Office of Inspector General

Semiannual Report to Congress

April 1 — September 30, 2012
Mission Statement

The mission of the U.S. Postal Service Office of Inspector General is 

to conduct and supervise objective and independent audits, reviews, 

and investigations relating to Postal Service programs and operations to:

 Prevent and detect fraud, theft, and misconduct;

 Promote economy, efficiency, and effectiveness;

 Promote program integrity; and

Keep the Governors, Congress, and Postal Service management 

informed of problems, deficiencies, and corresponding corrective actions.

About the Cover

The OIG relies on data modeling tools to detect fraud, waste, and abuse. The OIG’s Countermeasures and Performance Evaluations (CAPE) team, in partnership with the Office of Investigations 

and the Office of Audit, leverages innovative technologies and subject matter expertise to develop analytic tools, including data mining, risk assessments, and predictive analytics, to generate 

investigation and audit leads that have high potential for identifying fraud and money savings.

Using these services, the OIG has modernized its capability to synthesize data and information on postal operations, and to turn the data into insight on identifying root causes of and solutions 

to weaknesses in postal operations. We are transforming data and information into shared knowledge to focus our efforts on work of value and high-risk areas of the Postal Service. The OIG 

has deployed risk assessment models supporting investigators and auditors working in the areas of healthcare fraud, mail theft, financial fraud, contract fraud, and lease renewals.
3

A message from the Inspector General

This report, submitted pursuant to the Inspector General Act, outlines our work and activities for the 6-month period ending 

September 30, 2012. In the first section of this issue, we highlight audits and reviews that address risks in the strategic, 

financial, and operational areas of the U.S. Postal Service. The second section highlights investigations conducted during this 

reporting period that contributed to safeguarding the Postal Service’s revenue and assets and helped deter postal crimes.

Postal Service executives often work closely with their Office of Inspector General (OIG) counterparts to identify problems and 

collaborate on solutions. These efforts have resulted in significant savings opportunities. During this period, we issued 144 

audit reports, management advisories, and Performance and Results Information Systems (PARIS) risk models, and the Postal 

Service accepted 91 percent (106 of 116) of the OIG’s significant recommendations.

In addition, we conducted 2,045 investigations that led to 286 arrests, and $22 million in fines, restitutions, and recoveries 

that went to the Postal Service. We also participated with other agencies in a significant investigation that resulted in the 

largest healthcare fraud settlement in U.S. history. 

This was an historic year for the Postal Service. It was forced to default on two of its prefunding payments into the Retiree 

Health Benefits Fund due to its liquidity crisis. Without legislative change or other significant action, the Postal Service 

expects to lose more than $18 billion by 2015. While the situation is desperate, we do not think it is catastrophic. In fact, 

our work has indicated that the Postal Service has many opportunities to reduce its costs and position itself for new revenue 

opportunities. The savings from these efforts, some of which would require legislative action, would exceed the Postal 

Service’s projected shortfalls.

We issued a number of reports that considered ways the Postal Service could reduce its strategic and financial risk, improve 

efficiencies, and lower operational costs. For example, our report on overall plant efficiency identified opportunities for the 

Postal Service to reduce workhours and attain further efficiencies in mail processing operations for an associated economic 

impact of almost $665 million. We also issued a report on city delivery staffing and a separate report on the efficiency of 

customer service operations, both of which identified savings opportunities of more than $100 million. 

On the revenue side, we issued a report that included recommendations for growing the package business. In a strategic 

white paper, we considered opportunities for the Postal Service to carve out a niche in providing digital identity services. 

The OIG — with the support of the Governors, Congress, and Postal Service management — will continue to play a key role 

in maintaining the integrity and accountability of America’s postal service, its revenue and assets, and its employees through 

its audit and investigative body of work.

David C. Williams

Inspector General
AUDITS

Reports issued 144

Significant recommendations issued 116

Total reports with financial impact 39

 Funds put to better use $8,244,406,067

 Questioned costs $1,202,383,722

 Revenue Impact $696,415,496

TOTAL $10,143,205,285

INVESTIGATIONS 1

Investigations Completed 2,045

Arrests 286

Indictments/Informations 293

Convictions/pretrial diversions 2 331

Administrative actions 879

Cost Avoidance $103,418,346

Fines, Restitution, and Recoveries3 $1,965,795,625

 Amount to the Postal Service 4 $22,094,997

OIG HOTLINE CONTACTS

Telephone calls 31,576

E-Mail 15,584

Standard Mail 1,046

Voice Mail Messages 394

Facsimile - FAX 307

National Law Enforcement Communications Center 350

TOTAL CONTACTS 49,257

1

 Statistics include joint investigations with other law enforcement agencies.

2

 Convictions reported in this period may be related to arrests in prior reporting periods.

3 Amount under Fines, Restitutions, and Recoveries includes $1.9 billion from one pharmaceutical investigation.

4

 Amounts include case results of joint investigations with other OIG, federal, state, and local law enforcement entities.

Summary of Performance 

April 1— September 30, 2012
TABLE OF CONTENTS

OFFICE OF AUDIT ..................................................................................................................................... 6

Audit Work by Risk Category......................................................................................................................................... 7

Strategic Risk .............................................................................................................................................................. 7

Financial Risk .............................................................................................................................................................. 9

Operational Risk ........................................................................................................................................................ 15

OFFICE OF INVESTIGATIONS ............................................................................................................... 22

Financial Crimes........................................................................................................................................................ 23

Healthcare Fraud ....................................................................................................................................................... 24

Mail Theft .................................................................................................................................................................. 26

Contract Fraud........................................................................................................................................................... 28

General Crimes.......................................................................................................................................................... 29

Executive Investigations and Internal Affairs................................................................................................................. 29

SPECIAL FEATURES .............................................................................................................................. 11

In-Office Cost System Inputs into the Cost and Revenue Analysis Report ....................................................................... 11

Work Assignments for Limited Duty/Rehabilitation Employees....................................................................................... 12

Employee Retirement Options; Review of Fiscal Years 2012 and 2013 Liquidity; Alternative Health Care Plan .................. 14

City Delivery — Street Efficiency................................................................................................................................. 21

Joint Investigation Nets Historic Healthcare Fraud Settlement........................................................................................ 25

APPENDICES........................................................................................................................................... 31

APPENDIX A — Reports Issued to Postal Service Management..................................................................................... 32

Reports with Quantifiable Potential Monetary Benefits.......................................................................... 33

Report Listing.................................................................................................................................... 35

APPENDIX B — Findings of Questioned Costs............................................................................................................. 38

APPENDIX C — Recommendations That Funds Be Put to Better Use............................................................................. 39

APPENDIX D — Other Impacts ................................................................................................................................... 40

APPENDIX E — Reports with Significant Recommendations Pending Corrective Actions................................................. 42

APPENDIX F — Significant Management Decisions in Audit Resolution ......................................................................... 60

APPENDIX G — Status of Peer Review Recommendations............................................................................................ 61

APPENDIX H — Investigative Statistics........................................................................................................................ 62

APPENDIX I — Summary of U.S. Postal Inspection Service Investigative Activities Under Title 39 USC § 3005 & 3007.... 63

APPENDIX J — Closed Congressional and Board of Governors’ Inquiries....................................................................... 64

SUPPLEMENTAL INFORMATION ......................................................................................................... 69

Freedom of Information Act......................................................................................................................................... 69

Workplace Environment.............................................................................................................................................. 69

Acronym Guide .......................................................................................................................................................... 70
Office of 

Audit
April 1 — September 30, 2012 7

STRATEGIC RISK

Management Response to Audit Work

OA adheres to professional audit standards and 

generally presents its audit work to management 

for comments prior to issuing a final report. 

Unless otherwise noted in the selected audit work 

discussed in this report, management has agreed 

with our recommendations and is taking or has 

already taken corrective action to address the 

issues raised. 

SIGNIFICANT AUDIT WORK BY RISK CATEGORY

Audit Synopses

For the reporting period April 1—September 30, 2012

The Office of Audit (OA) uses a risk-based planning approach to identify audit work 

that will provide the best value to the Postal Service. This process identifies key 

areas to focus on, and then assigns work via risk deployment. For this reporting 

period, we highlight audits and reviews that address risks in the strategic, financial, 

and operational areas.

STRATEGIC RISK

The Strategic Risk category covers issues that impact the Postal Service’s overarching strategic direction. 

Strategic risk factors are those affecting the Postal Service’s ability to ensure that its products and services 

are self-sustaining and balance legal considerations and stakeholder views. The following audit work 

addresses strategic risk.

Cost of Appeals for Closing Postal Service-Operated Retail Facilities

Since fiscal year (FY) 2009, the Postal Service has increased efforts to optimize the retail network. As a 

result, the number of final determinations to discontinue retail operations has increased from 118 to 362 

(307 percent) from FY 2010 to FY 2011. On May 9, 2012, the Postal Service announced a new strategy 

for preserving post offices in rural America and achieving cost savings. The OIG and the Postal Regulatory Commission (PRC) OIG conducted this joint audit to assess the costs to the Postal Service and the 

PRC to process, administer, and manage closure appeals for Postal Service-operated retail facilities. 

The Postal Service Law Department is responsible for tracking, monitoring, and processing all retail 

facility closure appeal cases opened by the PRC. The PRC’s Office of General Counsel processes and 

advises PRC commissioners on appeal cases. In addition, the PRC appoints a public representative to 

represent the interests of the public in each case. The Postal Service OIG estimated the average costs 

and staff hours the law department needs to process each appeal are about $1,365 and 15 hours, 

respectively. The PRC’s costs to process an appeal range from $1,806 to $2,496 and its staff hours 

range from 19 to 29 hours. The OIG review found the law department did not consistently track attorney 

and staff hours spent on individual appeals. The law department recognizes the need for additional 

resources to handle the estimated workload and, accordingly, issued a statement of work to obtain 

support through contracting. Finally, from July through November 2011, the Postal Service withdrew 

four final determinations after appeals were filed with the PRC, although it did not disclose the factors that led to the withdrawals. We estimated the Postal Service could have realized cost savings if it 

considered those facts before the final determinations. The report contained no recommendations. 

Customer Complaint Resolution Process 

Postal Service customers can initiate complaints through a variety of mechanisms, including the Postal 

Service’s Internet site (USPS.com) or toll-free number (1-800-ASK-USPS), at retail units, and through 

congressional representatives and letters. The Postal Service received about 3 million customer complaints 

in FY 2011 from residential and small business customers throughout the country. Our report found that 
8 Semiannual Report to Congress

STRATEGIC RISK

the Postal Service is not efficiently and effectively resolving customer complaints. Specifically, staff members are closing 

complaints before customers consider their cases resolved. We estimated the Postal Service could have avoided costs of 

$8.8 million for the 12-month period ending March 31, 2012, had it handled complaints more efficiently. The Postal 

Service also did not adequately monitor complaint resolution partially because system performance and data issues, 

including outages and slow performance, have hindered the ability to do so. We recommended the Postal Service develop 

a mechanism to incorporate customer feedback regarding complaint resolution into the system; require current policies 

and procedures to be followed until planned updates are finalized; identify system deficiencies and desired enhancements 

and work to correct them; develop a strategy for reducing repeat complaints; and develop a mechanism for tracking system usage and response wait times and ensuring that ongoing actions related to archiving data and monitoring 

outages continue.

Delivery Fleet Strategies

The Postal Service owns and manages the world’s largest civilian vehicle fleet with about 200,000 vehicles, which are 

used primarily to support mail delivery. About 85 percent of its fleet is right-hand drive vehicles, including about 142,000 

long-life vehicles (LLVs). The expected service life of an LLV is 24 years, and the Postal Service’s LLVs are now between 

18 and 25 years old. Our objective was to assess delivery fleet strategies — using industry comparative analysis — that 

the Postal Service could apply. 

Our report determined the Postal Service does not have a comprehensive fleet management strategy but has some elements of a strategy in place. In June 2011, management developed a plan to purchase new vehicles; however, the Postal 

Service’s continuing financial situation prevents it from implementing the plan. After examining delivery fleet practices 

at organizations with a wide spectrum of fleet management expertise, we identified 32 best practices that fall into three 

categories: strategy, asset optimization, and asset acquisition categories. We recommended that management develop 

and implement a comprehensive fleet management strategy, which a dedicated team of specialists at headquarters 

would manage using identified best practices. We also recommended that management establish an annual new vehicle 

replacement strategy, as part of a comprehensive strategy, to replace part of the fleet each year, spread out the expenditures over time, and ensure the overall operational functionality of the fleet. 

Management disagreed with our finding that the Postal Service does not have a comprehensive fleet management strategy in place and our recommendation that it implement a comprehensive strategy managed by a headquarters team. The 

Postal Service stated that it has recently undergone an organization-wide restructuring and that its fleet strategy is not 

contained in one department but is a cooperative venture among various departments. 

Every Door Direct Mail-Retail 

Federal law allows the Postal Service to test experimental products under certain conditions. The law 

limits the experimental time to 24 months and revenue to $10 million in any given 12-month period, but 

authorizes the PRC to grant an exemption of up to $50 million. On January 12, 2011, the Postal Service 

filed a notice announcing its intent to initiate a market test of an experimental market-dominant product, 

Every Door Direct Mail-Retail (EDDM-R). The PRC approved the market test and the Postal Service 

launched EDDM-R in March 2011. Because sales of the EDDM-R product grew more quickly than anticipated, the Postal Service requested the PRC grant an exemption to the $10 million revenue cap, which 

the PRC granted. 

Our objective was to evaluate the status of the planned transition of EDDM-R from an experimental 

product to a permanent market-dominant product. Our report determined EDDM-R is rapidly approaching the experimental-product annual revenue cap. Consequently, the Postal Service must act quickly to 

transition the product from experimental to permanent status to avoid disrupting marketing momentum. 

In transitioning the product, the Postal Service could improve its methodology for measuring product 

success, strengthen controls over acceptance and verification, and better monitor product costs. We recommended management provide a timely request to the PRC to add EDDM-R as a permanent product; 

develop better sources and methodologies to measure how well the product is meeting goals; evaluate, 

monitor, and test controls; continue efforts to strengthen controls and streamline acceptance procedures; 

and monitor and evaluate product costs. The Postal Service adopted such recommendations and filed 

for a permanent classification with the PRC, which it granted on September 7. The product will be implemented with the annual price changes in January 2013.

Package Delivery Growth 

The Postal Service offers a variety of package products, such as First-Class Parcels, Non-Flat Machinables, Standard 

Parcels, Single-Piece Parcel Post, Express Mail, Priority Mail, Parcel Select, Parcel Return Service, and International Mail 

and Services. In FY 2011, the Postal Service’s total package volumes of 2.9 billion resulted in $11.5 billion in revenue and 

The Postal Service’s market test of its Every Door Direct Mail 

– Retail product proved highly successful, with sales growing 

faster than expected. Our report reviewed the planned transition 

from market test to permanent product offering.
April 1 — September 30, 2012 9

FINANCIAL RISK

a $2 billion profit. Some of these products are considered market-dominant for rate-making purposes, while others are 

considered competitive. Although the volumes of each catagory are roughly 50 percent of the Postal Service’s total package volume, market-dominant products account for only 23 percent of total package revenue, while competitive products 

account for 77 percent. Our objectives were to assess the effectiveness of the Postal Service’s strategies for increasing 

its package delivery business, identify opportunities for growth, and estimate the resulting potential additional net revenue 

if the Postal Service increased its market share. Our report determined that the Postal Service’s strategies for growing 

its package business have helped it keep pace with competitors in growing domestic and international package markets. 

The strategies are sound, but their effectiveness has been impacted by the lack of a strategic decision-making process 

for evaluating new sales opportunities, sales tracking system shortcomings, and chronic sales staff vacancies. The Postal 

Service could grow its package business by stabilizing sales staffing levels and adding new products. We recommended 

the Postal Service establish a strategic decision-making process for evaluating new sales opportunities, enhance the 

CustomerFirst! System, reassess sales staffing levels, continue to pursue legislative change that will allow it to ship beer 

and wine, and evaluate offering prepayment of customs duties and taxes and a local delivery product. 

Digital Identity: Opportunities for the Postal Service

This white paper discusses gaps in the digital marketplace and the need for strengthened digital identity, authentication 

procedures, and increased privacy protection for users. The Postal Service is well-positioned to fill these gaps by virtue 

of its history, reputation for trustworthiness, and nationwide infrastructure. For example, acting as a trusted third party, 

the Postal Service could verify individual or business mailing addresses. Further, enhanced digital identity authentication 

would allow new eGovernment and eCommerce opportunities. The Postal Service could facilitate and build on joint publicprivate sector initiatives, which are currently hindered by the inability to tie a user’s digital identity to a physical identity, 

such as a verifiable address. Use of such identity services would be entirely voluntary, with clear, comprehensible, and 

concise privacy guidelines. In addition, the Postal Service could offer its own digital identity service as a provider utilizing 

standards currently under development. With its network of post offices and carriers, the Postal Service could provide 

in-person verification services, building on its current passport services.

Strategic Advantages of Moving Mail by Rail

The Postal Service has used trains to transport mail since the early 1800s, but in recent years it shifted nearly all of 

its long-distance surface transportation to contracted highway trucks. In 2011, the Postal Service spent more than 

$3.3 billion on highway contracts and $40 million on freight rail contracts. However, over the last decade the Postal 

Service’s competitors in the private sector have shifted much of their long-distance transportation to rail. The freight rail 

industry achieved significant improvements in service, cost, and fuel efficiency since it was deregulated more than 

30 years ago. Its intermodal rail service can often meet the same service standards as highway transportation, but at 

lower rates and with four times the fuel efficiency. By increasing its use of intermodal rail, the Postal Service could save 

on transportation costs, reduce greenhouse gas emissions, reduce its exposure to fuel price volatility, and make its processing and transportation network more robust and sustainable over the long-term. Shifting a portion of mail volume to 

intermodal rail could yield annual cost savings of about $100 million without any changes to the Postal Service’s network. 

Further, broad-scale recommitment to intermodal rail could yield greater savings. 

A Framework for Delivery Network Optimization

This paper demonstrates how operational research methodology can be used to rationalize the facility space for delivery 

operations. This analytical model examines consolidation opportunities within the existing carrier facility footprint, while 

balancing the need for space that is near delivery routes against costs. The analysis shows that a much smaller network 

of delivery units is sufficient to meet existing delivery needs and could reduce Postal Service annual costs. Modeling tools 

like this can aid the Postal Service’s assessment of its delivery network needs.

FINANCIAL RISK

The Financial Risk category includes issues that have a clear financial impact, particularly those related to cost control 

and revenue generation. The greatest opportunities to reduce financial risks are in the areas of maximizing the costeffectiveness of contracts, and improving internal controls in financial systems, processes, and benefit programs.

The Postal Service faces a critical financial risk as it deals with the economic slowdown affecting the nation. While 

the Postal Service made progress in reducing costs, the possibility of further declines in volume means that it is still 

confronted by a major challenge to find ways to cut costs and increase revenues. 

Carrier Contributions to Revenue Generation and Customer Service 

Currently, letter carriers primarily deliver mail to three types of delivery points: door-to-door, curbside, and centralized. 

City carriers deliver mail in populated areas, while rural carriers deliver mail in areas more traditionally considered rural 

The Postal Service is well-positioned to fill 

the gaps in the digital marketplace by virtue 

of its history, reputation for trustworthiness, 

and nationwide infrastructure. On OIG white 

paper noted a particular opportunity in digital 

identity authentication services. 

A letter carrier cases mail to prepare it for 

delivery on her route.
10 Semiannual Report to Congress

FINANCIAL RISK

or remote. Carriers contribute to Postal Service revenue through the Customer Connect® and Rural Reach® programs by 

identifying sales leads for the Postal Service’s sales staff. Carriers’ level of participation in these programs varies among 

districts, but if districts with low participation adopt the best practices of districts with high participation, there might be 

an opportunity to increase the number and quality of sales leads and, thus, revenue. Our objective was to evaluate carrier contributions to revenue generation and customer service. We estimate that if the Postal Service could grow these 

programs by 5 percent, it could increase revenue by $18.7 million annually. Management could also enhance the process 

for collecting data on the services that carriers provide to allow better evaluation of delivery changes and measure rural 

customers’ needs. We recommended management implement best practices for sales lead programs and enhance data 

collection and reporting efforts to identify whether a lead results in new revenue for the Postal Service or diverts revenue 

from another product. 

Domestic Air Mail Irregularities

Irregularities occur when air carrier personnel fail to protect or safeguard the mail from, among other things, inclement 

weather, loss, destruction, or other hazards while in the air carrier’s control or custody. The Postal Service’s commercial 

air contract addresses domestic air mail irregularities and states that it will assess monetary penalties for damaged or 

unprotected mail. Postal Service personnel at commercial air stops record irregularities when they occur and transportation personnel adjudicate the irregularities or approve them for further processing. If approved, a penalty is assessed 

and the amount paid to the air carrier for transporting mail is reduced. The Postal Service paid about $194 million for 

transporting mail from October 1, 2010, through May 31, 2012, but only processed about $44,000 in claims over nearly 

the same time period. 

We determined that domestic air mail irregularities processing was not effective. Specifically, management did not monitor whether the field knew how to record problems or whether claim deductions were calculated accurately. Also, Postal 

Service personnel did not always record irregularities for adjudication and assess applicable penalties when they occurred. 

Further, management did not accurately calculate domestic air mail irregularity penalty amounts. 

In addition to network and personnel changes, these issues occurred because management did not consider this program 

a high priority and did not obtain data necessary to monitor the process. Also, comprehensive written procedures for processing domestic air mail irregularities did not exist and penalty amounts were automatically calculated based on outdated 

contract data. As a result, Postal Service personnel did not always assess or correctly assess penalties to air carriers, and 

the air carriers were not always held accountable for safeguarding the mail. We were not able to determine the reasonableness of the $44,000 of irregularity claims processed.

We recommended management implement a process to readily obtain data to monitor whether recording problems exist 

or claim deductions were calculated accurately. We also recommended implementing procedures for processing irregularities, and providing all airports the means to report irregularities and verify functionality on a regular basis.

Evaluation of the External First-Class Measurement System 

The Postal Service measures the on-time performance of First-Class Mail delivery to determine whether it meets mail 

delivery standards and to provide the PRC and the general public with information on its service performance. The postmaster general requested a review to determine whether a less costly way exists to implement this process, known as the 

External First-Class (EXFC) measurement system. 

The Postal Service, which uses EXFC data to plan, execute, and evaluate its internal processes, increased the sample size 

beyond what is necessary to meet the program’s statutory requirements to measure service performance. Internally, the 

Postal Service uses the data to support the National Performance Assessment and diagnose delivery problems at plants, 

delivery units and, in some instances, carrier routes. However, other internal reports already produced can provide alternative data to meet needs to reduce the costly sampling associated with EXFC.

The law generally requires the measurement system to be external to ensure objectivity and integrity. Accordingly, the 

Postal Service measures on-time performance using contractor studies. We identified ways to reduce EXFC costs, such 

as reducing its sampling costs by using EXFC for its primary purpose of service performance measurement or, with PRC 

approval, replacing contractors with an internal group, or competing future contracts. When negotiating the last EXFC 

contract, management intended to transition from the current, manual process to an automated process. However, the 

Postal Service has not yet developed a plan to automate this process. Without automation, the Postal Service will have to 

continue to pay the costs associated with manual reporting of test pieces. 

When developed, the automation plan should explore technological solutions such as using barcodes and hand held scanners to provide an effective end-to-end alternative to the current process. These technological solutions should also help 

to reduce costs and provide more reliable service performance measurement results. We also identified issues that affect 

Carriers contribute to Postal Service revenue 

through the Customer Connect® and 

Rural Reach® programs by identifying 

sales leads for the Postal Service’s sales 

staff. If the Postal Service could grow these 

programs by 5 percent, it could increase 

annual revenue by nearly $19 million, an 

OIG report indicated.
April 1 — September 30, 2012 11

FINANCIAL RISK

program reliability. Specifically, EXFC is vulnerable to “gaming” as management and staff often give potential test pieces 

preferential treatment to raise scores. We recommended using EXFC only to meet statutory requirements, developing a 

comprehensive plan to replace the current EXFC activities with an automated solution, and developing controls to eliminate 

unauthorized special treatment of test pieces. 

Management disagreed with our recommendation to use the EXFC contract to meet statutory requirements only and 

reduce the sample size accordingly. Management stated they did not have an internal system to provide end-to-end 

performance measurement and used EXFC to gain information on retail letters, cards, and flats to drive service improvements. Alternative systems have limitations, management said. Management also disagreed with our recommendation to 

develop controls to eliminate the unauthorized special treatment of the potential test pieces, saying they have administrative controls in place to guard against this.

Service Performance Measurement Data — Commercial Mail 

The Postal Act of 2006 requires the Postal Service to measure service performance for market-dominant products and 

report the results to the PRC. The law also requires the Postal Service to establish modern service standards for its 

market-dominant mail products. According to law, these standards should be designed “to provide a system of objective 

external performance measurements for each market-dominant product as a basis for measurement of Postal Service 

performance.” However, with PRC approval, an internal measurement system may be implemented instead of an external 

system. Our objective was to determine whether the data used for service performance measurement (SPM) of commercial mail is reliable. In addition, we reviewed Postal Service actions to address the issues identified in our interim report to 

determine whether they were successful in increasing the effectiveness of the SPM process. 

Our report determined the data used for service performance measurement of commercial mail is generally reliable. The 

Postal Service increased the volume of full-service Intelligent Mail barcode mail, resulting in a higher representation of 

commercial mail included in the measurement of service performance; however, coverage levels remain low for four of the 

13 categories used to assess whether the data used is representative of the overall population of full-service commercial 

mail. In addition, the SPM system is complex and the Postal Service uses proxy data from the External First-Class Measurement System for the last-mile calculation across all mail classes, which may distort actual results. We recommended 

the Postal Service simplify the scoring process used for measuring service performance of commercial mail and use 

actual commercial mail data in the last-mile calculation.

Revenue Sharing Agreements 

A strategic alliance is a cooperative arrangement between the Postal Service and one or more private entities. Some 

strategic alliances include revenue sharing, which allows the Postal Service and its partner to share the generated revenue 

from a strategic alliance. The Postal Service enters into revenue sharing agreements with various partners that are more 

efficient at providing certain services and products.

In-Office Cost System Inputs into the Cost and Revenue Analysis Report

The Postal Service annually prepares the Cost 

Revenue and Analysis (CRA) report, a key component of the Postal Service’s Annual Compliance 

report provided to the PRC to determine whether 

the Postal Service complied with the statutory 

requirement that each class or type of mail service 

bear the direct and indirect costs attributable 

to that class or service. The Postal Service’s 

accounting systems do not accumulate financial 

data by mail category so the Postal Service uses 

PRC-approved methods, including apportionment 

factors derived from operational and statistical 

systems to prepare the reports. Data collectors 

conduct more than 800,000 data collection readings a year to provide data for these systems. 

Special studies and operational information provide 

additional data required for cost development. The 

Postal Service spends about $69 million a year 

to manually collect statistical data for analysis 

and prepare the CRA report. This includes about 

$13 million for In-Office Cost System (IOCS) 

data collection, $1.3 million of which is spent on 

61,574 data collection readings in automated 

operations at mail processing facilities.

