Office of Inspector General

Semiannual Report to Congress

April 1 — September 30, 2010
The mission of the U.S. Postal Service Office of Inspector General (OIG) 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.

 Keep the Governors, Congress, and Postal Service management informed of problems, 

deficiencies, and corresponding corrective actions.

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

ending September 30, 2010. 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 OIG counterparts to identify problems and collaborate on 

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

165 audit reports and management advisories, and the Postal Service accepted 94 percent (141 of 149) of the 

OIG’s significant recommendations.

In addition, we conducted 1,991 investigations that led to 453 arrests and more than $672 million in fines, 

restitutions, and recoveries, of which more than $27 million went to the Postal Service. 

The Postal Service has reached a critical point in its history. It faces tremendous challenges to remain financially 

sound and meet its mission. 

While the Postal Service is finding its role in the digital age, there are near-term actions needed for sustainability 

and to increase its readiness to enter a period of change. These include optimizing the network of plants and Post 

Offices; assessing the cost-effectiveness of contracts; improving internal controls in financial systems, resolving the 

benefit program inequities; offering new postal product and services 

In September, we issued a report that summarizes the results of four OIG reports identifying overfunding issues in 

employees’ and retirees’ benefit funds. If our proposals to recover the overfunded amounts were placed in effect, the 

Postal Service could potentially recover $142.4 billion. In addition, the Postal Service would no longer need to make 

the required payments to the Postal Service Retiree Health Benefits Fund (retiree health fund) — an average of 

$5.6 billion per year.

The Postal Service can use these reports to come up with a legislative strategy when working with Congress, the 

Office of Personnel Management (OPM), and the Office of Management and Budget (OMB) to develop a fiscally 

responsible legislative proposal granting relief from the Postal Accountability and Enhancement Act (Postal Act of 

2006) requirements to prefund retiree health benefits.

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

a key role in helping to maintain 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

A MESSAGE FROM THE INSPECTOR GENERAL
SUMMARY OF PERFORMANCE

April 1 — September 30, 2010

AUDITS

Reports issued 165

Significant recommendations issued 149

Total reports with financial impact 43

Funds put to better use $11,502,017,298 

Questioned costs1 $57,179,926,121 

Revenue Impact $1,956,617,687 

TOTAL FINANCIAL IMPACT2 $ 70,638,561,106

INVESTIGATIONS3

Investigations completed 1,991

Arrests 453

Indictments/informations 466

Convictions/pretrial diversions4 507

Administrative actions 1,096

Cost avoidance $126,185,995

Fines, restitutions, and recoveries5 $ 672,064,407

Amount to Postal Service $27,117,893

OIG HOTLINE CONTACTS

Telephone calls 45,332

E-mail 13,524

Virtual Front Office calls 9,156

Standard Mail 1,071

Voice mail messages 513

Facsimile – FAX 385

National Law Enforcement Communications Center 282

TOTAL CONTACTS 70,263

1

 Includes unsupported costs of $5,919,236,174.

2

 The Postal Service agreed to recommendations or proposed alternative corrective actions that, if implemented, could result in more than 

$70 billion in savings.

3

 Statistics include joint investigations with other law enforcement agencies.

4

 Convictions reported in this time frame may be related to arrests made in prior reporting periods. 

5

 Amount under fines, restitution, and recoveries.
TABLE OF CONTENTS

OFFICE OF AUDIT..............................................................................................................2

Audit Work by Risk Category......................................................................................................................................... 3

Strategic Risk .............................................................................................................................................................. 3

Financial Risk .............................................................................................................................................................. 8

Operational Risk......................................................................................................................................................... 11

OFFICE OF INVESTIGATIONS ...........................................................................................18

Financial Crimes........................................................................................................................................................ 19

Workers’ Compensation Fraud.................................................................................................................................... 21

Delay, Destruction, and Theft of Mail by Employees...................................................................................................... 22

Contract Fraud........................................................................................................................................................... 23 

Official Misconduct .................................................................................................................................................... 24

Executive Investigations and Internal Affairs................................................................................................................. 25

SPECIAL FEATURES..........................................................................................................3

Pension / Retirement / Health Benefits / CSRS Overpayment .......................................................................................... 3

Financial Implications of Declining Mail Volumes............................................................................................................ 9

An Assessment of Worksharing................................................................................................................................... 13

A Framework to Optimize the Retail Network................................................................................................................ 15

Data Mining Successes.............................................................................................................................................. 17

Financial Fraud Awareness Posters Distributed to All Postal Facilities ............................................................................ 20

APPENDICES..................................................................................................................26

APPENDIX A — Reports Issued to Postal Service Management..................................................................................... 27

Reports with Quantifiable Potential Monetary Benefits ......................................................................... 28

Report Listing.................................................................................................................................... 31

APPENDIX B — Findings of Questioned Costs............................................................................................................. 34

APPENDIX C — Recommendations That Funds Be Put to Better Use............................................................................. 35

APPENDIX D — Reported Non-monetary Benefits........................................................................................................ 36

APPENDIX E — Reports with Significant Recommendations Pending Corrective Actions................................................. 38

APPENDIX F — Significant Management Decisions in Audit Resolution ......................................................................... 54

APPENDIX G — Status of Peer Review Recommendations............................................................................................ 55

APPENDIX H — Investigative Statistics........................................................................................................................ 56

APPENDIX I — Summary of U.S. Postal Inspection Service Investigative Activities Under Title 39 USC 3005 & 3007....... 57

APPENDIX J — Closed Congressional and Board of Governors’ Inquiries....................................................................... 58

SUPPLEMENTAL INFORMATION ......................................................................................65

Freedom of Information Act......................................................................................................................................... 65

Workplace Environment.............................................................................................................................................. 65

Acronym Guide .......................................................................................................................................................... 66
OFFICE OF AUDIT
April 1 — September 30, 2010 | 3 

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 be effective and efficient, and ensure that its products 

and services are self-sustaining and balance legal 

considerations and stakeholder views. The following audit 

work addresses strategic risk issues. 

Postal Accountability and Enhancement Act 

Price Cap Impacts 

The Postal Accountability and Enhancement Act (Postal 

Act of 2006) expedited the rate-making process and 

introduced price predictability; however, the act impacts the 

Postal Service’s ability to appropriately cover costs within 

certain mail classes and provide sufficient profit margins to 

cover institutional costs. While the act provided additional 

flexibility in managing product lines, some of its objectives, 

factors, and requirements are contradictory and present a 

compliance challenge for the Postal Service. One mandate 

requires each class of mail to cover its cost, while another 

mandate limits rate increases to the change in inflation, 

which was negative in FY 2009. In the current environment, 

the price cap is particularly daunting when there is no 

inflation and mail volume is declining. Specifically, seven 

domestic market-dominant products and services did not 

cover their costs or contribute to covering institutional 

costs in FY 2009. Revenue loss resulting from these seven 

products could total about $1.5 billion in FY 2010. Even if 

AUDIT WORK BY RISK CATEGORY

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. 

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 

or partially agreed with our 

recommendations and is 

taking or has already taken 

corrective action to address 

the issues raised.

Pension / Retirement / Health Benefits / CSRS Overpayment

The Postal Service is currently facing severe fiscal challenges. Congress recognizes these challenges and the issues 

associated with prefunding certain liabilities and urged the Postal Service to coordinate with the U.S. Office of Personnel 

Management (OPM) and the Office of Management and Budget (OMB) to develop a fiscally responsible legislative 

proposal granting a limited measure of relief from the Postal Act of 2006. 

The OIG issued reports identifying overfunding in the pension and retiree health care funds that the Postal Service can 

use when working with OPM and OMB. If proposals to recover the overfunded amounts were placed in effect, the Postal 

Service could potentially recover $142.4 billion. In addition, the Postal Service would no longer be required to prefund 

the Postal Service Retiree Health Benefits Fund (retiree health fund) at an average of $5.6 billion per year. Also, the 

Postal Service could prefund pensions and retirees’ health benefits at benchmarked levels, pay existing retirees’ health 

insurance premiums from the retiree health fund, and extinguish its debt to the U.S. Department of the Treasury. Further, 

the proposals could provide significant levels of cash for operations and allow the Postal Service to continue optimizing 

its infrastructure at a more reasonable pace and minimize the impact on current employees. These proposals include the 

following:

 Recover the $75 billion overfunding to the Civil Service Retirement System (CSRS) and use the funds to extinguish the 

Postal Service’s $10 billion debt to the treasury and finance retiree health care.

 Reduce prefunding levels to benchmarked standards of 80 percent for pensions and 30 percent for retiree health 

care.

 Recover overfunding of Federal Employees Retirement System (FERS) pension contributions of $5.5 billion.

 Reduce the projected health care inflation rate to the industry standard of 5 percent.

Addressing these issues would significantly improve the Postal Service’s financial condition, and allow it to continue its 

transformation envisioned by the Postal Act of 2006.

STRATEGIC RISK
4 | Semiannual Report to Congress

management had used all its available banked-rate authority 

in FY 2009, the Postal Service could have captured only 

about $1.75 million of the $1.5 billion revenue shortfall.

Allowing the Postal Service to apply the price cap to a 

larger base, such as the market-dominant level instead 

of each mail class, would give additional flexibility for 

the Postal Service to cover the cost of its products and 

services. If the increase in inflation in FY 2008 was 

applied to the market-dominant category as a whole for 

the FY 2009 price increase, the Postal Service could have 

generated additional revenue of about $424 million.

Management took corrective action to convey a legislative 

change request to the oversight committees to change the 

application of the price cap from individual mail classes 

to the market-dominant basket as a whole. However, 

management disagreed with the recommendation to 

provide a detailed transparent plan with established 

milestones for each product to cover costs, stating that 

such a plan would pre-suppose the actions of the Board of 

Governors which has a statutory duty to balance all relevant 

considerations in establishing prices.

Revenue Generation

The Postal Service has the opportunity to generate 

additional revenue by offering new postal and non-postal 

products and services. The combination of transactions 

moving to the Internet and the recent recession has led to 

an unprecedented decline in mail volume and a resulting 

decline in revenue for the Postal Service. Additionally, 

the Postal Act of 2006 prohibits the Postal Service from 

offering nonpostal products and services.

We suggested 10 strategic opportunities for the Postal 

Service to generate additional revenue from new postal 

and nonpostal products and services. The Postal Service 

should further evaluate these opportunities to diversify 

by expanding its product and service offerings to ensure 

its financial viability. While several of the recommended 

changes may require legislative changes, implementing 

these suggestions could result in $9.7 billion in additional 

revenue for the Postal Service annually, while providing 

improved service to its customers. 

Stations and Branches Optimization

To assess the Stations and Branches Optimization 

Consolidation (SBOC) Initiative to consolidate retail facilities, 

we reviewed some of the 3,600 stations and branches 

under the administration of main Post Offices. The Postal 

Service uses one closure process for Post Offices and 

another for stations and branches. Both federal law and 

Postal Service policies set forth regulations and procedures 

to close a Post Office. In contrast, the Postal Service uses 

an expedited process to close stations and branches, which 

are not specifically covered by statute. 

Auditors concluded the SBOC Initiative is a viable option 

for the Postal Service to reduce costs in the retail 

network, but opportunities exist to improve the process. 

Specifically, the Postal Service could improve SBOC 

Initiative communication and coordination with stakeholders 

to develop accurate and reliable facility data. In addition, 

the Postal Service needs to raise stakeholders’ confidence 

that it will make decisions in a transparent, equitable, and 

fact-based manner by integrating a strategic approach and 

establishing clear criteria for evaluating closure decisions. 

STRATEGIC RISK

Revenue Generation Opportunities

Products/Services That Can Be Offered Under Current Legislation

 1 Unaddressed mail service.

 2 Post Office box customer information.

 3 Selling advertising space in Postal Service outlets and on delivery vehicles.

 4 Enhanced online ordering and package delivery.

Products/Services That May Require Legislation Change

 5 Digital identity; secure e-mail service.

 6 Comprehensive micro-logistics service provider.

 7 Entertainment: DVD/video games fulfillment.

 8 In-person service center for community and government services.

 9 Bill payment at Postal Service outlets.

10 Banking services.

Based on feedback from industry representatives and international posts, we identified 10 potential revenue generating opportunities that 

could result in significant revenue impact in the long term. Note: While some initiatives may not be feasible in the short term due to the 

Postal Service’s current financial situation, they could represent significant revenue potential in the long term.
April 1 — September 30, 2010 | 5 

STRATEGIC RISK

Processing & Distribution Center 

Consolidations 

Following are summaries of audits on area mail processing 

consolidations requested by congressional representatives 

whose concerns included possible transfer or loss of jobs, 

continued effectiveness of mail operations, continued 

quality of service, justifiable cost savings and adequate 

efficiency methods in place, and public transparency. The 

representatives asked the OA to determine whether the 

Postal Service had a valid business case for consolidating 

mail processing operations at the following locations. 

Lima, OH, Processing & Distribution Facility. We 

determined that a business case exists to support 

consolidating the Lima, OH, Processing and Distribution 

Facility’s (P&DF’s) mail operations into the Toledo P&DC 

mail operations. Specifically, we found that sufficient 

capacity exists at the Toledo P&DC to process the Lima 

P&DF’s mail volume. In addition, customer service was 

expected to be maintained, no employees would lose 

their jobs, and mail processing efficiency was expected 

to improve. Furthermore, prior consolidation of the Lima 

P&DF’s Saturday outgoing mail volumes into the Toledo 

P&DC’s outgoing mail volumes over the past 6 years 

has produced favorable results. We determined that 

management needs to better communicate the effects of 

and reasons for the proposed consolidation, and address 

physical security concerns at the Toledo P&DC.

Dallas P&DC Outgoing Mail Consolidation. We found 

that adequate capacity existed at the North Texas P&DC to 

process the increase in mail volume from the Dallas P&DC, 

and substantial savings could be gained. Management 

agreed with our recommendations and is taking steps to 

consolidate the Dallas P&DC outgoing mail operations into 

the North Texas P&DC by FY 2011. 

Area and District Field Structure

The Postal Service has significant opportunities to reduce 

costs by consolidating its field structure. Management 

should develop a comprehensive plan to guide future field 

structure decisions and explore the viability of relocating 

area offices to headquarters. At a minimum, this plan would 

provide a method to evaluate and define an economic, 

efficient, and effective field structure to oversee the Postal 

Service’s universal service mission. 

Although the Postal Service recently consolidated one 

area and six district offices, we identified the following 

three other options, done separately or in combination, to 

consolidate its field structure further:

 Eliminate 14 offices by consolidating districts that have 

offices within 50 miles of another district office.

 Eliminate four area and 32 district offices by 

consolidating those offices whose workhours and mail 

volume are both below the mean mail volume and 

workhours.

 Eliminate duplicative staff positions and better 

position area management to work strategically 

with headquarters by relocating all area offices to 

headquarters.

The Postal Service currently has eight area and 74 district offices as depicted on this current Postal Service map.

