/21/01

Installation Audit - Akron 

Stamp Distribution Office

FF-AR-01-104 Fiscal Year 2001 Financial $0 $0 $0 $0 9/21/01

Installation Audit - Little Rock 

Stamp Distribution Office

FF-AR-01-105 Fiscal Year 2001 Financial $0 $0 $0 $0 9/21/01

Installation Audit - 

Experiment Post Office

FF-AR-01-106 Audit of Statistical Tests for $0 $0 $0 $0 9/5/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Westchester District

FF-AR-01-107 Audit of Statistical Tests for $0 $0 $0 $0 9/5/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

New Orleans District

APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

PAGE 92
FF-AR-01-108 Audit of Statistical Tests for $0 $0 $0 $0 9/05/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Springfield District

FF-AR-01-109 Audit of Statistical Tests for $0 $0 $0 $0 9/05/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Greater Indiana District

FF-AR-01-110 Audit of Statistical Tests for $0 $0 $0 $0 9/05/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Las Vegas District

FF-AR-01-111 Audit of Statistical Tests for $0 $0 $0 $0 9/05/01

Fiscal Year 2001 Cost and 

Revenue Analysis - Southeast 

New England District

FF-AR-01-112 Fiscal Year 2001 Financial $0 $0 $0 $0 9/21/01

Installation Audit - Lansing 

Business Mail Entry Unit

FF-AR-01-113 Audit of Statistical Tests for $0 $0 $0 $0 9/05/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Albuquerque District

FF-AR-01-114 Fiscal Year 2001 Financial $0 $0 $0 $0 9/14/01

Installation Audit - Erie District

FF-AR-01-115 Audit of Statistical Tests for $0 $0 $0 $0 9/20/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Royal Oak District

FF-AR-01-119 Audit of Statistical Tests for $0 $0 $0 $0 9/20/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Alabama District

FF-AR-01-120 Audit of Statistical Tests for $0 $0 $0 $0 9/20/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Greensboro District

FF-AR-01-121 Audit of Statistical Tests for $0 $0 $0 $0 9/20/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Boston District

FF-AR-01-122 Fiscal Year 2001 Financial $0 $0 $0 $0 9/14/01

Installation Audit - 

San Marcos Post Office

FF-AR-01-123 Audit of Statistical Tests for $0 $0 $0 $0 9/21/01

Fiscal Year 2001 Cost and 

Revenue Analysis - 

Oklahoma District

FT-FA-01-001 Internal Controls Over $0 $0 $0 $0 6/12/01

Money Order Refunds

CONTRACTING

CA-AR-01-002 Responsibilities of Contracting $0 $0 $0 $0 4/30/01

Officers' Representatives

CA-AR-01-003 Price Adjustment Claim for $5,891 $0 $0 $0 7/17/01

Year-A-Round Corporation

CA-AR-01-004 Consulting and Audit $0 $0 $0 $0 8/14/01

Services Contracts

PAGE 93

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
CA-AR-01-005 Supplier Diversity Program $0 $0 $0 $0 9/6/01