The mail processing portion of labor costs could 

be attributed to products and services using available automated data and, with additional system 

enhancements, the Postal Service could use data 

from mail processing systems to determine the 

mail processing portion of labor costs for product 

categories. Product category information could 

be obtained from data extracted from mailpiece 

images and mail volume and workhour information from Management Operating Data System. 

The Postal Service could combine this data with 

labor rates from the payroll system to compute 

the per unit labor cost of processing mailpieces 

on automated machines, reducing the need for 

manual data collection in the mail processing area. 

Using census data to determine mail processing 

labor costs per piece would enable the Postal 

Service to reduce 61,574 data collection readings a year, resulting in net savings of $4.29 

million over a 10-year period. Implementing 

the system enhancements to use automated 

data for costing purposes will also result in 

additional operational advantages. For example, 

the near real-time availability of per unit mail 

processing costs for mail products will help 

the Postal Service to better control processing 

costs and manage operations more efficiently. 
12 Semiannual Report to Congress

FINANCIAL RISK

We reviewed agreements to determine whether Postal Service management and alliance partners are complying with 

agreement controls, revenue share amounts are valid and accurate, and the relationship between the Postal Service and 

alliance partners is functioning effectively. For three of four agreements reviewed, management and alliance partners 

complied with agreement requirements, revenue sharing amounts were valid and accurate, and the relationship was 

efficient and effective. For one agreement, management did not implement a process to validate postage and the revenue 

from the production of mailpieces or require the alliance partner to provide detailed data on the number of visitors and 

total visits the partner’s website receives from the Postal Service’s website. In addition, the Postal Service did not address 

the partner’s concerns in a timely manner, which caused a small revenue loss over the past year. Lastly, management 

did not maintain a central repository for revenue sharing agreements to ensure timely, efficient, and accurate retrieval of 

information, and policies and procedures on establishing and monitoring revenue sharing agreements were not clear.

We recommended developing a process to verify the partner’s sales transaction data for completeness and accuracy; 

obtaining web traffic data to verify the partner’s revenue sharing; developing a process to address alliance partner concerns within mutually agreed timeframes; and communicating goals and developing a process to measure agreement 

performance. We also recommended establishing a central repository for all revenue share documentation; and developing and disseminating detailed procedures for creating, designing, and monitoring agreements. 

Management disagreed with our recommendation to monitor web activity associated with the Click2Mail product to verify 

revenue sharing customer registrations and purchases of Postal Service products beyond what is currently in place. They 

maintain that revenue levels do not justify the infrastructure and the current process is sufficient. They also stated they 

have begun tracking the percentage of traffic originating on USPS.com versus all other sources of the partner’s site. Management noted that once the partner has surpassed a certain revenue threshold, they could add a required independent 

audit to the terms of the agreement. 

Stamp Manufacturing and Inventory Management 

The Postal Service issues three kinds of stamps: (1) Definitives are issued in unlimited quantities in a variety of denominations and remain on sale until rates change; (2) Commemoratives are issued in limited quantities to pay tribute to people 

and events, and (3) Special Issues, such as the Love and holiday stamps, supplement definitive stamp stock. The Postal 

Service reduced the number of stamps it prints annually from 29.7 billion in FY 2009 to 21 billion stamps in FY 2011. 

Our objective was to evaluate whether the Postal Service effectively forecasts stamp stock requirements and manages 

stamp inventory.

Work Assignments for Limited Duty/Rehabilitation Employees

The Federal Employees’ Compensation Act 

(FECA) provides various benefits to civilian federal 

employees who sustain injuries or an occupational 

disease as a result of their employment. The 

Postal Service is the largest FECA participant 

in the federal government. In 2011, the Postal 

Service paid $1.2 billion in workers’ compensation 

claims as of March 31, 2012. Additionally there 

are about 16,497 employees with disabilities that 

are expected to be permanent or prolonged who 

are currently receiving workers’ compensation 

benefits. 

The Postal Service provides rehabilitation assignments for employees for whom the effects of 

an injury are considered permanent and/or the 

employee has reached maximum medical improvement. These employees have the same rights to 

pursue promotional and advancement opportunities as other employees and they can work 

outside of their craft and/or facility. The Postal 

Service identifies these assignments in conjunction 

with local Health and Human Resource managers 

and the District Reasonable Accommodation 

Committee. 

The Postal Service developed the Rehabilitation 

Program to fulfill its legal obligation to provide work 

for employees injured on duty. The program facilitates the proper placement and accommodation of 

employees injured on duty. This year we reviewed 

Postal Service policy on rehabilitation assignments 

for employees injured on duty and procedures 

for determining whether those employees could 

perform certain contract work. We initially selected 

six service areas, but after review with Supply 

Management officials, we determined that only 

three contracts provided potential for in-sourcing 

opportunities and rehabilitation assignments.

For example, we identified a contract that provides 

auto services, including transporting vehicles in 

need of repair and maintenance, to 28 vehicle 

maintenance facilities (VMFs) or repair garages. 

We found that employees who have been injured 

on the job and are able to return to work could 

perform some of this work at 10 of the 28 VMFs 

because only 10 of the VMFs could guarantee a 

4-hour shift as required and consistent with FECA 

rules and regulations. There is also the potential 

for other VMFs to provide similar rehabilitation 

assignments. 

Management stated that, while identification of 

rehabilitation employees able to perform shuttle 

service work is a local issue, opportunities exist 

for all Delivery Operations staff to reduce Office of 

Workers’ Compensation costs and future liabilities. 

As such, management plans to issue a memorandum to all district and area managers directing the 

local human resources group to consult with VMF 

management when evaluating proper placement of 

injured employees. Management also said this will 

be a joint effort to assess the feasibility of using 

rehabilitation employees to shuttle vehicles. 

 Management disagreed with our recommendation 

to establish a training plan for employees on the 

periodic roll who receive and accept an offer to 

perform vehicle shuttle service work. They said 

the Postal Service already has extensive training 

programs required for all employees who operate 

postal vehicles. Furthermore, any employee offered 

a modified duty assignment involving shuttle 

service work would have to meet the qualification 

standards before the offer is extended.
April 1 — September 30, 2012 13

FINANCIAL RISK

The Postal Service’s adoption of the Definitive Forever stamp has generally alleviated concerns regarding over-production 

and destruction of definitive First-Class Mail stamps. However, due to the unique nature of commemorative and special 

issue stamps, production volumes require closer management scrutiny. Specifically, we found the Postal Service overproduced 2 billion commemorative and special issue stamps during calendar years 2009 and 2010, resulting in $2 million 

annually of unnecessary manufacturing costs for stamps that were later destroyed. This occurred because the Postal 

Service did not develop and document an objective forecasting methodology and review process to determine stamp stock 

demand. In addition, reduced visibility in retail units hinders accurate forecasting and inventory management. 

We recommended the Postal Service improve controls over stamp manufacturing, including documentation of procedures 

to determine stamp stock requirements, and an enhanced review and approval process. We also recommended the Postal 

Service initially produce these stamps in limited runs and develop and implement a strategy to maximize sales through 

unique promotional opportunities, given the historical lifecycle of similar commemorative and special issue stamps.

Travel Expense Reimbursements and Travel Card Usage 

Postal Service employees and approving officials use eTravel, a web-based system, to electronically create, submit, 

and review travel expense reports. They may not use their official travel card for personal business or exceed cash 

advance limits. Also, when an employee is overpaid for travel expenses, the employee should repay the amount to the 

Postal Service. The Postal Service incurred $95 million in total travel expenses in fiscal year 2011. We found that some 

Postal Service employees improperly claimed expenses on their travel reimbursements and inappropriately used their 

travel cards.

We found six cases involving two employees in which the employees canceled a higher-priced airfare, traveled on a 

lower-priced one, but claimed the higher-priced fare on the travel reimbursement request. We also found instances where 

employees claimed a canceled fare but did not reimburse the Postal Service. In addition, eTravel allows employees to have 

their per diem reimbursements paid to the travel card rather than directly to their personal bank account, which can result 

in a credit balance and encourage employees to use it for a personal purpose, which is prohibited. Our review of 

10 employees who most frequently elected to have these reimbursements paid to the travel cards disclosed that six 

made multiple personal purchases or excessive cash withdrawals. 

Although each instance is unique, overall, approving managers do not have a mechanism to adequately monitor travel 

card activity. Also, the Postal Service did not have clear instructions explaining how to handle canceled airfare. As a result, 

the Postal Service is exposed to inappropriate or fraudulent activity that could hurt its reputation. We recommended 

management provide additional mechanisms for approving managers to monitor employees’ travel card activity. We also 

recommended management develop clear procedures for employees on how to account for canceled airfares and remove 

the eTravel System provision that allows employees to apply personal reimbursements to their travel cards.

Use of Data within Finance and Planning’s Field Budget Process 

A January 2011 agency-wide restructuring effort resulted in the Postal Service closing its Southeast Area Office 1 month 

later. This required the budget and account balances of the Southeast Area administrative office to be closed and reassigned to other active area administrative offices. We determined the Postal Service’s Finance and Planning Department 

did not effectively use available data to monitor the field budget, revenue, and expense variances occurring after the 

closing of the Southeast Area office. The Postal Service closed the Southeast Area in February 2011; however, it did not 

move the Southeast Area’s administrative office’s financial data to an active Postal Service area until July 2012. Finance 

and Planning used financial report data to prepare weekly and monthly reports for all areas but did not call attention to the 

inappropriately reported Southeast Area budget and revenue and expense transactions. Further, the Postal Service did not 

have procedures in place that adequately detailed the required tasks or a timeline to manage the transition. 

Because financial accounts were not appropriately moved to another Postal Service area, the budget was not eliminated 

or reassigned and about $15 million in revenue and expenses continued to accumulate in Southeast Area accounts after 

the area closed. Although we did not identify any specific instances, incorrect business decisions and performance evaluations may result if they are based on inaccurate or incomplete data. For example, management may renew transportation 

contracts unnecessarily or for additional costs because of insufficient data. With optimization likely to continue, and without a revised budget that reflects anticipated savings from closures, the Postal Service may not realize those savings.

We recommended using financial data to inform senior management and other responsible parties of financial issues 

requiring resolution and elevate those issues until they are resolved. Also, we recommended establishing clear and 

understandable policies and procedures for closing an administrative office and designating one functional group to 

oversee the process. 
14 Semiannual Report to Congress

FINANCIAL RISK

While the Postal Service has recently issued a management instruction and an updated handbook, neither documents 

a process to deactivate a finance number and allocate or provide adequate visibility over financial activity occurring 

subsequent to the unit closing. We recommended management develop specific criteria to deactivate finance numbers 

at discontinued postal retail units. Also, we recommended that management establish a method to allocate revenue and 

expenses at discontinued station and branch operations and provide adequate visibility of all transactions.

Unclaimed Funds

The OIG received a complaint from the Postal Inspection Service regarding an investigation of funds owed to various Connecticut post offices listed as unclaimed property with the state. The Postal Inspection Service was concerned that the 

Postal Service’s Office of General Counsel was not pursuing all unclaimed funds reported to state treasuries and referred 

this matter to the OIG. Our report determined the Postal Service could more efficiently and effectively collect unclaimed 

Employee Retirement Options, Pension and Retiree Health Care Funding Levels; Review of Fiscal Years 

2012 and 2013 Liquidity; and U.S. Postal Service Alternative Health Care Plan Proposal 

In 2012, more than 189,000 Postal Service 

employees will meet the age and service eligibility 

requirements for retiring with an immediate annuity 

and the Postal Service estimates it will have to 

reduce staffing by 220,000 career positions over 

the next 3 years. The 21st Century Postal Service 

Act of 2012 (S. 1789) proposes allowing the 

Postal Service to offer up to 1 year of additional 

credited service for individuals in the Civil Service 

Retirement System (CSRS) and up to 2 years for 

individuals in the Federal Employees Retirement 

System (FERS) as an incentive to encourage retirement. The bill also would let the Postal Service 

use the FERS overpayment for buyouts (up to the 

existing cap for federal workers of $25,000 for 

any one individual) or additional service credits. 

A number of retirement options may be available 

to employees in the near future as part of new 

legislation or other new authorities provided to the 

Postal Service, but there may be restrictions on 

how the Postal Service can use these options and 

whether they can be combined or not. Some of the 

options available to employees include voluntary 

early retirement, cash buyouts, re-employment for 

annuitants, and additional years of service credit. 

Funding requirements for pensions and retiree 

health care benefits have caused a tremendous 

burden on the Postal Service’s financial operations. The organization has fully funded its pension 

obligations for both CSRS and FERS. For retiree 

health care benefits, the Postal Service is required 

to prefund the expense at an increasing rate 

through 2016. We explored the progress on funding pension and retiree health care benefits as of 

September 30, 2011, and determined the Postal 

Service has funded its pension benefit obligation at 

nearly 105 percent and is currently overfunded by 

$13.1 billion. Further, the Postal Service is required 

to fully fund its future retiree health care benefit 

obligations and has funded nearly 50 percent of 

that obligation. The Postal Service defaulted on 

the $11.1 billion in retiree healthcare payments 

due in fiscal year FY 2012 and will likely default on 

the $5.6 billion payment due in FY 2013. Liquidity risks and shortfalls are projected to return in 

spring 2013 through October 2013, with the Postal 

Service projecting an estimated $1.2 billion cash 

shortfall in mid-October 2013. These liquidity 

concerns exist even with the expected default on 

Retiree Health Benefits prefunding payments. 

These annual prefunding payments, coupled 

with declining revenue, have challenged the 

Postal Service’s ability to meet all its obligations. 

Management proposed to decrease costs by 

more than $63 billion by offering its own health 

care benefits plan instead of participating in 

the Office of Personnel Management’s Federal 

Employees Health Benefits plan. These savings are due primarily to 1) required accounting 

changes, 2) use of Medicare coverage, 3) impact 

on employees, future retirees, and retirees, and 

4) efficiencies in health care purchasing. 

However, we found that management used an 

incorrect funding interest rate assumption to 

establish its future retiree health care obligation, understating the adjusted original liability 

of $90.2 billion by $14.1 billion, thus it should 

actually have been $104.3 billion. This, however, does not impact the overall $63 billion in 

cost savings. The Postal Service has removed 

from its proposal the plan to freeze the monthly 

premium amount it contributes to those retiring 

after January 1, 2014. The estimated $63 billion 

savings associated with the proposal would be 

reduced by about 20 percent, or $11 billion. 

Post Office Discontinuance Accounting Procedures 

As part of the restructuring effort, the Postal Service discontinued 537 retail units from fiscal years 2009 through 2011. 

Although the Retail Access Optimization Initiative to close more retail units was discontinued in May 2012, closing postal 

units may occur in the future. The Postal Service could close units for reasons unrelated to finances, such as the loss of 

the facility. Between the time operations end at a discontinued unit and the financial records are closed and deactivated, 

accounting transactions can be charged to the discontinued unit. Therefore, the correct policies and controls need to be in 

place to ensure proper allocation and visibility of all financial transactions associated with future closures, which is key to 

the success of any new initiatives.

We determined the Postal Service properly accounted for the disposition of assets and liabilities at discontinued units; 

however, it did not properly allocate and provide adequate visibility of revenue and expenses at discontinued postal retail 

units. Specifically, the Postal Service did not allocate revenue and expenses to the appropriate gaining unit after discontinuing operations at half of the postal retail units. In addition, the Postal Service did not provide adequate visibility of 

financial transactions at 221 (or 41 percent) of the 537 units. Rather, transactions from these units were commingled with 

transactions from other, related units. As a result, we identified about $17 million annually of improperly allocated revenue 

and expenses.
April 1 — September 30, 2012 15

OPERATIONAL RISK

funds held by U.S. state treasuries. Although the Postal Service is identifying some unclaimed funds through limited online 

searches, they are not using all available search methods to collect additional funds that are due. Opportunities exist to 

improve identification and collection of unclaimed funds by registering as a member of an online searchable database, 

incorporating additional search terms, and establishing points of contact with state treasuries. Based on our limited use 

of additional search methods and developing points of contact with state Treasury personnel, we identified $865,838 

of unclaimed funds that belong to the Postal Service. Further, we estimate that state treasuries are holding an additional 

$614,220 of unclaimed postal funds. We recommended the Postal Service use additional search methods to identify 

and collect unclaimed funds. This includes taking advantage of the benefits offered through membership with a publically 

available online service, using a variety of Postal Service terms when conducting searches, and establishing working relationships with U.S. state treasury employees.

OPERATIONAL RISK

The Operational Risk category focuses on issues related to the day-to-day operations of the Postal Service. These risk 

factors potentially affect the Postal Service’s abilities to provide timely, reliable delivery and customer service across all 

access points. Operational risk factors involve the quality of postal services and the end-to-end service performance of 

all mail, as well as the assurance that postal products and services meet customer expectations by being responsive, 

consistent, and easy to use.

Assessment of Overall Plant Efficiency 2012 

Mail processing is an integrated group of activities required to sort and distribute mail for dispatch and delivery. Post offices, stations, and branches send 

outgoing mail to processing and distribution centers (P&DCs) and processing 

and distribution facilities (P&DFs) for processing and dispatch for a designated 

service area. They also provide instructions on preparing collection mail, dispatching schedules, and establishing sort plan requirements to associate offices 

and mailers. 

Our objectives in this report were to follow up on the Postal Service’s progress 

in reducing workhours based on earlier recommendations and assess the 

efficiency of the processing and distribution network for FY 2011. Our report 

determined the Postal Service made substantial progress reducing workhours 

in the network from the previous year. During FY 2011, productivity for all plants 

improved by more than 5.9 percent over the prior fiscal year and overtime 

decreased by almost 4.2 percent compared with FY 2010. The Postal Service 

made these reductions with only slight declines in service from FYs 2010 to 2011; 

however, we found the Postal Service has not yet fully adjusted workhours in 

response to declining mail volume or achieved all possible efficiencies in mail processing operations. We recommended 

management reduce more than 14 million workhours by FY 2014, with an associated economic impact of almost 

$665 million, and periodically evaluate operating efficiency by assessing performance against the median productivity 

level for each plant grouping.

Carrier Optimal Routing System Phase ll 

Carrier Optimal Routing (COR) is a computer modeling carrier routing and travel optimization program used to configure 

safe and efficient travel patterns for city delivery routes. The Postal Service implemented the system in October 2005, 

helping to reduce workhours and vehicle costs, improve carrier safety, and establish more efficient lines-of-travel. 

Our objective was to review system usage to adjust and consolidate routes and global positioning system (GPS) usage in 

conjunction with COR. The Postal Service performed route adjustments using the COR system on 28,116 routes in the 

47 districts reviewed; however, it did not make route adjustments on 63,505 routes using the COR system. This condition 

occurred because the software was not user friendly, data preparation was labor-intensive and time-consuming, COR 

system technicians were not cross-trained, and manuals were not updated. In addition, districts with GPS devices did not 

always use them to track route time and performance jointly with the COR system to perform route adjustments. 

As a result, the Postal Service will not realize more than $84 million annually in cost reductions in city delivery from consolidation of carrier routes. We recommended management continue to pursue funding availability to resolve performance 

issues and implement the Web COR system. We also recommended that management re-emphasize performing route 

adjustments using the COR system. Additionally, we recommended cross-training to include database preparation and 

Large areas of the Pittsburgh Processing and Distribution Center were filled with empty letter 

and flat trays, which caused congestion and impeded the efficient flow of mail.
16 Semiannual Report to Congress

OPERATIONAL RISK

route adjustment processes. Lastly, we recommended management update city 

delivery manuals to perform route adjustments using the COR system. 

Management disagreed with our recommendation to continue pursuing funding 

to resolve performance issues with the WebCOR system and implement the 

web-based program nationwide. Management stated that WebCOR was developed and tested, but could not deliver the required performance or response 

time due to the architectural constraints of the operating environment. 

Management disagreed with the monetary impact associated with the recommendation to re-emphasize performing route adjustments using the COR 

system, specifically, that the $84 million in cost savings assumed that all routes 

could be adjusted using COR, with no consideration of preparation and formal 

route inspection costs. Further, management stated that FY 2012 and FY 

2013 projected savings should be reduced as the number of COR adjustments 

increase and that overtime rates inflated the potential savings. 

Management also disagreed with the recommendation to update Handbooks 

M-39, Management of Delivery Services, and M-41, City Delivery Carriers 

Duties and Responsibilities, to establish standards for using the COR system to 

perform route adjustments. Management stated that inserting references to the 

COR system in the handbooks is not necessary.

City Delivery Staffing 

Managing labor costs is critical because city delivery is the largest cost center in the Postal Service and the agency does 

not have, or expect to have, sufficient revenue to cover costs without making fundamental changes. Moreover, with an 

outlook that does not forecast a significant rebound for mail volume, the decrease directly affects carrier workloads. 

Therefore, having proper staffing levels at city delivery installations enhances efficient use of carrier resources and 

reduces costs. To develop staffing levels, officials use a budget-based process to determine the number of workhours 

needed (for route coverage) for labor costs to match the fiscal year budget. In fiscal year 2011, the Postal Service 

employed 183,774 city delivery carriers to deliver mail on 145,385 city routes, using more than 317.1 million workhours 

at the installations reviewed. Our objective was to evaluate whether Postal Service city delivery carrier staffing was at 

maximum levels at city delivery installations. The maximum level represents a staffing ceiling and does not imply that 

management needs to hire employees but, instead, manage at an established level. 

The Postal Service’s city delivery full-time (FT) carrier staffing varied at installations, consisting of excesses and shortages. This occurred because the Postal Service did not establish a maximum number of carriers needed per route in 

the budget process or at each installation based on need. These conditions contributed to installations exceeding their 

budgeted overtime by 10.4 million hours. Managing with maximum staffing levels and employing part-time resources 

would give the Postal Service options for reducing city delivery labor costs by more than $116.8 million annually. We 

recommended the Postal Service balance the number of FT carriers per route and manage labor costs within established 

budgets. We also recommended coordination with Labor Relations to continue pursuing the ability to increase the number 

of part-time, non-career flexible employees in the city letter craft to reduce labor costs. Management agreed in principle 

but did not agree with the monetary findings or the formula to determine value.

Commercial Mail Entry and Acceptance Initiatives 

The Postal Service developed initiatives for commercial mail entry and acceptance processes necessary to achieve core 

business strategies and performance goals. The objective of this audit was to determine the status of these initiatives and 

to identify issues facing the Postal Service as it moves forward. The key initiatives, which will streamline the commercial 

mail entry and acceptance processes, are in the initial phases but are meeting planned milestones. The Postal Service 

conducted an in-depth risk analysis to identify challenges that may impact the success of these initiatives. Using this 

analysis, the Postal Service developed corresponding risk mitigation strategies to directly address these challenges and 

minimize impacts to the planned schedule. However, we believe there are ongoing challenges that may negatively impact 

the success of these initiatives. 

The Postal Service worked closely with key internal and external stakeholders over the course of several months to gain 

concurrence on the approach to streamlining mail entry and acceptance processes and data used to demonstrate savings 

and justify the monetary investment. The Postal Service’s Executive Leadership Team reviewed and approved the project 

Productivity in plants improved during FY 2011 with only slight declines in service. However, 

the Postal Service could further adjust workhours in response to declining mail volume and 

achieve greater efficiencies in mail processing operations.
April 1 — September 30, 2012 17

OPERATIONAL RISK

on July 25, 2012. However, we believe financial and operational risks will continue to exist if the proposed risk mitigation 

strategies are not implemented effectively. For example, the mailing industry has cited concerns about the availability and 

stability of PostalOne!, the Postal Service’s primary system for recording commercial mail transactions and managing customer accounts. It has experienced multiple operational issues. We believe failure to properly address these issues may 

result in mailers’ reluctance to participate in the Full-Service Intelligent Mail Barcode (IMb) program, which is critical to the 

success of these initiatives. We recommended management closely monitor the financial and operational risks related to 

proposed commercial mail entry and acceptance initiatives and address availability issues related to PostalOne!. Further, 

we recommended identifying additional incentives to increase mailer participation in the Full-Service IMb program and 

develop a plan to address concerns mailers have with commercial mail transformation initiative requirements. Finally, we 

recommended developing a process that will allow Full-Service IMb mailers the opportunity to challenge postage adjustments made to streamlined mailings. On September 5, 2012, the Postal Service responded to our report in agreement 

with these recommendations and outlined high-level plans to address each recommended action.

Although management agreed with our overall recommendations, they did not agree to a part of the last recommendation 

requiring thorough testing before releasing or implementing PostalOne! system upgrades. While Postal Service management agreed to develop a PostalOne! improvement plan, they noted the latter part of the recommendation was misleading, 

as the Postal Service already conducts detailed system and customer acceptance testing prior to all releases. The Postal 

Service instead proposed the development of pre- and post-release assessments of PostalOne! testing processes to support continuous improvement in their testing cycles.

Efficiency of Customer Service Operations

Our objective in this audit report was to assess the overall efficiency of the Postal Service’s customer service operations, 

which include the sale of products and services at post offices, stations, and branches. The Postal Service uses various 

systems and reporting tools to track and measure efficiency in its customer service operations. The Customer Service 

Variance Program uses a standardized methodology, based on the retail unit’s projected workload and target productivity, 

to determine the number of workhours a unit should use. In FY 2011, the Postal Service spent almost $6.3 billion (about 

9 percent of total expenditures) on customer service operations. 

While the Postal Service has improved its customer service efficiency, units still performed below the national efficiency 

performance goals of 88 percent for FYs 2010 and 2011 and 90 percent for FY 2012. Managers at customer service 

units are not fully using available reports as tools to manage operations. These conditions occurred because managers 

did not match resources against their workload, senior managers did not promote the use of available reports, and not all 

managers were trained to use the reports. The Postal Service could have saved $114 million in FY 2011 if all customer 

service units had achieved the goal of 88 percent. 

We recommended districts develop and implement an action plan to better use workhours and implement best 

practices at applicable customer service units. We also recommended management provide customer service managers 

training as needed to enable them to effectively use available reports and tools. Finally, we recommended management 

require customer service unit managers to use the available reports and tools to allocate their resources based on the 

projected workload. 

Management generally agreed with the precept of our report and monetary impact, but took exception to our statement 

that some units underperformed because managers did not know how to effectively use managerial reports to assess 

resources against their workload and manage resources in response to workload changes. While they agreed with the 

cause in principle, they stated our review conducted at four poor performing offices did not provide a statistically 

relevant assessment. 

First-Class Mail on Air Transportation, Assignment by Weight 

The Postal Service contracts with select air carriers to transport First-Class Mail (FCM) to meet established service 

standards. The carriers include FedEx®, United Parcel Service® (UPS), and selected commercial passenger airlines. 

The Postal Service assigns mail to carriers considering contract minimums and the per pound costs of commercial air as 

a priority when determining the order in which mail is assigned, but does not consider the overall weight or density of the 

mail. The Postal Service spent $488 million in fiscal year 2011 to ship FCM by air. The Postal Service could save about 

$10 million in transportation costs over the next year if it considered weight when assigning FCM to air transportation. 

Our analysis also showed that the Postal Service could maintain contract commitments and service if this mail was reallocated, resulting in overall reduced air transportation costs. The estimated cost savings are net of additional costs for 

assignment system modifications. We recommended management modify the process to assign FCM to air transportation 

considering weight where feasible. 