Alaska

Dakotas

Big Sky

Arizona

Portland

Seattle

Central Plains

Colorado/Wyoming

Salt Lake City

Northland

Nevada-Sierra

Hawkeye

Mid-America

Dakotas

Big Sky

Arizona

Portland

Seattle

Central Plains

Colorado/Wyoming

Salt Lake City

Northland

Nevada-Sierra

Hawkeye

Mid-America

Caribbean

Albany

Northern New England

Westchester

Connecticut 

Valley

Northern New England

Greater Boston

SE New England

Northern New Jersey Long Island

Triboro

New York

Kentuckiana

Appalachian

Cincinnati

Columbus

Northern

Ohio

Central 

Pennsylvania

Western 

Pennsylvania

Western 

New York

South 

Jersey

Kentuckiana

Appalachian

Cincinnati

Columbus

Northern

Ohio

Central 

Pennsylvania

Western 

Pennsylvania

Western 

New York

South 

Jersey

Philadelphia Metro

Honolulu

San Diego

Sierra Coastal

Sacramento

Diego

San Francisco

Bay-Valley

Santa Ana

Los Angeles

Albuquerque

Rio Grande

Fort Worth

Oklahoma

Arkansas

Dallas

Louisiana

Houston

Albuquerque

Rio Grande

Fort Worth

Oklahoma

Arkansas

Dallas

Louisiana

Houston

Alabama Mississippi

Tennessee

South Georgia

Atlanta

Suncoast

North Florida

Alabama Mississippi

Tennessee

South Georgia

Atlanta

Suncoast

North Florida

South Florida

Lakeland

Gateway

Central Illinois Greater 

Indiana

Greater 

Michigan

Lakeland

Gateway

Central Illinois

Detroit

Greater 

Indiana

Greater 

Michigan

Northern Illinois

Southeast 

Michigan

Chicago

Greensboro

Richmond

Mid-Carolinas

Greater So Carolina

Baltimore

Capital

Greensboro

Richmond

Mid-Carolinas -

Greater So Carolina

Baltimore

Capital

Western Area Northern Virginia

Pacific Area

Great Lakes Area

Eastern Area

Southeast Area

Northeast Area

Capital 

Metro 

Area

Southwest Area
6 | Semiannual Report to Congress

STRATEGIC RISK

We could not fully evaluate the effectiveness of the recent 

area and district consolidations because consolidations 

were limited and management did not have documentation 

of the data used to make the decisions. However, the 

headquarters, area, and district management staff we 

interviewed believed that the consolidations went smoothly 

and did not negatively impact operations.

Benchmarking with Presort Bureaus

We benchmarked letter and flat-mail processing at the 

Postal Service with some presort bureaus. As background, 

a presort mailer sorts its own mail in ZIP Code order before 

presenting the mail to the Postal Service. A presort bureau 

presorts and commingles mail for other companies. Some 

larger presort bureaus have equipment similar to the 

Postal Service’s and provide an opportunity to identify best 

practices in mail processing operations. 

We determined that presort 

bureaus are better able to handle 

fluctuations in mail volume and 

economic changes because they 

used a standardized process 

when notifying employees of 

network changes, such as plant 

closures. Additionally, presort 

bureaus are not subject to binding 

union contracts. We observed 

the consistent use of automated 

and mechanized tray takeaway 

systems at presort facilities and 

little dependence on the manual 

movement of trays; while at 

postal facilities, we observed 

employees moving trays manually 

between processing operations, 

sometimes bypassing automated 

or mechanized alternatives. 

Presort managers at presort 

bureaus, base workforce 

schedules on mail volume, 

have employees cross crafts 

between processing and mail 

handling, and generally pay 

their employees lower wages 

than the Postal Service pays its 

employees. Conversely, Postal 

Service employees work full-time 

schedules independent of volume 

availability and do not cross 

crafts. Increasing workforce 

scheduling flexibilities and 

developing multi-functional employees could decrease the 

Postal Service labor costs.

Delivery Barcode Sorters Equipment 

Utilization

Delivery Barcode Sorter (DBCS) standard operating 

procedures recommend using mail volume levels when 

determining staffing and the number of machines to 

operate. The procedures outlined in these standards are 

key to reducing excess capacities or overproduction, 

increasing productivity, and controlling costs. However, we 

found that in the Capital Metro Area, plants routinely staff 

and operate DBCS machines unnecessarily using traditional 

approaches. DBCS excess capacities exist because plants 

in the Capital Metro Area do not adhere to work distribution 

standards. We determined that the Capital Metro Area could 

have deactivated 55 of its 72 DBCS machines during FYs 

2008 and 2009, respectively, and still have met service 

requirements. Deactivating excess DBCS machines would 

have saved the Capital Metro Area several million dollars 

annually.

Facility Optimization

We audited the New York, Northern New Jersey, and 

Chicago districts to assess whether the Postal Service has 

additional facility optimization opportunities for the Postal 

Service. We found that in these districts, the Postal Service 

has 5.1 million square feet in excess of what the current 

workload suggests is needed. 

The Postal Service has the option to optimize excess real 

property through selling property, leasing owned property, 

subleasing property, or investing in real estate projects. 

While the Postal Service made progress in optimizing its 

existing space, it can do more to dispose of excess interior 

space in a timelier manner. While management agreed 

to update its disposal process and implement metrics to 

better manage excess space; management did not agree 

with the amount of excess space or the potential monetary 

impact reported.

We also conducted an audit of the Postal Service process 

for selling real estate assets. We found that the Postal 

Service did not optimize its revenue on real estate sales 

because internal controls over real estate disposals needed 

strengthening. We determined that the Postal Service 

needed to update procedures to include a net present value 

(NPV) or cost benefit comparison of alternatives prior to the 

sale of real estate assets. Further, enhancing procedures 

that govern optimization by designating scenarios and 

exceptions that may apply in the sale of properties 

was needed. Management agreed to enhance facility 

optimization tools to include net present value comparisons 

Highlighting excess space in the New York District, these photos 

depict two facilities with excess interior space. The Morgan 

P&DC, top photo, is a Postal Service-owned plant with three 

vacant floors. The Radio City Station, bottom photo, is another 

owned facility, which houses delivery and retail operations with 

one vacant floor. Both are located near other Postal Service 

facilities also maintaining excess space.
April 1 — September 30, 2010 | 7 

STRATEGIC RISK

of optimization alternatives. In addition, management 

recently revised the charter for the Realty Asset Executive 

Committee to clarify its purpose and strengthen its scope.

Delivery Vehicle Replacement Strategy

The majority of the Postal Service’s long-life vehicles 

(LLV) delivery fleet is nearing the end of its 24-year life 

expectancy. Due to limited capital resources, the Postal 

Service has delayed its planned purchase of delivery 

vehicles until FY 2018; however, the Postal Service is 

expected to continue to face the same capital challenges at 

that time. 

We assessed whether the Postal Service has a viable and 

effective vehicle replacement strategy and found that the 

Postal Service has successfully maintained its LLV delivery 

vehicle fleet in safe working condition for more than 20 

years. They attribute this success to a robust preventive 

maintenance program, as well as a “fix as fails” strategy 

that we found to be operationally viable and generally cost 

effective. 

However, analysis of delivery vehicle costs shows that 

this strategy would not be cost effective for fleet vehicles 

the Postal Service will have to replace soon. These 

vehicles consist of 19,257 LLVs, with an average annual 

maintenance cost in excess of $5,600 for FYs 2008 and 

2009. Incurring maintenance costs at this rate, the “fix as 

fails” strategy costs $342 million more than it would cost to 

purchase new vehicles. We recommended that the Postal 

Service replace maintenance-intensive vehicles beginning 

in FY 2011, reemphasize service life and maintenance 

reinvestment guidelines to vehicle maintenance and district 

managers, and monitor maintenance-intensive delivery 

vehicles at the area level. 

Flats Sequencing System

We conducted the following audits related to Flats 

Sequencing System (FSS) machines that sort flat mail 

(oversized letters, magazines, advertisements, and so forth) 

in delivery order.

Program Status and Projected Cash Flow. On two 

previous occasions, the FSS failed to meet contract 

performance requirements. The Postal Service continued 

to work with the supplier to improve system performance 

and reliability at the Dulles, VA, Processing Center. The 

audit found that the Postal Service’s revised performance 

projections do not use current actual machine performance 

and the projected gain of at least $872 million from the 

FSS appears optimistic. In addition, significant changes in 

assumptions for FSS machines and measurement criteria 

have been made since the original investment approval. 

These changes make it challenging for the Postal Service to 

measure project success. 

We recommended that the Postal Service use actual 

machine performance and operational target data to 

more accurately report the progress of the FSS program’s 

financial outcomes in compliance reports such as the 

Investment Highlights report. Management agreed with 

the recommendation to use actual machine performance 

data for compliance reports, but took exception to certain 

findings and our recommendation to use operational target 

data. Management included financial outcomes based on 

actual performance in the Quarter III investment highlights 

report.

Operational Issues. We assessed the effects of the FSS on 

delivery operations in the Columbus, OH, and Mid-America 

Districts. We found five Columbus and six Mid-America 

District delivery units improved delivery operations during 

the FSS full production implementation. Columbus units cut 

operating costs by more than 

$500,000 and Mid-America 

units cut operating costs by 

more than $600,000. Both 

districts reduced city carrier 

office hours, manual distribution 

clerk workhours, and city carrier 

routes. 

Although the FSS improved 

delivery operations, the 

delivery units in each district 

received more than 8.5 million 

flat mailpieces that were not 

processed on the FSS because 

the mailpieces did not meet flat 

mail automation requirements. 

Also, each district received about 

2 million mailpieces that were 

not carrier routed and required 

manual sorting and casing to put 

them in delivery walk sequence. 

As a result, the Postal Service 

missed the opportunity to further 

reduce workhour costs. 

Postal Service Patent 

Management

Intellectual property is an 

intangible property created by 

individuals or organizations 

that can be owned, transferred, 

leased through licensing 

agreements, divided or 

Postal Service vehicles are being completely reassembled to include 

frame, engine, transmission, and body shell. Available data shows 

613 vehicle frames were replaced in FY 2008 and 2,250 frames in 

FY 2009.

26%

74%

Under $3,500

$3,500 and over

2009 Percent of Total Vehicles

Under $3,500

$3,500 and over

2009 Percent of Maintenance Cost

51% 49%

 Total Vehicles and Maintenance Costs
8 | Semiannual Report to Congress

improved. A patent is a protection of intellectual property. 

Properly managed, patents can be used to negotiate 

contracts and business deals, resolve disputes, enhance 

market share, and produce revenue. The Postal Service’s 

general counsel identifies and protects its intellectual 

property. To assess the commercial significance of Postal 

Service patents, we contracted with an intellectual property 

management company to perform an initial evaluation of 

three of the 97 U.S. patents identified as active and owned 

by the Postal Service. For the selected patents, we found 

the opportunity to leverage patents to generate significant 

new revenue. 

eIDEAS Timeliness and Transparency

The eIDEAS program is a web-based application that allows 

Postal Service employees to submit ideas online or at one 

of the kiosks located in processing plants. We determined 

that the eIDEAS program was not timely and management’s 

resulting actions were not transparent. The eIDEAS program 

guide stipulates that evaluators assess ideas within 7 days 

of submission, but level 1 evaluators took more than 

2 years to process employee ideas, while level 2 and level 

3 evaluators took more than 1 year and almost 7 months, 

respectively, to process ideas. While the number of ideas 

submitted has grown by 26 percent from FYs 2004 to 

2009, the number and value of awards has declined by 

more than 88 percent. Furthermore, a survey of employees 

who submitted ideas, revealed that untimely evaluations, 

insufficient management commitment and communication, 

and insufficient program transparency were perceived as 

inhibitors to the program’s success. 

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 cost-effectiveness of contracts, and improving internal 

controls in financial systems, processes, and benefit 

programs.

The Postal Service faces a critical financial risk as it, like 

other companies, deals with the economic slowdown 

affecting the nation. While the Postal Service made 

progress in reducing costs, the possibility of further 

declines in volume mean that it is still confronted by a 

major challenge to find ways to cut costs and increase 

revenues

Contracting Issues

During this reporting period, we assessed Postal Service 

controls over contract payment terms, noncompetitive 

contracts, and Electronic Data Interchange (EDI) contract 

payments. We found opportunities for improvement in 

controls in all areas.

Contract Payment Terms. We assessed whether the 

Postal Service receives consideration when contract 

payment terms are less than net 30 days to compensate 

for the opportunity cost associated with early payment. The 

Postal Service did not receive early payment consideration 

for 10 of 14 contracts reviewed. The 10 contracts totaled 

nearly $9 billion; consequently, the Postal Service incurred 

an opportunity cost of $19.3 million. Management agreed 

with the recommendation to revise the Postal Service’s 

guidance to include the business rationale and associated 

documentation in the contract file when less than 30-day 

payment terms are negotiated. However, management 

disagreed with the finding and monetary impact, stating 

that the Postal Service received value in other ways during 

negotiations for the contract reviewed.

Noncompetitive Contracts. At the request of Senators 

Susan M. Collins (ME) and Claire McCaskill (MO), we 

assessed Postal Service compliance with its policies 

controlling noncompetitive contracts, and compared them 

with Federal Acquisition Regulation (FAR) policies and 

private sector practices. Congress directed the Postal 

Service to operate outside of the federal procurement 

regulatory environment for efficiency. Although this 

provided increased contracting freedom and flexibility, 

necessary safeguards to balance these freedoms and 

ensure protection of the Postal Service’s interests were 

not consistently established or followed. While the Postal 

Service has recently strengthened its noncompetitive 

FINANCIAL RISK

 eIDEAS Submissions and Awards Given

Since FY 2004, the number of eIDEAS submissions has increased and the number of awards has 

decreased, along with the corresponding payouts.
April 1 — September 30, 2010 | 9 

FINANCIAL RISK

purchasing policy, additional controls are needed to 

ensure that the Postal Service’s interests are protected. 

Specifically, steps need to be taken to: 

 Strengthen the oversight and transparency of the Postal 

Service’s noncompetitive purchasing.

 Maximize competition.

 Ensure best value. 

 Avoid any actual or apparent conflicts of interest in the 

contracting process. 

We also found that the Postal Service cannot readily 

identify its noncompetitive contract universe and was not 

consistently complying with existing controls for justifying 

and approving noncompetitive contracts. 

Electronic Data Interchange Contract Payments.

We audited the controls over EDI payments for Highway 

Contract Route (HCR), utility and telecommunication 

invoices to assess whether Postal Service officials properly 

certified electronic payments to ensure that goods and 

services are received prior to payment. We found that 

Postal Service officials need to improve their oversight of 

electronic payments and that they did not certify about 

$5.6 billion in electronic payments. Our audit also found 

$7.6 million in HCR contract payments made more than 

30 days after the contract closed and $1.2 billion in HCR 

payments made without an assigned contracting officer to 

oversee them. 

Management did not state agreement with our 

recommendation to develop an oversight mechanism, 

and to identify contracting officers and notify them to 

oversee and administer HCR payments. They did, however, 

plan to take corrective actions. 

Management disagreed with our 

recommendation to develop and 

implement written procedures 

for receiving invoices for annual 

HCR services and verifying that 

services were rendered prior to 

payment. Management said the 

Postal Service has a streamlined 

payment process in place for 

HCR contracts and a system to 

automatically pay HCR suppliers 

at contracted rates. Management 

believes they have adequate 

compensating controls in place. 

However, management did say 

they would work to strengthen the 

control process. 