for Supplies, Services, 

and Equipment Purchases

CA-CAR-01-037 Evaluation of Incurred Costs $0 $0 $0 $0 4/19/01

CA-CAR-01-038 Evaluation of Fiscal Year $17,554 $17,554 $0 $0 4/19/01

2000 Common Area 

Maintenance Lease Costs 

CA-CAR-01-039 Review of Direct Labor and $7,255 $0 $0 $0 4/23/01

Indirect Expense Rates 

CA-CAR-01-040 Evaluation of Compliance $0 $0 $0 $0 4/30/01

with Cost Accounting Standard 

CA-CAR-01-041 Evaluation of Compliance $0 $0 $0 $0 5/8/01

with Cost Accounting Standard

CA-CAR-01-042 Evaluation of Proposal $0 $0 $0 $0 5/21/01

CA-CAR-01-043 Supplemental Review of $163,115,691 $0 $0 $0 5/29/01

Redetermination Claim 

CA-CAR-01-044 Follow-Up Review of $0 $0 $0 $0 6/5/01

Estimating System 

CA-CAR-01-045 Evaluation of Final Vouchers $0 $0 $0 $0 6/5/01

CA-CAR-01-046 Evaluation of Fiscal Year 1999 $2,505 $0 $0 $0 6/7/01

Incurred Costs

CA-CAR-01-047 Evaluation of Proposal $0 $0 $0 $0 6/7/01

CA-CAR-01-048 Evaluation of Proposal $0 $0 $0 $0 6/7/01

CA-CAR-01-049 Evaluation of Proposal $1,972,179 $0 $0 $0 6/8/01

CA-CAR-01-050 Evaluation of Cost $0 $0 $0 $0 6/8/01

Estimating Relationship Factors 

CA-CAR-01-051 Evaluation of Proposal $0 $0 $0 $0 6/20/01

CA-CAR-01-052 Evaluation of Indirect Expense $0 $0 $0 $0 6/21/01

Forward Pricing Rates 

CA-CAR-01-053 Evaluation of Firm Fixed $129,239 $0 $0 $0 6/26/01

Price Proposal 

CA-CAR-01-054 Pre-Award Accounting $0 $0 $0 $0 7/12/01

System Survey

CA-CAR-01-055 Pre-Award Accounting $0 $0 $0 $0 7/12/01

System Survey 

CA-CAR-01-056 Evaluation of Firm $0 $0 $0 $0 7/13/01

Fixed Price Proposal

CA-CAR-01-057 Evaluation of Incurred Costs $136,651 $0 $0 $0 7/18/01

CA-CAR-01-058 Evaluation of Incurred Costs $0 $0 $0 $0 7/19/01

CA-CAR-01-059 Evaluation of Claim $198,450 $198,450 $0 $0 7/19/01

CA-CAR-01-060 Evaluation of Incurred Costs $46,931 $0 $0 $0 7/27/01

CA-CAR-01-061 Evaluation of Incurred Costs $0 $0 $0 $0 7/30/01

CA-CAR-01-062 Evaluation of Forward Pricing $0 $0 $0 $0 8/2/01

Direct Labor Rates 

CA-CAR-01-063 Pre-Award Accounting $0 $0 $0 $0 9/11/01

System Survey 

CA-CAR-01-064 Review of Estimating System $0 $0 $0 $0 9/11/01

CA-CAR-01-065 Evaluation of Airfare $0 $0 $0 $0 9/13/01

Decrement Factor 

CA-CAR-01-066 Evaluation of Real Estate Taxes $1,131 $0 $0 $0 9/14/01

CA-CAR-01-067 Pre-Award Accounting $0 $0 $0 $0 9/14/01

System Survey 

CA-CAR-01-068 Evaluation of Firm Fixed $222,509 $34,467 $0 $0 9/14/01

Price Proposal 

APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

PAGE 94
CA-CAR-01-069 Evaluation of Firm Fixed $708,295 $0 $0 $0 9/14/01

Change Proposal 

CA-CAR-01-070 Evaluation of Timekeeping $0 $0 $0 $0 9/18/01

Practices and Procedures

CA-CAR-01-071 Evaluation of Proposal $0 $0 $0 $0 9/26/01

CA-CAR-01-072 Evaluation of Proposal $0 $0 $0 $0 9/26/01

CA-CAR-01-073 Evaluation of Proposal $0 $0 $0 $0 9/27/01

CA-CAR-01-074 Evaluation of Proposal $0 $0 $0 $0 9/27/01

CA-MA-01-002 Review of Payment Requests $0 $0 $0 $0 4/30/01

CA-MA-01-003 Review of Purchasing Process $0 $0 $0 $0 8/14/01

for Advertising Contracts

FACILITIES 

FA-AR-01-001 Authorization of Funds for $0 $0 $0 $0 9/17/01

Construction Projects

FA-AR-01-002 National Refrigerant $0 $0 $0 $0 9/27/01

Management Plan

FINANCIAL MANAGEMENT TOTALS $166,564,281 $250,471 $0 $51,081

TECHNOLOGY

INFORMATION SYSTEMS

IS-AR-01-001 Network Security $0 $0 $0 $0 4/18/01

IS-AR-01-002 Fiscal Year 2001 Information $0 $0 $0 $0 8/23/01

System Controls

IS-AR-01-003 Review of Security $0 $0 $0 $0 8/29/01

Access Controls

IS-CS-01-005 Server Security Testing $0 $0 $0 $0 5/2/01

IS-CS-01-006 Server Security Testing $0 $0 $0 $0 5/21/01

IS-CS-01-007 Server Security Testing $0 $0 $0 $0 5/21/01

IS-CS-01-008 Server Security Testing $0 $0 $0 $0 5/21/01

IS-CS-01-009 Server Security Testing $0 $0 $0 $0 5/24/01

IS-CS-01-010 Server Security Testing $0 $0 $0 $0 6/1/01

IS-CS-01-011 Server Security Testing $0 $0 $0 $0 6/15/01

IS-CS-01-012 Server Security Testing $0 $0 $0 $0 6/29/01

IS-CS-01-013 Server Security Testing $0 $0 $0 $0 8/2/01

DEVELOPMENTAL

DA-AR-01-004 PostalOne! Business Customer $0 $0 $0 $0 4/9/01

Support Systems Phase One

DA-AR-01-005 Decision Analysis Report Process $0 $0 $0 $0 9/27/01

DA-AR-01-006 Singulate, Scan, Induction Unit $0 $0 $0 $0 9/27/01

DA-AR-01-007 Tray Management System Post $0 $0 $0 $0 9/26/01

Acceptance Workhour Savings

DA-MA-01-002 Mailing Evaluation, Readability, $0 $0 $0 $0 9/24/01

and Lookup Instrument (MERLIN) 

First Article Test

DA-MA-01-003 Point of Service ONE Stage 3 $0 $0 $0 $0 9/27/01

ELECTRONIC COMMERCE

EC-AR-01-003 USPS.com Management and $0 $0 $0 $0 9/28/01

Security Issues

EC-MA-01-001 Efforts to Prevent Identity Theft $0 $0 $0 $0 7/5/01

TECHNOLOGY TOTALS $0 $0 $0 $0

PAGE 95

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
LABOR MANAGEMENT

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

VIOLENCE IN THE WORKPLACE

LB-AR-01-017 Review of Allegations of a $0 $0 $0 $0 5/14/01

Tense and Stressful Work

Environment at a Post Office 

in the Santa Ana District

LB-AR-01-018 Review of Allegations of a $0 $0 $0 $0 5/11/01

Hostile Work Environment at a 

New York Metro Area Post Office

LB-AR-01-019 Management Practices in $0 $0 $0 $0 6/7/01

the Alaska District

LB-AR-01-020 National Capping Report on $0 $0 $0 $0 8/23/01

Implementation of the 

Violence Prevention and Response 

Programs Postal Service-wide

LB-LA-01-002 Review of Allegations of a $0 $0 $0 $0 5/23/01

Violent Threat 

LB-LA-01-003 Review of Allegations of $0 $0 $0 $0 5/29/01

Harassment and Abuse at a 

Connecticut Post Office

LC-MA-01-001 Review of the Effectiveness of $0 $0 $0 $0 7/18/01

the Employee and Workplace 

Intervention Analyst Program in 

the Central Florida District 

HUMAN RESOURCE PROCESSES

LB-LA-01-004 Human Resources and Equal $0 $0 $0 $0 6/13/01

Opportunity Complaint Practices 

in the Rio Grande District

LC-AR-01-007 Audit of Alleged Nepotism $0 $0 $0 $0 6/4/01

in the Arkansas District

LC-AR-01-008 Management Oversight of $0 $0 $0 $0 7/10/01

Administrative Leave Used in 

the Los Angeles and 

San Diego Districts

HEALTH CARE

HC-AR-01-001 Cleveland Performance Cluster's $0 $0 $5,505 $0 9/28/01

Process for Administering 

Continuation of Pay Leave Benefits

HC-AR-01-002 Columbus Performance Cluster's $0 $0 $6,902 $0 9/28/01

Process for Administering 

Continuation of Pay Leave Benefits

LABOR MANAGEMENT TOTALS $0 $0 $12,407 $0

OVERSIGHT

OV-AR-01-002 Inspection Service Support $0 $0 $0 $0 4/30/01

to Postal Service Threat

Assessment Teams

OV-AR-01-003 Service Investigations Conducted $0 $0 $2,049,307 $0 8/22/01

by the Inspection Service

OV-AR-01-004 Postal Inspection Service Fraud $0 $0 $0 $0 9/28/01

Against Government Program

OVERSIGHT TOTALS $0 $0 $2,049,307 $0

PAGE 96 APPENDICES
OTHER SIGNIFICANT REVIEWS

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

EXECUTIVE INVESTIGATIONS

00CX059EC000 Executive Investigations $0 $0 $0 $0 8/27/01

98CX014EX000 Executive Investigations $0 $0 $0 $0 9/17/01

01HI086BI000 Executive Investigations $0 $0 $0 $0 7/12/01

01HX002BI000 Executive Investigations $0 $0 $0 $0 6/06/01

00CX017EX000 Executive Investigations $0 $0 $0 $0 9/05/01

01HI12NC000 Executive Investigations $0 $0 $0 $0 9/18/01

OTHER

IG-TR-01-002 House Committee on $0 $0 $0 $0 4/4/01

Government Reform Testimony

IG-TR-01-003 Senate Committee on $0 $0 $0 $0 5/15/01

Governmental Affairs Testimony

IG-TR-01-004 Subcommittee on International $0 $0 $0 $0 9/20/01

Security Proliferation and 

Federal Services Testimony

OTHER SIGNIFICANT REVIEWS TOTALS $0 $0 $0 $0

TOTALS $166,564,281 $250,471 $27,979,749 $1,414,279

PAGE 97
APPENDIX B

Findings of Questioned Costs

For the period April 1, 2001, through September 30, 2001

OFFICE OF INSPECTOR GENERAL AND INSPECTION SERVICE

Unsupported

Costs

Total Included In

Number of Questioned Questioned

Description Reports Costs Costs

Reports for which no management decision was 37 $110,314,199 $22,081,978

made at the beginning of the reporting period

Reports requiring management decision that were 13 $166,564,281 $250,471

issued during the reporting period

TOTALS 50 $276,878,480 $22,332,449

Reports for which a management decision was 

made during the reporting period (i+ii) 7 $9,581,263 $8,579,312

(i) Dollar Value of disallowed cost 578,765 $102,452

(ii) Dollar value of cost not disallowed 9,002,498 $8,476,860

Reports for which no management decision was made by 

the end of the reporting period 43 $267,297,217 $13,753,137

Reports for which no management decision was made within 

six months of issuance (See Note 1 for a list of individual reports) 9 $38,264,336 $5,985,226

Reports for which no management decision was made within 

one year of issuance (See Note 2 for a list of individual reports) 21 $62,468,600 $7,517,440

Note 1 – Reports for which no management decision was made within six months of issuance:

Unsupported

Costs

Total Included In

Report/ Questioned Questioned

Report Date Case Number Project Type Costs Costs

10/19/00 CA-CAR-01-002 Contract Audit $14,277,059 $4,971,627

11/17/00 CA-CAR-01-011 Contract Audit 1,274,207 0

11/22/00 CA-CAR-01-012 Contract Audit 738,508 379,646 

12/14/00 CA-CAR-01-013 Contract Audit 7,264,275 361,997 

2/2/01 CA-CAR-01-024 Contract Audit 101,768 0

2/7/01 CA-CAR-01-025 Contract Audit 11,191 0

2/9/01 CA-CAR-01-026 Contract Audit 1,609,538 0

2/26/01 CA-CAR-01-031 Contract Audit 487,790 271,956

2/27/01 CA-AR-01-001 Contracting Practices for the 

Procurement of Mail Transport 

Equipment Services 12,500,000 0

TOTAL $38,264,336 $5,985,226

PAGE 98 APPENDICES
Note 2 – Reports for which no management decision was made within one year of issuance:

Unsupported

Costs

Total Included In

Report/ Questioned Questioned

Report Date Case Number Project Type Costs Costs

2/29/00 TR-AR-00-005 Southwest Area Expenditures for Extra 

Highway Trips Using Leased Equipment $848,000 $0

3/31/00 CA-MA-00-001 Contract Audit Practices 92,214 0

4/27/00 CA-CAR-00-024 Contract Audit 131,750 0

4/27/00 CA-CAR-00-026 Contract Audit 3,531,433 0

5/17/00 CA-AR-00-001 United States Postal Service Warranty 

Repair of Tractors 977,598 0

6/6/00 CA-CAR-00-029 Contract Audit 13,107 0

6/26/00 CA-CAR-00-031 Contract Audit 5,065,428 0

7/28/00 CA-CAR-00-042 Contract Audit 580,338 0

8/25/00 CA-CAR-00-045 Contract Audit 160,053 0

8/25/00 CA-CAR-00-047 Contract Audit 917,345 0

9/13/00 CA-CAR-00-054 Contract Audit 6,172,504 0

9/20/00 CA-CAR-00-055 Contract Audit 10,565,117 0

9/20/00 CA-CAR-00-058 Contract Audit 159,388 0

9/20/00 CA-CAR-00-059 Contract Audit 49,120 0

9/20/00 FT-LA-00-002 Terminated Cleaning and 

Station Contracts 216,861 0

9/26/00 CA-CAR-00-062 Contract Audit 21,665 0

9/29/00 CA-CAR-00-064 Contract Audit 17,726,329 0

OIG TOTALS $47,228,250 $0

Unsupported

Costs

Total Included In

Report/ Questioned Questioned

Report Date Case Number Project Type Costs Costs

12/7/98 184-1243166-AC(1) Contract Audit $7,087,038 $5,841,563 

11/17/99 181-1294644-AC(1) Contract Audit 7,063,747 1,675,877

4/3/00 184-1126310-AC(1) Contract Audit 514,696 0

8/30/00 184-1210121-AC(1) Contract Audit 574,869 0

INSPECTION SERVICE TOTALS $15,240,350 $7,517,440 

TOTAL $62,468,600 $7,517,440 

PAGE 99
APPENDIX C

Recommendations That Funds

Be Put to Better Use

For the period April 1, 2001, through September 30, 2001

OFFICE OF INSPECTOR GENERAL AND INSPECTION SERVICE

Number of

Description Reports Dollar Value

Reports for which no management decision was 

made at the beginning of the reporting period 6 $38,944,408

Reports issued during the reporting period 5 $27,979,749

TOTALS 11 $66,924,157

Reports for which a management decision was made during the report period 4 $18,382,867

(i) Value of recommendations agreed to by management $10,012,407

(ii) Value of recommendations that were not agreed to by management $8,370,460

Reports for which no management decision was made by the end of the reporting period 7 $48,541,290

Reports for which no management decision was made within six months of issuance 

(See Note 1 for a list of individual reports) 0 $0

Reports for which no management decision was made within one year of issuance 

(See Note 2 for a list of individual reports) 5 $30,573,948

Note 1 – Reports for which no management decision was made within six months of issuance:

Recommend

Report Report/ Funds Put to

Date Case Number Project Type Better Use

None $0

TOTAL

Note 2 – Reports for which no management decision was made within one year of issuance:

Recommend

Report Report/ Funds Put to

Date Case Number Project Type Better Use

10/30/98 181-1252372-AC(1) Contract Audit $1,710,680

11/24/98 181-1254410-AC(1) Contract Audit 137,480

12/18/98 181-1253441-AC(1) Contract Audit 145,532

08/27/99 181-1294162-AC(1) Contract Audit 122,861

Review of Stamp 

Fulfillment Services

9/29/00 MK-AR-00-001 Performance 28,457,395

TOTAL $30,573,948

PAGE 100 APPENDICES
APPENDIX D

Reports with Significant

Recommendations Pending Corrective

Actions

For the period April 1, 2001 and September 30, 2001

This appendix lists reports containing significant recommendations pending final action by management. On October 1, 2000, the OIG assumed complete responsibility for tracking corrective

actions for all significant recommendations. As a result, the OIG performed an extensive analysis

to identify reports with significant recommendations requiring confirmation that appropriate corrective actions have been taken. This appendix identifies those reports. During the next 6

months, the OIG will be working with Postal Service management to validate whether appropriate corrective actions have been taken, and if so, remove them from this appendix.

OFFICE OF INSPECTOR GENERAL

Report Report Number of Issue 

Number Title Recommendations Date

LM-MA-99-002 Effectiveness of USPS Grievance Arbitration Procedures 2 3/26/99

LR-MA-99-001 Grievance Arbitration Management Information 2 3/26/99

QR-MA-99-001 USPS Management of Personal Services Contract 1 3/29/99

FA-AR-99-001 Review of Atlanta Olympics Facility Improvement Plan 2 3/31/99

OV-MA-99-001 Review of USPS Personnel Security Program - 

Process for Updating Sensitive Clearances 1 3/31/99

DA-AR-99-002 Point of Service ONE 1 9/20/99

TR-AR-99-001 Compliance Opportunities for Savings in Rail Detention Costs 3 9/23/99

FR-AR-99-010 Fiscal Year 1999 Information Systems Controls, St. Louis 2 9/28/99

Information Service Center

FR-AR-99-008 Fiscal Year 1999 Information Systems Controls, San Mateo 1 9/29/99

Information Service Center

TR-AR-99-003 Emergency and Extra Trip Expenditures on Highway Routes 6 9/29/99

CA-AR-99-001 Opportunities to Increase Savings Through the 2 9/30/99

Use of Natural Gas Vehicles

CA-AR-99-002 Removal of Underground Storage Tanks 1 9/30/99

CA-AR-99-003 Responsibilities of Contracting Officers’ Representatives 9 9/30/99

RP-MA-00-001 Indefinite Quantity Contracts 1 11/8/99

FR-LA-00-001 Sure Money Electronic Funds Transfer Service Expansion 2 11/23/99

to Dominican Republic

RG-MA-00-001 Cost and Benefit of the International Collection Program 1 12/3/99

FR-MA-00-001 Budget Cost Containment Measures 1 12/22/99

TR-AR-00-003 Commercial Air Carrier: Performance Measurement System 2 1/31/00

TR-AR-00-004 Commercial Air Carrier Performance: 2 1/31/00

Effectiveness of Pay for Performance

TR-AR-00-005 Southwest Area Expenditures for Extra Highway Trips 3 2/29/00

Using Leased Equipment

DS-AR-00-001 External First-Class Mail Measurement System 2 3/27/00

TR-AR-00-006 Commercial Air Carrier Performance: 2 3/27/00

Payment for Ground Handling Services

CA-MA-00-001 Contract Audit Practices 7 3/31/00

DA-AR-00-002 Tray Management System 5 3/31/00

RG-AR-00-002 Breast Cancer Research Stamp Program Review-Phase II 1 3/31/00

FR-FA-00-010(R) Relocation Benefits for Postal Service Officers - Revised 2 5/2/00

DA-MA-00-002 Priority Mail Processing Center Network 1 6/30/00

1999 Christmas Operations

FA-AR-00-002 Salt Lake City District 2002 Winter Olympic Plans 2 6/30/00

TR-AR-00-008 Extra Trip Expenditures at the Dallas Bulk Mail Center 1 6/30/00

PAGE 101
OV-MA-00-002 Review of Postal Inspection Service Forensic Scientist Salaries 1 7/17/00

TR-AR-00-009 Extra Trips Expenditures within the Mid-Atlantic Area 4 7/27/00

FA-MA-00-007 Review of the Managed Network Services Contract & 1 7/28/00

Billing Process of the Contractor

FT-FA-00-001 Money Order Blank Stock and Imprinters 6 8/25/00

FT-AR-00-002 International List Service Transmittal of 1 8/29/00

Funds Bank Secrecy Act Compliance

EC-AR-00-001 USPS eBillPay Security and Privacy Issues 1 9/5/00

DA-AR-00-004 Information Platform Planning 1 9/28/00

AC-AR-00-004 Use of Robotic Tray Handling System 2 9/29/00

AC-AR-00-005 International Mail Processing 2 9/29/00

DA-AR-00-006 Point of Service ONE Phase II 2 9/29/00

FA-AR-00-005 Seattle Processing and Distribution Center 1 9/29/00

IS-AR-00-004 State of Computer Security in the Postal Service 4 9/29/00

LB-AR-00-003 Evaluation of Postal Service Criteria for Workplace Violence 3 9/29/00 