Customer service operations include the 

sale of products and services at post offices, 

stations, and branches.
18 Semiannual Report to Congress

OPERATIONAL RISK

Efficiency Review of the Los Angeles Network Distribution Center 

Our audit determined that the Los Angeles network distribution center (NDC) has reduced workhours over the past 

several years, but further opportunities exist for improvement. Specifically, the Los Angeles NDC did not attain the average productivity of all NDCs above median productivity or take full advantage of existing automation. Consequently, the 

Los Angeles NDC used 200,019 more workhours than necessary. If the Postal Service eliminated these workhours, it 

would have an annual avoidance of about $6.5 million in labor costs. The NDC also damaged an average of 3,700 of 

the 175,000 pieces of mail handled daily. We recommended the Postal Service instruct Los Angeles NDC management 

to reduce workhours to produce an annual cost avoidance of $6.5 million, or increase volume by 39 million pieces, or a 

combination of both. We also recommended periodic evaluation of operating efficiency and staffing at the Los Angeles 

NDC to determine whether further workhour adjustments are necessary. Additionally, we recommended improving supervision of employees and maintenance of mail processing equipment, maximizing automation, and ensuring separation of 

non-machinable and machinable parcels throughout the processing network.

Frederick, MD, to Baltimore, MD, Area Mail Processing Consolidation

The Postal Service implemented area mail processing consolidation to eliminate excess capacity, reduce costs, improve 

service, and operate as a leaner, more efficient organization. This audit responded to a request from a congressional representative on consolidation of destinating mail processing operations from the Frederick, MD, Processing & Distribution 

Facility into the Baltimore Processing & Distribution Center. 

Our objectives were to assess the October 2011 through January 2012 consolidation and examine stakeholder concerns. 

Our report determined that this consolidation initially increased delayed mail, lowered service and customer experience 

scores, and increased transportation costs. Management acknowledged these challenges and has addressed many of 

the problems experienced during the consolidation. Further, operating conditions have improved as of February 2012. 

We recommended management avoid implementing consolidations during the fall and Christmas mailing seasons, as 

appropriate, ensure it meets customer service commitments, and complete transportation schedule adjustments to avoid 

late and extra trips.

Global Positioning System Technological Strategies for Contracted Highway Transportation Routes 

The Postal Service initiated a global positioning system (GPS) program for selected highway contract transportation 

routes in November 2010 to gain visibility of mail during transport. The program required that all ”long-haul” routes (more 

than 50 miles) provide tracking information every 30 minutes during transport. As of April 2012, about 960 routes were 

included in the program.

We found the GPS program was capturing limited data and not providing useful reports for highway transportation route 

management. This occurred because of inadequate planning and implementation and limited highway transportation route 

contractor participation requirements. Additionally, we determined that insufficient system reporting capabilities and inadequate data retention requirements were contributing factors. Consequently, the program was not being used fully and 

had not achieved its intended results even though it cost at least $1.6 million. We also determined the program can potentially include additional routes; provide maximum use of actionable reports with enhanced data analytics, use real-time 

alerts and enhanced geo-fencing (or assigning geographical borders); and include fuel analysis and route optimization 

information. There are also opportunities for integration with existing systems for enhanced transportation management. 

We recommended the Postal Service improve existing GPS functionality by updating and reinforcing policies and procedures; improving the monitoring and validation process to ensure supplier compliance; and reviewing and updating 

standard system reports to facilitate monitoring of supplier compliance and performance. We also recommended adding 

more highway contract routes and reporting capabilities to include exception reporting, establishing adequate GPS data 

retention policies, and exploring an end-to-end GPS platform with full-range functionality.

Mail Transport Equipment — Shortages of Pallets, Tubs, and Trays — Fall 2011 Mailing Season 

Mail Transport Equipment (MTE) is containers, such as pallets, flat tubs, and letter trays that hold mail during transportation. The Postal Service loans MTE to its customers for shipments through the Postal Service and has spent about $426 

million on MTE from FY 2006 to FY 2011, covering more than 149 million pieces of equipment. We initiated this audit in 

response to mailers’ complaints about MTE shortages during the fall 2011 mailing season. Our objectives were to assess 

these shortages and management controls over MTE. 

We confirmed that unprecedented MTE shortages existed at Postal Service facilities during the fall 2011 mailing season. 

This occurred because management did not effectively plan to have sufficient quantities on hand or develop a risk mitigation plan to avoid shortages. Also, management has not fully developed and instituted adequate controls for effective MTE 

A global positioning system program 

for selected highway contract route 

transportation routes was implemented 

to gain visibility of mail during transport. 

An audit of the program showed it has 

great potential, but the program was 

capturing limited data and not providing 

useful reports.

Improved maintenance of operating systems 

would improve efficiency at the Los Angeles 

Network Distribution Center, an OIG audit 

determined. A lack of proper maintenance 

and performance of the sorting equipment 

and a failure to sweep mail resulted in 

auditors finding mail dating back to 2007 

below the sorter’s belts.
April 1 — September 30, 2012 19

OPERATIONAL RISK

management. The shortages were compounded by a shrinking MTE budget. As a result, the Postal Service and its customers faced challenges in moving mail, which resulted in customer complaints and emergency purchases of less durable 

equipment to meet the challenges. 

We determined the Postal Service could have avoided purchases of less durable MTE totaling $11.1 million in FY 2011 

and $15.6 million in FY 2012 had adequate planning and controls been in place. We also estimate that MTE purchases 

of $24.3 million in FY 2011 and $23.6 million in FY 2012 are at risk of loss, theft, and misuse due to control weaknesses. 

Further, MTE shortages reflect poorly on the Postal Service’s brand, place revenue at risk, and less durable MTE raises 

safety concerns for mailers. We determined that the Postal Service initiated efforts to improve management of MTE, 

including developing a system to track and monitor MTE. 

We recommended the Postal Service develop processes and procedures for effective planning of and budgeting for MTE 

needs for the fall mailing season; implement prior OIG recommendations on MTE internal controls; and develop processes 

and procedures to limit distribution and improve accountability of MTE provided to mailers. We also recommended that 

management assess and implement industry best practices for inventory control, considering the cost benefit. 

Motor Vehicle Accident Prevention Program 

The Postal Service operates a fleet of about 200,000 vehicles, with more than 300,000 authorized drivers. During FYs 

2010 and 2011, these drivers had more than 20,000 accidents each year. Motor vehicle accidents result in medical costs 

to employers, legal expenses, property damage, and lost productivity. They also drive up the cost of benefits such as 

workers’ compensation, Social Security, and private health and disability insurance. The Postal Service’s Safe Driver Program established policies and guidelines to ensure that its drivers are equipped to drive safely, comply with Department of 

Transportation regulations, and collect and deliver mail efficiently. Our objective was to assess internal controls over motor 

vehicle safety. 

While the Postal Service has established procedures to monitor and oversee motor vehicle safety, supervisors did not 

always follow prescribed procedures. We identified issues relating to driving observations, vehicle safety inspections, and 

monitoring of driving privileges. We identified $97.7 million in assets at risk due to inadequate controls over motor vehicle 

safety. Efforts to prevent motor vehicle accidents help reduce costs, promote safety for employees and the public, and 

enhance the Postal Service brand. 

We recommended management provide supplemental guidance to area and district managers to enforce requirements 

for supervisors to adhere to motor vehicle safety procedures, to include conducting driving observations, ensuring drivers 

perform vehicle safety inspections, and performing quarterly driving privilege checks. We also recommended management provide periodic refresher training to supervisors on the Safe Driver Program and ensure that employees performing 

driving observations take the Driver Observation training course. Finally, we recommended management establish and 

implement proactive monitoring processes that include using Department of Motor Vehicles’ databases to ensure the 

validity of driver’s licenses for employees in driving positions. 

Management disagreed with the recommendation to establish and implement 

proactive monitoring processes that 

include using Department of Motor Vehicles’ databases to validate driver’s 

licenses for employees in driving positions, stating that it would be labor- and 

cost-prohibitive. Use of DMV data requires a release form signed by the 

employee and the costs vary by state. With 425,000 potential drivers, the Postal 

Service estimated that the annual costs would be more than $19 million.

Postal Vehicle Service — Nationwide Analysis 

Negotiated work rules for bargaining unit employees in Postal Vehicle Service 

(PVS) operations are covered under the American Postal Workers Union’s collective bargaining agreement, which was ratified in 2011. The contract allows 

management to eliminate part-time flexible (PTF) and part-time regular (PTR) 

employees in the motor vehicle craft and create non-traditional full-time (NTFT) 

duty assignments to replace assignments previously performed by PTF and PTR 

employees. Management can now develop schedules with fewer than 8 hours of 

work per day or 40 hours per week which are classified as full-time duty assignments. The new contract also requires management to schedule employees 

with consecutive days off in most cases; however, the local parties (management and union) can otherwise agree to split days off. 

An OIG audit of MTE recommended the 

Postal Service develop a risk mitigation plan 

to avoid shortages of MTE and it should 

avoid buying less durable wooden pallets 

that are routinely damaged.

With more than 300,000 authorized drivers, Postal Service motor vehicle accidents result in 

costly medical expenses, legal expenses, property damage, lost productivity, and an increase 

in the cost of benefits. The Safe Driver Program established guidelines to ensure safety and 

compliance with Department of Transportation regulations.
20 Semiannual Report to Congress

OPERATIONAL RISK

The objectives of this audit were to summarize the results of our prior audit work in this area and identify PVS scheduling 

and staffing issues and associated impacts that require nationwide attention. Our report determined that Postal Service 

Headquarters needs to strengthen nationwide processes, guidance, and monitoring of PVS fleet management procedures 

for conducting required schedule and vehicle utilization reviews. Management could create more efficient PVS schedules 

by using NTFT duty assignments and changing work schedules to include split days off. We also determined that, at 

some previously audited facilities, drivers were not consistently following prescribed safety procedures when conducting 

PVS operations. 

We recommended the Postal Service ensure that managers follow prescribed fleet management procedures for conducting schedule and vehicle usage reviews, make more timely PVS schedule changes, and increase the use of NTFT duty 

assignments where fewer than 8 hours of work exists when feasible. Also, we recommended that management encourage 

local officials to negotiate the use of split days off with local union officials, ensure that processing and distribution center 

managers enforce the use of seat belts, chock blocks, and load restraints by drivers, and ensure that managers periodically monitor compliance. By making these changes nationally we estimate the Postal Service could save about $47.1 

million annually. 

Management generally agreed with the monetary value used for assets at risk and our recommendations but not our 

monetary impact, saying our estimates were inaccurate because the American Postal Workers Union Agreement does 

not currently allow for the use of split days off for NTFT duty assignments without further action at the national and local 

levels. In addition, management stated they cannot agree with our projected savings associated with the use of the NTFT 

position since the ability to optimize around the NTFT position is conditional on vacancies, volunteer full-time regular 

employees, and conversion of postal support employees (PSEs) after their initial 1-year term as PSEs.

Management stated they will continue to track and monitor compliance with fleet management procedures on a quarterly 

basis. In addition, they will continue to pursue and monitor the maximum use of postal support employees (PSE) and 

NTFT duty assignments to control costs and hours. However, regarding the use of split days off, management does not 

believe encouraging the negotiation of split days off for NTFT duty assignments is actionable at this time. 

Suspension and Debarment Program

Suspensions and debarments are administrative remedies that federal agencies can take to protect against future losses 

from supplier fraud, waste, abuse, poor performance, and non-compliance with contract provisions or applicable laws. 

The Postal Service should continuously measure and analyze supplier performance relative to contractual requirements 

and apply suspension and debarment remedies when applicable to help limit future Postal Service losses. Our objective 

was to assess the Postal Service’s suspension and debarment program. Specifically, we evaluated the Postal Service’s compliance with pertinent regulations 

and benchmarked its suspension and debarment practices against Federal 

Acquisition Regulation (FAR) and FAR-exempt agencies to identify best practices 

and key program similarities and differences 

Our report determined that, although no suspended or debarred suppliers 

are currently under contract with the Postal Service, opportunities exist for 

improving the suspension and debarment program. Suspension and debarment officials did not consistently update or accurately record suspension and 

debarment activity in the General Service Administration’s Excluded Parties 

List System and the Postal Service list of suppliers debarred, suspended, and 

ineligible at the time of suspension or debarment, as required. We also identified 

best practices that, if implemented, could strengthen the program. We recommended management consistently update and accurately record suspension and 

debarment activity on the required lists upon debarment and instruct contracting 

staff on suspension and debarment policies and practices at least annually. 

An OIG audit assessed the Postal Service’s suspension and debarment program, including a 

review of how regularly it was updating and recording suspensions and debarment activity in 

the General Service Administration’s Excluded Parties List System.
April 1 — September 30, 2012 21

OPERATIONAL RISK

Unauthorized Contractual Commitments 

An unauthorized contractual commitment occurs when a Postal Service employee who has not been delegated as a contracting authority or a local buying authority allows another party to deliver or provide goods or services. An unauthorized 

contractual commitment also occurs when individuals who have delegated contracting authority exceed that authority. The 

Postal Service requires unauthorized contractual commitments to go through a process called ratification, which involves 

after-the-fact preparation and execution of appropriate contractual documents. Our objective was to determine whether 

the Postal Service ratified unauthorized contractual commitments in accordance with its policy. We reviewed contracting actions to determine whether contracting officers (COs) received delegations of authority to exceed their contracting 

authority. We also benchmarked Postal Service contracting authority levels and delegation of authority practices with 

those of other federal agencies. 

Postal Service personnel did not always ratify unauthorized contractual commitments in accordance with Postal Service 

policy. Of the 23 unauthorized contractual commitments we reviewed, eight (35 percent, valued at $582,649) were either 

missing the approval of the ratifying official, approved by an individual who did not have sufficient approval authority, or 

lacked sufficient documentation. We also found that Postal Service personnel generally followed their policy on delegating 

additional contracting authority in cases where an individual CO’s contracting authority is insufficient. However, we did 

identify one contracting action in which the CO did not receive the proper delegation and exceeded their authority by 

more than $5.1 million. Finally, our benchmarking results indicated that, unlike the Postal Service, other federal agencies 

do not have a policy providing for a one-time delegation of authority to COs to execute actions over and above their 

contracting authority.

City Delivery — Street Efficiency in the San Diego District; City Delivery – Street Efficiency Louisiana District; 

Street Efficiency — Capital District 

The Postal Service faces the most difficult operating period in its 235-year history. Mail volume in 

FY 2011 declined by another 3 billion pieces to 

168 billion, dropping total mail volume to levels 

not seen since 1992. Since 2007, mail volume 

has dropped by about 44 billion pieces. The Postal 

Service must improve operational efficiency to 

reduce costs while facing financial losses from 

declining mail volume. Significant opportunities 

exist for improving efficiency and reducing costs 

in mail delivery.

We assessed the overall street efficiency of city 

street delivery in the San Diego, Louisiana, and 

Capital districts and identified opportunities 

for efficiency and cost savings. Street delivery 

includes carriers delivering and collecting mail on 

their assigned routes. There are opportunities for 

improvement in all of these districts

The San Diego District could use about 6 minutes 

less street time per day on each carrier route (or 

about 83,900 workhours annually) and we estimate a monetary impact of $3.4 million annually 

in funds put to better use. The Louisiana District 

could use about 12 fewer minutes of street time 

per day on each carrier route and save about $4.4 

million annually. The district also had issues with 

inadequate security safeguards resulting in assets 

at risk totaling $65,698 at four delivery units, 

but management immediately initiated corrective 

action on these matters. Finally, the Capital District 

has opportunities for enhanced street delivery 

efficiency – it could use about 12 fewer minutes of 

street time per day on each carrier route and save 

about $4.5 million annually.

A delegation from the government of Japan, including a member of its legislature (the Diet) and officials from the Embassy of Japan, met with 

officials of the OIG to learn about the role and mission of an Office of Inspector General. Japan Post is considering the establishment of an 

inspection and audit department that would be independent from the departments they review.
Office of 

Investigation
April 1 — September 30, 2012 23

FINANCIAL CRIMES

The Postal Service is consistently ranked by the Ponemon Institute as America’s 

“most trusted federal agency.” Among the reasons for this ranking is the integrity of 

its employees. Unfortunately, a small number of postal employees and contractors 

betray that integrity and abuse the public’s trust in the Postal Service.

To protect the mail and to ensure the integrity of 

postal processes, finances, and personnel, the 

Postal Service relies on the investigative efforts of 

the Office of Investigations’ (OI) special agents. 

These special agents are stationed in offices nationwide. Their charge is to investigate internal crimes 

and frauds committed by postal employees and 

contractors against the Postal Service and employee 

misconduct. Following is work conducted by the OI 

during this reporting period that contributed to safeguarding the Postal Service’s revenue and assets 

and helped deter postal crimes, ultimately helping 

to maintain a stable and sound Postal Service.

Special agents investigate internal crimes and frauds 

committed by postal employees and contractors 

against the Postal Service and employee misconduct. 

Workers’ Compensation Fraud 

Investigative Results

April 1 — September 30, 2012

 487 fraud investigations resolved

 $92 million in compensation payments avoided

 19 arrests

 30 indictments

 24 convictions

 83 personnel actions taken by management FINANCIAL CRIMES

A large portion of the $65 billion in revenue generated by the Postal Service last year is handled at the 

32,000 postal retail locations. Employees who embezzle funds, kite or otherwise misuse money orders, or 

steal and misuse postal-issued credit cards receive investigative attention from our special agents. 

 A California window clerk was sentenced in May in federal court to 3 years of probation and ordered to 

pay $20,000 in restitution to the Postal Service. An OIG investigation revealed the window clerk underreported stamp sales to conceal her embezzlement from the cash drawer. A financial reconciliation 

identified shortages in excess of $74,000. During the investigation, the clerk admitted to stealing about 

$20,000. She subsequently resigned from the Postal Service. 

 An OIG investigation determined that a Michigan sales and service associate embezzled funds from evening postal deposits. During an interview with agents, the employee admitted to using the stolen money 

to gamble at a casino. As a result of the investigation, the sales associate resigned from the 

Postal Service. In May, the former associate pled guilty in federal court to misappropriation of postal 

funds. The associate was sentenced to 49 days imprisonment and ordered to pay $8,350 in restitution 

to the Postal Service. 

 In April, a Connecticut sales and service associate was sentenced in federal court to 6 months home 

confinement, 5 years of probation, 200 hours of community service, and ordered to pay more than 

$20,000 in restitution. An OIG Investigation determined the associate voided sales transactions of 53 

money orders totaling $16,635 that Postal Service customers had purchased. During an interview with 

agents, the associate admitted he fraudulently voided money orders after he sold them to customers. 

The sales associate stated that he stole money to take care of personal financial problems and support a 

gambling addiction. As a result of the investigation, the Postal Service terminated the associate. 

 An OIG investigation disclosed that a New Jersey sales and service associate embezzled about $19,000 

from the Postal Service by making false refund entries into the Point of Service (POS) retail terminal. In 

May, the associate pled guilty to misappropriation of postal funds and was subsequently sentenced in 

federal court to 2 years of probation and ordered to pay more than $19,700 in restitution to the Postal 

Service. As a result of the investigation, the associate was removed from the Postal Service. 
A former rural letter carrier claimed an 

on-the-job injury to her back and made false 

statements to her physician to maintain 

a limited work-duty status. OIG agents 

determined the carrier participated in at least 

80 separate marathons and triathlons since 

claiming her injury. 

24 Semiannual Report to Congress

HEALTHCARE FRAUD

 A Nebraska officer in charge failed to pay for about 20 money orders, totaling nearly $6,000, which he used for personal expenses, an OIG investigation determined. During an interview with agents, the officer admitted to stealing the 

money orders for his personal use. In April, he pled guilty in federal court to embezzlement of Postal Service money 

orders. The employee was sentenced to 6 months imprisonment, 3 years of probation and ordered to pay $6,600 in 

restitution. The employee resigned from the Postal Service. 

 OIG agents investigating an Arizona postmaster determined she issued and cashed Postal Service money orders for 

personal use. During an interview with agents, the employee admitted to stealing cash from her drawer and money 

orders from the mail. In May, the postmaster pled guilty in federal court to attempting to pass a forged and altered 

Postal Service money order and theft of mail. The postmaster was sentenced to 16 months of imprisonment, 3 years 

of supervised release and ordered to pay approximately $19,000 in restitution. The postmaster resigned from the 

Postal Service. 

 In July, a North Carolina postmaster was sentenced in federal court to 5 years of probation and ordered to pay a 

$3,000 fine after pleading guilty to misappropriation of funds. Our investigation revealed the postmaster issued money 

orders to customers without reporting the sales and kept the cash for personal use. The investigation also determined 

the postmaster failed to report funds received from Post Office Box fee transactions and permit mailing postage transactions. As a result of the investigation, the employee resigned from the Postal Service and reimbursed the 

Postal Service $31,392 

HEALTHCARE FRAUD

The monetary and medical benefits paid by the Postal Service to workers’ compensation claimants (employees who 

sustained job-related injuries) in FY 2012 totaled more than $1.3 billion; its estimated total liability for future workers’ 

compensation costs is more than $17.5 billion. Administered by the U.S. Department of Labor (DOL), the Office of Workers’ Compensation (OWCP) provides direct compensation to providers, claimants, and beneficiaries. The Postal Service 

later reimburses the OWCP in a process known as charge-back billing.

The workers’ compensation program exists for employees who are legitimately injured while on duty. The program provides benefits to injured employees and their families while the employee is unable to work. Postal employees who attempt 

to defraud OWCP with false claims are criminally prosecuted to permanently prevent payment of additional compensation 

and to recover funds fraudulently obtained. Cases that may require administrative action are referred to the Postal Service 

and the DOL. Special agents work closely with Health and Resource Management specialists from the Postal Service 

on all phases of these investigations. Following are examples of workers’ compensation fraud cases investigated during 

this period.

 Abbott Laboratories pled guilty in May and agreed to pay $1.5 billion to resolve its criminal and civil liability arising from 

the company’s unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the 

Food and Drug Administration (FDA). Abbott admitted that the company maintained a specialized sales force trained 

to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite 

the absence of credible scientific evidence that Depakote was safe and effective for that use. The resolution includes 

a criminal fine and forfeiture totaling $700 million and civil settlements with the federal government and the states 

totaling $800 million. The investigation revealed that the company defrauded the Postal Service of about $1.1 million 

through insurance reimbursements. Sentencing is pending. The Postal Service has not yet received the monies due in 

this case and they will be reported in a future semiannual report to Congress. 

 After a two-day jury trial in May, a Florida rural carrier – and veteran triathlete – was found guilty in federal court of 

making false statements and healthcare fraud. The rural carrier filed a claim for an on-the-job injury to her back and 

was placed in a limited duty work status by her treating physician. An OIG investigation determined the carrier made 

false statements to her physician in order to maintain a limited duty work status. Video surveillance conducted by 

agents showed the carrier repeatedly exceeding her medical restrictions. Agents determined the rural carrier participated in at least 80 separate marathons and triathlons since claiming her injury. As a result of our investigation, the 

Postal Service terminated the rural carrier, resulting in a cost avoidance of more than $140,000. 

 An OIG investigation revealed that the daughter of a former Pennsylvania letter carrier falsified forms sent to the Department of Labor to ensure the continuation of her father’s worker’s compensation benefits. The daughter, who was not 

a postal employee, continued to receive and cash checks for compensation payable to her late father for 8 months 

following his death. During the investigation, the daughter pled guilty to making false statements. DOL issued a letter 

of indebtedness, resulting in the recovery of approximately $17,000 to the Postal Service. In June, the woman was 

sentenced to 4 years of probation, 200 hours of community service, and a $1,000 fine. 
April 1 — September 30, 2012 25

HEALTHCARE FRAUD

 After pleading guilty in federal court to insurance fraud, a California city letter carrier was sentenced in May to 75 days 

of imprisonment, 3 years of supervised release, and ordered to pay $820 in fines and $17,329 in restitution to the 

Postal Service. The investigation revealed the carrier, who claimed to be totally disabled from an on-the job back injury, 

misrepresented his medical condition and physical capabilities. Video surveillance showed the carrier practicing martial 

arts, playing football, performing yard work, carrying heavy items, and driving for long periods of time. As a result of the 

investigation, the Postal Service terminated the carrier and DOL terminated the carrier’s compensation benefits, realizing a savings in excess of $1.5 million for the Postal Service. 

 A joint investigation with the California District Attorney’s (DA) Office Bureau of Investigation revealed that a California 

window clerk was involved in issuing fraudulent passports to facilitate real estate fraud and human smuggling schemes. 

The investigation determined the clerk provided relatives fraudulent U.S. passports, which allowed them to commit real 

estate fraud, resulting in more than $2 million dollars in bank losses. The clerk failed to report income earned from 

illegal activities while receiving benefits from DOL. In April, the clerk pled guilty in state court to forgery, passport fraud, 

real estate fraud, and workers’ compensation fraud. The court sentenced the clerk to 2 years of imprisonment. As a 

result of the investigation, the clerk resigned from the Postal Service, resulting in a cost avoidance of $397,000. 

 An April investigation determined that a Michigan distribution clerk failed to report concurrent employment while claiming total disability as the result of an on-the-job injury. During an interview with agents, the clerk admitted to being a 

co-owner of a dog grooming and kennel business and working 6 days a week. The Postal Service terminated the clerk 

and DOL ended her benefits, resulting in a cost avoidance of about $968,000.

 In July, a retired Massachusetts letter carrier was sentenced to 4 months imprisonment, 1 year of probation and 

ordered to pay $26,823 in restitution to the Postal Service. The former carrier pled guilty to false statements or fraud 

to obtain workers’ compensation benefits and mail fraud. The carrier alleged total disability from a work-related head 

and neck injury and received more than $168,000 in worker’s compensation payments. An OIG investigation revealed 

the former carrier exceeded medical engaging in activities such as golfing and landscaping with large power equipment. The DOL terminated the former carrier’s benefits realizing a cost savings of more than $1.1 million for the Postal 

Service. 

 A May investigation found that a North Carolina part time flexible clerk operated multiple booths at a flea market to 

sell clothing, gift baskets that he designed and created, and other merchandise. During an interview with agents, the 

employee admitted to owning and operating the business and failed to report the income to DOL. The investigation 

prompted the employee to resign from the Postal Service. DOL terminated compensation and benefits resulting in a 

cost avoidance of approximately $884,000. 

Joint Investigation Nets Historic Healthcare Fraud Settlement

OIG special agents investigated a case that 

resulted in the largest healthcare fraud settlement in United States history. Multiple qui tam1

complaints filed against a United Kingdom-based 

pharmaceutical company, GlaxoSmithKline 

(GSK), were investigated jointly by the OI, the 

Department of Health and Human Services 

OIG, the FBI, the Defense Criminal Investigative Service, the Food and Drug Administration 

Office of Criminal Investigations, the Office of 

Personnel Management OIG and the offices of 

various state Attorneys General. The investigation 

determined that from 1994 through 2010, the 

pharmaceutical company promoted its best-selling 

antidepressants for unapproved uses, failed to 

report safety data about a top diabetes drug, and 

improperly marketed a half-dozen other drugs.

In July 2012, the company pled guilty to a 

three-count criminal information, including two 

counts of introducing misbranded drugs into 

interstate commerce and one count of failing 

to report safety data about another drug to the 

FDA. Under the terms of the plea agreement, 

the company paid a total of $1 billion, including a criminal fine exceeding $956 million and 

forfeiture exceeding $43 million. The criminal 

plea agreement also included non-monetary 

compliance commitments and certifications by the 

company’s U.S. president and board of directors.