Maximizing the CostEffectiveness of Contracts

On behalf of OA, the Defense Contract Audit Agency 

conducted 11 contract-related audit reports covering 

various Postal Service contracting activities during the 

reporting period. These audits identified unsupported 

and questioned costs of $511,906. This information was 

provided to contracting officers for their consideration 

in negotiating the best terms for the Postal Service and 

to effectively manage contract terms. The following are 

examples of this work:

 An audit of labor costs on a contract for the National 

Customer Support Center disclosed more than $500,000 

in unsupported questioned costs. The contractor could 

not provide resumes for 24 of their employees and 

RISK ANALYSIS RESEARCH CENTER

The OIG’s Risk Analysis Research Center (RARC) 

conducts in-depth research and analysis, clarifies 

complex postal issues, and informs current debates 

about postal policy by facilitating the interchange 

of ideas. The team also conducts economic and 

academic studies as well as coordinates guest 

lectures by experts in the postal community. The 

RARC research group has three separate teams, 

Mission Operations, Support Operations, and 

Financial Operations. Some of the issues covered in 

RARC whitepapers have included the CSRS pension 

responsibility, worksharing, financial implications of 

declining mail volumes, pricing policies in a Postal 

Accountability and Enhancement Act environment, and 

optimizing the postal retail network.

Financial Implications of Declining Mail Volumes 

Annual mail volume peaked in 2006 at 213 billion pieces. Since then, mail volume has declined. It is difficult to determine how much of this drop is due to the 

recent economic downturn, but many postal experts consider that a period of long-term volume decline has begun. Can the Postal Service remain solvent at 

much lower volume levels?

The RARC asked George Mason University’s (GMU’s) School of Public Policy to look at the financial sustainability of the Postal Service at lower mail volume 

levels. The results of GMU’s analysis can be found in the OIG whitepaper “Implications of Declining Mail Volumes for the Financial Sustainability of the Postal 

Service.” GMU researchers created a model to analyze the financial position of the Postal Service at many different volumes. The results of their analysis 

suggest the outlook for the Postal Service is optimistic. The Postal Service is financially sustainable down to volume levels of 100 billion pieces per year. 

However, changes to the Postal Service’s cost or revenue structure will be needed.

The model can run “what if” scenarios, showing how various cost-reduction initiatives can lessen the need for rate increases at specific volume levels. GMU 

researchers analyzed the financial effects of options such as switching to 5-day delivery, optimizing the retail network, and increasing productivity. They also 

examined how the cost structure of the Postal Service will change if volume declines. At lower volume levels, delivery will become a much larger share of total 

costs, and any cost burdens unrelated to delivering the mail will be significantly more difficult to bear. 

GMU’s analysis is encouraging. It provides hope that the Postal Service can remain solvent at lower volume levels, if it is allowed to act.
10 | Semiannual Report to Congress

FINANCIAL RISK

another seven employees did not meet the minimum 

experience and/or education requirements for the labor 

category for which they were billing. 

 A floor check audit disclosed weaknesses in a 

contractor’s timekeeping system. The contractor’s 

employees were not properly completing timesheets 

nor complying with company policies and procedures. 

The contractor’s management did not adequately review 

timesheets and the labor distribution payroll records did 

not reconcile with timesheets.

Grievance Settlements and Payments

We initiated this audit to determine whether internal 

controls over grievance settlements and payments were 

effective. The Postal Service pays millions of dollars in 

grievance settlements ($250 million in FY 2008 and 

$179 million in FY 2009). We found that management 

controls over grievance settlements and disbursements 

need to be strengthened. Specifically, we reviewed 

600 grievance payments and disbursements and found 

234 (or 39 percent) were not supported by adequate 

documentation. Missing were signed Grievance Arbitration 

Tracking System decision letters that document the reason 

for the settlement; the Grievance Form, which explains the 

original grievance; and documentation that explained how 

management determined the amount of the payment. 

Further, we found that oversight of the grievance settlement 

process was inconsistent among the districts. Supervisors 

are authorized to settle grievances at any amount; and 

although some postal managers had implemented a 

consultation process for grievance settlements, others 

believed oversight of grievances before settlement and 

documentation of any consultation would violate union 

contracts. Management agreed with our findings and 

recommendation to develop and implement an internal 

control plan for grievance settlements and payments to 

ensure consistency among districts and compliance with 

contractual agreements.

Postal Service Employee Benefits

Senator Susan M. Collins (ME) asked OA to update the 

OIG’s 2007 employee benefits program comparability 

data and determine what the savings would be if the 

Postal Service changed its Federal Employees’ Group Life 

Insurance (FEGLI) and Federal Employees Health Benefits 

(FEHB) program contribution rates to match the federal 

government. Auditors concluded that the Postal Service 

has reduced its FEHB contribution rate by 1 percent per 

year from 2008 to 2010 with similar reductions planned in 

2011 and 2012. However, its FEGLI and FEHB contribution 

rates are still higher than those of the federal government. 

We determined the Postal Service can save approximately 

$705 million in calendar year 2011, if it matches the 

federal government’s FEGLI rate and uses the federal 

government formula to calculate its FEHB contribution 

rates.

Advertising Costs

We assessed whether advertising costs were accurately 

reported to the Postal Regulatory Commission (PRC) and 

whether Priority Mail advertising costs were shifted to 

other products. We reviewed statutory requirements and 

met with PRC, Law Department, and Finance managers to 

discuss reporting criteria. We determined that, following 

passage of the Postal Act of 2006, management did not 

issue written instructions clarifying 

how to allocate advertising 

costs to various products and 

services. During FY 2009, 

advertising managers changed 

their procedures for allocating 

advertising costs without notifying 

finance personnel of the change. 

The new procedures did not 

follow the PRC’s established cost 

methodology. Finance managers 

corrected most, but not all, of 

these misallocations, resulting 

in a misstatement of advertising 

costs reported to the PRC. 

The remaining misallocations 

understated Priority Mail 

advertising costs by $5.6 million, 

which made the product appear to 

be more profitable.

Grievance Issue Categories Proportion

Overtime Assignment 11.91%

Overtime Work 13.20%

Performance of Bargaining Unit Work 7.55%

Cross Craft Assignment 6.20%

Employees Not on Overtime List 6.29%

Hours of Work 4%

Article 8 Overtime 6.64%

No Issue Available 3.13%

Equitable Distribution of Overtime 2.47%

Grievance-Arbitration Procedure 2.23%

Prohibition of Unilateral Action 1.37%

Other Issues 35.02%

We developed a point estimate with a 95 percent confidence level for each grievance issue that 

occurred 10 times or more in our sample. We combined the remaining issues in the other issues 

category. This table is our projection of the makeup of all grievances settled in FYs 2008 and 

2009.
April 1 — September 30, 2010 | 11 

OPERATIONAL RISK

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 ability 

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

We assessed efficiency by benchmarking each plant’s 

productivity (volume per workhour) against the median 

productivity level. We determined management has not 

yet fully adjusted workhours in response to changes in 

workload, nor achieved all possible efficiencies in mail 

processing operations provided by opportunities such as 

the introduction of additional automation. The Postal Service 

could improve efficiency by reducing more than 

16.2 million workhours by the end of FY 2012. This 

would allow the Postal Service to achieve at least median 

productivity levels in the processing network and avoid 

significant costs. 

City Delivery Efficiency Reviews

The OA initiated a series of audits nationwide to assess 

the overall efficiency of city delivery operations and identify 

opportunities to reduce operating costs. We audited the 

Southeast Area’s Atlanta District and the Pacific Area’s Bay 

Valley and Los Angeles Districts, located in California. 

We found that the three districts were not operating at 

peak efficiency and could reduce city delivery operating 

costs. Although several factors contributed, the two primary 

causes were insufficient review and oversight of unit 

offices’ operation, and inadequate coordination with mail 

processing facilities to ensure mail was timely received and 

was in a condition that promoted office operating efficiency. 

We recommended that these districts reduce more than 

608,000 workhours, and periodically evaluate units’ 

operating efficiency and staffing to determine whether 

further workhour adjustments are necessary based on 

workload. 

Postal Vehicle Service Transportation

Network transportation has two surface transportation 

components: Postal Vehicle Service (PVS), which uses 

Postal Service employees, vehicles and facilities, and HCRs, 

which are contracted transportation. In FY 2009, the Postal 

Service spent about $1.2 billion dollars on PVS operations 

covering more than 130 million miles, and more than 

$3 billion on HCR transportation covering more than 1.6 

billion miles. The following audits were conducted in this 

area: 

PVS Scheduling and Staffing. We assessed whether 

scheduling and staffing of PVS operations at the Atlanta 

District were efficient, effective, and economical. Based 

on this audit, the Atlanta District began taking steps to 

more efficiently and effectively manage PVS transportation 

processes and schedules, thereby reducing labor and 

related costs. Additionally, we concluded that the Postal 

Service could further reduce PVS costs by utilizing alternate 

schedules to include split days off and expanding the use 

of part-time drivers for PVS operations where possible. In 

response to this report, management stated that there are 

21 pilot sites that include the use of split days off, split 

shifts, and mixed duty assignments to increase productivity. 

Additionally, management stated that they have a plan 

to increase workforce flexibility to improve operational 

efficiency and the effectiveness of PVS.

PVS Operations. Auditors assessed whether PVS vehicle 

operations at the Southern Maryland P&DC were effective 

and economical. They concluded that Southern Maryland 

P&DC management could more effectively manage PVS 

transportation processes and schedules, thereby reducing 

more than 10,000 driver workhours and related costs. In 

addition, management could consolidate or eliminate eight 

HCR trips. Also, we assessed whether PVS operations at the 

Washington, DC, Network Distribution Center (NDC) were 

effective and economical and concluded that workhours 

assigned to yard activities did not match productivity 

standards. The audit concluded that Washington NDC 

management could phase out about 7,000 workhours by 

following productivity standards, thereby saving about 

$2.8 million over a 10-year period. 

Review of Vehicle Parts 

Program

We assessed the Postal 

Service’s purchasing and 

inventory management 

processes. We found that 

although the process had 

significantly reduced costs 

for vehicle parts, the Postal 

Service did not always pay 

the lowest price for vehicle 

parts and vehicle part assets 

that were at risk in some 

Vehicle Maintenance Facility 

(VMF) units. These conditions 

occurred due to inadequate 

processes, unclear purchasing 

Based on our 12 PVS audits, the Postal Service has been taking 

steps to more efficiently and effectively manage PVS transportation 

processes and schedules, thereby reducing labor and related costs.
12 | Semiannual Report to Congress

OPERATIONAL RISK

policies, and resource constraints, as well as insufficient 

internal controls to secure vehicle parts assets in some 

VMF inventory stockrooms. 

We recommended that the Postal Service establish 

a process to analyze similar vehicle parts from the 

two consignment suppliers to aid in negotiations with 

suppliers. This would ensure that the Postal Service 

receives the lowest available cost on vehicle parts. We 

also recommended management communicate consistent 

clear policy to VMF personnel on purchasing vehicle parts 

and re-emphasize stockroom policies and procedures that 

include separation of duties. 

Automated 

Package 

Processing System

Electronic Conditional 

Based Maintenance 

(eCBM) requires that 

maintenance hours be 

aligned with machine 

usage and establishes 

an expected level of 

maintenance based on 

machine throughput. 

During a 2-year period 

ending September 30, 

2009, Postal Service 

facilities equipped with 

Automated Package 

Processing System 

(APPS) machines 

exceeded estimates for preventive maintenance by 85,958 

workhours. The most frequent causes for excessive 

workhours were jams occurring due to mail processed not 

meeting proper specifications according to size and weight 

and the inability to incorporate the eCBM checklist for dualsided APPS systems. 

As a result of our recommendations, management agreed 

to provide stand-up service talks to all managers and 

all APPS employees, and revise the eCBM task list to 

accommodate work requirements to include dual sided 

APPS configurations. Management also agreed to establish 

a control to track preventive maintenance hours to assist 

field sites in managing performance within 20 percent of 

eCBM requirements. 

Mail Transport Equipment

Mail transport equipment (MTE) are containers of 

various types used to hold mail during processing and 

transportation within or between Postal Service facilities, its 

contractors, its mailers, and other external customers. The 

Postal Service also loans MTE to mailers and other external 

customers as a courtesy to convey mail to and from postal 

installations. Postal Service policy requires routine audits 

of mailers and postal facilities to ensure that MTE is not 

misused or misappropriated and the quantity on hand is 

adequate. 

We found that although the Postal Service has taken a 

number of steps to enhance MTE management over the 

last 2 years, opportunities exist at the headquarters’ level 

to more effectively manage and control MTE nationwide. 

Specifically, management could provide updated, 

comprehensive policy, guidance, and oversight that support 

MTE operational requirements. Management could also 

develop a nationwide comprehensive inventory system for 

identifying and tracking all MTE throughout the network 

and for effectively determining annual MTE purchase 

requirements. In addition, management could ensure areas 

have sufficient resources to monitor the management of 

MTE in the field or at mailer facilities, as well as ensure 

appropriate compliance with national MTE requirements. 

We concluded that if comprehensive controls over MTE had 

been in place at facilities and mailers, the Postal Service 

could have spent significantly less for MTE in FYs 2008 and 

2009 and could ensure that only needed MTE is purchased 

in the future. 

FedEx Transportation Agreement

We conducted the following audits of the FedEx 

Corporation’s (FedEx) Transportation Agreement.

Use of Contract Transportation. In FY 2009, the Postal 

Service paid FedEx to transport about 1.3 billion pounds 

We found that although the Postal Service has taken a number of steps to 

enhance MTE management over the last 2 years, opportunities exist at the 

headquarters’ level to more effectively manage and control MTE nationwide.

We found that Postal Service headquarters needs to strengthen nationwide processes, guidance, and 

monitoring in implementing the FedEx Transportation Agreement.
April 1 — September 30, 2010 | 13 

An Assessment of Worksharing

For more than 30 years, the Postal Service has offered workshare discounts. Worksharing is a form of outsourcing where mailers perform certain mail 

processing, handling and transportation activities in exchange for reduced postage prices. Over the years, worksharing has evolved into a complex program 

affecting most mail volume and driving fundamental Postal Service operations.

Worksharing also has a crowded field of influential stakeholders with widely differing views on how it should operate. To some, worksharing liberated the 

Postal Service’s supply chain to the private sector, increased efficiency, grew mail volume, and allowed the Postal Service to tailor pricing to its customers’ 

needs. To others, worksharing exposed the Postal Service to revenue risks, provided subsidies to big mailers, and sacrificed postal jobs to unfair competition.

While much of the discussion surrounding worksharing is very complicated and open to interpretation, much can still be said to inform the debate. The RARC 

explored worksharing and discussed this important topic with stakeholders in the mailing community. The OIG’s whitepaper “Assessment of Worksharing” 

reveals that in many ways worksharing has been a resounding success in the United States and a model for posts in other countries to emulate. Yet, there are 

still problems to be addressed and opportunities to be explored. Some of the key findings include the following:

 Worksharing has rapidly grown to dominate the Postal Service’s business and today represents more than 80 percent of mail volume. 

 The Postal Service provided $15 billion worth of discounts for work that saved $14.8 billion in avoided costs in fiscal year 2008.

 The Postal Service’s ability to retain earnings may create an incentive to set discounts to be less than the Postal Service’s avoided costs, especially in areas 

where discounts greatly exceed mailer cost. Historically, workshare discounts have been set equal to the mail processing, handling and transportation costs 

avoided by the Postal Service.

 The Postal Service’s worksharing program is recognized as the largest, most sophisticated, and most transparent in the world.

The time is right for the Postal Service, the PRC, and the stakeholder community to reexamine and reevaluate certain principles supporting worksharing in 

order to prepare it for the next 30 years. 

OPERATIONAL RISK

of mail. We assessed whether the Postal Service’s use of 

the FedEx Day-Turn network was effective and economical 

in the Capitol Metro, Eastern, Great Lakes, and Northeast 

Areas. Our audit found that from October 2006 through 

April 2009, these areas incurred costs by using FedEx 

to sort mail unnecessarily and by moving mail that could 

have been moved on less costly surface transportation or 

passenger airlines. Management did not agree with all of 

our estimated savings; however, management said their 

corrective actions should reduce or eliminate their exposure 

to any funds wasted. 