Prevention and Response Program

MK-AR-00-001 Review of Stamp Fulfillment Services Performance Measures 1 9/29/00

OV-AR-00-005 Review of the United States Postal Inspection Service 2 9/29/00

Budget Process

TR-AR-00-011 Dedicated Christmas Air Network - Phase 1 3 9/29/00

MK-AR-00-002(R) Management Controls over the 3 10/31/00

Sales Force Augmentation Program - Revised

TR-AR-01-001 Adequacy of Mail Transport Equipment Service Center 4 10/31/00

Network Internal Controls

CA-MA-01-001 Privacy Data Contained in Contract Files 2 12/24/00

DE-AR-01-002 Review of the Revised Rules Governing Commercial Mail 3 4/9/01

Receiving Agencies 

DA-AR-01-004 Postal One! Business Customer Support Systems Phase One 5 4/9/01

IS-AR-01-001 Network Security 5 4/18/01 

CA-AR-01-002 Responsibilities of Contracting Officers’ Representatives 9 4/30/01

OV-AR-01-002 Inspection Service Support to Postal Service Threat 2 4/30/01

Assessment Teams 

TR-AR-01-003 Mail Transport Equipment Service Center-Decision Analysis 1 5/4/01 

Report Performance and Financial Benefits 

LC-AR-01-007 Alleged Nepotism in the Arkansas District 5 6/4/01

LB-AR-01-019 Management Practices in the Alaska District 2 6/7/01

TR-LA-01-001 Review of a Transportation Agreement 2 6/26/01

TR-AR-01-004 Bulk Fuel Purchase Plan 5 7/27/01

TR-MA-01-002 Excise Taxes and Third Party Ground Handling Costs under a 1 8/8/01

Transportation Agreement 

CA-AR-01-004 Consulting and Audit Services Contracts 1 8/14/01

OV-AR-01-003 Service Investigations Conducted by the Inspection Service 2 8/22/01

IS-AR-01-002 Fiscal Year 2001 Information System Controls 5 8/23/01 

IS-AR-01-003 Review of Security Access Controls 8 8/29/01

CA-AR-01-005 Supplier Diversity Program for Supplies, Services, and 9 9/6/01

Equipment Purchases 

DA-AR-01-007 Tray Management System Post Acceptance Work Hour Savings 1 9/26/01

DA-AR-01-005 Decision Analysis Report Process 10 9/27/01

DA-AR-01-006 Singulate, Scan, Induction Unit 5 9/27/01

FA-AR-01-002 National Refrigerant Management Plan 3 9/27/01

TR-MA-01-003 Security Risks Associated with a Transportation Agreement 1 9/27/01

EC-AR-01-003 USPS.com Management and Security Issues 3 9/28/01

MK-AR-01-002 Stamp Printing Quantities 4 9/28/01

OV-AR-01-004 Postal Inspection Service Fraud Against Government Program 1 9/28/01

TR-AR-01-006 Manual Payments on Rail Transportation Contracts 3 9/28/01 

APPENDICES

Report Report Number of Issue 

Number Title Recommendations Date

PAGE 102
PAGE 103

INSPECTION SERVICE

Report Report Number of Issue 

Number Title Recommendations Date

0061-1263973-RI(1) Meter Security Review, Pitney Bowes, Inc., 1 5/21/99

Lanham, Maryland

0188-1300042-AF(2) Financial Audit, Stamp Distribution Office, 1 8/24/00

Seattle District, Seattle, Washington

0061-1305144-RI(1) Meter Security Review, Ascom Hasler Mailing 2 3/16/00

Systems, Inc., Houston, Texas

0038-1292495-PA(2) Delivery Automation 1 2/8/00

0044-1248530-PA(2) Small Post Office Cost Study 2 8/1/00

0022-1244541-PA(1) Priority Mail 1 3/17/99

0052-1290664-PA(3) City Carrier and Flat Sorting Machine (FSM) 2 10/5/99

Operations Cost Savings, San Antonio, Texas

0061-1296645-RI(1) Meter Security Review, Postage Technology 6 7/5/00

Management, Lisle, Illinois

0016-1298651-AF(2) Financial Audit, Westchester District Accounting Unit, 1 11/23/99

White Plains, New York

0016-1298678-AF(2) Financial Audit, San Francisco District Accounting Office, 2 8/29/00

San Francisco, California

CONTRACT AUDITS

Report Number Contractor Report Date

0181-1165940-AC(1) Contract Audit 5/20/95

0181-1237199-AC(1) Contract Audit 4/14/98

0181-1252372-AC(1) Contract Audit 10/30/98

0181-1253441-AC(1) Contract Audit 12/18/98

0181-1254410-AC(1) Contract Audit 11/24/98

0181-1294162-AC(1) Contract Audit 8/27/99

0181-1294644-AC(1) Contract Audit 11/17/99

0184-1126310-AC(1) Contract Audit 4/3/00

0184-1210121-AC(1) Contract Audit 8/30/00

0184-1243166-AC(1) Contract Audit 12/7/98
APPENDIX E

Investigative Statistics1

For the period April 1, 2001, through September 30, 2001

OFFICE OF INSPECTOR GENERAL

Statistics

Arrests 10

Information2/Indictments 8

Convictions2,3/Pretrial Diversions 16

Suspension/Debarments

Individuals 0 

Firms 1

Administrative Actions

Postal Service Employee2 8 

Contractor 5

Fines, Restitution, and Recoveries $1,528,276

Cost Avoidance, Savings and Funds Put To Better Use $1,837,646

INSPECTION SERVICE

Type of Investigation Arrests Convictions3

Revenue & Asset Protection Program

Expenditure Investigations 0 4

Financial Investigations 146 146

Workers' Compensation Fraud 25 19

Revenue Investigations 33 53

Robbery 29 30

Burglary 89 84

Miscellaneous External Crimes

Includes counterfeit and contraband postage, 

money order offenses, vandalism, and arson 243 265

Assaults Against Employees

Includes threats and assaults against on-duty postal employees 187 142

Narcotics Cases

Includes employees and non-employees selling narcotics on postal property 11 15

Mail Theft by Employees, Non-Employees or Contractors

Includes theft and possession of stolen mail 2,913 2,858

Miscellaneous Employee Crimes

Includes theft of postal property and sabotage of equipment 32 25

Bombs/Explosive Devices 20 13

Mailing of Controlled Substances

Includes hazardous material, firearms and weapons, intoxicants, 

explosives other than bombs, extortion and false documents 819 604

Child Exploitation, Mailing of Obscene Matter, and 

Sexually Oriented Advisement 153 135

Mailing of Miscellaneous Nonmailables

Includes hazardous material, firearms and weapons, intoxicants, 

explosives other than bombs, extortion, and false documents 40 21

Mail Fraud 754 721

INSPECTION SERVICE TOTALS 5,494 5,135

1 Statistics include joint investigations with other federal law enforcement agencies.

2 Some of these occured in the prior semiannual reporting period, however, they were not reported

until the current reporting period.

3 Convictions reported in this time frame may be related to arrests made in prior reporting periods.

PAGE 104 APPENDICES
APPENDIX F

Summary of Postal Service Investigative

Activities Under 39 USC § 3013

For the period April 1, 2001, through September 30, 2001

The Postal Reorganization Act requires the Postmaster General to furnish information on the

investigative activities of the Postal Service on a semiannual basis. With passage of the

Deceptive Mail Prevention and Enforcement Act in December 1999, the Postal Service's reporting obligations were changed. 

The Act requires the Postal Service to submit its semiannual report to the OIG rather than to

the Board of Governors, expands the subject matter that must be reported, and revises the reporting schedule to coordinate with the OIG Semiannual Report to Congress. The information in

the report includes actions directed at combating crimes involving the mail; costs and expenditures devoted to Postal Service investigative activities; use of subpoena power; and any additional

information the OIG may require.

ABUSE OF MAILS

The Postal Service reports to the OIG information related to investigative activities designed to

protect the public against unscrupulous mailers perpetrating fraudulent schemes. The following

information summarizes the administrative and judicial actions initiated and resolved during the

reporting period. These actions include the issuance of cease and desist orders directed to mailers, actions to intercept payments fraudulently induced, and orders seeking to intercept fraudulent

mailings.