In addition to the criminal fines, GSK also paid $2 

billion to resolve its civil liabilities with the federal 

government under the False Claims Act, as well 

as the various state Attorneys General. The civil 

settlement resolves claims relating to specific 

drugs, and also resolves pricing fraud allegations.

The portion of the criminal fine payable to the 

Postal Service will be $6 million2

. In addition, 

the Postal Service will receive about $200,000 

in civil damages related to payments made on 

behalf of postal employees who received the 

drugs through workers’ compensation benefits. 

The exact asset forfeiture amount payable to 

the Postal Service has yet to be determined.

1

Qui tam actions are filed by private entities who stand in the place of the government. Similar to whistleblower actions, qui tams resulting in monetary judgments entitle the plaintiff to a share. The False Claims Act (31 U.S.C. §§ 3729–3733) 

 authorizes qui tam actions on behalf of the federal government.

2

The Postal Service OIG’s financial statistics for the FY2012 SARC (April through September) reporting period does not reflect GSK’s total $3 billion settlement, due to continued assessments and evaluations on how the money will be 

 distributed to the affected parties and the government. Therefore, portions of the settlement amount will be reflected in the FY2013 SARC (October through March).”

A former Massachusetts letter carrier 

alleged total disability from a workrelated head and neck injury, but an OIG 

investigation found the carrier exceeded 

medical restrictions on several occasions, 

including golfing and landscaping. After a 

guilty plea on fraud charges, the former 

employee’s benefits were terminated for a 

cost savings of $1.1 million for the Postal 

Service.
26 Semiannual Report to Congress

MAIL THEFT

MAIL THEFT

Special agents investigate allegations of postal employees delaying, destroying, or stealing mail. Suspected employees are 

referred to prosecutors or to management for administrative action. 

An OIG investigation uncovered a scheme in which a Tennessee temporary employee removed mailing labels from parcels and replaced them with 

handwritten labels addressed to his residence. The employee rerouted about 

$25,000 worth of merchandise to his residence through the mail. During a 

search warrant execution, agents recovered several stolen computers, flat 

screen televisions, PlayStations, a home security unit, a U.S. passport, digital 

camcorders, digital cameras, and large inflatable waterslides. In May, the 

employee pled guilty to theft of mail. One month later, the employee was sentenced to 6 months of home detention, 3 years of probation, and ordered to pay 

a $10,000 fine to the Postal Service. As a result of the investigation the Postal 

Service terminated his employment. 

In April, a rural carrier associate in Oklahoma pled guilty in federal court to 

theft of mail. An investigation determined the employee stole parcels containing 

controlled substances, mailed by the Department of Veterans Affairs (VA). During an interview with OIG agents, the employee admitted to stealing several VA 

parcels and burning the packaging to conceal the thefts. She stole the parcels 

to support her addiction to prescription drugs. The employee was sentenced 

to 2 years of probation and ordered to attend a court ordered drug treatment 

program. The employee resigned from the Postal Service. 

A New York letter carrier confessed to OIG agents during an investigation to 

stealing the contents of Express Mail packages, including more than $75,000 

in cash, diamonds, and electronics, which the carrier pawned. In May, the letter 

carrier pled guilty in federal court to theft of mail and possession of stolen mail 

and was ordered to forfeit about $68,000. As a result of the investigation, the 

letter carrier resigned from the Postal Service. Sentencing is pending.

 Agents observed, during an investigation, a Florida distribution clerk opening customers’ envelopes, removing cash, 

and concealing it in her pocket. The clerk admitted to agents that she stole cash and gift cards over a 3-month period. 

The employee resigned from the Postal Service and in July was sentenced to two years of probation, 50 hours of community service, and ordered to pay $300 in restitution. 

 The OIG received complaints from customers in Illinois regarding missing prescription drug parcels. An investigation 

determined that an Illinois supervisor was responsible for the thefts. The supervisor fielded complaints and referred the 

information to the OIG from customers whose packages he stole. The supervisor admitted to agents that he stole 

prescription packages due to his addiction to pain medication. In July, the supervisor, who was convicted of mail theft, 

was sentenced in federal court to 2 years supervised release, 50 hours of community service, and ordered to pay a 

$1,200 fine. The employee resigned from the Postal Service. 

 In June, a Michigan rural route carrier entered a federal pretrial diversion program for a period of 12 months for theft of 

mail. The rural carrier was ordered to perform 40 hours of community service and agreed not to seek re-employment 

with the Postal Service. The OIG opened an investigation after receiving customer complaints regarding missing 

mail. During an interview with OIG agents, the rural carrier admitted to stealing about $300 from greeting cards. The 

employee resigned from the Postal Service. 

 An investigation revealed that a California supervisor stole and attempted to use a gift card at Macy’s. However, the 

store declined the transaction because the gift card was reported stolen. The supervisor admitted to the theft in an 

interview with agents. The Postal Service removed the supervisor and in May, the supervisor pled guilty to obstruction 

of mails. He was sentenced in federal court to 6 months of probation, 50 hours of community service, and ordered to 

pay restitution.

An OIG investigation uncovered a scheme by a temporary employee to reroute packages 

with televisions, high-end electronics, and large inflatable water slides to his residence. The 

employee pled guilty to theft of mail and was sentenced to 6 months of home detention and 

3 years of probation. 
April 1 — September 30, 2012 27

MAIL THEFT

 Another California case involved theft of gift cards. A California letter carrier redeemed gift cards he stole from the 

mail, an OIG investigation determined. During an interview with agents the carrier admitted to stealing and using the 

gift cards. As a result of the investigation, the employee resigned from the Postal Service. In July, the carrier pled guilty 

to obstruction of mails and was sentenced in federal court to 2 years’ probation, ordered to pay a $2,000 fine, and 

$309 in restitution. 

 A mail handler pled guilty in July in federal court to delay and destruction of mail, and theft of government property. During the investigation, OIG agents discovered at least nine postal customers had greeting cards stolen from 

the mail and rifled. The mail handler redeemed these cards at various stores. The employee admitted to OIG agents 

that he stole at least 50 gift cards from the mail with an estimated value of $4,000. In December 2009, the employee 

resigned from the Postal Service. 

 A California city letter carrier admitted to OIG agents during an investigation that he had stolen about 10 pieces of mail 

to fuel his drug habit. The carrier also confessed to using crystal meth and black tar heroin while on duty. The Postal 

Service terminated the carrier’s employment and in August he pled guilty in the State of California District Court to 

check/money order fraud, possession of stolen check/money order, and theft of property. The carrier was sentenced 

to 45 days imprisonment and 3 years of probation. 

 During an investigation, OIG agents observed a Nevada letter carrier enter his personal residence with stolen mail. 

Agents executed a federal search warrant at the carrier’s home and recovered 562 Netflix DVDs, 158 pieces of political mail, and seven periodicals. During an interview with agents, the carrier admitted to stealing Netflix DVDs for more 

than a year and disposing of the envelopes in his household trash. The carrier said he stole mail from several different 

routes in order to avoid detection. In June, the carrier pled guilty in federal court to theft of mail and was sentenced to 

3 years of probation and ordered to pay about $7,100 in restitution. The letter carrier resigned from the Postal Service. 

 A Kansas clerk was responsible for the theft of more than 40 packages containing narcotics intended for delivery to 

veterans, an OIG investigation determined. During a surveillance operation, agents observed the clerk hide the parcels 

in a large mail sack, which she later placed in her personal vehicle. The clerk admitted to stealing the parcels for more 

than a year in an interview with agents. In April, the clerk pled guilty to theft of mail and was sentenced in federal court 

to 2 years of probation, ordered to pay a $500 fine, and approximately $300 in restitution. The clerk resigned from the 

Postal Service. 

 A Kansas highway contract route driver was sentenced in July to 5 years of probation and ordered to pay nearly 

$3,000 in restitution after pleading guilty to mail theft in federal court. An OIG investigation determined the driver 

was responsible for the theft of more than 100 pieces of First-Class Mail, containing more than $3,000 in cash and 

gift cards. The driver and his spouse were observed on video using stolen gift cards. During an interview, the driver 

admitted to stealing about $40 to $80 a day in cash and gift cards from the mail, while discarding checks and money 

orders. The driver’s wife pled guilty to criminal use of a financial card and was sentenced to 2 days imprisonment, 12 

months of probation, and ordered to pay restitution. As a result of the investigation, the Postal Service terminated the 

driver. 

 A Wisconsin temporary carrier admitted to agents during an interview to stealing deliverable mail on his route, in addition to stealing outgoing mail left in residential mailboxes by postal customers. During a search of the carrier’s vehicle 

and residence, agents recovered more than 9,000 pieces of mail. The carrier admitted he stole cash from the mail 

approximately 20 times per day to buy gas for his personal vehicle. The carrier pled guilty, in March, to theft of mail 

and delay of mail in federal court. In June, the carrier was sentenced to 20 months in prison, followed by 3 years of 

supervised probation. The carrier also resigned from the Postal Service. 

 A former Wyoming custodian pled guilty to delay or destruction of mail. An OIG investigation determined that over a 

3-month period, the custodian took multiple pieces of First-Class Mail from the Post Office. The stolen parcels contained gift cards, DVDs, and three silver coins. Agents were able to track the stolen coins to a pawn shop in Casper, 

WY, and discovered that the custodian sold the coins. Agents obtained video from a local Applebee’s restaurant that 

showed the custodian using stolen gift cards that were sent to customers in the Casper delivery area. The custodian 

said he threw away numerous mailings with their contents, including prescription medications from the VA. The Postal 

Service terminated the custodian. In May, he was sentenced in federal court to 2 years of probation and ordered to pay 

about $1,100 in restitution. 

Special agents investigate allegations of 

postal employees delaying, destroying, 

or stealing mail. In one investigation, a 

Nevada letter carrier admitted to stealing 

mail containing DVDs over the course of a 

year and disposing of the envelopes in his 

household trash.
28 Semiannual Report to Congress

CONTRACT FRAUD

CONTRACT FRAUD

The Postal Service manages contracts, ranging from multimillion dollar national contracts for services such as transportation networks and IT infrastructures to local contracts for supplies and services at individual postal facilities. The OIG aids 

the Postal Service by investigating allegations of contract fraud, waste, and misconduct. When contract improprieties are 

documented, special agents present the evidence for criminal and civil prosecution and administrative remedies. 

During this reporting period, we conducted 94 contract fraud investigations, resulting in 13 arrests and more than $4 million in monetary benefits to the Postal Service.

 A California court awarded $1,668,330 to the Postal Service in May in a judgment of $16.5 million against a government contractor. In 2004, a complaint was filed in U.S. District Court against Avaya Inc., a company that sells and 

leases desktop telephone systems to federal agencies. Two former company employees alleged the company and a 

separate finance company violated the False Claims Act by knowingly submitting false invoices to the Postal Service 

and other U.S. government agencies for the leasing, renting, and post-warranty maintenance of telephone systems. 

During the 1990s, government agencies replaced obsolete telephone systems with more modern phones. Agents 

analyzed about 60,000 invoices from the telephone systems company and determined, in many instances, the company knowingly continued to bill for lease and maintenance charges of obsolete systems, which had been removed, 

disconnected, or replaced with modern systems. In addition, analysis revealed the company often billed for the removal 

of the obsolete equipment and continued to knowingly bill removal charges for many months afterwards.

 During an OIG investigation, a highway contract route (HCR) driver admitted to agents that he directed his wife and 

employees to use the Postal Service Voyager credit cards unlawfully. The Nebraska contract driver pled guilty in April to 

theft of government money or property for his unlawful purchase of fuel valued at almost $130,000 for non-Postal service businesses. The contractor operated two HCR routes in Nebraska between May 1, 2005, and March 31, 2008, 

while operating newspaper routes and a courier service at the same time. The contract route driver was sentenced to 

36 months of probation and ordered to pay approximately $126,000 in restitution.

 An OIG investigation determined that the owner of a vehicle repair company bribed several Postal Service Vehicle 

Maintenance Facility (VMF) employees in the Detroit metropolitan area. The bribes included cash, gift cards, vehicles, 

prostitutes, free service on personal vehicles, and other items of financial value in exchange for vehicle repair work. 

Four employees were convicted of conspiracy to commit bribery and/or bribery and one employee was convicted of 

acceptance of illegal gratuities. The employees were sentenced to imprisonment ranging from 3 months to 18 months, 

2 years of probation and fines totaling $4,000. Three employees received administrative downgrades. The owner and 

the vehicle repair company were debarred from conducting business with the federal government. 

 In Alabama, a Postal Service VMF supervisor conspired with two contractors to submit false claims for services and 

repairs on Postal Service vehicles. In exchange for approving the false claims, the supervisor received cash payments 

from the contractors ranging from $500 to $2,000. The supervisor and two contractors were prosecuted in federal 

court. The supervisor was sentenced to 37 months of imprisonment and 36 months of probation. The contractors were 

sentenced to 3 years of probation. The defendants were ordered to jointly pay $330,000 in restitution to the Postal 

Service. Both contractors were debarred for a period of 3 years and the supervisor resigned from the Postal Service.

 An OIG investigation determined that an Illinois contractor’s sales representative to the Postal Service frequently entered 

a Postal Service Vehicle Maintenance Facility and disposed of large quantities of soap products in order to sell higher 

volumes of the soap to the Postal Service, increasing commissions for both the contractor and the sales representative. 

The Postal Service terminated the contract. In January, the sales representative pled guilty in federal court to mail fraud 

and theft of public money, property, or records. The sales representative received a sentence of 9 months imprisonment, 5 months of home confinement, 2 years of supervised release, 20 hours of community service, and was ordered 

to pay $102,510 in restitution and a $1,000 fine to the Postal Service.

A contractor’s sales representative to the 

Postal Service frequently entered a Postal 

Service Vehicle Maintenance Facility and 

disposed of large quantities of soap products 

so he could sell higher volumes of soap 

to the Postal Service. An OIG investigation 

uncovered the fraud, and the Postal Service 

terminated the contract. The sales rep pled 

guilty in federal court to mail fraud and theft 

of public money, property or records.
April 1 — September 30, 2012 29

GENERAL CRIMES

GENERAL CRIMES

 An OIG investigation found that an Ohio rural carrier fraudulently received state unemployment benefits between 

August 2009 and May 2011. The carrier failed to accurately report to the state income earned while employed by the 

Postal Service, thereby increasing the unemployment compensation owed to the state by the Postal Service. In May, the 

carrier was sentenced to 2 years of probation and ordered to pay restitution of about $26,900 after pleading guilty in 

state court to theft and telecommunications fraud. 

 Two Massachusetts letter carriers and two non-Postal Service co-conspirators pled guilty in federal court to possession 

and conspiracy to distribute cocaine. In April 2011, OIG agents initiated an investigation into the two letter carriers for 

possession and distribution of cocaine while on duty. The four defendants were arrested in September 2011. During 

the arrest, OIG agents seized more than 250 grams of cocaine, as well as drug paraphernalia, $3,400 in cash, and 

fraudulent Social Security cards. As a result of the investigation, both letter carriers resigned from the Postal Service. 

In May, a non-postal defendant was sentenced to 24 months imprisonment, followed by 3 years of supervised release. 

A month later, one of the former letter carriers received a sentence of 8 months imprisonment, 3 years of supervised 

release, and was ordered to pay a $1,500 fine. Later in the summer, a non-postal defendant was sentenced to1 year 

imprisonment, 3 years of supervised release, and was ordered to pay a $1,000 fine. In October, the other former letter 

carrier was sentenced to 8 months imprisonment, followed by 3 years of supervised release. 

 In July, a Connecticut clerk was sentenced in state court to 5 years imprisonment and 10 years of probation after 

pleading guilty to criminal attempt at possession of child pornography. During the investigation, agents determined that 

the clerk regularly used his Postal Service-issued computer to search for pornographic materials and images involving children engaged in sexual acts. During an interview with agents, the clerk admitted to using his Postal Service 

computer to access pornographic websites on more than one thousand occasions. As a result of the investigation, the 

Postal Service terminated the clerk. 

 An investigation determined that a former Maryland temporary clerk accessed change of address information provided 

by postal customers to facilitate an identity theft scheme with three co-conspirators. The defendants obtained personal 

identifiable information and counterfeit driver’s licenses to fraudulently open “instant credit” accounts in the names of 

the victims. They purchased high-end electronics and other expensive merchandise, before the victims became aware 

of the existence of the account. This resulted in approximately $500,000 in bank losses. In April, the former temporary 

clerk pled guilty in federal court to conspiracy to commit bank fraud and aggravated identity theft; and aiding and 

abetting; and was sentenced to 70 months imprisonment, 3 years of supervised release, and ordered to pay nearly 

$610,000 in restitution. The Postal Service terminated the clerk.

EXECUTIVE INVESTIGATIONS AND INTERNAL AFFAIRS

OI conducts criminal and administrative investigations of Postal Service executives, and OIG and Postal Inspection Service 

personnel, as well as whistleblower reprisal investigations.

Whistleblower Reprisal Activity

The Whistleblower Protection Act does not apply to the Postal Service. However, the Postal Service has its own policy 

governing whistleblower retaliation. The policy prohibits retaliation against employees who have disclosed information they 

reasonably believe to be: 1) a violation of any rule, law or regulation, or 2) a gross waste of funds, gross mismanagement, 

abuse of authority, or a substantial and specific danger to public health or safety.

 Allegations received: ...............................80

 OIG investigations initiated:......................13

 Investigations closed with no actions:.......18

 Allegations closed with no action: ............82

 Open investigations:..................................4

 OIG found reprisal: ....................................0
30 Semiannual Report to Congress
Appendices
32 Semiannual Report to Congress

APPENDIX A

APPENDIX A

Reports Issued to Postal Service Management

For the period April 1— September 30, 2012

OIG audit teams conduct performance and financial audits, evaluations, and other reviews to address the business of the Postal Service. Each team issues audit 

reports (AR) or management advisory (MA) reports in accordance with the identified needs of the project.

Summary

Risk Categories Number of Reports Funds Put to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

Strategic 12 $17,600,000 $8,805,460 — $646,535,774 

Financial 45 $7,621,094,686 $102,308,460 $ 96,477,653 $4,611,087 

Operational 47 $605,711,381 $1,091,269,802 $6,328,371 $45,268,635 

SUB-TOTAL 104 $8,244,406,067 $1,202,383,722 $102,806,024 $696,415,496 

PARIS Risk Model Reports 40 — — — — 

TOTAL 144 $8,244,406,067 $1,202,383,722 $102,806,024 $696,415,496

Fiscal Year 2012 Summary

For the period October 1, 2011— September 30, 2012

Risk Categories Number of Reports Funds Put to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

Issused Reports 168 $9,291,590,525 $1,979,766,966 $852,297,331 $801,473,754 

PARIS Risk Models Report 71 — — — —

TOTAL 239 $9,291,590,525 $1,979,766,966 $852,297,331 $801,473,754 

APPENDICES

The Inspector General (IG) Act of 1978 requires semiannual reports on the immediately preceding 6-month periods ending September 30 and March 31. These 

reports are sent to Congress and made available to the public.

This report summarizes OIG activities and illustrates significant problems, abuses, and deficiencies, along with recommendations and corrective actions related 

to the administration of U.S. Postal Service programs and operations during the reporting period.

The appendices on the following pages fulfill the requirements of the Act.
April 1 — September 30, 2012 33

APPENDIX A

Funds Put 

to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

STRATEGIC RISK 

Marketing and Service

Customer Complaint Resolution Process; MS-AR-12-007; 9/10/2012 $17,600,000 $8,800,000 — — 

Package Delivery Growth; MS-AR-12-003; 5/4/2012 — — — $646,535,774

Planning, Innovation, and Optimization

Cost of Appeals for Closing Postal Service-Operated Retail Facilities; 

CI-AR-12-005; 7/12/2012

— $5,460 — —

FINANCIAL RISK 

Cost, Pricing, and Rates

In-Office Cost System Inputs into the Cost and Revenue Analysis Report; 

CRR-AR-12-004; 5/30/2012

$4,289,691 — — —

Facilities, Environmental, and Sustainability

Lease Purchase Options for Postal Service Facilities; DA-AR-12-002; 9/18/2012 — $1,704,786 — $2,443,268

Financial

Controls Over the Check Acceptance Process; FI-MA-12-016; 9/6/2012 — — — $760,764

Controls Over Indemnity Claims; FF-AR-12-004; 6/11/2012 — $2,109,309 $2,109,309 —

Evaluation of the External First-Class Measurement System; 

FF-AR-12-006; 9/18/2012 

$11,870,546 — — —

Follow-Up on Financial Accountability Audit Report Recommendations; 

FF-AR-12-009; 9/28/2012

— $2,782,794 $2,782,794 —

Revenue Sharing Agreements; FI-AR-12-004; 9/14/2012 — — — $1,407,055

Unclaimed Funds; FF-AR-12-003; 4/16/2012 $865,838 — — —

Financial Reporting

Pension and Retiree Health Care Funding Levels; FT-MA-12-002; 6/18/2012 $7,600,000,000 — — —

Marketing and Service

Stamp Manufacturing and Inventory Management; MS-AR-12-006; 7/23/2012 $4,068,611 $4,068,611 — —

Supply Management

International Transportation Payments; CA-AR-12-007; 9/28/2012 — $91,585,550 $91,585,550 —

Audit of Serco, Incorporated Incurred Costs for Fiscal Year 2008; 

CA-CAR-12-009; 8/7/2012

— $57,410 — —

Definitions:

Questioned Costs. A cost that is unnecessary, unreasonable, unsupported, or an alleged violation of law, regulation, contract, and so forth.

Unsupported Questioned Costs. A cost that is not supported by adequate documentation. Unsupported costs are included with the amounts shown as 

Questioned Costs.

Funds Put to Better Use. Funds that could be used more efficiently by implementing recommended actions.

Revenue Impact. Amounts from revenue generating functions such as retail sales, rent, leases, or fees that were underpaid or not realized. In 

addition, this category includes increased revenue from existing functions and generating revenue from new sources.

PARIS Risk Models. Performance and Results Information Systems (PARIS) models with data visualization techniques. These models identify operational 

and financial risks, and enable OA staff to conduct reviews of Postal Service functions on a nationwide basis, while also identifying areas of emerging risk 

— fundamentally changing the way the OIG examines and monitors risk. We present quarterly summary results and trend analyses of these risk models to 

key Postal Service executives and stakeholders. 

Reports with Quantifiable Potential Monetary Benefits
34 Semiannual Report to Congress

APPENDIX A

Funds Put 

to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

OPERATIONAL RISK 

Delivery

Carrier Optimal Routing System Phase ll; DR-AR-12-005; 8/21/2012 $173,512,846 $84,446,027 — —

City Delivery — Excess Routes; DR-AR-12-002; 6/19/2012 $500,220 — — —

City Delivery Operations — Brick Main Post Office; DR-MA-12-004; 9/27/2012 $667,528 $560,592 $560,592 —

City Delivery Operations — Lancaster Carrier Annex; DR-MA-12-003; 9/28/2012 $1,031,676 $868,388 — —

City Delivery Staffing; DR-AR-12-006; 8/24/2012 $233,710,548 — — —

City Delivery — Street Efficiency Capital District; DR-AR-12-003; 8/16/2012 $9,138,265 — — —

City Delivery — Street Efficiency Louisiana District; DR-AR-12-004; 8/16/2012 $8,874,598 — — —

City Delivery — Street Efficiency San Diego District; DR-AR-12-001; 6/5/2012 $6,840,240 — — —

Facilities, Environmental, and Sustainability

Land Optimization — Central Illinois District; DA-AR-12-001; 9/19/2012 — — — $42,337,385

Land Optimization — Northern Virginia District; DA-AR-12-003; 9/28/2012 — — — $2,931,250

Information Technology

Cloud Computing; IT-AR-12-006; 5/9/2012 $5,349,675 — — —

Virtualization Technology; IT-AR-12-007; 5/18/2012 $4,528,776 — — —

Network Processing

Assessment of Overall Plant Efficiency 2012; NO-MA-12-001; 4/27/2012 — $664,997,872 — —

Efficiency Review of the Cleveland, OH Processing and Distribution Center; 

NO-AR-12-005; 6/5/2012

$22,747,745 — — —

Efficiency of the Los Angeles, CA International Service Center; 

NO-AR-12-009; 09/21/2012

$4,318,829 — — —

Efficiency Review of the Los Angeles Network Distribution Center; 

NO-AR-12-007; 8/3/2012

$13,036,879 — — —

Frederick, MD to Baltimore, MD Area Mail Processing Consolidation; 

NO-AR-12-006; 7/3/2012

$558,021 — — —

Retail, Business, and International

Efficiency of Customer Service Operations; EN-AR-12-003; 8/17/2012 — $285,725,051 — —

Supply Management

Oversight of Equitable Adjustments; CA-AR-12-006; 9/28/2012 — $80,347 $80,347 —

Unauthorized Contractual Commitments; CA-AR-12-004; 8/6/2012 — $5,687,432 $5,687,432 —

Transportation

Atlanta Network Distribution Center — Postal Vehicle Service Operations; 

NL-AR-12-007; 7/24/2012

$694,105 — — —

First-Class Mail on Air Transportation — Assignment by Weight; 

NL-AR-12-010; 9/28/2012

$9,968,164 $22,200,308 — —

Mail Transport Equipment — Shortages of Pallets, Tubs, and Trays — Fall 2011 

Mailing Season; NL-AR-12-011; 9/28/2012

— $26,703,785 — —

POSTAL SERVICE INITIATIVE: Consolidation of Mail for Transportation Between 

Network Distribution Centers; NL-AR-12-006; 5/29/2012

$15,365,532 — — —

Postal Vehicle Service — Nationwide Analysis; NL-AR-12-005; 4/25/2012 $94,268,786 — — —

St. Louis Network Distribution Center — Postal Vehicle Service Operations; 

NL-AR-12-008; 9/21/2012

$598,948 — — —

TOTAL $8,244,406,067 $1,202,383,722 $102,806,024 $696,415,496
April 1 — September 30, 2012 35

APPENDIX A

STRATEGIC RISK 

Facilities, Environmental, and Sustainability

21st Century Post Office: Non-Postal Products and 

Services; DA-MA-12-005; 7/16/2012

Partnerships with Other Government Agencies; 

DA-MA-12-006; 9/28/2012

Human Resources and Security

Employee Retirement Options; HR-MA-12-001; 

5/2/2012

Marketing and Service

Customer Complaint Resolution Process; MSAR-12-007; 9/10/2012

Every Door Direct Mail — Retail; MS-AR-12-004; 

5/7/2012

Package Delivery Growth; MS-AR-12-003; 

5/4/2012

Summary of Focus Group Discussions on the 

Future of First-Class Mail; MS-MA-12-001; 

4/20/2012

Planning, Innovation, and Optimization

Cost of Appeals for Closing Postal ServiceOperated Retail Facilities; CI-AR-12-005; 

7/12/2012

Delivery Fleet Strategies; CI-AR-12-006; 

8/14/2012

Smart Team

Email Management Services: Opportunity for the 

Postal Service; SMT-WP-12-001; 9/27/2012

Ideation Software Solution Comparative Analysis; 

SMT-WP-12-002; 9/28/2012

Supply Management

Benchmarking Sustainability Contracting Practices; 

CA-MA-12-002; 8/8/2012

FINANCIAL RISK

Cost, Pricing, and Rates

In-Office Cost System Inputs into the Cost and 

Revenue Analysis Report; CRR-AR-12-004; 

5/30/2012

Facilities, Environmental, and Sustainability

Lease Purchase Options for Postal Service 

Facilities; DA-AR-12-002; 9/18/2012 

Financial

Controls Over the Check Acceptance Process; 

FI-MA-12-016; 9/6/2012

Controls Over Indemnity Claims; FF-AR-12-004; 

6/11/2012

Evaluation of the External First-Class Measurement 

System; FF-AR-12-006; 9/18/2012

Financial Controls Over Automated Postal Centers; 

FI-MA-12-007; 5/17/2012

Financial Controls Over Business Reply Mail at 

the Roanoke, VA Main Post Office; FI-AR-12-003; 

6/4/2012

Follow-Up on Financial Accountability Audit Report 

Recommendations; FF-AR-12-009; 9/28/2012

Management of Business Master Trust Accounts; 

FF-MA-12-010; 9/5/2012

Post Office Discontinuance Accounting Procedures; 

FF-AR-12-007; 9/25/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Business Mail Entry Unit/Staged 

Detached Mail Unit Reviews, Quarter 2; 

FI-MA-12-009; 5/29/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Business Reply Mail Reviews, Quarter 2; 

FI-MA-12-008; 5/21/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Continuous Detached Mail Unit Reviews, 

Quarter 2; FI-MA-12-010; 6/5/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Plant Verified Drop Shipment Reviews, 

Quarter 2; FI-MA-12-006; 5/16/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Business Mail Entry Unit/Staged 

Detached Mail Unit Reviews, Quarter 3; 

FI-MA-12-011; 8/16/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Business Reply Mail Reviews, Quarter 3; 

FI-MA-12-012; 8/16/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Continuous Detached Mail Unit Reviews, 

Quarter 3; FI-MA-12-015; 8/30/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Plant Verified Drop Shipment Reviews, 

Quarter 3; FI-MA-12-013; 8/17/2012

Fiscal Year 2012 Field Testing Control and 

Oversight Plant Verified Drop Shipment Reviews, 

Quarter 3; FI-MA-12-015; 8/30/2012

Revenue Sharing Agreements; FI-AR-12-004; 

9/14/2012

Review of Fiscal Years 2012 and 2013 Liquidity; 

FI-WP-12-001; 7/25/2012

U.S. Postal Service Alternate Health Care Plan 

Proposal; FI-MA-12-014; 8/22/2012

Use of Data Within Finance and Planning’s Field 

Budget Process; FF-AR-12-005; 9/20/2012

Unclaimed Funds; FF-AR-12-003; 4/16/2012

Financial Reporting

Domestic Air Mail Irregularities; FT-AR-12-015; 

9/28/2012

Independent Report on Employee Benefits, 

Withholdings, Contributions, and Supplemental 

Semiannual Headcount Reporting Submitted to the 

Office of Personnel Management; FT-AR-12-013; 

9/25/2012

New Jersey Network Distribution Center — 

International Air Mail Records Unit; FT-AR-12-011; 

8/10/2012

Pension and Retiree Health Care Funding Levels; 

FT-MA-12-002; 6/18/2012

Processing of Meter Activity; FT-AR-12-012; 

9/6/2012

Travel Expense Reimbursements and Travel Card 

Usage; FT-AR-12-014; 9/27/2012

U.S. Postal Service Export Controls Monitoring 

Program; FT-MA-12-001; 4/17/2012

U.S. Postal Service Export Controls Monitoring 

Program — Phase II; FT-MA-12-003; 9/14/2012

Human Resources and Security

Rehabilitation Assignments for Employees Injured 

on Duty; HR-AR-12-004; 8/27/2012

Marketing and Service

Carrier Contributions to Revenue Generation and 

Customer Service; MS-AR-12-005; 6/19/2012

Federal Sector Web Pages: Opportunities for 

Enhancement; MS-MA-12-002; 9/12/2012

Stamp Manufacturing and Inventory Management; 

MS-AR-12-006; 7/23/2012

Report Listing

Complete listing of all OIG reports issued to Postal Service management.