FedEx National Analysis. We assessed national 

issues related to processes, guidance, and oversight in 

implementing the FedEx Transportation Agreement and 

operations associated with the Day-Turn network. We 

focused on systemic or significant issues identified in our 

prior FedEx Transportation Agreement audits of the eight 

Postal Service areas.

We found that Postal Service headquarters needs to 

strengthen nationwide processes, guidance, and monitoring 

in implementing the FedEx Transportation Agreement. 

Specifically, to avoid unnecessary transportation costs we 

determined that management could more effectively do the 

following:

 Monitor and avoid transportation of surface mail classes 

on FedEx. 

 Validate the accuracy of mail capacities provided by 

commercial carriers. 

 Ensure carriers comply with providing the capacities. 

 Address local officials’ concerns over the ability of 

carriers to handle provided capacities. 

 Adjust mail volume arrival profiles for Terminal Handling 

Services (THS) locations, or adjust mail tender times to 

FedEx to ensure THS contractors have sufficient time to 

build planned bypass containers. 

 Reinforce existing policies and procedures for processing 

and assigning mail, for building by-pass containers, and 

for tendering mail to FedEx; and standardize oversight 

at THS contract sites to monitor FedEx operations and 

ensure local compliance with established processes and 

procedures.

First-Class and Standard Mail 

Workshare Discounts

We assessed whether the Postal Service bases First-Class 

Mail and Standard Mail workshare discounts for presort 

letters on current cost inputs. We determined that presort 

letter cost models for First-Class Mail and Standard Mail 

contain inputs that may not reflect current operating 

conditions. Of the 288 inputs the models use, 

13 were last updated prior to FY 2008. Our audit also found 

that to obtain more favorable letter rates some mailers 

reconfigured their flats into letter-sized booklets; however, 

these reconfigured letters are sometimes processed as flats 

instead. Management agreed with our recommendation to 

determine the feasibility of updating the 13 First-Class Mail 
14 | Semiannual Report to Congress

and Standard Mail cost inputs and to create a prioritized 

list for completing the updates. Although management 

disagreed with our recommendation to undertake a study 

to identify needed changes to the letter cost models due to 

the volume of reconfigured letters and the percentage of 

those processed as flats, they are aware of the issue and 

are pursuing an alternate solution.

FY 2009 Standard Mail Volume Incentive 

Program

We evaluated the Standard Mail Volume Incentive Program 

(Summer Sale) to determine whether the objective to 

increase volume and revenue was achieved and if the 

process used to establish the customers’ mailing history 

was a valid and accurate method. From July through 

September, the Postal Service ran the FY 2009 Summer 

Sale program to increase volume during a typically light 

mail volume period and to increase revenue. 

We determined that the Postal Service did not always use 

independent, reliable, and complete data to calculate the 

$24.1 million in net revenue contribution and the increased 

volume it reported from the FY 2009 Summer Sale. This 

occurred because the Postal Service relied on certain 

customer-provided data to determine customer thresholds 

that was a key component in evaluating revenue and 

volume increases. Additionally, the Postal Service did not 

accurately track expenses incurred by employees working 

on the FY 2009 Summer Sale project. 

Management generally agreed with our recommendation 

to develop a process to obtain accurate and verifiable 

customer mailing data that dependably measures and 

reports on the effect of customer incentive programs. 

Management also agreed to develop a method to more 

accurately track employees’ time spent working on 

projects. However, management did not believe the report 

reflected the intangible benefits the Summer Sale provided, 

including the promotion of customer business, retention of 

customers, and rewarding loyal customers.

Efficiency of Retail Customer Service 

Operations

We assessed the overall efficiency of retail customer 

service operations. Although management eliminated 

about 56 million retail customer service workhours since 

FY 2006, they have not yet fully adjusted workhours in 

response to changes in workload. The ratio of earned 

workhours (workhours supported by workload) divided by 

actual workhours has remained unchanged at about 

84 percent since 2006. The FY 2009 national goal was 

97.7 percent. 

Opportunities exist to eliminate retail customer service 

workhours. We recommended that the Postal Service 

implement best practices for retail customer service 

operations at all facilities, and explore opportunities to 

consolidate business mail acceptance operations at Post 

Offices, stations, and branches. We also recommended 

that management periodically evaluate operating efficiency 

by assessing performance against productivity targets 

and adjusting resources in response to workload changes. 

For example, management could re-deploy employees to 

facilities where there is sufficient workload to support the 

workhours.

PostalOne! Outage

PostalOne! is the Postal Service’s primary system for 

recording business mail revenue. On February 5, 2010, the 

PostalOne! system was unavailable for 4 days because of 

an erroneous computer command. We assessed how the 

PostalOne! outage impacted Postal Service operations and 

revenue collection. Our audit disclosed that the February 

2010 PostalOne! outage impacted mail acceptance 

operations and revenue collection efforts nationwide. 

Certain mail acceptance business controls that relied on 

PostalOne! operational availability were not effective during 

the outage and the Postal Service did not have effective 

alternative action plans to ensure that these key mail 

acceptance controls were in place and followed. While the 

Postal Service implemented a set of manual procedures, 

commonly called a contingency plan, these procedures 

did not sufficiently take the place of business controls that 

depend on a functioning PostalOne! system. Postal Service 

management disagreed and stated that the contingency 

plan they implemented during the outage provided manual 

processes that mitigated the short-term impact and risks. 

However, management agreed to update their contingency 

plan to align with key financial controls.

OPERATIONAL RISK

FY 2008 Worksharing Cost Avoidances and Discounts (In billions)

Class of Mail Cost Avoidance Discount

Standard Mail $7.9 $8.3

First-Class Mail 4.1 4.2

Periodicals 2.0 1.7

Package Services 0.8 0.8

Total $14.8 $15.0

Worksharing involves 80 percent of current mail volume, allowing the Postal Service to avoid $14.8 billion 

in costs and provide $15 billion in discounts to mailers (see Table). Combined, workshared Standard Mail 

and First-Class Mail saved the Postal Service $12 billion (with $7.9 billion and $4.1 billion, respectively) and 

account for 81 percent of the total cost avoided by worksharing..
April 1 — September 30, 2010 | 15 

A Framework to Optimize the Retail Network 

The Postal Service has a vast legacy retail network that includes 36,000 Post Offices, stations, branches, and contract 

locations. Yet the Postal Service’s current network may not necessarily meet the needs of the ways people live and work 

now. In fact, there are mounting financial pressures and an emerging consensus in the postal community on the need 

to review the Postal Service’s retail network. One possible strategy is to optimize the network both to reduce costs and 

improve service.

The RARC worked with Dr. Anthony Yezer, a well-known real estate economist, to describe how the Postal Service’s 

retail network would operate if it were optimally reorganized. The goal was to provide a thorough, objective, transparent 

modeling approach that would guide planners in making decisions about the network and allow stakeholders to review 

the decision process. 

The optimal retail model is discussed in the OIG whitepaper “Analyzing the Postal Service’s Retail Network Using an 

Objective Modeling Approach.” The results show that, overall, the Postal Service’s network has too many retail facilities 

located too closely together. In larger cities, the number and size of retail facilities seems to be about right. In some 

high-density downtown areas, there may even be too few facilities. In smaller towns and rural areas, however, the 

misalignment is more acute. The model suggests there are likely too many facilities and they are spaced too close 

together. The findings suggest that fewer larger retail facilities that are better staffed and are open longer hours could 

better serve the public while increasing revenue and reducing costs. 

Recent reports by the Postal Service and the Government Accountability Office have raised the issue of rethinking the 

provision of retail services. As the Postal Service and its stakeholders consider retail modernization, the work presented 

in the OIG white paper can make a contribution to policymakers wrestling with these important issues.

OPERATIONAL RISK

Information Technology

The following audits show how the Postal Service can 

strengthen security to further preserve the integrity of its 

information and resources. 

Modem Security. We determined whether controls over 

modems are adequate to protect information resources at 

a Postal Service Information Technology Service Center. 

Modem security is essential to preserve the integrity and 

confidentiality of the Postal Service network. Unsecured 

or unauthorized modems may provide malicious users 

undetected access to Postal Service information resources. 

While security controls over modems are adequate to 

protect information resources at this facility, management 

can improve controls over modems by performing required 

modem security assessments and properly accounting for 

modems. Management agreed with the recommendations 

and will perform annual vulnerability assessments of 

all identified modems within the infrastructure and will 

reconcile and maintain an approved inventory of modems.

UNIX Operating System Master Controls. We conducted 

this audit in support of the Postal Service’s regulatory 

requirement to comply with the Sarbanes-Oxley Act of 

2002. We audited whether the Postal Service’s UNIX 

operating system environment (hosting applications 

supporting the financial statements) complies with 

information technology controls. We tested UNIX servers 

and workstations and concluded that the UNIX operating 

system environment, hosting applications supporting 

the financial statements, generally complies with these 

controls. However, management can improve preventive 

and detective security controls, and thereby, preserve 

the Postal Service brand. Management agreed with our 

recommendations and began remediating configurationrelated vulnerabilities during the audit. 

Access Controls over the Electronic Data Distribution 

Infrastructure. We evaluated access controls over 

the Electronic Data Distribution Infrastructure (EDDI) to 

supplement an OIG investigation associated with alleged 

unauthorized access to and modification of EDDI servers 

and files. EDDI servers — essentially workstations that 

share files — facilitate the automated delivery of address 

data, mail sort programs, and application software updates 

required to maintain current mail processing and handling 

equipment nationwide. Infrastructure access controls help 

prevent unauthorized modification to, or unavailability of, 

the data or systems that provide the Postal Service with 

the capability to deliver mail efficiently. We concluded that 

EDDI access controls are ineffective. Management agreed 

with the recommendations to improve preventive access 

controls to preserve the Postal Service brand.

Public Key Infrastructure. We performed this audit at 

the request of Postal Service management to ensure that 

external Public Key Infrastructure (PKI) services continue 
OPERATIONAL RISK

16 | Semiannual Report to Congress

to operate at a level to remain cross-certified with the U.S. 

Government’s Federal Bridge Certification Authority. We 

assessed whether the Postal Service effectively managed 

its external PKI services to comply with established 

guidance. PKI is the combination of software, encryption 

technologies, processes, and services that enables an 

organization to secure its communications and business 

transactions. PKI relies on the exchange of digital 

certificates between authenticated users and trusted 

resources. While the Postal Service generally managed 

its external PKI services in compliance with established 

guidance, we identified inconsistencies between the 

Postal Service’s Certificate Policy, Certification Practice 

Statements, and operations in the external PKI environment. 

Management agree with our recommendation to develop 

procedures to ensure reviews of applicable policies and 

processes are performed following changes to the Postal 

Service external PKI environment. 

Network Security Assessment. We audited whether 

network security controls at the National Customer 

Support Center (NCSC), and associated sites, adequately 

provide for the confidentiality, integrity, and availability 

of Postal Service information resources. The Memphis 

NCSC supports the Postal Service with a quality address 

database, a change of address system, and customer 

address products to facilitate the timely and cost-effective 

coding, sorting, and delivery of mail. In FY 2009, NCSC 

products and services generated more than $100 million 

in revenue. We concluded that management can improve 

information security at the NCSC. Based on our audit 

results, management began remediating patch and 

configuration-related 

vulnerabilities 

during the audit. 

Management 

agreed with our 

findings and had a 

target completion 

date of the end 

of September 

2010. In addition, 

management is 

coordinating with 

the Corporate 

Information Security 

Office to verify the 

configuration of 

the vulnerability 

management 

software to ensure 

it performs web server assessments according to Postal 

Service policy. 

Certification and Accreditation Process. We assessed 

whether the Postal Service’s implementation of the 

certification and accreditation (C&A) process was effective 

and timely in identifying and mitigating risks associated 

with critical applications. This formalized process assesses 

threats, defines security requirements and controls, tests 

security solutions, and evaluates the security controls and 

processes throughout an online application’s life cycle. 

Auditors found that management deployed some production 

applications before completing the C&A process. We were 

unable to locate completed C&A documentation packages 

for any of the 60 applications in the Technical Solution 

Life Cycle Artifacts or Corporate Information Security team 

document libraries. We also found Enterprise Information 

Repository (EIR) data instrumental to the C&A process were 

inconsistent, inaccurate, or missing, thereby rendering the 

EIR information unreliable. Management agreed with our 

recommendations to ensure the C&A process is completed 

for all critical applications and applications are recertified 

when required; to mitigate high residual risks for all critical 

applications; to update and validate information in the 

EIR; and, to maintain C&A documentation in a centralized 

location.

Function 4 Overtime Workhours

We assessed whether postal officials effectively managed 

Function 4 workhours to reduce overtime costs, and found 

that they did. Overall Function 4 overtime workhours 

decreased from 17.5 million in FY 2008 to 9.2 million in 

FY 2009. However, unauthorized overtime workhours as 

a percentage of total overtime workhours increased from 

FY 2008 to FY 2009. We estimated that in FYs 2008 and 

2009, the Postal Service incurred unsupported questioned 

costs totaling $79.6 million for unauthorized overtime 

workhours.

Management agreed with our recommendation to reiterate 

to first line supervisors the importance of providing 

supervisory oversight of the badge control and clock ring 

process. They also agreed with our recommendation to 

re-emphasize the importance of adjusting the Time and 

Attendance Collection System (TACS) timely to reflect 

changes in employees’ scheduled tours of duty and to 

record authorized overtime in the TACS in a timely manner 

to reduce the amount of unauthorized overtime recorded 

on the TACS Unauthorized Overtime Report. However, 

management disagreed with our recommendation to 

implement an automated solution to prevent employees 

from clocking in before and out after their scheduled tours 

of duty without supervisory approval. They stated that the 

primary purpose of the TACS is to accurately record hours 

worked by employees in order to pay them in compliance 

Customer Filed

COA Scanned, Processed, and

Stored in the COA Recorder

Server (CARS) at the NSCS

Transmitted to PARS (18 months data) Mailpiece Addresses

Matched to COA on File

NCOA Database

(48 months data)

NCOA Link

MERLIN Move Update

Testing

The Postal Service assesses Move Update compliance at acceptance using a 

performance based verification (PBV) process. The Mail Evaluation Readability 

Lookup Instrument (MERLINTM) uses change of address (COA) information to 

perform the assessment. The chart depicts the flow of COA information to MERLIN.
OPERATIONAL RISK

April 1 – September 30, 2010 | 17 

with the Fair Labor Standards Act and applicable Postal 

Service labor contracts. Management indicated that 

the responsibility for verifying clock rings and ensuring 

employees’ clock rings align with scheduled and authorized 

work is best charged to supervisors. They believe the use 

of the TACS reports offers the most effective and efficient 

method of managing clocking activity.

Move Update Program and Investigations 

We assessed internal controls over the Move Update 

program to determine if the Postal Inspection Service 

conducted Move Update investigations according to Postal 

Service policies and procedures. We found that although 

the costs associated with undeliverable as addressed mail 

exceeded an estimated $1.5 billion, and the discounts 

associated with Move Update compliance exceeded 

$3.5 billion for FY 2008, the Postal Service did not 

establish a sufficient method to evaluate compliance with 

Move Update standards at acceptance until 2009 — 

12 years after Move Update began. Even with this new 

compliance effort, many mail acceptance facilities do not 

have the necessary processing equipment to be able to 

assess compliance. 