INSPECTION SERVICE

False Cease &

Type of Complaints Consent Representation Desist

Scheme Filed Agreements Orders Orders

Contest/Sweepstakes 3224

Employment 5111

False billings 1 1 1

Fraud - Internet Schemes 3 3 3

Investments 1 1 1

Lotteries (foreign and domestic) 2 2

Merchandise:

Failure to furnish 3233

Failure to pay 2 2 2

Miscellaneous 3 2

Work at home 2222

TOTAL 22 16 11 19

PAGE 105
ADMINISTRATIVE ACTIONS

Administrative Action requests 22

Temporary Restraining Order requests 0

Temporary Restraining Orders issued 0

Civil Injunction (1345) requests 3

Civil Injunctions (1345) issued 3

Cases using Direct Purchase Authority 0

Refusals of Direct Purchase Authority 0

Civil penalties (Section 3012) imposed $45,000

Expenditures incurred for:

Test Purchases $0

Expert Testimony $0

Witness Travel $0

Withholding Mail Orders issued 36

Voluntary Discontinuances 176

POSTAL SERVICE ADMINISTRATIVE SUBPOENA AUTHORITY

The Postal Service reports to the Office of Inspector General information on the number of cases

in which the Postal Service issued administrative subpoenas in connection with deceptive mailing. The following section identifies the number and nature of cases in which the Postal Service

exercised this authority to request relevant business and associated records.

Case Number Date Requested Scheme

USPS-01-020 04/03/01 Advance Fee

USPS-01-021 04/10/01 Sweepstakes Fraud

USPS-01-022 04/10/01 Sweepstakes Fraud

USPS-01-023 04/10/01 Sweepstakes Fraud

USPS-01-024 06/29/01 Medical Quackery

USPS-01-025 08/27/01 Sweepstakes Fraud

USPS-01-026 08/27/01 Misrepresentation

USPS-01-027 09/17/01 False Billing

USPS-01-028 09/26/01 Charitable Solicitations

FINANCIAL REPORTING ON INVESTIGATIVE ACTIVITIES

The Postal Service reports to the Office of Inspector General information related to the amount

of financial expenditures and obligations incurred pursuing the investigative activities of the

Postal Service. Information related to these activities is summarized below.

Type Semi Annual Report

Personnel $175,027,543

Nonpersonnel $38,010,430

Total Expenditures $213,037,973

Capital Obligations $511,526

PAGE 106 APPENDICES
OTHER INVESTIGATIVE ACTIVITIES

The Postal Service also reports to the Office of Inspector General additional information related

to significant investigative activities and other investigative matters. This section outlines a

number of significant investigative activities the Postal Service has initiated and is pursuing, to

include the Mail Task Forces and the KNOW FRAUD Program. Inspection Service and Office

of Inspector General criminal statistical information is summarized in Appendix E. 

MAIL TASK FORCES

The Inspection Service has partnered with the financial services, manufacturing, and direct marketing industries on behalf of the U.S. Postal Service to form three task forces to combat fraud:

Credit Card Mail Security, Rebate Fraud and Mail Order Security. Each task force helps to

reduce mail fraud, theft, and processing problems by identifying and exchanging information on

best practices, fraud trends and loss-prevention techniques; and to develop improved processes

and procedures.

The Credit Card Mail Security Task Force was created in 1992 and has dramatically reduced

nonreceived issued credit card fraud losses by 68 percent, while credit card purchases have

increased more than 86 percent. In 1995, the Inspection Service teamed with the coupon rebate

industry to combat mail-in rebate fraud. The group’s efforts reduced fraud by an estimated $100

million in 1997. In 1996, the Inspection Service and the direct marketing industry created the

Mail Order Task Force to facilitate this continued success by joining together to prevent and

detect fraud and theft. In a pilot program, the Mail Order Task Force has reduced nonreceipt

losses by 10 percent to 15 percent for direct marketing companies experiencing mail processing

problems.

KNOW FRAUD

In an effort to educate and help consumers, President Clinton launched KNOW FRAUD, a consumer protection effort, in November 1999 and cited it as an excellent example of “coordination

among the federal government’s consumer protection agencies.” To launch the KNOW FRAUD

program, the Inspection Service joined forces with several federal, state, and private agencies,

including the Department of Justice, Federal Bureau of Investigations, Federal Trade Commission,

Securities and Exchange Commission, National Association of Attorneys General, American

Association of Retired Persons, and Better Business Bureau. The KNOW FRAUD initiative has

included a postcard mailing to 120 million American households alerting consumers to the dangers of telemarketing and mail fraud. 

The KNOW FRAUD partnership is now focusing on identity theft. Work is underway by the

partners to get an identity theft prevention message to consumers. A toll-free ID theft hotline, 1-

877-438-4338, and a KNOW FRAUD website were established to provide consumers with additional information and to link consumers with law enforcement officials who would share information.

PAGE 107
DEFINITIONS OF SCHEMES

Contest/Sweepstakes. Schemes in which the respondent is required to pay a fee to obtain prizes

of money, gifts or other items of value. "Prizes" are either never shipped or are inferior to what

was promised.

Employment. Soliciting money for information or assistance in obtaining nonexistent or misrepresented jobs.

False billings. Mailing solicitations in the guise of billings.

Fraud - Internet Schemes. Fraudulent schemes using the Internet with a nexus to the mail.

Fraud against U.S. Postal Service. Any scheme that attempts to defraud the U.S. Postal

Service.

Investments. Misrepresented opportunities to invest in commodities, gems, metals, stocks,

bonds, certificates of deposit, mutual funds, IRAs, coins, stamps, art, etc.

Lotteries. Advertisements seeking money or property by mail for participation in schemes to win

prizes through chance.

Merchandise failure to furnish. A mail order operator that does not provide ordered merchandise.

Merchandise failure to pay. Mail order merchandise that is acquired without providing payment.

Miscellaneous. Any other scheme not described in a specific category. 

Work at home. Schemes, such as envelope stuffing, that do not provide home employment.

PAGE 108 APPENDICES
APPENDIX G

Closed Congressional and Board of

Governors Inquiries

For the period April 1, 2001, through September 30, 2001

This appendix lists the 106 Congressional and Governors inquiries the OIG closed during this

reporting period. The OIG reviewed these inquiries to help identify systemic issues and to determine the need for future Postal-wide audits.

CONGRESSIONAL

PERFORMANCE

Requestor Allegations/Concern Response Date

Representative, Texas Concern that all envelopes are not sealed prior to delivery 06-Apr-01 

Representative, New York Allegation of inadequate consideration of submitted suggestion 06-Apr-01 

Senator, Tennessee Request for information on Postal Service polices and procedures 26-Apr-01 

Representative, California Allegation of improper mail insurance policy 07-Jun-01 

Representative, New York Allegation that mail was improperly impounded 18-Jul-01 

Representative, New York Request for review of the Bulk Fuel Purchase Plan 13-Aug-01 

Representative, Texas Complaint on customer service 27-Aug-01 

Representative, Virginia Concerns with assigned ZIP Codes 27-Aug-01 

Representative, Texas Allegation of poor service to a Micronesia state 28-Sep-01 

Representative, Minnesota Allegation of interference with mail delivery 28-Sep-01 

FINANCIAL MANAGEMENT

Requestor Allegations/Concern Response Date

Senator, Georgia Allegation of management misconduct 26-Apr-01 

Representative, California Allegation of discriminatory treatment to repay a debt 14-Jun-01 

Representative, New York Allegation of improper spending and relocation practices 15-Jun-01 

Representative, New York Allegation of credit card abuse 26-Jun-01 

Representative, New York Allegation that a felony had been committed 30-Jun-01 

Representative, Ohio Allegation of embezzlement, perjury and falsification of records 06-Jul-01 

Representative, New York Allegation of improper spending and relocation practices 12-Jul-01 

Representative, New York Request for review of land sale transaction 16-Jul-01 

Representative, Minnesota Request for review of efforts to alter current operations of a post office 20-Jul-01 

Representative, New York Concerns on relocation benefits 04-Sep-01

LABOR MANAGEMENT

Requestor Allegations/Concern Response Date

Representative, Texas Allegations of mistreatment by management officials 06-Apr-01 

Representative, New Jersey Allegation of hostile work environment and 09-Apr-01

failure to alleviate the situation

Representative, New Jersey Allegation of improper behavior of a postmaster 16-Apr-01 

Senator, Texas Allegation of harassment 16-Apr-01 

Representative, Allegation of tense, abusive and volatile work environment 19-Apr-01

Pennsylvania 

Senators, North Carolina Allegation of retaliation for filing a complaint 27-Apr-01 

Representative, New Jersey Allegation of harassment 11-May-01 

Representative, California Allegation of not converting an individual to full time status 11-May-01 