For the period April 1— September 30, 2012
36 Semiannual Report to Congress

APPENDIX A

Planning, Innovation, and Optimization

Closure of Contract Postal Units; CI-MA-12-001; 

8/16/2012

Retail, Business, and International

Competition in the International Outbound Mail 

Market; EN-WP-12-001; 5/18/2012

Supply Management

Audit of Accenture Federal Services, LLC’s 

Estimating System and Related Internal Controls; 

CA-CAR-12-008; 6/26/2012

Bell and Howell, LLC Pricing Rates for the MERLIN 

Level of Effort Maintenance Support for Fiscal Year 

2012; CA-CAR-12-011; 9/25/2012

Financial Condition Risk Assessment on The 

Siebold Company, Inc.; CA-CAR-12-007; 

4/16/2012

Financial Risk Assessment of Tracie McCormick, 

Inc.; CA-CAR-12-013; 9/24/2012

Financial Risk Assessment of Videojet, Inc. and 

Danaher Corporation; CA-CAR-12-012; 9/24/2012

International Transportation Payments; CAAR-12-007; 9/28/2012

Audit of Serco, Incorporated Incurred Costs for 

Fiscal Year 2008; CA-CAR-12-009; 8/07/2012

URS Group, Incorporated Incurred Costs for Fiscal 

Year 2006; CA-CAR-12-010; 9/24/2012

OPERATIONAL RISK

Cost, Pricing, and Rates

Service Performance Measurement Data — 

Commercial Mail; CRR-AR-12-005; 6/25/2012

Delivery

Carrier Optimal Routing System Phase ll; DRAR-12-005; 8/21/2012

City Delivery — Excess Routes; DR-AR-12-002; 

6/19/2012

City Delivery Operations — Brick Main Post Office; 

DR-MA-12-004; 9/27/2012

City Delivery Operations — Lancaster Carrier 

Annex; DR-MA-12-003; 9/28/2012

City Delivery Route Optimization Pilot Initiative; DRMA-12-002; 8/24/2012

City Delivery Staffing; DR-AR-12-006; 8/24/2012

City Delivery — Street Efficiency Capital District; 

DR-AR-12-003; 8/16/2012

City Delivery — Street Efficiency Louisiana District; 

DR-AR-12-004; 8/16/2012

City Delivery — Street Efficiency San Diego 

District; DR-AR-12-001; 6/5/2012

Survey of Postmasters’ Paperwork and Reporting 

Requirements; DR-MA-12-001; 5/25/2012

Vehicle Parts Inventory Management — Northeast 

Area; DR-AR-12-007; 9/24/2012

Facilities, Environmental, and Sustainability

Accuracy of the Electronic Facilities Management 

System; DA-AR-12-004; 9/28/2012

Land Optimization — Central Illinois District; DAAR-12-001; 9/19/2012

Land Optimization — Northern Virginia District; 

DA-AR-12-003; 9/28/2012

Human Resources and Security

Arrow Key Alternatives; HR-MA-12-002; 

9/12/2012

Motor Vehicle Accident Prevention Program; HRAR-12-006; 9/21/2012

Postal Service Challenges in the Equal Employment 

Opportunity Process; HR-MA-12-003; 9/21/2012

State of Security; HR-AR-12-005; 9/12/2012

Information Technology

Cloud Computing; IT-AR-12-006; 5/9/2012

Security Awareness Training Program; ITAR-12-008; 6/25/2012

Security of File Transfer Protocol Transmissions; 

IT-AR-12-009; 9/12/2012

Virtualization Technology; IT-AR-12-007; 

5/18/2012

Network Processing

Assessment of Overall Plant Efficiency 2012; NOMA-12-001; 4/27/2012

Efficiency Review of the Cleveland, OH Processing 

and Distribution Center; NO-AR-12-005; 6/5/2012

Efficiency of the Los Angeles, CA International 

Service Center; NO-AR-12-009; 09/21/2012

Efficiency Review of the Los Angeles Network 

Distribution Center; NO-AR-12-007; 8/3/2012

Frederick, MD to Baltimore, MD Area Mail 

Processing Consolidation; NO-AR-12-006; 

7/3/2012

Timely Processing of Mail at the Pittsburgh, 

PA Processing and Distribution Center; NOAR-12-008; 9/18/2012

Timeliness of Mail Processing at Processing and 

Distribution Centers; NO-AR-12-010; 9/28/2012

Planning, Innovation, and Optimization

Post-Implementation Review Process; CIAR-12-007; 9/28/2012

Postal Service Retail Facilities Optimization 

Options; CI-MA-12-002; 9/17/2012

Retail, Business, and International

Commercial Mail Entry and Acceptance Initiatives; 

EN-AR-12-004; 9/14/2012

Efficiency of Customer Service Operations; ENAR-12-003; 8/17/2012

Supply Management

Contract Management Data — Transportation 

Contract Support System; CA-AR-12-005; 

8/9/2012

Do Not Pay List; CA-AR-12-003; 7/26/2012

Oversight of Equitable Adjustments; CAAR-12-006; 9/28/2012

Suspension and Debarment Program; CAAR-12-002; 5/30/2012

Unauthorized Contractual Commitments; CAAR-12-004; 8/6/2012

Transportation

Atlanta Network Distribution Center — Postal 

Vehicle Service Operations; NL-AR-12-007; 

7/24/2012

First-Class Mail on Air Transportation — 

Assignment by Weight; NL-AR-12-010; 9/28/2012

Global Positioning System Technology for Highway 

Contract Routes; NL-AR-12-009; 9/21/2012

Mail Transport Equipment — Shortages of Pallets, 

Tubs, and Trays — Fall 2011 Mailing Season; NLAR-12-011; 9/28/2012

POSTAL SERVICE INITIATIVE: Consolidation of Mail 

for Transportation Between Network Distribution 

Centers; NL-AR-12-006; 5/29/2012

Postal Vehicle Service — Nationwide Analysis; 

NL-AR-12-005; 4/25/2012

St. Louis Network Distribution Center — Postal 

Vehicle Service Operations; NL-AR-12-008; 

9/21/2012

Survey of System Users of the Global Positioning 

System for Highway Contract Routes; NLMA-12-001; 8/14/2012
April 1 — September 30, 2012 37

APPENDIX A

PARIS Risk Models

Complete listing of all OIG PARIS Risk Models issued to Postal Service management.

For the period April 1— September 30, 2012

Cost, Pricing, and Rates

Fiscal Year 2012 Cost, Pricing, and Rates Risk 

Model Quarter 2; CRR-ID-12-003; 5/15/2012

Fiscal Year 2012 Cost, Pricing, and Rates Risk 

Model Quarter 3; CRR-ID-12-004; 8/15/2012

Delivery

Fiscal Year 2012 City Delivery Efficiency Risk 

Model Quarter 2; DR-ID-12-003; 5/25/2012

Fiscal Year 2012 City Delivery Efficiency Risk 

Model Quarter 3; DR-ID-12-004; 8/14/2012

Facilities, Environmental, and Sustainability

Fiscal Year 2012 Green Risk Model Quarter 2; DAID-12-006; 5/16/2012

Fiscal Year 2012 Green Risk Model Quarter 3; DAID-12-009; 8/16/2012

Fiscal Year 2012 Maintenance Risk Model Quarter 

1; DA-ID-12-008; 7/5/2012

Fiscal Year 2012 Real Estate Risk Model Quarter 2; 

DA-ID-12-007; 5/29/2012

Fiscal Year 2012 Real Estate Risk Model Quarter 3; 

DA-ID-12-010; 8/17/2012

Financial

Fiscal Year 2011 Business Mail Entry Unit Risk 

Model Quarter 4; FI-ID-12-003; 4/23/2012

Fiscal Year 2012 Audit of Confidential Funds; FFID-12-010; 6/27/2012

Fiscal Year 2012 Business Mail Entry Unit Risk 

Model Quarter 2; FI-ID-12-006; 7/13/2012

Fiscal Year 2012 Business Mail Entry Unit Risk 

Model Quarter 3; FI-ID-12-007; 8/28/2012

Fiscal Year 2012 Cost and Controls Risk Model 

Quarter 2; FF-ID-12-008; 5/10/2012

Fiscal Year 2012 Cost and Controls Model Quarter 

3; FF-ID-12-011; 8/28/2012

Fiscal Year 2012 Form 10Q Financial Report 

Review, Quarter 1; FI-ID-12-004; 4/23/2012

Fiscal Year 2012 Form 10Q Financial Report 

Review, Quarter 2; FI-ID-12-005; 6/14/2012

Fiscal Year 2012 Form 10Q Financial Report 

Review, Quarter 3; FI-ID-12-008; 9/4/2012

Financial Reporting

Fiscal Year 2012 Bank Secrecy Act Risk Model 

Quarter 2; FT-ID-12-005; 5/9/2012

Fiscal Year 2012 Bank Secrecy Act Risk Model 

Quarter 3; FT-ID-12-008; 8/14/2012

Fiscal Year 2012 General Ledger Risk Model 

Quarter 2; FT-ID-12-006; 5/11/2012

Fiscal Year 2012 General Ledger Risk Model 

Quarter 3; FT-ID-12-007; 8/10/2012

Review of the Securities and Exchange 

Commission Office of Inspector General 

Workpapers and Final Report Addressing the 

Securities and Exchange Commission’s Restacking 

Project; FT-ID-12-009; 9/28/2012

Human Resources and Security

Fiscal Year 2011 Human Capital Optimization Risk 

Model Quarter 4; HR-ID-12-005; 7/11/2012

Fiscal Year 2011 Security Risk Model Quarter 4; 

HR-ID-12-006; 7/12/2012

Fiscal Year 2012 Human Capital Optimization Risk 

Model Quarter 2; HR-ID-12-004; 7/11/2012

Fiscal Year 2012 Human Capital Optimization Risk 

Model Quarter 3; HR-ID-12-008; 9/24/2012

Fiscal Year 2012 Security Risk Model Quarter 3; 

HR-ID-12-007; 9/24/2012

Information Technology

Fiscal Year 2012 Information Technology Security 

Risk Model Quarter 2; IT-ID-12-004; 6/27/2012

Pen Test U.S. Postal Service Office of Inspector 

General Information Technology Development Web 

Server; IT-ID-12-003; 5/9/2012

Marketing and Services

Fiscal Year 2012 Retail Customer Service Risk 

Model Quarter 2; MS-ID-12-003; 5/15/2012

Fiscal Year 2012 Retail Customer Service Risk 

Model Quarter 3; MS-ID-12-004; 8/15/2012

Network Processing

Fiscal Year 2012 Machines That Speak Risk Model 

Quarter 2; NO-ID-12-003; 5/17/2012

Fiscal Year 2012 Machines That Speak Risk Model 

Quarter 3; NO-ID-12-005; 7/17/2012

Fiscal Year 2012 Network and Delivery 

Optimization Risk Model Quarter 1; NO-ID-12-002; 

4/25/2012

Fiscal Year 2012 Network and Delivery 

Optimization Risk Model Quarter 2; NO-ID-12-004; 

5/23/2012

Fiscal Year 2012 Network and Delivery 

Optimization Risk Model Quarter 3; NO-ID-12-006; 

9/11/2012

Planning, Innovation, and Optimization

Fiscal Year 2012 Workplace Environment Risk 

Model Quarter 2; CI-ID-12-018; 5/29/2012 

Fiscal Year 2012 Workplace Environment Risk 

Model Quarter 3; CI-ID-12-024; 8/28/2012

Retail, Business, and International

Fiscal Year 2012 Revenue Generation and 

Assurance Risk Model Quarter 2; EN-ID-12-003; 

5/16/2012

Fiscal Year 2012 Revenue Generation and 

Assurance Risk Model Quarter 3; EN-ID-12-004; 

8/13/2012

Supply Management

Fiscal Year 2012 Supplier Solvency Risk Model 

Quarter 2; CA-ID-12-003; 5/11/2012

Fiscal Year 2012 Supplier Solvency Risk Model 

Quarter 3; CA-ID-12-004; 8/14/2012 

Transportation

Fiscal Year 2012 Air Transportation Risk Model 

Quarter 2; NL-ID-12-006; 5/15/2012

Fiscal Year 2012 Air Transportation Risk Model 

Quarter 3; NL-ID-12-008; 8/14/2012

Fiscal Year 2012 Surface Transportation Risk 

Model Quarter 2; NL-ID-12-005; 5/3/2012

Fiscal Year 2012 Surface Transportation Risk 

Model Quarter 3; NL-ID-12-007; 8/9/2012
38 Semiannual Report to Congress

APPENDIX B

APPENDIX B

Findings of Questioned Costs

For the period April 1 — September 30, 2012

As required by the IG Act, the following pages show the total number of audit reports and the total dollar value of questioned costs in audit reports.

Questioned Cost: A cost that is unnecessary, unreasonable, unsupported, or an alleged violation of law, regulation, or contract.

Description Number of Reports Questioned Costs

Unsupported Costs 

Included in 

Questioned Costs

Reports for which no management decision was made at the beginning of the reporting period — — —

Reports requiring management decision that were issued during the reporting period 17 $ 1,202,383,722 $ 102,806,024

TOTAL 17 $1,202,383,722 $102,806,024 

Reports for which a management decision was made during the reporting period (i & ii) 17 $ 1,202,383,722 $ 102,806,024

(i) Dollar Value of disallowed cost 10 $ 970,630,753 $ 6,165,371

(ii) Dollar value of cost not disallowed1 9 $ 231,752,969 $ 96,640,653

Reports for which no management decision was made by the end of the reporting period 

Negotiations are ongoing

— — —

Reports for which no management decision was made within 6 months of issuance

(See Note 1 for a list of individual reports)

— — —

Reports for which no management decision was made within 1 year of issuance

(See Note 2 for a list of individual reports)

— — —

Contract reports with a significant audit finding

(See Note 3 for a list of individual reports)

— — —

1

Management partially agreed with the monetary impact of two audit reports.

Note 1 — Reports for which no management decision was made within 6 months of issuance: 

None for this report period

Note 2 — Reports for which no management decision was made within 1 year of issuance: 

None for this report period 

Note 3 — Contract reports with a significant audit finding:

None for this report period
April 1 — September 30, 2012 39

APPENDIX C

Description Number of Reports Dollar Value

Reports for which no management decision was made at the beginning of the reporting period — —

Reports issued during the reporting period 25 $ 8,244,406,067

TOTAL 25 $8,244,406,067

Reports for which a management decision was made during the report period (i & ii) 25 $ 8,244,406,067 

(i) Value of recommendations agreed to by management 14 $ 7,677,591,974 

(ii) Value of recommendations that were not agreed to by management1 12 $ 566,814,093

Reports for which no management decision was made by the end of the reporting period — — 

Reports for which no management decision was made within 6 months of issuance 

(See Note 1 for a list of individual reports)

— —

Reports for which no management decision was made within 1 year of issuance 

(See Note 2 for a list of individual reports)

— —

1

Management partially agreed with the monetary impact of one audit report.

Note 1 — Reports for which no management decision was made within 6 months of issuance:

None for this report period

Note 2 — Reports for which no management decision was made within 1 year of issuance:

None for this report period

APPENDIX C

Recommendations That Funds Be Put to Better Use

For the period April 1 — September 30, 2012

As required by the IG Act, the following pages show the total number of audit reports and the total dollar value of recommendations for funds that can be put to 

better use by management.

Funds Put to Better Use: Funds that could be used more efficiently by implementing recommended actions.
40 Semiannual Report to Congress

APPENDIX D

APPENDIX D

Other Impacts

For the period April 1, 2011— September 30, 2012

Overview

Many of our audit reports identify areas for improvement that result in non-monetary benefits to the Postal Service. These benefits include improvements to 

service, protection of assets and improvements in the reliability of data.

Type of Measure Value or Amount

IMPROVED SERVICE

Recommendations that address the Postal Service’s efforts to improve the quality and accessibility of its products 

and services

Number of Recommendations 32

Number of customer service audits conducted Number of Audits 28

SAFEGUARDING ASSETS

Assets or Accountable Items at Risk

Inadequate internal controls put the value of assets or accountable items (such as cash and stamps) at risk of loss Dollar Value $132,659,63

Physical Safety and Security

Dollar value of physical assets (plant, computer equipment, vehicles, and so forth) at risk of loss due to inadequate 

physical protection

Dollar Value —

Recommendations that address the safety and security of Postal Service employees and/or the work environment Number of Recommendations 16

Number of employee/facility safety and security audits conducted Number of Audits 36

Information Technology Security

Inadequate controls/protection put the value of data, IT assets (software, networks), and employee work time at risk of loss Dollar Value —

Dollar value of data at risk Dollar Value $63,545,900

Number of data security/IT security audits conducted Number of Audits 24

Revenue at Risk

Dollar value of revenue that the Postal Service is at risk of losing. (Mailers seeking alternative solutions for current services) Dollar Value $168,921,838

Disbursements at Risk

Dollar value of disbursements made where proper Postal Service internal controls and processes were not followed Dollar Value $27,372,747

Goodwill/Branding

An “adverse impact” on goodwill is an actual event/problem that harms the Postal Service’s reputation or a 

potential problem that could negatively impact the Postal Service “brand name”

Number of Issues Identified 35

Misallocation of Costs 

A misallocation of costs can occur when Postal Service costs are misclassified as volume variable, product specific, or 

institutional costs

Dollar Value —

Capital Investment Savings Shortfall and Predicted Savings Shortfall

The difference between the savings predicted by the Decision Analysis Report for capital investment projects and the 

actual savings realized, and the difference between the savings predicted by the Postal Service for a project (e.g., capital 

investment, consolidation, etc.) and the actual savings realized or the OIG estimate of savings which will be realized

Dollar Value $307,000,000

Potential Additional Revenue

Revenue the Postal Service could potentially generate for goods delivered or services rendered based on suggested 

improvements

Dollar Value $56,714,220
April 1 — September 30, 2012 41

APPENDIX D

Type of Measure Value or Amount

RELIABILITY OF DATA

Records at Risk

Data at risk of corruption or loss due to inadequate internal controls and or protection Number of Data Records at Risk 22,766

Dollar value of data used to support management decisions that is not fully supported or completely accurate Dollar Value $564,415,152
42 Semiannual Report to Congress

APPENDIX E

APPENDIX E

Reports with Significant Recommendations Pending Corrective Actions

For the period through September 30, 2012

As required by the IG Act, the following pages include a list of each audit report for which no management decision has been made by the end of the 

reporting period.

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

IS-AR-07-017 8/29/2007 Separation of Duties at the Eagan, MN; San Mateo, CA; and St. Louis, MO, Information Technology and Accounting 

Service Centers

R-4 — Notify the U.S. Postal Inspection Service when a new Information Technology and Accounting Service Center position is 

created, a new employee is hired, or an employee is promoted to a new position, to make certain the proper clearance 

level is attributed to the employee. TID: December 2012

FF-AR-08-131 3/19/2008 Fiscal Year 2007 Financial Installation Audits – Business Mail Entry Units

R-2 — Provide proper management oversight and instructions to schedule periodic verifications when Periodicals mailings are 

received during non-business hours. TID: October 2012

FF-MA-08-001 7/21/2008 Fiscal Year 2008 – Use of No-Fee Money Orders

R-2 — Evaluate the feasibility of restricting the use of no-fee money orders for local purchases in order to reduce the Postal 

Service’s exposure to financial loss. TID: September 2013

SA-AR-08-013 8/22/2008 Security Clearances for Postal Service Employees 

R-2 — Revise the Administrative Support Manual, as appropriate, to reflect changes to the list of positions requiring a security 

clearance. TID: December 2012

IS-AR-08-016 8/29/2008 Identity Theft Potential in the Change of Address Process

R-1 — Update the Internet and Telephone Change of Address applications to eliminate acceptance of anonymous prepaid 

credit cards. TID: December 2012

IS-AR-09-001 10/8/2008 Electronic Travel Voucher System Controls

R-1 — Revise Postal Service Handbook F-15, Travel and Relocation, to require travelers to arrange for lodging at the prevailing 

government lodging rate, whenever practical. TID: February 2013

R-2 — Revise Postal Service Handbook F-15, Travel and Relocation, to require travelers to obtain prior approval and justify 

exceeding the government lodging rate within the notes on the electronic voucher. TID: February 2013

IS-AR-09-004 2/20/2009 Access Controls in the Enterprise Data Warehouse

R-3 — Update the Business Impact Assessment for the Enterprise Data Warehouse and recertify the system as required by 

 Postal Service Handbook AS-805-A, Application Information Security Assurance Process. TID: January 2013

EN-AR-09-005 9/28/2009 Performance Goals for Market-Dominant Products

R-1 — Document the methodology used to develop future performance goals for market-dominant products. 

TID: December 2012
April 1 — September 30, 2012 43

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NL-AR-09-010 9/30/2009 Fuel Management Consumption Strategies for Surface Network Operations

R-1 — Revise the fuel consumption strategy for surface network operations covering Postal Service and Highway Contract 

Route transportation to ensure that it is comprehensive and implements the industry best practices identified in our 

audit. TID: June 2011

R-2 — Assess and implement all opportunities for owned, leased, and contracted vehicles to use technology to reduce wind 

resistance and identify the most viable advanced aerodynamics options consistent with industry best practices and 

adjust contracts as appropriate to account for the reduced fuel need. TID: June 2011

R-3 — Establish and implement tire inflation maintenance requirements for its owned heavy-duty vehicle fleet, as well as its 

leased, and contracted vehicles consistent with industry best practices and adjust contracts as appropriate to account 

for the reduced fuel need. TID: June 2011

R-5 — Evaluate Highway Contract Routes and, where feasible, implement speed limit requirements consistent with industry 

best practices and adjust contracts as appropriate to account for the reduced fuel need. TID: June 2011

IS-AR-10-002 12/22/2009 General Control Review of Human Resources Shared Service Center

R-2 — Initiate appropriate security clearance investigations for all employees in sensitive positions at the Human Resources 

Shared Service Center. TID: December 2012

MS-AR-10-001 2/9/2010 Plant-Verified Drop Shipment Controls

R-4 — Provide an electronic reporting solution whereby PS Form 8125, Plant-Verified Drop Shipment Verification and 

Clearance, information at the destination facility can be compared with the information at the origin location. 

Discrepancies or incomplete forms should be investigated. TID: December 2012

DR-AR-10-003 3/16/2010 Rural Delivery Christmas Operations 

R-1 — Renegotiate with the National Rural Letter Carriers Association (NRLCA) to eliminate the supplemental Christmas 

Overtime Pay Provision, Article 9.2(k), set forth in the NRLCA Agreement expiring in November 2010 and any 

subsequent NRLCA agreements. TID: December 2012

IS-AR-10-008 5/4/2010 Certification and Accreditation Process

R-1 — Provide Corporate Information Security the authority necessary to enforce and execute the responsibilities for managing 

the Certification and Accreditation process. TID: December 2012

R-3 — Ensure all portfolio managers receive mandatory training regarding their role, responsibility, and accountability for 

implementing and reinitiating the Certification and Accreditation process. This training should also be made available 

to all executive sponsors. TID: December 2012

R-4 — Hold portfolio managers accountable to complete the Certification and Accreditation process within the Technology 

Solutions Life Cycle prior to implementing critical applications into the production environment. TID: December 2012

R-5 — Complete the Certification and Accreditation process for all critical applications currently in production, as required by 

Handbook AS-805, Information Security. TID: December 2012

R-6 — Ensure the portfolio managers work with the executive sponsors to initiate the recertification process for critical 

applications assigned to their functional areas as required by Handbook AS-805, Information Security. 