We also found that the 21 investigations we reviewed were 

all treated as administrative cases, rather than criminal 

or civil cases. Thus, law enforcement officers who receive 

special pay and benefits conducted these administrative 

investigations when non-law enforcement personnel could 

have done this work more economically, and in a less 

intimidating environment. Lastly, nine of 21 cases reviewed 

resulted in settlement agreements. In our analysis we found 

that two of the settlements combined issues unrelated to 

Move Update (such as a complaint made by the mailer 

against the Postal Service). These control weaknesses and 

inconsistent treatment of compliance issues have resulted 

in significant revenue at risk for the Postal Service, mailer 

frustration, and mailer concerns regarding a negative 

impact on their brand. Further, the Postal Service is at risk 

of losing significant future revenue from mailers who are 

threatening to stop using the mail to communicate with 

their customers.

Revenue for Official Mail U.S. House of 

Representatives

The Postal Service accepts, processes, and delivers franked 

mail sent under an authorized individual’s signature, or 

facsimile signature, without prepayment of postage. Title 

39, U.S. Code, Chapter 32, Penalty and Franked Mail, 

establishes the franked mail privilege for the vice president 

and members of Congress. Based on concerns raised by 

the House of Representatives mailroom, we audited the 

processes for accepting, verifying, and collecting revenue 

for official mail from the U.S. House of Representatives. 

Additionally, we assessed the controls over transferring the 

House bulk mailing transactions between the associated 

computer systems. We concluded that the Postal Service’s 

process for verifying and accepting franked mail at the 

Southern Maryland Business Mail Entry Unit did not fully 

comply with Postal Service mail acceptance policy. Further, 

the Eagan Accounting Service Center could improve the 

controls over transferring bulk mailing transactions between 

computer systems to ensure invoices provided to the House 

are complete and accurate.

Data Mining Successes 

Data mining continues to play an important role in transforming rapidly growing 

business data into useful, actionable information. During this reporting period, 

the RARC’s Data Mining Group continued to develop data mining methods and 

analytical tools, but emphasized delivering results in the areas of health care 

fraud, financial fraud, internal mail theft, and contract fraud. These results led to 

investigative outcomes and the planning and initiation of investigations. The Data 

Mining Group accomplished the following results:

 Provided updated analyses of potential, recent claimant fraud activity based 

on the Office of Workers’ Compensation Program analytical model and refresh 

of monthly data. The group also developed the first release of an innovative 

reporting tool allowing expert, health care analysts to identify and extract 

suspicious patterns and relationships within provider data.

 Delivered specific referrals of potential embezzlement activity at local facilities 

based on tools, algorithms, and up-to-date retail revenue and expense data. 

 Delivered ranking reports and referrals pinpointing processing operations 

and carrier routes with significant mail loss based on an analytical database, 

routines, and updated mailer and postal operations data. One notable, new 

technique analyzed a large retail company’s data to successfully address the 

potential theft of stored value cards.

 Completed a pioneering study to isolate and score suspicious, fraudulent activity 

within supplies, services, and mail equipment contracts.

The Data Mining Group is committed to developing data mining methods and 

analytical tools that provide useful leads for OIG investigators.

The Postal Service accepts, processes, and delivers franked mail sent under an authorized 

individual’s signature, or facsimile signature, without prepayment of postage.
OFFICE OF INVESTIGATIONS
April 1 — September 30, 2010 | 19 

FINANCIAL CRIMES

FINANCIAL CRIMES

A large portion of the $68 billion in revenue generated 

by the Postal Service last year is handled at the 36,400 

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

Embezzlements

Special agents employ various investigative techniques to 

uncover embezzlements by postal employees who steal 

money from cash drawers, use sophisticated schemes to 

manipulate postal money orders or money order funds, or 

falsify financial retail records. Employees found responsible 

for missing postal funds are reported to management for 

appropriate administrative action. In cases that warrant 

criminal prosecution, offenders face the loss of their jobs, 

jail time, and court-ordered restitution. Following are 

examples of embezzlement cases we investigated during 

this reporting period.

 In September, the U.S. Attorney’s Office for the Western 

District of Oklahoma announced that a former small town 

postmaster pled guilty to charges of embezzling nearly 

$650,000 in postal funds and failing to pay income taxes 

on the ill-gotten gains. At sentencing, the now former 

postmaster faces up to 10 years in prison, a $250,000 

fine, and restitution. As part of his plea, the defendant 

agreed to pay restitution to the Postal Service in the 

amount of $642,808. In addition, he agreed to pay back 

taxes to the IRS for tax years 2005 through 2008. We 

initiated an investigation after management reported a 

postmaster’s failure to properly account for a corporate 

check submitted in payment of a permit mailing. Our 

investigation determined the postmaster failed to 

account for more than the one check. From October 

2005 through September 2009, the postmaster used 

his position of trust to embezzle postal funds by failing to 

credit customer accounts for the full amount of checks 

submitted in payment of bulk mailings. The postmaster 

embezzled the difference by purchasing money orders in 

his own name, which he then used for his own personal 

benefit. The postmaster admitted to the embezzlement 

and submitted his resignation after 40 years with the 

Postal Service.

 A New York finance supervisor was removed, in April, 

from her position with the Postal Service after she was 

sentenced to 6 months in prison. Our investigation began 

in June 2009, after a Postal Service manager reported 

to us that a New York City station had failed to submit 

daily remittances for an entire week. Our investigation 

revealed the finance supervisor, who was responsible 

for preparing and submitting the remittances, called in 

sick immediately after the missing remittances had been 

discovered and reported to the OIG as missing. An arrest 

warrant was issued and the supervisor surrendered 

to our special agents. In September 2009, the finance 

supervisor pled guilty in federal court to embezzlement, 

admitting she stole $121,000 in postal funds. In 

March, the supervisor was sentenced to 6 months’ 

imprisonment, 3 years’ supervised release, and ordered 

to pay restitution of $121,000 to the Postal Service. 

 In July, a sales and service associate (SSA) in Puerto 

Rico pled guilty in federal court to the misappropriation 

of postal funds and theft of public money. The charges 

stemmed from an OIG investigation that disclosed the 

SSA had been falsely manipulating his computer terminal 

to void postal money orders that had actually been 

issued to customers. The amount of the embezzlement 

was identified as more than $154,000. In May, the SSA 

was removed from his position with the Postal Service. 

Sentencing in the criminal case is pending.

 In another Puerto Rico case, after a 3-week trial, in 

December 2009, four former SSAs entered guilty pleas 

in federal court. The ex-employees had been accused 

INVESTIGATIONS

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.
20 | Semiannual Report to Congress

FINANCIAL CRIMES

Financial Fraud Awareness Posters Distributed to all Postal Facilities

This year’s awareness and crime 

prevention campaign targeted a crime 

that costs the Postal Service millions 

of dollars each year — financial fraud 

and embezzlements. To reach all postal 

employees, the campaign kicked off 

with a paycheck stuffer sent to more 

than 600,000 postal employees. In 

addition, a companion poster was 

distributed to 33,000 postal facilities 

for display on workroom floor bulletin 

boards and a screen saver was 

pushed out to 150,000 Postal Service 

computers. 

The theme of the campaign is, “Don’t 

think about taking or ‘borrowing’ 

the Postal Service’s money.” The 

campaign’s message and call to action 

are clear — “Do the right thing... even 

if nobody is looking.” Those who steal 

or embezzle postal funds hurt the Postal 

Service financially and run the risk of losing their job, benefits, and could face jail time for their 

offenses.

in a 189-count indictment of embezzlement of public 

funds, false entries, and the fraudulent issuance of 

postal money orders. The charges resulted from an OIG 

investigation that identified a loss of nearly $100,000 

in postal funds. Following their guilty pleas, the four 

SSAs were removed from their positions with the Postal 

Service. In June, two of the former SSAs were sentenced 

to 18 months in a community confinement center, 

5 years’ probation, and 200 hours of community service. 

The remaining two SSAs were sentenced to 30 days 

home confinement, 5 years’ probation, and 100 hours 

of community service. All together, the four defendants 

were ordered to pay more than $93,000 in restitution to 

the Postal Service. 

 An Iowa SSA was sentenced, in July, to 1 year in federal 

prison after pleading guilty to embezzling more than 

$240,000 from the Postal Service. Our investigation was 

initiated after data analysis revealed a large amount of 

refunds had been issued through a retail unit. The SSA 

admitted to falsely issuing refunds that she converted to 

her personal use and resigned from her position with the 

Postal Service. In addition to her sentence, the SSA was 

ordered to make full restitution of more than $243,000 

to the Postal Service. 

 In September, a former lead sales SSA, in Oregon, 

was sentenced to 18 months incarceration in a federal 

facility, 3 years’ supervised release, and ordered to pay 

more than $200,000 in restitution to the Postal Service. 

The former employee pled guilty in March 2009, after an 

OIG investigation revealed she had falsely issued more 

than 700 postal money orders that she converted to 

personal use. The scope of the illegal activity occurred 

from February 2007 through December 2008. Some of 

the money had been used to pay credit card bills and 

purchase vehicles. The SSA has been removed from the 

Postal Service. 

Voyager Credit Card 

Through a partnership with U.S. Bank and Voyager Fleet, 

the Postal Service issues one credit card per vehicle 

for refueling, routine maintenance, and vehicle washing 

and polishing. Postal employees and contractors are 

investigated for disclosure of personal identification 

numbers (PINs) to non-postal entities, using the Voyager 

card for personal use, exceeding the daily purchase limit 

without proper authorization, or transferring purchasing 

authority to a non-postal entity. Special agents investigated 

63 cases of Voyager credit card fraud in this reporting 

period, resulting in 38 arrests and 25 administrative 

actions. The following is an example of one such case. 

 In May, a Houston city carrier pled guilty in federal court 

to one count of theft of government property. The charge 

related to nearly $18,000 in unauthorized Voyager card 

charges. The city carrier resigned from his position with 

the Postal Service following our investigation, which 

included surveillance of the city carrier selling the fuel 

to individuals in exchange for cash. In July, the former 

employee was sentenced to 3 years’ probation and 

ordered to pay nearly $18,000 in restitution to the Postal 

Service.

Tort Claims

The Postal Service established the Tort Claims Program 

to monitor and resolve claims filed against the Postal 

Service by customers seeking compensation for injuries or 

losses incurred while using postal facilities. According to 

an agreement with the Postal Service’s Law Department, 

special agents investigate tort claim cases involving 

suspected fraud and cases for which the U.S. Attorney’s 

Office has requested an investigation. The following is an 

example of one such case.

 A civil tort claim was filed against the Postal Service in 

California after an accident involving a postal vehicle. 

The claimant alleged in the lawsuit to have suffered 

extensive and permanent damage to her nervous system 

as a result of the accident. Our surveillance showed 

the claimant shopping, lifting her grandchildren, and 

engaging in normal day-to-day activities. Due to our 

special agent’s investigation, the case was settled, 

resulting in a savings to the Postal Service of $135,000. 
April 1 — September 30, 2010 | 21 

A Florida letter carrier alleged total disability from a work-related neck injury. However, our investigation determined 

the carrier was earning income as a real estate agent and property manager. A search warrant led to the recovery of 

photographs and video that depicted the carrier actively hiking, snow skiing, bicycling, bungee jumping, dancing, horseback 

riding, and scuba diving.

WORKERS’ COMPENSATION FRAUD

WORKERS’ COMPENSATION 

FRAUD

In FY 2010, the monetary and medical 

benefits paid by the Postal Service to workers’ 

compensation claimants (employees who 

sustained job-related injuries) totaled more 

than $1.1 billion and its estimated total liability 

for future workers’ compensation costs is 

more than $11.4 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 

billings.”

Proactive OIG prevention campaigns create an 

awareness of workers’ compensation fraud. 

Special agents detect and investigate allegations 

of fraudulent claims. Successful investigations 

of fraud result in significant long-term savings 

to the Postal Service. Investigative efforts 

during this reporting period resulted in nearly 

$99 million in cost savings or avoidances, 

29 arrests, and 118 administrative personnel 

actions, including removals and suspensions and 

termination of benefits.

Claimant Fraud

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. 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.

 In July, our investigation of a former Florida rural carrier 

led to an 18-month federal prison sentence, 3 years’ 

probation, and obligation to pay more than $193,000 

in restitution. The rural carrier pled guilty to a 17-count 

indictment charging her with workers’ compensation 

fraud, making false statements and theft. The carrier 

had alleged total disability from a work-related neck 

injury and received in excess of $142,000 in workers’ 

compensation payments. Our investigation determined 

the carrier was earning income as a real estate agent 

and property manager. A subsequent search warrant led 

to the recovery of photographs and video that depicted 

the carrier actively hiking, snow skiing, bicycling, bungee 

jumping, dancing, horseback riding, and scuba diving. 

The DOL terminated the rural carrier’s compensation 

benefits, realizing a savings of more than $1.4 million for 

the Postal Service.

 After pleading guilty, in September, a former New York 

SSA was sentenced to 2 months’ incarceration, 3 years’ 

probation, and ordered to pay restitution of $33,884. 

The SSA had alleged total disability, as a result of a 

work-related injury to his lower back, and had received 

approximately $127,000 in workers’ compensation 

payments. A joint investigation with the Social Security 

Administration OIG revealed the SSA was performing 

activities that were inconsistent with the capabilities 

he communicated to his physician, the DOL, the Postal 

Service, and the Social Security Administration. Video 

surveillance conducted by special agents show the 

associate landscaping his yard, pushing a fully loaded 

wheelbarrow weighing more than 225 pounds, building 

a flagstone retaining wall, mowing his lawn, lifting a lawn 

mower, and carrying heavy objects. The DOL terminated 
22 | Semiannual Report to Congress

DELAY, DESTRUCTION, AND THEFT OF MAIL BY EMPLOYEES

the associate’s benefits, realizing a savings of more than 

$1 million for the Postal Service. 

 In June, a federal judge sentenced a former California 

city carrier to 3 months’ home detention, 5 years’ 

probation, and ordered him to pay restitution of more 

than $50,000. The carrier pled guilty to false statement 

or fraud to obtain federal employees’ compensation in 

February. Our investigation determined that the carrier, 

who claimed to be totally disabled from an on-the-job 

shoulder injury, was earning income as the owner and 

operator of an assisted living facility. As a result of our 

investigation, the DOL terminated the city carrier’s 

compensation benefits, realizing a cost savings of about 

$862,000 for the Postal Service. 

 After a 5-day jury trial in April, an Ohio mail processing 

clerk was found guilty in federal court of workers’ 

compensation fraud, making false statements, and mail 

fraud. In February 2004, the clerk filed a total disability 

workers’ compensation claim for an alleged on-the-job 

injury to her knee. Video surveillance conducted by 

our agents showed the clerk repeatedly exceeding her 

medical restrictions. We watched the clerk shopping 

for extended periods of time, lifting objects, climbing 

stairs, and performing yard work. The DOL terminated 

the clerk’s compensation benefits, resulting in a cost 

avoidance of more than $900,000 for the Postal Service. 

The clerk was terminated from the Postal Service as a 

result of her conviction. 

Medical Provider Fraud

The workers’ compensation program is also subject to 

fraud and abuse by medical providers used by postal 

employees injured on the job. A few seek to take advantage 

of this program by submitting false bills, colluding with 

claimants to extend benefits or falsifying claim documents. 

When evidence of abuse exists, OIG agents investigate 

these providers. Following are two case examples.