Representative, Ohio Allegation managerial harassment 11-May-01 

Representative, Oregon Allegation of obstruction of an EEOC case 11-May-01 

PAGE 109
Representative, California Allegation of managerial corruption 11-May-01 

Representative, New Jersey Allegation of unwarranted discipline and harassment 11-May-01 

Representative, Ohio Allegation that termination was retaliation 11-May-01 

Representative, New Jersey Allegation of harassment and poor treatment 11-May-01 

Senator, Oregon Allegation of managerial harassment, sexual harassment 11-May-01 

and denial of disability retirement

Senator, Illinois Allegation of wrongful termination 11-May-01 

Senator, Tennessee Allegation of managerial harassment and discrimination 11-May-01 

Representative, Ohio Allegation of inadequate disciplinary practices 14-May-01 

Representative, New Jersey Allegation of a hostile work environment 15-May-01 

Representative, California Allegation of mistreatment, harassment, discrimination and intimidation 16-May-01 

Representative, Texas Allegation of racial discrimination 23-May-01 

Representative, New York Allegation of favoritism for family members 23-May-01 

Representative, New York Allegation of hostile work environment 23-May-01 

Representative, Texas Allegation of disregard of health restrictions 23-May-01 

Representatives, Texas Allegation of managerial harassment and discrimination 24-May-01 

and New York 

Representative, Ohio Allegation of managerial harassment 30-May-01 

Representatives, Florida Allegation of mismanagement 07-Jun-01 

and Arizona; 

Senator, Arizona

Representative, Ohio Allegation of harassment and discrimination 13-Jun-01 

Representative, New Jersey Allegation of inadequate handling of complaint and 13-Jun-01 

termination as retaliation

Senator, Michigan Allegation of noncompliance with settlement agreement 14-Jun-01 

Representative, California Allegation of mismanagement and a hostile work environment 18-Jun-01 

Senator, South Dakota Allegation of managerial harassment and retaliation 18-Jun-01 

Senator, Tennessee Allegations of a hostile work environment 26-Jun-01 

Senator, Tennessee Allegation of safety issues and potential for violence 26-Jun-01 

Representatives, Allegations of discrimination and harassment 29-Jun-01 

Connecticut, New York 

and California

Senator, Tennessee Allegation of a hostile work environment 29-Jun-01

Representative, California Concerns on non-selection for employment 06-Jul-01 

Representative Allegations of financial and personal harassment, and intimidation 06-Jul-01

and Senator, Florida

Representative, Texas Concerns over practices used in returning injured staff to work 09-Jul-01 

Representatives, Georgia Allegations of harassment and management failure to take action 16-Jul-01 

and New York

Representative, New York Allegation of managerial harassment 17-Jul-01 

and Senator, Tennessee

Representative, Indiana Allegation of personal mistreatment 17-Jul-01 

Representative, New York Allegation of harassment 18-Jul-01 

Representative, Illinois Request for information on Equal Employment Opportunity complaint 03-Aug-01 

Representative, New Jersey Allegation of harassment of an employee 06-Aug-01 

Representative, New York Allegations of bribery, witness tampering, abuse, 06-Aug-01 

waste, and mismanagement

Representative, Alaska Allegation of mismanagement 09-Aug-01 

Representative, Ohio Allegation of improper personnel practices 13-Aug-01 

Senator, Louisiana Allegations of harassment, retaliation and failure to address job injury 16-Aug-01 

Representative, Indiana Allegation of harassment 27-Aug-01 

Representative, New Jersey Allegation of hostile work environment 17-Sep-01 

Representative, Allegation of improper use of confidential documents 18-Sep-01 

Massachusetts in a personnel action

Senator, Tennessee Allegations of harassment and a hostile work environment 18-Sep-01

APPENDICES

Requestor Allegations/Concern Response Date

PAGE 110
OVERSIGHT OF INSPECTION SERVICE 

Requestor Allegations/Concern Response Date

Senator, Connecticut Allegation of stolen mail and mail tampering 18-Apr-01 

Senator, New Jersey Allegation of improper investigation on opened mail 26-Apr-01 

Representative New York Allegation of using a position for personal gain 27-Apr-01 

Senator, Maryland Allegation of illegal wiretap 16-May-01 

Senator, Maryland Allegation of fraud, retaliation and harassment 29-May-01 

Representative, Allegation of mail tampering 07-Jun-01

New Jersey

Representative, Texas Allegation of corruption 05-Jul-01 

Representatives, New York Allegation of improper adverse employment actions 17-Jul-01

and Oklahoma

Representative, New York Review of improperly conducted investigation 17-Jul-01

OTHER SIGNIFICANT ISSUES

Requestor Allegations/Concern Response Date

Representative, Kentucky Request for copy of report 16-May-01 

Representative, Allegation of improper consideration of an 29-May-01 

Rhode Island employment application

Senator, Indiana Allegation of fraud and collusion 18-Jun-01 

Senator, North Carolina Concern that OIG did not investigate a matter 26-Jun-01

currently under the EEO process

Representative, California Request for copies of documents 26-Jun-01 

Representative, New York Allegations of inappropriate conduct and unauthorized tape recordings 18-Jul-01 

Representative Concerns about disciplinary action 03-Aug-01

and Senators, Virginia

Senator, Mississippi Requests for information concerning OIG employment 04-Sep-01 

Representative, New York Allegation of retaliation for assisting in an OIG investigation 18-Sep-01 

GOVERNORS

PERFORMANCE

Requestor Allegations/Concern Response Date

Governor Allegation of untimely delivery of tax returns and payments 10-Apr-01

Governor Request for review of contractor 04-May-01

OTHER SIGNIFICANT ISSUES

Requestor Allegations/Concern Response Date

Governor Request for review of the Sunshine Act as it relates 20-Jul-01

to Board of Governors meeting

PAGE 111
PAGE 112 APPENDICES

APPENDIX H

Testimony Before Congress

Statement of Karla W. Corcoran, Inspector General United States Postal Service before the

Subcommittee on International Security, Proliferation and Federal Services of the Senate

Committee on Governmental Affairs

September 20, 2001

INTRODUCTION 

BACKGROUND 

Chairman Akaka and Members of the Subcommittee, on

behalf of the Office of Inspector General (OIG), United

States Postal Service, I am pleased to submit this written

statement. This statement highlights opportunities to capitalize on existing revenue, resources, and personnel while

improving accountability and public trust.

Congress created the OIG in 1996, and the Postal Service

Governors appointed me in 1997 as the first independent

Inspector General. My office conducts independent audits,

reviews, and investigations of postal programs and operations. In addition, the OIG has an express statutory responsibility to oversee all activities of the Inspection Service.

The OIG is uniquely situated to bring to Congress an independent assessment of postal operations. Over the last two

years alone, our audits and investigations have identified

over $500 million in savings; cost avoidance; and waste,

fraud, and abuse in postal operations.

The Postal Service operates a basic and fundamental service

to the American people, seeking to provide prompt, reliable,

efficient, and universal service – to everyone, everywhere.

This has been the mission since the first days of the republic

and still is the mission in the 21st Century. Everyone benefits from the Postal Service’s universal service mandate and

its universal access. Customers have come to rely on the

Postal Service as a trusted third party, bringing safety, security, and privacy to the nation’s personal and business communications. With over 38,000 facilities across the nation,

it is the world’s largest retailer. It has more employees than

any other business except Wal-Mart, and if it were a private

corporation, would rank in the top 10 of the Fortune 500.

The Postal Service, as a quasi-governmental entity, is

required to act in a businesslike manner while struggling

with its public role, as it develops new product lines, ventures into eCommerce, and other initiatives that compete

with private industry and foreign posts. Being a quasi-governmental entity, the Postal Service must be accountable to

the public. However, the Postal Service considers its business information proprietary and claims exemption from disclosure.

As a business entity, the Postal Service would be expected

to generate a profit. Under current law, it must operate on

its own revenue, on a breakeven basis, while providing universal service, regardless of the expense. However, growth

in service does not guarantee growth in revenue. Therefore,

the Postal Service generally relies on postage rate increases
PAGE 113

STRATEGIC 

DECISION-MAKING 

to offset costs. The last rate increase occurred this year, and

the Postal Service has recently announced it will be seeking

another.

In our May 15, 2001, statement to the Senate Committee

on Governmental Affairs, we reported the Postal Service

should continue to address opportunities to improve critical

management practices. Since May, we have continued to

identify opportunities for the Postal Service to improve its

strategic decision-making, financial management, contracting, labor management, and computer security and privacy.