TID: December 2012

R-7 — Develop a formal, centralized mechanism to track the status of all unmitigated residual risks identified in the applications’ 

risk mitigation plan. TID: December 2012

R-8 — Input unmitigated residual risks identified in the applications’ risk mitigation plan into the formal, centralized tracking 

mechanism and track the risks through resolution. TID: December 2012

R-9 — Work with executive sponsors to resolve unmitigated residual risks identified in the risk mitigation plans and recertification 

letters associated with the critical applications. TID: December 2012

R-12 — Input the Certification and Accreditation documentation for all critical applications into the central repository. 

TID: December 2012
44 Semiannual Report to Congress

APPENDIX E

Report Number Report Number

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

CA-AR-10-004 5/27/2010 Contract Payment Terms

R-1 — Revise the Postal Service’s Supplying Principles and Practices, Section 512.2, Payment Time Frame, and other sections 

as necessary, with language stating that when contracting officers negotiate payment terms other than net 

30 days, they include the business rationale and associated documentation for the payment terms in the contract file. 

TID: February 2013

NO-MA-10-001 6/11/2010 Assessment of Overall Plant Efficiency 2010

R-1 — Reduce 16.2 million workhours by FY 2012 with an associated economic impact of $743,961,610. 

TID: December 2012

CI-MA-10-001 6/18/2010 Civil Service Retirement System Overpayment by the Postal Service

R-1 — Pursue all necessary actions, including those suggested by the Office of Inspector General, to either secure the return 

of the $75 billion overpayment or to otherwise realize the benefit of this overpayment to the Postal Service. TID: None

MS-AR-10-004 7/28/2010 Efficiency of Retail Customer Service Operations

R-2 — Explore opportunities to consolidate business mail acceptance operations at post offices, stations, and branches. 

TID: October 2012

FT-MA-10-001 8/16/2010 Federal Employees Retirement System Overfunding

R-1 — Pursue legislative action to alter the Postal Service’s Civil Service Retirement and Disability Fund Contributions for 1 or 

more years until the Federal Employees Retirement System surplus is extinguished. TID: September 2011

R-2 — Coordinate with the Office of Personnel Management to identify causes of actual payout differences between the 

Postal Service and the rest of the federal government and use that information to reduce the risk of future surpluses. 

TID: September 2011

R-3 — Pursue legislative action to define future distribution of significant surpluses. TID: September 2011

R-4 — Coordinate with the Office of Personnel Management to create a sub-account within the Civil Service Retirement and 

Disability Fund exclusive to the Postal Service. TID: September 2011

DA-MA-10-004 8/31/2010 Postal Service Patent Management

R-1 — Establish a strategic plan with timelines to capitalize on the Postal Service’s patent inventory strength. 

TID: June 2012

CA-AR-10-005 9/20/2010 U.S. Postal Service Purchasing Policies

R-5 — Take steps to ensure full and accurate tracking and public reporting of noncompetitive contracting actions. Data 

reported should include, but not be limited to, total dollars committed both competitively and noncompetitively; and 

the contractor, dollar value, and noncompetitive justifications for noncompetitive contracts. The tracking mechanism 

should be able to identify when a noncompetitive contract has crossed the review and approval threshold based on 

modification after initial award. TID: February 2012

R-9 — Institute an oversight mechanism to ensure and track compliance with updated noncompetitive contracting policies. 

TID: March 2012

IS-AR-10-014 9/23/2010 Controls Over Payment Card Transaction Data

R-1 — Finalize and implement a Payment Card Industry remediation plan that includes all associated costs, resources, and 

milestones needed to achieve and maintain Payment Card Industry-Data Security Standards compliance. 

TID: September 2013

NL-AR-10-010 9/29/2010 Air Networks – Federal Express Transportation Agreement – National Analysis

R-5 — Standardize Postal Service oversight at Terminal Handling Services operations to ensure adequate on-site Postal 

Service representation to monitor Federal Express operations and ensure local compliance with established processes 

and procedures. TID: October 2012
April 1 — September 30, 2012 45

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NL-AR-10-009 9/29/2010 Management of Mail Transport Equipment - National Analysis 

R-1 — Further develop, update and reinforce national Mail Transport Equipment policies and procedures contained in the 

Postal Operations Manual and the Postal Handbook PO-502, Container Methods, which address mail transport 

equipment inventory and accountability controls, including validating customer mail transport equipment needs as well 

as tracking and reconciling mail transport equipment loaned to mailers and other external customers. 

TID: December 2012

R-2 — Continue pursuing implementation of a planned automated mail transport equipment management system and ensure 

its functionality for inventory and accountability processes and for enhancing the Postal Service’s visibility into mail 

transport equipment internally and at mailers. TID: January 2013

R-4 — Ensure that Area Distribution Networks’ Offices have appropriate resources assigned responsibly to monitor and 

manage Mail Transport Equipment, and maintain compliance with Postal Operations Manual requirements. 

TID: May 2012

R-5 — Document the current process for identifying annual, routine Mail Transport Equipment purchase requirements and 

ensure the process includes Mail Transport Equipment Service Center network information and facility and mailer 

inventory data, to ensure that only the necessary amount of Mail Transport Equipment is purchased. TID: January 2013

CA-AR-10-006 9/30/2010 Certification Process for Electronic Payments

R-1 — Develop an oversight mechanism to monitor and ensure contracting officers’ and/or designated officials’ receipt and 

certification of invoices. TID: October 2012

R-2 — Reiterate to contracting officers and/or their designees their roles and responsibilities, and the importance of following 

Postal Service criteria, policies, and procedures for certification of invoices prior to payment to ensure that invoices are 

correct and goods and services were received. TID: October 2012

R-3 — Develop and implement written procedures for receiving invoices for annual highway contract route services and 

verifying that services were rendered prior to payment. TID: October 2014

R-5 — Review the $7.6 million in payments made more than 30 days after contract end dates and collect overpayments. 

TID: November 2012

R-6 — Provide detailed, consistent training for all designated officials on their roles and responsibilities and the usage of the 

Utility Management System. TID: August 2011

R-8 — Ensure that Utility Management System designated official contact information is accurate and that the system requires 

positive certification by the designated official before invoice payment. TID: November 2012

FT-MA-10-002 9/30/2010 Summary of Substantial Overfunding and Postal Service Pension and Retiree Health Care Funds

R-1 — Develop a comprehensive legislative strategy to recover overfunded amounts. TID: September 2011

R-2 — Aggressively pursue and carefully review all available data related to Civil Service Retirement System, Federal 

Employee Retirement System, and retiree health benefit calculations, including those associated with determining any 

overfunding situations, to ensure that calculations are reasonable and accurate. TID: September 2011

NL-MA-11-001 12/6/2010 Surface Mail Classes on Air Transportation Networks

R-1 — Verify that actions already taken related to minimizing surface mail classes on the FedEx Day-Turn network are applied 

to other air networks to ensure transportation managers use surface transportation, instead of the FedEx Night-Turn, 

commercial air carrier, United Parcel Service, and Christmas air transportation networks to move surface mail types 

where possible. TID: December 2012

R-2 — Routinely provide headquarters and area management with data, including Transportation Cost System/Cost and 

Revenue Analysis data, to monitor and track the volume and avoid additional costs for flying surface mail classes on 

the FedEx Night-Turn, commercial air carrier, United Parcel Service, and Christmas air transportation networks. 

TID: September 2011

R-3 — Reinforce existing policies and procedures for the processing and assigning of mail to air and surface transportation. 

TID: None
46 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NO-AR-11-004 12/14/2010 Houston, TX Processing and Distribution Center Mail Consolidation

R-1 — Pursue expansion of the North Houston Processing and Distribution Center and consolidate the Houston Processing 

and Distribution Center’s mail processing operations into the expanded facility, by fiscal year 2013. 

TID: September 2013

FF-AR-11-004 12/15/2010 Express Mail Guarantees 

R-5 — Establish a timeframe for and develop a process to analyze Express Mail refunds by origin and destination to evaluate 

risk and identify necessary changes in service in order to make better business decisions for guarantees. 

TID: October 2012

DR-MA-11-001 3/14/2011 The Effects of the Flats Sequencing System on Delivery Operations – Arizona District

R-1 — Continue to collaborate with business mailers to ensure flat mailpieces meet automation requirements and reduce the 

amount of unworked flat mail sent to delivery units. TID: None

IT-AR-11-004 3/16/2011 Computer Incident Data Reliability

R-3 — Integrate the Data Loss Prevention and Security Information Manager applications with the security incident 

management system to ensure a single incident data repository. TID: February 2013

R-4 — Either modify the existing incident management system or pursue development of a new system that enforces date and 

time value sequence and data validation. TID: February 2013

HR-AR-11-001 3/31/2011 Allegations of Inaccurate Time and Attendance Records 

R-2 — Issue supplemental guidance emphasizing the importance of completing Postal Service Form 1017-A, Time 

Disallowance Record, and PS Form 3971, Request for or Notification of Absence. TID: July 2012

R-3— Establish a review and approval process to ensure time disallowances are appropriate and documented as required. 

TID: July 2012

R-4 — Establish periodic monitoring of clock ring deletions to ensure employee workhours are recorded accurately. 

TID: July 2012

R-5 — Provide periodic refresher training to managers, postmasters, supervisors, and acting supervisors on the Time and 

Attendance Collection System. TID: July 2012

R-6 — Issue supplemental guidance to supervisors and managers regarding the appropriate use of operation codes 

associated with recording safety talks and informational meetings in the Time and Attendance Collection System. 

TID: July 2012

DA-MA-11-002 4/8/2011 Postal Service Patent Management Continuation

R-1 — Work closely with subject matter experts to review highly rated patents to draft claims as appropriate. 

TID: September 2013

R-2 — Develop a comprehensive strategy for developing patent intellectual property that enhances Postal Service products 

and services and its competitive position in the global marketplace and is a source of income. The strategy should 

capitalize on patent evaluations performed to date and include an assessment of business options available for 

achieving the significant financial returns. TID: September 2013

R-3 — Ensure the Postal Service has an effective patent management process and comprehensive licensing program in place. 

This establishes control that protects intellectual capital and provides an appropriate return on investment. 

TID: September 2013

HR-MA-11-001 4/22/2011 Retirement for U.S. Postal Service Employees on Workers’ Compensation

R-1 — Continue to pursue legislative change to reform the Federal Employees’ Compensation Act to reduce workers’ 

compensation benefits for retirement age employees. TID: None
April 1 — September 30, 2012 47

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

CA-AR-11-004 4/27/2011 Internal Controls over the Contract Close-out Process

R-1 — Establish standardized contract close-out policies and procedures. This should include a system alert requiring 

contracting staff to complete Contract Authoring Management System close-out reports before they close-out a 

contract and ensuring that remaining funds are promptly decommitted when the contract is completed and closed. 

TID: September 2012

R-3 — Establish a periodic control to ensure category management center personnel follow records management 

requirements for contract files, including, but not limited to, retaining records for the required 6 years. TID: March 2012

NO-MA-11-004 5/20/2011 Assessment of Overall Plant Efficiency 2011

R-1 — Reduce 14,017,630 workhours by FY 2012 with an associated economic impact of $647,586,823. 

TID: September 2013

HR-AR-11-004 5/27/2011 Compliance with Occupational Safety and Health Administration Recordkeeping Requirements

R-2 — Revise the Postal Service Occupational Safety and Health Administration Recordable Date policy to better clarify how 

to determine Occupational Safety and Health Administration recordable dates when they differ from the initial injury or 

illness date. TID: March 2012

R-4 — Establish mandatory training for officials responsible for determining Occupational Safety and Health Administration 

recordable cases and completing related forms. TID: December 2011

NL-AR-11-003 6/7/2011 Management of the Highway Contract Route Voyager Card Program

R-1 — Further develop, update, and reinforce requirements for the Postal Service and highway contract route suppliers to 

enhance systems infrastructure, including incorporating systems edits and automation tools where possible, and 

monitor fuel transactions as necessary to avoid unauthorized purchases and ensure adherence to contract gallon limits. 

TID: October 2011

R-2 — Ensure that contracting officers apply pooling in accordance with established requirements and ensure pools are 

appropriately documented and approved. TID: October 2011 

R-3 — Perform and document all outstanding reconciliations for prior periods to determine excess purchased fuel gallons and 

collect resultant overpayments. TID: October 2011

R-4 — Implement controls over the contractors that include: 

 Strengthening procedures for safeguarding and securing highway contract route Voyager Cards; ensuring suppliers 

use available tools to effectively manage the cards; and requiring that suppliers maintain an inventory of issued 

cards. 

 Coordinating with the U.S. Bank to limit the number of highway contract route Voyager Cards issued to highway 

suppliers; establish a secure activation protocol for mailed HCR Voyager Cards and unique personal identification 

numbers; and implement a periodic review of new, cancelled, and extra HCR Voyager Cards to identify potential 

patterns of mismanagement or misuse. 

TID: June 2012

R-5 — Continue to pursue funding when feasible for enhancing the functionality of the Fuel Asset Management System and 

Enterprise Data Warehouse eFuel modules and to ensure the systems are user-friendly and enable management to 

more efficiently and effectively monitor authorized gallons, identify excess gallons, and recover any related excess 

payments. TID: None

R-6 — Periodically assess the financial and operational viability of the highway contract route Voyager Card program, including 

performing a formal cost-benefit analysis based on complete and recent data, considering the costs of implementing 

controls to address deficiencies identified in this report as appropriate. TID: September 2011

R-7 — Continue to identify and evaluate other fuel management program best practices used in the transportation industry, 

and perform a comparative analysis against the existing highway contract route Voyager Card program, where possible. 

TID: None
48 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

DA-AR-11-008 6/8/2011 Conflicts of Interest: Facility Leases and Contract Delivery Services

R-1 — Revise the Postal Service’s policy for leasing property under 3,000 square feet from employees or relatives to include 

an ethics review. TID: December 2012

R-2 — Evaluate the universe of potential facility lease conflicts and develop an action plan to minimize active and future 

conflicts. TID: December 2012

R-3 — Implement a control to systemically identify, monitor, and resolve potential conflicts of interest with facility leases and, 

if necessary, request waivers for leases that represent conflicts. TID: December 2012

R-4 — Evaluate the universe of potential delivery service contract conflicts and develop an action plan to minimize active and 

future conflicts. TID: December 2012

R-5 — Implement a control to systemically identify, monitor, and resolve contract delivery service regulatory and policy 

violations in a timely manner. TID: December 2012

DR-MA-11-002 7/19/2011 National Assessment of City Delivery Efficiency 2011 - Office Performance

R-1 — Reduce 2,002,690 workhours during fiscal year 2012 with an associated economic impact of $88,192,128. TID: None

NL-AR-11-004 7/25/2011 Postal Vehicle Service Transportation Routes – Baltimore Processing and Distribution Center

R-1 — Ensure that Baltimore Processing and Distribution Center managers follow prescribed fleet management procedures for 

making Postal Vehicle Service schedules effective, including conducting schedule and vehicle utilization reviews. 

TID: None

R-4 — Eliminate from highway contracts 24 trips identified in our audit and already agreed to by local and area management.

TID: None

HR-AR-11-005 8/5/2011 Postal Service Facility Security

R-3 — Issue supplemental guidance and enhance internal controls to: 

 Ensure security control officers conduct facility security surveys as required. 

 Ensure corrective actions are taken to address security deficiencies. 

 Ensure security control officers take the mandatory security training. 

TID: August 2012

HR-AR-11-006 8/8/2011 2009 Pay for Performance Program

R-1 — Clarify policies and procedures to better define the relationship between the national performance assessment and 

core requirements, and the role of higher level management in the pay for performance process. TID: July 2012

R-2 — Establish and implement mandatory training events that educate new and existing participants and managers on policy, 

roles and responsibilities, goal setting, and the program’s objectives. TID: July 2012

R-3 — Evaluate the effectiveness of the current process used to establish and use behavioral core objectives to rate 

employees’ performance. TID: July 2012

HR-MA-11-003 8/12/2011 Stand-by Time

R-1 — Assess the inappropriate use of stand-by overtime nationwide, especially in function one, and implement internal 

controls to address usage and recording issues identified. TID: September 2011

R-2 — Enhance management controls to ensure employees and supervisors accurately report and record stand-by time. 

TID: August 2012

MS-AR-11-006 8/24/2011 Effects of Compliance Rules on Mailers

R-1 — Estimate and consider mailing industry costs as part of cost-benefit analyses, where practical, to determine whether 

the benefits of new initiatives and rule changes are justified in light of total industry costs. TID: None
April 1 — September 30, 2012 49

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

DA-AR-11-010 8/30/2011 Intelligent Mail: Realizing Revenue Assurance Benefits

R-1 — Establish timeframes for implementing the enhanced/expanded automated verifications as described in the original 

Intelligent Mail infrastructure Decision Analysis Report. TID: January 2013

R-2 — Develop a tolerance level for low scan rates to use for exception reporting. TID: January 2013

R-3 —Develop a process for identifying the cause(s) of low scan rates for customer follow-up as warranted. 

TID: January 2013

FF-AR-11-013 8/30/2011 Postal Service Refunds

R-2 — Analyze and establish an administrative and minimum fee that will cover processing costs. TID: January 2013

R-4 — Complete the update to the PostalOne! system to enable electronic transmission of Value Added Refund data to 

accounts payable. TID: April 2013

CRR-AR-11-003 9/6/2011 Service Performance Measurement Data - Commercial Mail

R-1 — Establish milestones for implementing recovery of Full-Service Intelligent Mail Barcode discounts provided to mailers 

when Full-Service mailings do not meet the specific requirements for the discounts received. TID: January 2013

IT-AR-11-009 9/14/2011 Project Phoenix

R-1 — Modify the Technology Solution Life Cycle process to require the identification, documentation, and analysis of 

applicable back-end business processes and information technology systems during the technology solution 

requirements, analysis, and design phases. TID: October 2012

IT-AR-11-008 9/14/2011 Remote Access Controls

R-1 — Implement two-factor authentication to comply with Handbook AS-805 requirements and to meet Payment Card 

Industry – Data Security Standards. TID: December 2012

R-11 — Suspend remote access for all employees or contractors until they complete required security awareness training. 

TID: October 2012

HR-AR-11-002 9/19/2011 Postal Service Work Rules and Compensation Systems

R-3 — A comprehensive study to determine the optimal incentive-based carrier compensation system. TID: June 2013

FF-AR-11-015 9/23/2011 Business Mail Acceptance Centralization Process

R-2 — Require each district to conduct a centralization feasibility study, document the results, and take action based on the 

results of the study, as appropriate. TID: October 2013

R-3 — Manage business mail entry workhour usage to achieve 93 percent efficiency and develop tools to monitor 

performance. TID: October 2013

R-4 — Establish annual goals for business mail entry workhour efficiency to include measuring performance against goals. 

TID: October 2013

NL-AR-11-006 9/23/2011 Mail Transport Equipment – Needs, Distribution, and Use

R-1 — Perform a comprehensive mail transport equipment needs analysis for the network distribution center network to 

determine the amount of rolling stock, by type, needed on a daily basis to meet operational requirements. 

TID: October 2011

R-3 — Reissue over-the-road container policy to reflect the present and future operational needs and use of the containers 

within and outside the network. TID: October 2011
50 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

DR-AR-11-007 9/26/2011 Follow-up on City Delivery Standard Operating Procedures

R-1 — Re-evaluate the certification criteria and ensure the criteria require units to meet, at least the national average percent 

to standard for office operations. TID: December 2012

R-3 — Establish an annual process to de-certify units that do not maintain performance standards after certification. 

TID: December 2012

NL-AR-11-008 9/27/2011 Evaluation of Major Transportation Technology Initiatives

R-5 — Ensure comprehensive training is provided for employees throughout the technology’s life cycle. TID: May 2012

CA-AR-11-007 9/30/2011 Contract Postal Units Contract Oversight

R-1 — Require Contract Postal Unit contractors to submit invoices for payment. TID: None

R-2 — Create a process to ensure the contracting officer or contracting officer’s representative validates and certifies invoices 

prior to payment, using data maintained in the Contract Postal Unit Technology system. TID: None

R-3 — Establish a mandatory training procedure to ensure all contract officer representatives receive training of appointed 

duties within 2 weeks of notification of the contracting officer’s representative appointment. TID: March 2012

R-4 — Develop an oversight mechanism to monitor whether contracting officer’s representatives conduct quarterly 

performance and annual financial reviews, obtained completed appointment letters, and retain contract postal unit 

contracts in the contract administrative files. TID: March 2012

HR-AR-11-007 9/30/2011 Postal Service Workers’ Compensation Program

R-1 — Continue to pursue legislative change to transform the Federal Employees’ Compensation Act into a modernized 

workers’ compensation program that includes best practices for increasing program effectiveness and efficiencies 

and reducing costs. TID: None

R-2 — Pursue legislative change to amend Federal Employees’ Compensation Act to allow recovery of continuation of pay 

benefits in third-party cases. TID: None

R-3 — Pursue legislative change to reform Federal Employees’ Compensation Act to allow employing agencies to present 

evidence at hearings when fraud is alleged. TID: None

R-4 — Clearly define organizational responsibilities for detecting workers’ compensation fraud:

 Establish requirements for U.S. Department of Labor to respond to reports of investigations within 45 days after 

receiving them.

 Establish a provider compliance program. 

 Revise the method used to determine the administrative fee to ensure the fee is based on actual costs to administer 

Postal Service Workers’ Compensation Program.

TID: None

R-5 — Develop mandatory and refresher training for Postal Service officials responsible for workers’ compensation to ensure 

they are aware of their roles and responsibilities for workers’ compensation. TID: September 2012

MS-AR-11-007 9/30/2011 Strategic Approaches to Revenue Protection

R-1 — Work with a broadened group of internal and external stakeholders to prepare for streamlining the entry of business 

mail, accelerate the timeline for streamlined acceptance and verification, and seek to leverage technology to provide 

revenue protection for Basic Service Intelligent Mail and non-automated volumes. TID: January 2013
April 1 — September 30, 2012 51

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

IT-AR-12-001 10/21/2011 State of Corporate Information Technology Security

R-2 — Complete the certification and accreditation process for the remaining national applications. TID: December 2013

R-4 — Implement a corporate-wide encryption solution to enhance the sensitive data protection effort. TID: October 2013

CA-AR-12-001 11/2/2011 Contracting Opportunities and Impact of the Service Contract Act 

R-2 — Review the benefits of outsourcing cleaning/janitorial service positions and postal service vehicle driver positions and 

work with Supply Management to restructure those positions to achieve the most cost effective solution. 

TID: March 2013

R-3 — Working with supply management and Postal Service program officials, ensure that appropriate financial data is 

collected to aid in making in-sourcing/outsourcing decisions. TID: March 2013

HR-AR-12-001 11/14/2011 Postal Service Health and Safety Program 

R-1 — Review and revise, as appropriate, supervisor performance measures to place a higher priority on maintaining a safe 

and healthy work environment; for example: performance measures could be linked to the number of abated and/or 

unabated safety hazards. TID: October 2011

R-4 — Establish and implement standard operating procedures for dock operations. TID: May 2012

R-5 — Perform and oversee preventive maintenance procedures for eyewash and shower units. TID: September 2012

R-6 — Conduct required safety inspections and abate safety hazards in a timely manner to ensure safe and healthy working 

conditions for the employees. TID: September 2012

R-7 — Enter Postal Service Forms 1767 accurately and timely in the Safety Toolkit. TID: September 2012

CRR-AR-12-002 12/13/2011 Management Operating Data System

R-1 — Develop a monthly report that identifies the top Management Operating Data System operation numbers and facilities 

causing Management Opertaing Data System errors. TID: March 2012

R-2 — Expand existing Management Opertaing Data System exception reports to include observations that exceed maximum 

machine throughput and manual productivities. TID: March 2012

R-3 — Issue monthly enhanced exception reports to management at the area, district, and facility level to highlight recurring 

MODS errors at facilities. TID: April 2012

R-4 — Develop controls within the Management Opertaing Data System that enforce the requirement for facility managers to 

correct MODS errors in a timely manner. TID: September 2012

R-6 — Monitor operation numbers where the majority of Management Opertaing Data System errors occur, and determine the 

potential impact on applicable cost data. TID: July 2012

R-7 — Evaluate existing quality assurance procedures to determine whether eliminating Management Opertaing Data 

System errors at the facility level, and eliminating observations that exceed maximum machine throughputs or manual 

productivities, would improve the reliability of Management Opertaing Data System-based productivities. TID: July 

2012

FI-AR-12-001 12/28/2011 Expedited Packaging Supplies Program

R-1 — Implement a comprehensive, automated procedure to determine the quantity of expedited packaging supplies retained 

by major mailers, post offices and other facilities that distribute Postal Service’s expedited packaging supplies to 

customers. TID: December 2012

R-2 — Develop a comprehensive plan to monitor usage and identify and reduce waste associated with expedited packaging 

supplies. TID: September 2012

IT-AR-12-003 1/9/2012 Fiscal Year 2011 Information Technology Internal Controls

R-1 — Implement corrective actions to address all open issues noted in this report for fiscal years 2010 and 2011. 

TID: November 2012
52 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

IT-AR-12-002 1/9/2012 Patch Management Processes

R-1 — Ensure that all operating system and database patches are tested, documented, and implemented as required by 

Handbook AS-805, Information Security. TID: January 2013

R-2 — Ensure that administrators obtain required policy exception approvals when system patches are not applied. 

TID: January 2013

R-3 — Ensure that written procedures are developed to define the patch management process for each group, operating 

system, and database to include test and back-out plans. TID: January 2013

R-4 — Ensure that configuration management inventory records are reconciled to the actual servers and databases for their 

respective group. TID: January 2013

R-5 — Work together to implement a process to verify that required operating system and database patches distributed to the 

mail processing plants are applied. TID: January 2013

R-6 — Implement a common method for all entities to track information technology asset and patch information. 

TID: July 2014

R-7 — Ensure vulnerability mediation training is provided to all employees and contractors responsible for enterprise patch 

management. TID: July 2014

R-8 — Conduct risk assessments and cost analyses to develop an enterprise-wide migration plan for upgrading unsupported 

operating systems and databases to vendor-supported software. TID: July 2014 

R-9 — Adopt a method to identify, capture, and report patch management metrics to assist with oversight of the patch 

management process and facilitate related business and security decisions. TID: July 2014

FI-AR-12-002 1/10/2012 Bad Check Prevention and Collection 

R-1 — Increase the bad check service charge to the national retail median of $30. TID: October 2012

MS-AR-12-002 1/12/2012 Mail Verification Procedures at Detached Mail Units 

R-1 — Review automation efforts to date to identify improvements that can be made in the interim while mailers continue to 

implement Intelligent Mail barcode technologies. TID: June 2013

R-2 — Continue ongoing mail verification training efforts while detached mail unit employees continue to use manual mail 

verification processes. TID: January 2013

R-3 — Enhance automated systems to notify managers when acceptance employees override Mail Evaluation Readability 

Lookup Instrument results. TID: June 2013

R-4 — Develop and implement automated tools that managers can use to monitor and evaluate detached mail unit staffing 

and scheduling. TID: June 2013

NO-AR-12-003 1/20/2012 Consolidation of Mail Processing Operations at the Mansfield, OH, Customer Service Mail Processing Center

R-1 — Identify repositioning plans for all impacted employees at the Mansfield Customer Service Mail Processing Center. 