 After a 2-day jury trial in April, a Texas massage 

therapist was found guilty on one count of making false 

statements related to a health care matter and nine 

counts of health care fraud. The massage therapist 

was sentenced to 78 months’ imprisonment and 

ordered to forfeit $1.6 million in assets. Upon release 

from imprisonment, she will be on 3 years’ probation. 

Our investigation revealed the massage therapist was 

engaging in a health care scheme to defraud the OWCP 

by presenting herself as a physical therapist and billing 

for patient services that were not rendered. The therapist 

received payment from OWCP of more than $1.5 million, 

of which only $191,345 was determined to be for actual 

massage therapy services. 

 In March, an Illinois chiropractor was indicted on 18 

counts of health care fraud. The chiropractor’s staff 

(physician and one medical biller) were indicted on one 

count of health care fraud. In June, the chiropractor’s 

second medical biller pled guilty to one count of health 

care fraud. Our investigation revealed the chiropractor, 

who owned and operated a chiropractic facility, in 

conjunction with his staff executed a scheme to defraud 

the OWCP by submitting bills for fraudulent medical 

services. From January 2001 to November 2007, the 

chiropractor and his staff submitted bills to the OWCP in 

excess of $4.5 million and were paid more than 

$2.1 million for medical services allegedly provided to 

more than 300 postal employees. Of the monies paid, 

only $1,501 was determined to be for actual chiropractic 

services. The chiropractor and his staff also provided 

patients falsified disability ratings, resulting in 

$9.3 million in unwarranted schedule awards. 

Sentencing is pending for the physician and two medical 

billers. Criminal resolution for the chiropractor is pending.

DELAY, DESTRUCTION, AND THEFT OF 

MAIL BY EMPLOYEES 

Special agents investigate allegations of postal employees 

delaying, destroying, or stealing mail. Guilty employees are 

prosecuted or referred to management for administrative 

action. 

Theft of Mail by Employees

Following are examples of cases in which postal employees 

stole mail for personal gain.

 In August, a Missouri mail processing clerk pled guilty 

to five counts of theft of mail and one count of fraud 

in connection with access devices. The clerk was 

responsible for rifling Standard Mail containing Best 

Buy Reward Zone certificates over the past 4 years and 

using them to purchase electronics and other items 

for personal use totaling nearly $3,000 in certificates. 

A federal search warrant on the clerk’s residence 

yielded laptop computers, digital telephones, iPods, 

computer hard drives, digital cameras, and video game 

consoles purchased with the stolen reward certificates. 

WORKERS’ COMPENSATION FRAUD 

INVESTIGATIVE RESULTS

April 1 — September 30, 2010

 407 fraud investigations resolved

 $98.8 million in compensation payments avoided

 29 arrests

 35 indictments

 23 convictions

 118 personnel actions taken by management
April 1 — September 30, 2010 | 23 

Also recovered during the search were Netflix and 

Blockbuster DVDs, various gift cards, driver’s licenses, 

First-Class Mail, postal money orders, and debit cards 

in the names of postal customers. The clerk admitted to 

rifling First-Class Mail containing bank cards and their 

corresponding PIN numbers. Using this information, 

the clerk was able to make cash withdrawals from 

Automated Teller Machines, stealing nearly $29,000 in 

cash from bank customers. The clerk resigned from the 

Postal Service. Sentencing is pending.

 In August, a Washington, DC, city carrier was sentenced 

to 25 months of incarceration and ordered to pay more 

than $130,000 in restitution for theft of Treasury checks, 

DC Government checks, and identity theft. The carrier 

and two co-conspirators pled guilty in July. The carrier 

stole more than $100,000 in checks, which she sold 

to a nonemployee co-conspirator. In February 2010, 

during a joint surveillance operation with the Postal 

Inspection Service, the U.S. Secret Service, and the DC 

OIG, investigators observed the city carrier mishandling 

checks belonging to other carrier routes. After the carrier 

was observed passing the checks to a co-conspirator, 

she was subsequently arrested and interviewed by 

agents. During the interview, the city carrier admitted 

to stealing checks from the Post Office over a 2-year 

period. She confessed to providing the checks to a friend 

and receiving approximately $500 per check. The friend 

gave the checks to runners, who cashed the checks at 

various check-cashing establishments using fraudulent 

driver’s licenses. A criminal complaint was filed against 

the carrier in February 2010. She resigned from the 

Postal Service in July 2010. 

 In June, a California general expeditor was found 

responsible for the theft of more than 100 parcels 

containing pharmaceuticals. She was sentenced to 

5 months in prison for each of the two counts against 

her, to be served concurrently, 6 years’ probation, and 

ordered to pay more than $9,300 in restitution after 

pleading guilty to theft of mail and delay or destruction 

of mail in January 2010. While under OIG agents’ 

surveillance, the expeditor rifled parcels in the back 

of a parked truck, emerging with pill bottles in her 

pants pockets and shirt. During an interview with our 

special agents, she admitted stealing parcels containing 

pharmaceuticals from the mail for at least 4 years. She 

said she only stole parcels containing Vicodin to support 

her addiction. The expeditor resigned from the Postal 

Service.

Delay or Destruction of Mail by Employees

Citizens and businesses expect their deposited mail to 

be delivered in a timely manner and not be delayed or 

destroyed. Postal employees and contractors who delay, 

desert, or dump mail are 

investigated by our special 

agents.

 In August, an Alabama 

temporary letter carrier pled 

guilty to one count of delay of 

mail and was sentenced to 

12 months’ probation. A 

tip from a citizen led our 

special agents to a dumpster 

at a local gas station. They 

reviewed footage from the gas 

station’s video surveillance 

system and observed a postal 

vehicle backing towards the 

dumpster. We recovered 

more than 250 pieces of 

mail from the dumpster. The 

carrier resigned from the 

Postal Service following this 

investigation. 

 A Georgia rural letter carrier pled guilty, in May, to 

obstruction of mail. During a surveillance operation, 

special agents observed the carrier throwing mail into a 

dumpster. We detained the rural carrier and recovered 

more than 600 pieces of mail from the dumpster, 

including Netflix DVDs and other First-Class Mail. The 

rural carrier admitted to discarding mail into the same 

dumpster on several occasions over a 2-month period. 

The rural carrier acknowledged that throwing the mail 

away was unlawful; however, he wanted to be done for 

the day. The rural carrier was ordered to serve 

12 months’ supervised probation, and to pay $500 in 

fines and $182 in restitution to Netflix. The rural carrier 

was removed from the Postal Service in March 2010. 

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 66 contract fraud investigations, resulting in 

6 arrests and more than $ 46.1 million in monetary 

benefits to the Postal Service. Following are summaries of a 

Risk Alert we issued and some of the contract fraud cases 

we investigated:

CONTRACT FRAUD

A federal search warrant on a clerk’s residence yielded laptop 

computers, digital telephones, iPods, computer hard drives, digital 

cameras, Netflix and Blockbuster DVDs, video game consoles, and 

much more. Sentencing is pending.
24 | Semiannual Report to Congress

OFFICIAL MISCONDUCT

A Contract Fraud Risk Alert was issued to the Postal 

Service detailing issues of HCR contractors not maintaining 

workers’ compensation insurance. The OIG provided 

specific actions to take to improve the control environment 

that included specific certification and documentation 

requirements to better protect the interests of the Postal 

Service. 

 In July the Postal Service realized a cost avoidance 

of more than $19.8 million after a mail equipment 

contractor submitted a modified Request for Equitable 

Adjustment (REA) related to an OIG investigation. This 

ongoing investigation determined the initial REA did 

not contain adequate supporting documentation to 

substantiate the damages claimed by the contractor. The 

investigation continues into the modified REA filed by the 

contractor subsequent to the OIG’s investigative findings 

to date. 

 A joint investigation with the FBI and U.S. Department 

of Transportation OIG resulted in a postal contract air 

cargo carrier pleading guilty in August 2010 and paying 

a $38 million criminal fine for its role in a conspiracy to 

fix prices in the air transportation industry. In August, 

the court ordered the defendant to pay 10 percent of 

the criminal fine, equaling $3.8 million, directly to the 

Postal Service. The investigation resulted in a one-count 

felony charge filed in U.S. District Court for the District of 

Columbia, alleging the company engaged in a conspiracy 

to fix the cargo rates charged to customers, including the 

Postal Service, for air cargo shipments from at least July 

2004 until at least February 2006. From October 2003 

through June 2009, the Postal Service had paid the 

contractor in excess of $205 million to transport cargo 

internationally and in excess of $2 million to transport 

cargo domestically. The parties conspired by agreeing 

on certain components of cargo rates for shipments on 

certain routes to/from the U.S. 

 The Postal Service realized a recovery of more than 

$4.4 million as a result of the OIG’s participation in a 

multi-agency investigation against a Massachusetts 

company for violating the False Claims Act and the 

Federal Anti-kickback Act. A civil complaint, initially 

filed in the Eastern District of Arkansas in 2006 but 

transferred to the U.S. District Court for the Eastern 

District of Virginia in 2009, alleged the company 

misrepresented its commercial pricing practices 

and fraudulently induced U.S. Government agencies, 

including the Postal Service, to enter into contracts 

with prices that were higher than they would have been 

had the false misrepresentations not been made. The 

complaint also alleged the company engaged in an illegal 

kickback scheme designed to influence the government 

to purchase the company’s products. 

The parties reached a settlement agreement that was 

filed in the U.S. District Court for the Eastern District of 

Virginia in May. In July, the Postal Service realized an 

additional recovery of more than $99,000. This was a 

result of the OIG’s participation in a second investigation 

into this company for the sale of defective computer 

platforms for the storage of data to U.S. Government 

agencies, including the Postal Service. The second multiagency investigation was settled in a civil settlement 

approved by the U.S. District Court for the Eastern 

District of Virginia. 

 In April, a Civil False Claims Act complaint, which had 

been filed on behalf of the Postal Service by the U.S. 

Department of Justice in the U.S. District Court, Northern 

District of Texas, was settled via a Settlement Agreement. 

Our investigation determined that since approximately 

2003, a Postal Service HCR contractor filed more than 

337 false or fraudulent fuel use certification claims 

with the Postal Service for payment associated with the 

contract, which led to the filing of the civil complaint. 

Fuel use certification forms were the means by which 

the contractor requested and received increases in 

compensation under its contracts with the Postal 

Service. As a result of the settlement, the Postal Service 

received a financial recovery of $970,000 and realized a 

cost avoidance of more than $284,000 associated with 

additional improper claims submitted by the contractor 

that had not yet been paid but were identified by our 

investigation. 

 An Ohio HCR contractor pled guilty, in August, to 

six misdemeanor counts of attempted workers’ 

compensation fraud on Postal Service HCR contracts. 

The contractor received a 6-month suspended sentence 

on each count, was ordered to serve probation, and pay 

$6,500 in restitution. The investigation determined that 

beginning in 2005, as part of the contract, the Postal 

Service paid the contractor to maintain a workers’ 

compensation policy that was never obtained. 

OFFICIAL MISCONDUCT 

Postal Service employees are guilty of misconduct when 

they do the following:

 Misuse Postal Service computers.

 Destroy or steal postal property.

 Lie or forge signatures on official documents.

 Steal funds.

 Abuse authority.

 Sabotage operations.

 Use narcotics or sell drugs while on duty.

 Abuse alcohol while on duty.
April 1 — September 30, 2010 | 25 

EXECUTIVE INVESTIGATIONS AND INTERNAL AFFAIRS

During this reporting period special agents investigated 

108 cases of employees selling, possessing, or using illegal 

drugs on duty; made 37 arrests; and the Postal Service 

took 47 administrative personnel actions. Following are 

examples of cases the OIG investigated involving employee 

misconduct.

 In June, a distribution window clerk (DWC), who was also 

a secretary-treasurer for an American Postal Workers 

Union (APWU) Chapter in New Mexico, was sentenced 

in federal court to 2 years’ probation and ordered to 

pay more than $6,000 in restitution to the APWU. The 

investigation, conducted jointly with The Office of LaborManagement Standards of the DOL revealed that the 

DWC embezzled union funds and falsified the union’s 

annual report to the DOL. The DWC was arrested and 

pled guilty to falsification of an annual report filed by a 

union. The DWC retired from the Postal Service. 

 A Florida rural carrier, along with one non-Postal Service 

co-conspirator, pled guilty, in April, to conspiracy with 

intent to distribute more than 500 grams of cocaine. 

The investigation, conducted jointly with the Osceola 

County Bureau of Investigation, the Drug Enforcement 

Administration (DEA), and the Postal Inspection Service, 

revealed that the rural carrier distributed parcels 

containing illegal narcotics. The parcels were sent from 

Puerto Rico to nonexistent addresses along the carrier’s 

route. The carrier would intercept the parcels and pass 

them to the non-Postal Service co-conspirator. Both 

subjects were arrested and the carrier was removed 

from the Postal Service. In August, the rural carrier was 

sentenced in federal court to 7 years and 3 months’ 

confinement to be followed by 5 years’ supervised 

release. The non-Postal Service co-conspirator received a 

mandatory minimum sentence of 10 years’ confinement 

to be followed by 8 years’ supervised release. 

 In June, a city carrier in Pennsylvania was sentenced 

in federal court to serve 1 year and 1 day in prison, 

followed by 2 years’ supervised release, and ordered 

to pay restitution of more than $41,000 to the IRS. This 

investigation, conducted jointly with the DEA, the IRS, 

and the U.S. Immigration and Customs Enforcement, 

revealed the city carrier was involved in a scheme to 

fraudulently acquire federal income tax refund checks. 

The carrier worked with non-postal co-conspirators who 

used compromised birth certificates and Social Security 

numbers to file fraudulent tax returns. Accordingly, the 

carrier provided destination mailing addresses from 

his postal route, intercepted the tax refund checks 

from the mail, and received cash payments from his 

co-conspirators in exchange for the checks. The carrier 

pled guilty to conspiracy to defraud the government with 

respect to claims, and was removed from the Postal 

Service. One of the co-conspirators pled guilty to defraud 

the government and is awaiting sentencing. The other 

co-conspirator is currently a 

fugitive.

 A California customer 

service supervisor (CSS), 

in June, was sentenced in 

Federal court to 10 months’ 

home confinement, 3 years’ 

probation, and ordered to 

pay a $2,000 fine. This 

investigation, conducted jointly 

with the State Department, 

revealed that the CSS used her 

postal position to fraudulently 

obtain a passport to enable her 

brother to enter the U.S. The 

CSS acquired a third party’s 

driver’s license information 

and naturalization certificate 

and used the postal passport 

application process to submit 

the fraudulent passport 

application. The CSS provided 

the passport to her brother, who then entered the U.S. 

illegally on several occasions. In October 2009, the CSS 

was indicted and arrested for making a false statement 

in a passport application. An administrative decision 

regarding the CSS is pending. 

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 an employee who has disclosed 

information he or she reasonably believes to be:

1) a violation of any rule, law or policy, 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: .................................................. 106

OIG Investigations initiated............................................ 24

Investigations closed with no finding of retaliation 

 or deferred to other adjudicative body:......................... 20

Allegations closed with no action:.................................. 53

Open investigations:..................................................... 15

OIG found reprisal:......................................................... 0

A Florida rural carrier, along with one non-Postal Service 

co-conspirator, pled guilty, in April, to conspiracy with intent to 

distribute more than 500 grams of cocaine.
APPENDICES
April 1 — September 30, 2010 | 27 

APPENDIX A

APPENDIX A

Reports Issued to Postal Service Management

For the period April 1 — September 30, 2010

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 reports (MA) in accordance with the identified needs of the project.