In addition, this testimony will address our oversight of the

Inspection Service. These areas are vital to the success of

the Postal Service. We also think the Postal Service would

benefit greatly from any guidance that Congress can provide

regarding what its mission currently is, and what it should

be in the future.

With the Postal Service reporting at least a $1.65 billion

dollar loss and increased costs, strategic decision-making to

effectively allocate and manage resources is crucial to the

success of its core business. The following examples illustrate the need for the Postal Service to improve in this area: 

◆Since 1997, we have performed reviews of Postal

Service automated mail processing and computerized

retail equipment investments totaling over $1.9 billion. These reviews concluded that the Postal Service

sometimes did not achieve the anticipated return on

investment, account for all costs, and properly track

performance. When this occurs, anticipated gains may

never be realized — and may even result in losses.

◆Our review of seven projects, representing over

$800 million in postal expenditures, disclosed the

Postal Service did not adequately validate test results,

savings, and cost methodology before approval. After

approval, the Postal Service did not provide adequate

project information in order to reevaluate the investment decision. Therefore, the Postal Service could not

be assured that sound investment decisions were made.

◆A recent audit revealed that stamp production would

exceed demand by approximately 11 billion stamps

for FY 2001 and 2002. As a result of our audit,

postal management agreed to reduce overall stamp

production in FY 2002 for an estimated savings of

$10.5 million.

◆We are currently reviewing Postal Service sponsorship

programs. In one example, we identified almost $20

million already spent for the U.S. Cycling Team sponsorship, with a commitment of an additional $25 million over the next 3 years. We plan to determine to

what extent these programs contribute to the core

business strategy for growing new revenue.

◆Because the Postal Service does not always collect sufficient cost information, it cannot accurately measure

the success of its programs. For example, our review of

a lease/purchase decision on trailers indicated the

Postal Service will spend millions of dollars more than
PAGE 114 APPENDICES

FINANCIAL 

MANAGEMENT

CONTRACTING 

necessary for trailer leases over a 12-year period. This

occurred because postal management lacked sufficient

and accurate cost data to make an effective decision on

whether or not to lease or purchase the equipment.

Postal management is currently preparing its response

to this report. 

The Postal Service needs to effectively manage costs and

productivity in order to improve its financial condition.

The following examples illustrate some of the financial

management areas requiring attention.

◆The Postal Service is a $65 billion business that does

not provide its program managers the means to effectively track financial obligations. Without this information, it is difficult to develop, justify, and defend

program budgets. The Postal Service tracks expenses

when paid because it contends that its major expenses

are salaries and benefits. This would be analogous to

waiting until a personal check clears the bank before

recording it and reducing your balance in your checkbook. Other government agencies and business entities track costs when obligated and incurred, providing

all levels of management with the information needed

for effective program management.

◆The Postal Service is unable to determine the cost of

processing 126,000 grievance arbitration cases currently pending and does not track costs for resolving labor

disputes. This information would help the Postal

Service determine the financial magnitude of this

problem and manage the associated costs more effectively.

◆The Postal Service paid a contractor $5.2 million in

commissions to develop new revenue sources.

However, the Postal Service could not verify the

amount of revenue claimed by the contractor. The

Postal Service agreed to hold off on expanding this

program until new management controls are put into

place. 

The Postal Service administers over $15 billion a year in

contracts for goods and services. This makes it one of the

largest contracting organizations in the federal government.

However, the Postal Service has not always followed its

own procurement policies or sound contracting principles.

Over the last four years, our reviews have disclosed that

such contracting practices have resulted in more than

$400 million in monetary findings including fraud, waste,

abuse, mismanagement, and other recoveries. We have

consistently reported on improvements needed in contracting procedures, as the following examples illustrate.

◆We found that, contrary to its own procurement practices, the Postal Service entered into a $6.3 billion

transportation agreement without first independently

validating the financial data used to justify the decision. Not all of the financial data was found to be

accurate or adequately supported. As a result, the

anticipated level of savings may not be realized.
PAGE 115

LABOR MANAGEMENT

◆As a result of one of our investigations, and with the

cooperation of Postal Service management, the Postal

Service recovered over $12 million from a major

telecommunications contractor and will be able to

avoid an additional $58 million in erroneous billings.

While the Postal Service was concerned about billing

discrepancies, it needed additional resources to

research and resolve the issue. Working with management, we found the Postal Service was repeatedly

billed for work that was substandard, or not performed

at all, and had not been monitoring contractor performance. Postal Service management is now monitoring this contractor’s performance and reviewing all

future bills.

◆One of our audits revealed a situation where a contractor was involved in writing contract requirements.

Under federal government contracting regulations, this

conduct would be specifically prohibited as an organizational conflict of interest. However, according to

postal policy, it is not prohibited. This contractor

received a series of sole source contracts valued in

excess of $300 million. The contracts were awarded,

in part, to compensate the contractor for preparing the

statement of work used to award other competitive

contracts. If these contracts had been competitively

bid, the Postal Service could have saved $53 million.

◆As a result of hearings held over 20 years ago by this

Subcommittee, federal laws and executive orders were

passed to ensure an effective and uniform governmentwide debarment system to protect the government

from contractors who engage in fraud. The Postal

Service does not honor debarments by other federal

agencies. As a result, contractors who have been convicted of defrauding other federal agencies, and have

been debarred from contracting with those agencies,

are free to contract with the Postal Service.

Although the Postal Service has its own debarment

system, only three contractors are currently listed. We

believe this is caused, in part, by the fact that the

Postal Service requires a higher standard of evidence

than is required anywhere else in the federal government to debar a contractor for fraud. We believe this

standard is unnecessary and inhibits the Postal Service

from protecting itself from fraudulent contractors. We

identified these problems to postal management over

two years ago; however, to date, no action has been

taken to revise the current procedures.

Labor management relations can affect employee morale,

productivity, and the Postal Service’s public image. Our

work focuses on systemic nationwide labor management

issues, including succession planning, diversity, compensation and benefits, workplace environment, management of

complaint processes, and use of labor resources. 

Since our inception, we have worked with the Postal

Service to prevent reprisal against postal employees who

report waste, fraud, and abuse to the OIG. Employees at
PAGE 116 APPENDICES

other federal agencies have been covered by the

Whistleblower Protection Act for over 20 years. However,

the Postal Service is not covered by this Act. We are

pleased that the former Postmaster General took our advice

and extended similar protection to all postal employees.

However, it is important that the new Postmaster General

formally implement this policy as soon as possible to avoid

the necessity for legislative action.

Also, our current audit work demonstrates opportunities for

further workplace enhancement and cost savings. ◆Our review of violence prevention and response programs at 25 Postal Service districts disclosed that none

of the districts fully implemented the required controls

designed to reduce the potential for violence. District

officials either were not aware of the requirements, or

believed the requirements were not mandatory or

applicable in all situations. Workplace violence can

subject the Postal Service to significant financial liability, diminished credibility, decreased productivity, and

may lead to property damage.

◆The Postal Service’s pay for performance program is

based on a private sector model for financial performance. However, the Postal Service, unlike the private

sector, pays incentive awards without regard to its

overall financial condition. This occurs because of

inflation indexing that has been added to the model.

The pay for performance program could achieve more

meaningful results if the financial condition of the

Postal Service was a more significant measure for

determining incentive awards. 

◆In addition to pay for performance, the Postal Service

offers other benefits to its senior executives that are

more generous than those offered by other government

agencies and private sector companies. For example,

Postal Service officers automatically receive $25,000 to

cover miscellaneous relocation expenses, regardless of

the amount incurred. In one case, we found that an

executive received three $25,000 payments over four

years. In other federal agencies, the maximum amount

that an employee can receive for these miscellaneous

expenses is $700. Further, we benchmarked 23

Fortune 500 companies and found their miscellaneous

expense benefits ranged from $0 to $5,000. Postal

Service management justifies these payments because

unlike private corporations, it cannot give large pay

increases when people are promoted.

The Postal Service also has a program intended to

assist employees in purchasing homes in high-cost

areas. In benchmarking this practice with 31 private

and public sector organizations, we noted the Postal

Service was the only organization that purchased

employees’ homes and operated as a lien holder.