TID: None

R-2 — Continue to monitor and take necessary actions to ensure mail is processed timely at the Cleveland Processing and 

Distribution Center. TID: None 

CRR-AR-12-003 1/27/2012 Revenue, Pieces, and Weight Inputs Into the Cost and Revenue Analysis Report

R-2 — Explore concentrating sampling and data collection of manually processed mail from delivery units to the serving 

processing and distribution facilities for Revenue, Pieces, and Weight estimation purposes. TID: January 2013 
April 1 — September 30, 2012 53

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

CI-AR-12-004 2/2/2012 Domestic Mail Manual Preparation and Acceptance Mail Instructions

R-1 — Combine and remove all duplications in the Domestic Mail Manual, Quick Service Guides, Business Mail Acceptance, 

Job Aids, and Customer Support Rulings; and publish a new document available to all mailers online. 

TID: November 2013

R-2 — Migrate to a one permit per customer requirement using PostalOne!: TID: August 2013

R-3 — Archive all PostalOne! deleted or canceled permits. TID: April 2015

NL-AR-12-001 2/2/2012 Postal Vehicle Service Transportation Routes – Margaret L. Sellers Processing and Distribution Center

R-1 — Ensure ML Sellers Processing and Distribution Center managers follow prescribed fleet management procedures 

for making postal vehicle service schedule changes more timely including conducting annual schedule and vehicle 

utilization reviews 

TID: November 2012

R-2 — Verify the reallocation of 2,424 workhours within existing postal vehicle service schedules and reallocate an additional 

5,728 workhours within PVS schedules to accommodate future Flat Sequencing System implementation. TID:

November 2012

DA-MA-12-003 2/9/2012 21st Century Post Office: Opportunities to Share Excess Resources

R-1 — Develop and implement a strategy to share surplus Post Office resources with appropriate federal, state, and municipal 

government agencies. TID: None

NL-AR-12-002 2/28/2012 Standardization of Integrated Mail Handling System Loaders at Network Distribution Centers

R-1 — Direct network distribution centers to modify Integrated Mail Handling System loaders to safely accept over-the-road 

containers, while continuing to accept Postal Paks, as designed. TID: July 2012

NL-AR-12-003 3/12/2012 Density of First-Class Mail on Air Transportation 

R-1 — Continue to develop optimization processes to increase First-Class Mail density to maximize container space. 

TID: April 2013

R-2 — For sites equipped with the Advanced Facer Canceler System series 200 machines, separate First-Class Mail to be 

transported by air for sorting on a single sorting machine for further processing and dispatch. TID: April 2013

R-3 — Develop targeted secondary sort programs to process First-Class Mail bound for air transportation to maximize 

container space. TID: April 2013

R-4 — For sites equipped with automated flat sorting equipment, adjust sensors to ensure flat tubs are filled to maximum 

capacity prior to discharge or removal from the machine. TID: April 2012

IT-AR-12-005 3/19/2012 SAP Human Capital Management System Security Assessment 

R-1 — Encrypt human resources data at rest and in transit according to Handbook AS-805, Information Security, 

requirements. TID: November 2012

HR-AR-12-002 3/30/2012 Postal Service Mail Security

R-1 — Develop and implement training to ensure personnel responsible for accountable mail and keys understand their 

responsibilities. TID: July 2012

R-2 — Establish policies and procedures requiring responsible personnel to conduct periodic reviews to ensure mail 

safeguarding and accountability requirements are followed. TID: July 2012

R-3 — Develop and implement training for contract postal unit personnel to ensure they understand their responsibilities 

regarding safeguarding mail and accounting for Registered Mail. TID: July 2012
54 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

HR-AR-12-003 3/30/2012 Unauthorized Overtime Usage in Field Operations

R-1 — Issue supplemental guidance to supervisors and managers to emphasize the importance of: completing and 

maintaining PS Forms 1017-B, Unauthorized Overtime Record, for employees who incur unauthorized overtime; 

approving and disapproving PS Forms 3996, Carrier Auxiliary Control, before carriers leave for their routes and 

reviewing the forms to assess actual time used when they return; and following badge control and clock ring 

procedures to help prevent unauthorized overtime. TID: September 2012

R-2 — Develop a consolidated report, or revise an existing report, to include the Time and Attendance Collection System and 

Unauthorized Overtime Reports; and require supervisors to review the consolidated report to ensure the accuracy of 

the timekeeping data and improve monitoring of unauthorized overtime. TID: September 2012

R-3 — Provide periodic refresher training for supervisors to emphasize their responsibilities for time and attendance, including 

monitoring unauthorized overtime and using PS Form 3996, Carrier Auxiliary Control, for managing delivery operations. 

TID: September 2012

R-4 — Develop and implement performance measures or other management controls to hold managers and supervisors 

accountable for failing to address unauthorized overtime. TID: September 2012

R-5 — Establish and implement proactive monitoring processes that include periodic reminders and a system of 

accountability, similar to the procedures that have been implemented in the Central Pennsylvania District to minimize 

unauthorized overtime. TID: September 2012

NL-AR-12-005 4/25/2012 Postal Vehicle Service — Nationwide Analysis

R-1 — Instruct area Postal Service officials to follow prescribed fleet management procedures for conducting Postal Vehicle 

Service schedule and vehicle utilization reviews and make necessary changes to the schedules in a more timely fashion 

(or at least annually) to match the fluid operational changes. TID: None

R-2 — Ensure Postal Service officials change schedules when feasible to reduce overall scheduled workhours and staffing by 

increasing the use of non-traditional full-time employees where fewer than 8 hours of work exists. TID: None

R-3 — Encourage area Postal Service officials to negotiate the use of split days off with local union officials where possible to 

reduce operating costs through staff reductions. TID: March 2012

R-4 — Instruct processing and distribution center management to issue memorandums to drivers reinforcing the use of seat 

belts, chock blocks, and load restraints; and periodically monitor compliance. TID: April 2012

NO-MA-12-001 4/27/2012 Assessment of Overall Plant Efficiency 2012

R-1 — Reduce 14,268,171 workhours by fiscal year 2014 with an associated economic impact of $664,997,872. 

TID: September 2014

MS-AR-12-003 5/4/2012 Package Delivery Growth

R-2 — Develop enhancements to the CustomerFirst! system to ensure that the data and information contained within are reliable 

and useful. TID: January 2015

R-4 — Evaluate the feasibility of offering a local product the customer either arranges to have picked up or takes to the local Post 

Office for sortation and delivery without involving a mail processing plant. TID: December 2013

R-5 — Continue to pursue legislative change that will allow the Postal Service to ship beer and wine. TID: January 2014

R-6 — Evaluate the feasibility of offering an international service that will allow customers the option of prepaying customs duties 

and taxes. TID: September 2013

IT-AR-12-007 5/18/2012 Virtualization Technology

R-1 — Prepare a business case analysis to determine the best approach to expand virtualization technology to the servers in 

Merrifield, VA. TID: November 2012
April 1 — September 30, 2012 55

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NL-AR-12-006 5/29/2012 Postal Service Initiative: Consolidation of Mail for Transportation Between Network Distribution Centers

R-1 — Continue to pursue opportunities to consolidate long distance transportation routes. TID: None

R-2 — Pursue an overall trailer consolidation ratio of 2.5:1 in the original 19 consolidation pilot transportation lanes and all 

subsequent expansion lanes. TID: None

R-3 — Add Jacksonville Network Distribution Center’s Puerto Rico Highway Contract Routes 32202 and 32204 into the 

consolidation initiative. TID: September 2012

R-4 — Ensure Postal Service managerial oversight at the contract consolidation facilities. TID: July 2012

DR-AR-12-001 6/5/2012 City Delivery — Street Efficiency San Diego District

R-1 — Reduce 83,943 workhours to achieve an associated economic impact of more than $3.3 million annually or $6.8 million 

over 2 years. TID: October 2014

NO-AR-12-005 6/5/2012 Efficiency Review of the Cleveland, OH Processing and Distribution Center 

R-1 — By fiscal year 2017, reduce workhours by 352,388 to produce a cost avoidance of $22.7 million over the following 2 

years, or through consolidations, increase mail volume by 377 million, or a combination of workhours reductions and mail 

volume increases that will achieve the median productivity level of 1,069 pieces per hour. TID: September 2014

FT-MA-12-002 6/18/2012 Pension and Retiree Health Care Funding Levels

R-1 — Pursue legislative action to refund the current pension surplus, and any future pension surpluses, to the Postal Service. 

TID: January 2013

DR-AR-12-002 6/19/2012 City Delivery — Excess Routes

R-1 — Eliminate 33 excess city delivery routes in their respective districts. TID: May 2013

R-2 — Review delivery units consistently using fewer than projected street hours to make appropriate route adjustments, 

eliminations, and consolidations. TID: May 2013

R-3 — Reallocate the 33 assigned Postal Service-owned delivery vehicles from the eliminated city routes to rural routes to 

achieve an associated economic impact of $250,110 annual discounted savings or $500,220 over 2 years. 

TID: June 2013

IT-AR-12-008 6/25/2012 Security Awareness Training Program

R-1 — Include information security awareness training on the Human Resources mandated training list as part of the Strategic 

Training Initiative. TID: June 2013

R-2 — Modify Handbook AS-805, Information Security, to clearly define the users who are required to take the mandatory 

information security awareness training TID: July 2013

R-3 — Establish a monitoring process to track user compliance with Handbook AS-805, Information Security, information security 

awareness training requirements. TID: July 2013

R-4 — Work with applicable managers to take appropriate action, including suspending access if necessary, to ensure employees 

and contractors complete the security awareness training in compliance with Handbook AS-805, Information Security, and 

regulatory requirements. TID: September 2013

DA-MA-12-005 7/16/2012 21st Century Post Office: Non-Postal Products and Services

R-1 — Develop a strategy to identify, evaluate and offer the most promising non-postal products and services, including how to 

overcome identified barriers, when legislation permits. TID: None
56 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NL-AR-12-007 7/24/2012 Atlanta Network Distribution Center — Postal Vehicle Service Operations

R-1 — Follow prescribed Postal Service standard operating procedures for live loading of trailers. TID: None

R-2 — Periodically assess postal vehicle service spotter truck driver workload and staffing requirements with respect to 

productivity standards to maintain appropriate staffing levels. TID: None

R-3 — Eliminate 1,746 annual workhours associated with reducing about 200 spotter moves per week by implementing live load 

procedures. TID: None

R-4 — Eliminate 6,984 annual workhours associated by improving postal vehicle service truck driver productivity to the 

Breakthrough Productivity Initiative standard of 40 moves per day, or 200 moves per week. TID: None

NO-AR-12-007 8/3/2012 Efficiency Review of the Los Angeles Network Distribution Center

R-1 — Reduce workhours by 200,019 by fiscal year 2017 to produce an annual cost avoidance of about $6.5 million, or increase 

volume by 39 million pieces, or combine workhour reductions and mail volume increases that will achieve the above 

average median productivity level of 117 pieces per hour. TID: February 2017

CA-AR-12-004 8/6/2012 Unauthorized Contractual Commitments

R-2 — Reinforce current policies by training and conducting periodic reviews to ensure that Supply Management contracting 

personnel follow the ratification process and documentation requirements for unauthorized contractual commitments. 

TID: March 2013

CI-AR-12-006 8/14/2012 Delivery Fleet Strategies

R-1 — Implement a comprehensive fleet management strategy that is managed by headquarters using a dedicated team of 

specialists whose primary focus is to use identified best practices for the management of the Postal Service’s vehicle fleet. 

TID: None

R-2 — Establish an annual new vehicle replacement strategy, as part of a comprehensive fleet management strategy, to replace 

part of the fleet each year, spread out the expenditures over time, and ensure the overall operational functionality of the 

fleet. TID: September 2016

DR-AR-12-003 8/16/2012 City Delivery — Street Efficiency Capital District

R-1 — Reduce 110,740 workhours to achieve an associated economic impact of $4.5 million annually, or $9 million over 2 years. 

TID: October 2014

DR-AR-12-004 8/16/2012 City Delivery — Street Efficiency Louisiana District

R-1 — Reduce 107,550 workhours to achieve an associated impact of more than $4.4 million annually, or $8.8 million over 2 

years. TID: September 2014

EN-AR-12-003 8/17/2012 Efficiency of Customer Service Operations

R-3 — Provide training as needed to customer service managers that would enable them to effectively use managerial reports 

and tools. TID: None

DR-AR-12-005 8/21/2012 Carrier Optimal Routing System Phase ll

R-1 — Continue to pursue funding to resolve performance issues with the Web Carrier Optimal Routing system and implement the 

web-based program nationwide. TID: None

R-2 — Re-emphasize performing route adjustments using the Carrier Optimal Routing system to achieve an annual economic 

impact of more than $84 million. TID: None

R-3 — Cross-train existing and additional personnel in both Carrier Optimal Routing system database preparation and route 

adjustment processes to ensure the availability of adequately trained resources. TID: None

FI-MA-12-014 8/22/2012 U.S. Postal Service Alternate Health Care Plan Proposal

R-1 — Revise the Postal Service’s alternative health care plan projected savings to include the additional cost of shifting to the 

appropriate discount rate used for funding obligations for federal employee pension and other retirement benefits. 

TID: None
April 1 — September 30, 2012 57

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

DR-MA-12-002 8/24/2012 City Delivery Route Optimization Pilot Initiative

R-2 — Execute a new initiative to maximize savings by using lessons learned and data results from the pilot with the goal of 

optimizing the full- and part-time staff mix. TID: None

DR-AR-12-006 8/24/2012 City Delivery Staffing

R-1 — Balance the number of full-time carriers per route and manage labor cost within established fiscal year budgets. TID: None

R-2 — Continue pursuing the ability to increase the number of part-time, non-career flexible employees at installations nationwide 

in the city letter carrier craft to reduce labor costs. TID: None

HR-AR-12-004 8/27/2012 Rehabilitation Assignments for Employees Injured on Duty

R-1 — Establish and implement a plan to allocate a portion of the vehicle shuttle services work performed at the 28 vehicle 

maintenance facilities included in our audit, for employees on the periodic roll. TID: September 2012

R-2 — Assess the feasibility of allocating a portion of the shuttle services at the remaining 281 vehicle maintenance facilities to 

rehabilitation assignments. TID: September 2012

R-3 — Establish a training plan for employees on the periodic roll who receive and accept an offer to perform vehicle shuttle 

service work. TID: None

FI-MA-12-016 9/6/2012 Controls Over the Check Acceptance Process

R-5 — Require host post offices to continuously provide the most recent bad check lists to contract postal units. TID: September 

2012. 

MS-AR-12-007 9/10/2012 Customer Complaint Resolution Process

R-1 — Develop a strategy for reducing the number of repeat complaints to include specific actions to:

 Update and implement procedures to incorporate customer feedback on the Postal Service’s resolution of customer 

complaints into the Enterprise Consumer Care system.

 Finalize updates to policies and procedures for collecting, analyzing, and resolving customer complaints to include 

guidance for conducting quality control reviews and performing customer follow-up surveys; and, in the interim, 

require staff to follow the current policies for conducting quality control reviews and performing customer follow-up 

surveys. 

TID: January 2013

R-2 — Identify deficiencies and desired enhancements for the Enterprise Consumer Care system and take necessary action to 

notify the Information Technology department. TID: September 2013

R-3 — Develop a mechanism for tracking Enterprise Consumer Care system usage and wait times and ensuring that current 

archiving processes and system outage records are continued. TID: September 2013

IT-AR-12-009 9/12/2012 Security of File Transfer Protocol Transmissions

R-1 — Assign a controlling authority the responsibility for managing all electronic file transfer activities and enforcing electronic 

file transfer policies. TID: October 2012

R-2 — Publish an enterprise-wide management instruction and implement training on secure electronic file transfer usage to 

reinforce the requirements of Handbook AS-805, Information Security. TID: October 2012

R-3 — Direct the controlling authority identified in recommendation one to develop a business case solution to mitigate and, 

ultimately, eliminate the use of file transfer protocol transmissions to ensure the protection of sensitive data in accordance 

with Handbook AS-805, Information Security. TID: October 2012

R-4 — Conduct periodic security assessments to identify and monitor file transfer protocol usage throughout the Postal Service 

network. TID: September 2013

R-5 — Identify, monitor, and remove all unnecessary file transfer protocol services running on all servers and mainframes and 

identify the related sensitive applications. TID: September 2013

R-6 — Implement a secure electronic file transfer protocol for receiving manifest files from external business partners. 

TID: September 2017
58 Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

HR-AR-12-005 9/12/2012 State of Security

R-1 — Revise procedures to ensure letter carriers clearly understand their responsibilities to identify anonymous mail. 

TID: January 2013

R-2 — Enhance the nationwide anonymous mail seeding program by establishing procedures for identifying problem facilities that 

fail to detect anonymous mail. TID: January 2013

R-3 — Require responsible personnel to take additional training to address noncompliance and reduce the failure rate. 

TID: January 2013

R-4 — Establish procedures for conducting follow-up testing of facilities to address noncompliance with anonymous mail 

requirements. TID: January 2013

R-5 — Establish procedures to identify and prioritize facility security deficiencies to ensure they are properly addressed.

TID: January 2013

EN-AR-12-004 9/14/2012 Commercial Mail Entry and Acceptance Initiatives

R-5 — Develop an action plan to address and correct PostalOne! operational problems affecting the integrity, reliability, and 

functionality of the system. In addition, conduct thorough testing before releasing and implementing system upgrades. 

TID: September 2013

FI-AR-12-004 9/14/2012 Revenue Sharing Agreements

R-1 — Develop a process to independently verify sales transaction data for completeness and accuracy. TID: May 2012

R-3 — Develop a process to address business alliance concerns within a mutually agreed upon timeframe to avoid revenue loss. 

TID: October 2012

R-4 — Communicate goals and develop a process to measure the performance of the revenue sharing agreements, at least 

annually. TID: October 2012

R-5 — Establish and maintain a central repository for all revenue sharing agreement documentation. TID: November 2012

R-6 — Develop detailed policies and procedures for creating, designing, and monitoring revenue sharing agreements and 

disseminate the new procedures to the entire organization. TID: December 2012

DA-AR-12-002 9/18/2012 Lease Purchase Options for Postal Service Facilities

R-1 — Develop an objective methodology to quantify and prioritize opportunities for favorable purchase option exercises. 

TID: October 2012

R-2 — Establish procedures for assigning lease purchase options to third parties in the real estate market. TID: December 2012

R-3 — Reiterate the importance of performing the required analysis on potentially favorable purchase options despite future 

opportunities to exercise. TID: September 2012

NL-AR-12-009 9/21/2012 Global Positioning System Technology for Highway Contract Routes

R-1 — Update and reinforce policies and procedures for the highway contract route Global Positioning System program with 

employees and suppliers, including re-training personnel as necessary and designating necessary resources at plants to 

ensure they have an understanding of their roles, responsibilities, and accountability. TID: December 2012

R-2 — Improve the monitoring and validation process for compliance to ensure the timely entry of all contract service changes 

in the field, termination of contracts not meeting compliance requirements, and the use of Global Positioning System 

compliance as criteria for future contract awards. TID: January 2013

R-3 — Continue to review and update the standard reports available in the Highway Contract Route Tracking Module so 

compliance and supplier performance can be monitored or reviewed without a contractor preparing special ad hoc reports. 

TID: November 2012

R-4 — Expand the Global Positioning System (GPS) program to include additional highway contract routes where feasible and 

explore an end-to-end GPS platform using industry best practices that includes a full-range of functionality and reports 

covering applicable contracted transportation. TID: January 2013

R-5 — Re-evaluate data retention requirements of the Highway Contract Route Tracking Module, including the type of data 

retained and for how long to include consideration of potential contract and legal challenges to actions taken resulting from 

non-compliance with the reporting requirements. TID: November 2012
April 1 — September 30, 2012 59

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

HR-AR-12-006 9/21/2012 Motor Vehicle Accident Prevention Program

R-1 — Provide supplemental guidance to area and district level managers to ensure they enforce the requirements for supervisors 

to adhere to motor vehicle safety procedures, to include conducting driving observations, ensuring drivers perform vehicle 

safety inspections, and performing quarterly driving privileges checks. TID: October 2012

R-2 — Provide periodic refresher training to supervisors on the Safe Driver Program and ensure employees performing driving 

observations take the Driver Observation training course. TID: June 2013

R-3 — Establish and implement proactive monitoring processes that include using Department of Motor Vehicle’s databases to 

validate driver’s licenses for employees in driving positions. TID: None

NL-AR-12-008 9/21/2012 St. Louis Network Distribution Center — Postal Vehicle Service Operations

R-1 — Periodically assess postal vehicle service spotter truck driver workload and staffing requirements with respect to 

productivity standards to maintain appropriate staffing levels. TID: July 2012

R-2 — Eliminate 6,984 annual workhours associated by improving postal vehicle service truck driver productivity to the 

Breakthrough Productivity Initiative standard of 40 moves per day, or 200 moves per week. TID: August 2012

R-3 — Ensure that St. Louis Network Distribution Center management re-emphasis the safety policy that drivers must wear safety 

belts whenever the vehicle is in motion and provide management oversight for enforcement. TID: September 2012

DR-MA-12-004 9/27/2012 City Delivery Operations — Brick Main Post Office

R-1 — Reduce 7,744 office and street workhours in fiscal years 2013 and 2014 to achieve an annual economic impact of 

$333,764. TID: December 2014

R-2 — Ensure management reinforce Postal Service policies and procedures for city delivery street operations to help eliminate 

carrier inefficient practices and avoid unnecessary labor costs. TID: October 2012

R-4 — Pursue available technologies to assist in monitoring carrier performance during street delivery. TID: October 2012

DA-AR-12-004 9/28/2012 Accuracy of the Electronic Facilities Management System

R-1 — Modify the Electronic Facilities Management System to address inconsistency in data entry, including the use of dropdown lists and requiring completion of all data fields. TID: December 2012

R-2 — Develop a plan to require annual review and validation of all Electronic Facilities Management system data by Facilities 

Service Office personnel. TID: August 2013

R-3 — Develop and administer training for the use of Electronic Facilities Management System. TID: None

DR-MA-12-003 9/28/2012 City Delivery Operations - Lancaster Carrier Annex

R-1 — Reduce 12,339 office and street workhours in fiscal years 2013 and 2014 to achieve an annualized economic impact of 

$515,838, or $1,031,676 over 2 years. TID: September 2014

R-2 — Ensure that supervisors establish and discuss performance expectations, and consistently oversee daily street operations 

using management tools and reports to avoid the unnecessary labor costs of $868,388. TID: October 2012

R-5 — Ensure management reinforces Postal Service policies and procedures for city delivery street operations to help eliminate 

carrier inefficient practices during office and street operations. TID: October 2012

R-6 — Ensure supervisors address carrier performance when a carrier does not follow established delivery procedures in the 

office and on the street. TID: October 2012

NL-AR-12-010 9/28/2012 First-Class Mail on Air Transportation Assignment by Weight

R-1 — Modify the assignment process to assign First-Class Mail to air transportation considering weight where feasible, with 

the heavier mail being assigned to FedEx and the lighter mail being assigned to United Parcel Service and commercial 

passenger air carriers – with consideration of contractor service performance and future air transportation contract 

requirements. TID: March 2013
60 Semiannual Report to Congress

APPENDIX E AND F

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NL-AR-12-011 9/28/2012 Mail Transport Equipment – Shortages of Pallets, Tubs, and Trays – Fall 2011 Mailing Season

R-1 — Finalize procedures, processes, and guidelines to ensure there is effective planning and budgeting for Mail Transport 

Equipment (MTE) needs for the fall mailing season, taking into consideration operational and customer needs, financial 

condition, MTE leakage, and MTE condemnation. TID: March 2013

R-2 — Finalize implementation of prior U.S. Postal Service Office of Inspector General recommendations from the Management 

of Mail Transport Equipment (MTE) – National Analysis audit (Report Number NL-AR-10-009, dated September 29, 2010) 

covering an automated inventory and tracking system, ensuring adequate resources for areas and plants, and update 

policies and procedures that support current MTE operational requirements. TID: December 2012

R-3 — Finalize processes and procedures (considering costs and benefits) to limit or better control distribution and have visibility 

of Mail Transport Equipment distributed to mailers and other customers. TID: July 2013

R-4 — Evaluate the best practices identified in this report and identify any applicable industry best practices for implementation 

(considering costs and benefits), such as the viability of implementing Radio Frequency Identification technology to control 

the leakage of plastic pallets and reduce annual purchase of replacement plastic pallets. TID: March 2013

CA-AR-12-006 9/28/2012 Oversight of Equitable Adjustments

R-1 — Require contracting officers to include a general release of claims in all supplemental agreements that constitute a release 

by the supplier for additional costs beyond that which is provided for in the contract modification or a more specific release 

in complex or contentious equitable adjustments. TID: November 2012

R-3 — Reiterate the contract file tracking process to ensure contract files are not lost when they are transferred from one office to 

another. TID: November 2012

DA-MA-12-006 9/28/2012 Partnerships with Other Government Agencies

R-1 — Clearly define organizational roles and responsibilities for developing and managing partnerships with other federal 

agencies and establish a written policy to identify, develop, track, and follow-up on potential partnership opportunities. 

TID: February 2013

CI-AR-12-007 9/28/2012 Post-Implementation Review Process

R-1— Improve the Post-Implementation Review (PIR) process in Handbook PO-408, Area Mail Processing Guidelines to:

 Identify and separate savings and costs associated with other concurrent initiatives from savings and costs directly 

related to the area mail processing consolidation.

 Implement the use of automated data calculation and pre-population for PIR worksheets and checklists.

 Establish a process to allocate savings and costs when multiple consolidations are made into the same gaining 

facility.

 Assess whether current PIR timelines should be adjusted. 

TID: March 2014

APPENDIX F

Significant Management Decisions in Audit Resolution

For the period April 1 — September 30, 2012

As required by the IG Act, the following discusses information concerning any significant management decision with which the Inspector General disagrees and 

is currently in audit resolution

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

HR-AR-12-004 8/27/12 Rehabilitation Assignments for Employees Injured on Duty

R-3 — Establish a training plan for employees on the periodic roll who receive and accept an offer to perform vehicle shuttle 

service work. 
April 1 — September 30, 2012 61

APPENDIX G

APPENDIX G

Status of Peer Review Recommendations

Federal audit organizations undergo an external quality control assessment by their peers every 3 years. The Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010 requires an appendix reporting on 1) any Office of Inspector General peer reviews conducted during the semiannual period; and 2) any 

outstanding recommendations from any previous or current peer reviews that remain outstanding or have not been fully implemented.

Office of Audit

Internal Peer Reviews

The Postal Service Office of Inspector General did not undergo an internal peer review during this reporting period. The Department of Defense OIG conducted the last 

peer review of our organization for the period covering April 1, 2008 – March 31, 2009, and issued a quality control review report of our audit organization on March 31, 

2010. We received a peer review rating of pass and implemented all recommendations as of March 31, 2011. 

A copy of this quality control review report, in its entirety, can be viewed on the USPS OIG website, www.uspsoig.gov.