Summary

Risk Factors Number of Reports Funds Put to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

Strategic 20 $1,297,315,729 $49,818,069,592 — $1,956,322,664 

Operational 42 $441,774,646 $1,514,662,329 $79,646,787 $229,610 

Financial 103 $9,762,926,923 $5,847,194,200 $5,839,589,387 $65,593 

TOTAL 165 $11,502,017,298 $57,179,926,121 $5,919,236,174 $1,956,617,867 

Fiscal Year 2010 Summary

For the period October 1, 2009 — September 30, 2010

Number of Reports Funds Put to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

TOTAL 353 $11,895,954,570 $57,304,647,559 $5,933,919,980 $1,957,201,806

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.

Definitions:

Questioned Costs. A cost that is unnecessary, unreasonable, unsupported, or an alleged violation of law, regulation, contract, and so forth.

Unsupported 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.
28 | Semiannual Report to Congress

Reports with Quantifiable Potential Monetary Benefits

Funds Put 

to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

STRATEGIC RISK

Capital Investments

Civil Service Retirement System Overpayment by the Postal Service; CI-MA-10-001; 

6/18/2010

— $49,808,000,000 — —

Cost, Revenue, and Rates

Impact of Postal Accountability and Enhancement Act Price Caps; CRR-AR-10-005; 

9/27/2010

— — — $1,954,822,664

Engineering and Facilities

Capital Metro Area: Delivery Barcode Sorters Equipment Utilization; 

DA-AR-10-002; 5/7/2010

— $9,639,036 — —

Facility Energy: Metering Technologies; DA-AR-10-006; 7/2/2010 $1,691,740 $210,522 — —

Facility Optimization: Chicago District; DA-AR-10-009; 8/25/2010 $23,517,019 — — —

Facility Optimization: New Jersey District; DA-AR-10-008; 8/25/2010 $157,963,990 — — —

Facility Optimization: New York District; DA-AR-10-010; 8/25/2010 $446,258,222 — — —

Delivery Vehicle Replacement Strategy; DA-AR-10-005; 6/16/2010 $342,127,370 — — —

Facilities Optimization Controls Over the Selling of Assets; DA-AR-10-004; 

6/1/2010

— $220,034 — $1,500,000 

Field Financial

Area and District Office Field Structure; FF-AR-10-224; 9/17/2010 $289,000,000 — — —

Network Optimization

Southeast Area Processing and Distribution Center Consolidations; 

EN-AR-10-006; 9/17/2010

$33,984,345 — — —

Stations and Branches Optimization and Consolidation; EN-AR-10-005; 

8/17/2010

$2,773,043 — — —

OPERATIONAL RISK

Delivery

City Delivery Efficiency Review – Atlanta District; DR-AR-10-009; 9/24/2010

City Delivery Efficiency Review – Bay-Valley District; DR-AR-10-007; 8/26/2010 $79,016,988 — — —

City Delivery Efficiency Reviews – Los Angeles District; DR-AR-10-006; 7/1/2010 $105,056,064 — — —

Flats Sequencing System – Columbus, OH, District; DR-MA-10-002; 9/17/2010 — $155,157 — —

Flats Sequencing System Operational Issues; DR-AR-10-005; 7/1/2010 — $852,336 — —

The Effects of the Flats Sequencing System on Delivery Operations – Mid-America 

District; DR-MA-10-001; 9/23/2010

— $145,515 — —

Vehicle Parts Program; DR-AR-10-008; 9/24/2010 $9,257,751 $8,230,719 — —

Engineering and Facilities

Automated Package Processing System Equipment Maintenance Opportunities; 

DA-AR-10-003; 5/13/2010

$2,434,878 $3,496,679 — —

$27,374,309 — — — 

APPENDIX A
April 1 — September 30, 2010 | 29 

Funds Put 

to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

Field Financial

Fiscal Year 2010 PostalOne! Outage; FF-AR-10-205; 8/5/2010 $355,107 — — —

Network Processing

Assessment of Overall Plant Efficiency 2010; NO-MA-10-001; 6/11/2010 — $743,961,610 — —

Sales & Service

Electronic Postmark Program License Fees; MS-MA-10-001; 9/2/2010 — — — $229,610

Premium Pay at Bedford Park Computerized Forwarding System Unit; 

MS-AR-10-006; 8/30/2010

— $155,062 — —

Function 4 Overtime Workhours; MS-AR-10-002; 4/26/2010 — $79,646,787 $79,646,787 —

Efficiency of Retail Customer Service Operations; MS-AR-10-004; 7/28/2010 — $613,695,129 — —

Transportation

Air Networks – Federal Express Transportation Agreement – Capital Metro, 

Eastern, Great Lakes, and Northeast Areas; NL-AR-10-005; 5/25/2010

$170,587,930 $35,265,247 — —

Management of Mail Transport Equipment – National Analysis; NL-AR-10-009; 

9/29/2010

— $29,058,088 — —

Postal Vehicle Service Transportation Routes – Southern Maryland Processing and 

Distribution Center; NL-AR-10-006; 7/14/2010

$4,756,261 — — —

Postal Vehicle Service Transportation Routes – Washington Network Distribution 

Center; NL-AR-10-007; 8/4/2010

$2,791,349 — — —

Postal Vehicle Services – Scheduling and Staffing - Atlanta District; 

NL-AR-10-008; 9/29/2010

$40,144,009 — — —

FINANCIAL RISK

Financial Reporting

Summary of Substantial Overfunding and Postal Service Pension and Retiree Health 

Care Funds; FT-MA-10-002; 9/30/2010

$8,708,458,327 — — —

Territorial Cost of Living Allowance; FT-AR-10-012; 8/16/2010 — $11,944 — —

Fiscal Year 2010 Financial Installation Audit

Airway Road Finance Station Post Office – Dayton, OH; FF-AR-10-221; 8/31/2010 — $3,076 $3,076 —

Bridgeville Business Mail Entry Unit – Bridgeville, PA; FF-AR-10-161; 5/11/2010 — — — $2,222

Caldwell Post Office – Caldwell, NJ; FF-AR-10-171; 5/24/2010 — $1,127 $1,127 —

Fort Point Station – Boston, MA; FF-AR-10-187; 6/24/2010 — $3,223 $3,223 —

Hammonton Post Office – Hammonton, NJ; FF-AR-10-162; 5/14/2010 — $1,593 $1,593 —

Imperial Beach Post Office – Imperial Beach, CA; FF-AR-10-157; 4/28/2010 — $2,211 — —

James A. Farley Business Mail Entry Unit – New York, NY; FF-AR-10-209; 

8/3/2010

— — — $2,688

Kilmer Lobby Branch – Edison, NJ; FF-AR-10-202; 7/19/2010 — $4,848 $4,848 —

Lebanon Junction Business Mail Entry Unit – Lebanon Junction, 

KY; FF-AR-10-173; 6/2/2010

— — — $27,910

Manchester Business Mail Entry Unit – Manchester, NH; FF-AR-10-201; 7/19/2010 — — — $8,510

Midland Business Mail Entry Unit – Midland, MI; FF-AR-10-219; 8/26/2010 — — — $14,009

Morrisville Post Office – Morrisville, PA; FF-AR-10-186; 6/22/2010 — $625 $625 $631

APPENDIX A
30 | Semiannual Report to Congress

APPENDIX A

Funds Put 

to Better Use Questioned Costs

Unsupported 

Questioned Costs Revenue Impact

Nashville Post Office – Nashville, IN; FF-AR-10-185; 6/17/2010 — $4,550 $4,550 —

Owings Mills Post Office – Owings Mills, MD; FF-AR-10-191; 7/1/2010 — $3,248 $3,248 $3,814

Philadelphia Main Office Station – Philadelphia, PA; FF-AR-10-213; 8/10/2010 — $74,786 $74,786 —

Pottstown Business Mail Entry Unit – Pottstown, PA; FF-AR-10-168; 5/24/2010 — — — $4,205

Randolph Post Office – Randolph, MA; FF-AR-10-208; 8/2/2010 — $4,500 — —

Richardson Business Mail Entry Unit – Richardson, TX; FF-AR-10-166; 

5/19/2010

— — — $1,604

Human Resources and Security

Employee Benefit Programs; HR-MA-10-001; 9/30/2010 $705,425,522 — — —

Grievance Settlements and Payments; HR-AR-10-003; 7/1/2010 — $27,782,853 $27,782,853 —

Use of Employees in Rehabilitation Status; HR-AR-10-002; 5/27/2010 $349,043,074 — — —

Supply Management

Audit of Tom Roberts Realty U.S. Postal Service Contract; CA-CAR-10-010; 

7/28/2010

— $73 — —

Bowe, Bell and Howell Proposal for the Mail Evaluation Readability Lookup 

Instrument (MERLIN) Maintenance Support FY 2010; CA-CAR-10-004; 

6/17/2010

— $8,320 $8,320 —

Certification Process for Electronic Payments; CA-AR-10-006; 9/30/2010 — $5,587,653,734 $5,580,067,649 —

Contract Payment Terms; CA-AR-10-004; 5/27/2010 — $12,189,632 $12,189,632 —

Labor Costs in the Northrop Grumman Information Systems Contract 

2DPSCM05-B-3035; CA-CAR-10-005; 6/22/2010

— $503,513 $503,513 —

Postal Service Purchasing Policies; CA-AR-10-005; 9/20/2010 — $218,940,344 $218,940,344 —

TOTAL $ 11,502,017,298 $57,179,926,121 $5,919,236,174 $1,956,617,867 
April 1 — September 30, 2010 | 31 

APPENDIX A

Report Listing

Complete listing of all OIG reports issued to Postal Service management.

For the period April 1 — September 30, 2010

STRATEGIC RISK

Capital Investments

Civil Service Retirement System Overpayment by 

the Postal Service; CI-MA-10-001; 6/18/2010

Cost, Revenue, and Rates

Impact of Postal Accountability and Enhancement 

Act Price Caps; CRR-AR-10-005; 9/27/2010

Engineering and Facilities

Capital Metro Area: Delivery Barcode Sorters 

Equipment Utilization; DA-AR-10-002; 5/7/2010

eIDEAS Timeliness and Transparency; 

DA-MA-10-003; 8/3/2010 

Facility Energy: Metering Technologies; 

DA-AR-10-006; 7/2/2010

Facility Optimization: Chicago District; 

DA-AR-10-009; 8/25/2010 

Facility Optimization: New Jersey District; 

DA-AR-10-008; 8/25/2010

Facility Optimization: New York District; 

DA-AR-10-010; 8/25/2010 

Flats Sequencing System: Program Status and 

Projected Cash Flow; DA-AR-10-007; 7/27/2010

Postal Service Patent Management; 

DA-MA-10-004; 8/31/2010

Congressional Inquiry New Construction Project, 

Waterloo, IA; DA-MA-10-002; 6/25/2010

Delivery Vehicle Replacement Strategy; 

DA-AR-10-005; 6/16/2010

Facilities Optimization Controls Over the Selling of 

Assets; DA-AR-10-004; 6/1/2010

Field Financial

Area and District Office Field Structure; 

FF-AR-10-224; 9/17/2010

Network Optimization

Benchmarking Best Practices with Presort 

Bureaus; EN-MA-10-004; 6/7/2010

Des Moines Network Distribution Center 

Congressional Request; EN-MA-10-003; 5/4/2010

Southeast Area Processing and Distribution Center 

Consolidations; EN-AR-10-006; 9/17/2010

Stations and Branches Optimization and 

Consolidation; EN-AR-10-005; 8/17/2010

Network Processing

Consolidation of Lima Processing and Distribution 

Facility Mail Operations Into the Toledo Processing 

and Distribution Center; 

NO-AR-10-007; 7/2/2010

Sales and Service

Revenue Generation Strategic Report; 

MS-MA-10-002; 9/28/2010

OPERATIONAL RISK

Cost, Revenue, and Rates

Controls Over System for International Revenue 

and Volume, Outbound and International OriginDestination Information System; CRR-AR-10-006; 

9/23/2010

Cost and Revenue Analysis Reporting Model; 

CRR-AR-10-003; 7/27/2010

Delivery

City Delivery Efficiency Review – Atlanta District; 

DR-AR-10-009; 9/24/2010

City Delivery Efficiency Review – Bay-Valley 

District; DR-AR-10-007; 8/26/2010

City Delivery Efficiency Reviews – Los Angeles 

District; DR-AR-10-006; 7/1/2010

Flats Sequencing System – Columbus, OH, District; 

DR-MA-10-002; 9/17/2010

Flats Sequencing System Operational Issues; 

DR-AR-10-005; 7/1/2010

The Effects of the Flats Sequencing System on 

Delivery Operations – Mid-America District; 

DR-MA-10-001; 9/23/2010

Vehicle Parts Program; DR-AR-10-008; 9/24/2010

Engineering & Facilities

Automated Package Processing System Equipment 

Maintenance Opportunities; DA-AR-10-003; 

5/13/2010

Field Financial

Fiscal Year 2009 Standard Mail Volume Incentive 

Program; FF-AR-10-196; 7/16/2010

Fiscal Year 2010 PostalOne! Outage; 

FF-AR-10-205; 8/5/2010 

Revenue for Official Mail from the House of 

Representatives Mailroom; FF-AR-10-210; 

8/6/2010

Human Resources & Security

Allegations of Inappropriate Methodologies in 

a San Francisco Investigation; SA-MA-10-002; 

9/29/2010

Postal Service Security Clearance Requirements 

for Air Transportation Contractors; SA-MA-10-001; 

4/29/2010

Move Update Program and Investigations; 

SA-AR-10-001; 5/12/2010

Information Technology

L’Enfant Badge Access Controls; IS-AR-10-012; 

8/4/2010 

Modem Security at the Raleigh Information 

Technology Service Center; IS-AR-10-009; 

5/19/2010

Access Controls Over the Electronic Data 

Distribution Infrastructure; IS-AR-10-011; 

7/29/2010

Certification and Accreditation; IS-AR-10-008; 

5/4/2010

External Public Key Infrastructure Services – Fiscal 

Year 2010; IS-AR-10-013; 9/15/2010

Network Security Assessment of the National 

Customer Support Center; IS-AR-10-007; 

4/19/2010

Controls Over Payment Card Transaction Data; 

IS-AR-10-014; 9/23/2010

Securing Sensitive Data on Postal Inspection 

Service Laptops; IS-MA-10-001; 9/2/2010

UNIX Operating System Master Controls; 

IS-AR-10-010; 7/22/2010
32 | Semiannual Report to Congress

Network Processing

Assessment of Overall Plant Efficiency 2010; 

NO-MA-10-001; 6/11/2010

Charlottesville Processing and Distribution Facility 

Consolidation; NO-AR-10-008; 8/3/2010

Color-Coding of Standard Mail and Mail Condition 

Reporting at the Austin Processing and Distribution 

Center; NO-AR-10-010; 9/3/2010

Color-Coding of Standard Mail and Mail Condition 

Reporting in the Northland District; 

NO-AR-10-006; 6/9/2010

Internal Controls over Powered Industrial Vehicles 

at Sites Without the Powered Industrial Vehicle 

Management System; NO-AR-10-009; 8/31/2010

Sales & Service

Electronic Postmark Program License Fees; 

MS-MA-10-001; 9/2/2010

Premium Pay at Bedford Park Computerized 

Forwarding System Unit; MS-AR-10-006; 

8/30/2010

Function 4 Overtime Workhours; MS-AR-10-002; 