Management justified this practice saying that it is

similar to what universities do to attract qualified professors. These benefits fuel the perception that the

Postal Service is not fiscally responsible, particularly in
PAGE 117

COMPUTER SECURITY

light of increasing rates and declining profits.

◆Although the Postal Service prohibits nepotism, our

audit work has substantiated instances where this practice exists. For example, in three instances, two managers either directly decided or influenced personnel

selections involving their relatives. We also noted that

a total of 20 members of the same family were

employed in a postal district, 10 of whom worked in

offices that reported directly or indirectly to the postmaster to whom they were related. 

Also, we have found the appearance of nepotism can

be avoided if local procedures are formalized, well publicized, and followed. This can alleviate the negative

impact in the workplace that occurs when employees

question the fairness of the personnel selection process. 

In order to ensure the continuity of delivery services and

provide for a secure electronic commerce environment, the

Postal Service must ensure the security of its computers and

networks and the privacy of its customers’ information.

Virtually every piece of First-Class Mail is “touched” on

numerous occasions by a variety of computer-controlled

mail processing equipment. A breach in computer security

by terrorists or cyber criminals could significantly impact the

Postal Service’s mail and eCommerce operations, resulting

in a loss of public trust and revenue.

We have identified security and privacy concerns in these

areas and discussed opportunities for improvement with

postal management. The Postal Service has appointed a

chief privacy officer and chief information security officer

who will focus Postal Service management’s efforts in these

areas.

Under the designation of investigative functions between

the OIG and the Inspection Service, the OIG is responsible

for investigating criminal and terrorist attacks against the

postal computer network. To carry out these responsibilities, we work with other federal law enforcement agencies

and postal officials to protect the postal network from cyber

attacks.

◆The OIG represents the Postal Service on the FBI’s

National Infrastructure Protection Center, the primary

coordination authority for the protection of the

nation’s computer networks. This is important because

the Postal Service, like the rest of government and

industry, is dependent on these computer networks.

Being part of this task force allows the OIG to receive

early notice of criminal and terrorist attacks on federal

computer networks, which could affect the Postal

Service. Following last week’s terrorist attacks, we

have provided additional agents and computer specialists to support this critical activity. 

◆We identified a major Postal Service Internet site that

did not have a comprehensive disaster recovery plan.

The Postal Service could not ensure that certain

important applications, including eCommerce programs, would continue in the event of a failure or that

recovery would be timely and complete.
PAGE 118 APPENDICES

◆The recent national attack of the Code Red computer

worm, which was designed to disrupt computer operations, illustrated the damage Internet terrorists and

hackers can inflict on the day-to-day operations of the

Postal Service. Quick response by the Postal Service’s

computer incident response team, along with our computer intrusion team, minimized interruption of network service by halting the spread of the Code Red

worm.

◆Given last week’s tragic events at the World Trade

Center and the Pentagon, all federal agencies are

devoting heightened attention to protecting important

federal transportation, communications, utilities, computer networks, and other critical operations and systems from terrorist and criminal attacks. In May 1998,

the President issued Presidential Decision Directive 63,

which sets forth requirements for all federal agencies to

identify critical agency assets, and to develop strategies

to protect these assets from terrorist or criminal

attacks. Because the Postal Service’s delivery network

is a vital national asset, the Postal Service needs to

take immediate action to fully comply with

Presidential Decision Directive 63.

◆Last year, Congress passed the Government

Information Security Reform Act to improve government computer security; however, the Act does not

apply to the Postal Service. Our audit and investigative work has identified many computer security deficiencies that could have been prevented if the Postal

Service had more aggressively implemented the best

practices recommended by the Act. 

We also have identified several security and privacy concerns, as follows: ◆Our telecommunications review at a major Postal

Service data center identified myriad security vulnerabilities involving network servers. These security vulnerabilities, if exploited, could compromise the confidentiality, integrity, and availability of postal operations, and harm its reputation as a trusted business

partner. The OIG provided detailed test results to

postal officials who subsequently incorporated this

information into an improved network security plan.

◆The Postal Service used computer code in three

Internet websites to collect, track, and send data to

third parties without the customers’ knowledge. This

could have created the perception that the Postal

Service was profiling its website visitors. The Postal

Service subsequently removed the code from these systems. 

◆We identified eBusiness agreements that did not have

sufficient security, privacy, and access language to protect the Postal Service and its commercial partners and

customers. A breach in these areas could result in the

theft of valuable information, loss of revenue, and

interference with business and customer relationships. 
PAGE 119

The OIG was established within the Postal Service with

specific statutory authority to oversee all Inspection Service

operations and programs. Recent Congressional concerns

about the FBI and IRS have clearly emphasized the need for

oversight over major federal law enforcement agencies. To

address our statutory mission, we have devoted significant

OIG resources to Inspection Service oversight.

◆One of our earlier audits of the Postal Inspection

Service, performed at the request of Congress, disclosed

that more than 10 percent of postal inspectors were

not meeting their statutory work hour requirement for

criminal investigative work because they were spending

the majority of their time performing audits. Since

then, the Inspection Service has taken steps to correct

this deficiency.

However, in a recent review of service investigations,

we noted the Inspection Service, while complying with

the statutory work requirement for investigators, is

continuing to utilize criminal investigators for mail

processing reviews where a lower-paid, non-criminal

investigator could perform the same work. The

Inspection Service justifies this work by stating that it

is important to ensure the accuracy and safety of the

mail.

We found the Postal Service could put approximately

$2 million to better use over the next 5 years by using

non-criminal investigators who do not receive 25 percent law enforcement availability pay. Management

disagreed with our recommendations, stating customers

want the Postal Service to use federal criminal investigators to conduct this work. However, we contacted a

majority of the mailers identified by the Postal Service

as wanting the Inspection Service to conduct these

reviews, and only a handful were aware that the

Inspection Service conducted this work. We are currently working to resolve this issue.

◆Our draft report of the Inspection Service’s executive

awards program noted that 100 percent of its 41 executives received awards, ranging from $2,500 to $20,000,

for a total of $444,000 in FY 2000. Despite the

requirement of the Board of Governors that awards be

based on individual accomplishments, the Inspection

Service used identical justifications. These identical

justifications did not identify individual accomplishments. We are awaiting management’s official comments on this report. 

The tragic events of last Tuesday have changed the world

and the Postal Service, including our office. I am proud to

say that our employees have risen to the occasion. Our

employees were present at the World Trade Center at the

time of the attack, and were among the first to alert tenants

and local law enforcement agencies of the crash. Agents

from our New York office are still participating in rescue

efforts. In Washington, our employees assisted as paraINSPECTION SERVICE 

OVERSIGHT 

CONCLUSION 
PAGE 120 APPENDICES

medics at the Pentagon. Since these attacks, over 10 percent of our investigative staff is working to support a variety

of federal law enforcement efforts to identify and apprehend

the terrorists. We have provided agents and computer specialists to participate in an elite federal cyber-terrorist task

force. We have provided agents to serve as Sky Marshals

and to work with FBI command centers in coordinating federal investigative efforts. We are also working with the

Inspector General community to provide a pool of investigative resources to support the national effort. We believe

that this is the single most important criminal investigation

in the nation today, and we are prepared to support it

throughout this crisis while continuing to perform our statutory mission regarding the Postal Service. 

Finally, the competing obligations of public service and

commercial enterprise present unique challenges for the

Postal Service, particularly as the communications and

delivery industries have become more competitive. Our

evaluation of the Postal Service to date suggests that it

could benefit from strategic direction about its role in the

21st Century. That direction can only come from the

Congress, as it did in the Postal Reorganization Act of 1970.

In order to provide guidance, Congress may want to consider certain fundamental questions. For example, should the

Postal Service of the 21st Century: 

◆Be a quasi-governmental entity or private corporation? 

◆Maintain universal service in the age of the Internet?

◆Have a monopoly or shared access to local mailboxes?

◆Have a rate making process or market-based pricing?

◆Have limited product lines or more product flexibility?

◆Have limited investment options or greater freedom to

invest?

◆Have binding arbitration or unfettered labor negotiations?

◆Have limited markets or global competition? 

Regardless of the outcome of postal reform, we believe

postal management has many opportunities to improve its

accountability and public trust. The independent oversight

provided by Congress and the OIG will continue to assist

the Postal Service as it makes decisions in these challenging

times. In our view, in order to ensure the success of future

Postal Service operations, Congress and Postal Service management need to address these issues. 
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