External Peer Reviews

The Postal Service Office of Inspector General conducted an external quality control review of the U.S. Department of Homeland Security (DHS) Office of Inspector General 

audit organization and issued a final report on June 28, 2012. The DHS OIG received a peer review rating of pass. They implemented and closed all eight recommended 

improvements with the exception of the following recommendation. 

Recommendation 3: We recommend DHS OIG reiterate to audit teams the importance of ensuring that management review and sign-off on procedure summary 

steps prior to report issuance.

Status: Not fully implemented. In July 2012, all DHS OIG audit staff was briefed on USPS OIG’s peer review results and recommendations for 

improving their quality control and assurance system, including the importance of ensuring that management reviews and signs off on 

procedure summary steps prior to report issuance. DHS OIG issued a revised OIG Audit Manual on September 30, 2012, and their audit staff is 

being scheduled for audit manual training. The training had not been completed as of the end of this reporting period. 

A copy of the external quality control review report in its entirety can be viewed on the DHS OIG Web site at www.oig.dhs.gov.

Office of Investigations

Internal Peer Reviews

None conducted during this period.

External Peer Reviews

From August 6 to August 24, 2012, the Postal Service OIG conducted a peer review of the Health and Human Services Office of Inspector General’s (HHS-OIG) Office 

of Investigations. We reviewed their Investigative Operations at their headquarters and at two of their field offices. A letter on the review of the HHS OIG was issued in 

October 2012. HHS-OIG was found to be in compliance with the quality standards established by the President’s Council on Integrity and Efficiency, the Executive Council 

on Integrity and Efficiency, and the U.S. Attorney General.
62 Semiannual Report to Congress

APPENDIX H

APPENDIX H

Investigative Statistics*

For the period April 1— September 30, 2012

Investigations 

Completed Arrests

Indictments/ 

Informations

Convictions/ 

Pretrial 

Diversions**

Admin. 

Action 

Taken 

Cost 

Avoidance

Fines, 

Restitution, and 

Recoveries

Amt. to USPS

(from previous 

column)***

To Mgmt.

for Admin. 

Action

Theft, Delay, or Destruction 

of Mail by Employees or 

Contractors

876 171 162 198 337 $1,546 $5,761, 232 $514,969 236

Injury Compensation 

Fraud 

487 19 30 24 83 $92,957,005 $1,938,517,726 1 $16,693,816 73

Official Misconduct 336 25 26 22 235 $200,000 $698,865 $77,462 150

Financial Fraud and 

Embezzlements 

252 58 65 79 131 $1,335,700 $777,751 $742,682 93

Contract Fraud 94 13 10 8 93 $8,924,095 $20,040,051 $4,066,068 26

TOTAL 2,045 286 293 331 879 $103,418,346 $1,965,795,625 $22,094,997 578

* Statistics include joint investigations with other law enforcement agencies.

** Convictions reported in this period may be related to arrests in prior reporting periods.

*** Amounts include case results of joint investigations with other OIG, federal, state, and local law enforcement entities.

1

 Amount under Fines, Restitutions, and Recoveries includes $1.9 billion from one pharmaceutical investigation.

For the period October 1, 2011— September 30, 2012

Investigations 

Completed Arrests

Indictments/ 

Informations

Convictions/ 

Pretrial 

Diversions**

Admin. 

Action 

Taken 

Cost 

Avoidance

Fines, 

Restitution, and 

Recoveries

Amt. to USPS

(from previous 

column)***

To Mgmt.

for Admin. 

Action

Theft, Delay, or Destruction 

of Mail by Employees or 

Contractors

1,522 331 341 378 689 $1,546 $27,251,688 $628,116 562

Injury Compensation 

Fraud 

875 32 48 40 156 $177,301,312 $2,185,398,980 1 $18,104,466 172

Official Misconduct 616 42 41 69 446 $200,000 $970,339 $217,859 342

Financial Fraud and 

Embezzlements 

517 114 134 153 264 $1,978,650 $3,158,613 $3,049,952 226

Contract Fraud 163 17 19 15 124 $9,711,756 $64,497,673 $48,522,701 50

TOTAL 3,693 536 583 655 1,679 $189,193,264 $2,281,277,293 $70,523,094 1,352

* Statistics include joint investigations with other law enforcement agencies.

** Convictions reported in this period may be related to arrests in prior reporting periods.

*** Amounts include case results of joint investigations with other OIG, federal, state, and local law enforcement entities.

1

 Amount under Fines, Restitutions, and Recoveries includes $1.9 billion from one pharmaceutical investigation.
April 1 — September 30, 2012 63

APPENDIX I

Administrative Subpoenas Requested by the Postal Inspection Service

There was one request during the reporting period.

Type of Scheme

Complaints 

Filed

Consent 

Agreements FROs

Cease & 

Desist Orders

Advance fee — — — —

Charity 3 3 — 3

Sweepstakes/Lottery 21 25 12 25

Coupon/Rebate fraud 1 1 — 1

False billings 21 16 6 16

Fraudlent Postage 9 9 1 9

Identity Theft — — — —

Internet Auction — — — —

Counterfeit Financial Instruments 12 12 — 11

Medical Product Fraud 2 2 — 2

Merchandise:

 Failure to furnish 5 6 1 6

 Failure to pay 6 7 — 7

Misrepresentation 1 1 — 1

Miscellaneous — — — —

Reshipping Scheme 14 14 5 14

Telemarketing — — — —

Work at home 4 4 — 5

TOTAL 99 100 25 100

APPENDIX I

Summary of U.S. Postal Inspection Service Actions Under 39 USC § 3005 and 3007

For the period April 1 — September 30, 2012

Financial Reporting on 

Investigative Activities for the 

Postal Inspection Service 

Type

Personnel $173,369,308

Nonpersonnel $34,083,454 

TOTAL $207,452,762

Capital obligations $3,838,185

Other Administrative Actions

Administrative Action Requests —

Temporary Restraining Orders Requested —

Temporary Restraining Orders Issued —

Cases Using Direct Purchase Authority —

Civil Penalties (Section 3012) Imposed 4 

Test Purchases —

Withholding Mail Orders Issued 20

Voluntary Discontinuances 65
64 Semiannual Report to Congress

APPENDIX J

APPENDIX J

Closed Congressional and Board of Governors’ Inquiries

For the period April 1— September 30, 2012

This appendix lists the congressional and Board of Governors inquiries the OIG closed during this reporting period. OIG units reviewed or investigated these 

inquiries to resolve allegations and disputes, and to help identify systemic issues. Inquiries are listed in the chronological order of receipt.

Inspector General Investigations (35)

Requestor Allegation/Concern Major Findings/Resolution Closure Date

Senator, Virginia Non-receipt of international mail An investigation confirmed a postal employee stealing international 

mail packages. We reported our findings to the United States 

Attorney's Office (USAO) for prosecution.

05/07/12

Senator, Texas Postal management misconduct and hostile work environment at a 

Post Office

We did not substantiate allegations of management misconduct. 04/09/12

Senator, Indiana Lost, stolen, or rifled packages sent as Registered Mail packages An investigation confirmed a postal employee stole international 

Registered Mail packages. The USAO accepted the case for 

prosecution.

05/07/12

Representative, 

California

Hostile work environment We substantiated the allegations. There was also an unusually high 

number of grievances from the Post Office. We referred our findings to 

postal management for review and response.

06/29/12

Senator, Tennessee Postal management misconduct We did not substantiate the allegations. Instead we found the 

complainant was at fault for not providing proper documentation.

07/20/12

Senator, Tennessee Postal management misconduct We did not substantiate the allegations. Instead we found the 

complainant was at fault for not providing proper documentation.

07/20/12

Senator, Ohio Falsification of Express Mail delivery scans An investigation confirmed a falsification of Express Mail delivery. We 

referred our findings to management for corrective action and referred 

the case to the USAO, which declined prosecution.

05/22/12

Representative, 

Pennsylvania

Postal contractor misuse of Postal Service fuel card We did not substantiate the allegations of misuse of the card, and 

noted usage was less than the contract amount.

04/23/12

Representative, 

Massachusetts

Postal management falsification of workers' compensation claim 

documents

In consultation with the congressional office, we determined the issue 

had been addressed in 2009 and required no further OIG work.

08/27/12

Representative, New 

York

Postal management misconduct and neglect of property An investigation found management followed proper procedures and 

did not conclude that the postal facility was damaged because of 

postal management neglect.

05/07/12

Senator, Washington Postal employees engaged in a verbal altercation involving coworkers 

and postal customers.

We did not substantiate the allegation, and noted the matter was 

under review by local authorities.

04/02/12

State Senator, New York A postal employee improperly entered a change of address for a 

private organization

We confirmed that the postal employee changed the address, but 

that it may have resulted from a misunderstanding within the private 

organization.

05/14/12

Representative, Ohio Falsification of Express Mail delivery scans, and disciplinary inaction 

against the violators

An investigation confirmed a falsification of Express Mail delivery. We 

referred our findings to management for corrective action and referred 

the case to the USAO, which declined prosecution.

05/22/12

Representative, Indiana A variety of management misconduct at a post office Our workplace environment review revealed no basis for formal OIG 

work on the issue. We confirmed mail delay and reporting issues 

and worked with management to resolve the issues. We did not 

substantiate the allegation that management manipulated rural carrier 

workloads to suppress rural carrier pay.

05/11/12
April 1 — September 30, 2012 65

APPENDIX J

Requestor Allegation/Concern Major Findings/Resolution Closure Date

Representative, 

Colorado

Dissatisfaction of previous OIG investigation into theft of coins from 

the mail

We reviewed our work in 2010, and the obstacles we encountered 

in seeking prosecution by local authorities. We offered assistance in 

resolving the constituent's postal claim.

06/13/12

Senator, New York Non-delivery of mail An investigation found no misconduct or patterns of theft in mailing, 

processing, or delivery areas, and did not locate the missing mail.

05/11/12

Representative, 

California

Mismanagement, discrimination, and hostile work environment We found the employees have elected a formal administrative remedy 

that will address substantially the same issues they brought to the 

OIG; we declined investigative action as they seek administrative 

relief.

07/16/12

Representative, 

California

Mismanagement and a hostile work environment, including a 

reduction in the workforce and delivery routes

We noted a postal climate assessment had occurred, and we reviewed 

the status of its implementation. We found management was aware 

of the level of employee concern, actively engaged in responding, and 

had planned, scheduled, or accomplished the items recommended in 

the climate assessment.

08/22/12

Representative, Georgia A postal employee harassed coworkers An investigation did not develop evidence supporting the harassment 

allegations, but confirmed other conduct issues were to be resolved 

through personnel actions.

05/11/12

Representative, Indiana Improper mail handling An investigation found no pattern of improper handling in the area; 

management addressed issues concerning problems during a mailhold, and accepted responsibility for the error.

07/17/12

Senator, Texas Non-delivery of a certified mail item containing cash An investigation found no patterns or evidence of theft or employee 

misconduct, and could not locate the missing item.

05/25/12

Representative, New 

York

Non-receipt of a postal parcel An investigation developed no obvious patterns of theft or wrongdoing 

by postal employees. One of the missing items was recovered during 

the investigation.

09/10/12

Senator, Colorado Favoritism, destruction of documents, and creation of hostile work 

environment by manager

The Colorado/Wyoming District had conducted an internal fact finding 

into the workplace issues, resulting in disciplinary actions and an 

employee transfer. We found no conclusive evidence of intentional mail 

delay.

07/06/12

Commission on 

Congressional Mailing 

Standards (Franking 

Commission)

Management at an Illinois Post Office intentionally delayed delivery 

of congressional franked mail to a congressional office and to 

constituents; required the congressional office to personally pay for 

mail sent under the frank; detained and delayed mail; and tampered 

with postal forms.

We determined management intentionally delayed delivery of franked 

mail. Postal employees misunderstood the law and removed franked 

mail from the mail stream. We confirmed postal employees improperly 

forwarded mail they questioned to the Postal Inspection Service, 

though we could not confirm the theory under which that agency 

became involved. We confirmed congressional staff were forced to 

personally pay for mail properly sent under the frank and that some 

mail was intentionally delayed. We did not substantiate that a mass 

mailing was delayed or that forms associated with the mailing were 

altered by postal employees.

09/21/12

Representative, Georgia OIG investigation and interviews were improper The internal affairs review referred the matter to OIG management for 

action deemed appropriate.

08/29/12

Representative, 

Missouri

Postal contractor not paid for vehicle repairs performed in 2010 and 

2011

While a review did not disclose employee misconduct, we confirmed 

delay in payment of outstanding invoices caused by personnel changes 

at the facility, and documented overcharges needing to be deducted 

from the balance due.

07/02/12

Representative, Ohio Intentional theft, delay, or destruction of mail under a forwarding notice Our investigation found no intentional delay or misconduct; instead, 

an error we found in automated machines used to process change of 

address (COA) cards caused two successive COAs to be processed in 

reverse order.

09/21/12

Representative, North 

Carolina

Complaint about missing parcels We found no misconduct by postal employees and were unable to 

locate the missing items, or records on them, despite searches at 

multiple locations and coordination with local authorities.

08/22/12
66 Semiannual Report to Congress

APPENDIX J

Requestor Allegation/Concern Major Findings/Resolution Closure Date

Senator, Virginia OIG investigation into a postal employee's receipt of Workers' 

Compensation

A recently completed OIG investigation reviewed the employee's 

receipt of monthly compensation checks after his return to work. 

Thereafter, the matter was handled as a disciplinary issue by postal 

management, As the inquiry presented no new issues for review, we 

found no basis to reopen or revise our previous investigative work.

06/18/12

Senator, Missouri Irregular mail delivery and missing mail Complainant's route is an auxiliary mail delivery route, which is 

assigned on a day-to-day basis to various carriers who deliver the 

route either before or after their primary route. As a result, delivery 

times will vary. Our integrity tests did not reveal timeliness or delivery 

issues.

08/15/12

Senator, Florida Failure to investigate allegations Our office forwarded the complaint and other related forms to 

postal management for review and action. Federal law enforcement 

organizations are accorded substantial investigative discretion over the 

substance and identity of the cases on which they expend their limited 

resources.

08/29/12

Representative, New 

Mexico

OIG personnel failed to respond to postal employee misconduct 

including falsification of scans, scan dates on mail, and entry of 

fraudulent information.

Our office revealed no indication of misconduct or failure to investigate 

by OIG personnel.

08/20/12

Senator, Minnesota OIG personnel failed to respond to complaint; employee has now 

suffered whistleblower retaliation

The underlying allegations did not justify a formal investigation; the 

whistleblower retaliation complaint was overtaken by administrative 

remedies the employee elected. 

09/10/12

Representative, 

California

Mail tampering by a postal employee Our investigation, including interviews and controlled tests, revealed 

no evidence or patterns of mail theft.

08/29/12

Representative, 

California

OIG should investigate circumstances of an employee being placed on 

administrative leave

We previously investigated charges and countercharges involving the 

employee and his managers and reported our findings to management. 

We determined that the OIG has no jurisdiction to intervene further in a 

personnel matter under the jurisdiction of his agency. 

09/04/12

Representative, New 

York

Misconduct, delay of mail by postal employee We determined that the employee was absent on some of the days 

when the misconduct allegedly occurred. We reported our findings to 

management.

09/10/12

Inspector General Audits/Risk Analysis Research Center Reports (8)

Requestor Allegation/Concern Major Findings/Resolution Closure Date

Representative, West 

Virginia

Management intentionally delaying mail at a Baltimore P&DC OIG produced audit NO-AR-12-006, Frederick, MD, to Baltimore, MD, 

Area Mail Processing Consolidation. OIG found that the consolidation 

initially resulted in significant delayed mail and declines in service and 

customer experience. Transportation cost also increased. 

07/05/12

Representative, Florida Request for a feasibility study into to what extent profits, efficiency, 

cost-savings, and consumer accessibility to postal services will 

increase as a result of closing 20 full-service CPUs

OIG produced audit CI-MA-12-001, Closure of Contract Postal Units. 

OIG found that the 20 CPU closures were needed to facilitate the 

2010-2015 Collective Bargaining Agreement negotiation. OIG found 

that the impact on retail alternatives was minimal. 

08/16/12

Senator, Florida Requesting audit of the consolidation of the Mid-Florida P&DC into the 

Orlando P&DC

OA added a review of this consolidation to its ongoing work on the 

future of the processing network.

04/03/12

Council Member, Los 

Angeles, California

Postal Service failure to notify the community of the closure of a 

historic Post office; failure to comply with local planning and zoning 

law

The Postal Service applied Postal Regulatory Commission rule when 

it informed the mayor, held a public hearing in April, and met with a 

neighborhood council and community members in May. In compliance 

with 39 CRF 241.4(f), the Postal Service sent plans to the principle 

inspector for the city in November 2011.

07/09/12
April 1 — September 30, 2012 67

APPENDIX J

Requestor Allegation/Concern Referred To Closure Date

Chairman, House 

Committee

Request for data/ information on the audit report, 21st Century Post 

Office

We provided documents that include the survey and survey data. 04/12/12

Representative, 

Tennessee

Requesting audit of the consolidation of the Chattanooga P&DC into 

Nashville and Atlanta P&DC

OA added a review of this consolidation to its ongoing work on the 

future of the processing network.

04/24/12

Representative, Illinois Fraudulent change to ZIP Code. Our office found no evidence of fraud by Postal Service management 

and that proper postal policies and procedures were followed leading 

up to the change in the ZIP Code, of which the constituents were 

notified in 2002.

08/16/12

Senator, Pennsylvania Concerns about several Pennsylvania plant consolidations Our review of postal work papers for the Pennsylvania locations 

confirmed that a reasonable business case existed. We saw no issues 

that should cause the Postal Service not to pursue the efficiencies 

offered by the AMPs, but noted the ultimate success is directly linked 

to management of the AMP process.

07/20/12

Inspector General General Counsel or other unit not mentioned (13)

Requestor Allegation/Concern Major Findings/Resolution Closure Date

Senator, New York OIG did not complete and remit certified mail receipts We found practices of the postal unit serving OIG headquarters 

deviated from POM 822.111. We requested the local postmaster take 

whatever administrative action necessary, and revised internal OIG 

procedures.

05/28/12

Senator, Minnesota Constituent seeking release of OIG surveillance tapes compiled during 

Workers' Compensation investigation

The FOIA Office redacted and released documents. 04/20/12

Representative, Texas Constituent seeking report developed following his whistleblower 

retaliation complaint

The FOIA Office released a redacted report of investigation. 04/11/12

Chairman, House 

Committee

Passage of the Digital Accountability and Transparency Act Courtesy letter issued. 05/01/12

Chairman, Senate 

Committee

Reaction to elements of S.1789 Courtesy letter issued. 05/01/12

Representative, South 

Carolina

The Voluntary Protection Program (VPP), a workplace safety effort, is a 

fraudulent and wasteful activity

Neither our Office of Audit or Investigations found the issues raised 

were appropriate for review.

07/30/12

Representative, Georgia Financial status of Postal Service and ways to make it solvent again OIG personnel responded. 06/06/12

Representative, 

California

FOIA request for workplace environment investigative report The FOIA Office issued a redacted report. 09/05/12

Ranking Member, 

Senate Committee

Inquiry regarding the availability of OIG staff. Assistance provided. 07/06/12

Representative, Florida Contesting removal from OIG position The employee did not provide essential documentation in support of 

claims and failed to attend required fitness exams. 

07/31/12

Chairman, House 

Committee

Inquiry regarding agency issuance of seven-day letters, and related 

issues

We reported the OIG had not issued any seven-day letters in the 

specified timeframe, but was cognizant of the requirements of the law.

08/27/12

Chairman, House 

Committee

Requests redacted copy of SEC investigation when complete. We provided the requested document. 09/19/12

Chairman, House 

Committee

Requests unredacted copy of SEC investigation when complete. Our office provided an unredacted copy of the report. 09/19/12
68 Semiannual Report to Congress

APPENDIX J

Referrals (6)

Requestor Allegation/Concern Referral to or Other Action Closure Date

Senator, Texas Postal employee request for information regarding a previous 

complaint

Referred to Department of Labor. 08/09/12

Representative, CA Mail theft, most likely by party external to the Postal Service Referred to Inspection Service for review and response. 05/16/12

Senator, CT Inquiry regarding post office reduction in service hours to match with 

customers' use of the facility

Referred to U.S. Postal Service, Government Relations Office (GRO) for 

review and response.

07/27/12

Council Member, NY Improper mail handling Referred to GRO for review and response. 07/27/12

Representative, New 

Jersey

Postal management misconduct An earlier investigation did not find evidence of misconduct; we 

referred the inquiry to postal management for action deemed 

appropriate.

08/17/12

Representative, 

California

Whistleblower reprisal and management misconduct The allegations did not meet the requirements of whistleblower 

reprisal, but some issues may raise employment matters with 

administrative remedies available. Referred to GRO for review and 

response.

09/19/12
April 1 — September 30, 2012 69

FREEDOM OF INFORMATION ACT/ WORKPLACE ENVIRONMENT

Requests Number of Requests

Carryover from prior period 17

Received during period 270

Total on hand during period 287

Actions Number of Requests

Processed during the period 256

 Requests denied in full 9

 Requests denied in part 80

 Requests granted in full 15

 No records 17

 Requests referred 39

 Requests withdrawn 9

 Fee-related reasons —

 Records not reasonably described —

 Not a proper FOIA request for some other reason 19

 Not an agency record 67

 Duplicate request 1

Balance Number of Requests

Balance at the end of the period (pending) 31

Processing Days Number of Days

Median processing days to respond to a FOIA request 6

SUPPLEMENTAL INFORMATION

Freedom of Information Act

The OIG’s Freedom of Information Act (FOIA) Office operates independently 

of, but frequently coordinates with, its counterparts at the Postal Service and 

the Postal Inspection Service. The FOIA Office receives requests for records 

from the public, the media, and postal employees. The FOIA, according to 

the Department of Justice, “generally provides that any person has a right, 

enforceable in court, to obtain access to federal agency records, except to 

the extent that such records (or portions of them) are protected from public 

disclosure by one of nine exemptions.”

For the period April 1 — September 30, 2012

SUPPLEMENTAL INFORMATION

Workplace Environment

The OI Workplace Environment unit reviews workplace environment and 

operational issues that may affect workplace climate in postal facilities 

through the country. The OIG Hotline is the usual source for the complaints, 

but occasionally members of Congress, the Governors, and postal 

management will raise concerns or forward complaints appropriate for 

review by the unit. Complaint topics range from sexual harassment and 

discrimination to workplace safety. Workplace Environment reviews are 

designed to identify systemic, rather than individual, issues and foster 

postal management efforts toward providing employees a stress- and 

adversity-free work environment.

The unit accepts complaints from any postal employee, including OIG 

and Postal Inspection Service staff. Reviews may result in fact-finding 

reports to management or referral for specific suggested action, such as 

climate assessments. 

Activities

For the period October 1, 2011 - March 31, 2012

Complaints Received Total

Carryover from prior period 18

Complaints received from OIG Hotline, Congress, governors, 

management, internal, and other

237

Total on hand during this period 255

Workplace Environment Actions Total

Complaints reviewed and closed during the period 226

Referred to Postal Inspection Service 1

Referred to Office of Audit —

Referred to Office of Investigations 2

Referred to Workplace Environment 32

Referred to Hotline 5

Referred to Summary of findings to Congress/BOG/Postal 

Service Management

36

Referred to FOIA —

Referred to AIG for Investigations —

Referred to Database for statistical analysis and possible 

systemic review

147

Complaints pending at the end of the period 3
70 Semiannual Report to Congress

ACRONYM GUIDE

APPS: Automated Package Processing System

APWU: American Postal Workers Union

C&A: certification and accreditation

CSRS: Civil Service Retirement System

CSS: customer service supervisor

DBCS: Delivery Barcode Sorter

DOL: U.S. Department of Labor

DEA: Drug Enforcement Administration

DWC: distribution window clerk

eCBM: Electronic Conditional Based Maintenance

EDDI: Electronic Data Distribution Infrastructure

EDI: Electronic Data Interchange

EIR: Enterprise Information Repository

FEGLI: Federal Employees’ Group Life Insurance

FEHB: Federal Employees Health Benefits

FSS: Flats Sequencing System

GMU: George Mason University

HCR: highway contract route

LLV: long-life vehicles

MTE: mail transport equipment

NALC: National Association of Letter Carriers

NCSC: National Customer Support Center

NDC: network distribution center

NPV: net present value

OA: Office of Audit

OI: Office of Investigations

OWCP: Office of Workers’ Compensation Programs

P&DC: processing and distribution center 

P&DF: processing and distribution facility

PAEA: Postal Accountability and Enhancement Act of 2006 

(also known as the Postal Act of 2006)

PKI: Public Key Infrastructure

PRC: Postal Regulatory Commission

PVS: Postal Vehicle Services

RARC: Risk Analysis Research Center

SBOC: Stations and Branches Optimization Consolidation

SSA: sales and services associate

TACS: Time and Attendance Collection System

VMF: Vehicle Maintenance Facility

Acronym Guide

Here is a quick guide to acronyms used in this reporting period.

© 2012. USPS. All Rights Reserved. The following are among the many trademarks owned by the United States Postal Service: United States Postal Service®, United States Postal Service® 

with Eagle Design, U.S. Postal Service®, USPS®, First-Class Mail®, usps.com®, Click-N-Ship®, Automated Postal Center®, APC®, Express Mail®, Priority Mail®, Standard Mail®, Parcel 

Post®, Media Mail®, Customized MarketMail®, Intelligent Mail®, Parcel Select®, Express Mail International®, Quick, Easy, Convenient®, United States Postal Service Office of Inspector 

General® with Eagle Design, Post OfficeTM, Postal ServiceTM, Signature ConfirmationTM, Certified Mail®, Delivery ConfirmationTM, Registered MailTM, ZIP CodeTM, Priority Mail International®, 

First-Class Mail International®, Premium Forwarding Service®, Forever®, gopost®, Priority Mail Flat Rate®, DMM®, PostalOne!®, USPS Delivery Confirmation®, Approved by the Postmaster General®, and Postmaster GeneralTM. 
The U.S. Postal Service has two law enforcement agencies with distinct areas of investigative 

responsibility to serve the needs of stakeholders, postal employees, and the American public.

Who do I call?

Postal Inspection Service

■■ Security of employees, facilities, and equipment

■■ Revenue and postage fraud

■■ International mail security

■■ Violent crimes: 

- Threats and assaults of employees 

- Burglaries and robberies

■■ Mail theft by nonemployees

■■ Dangerous mail and bombs

■■ Mail fraud

■■ Identity theft

■■ Narcotics in the mail

■■ Child pornography and obscenity

Office of Inspector General

■■ Theft, delay, or destruction of mail 

by employees and contractors

■■ Workers’ compensation fraud

■■ Embezzlements and financial crimes

■■ Contract fraud

■■ Kickbacks

■■ Computer crimes

■■ Narcotics

■■ Employee misconduct

■■ Internal affairs and executive investigations

■■ Whistleblower reprisals

Contact: 888-877-7644

www.uspsoig.gov

Contact: 877-876-2455

http://postalinspectors.uspis.gov
U.S. POSTAL SERVICE OFFICE OF INSPECTOR GENERAL 

1735 N. Lynn Street, Arlington, VA 22209-2020 

1-888-USPS-OIG (1-888-877-7644) Fax: 703-248-2291 www.uspsoig.gov