4/26/2010

Staten Island and Brooklyn Business Mail Entry 

Units Mail Verification Procedures; MS-AR-10-005; 

8/30/2010

First-Class and Standard Mail Workshare 

Discounts; MS-AR-10-003; 7/2/2010

Efficiency of Retail Customer Service Operations; 

MS-AR-10-004; 7/28/2010

Transportation

Air Networks – Federal Express Transportation 

Agreement – National Analysis; NL-AR-10-010; 

9/29/2010

Air Networks – Federal Express Transportation 

Agreement – Capital Metro, Eastern, Great Lakes, 

and Northeast Areas; NL-AR-10-005; 5/25/2010

Management of Mail Transport Equipment – 

National Analysis; NL-AR-10-009; 9/29/2010

Postal Vehicle Service Transportation Routes – 

Southern Maryland Processing and Distribution 

Center; NL-AR-10-006; 7/14/2010

Postal Vehicle Service Transportation Routes – 

Washington Network Distribution Center; 

NL-AR-10-007; 8/4/2010

Postal Vehicle Services - Scheduling and Staffing – 

Atlanta District; NL-AR-10-008; 9/29/2010

FINANCIAL RISK

Cost, Revenue, and Rates

Advertising Cost Reporting; CRR-AR-10-004; 

8/18/2010

Field Financial

Statistical Tests for Fiscal Year 2010; 

FF-AR-10-222; 9/14/2010

Financial Reporting

Compliance with Bank Secrecy Act; 

FT-AR-10-014; 9/30/2010

Independent Report on Employee Benefits, 

Withholdings, Contributions, and Supplemental 

Semiannual Headcount Reporting Submitted to the 

Office of Personnel Management; FT-AR-10-013; 

9/22/2010

Federal Employees Retirement System 

Overfunding; FT-MA-10-001; 8/16/2010

Summary of Substantial Overfunding and Postal 

Service Pension and Retiree Health Care Funds, 

FT-MA-10-002; 9/30/2010

Territorial Cost of Living Allowance; FT-AR-10-012; 

8/16/2010

Fiscal Year 2010 Financial Installation Audit

Airway Road Finance Station Post Office – 

Dayton, OH; FF-AR-10-221; 8/31/2010

Anchorage Business Mail Entry Unit – 

Anchorage, AK; FF-AR-10-189; 6/30/2010

Bardstown Business Mail Entry Unit – 

Bardstown, KY; FF-AR-10-214; 8/10/2010

Barneveld Post Office – Barneveld, WI; 

FF-AR-10-217; 8/19/2010 

Bolingbroke Post Office – Bolingbroke, GA; 

FF-AR-10-183; 6/17/2010

Boyertown Business Mail Entry Unit – 

Boyertown, PA; FF-AR-10-199; 7/13/2010

Bridgeville Business Mail Entry Unit – 

Bridgeville, PA; FF-AR-10-161; 5/11/2010

Burlington Post Office – Burlington, KS; 

FF-AR-10-172; 6/2/2010 

Caldwell Post Office – Caldwell, NJ; 

FF-AR-10-171; 5/24/2010 

Camp Wood Post Office – Camp Wood, TX; 

FF-AR-10-203; 7/22/2010

Chanhassen Business Mail Entry Unit – 

Chanhassen, MN; FF-AR-10-170; 5/24/2010

Columbus Business Mail Entry Unit – 

Columbus, GA; FF-AR-10-176; 6/9/2010

Driggs Post Office – Driggs, ID; FF-AR-10-193; 

7/6/2010

Dunn Business Mail Entry Unit – Dunn, NC; 

FF-AR-10-142; 4/6/2010

Elkhart Business Mail Entry Unit – Elkhart, IN; 

FF-AR-10-198; 7/13/2010

Fitchburg Business Mail Entry Unit – 

Fitchburg, MA; FF-AR-10-190; 7/1/2010

Fort Gay Post Office – Fort Gay, WV; 

FF-AR-10-160; 5/6/2010 

Fort Point Station – Boston, MA; FF-AR-10-187; 

6/24/2010

Fort Worth Business Mail Entry Unit – 

Fort Worth, TX; FF-AR-10-223; 9/20/2010

Franklin Square Business Mail Entry Unit – 

Franklin Square, NY; FF-AR-10-150; 4/21/2010

Fullerton Business Mail Entry Unit – Fullerton, CA; 

FF-AR-10-140; 4/6/2010

Glenwood Springs Post Office – 

Glenwood Springs, CO; FF-AR-10-184; 6/17/2010

Hammonton Post Office – Hammonton, NJ; 

FF-AR-10-162; 5/14/2010

Harpersfield Post Office – Harpersfield, NY; 

FF-AR-10-143; 4/7/2010

Hazelwood Business Mail Entry Unit – 

Hazelwood, MO; FF-AR-10-145; 4/7/2010

Hazelwood Post Office – Hazelwood, MO ; 

FF-AR-10-144; 4/7/2010

Hudson Business Mail Entry Unit – Hudson, MA; 

FF-AR-10-215; 8/19/2010

Imperial Beach Post Office – Imperial Beach, CA; 

FF-AR-10-157; 4/28/2010

Jacksonville Business Mail Entry Unit – 

Jacksonville, FL; FF-AR-10-164; 5/17/2010

Jacksonville Main Office Postal Store – 

Jacksonville, FL; FF-AR-10-163; 5/17/2010

James A. Farley Business Mail Entry Unit – 

New York, NY; FF-AR-10-209; 8/3/2010

Joelton Post Office – Joelton, TN; FF-AR-10-194; 

7/8/2010

Jonesboro Business Mail Entry Unit – 

Jonesboro, AR; FF-AR-10-216; 8/19/2010

APPENDIX A
April 1 — September 30, 2010 | 33 

Kailua Kona Business Mail Entry Unit – 

Kailua Kona, HI; FF-AR-10-158; 5/4/2010

Kalispell Business Mail Entry Unit – Kalispell, MT; 

FF-AR-10-206; 8/2/2010

Kerkhoven Post Office – Kerkhoven, MN; 

FF-AR-10-211; 8/6/2010

Kilmer Lobby Branch – Edison, NJ; FF-AR-10-202; 

7/19/2010

Lansing Business Mail Entry Unit – Lansing MI; 

FF-AR-10-218; 8/24/2010

Le Mars Post Office – Le Mars, IA; FF-AR-10-153; 

4/23/2010

Lebanon Junction Business Mail Entry Unit – 

Lebanon Junction, KY; FF-AR-10-173; 6/2/2010

Lexington Main Post Office – Lexington, KY; 

FF-AR-10-146; 4/9/2010

Lihue Business Mail Entry Unit – Lihue, HI; 

FF-AR-10-154; 4/23/2010

Lilbourn Post Office – Lilbourn, MO; 

FF-AR-10-149; 4/20/2010

Long Island City Business Mail Entry Unit – 

Long Island City, NY; FF-AR-10-167; 5/20/2010

Lynchburg Business Mail Entry Unit – 

Lynchburg, VA; FF-AR-10-212; 8/10/2010

Madelia Business Mail Entry Unit – Madelia, MN; 

FF-AR-10-151; 4/21/2010

Manchester Business Mail Entry Unit – 

Manchester, NH; FF-AR-10-201; 7/19/2010

Margaret L. Sellers Business Mail Entry Unit – 

San Diego, CA; FF-AR-10-141; 4/6/2010 

Midland Business Mail Entry Unit – Midland, MI; 

FF-AR-10-219; 8/26/2010

Midtown Station Business Mail Entry Unit – 

Ocean City, MD; FF-AR-10-152; 4/22/2010

Morrisville Post Office – Morrisville, PA; 

FF-AR-10-186; 6/22/2010 

Mount Pleasant Post Office – Mount Pleasant, IA; 

FF-AR-10-169; 5/24/2010

Nashville Post Office – Nashville, IN; 

FF-AR-10-185; 6/17/2010

New Albany Post Office – New Albany, MS; 

FF-AR-10-200; 7/19/2010

Newburgh Main Post Office – Newburgh, IN; 

FF-AR-10-177; 6/8/2010

Owings Mills Post Office – Owings Mills, MD; 

FF-AR-10-191; 7/1/2010

Park Hills Post Office – Park Hills MO; 

FF-AR-10-159; 5/5/2010 

Philadelphia Main Office Station – Philadelphia, PA; 

FF-AR-10-213; 8/10/2010 

Philomath Post Office – Philomath, OR; 

FF-AR-10-165; 5/18/2010 

Plainview Branch, Plainview, NY; FF-AR-10-220; 

8/31/2010

Portland Downtown Station Post Office – 

Portland, ME; FF-AR-10-156; 4/26/2010

Pottstown Business Mail Entry Unit – 

Pottstown, PA; FF-AR-10-168; 5/24/2010

Prestonsburg Business Mail Entry Unit – 

Prestonsburg, KY; FF-AR-10-197; 7/13/2010

Randolph Post Office – Randolph, MA; 

FF-AR-10-208; 8/2/2010 

Reidsville Business Mail Entry Unit – 

Reidsville, NC; FF-AR-10-178; 6/9/2010

Richardson Business Mail Entry Unit – 

Richardson, TX; FF-AR-10-166; 5/19/2010

Ridgeland Business Mail Entry Unit – 

Ridgeland, SC; FF-AR-10-188; 6/28/2010

Rome Post Office – Rome, NY; FF-AR-10-155; 

4/26/2010

San Jose Business Mail Entry Unit – San Jose, CA; 

FF-AR-10-147; 4/19/2010

Sandusky Post Office – Sandusky, MI; 

FF-AR-10-182; 6/16/2010 

Shakopee Business Mail Entry Unit – 

Shakopee, MN; FF-AR-10-204; 7/28/2010

Slayton Business Mail Entry Unit – Slayton, MN; 

FF-AR-10-195; 7/12/2010

Stillwater Post Office – Stillwater, MN; 

FF-AR-10-192; 7/6/2010

Waianae Post Office – Waianae, HI; 

FF-AR-10-148; 4/20/2010

Weatherford Business Mail Entry Unit – 

Weatherford, TX; FF-AR-10-180; 6/11/2010

Westbury Business Mail Entry Unit – Westbury, NY; 

FF-AR-10-181; 6/15/2010

Wilton Business Mail Entry Unit – Wilton, NH; 

FF-AR-10-175; 6/4/2010

Yazoo City Business Mail Entry Unit – 

Yazoo City, MS; FF-AR-10-174; 6/4/2010

Human Resources and Security

Employee Benefit Programs; HR-MA-10-001; 

9/3/2010

Employee Layoff Provisions; HR-MA-10-002; 

9/30/2010

Grievance Settlements and Payments; 

HR-AR-10-003; 7/1/2010 

Use of Employees in Rehabilitation Status; 

HR-AR-10-002; 5/27/2010

Supply Management

Accenture Labor Floor Check for Fiscal Year 2009; 

CA-CAR-10-013; 9/28/2010

Audit of Tom Roberts Realty U.S. Postal Service 

Contract; CA-CAR-10-010; 7/28/2010

Bowe, Bell and Howell Proposal for the Mail 

Evaluation Readability Lookup Instrument (MERLIN) 

Maintenance Support FY 2010; CA-CAR-10-004; 

6/17/2010

Modified Financial Capability Risk Assessment – 

BrightKey, Inc.; CA-CAR-10-012; 8/25/2010

Certification Process for Electronic Payments; 

CA-AR-10-006; 9/30/2010

Contract Payment Terms; CA-AR-10-004; 

5/27/2010

Detailed Financial Capability Risk Assessment 

North American Conveyor, Inc.; CA-CAR-10-006; 

7/9/2010

Modified Financial Capability Risk Assessment 

BrightKey, Inc.; CA-CAR-10-007; 7/12/2010

Labor Costs in the Northrop Grumman Information 

Systems Contract 2DPSCM05-B-3035; 

CA-CAR-10-005; 6/22/2010

Modified Financial Capability Risk Assessment of 

OfficeMax, Inc.; CA-CAR-10-009; 7/28/2010

Modified Financial Capability Risk Assessment – 

Pitney Bowes, Inc.; CA-CAR-10-008; 7/28/2010

Postal Service Purchasing Policies; 

CA-AR-10-005; 9/20/2010

Ruhl & Ruhl Commercial Company U.S. Postal 

Service Contract; CA-CAR-10-011; 8/4/2010

Ryder Integrated Logistics, Incorporated Key 

Performance Indicators for Calendar Year 2008; 

CA-CAR-10-003; 4/29/2010 

APPENDIX A
34 | Semiannual Report to Congress

APPENDIX B

APPENDIX B

Findings of Questioned Costs

For the period April 1 — September 30, 2010

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 7 $1,243,752 $127,168

Reports requiring management decision that were issued during the reporting period 34 $57,179,926,121 $5,919,236,174

TOTAL 41 $57,181,169,873 $5,919,363,342 

Reports for which a management decision was made during the reporting period (i & ii) 38 $57,180,357,629 $5,919,363,342

(i) Dollar Value of disallowed cost $51,424,841,558 $219,102,457

(ii) Dollar value of cost not disallowed $5,755,516,071 $5,700,260,885

Reports for which no management decision was made by the end of the reporting period 

Negotiations are ongoing

3 $812,244 —

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)

2 $812,171 —

Contract reports with a significant audit finding

 (See Note 3 for a list of individual 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:

Subject Report/Case Number Report Date Questioned Costs

Unsupported Costs Included 

in Questioned Costs

Audit of Portions of a Termination for Convenience 

Settlement Proposal Submitted by Northrop Grumman 

Electronic Systems

CA-CAR-09-011 3/16/2009 $475,322 —

Termination Settlement Proposal Submitted by C.R. 

Daniels, Incorporated

CA-CAR-09-019 7/24/2009 $336,849 —

TOTAL $812,171 —

Note 3 — Contract reports with a significant audit finding:

None for this report period
April 1 — September 30, 2010 | 35 

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 21 $11,502,017,298 

TOTAL 21 $11,502,017,298 

Reports for which a management decision was made during the report period (i & ii) 20 $11,468,032,953 

(i) Value of recommendations agreed to by management — $ 9,416,026,433

(ii) Value of recommendations that were not agreed to by management — $ 2,052,006,520

Reports for which no management decision was made by the end of the reporting period 1 $ 33,984,345 

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)

— —

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, 2010

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.
36 | Semiannual Report to Congress

APPENDIX D

APPENDIX D

Reported Non-Monetary Benefits

For the period April 1 — September 30, 2010

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 55

Number of customer service audits conducted Number of Audits 25

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 $1,112,483,223

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 17

Number of employee/facility safety and security audits conducted Number of Audits 25

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 $364,090,402

Number of data security/IT security audits conducted Number of Audits 21

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 $ 752,289,397

Disbursements at Risk

Dollar value of disbursements made where proper Postal Service internal controls and processes were not followed Dollar Value $9,506

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 28

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 $75,007,596

Capital Investment Savings Shortfall

The difference between the savings predicted by the Decision Analysis Report for capital investment projects and the 

actual savings realized

Dollar Value $431,088,520

Potential Additional Revenue

Revenue the Postal Service could potentially generate for goods delivered or services rendered based on suggested 

improvements

Dollar Value $9,734,237,193
April 1 — September 30, 2010 | 37 

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 —

Dollar value of data used to support management decisions that is not fully supported or completely accurate Dollar Value $910,965,964
38 | Semiannual Report to Congress

APPENDIX E

APPENDIX E

Reports with Significant Recommendations Pending Corrective Actions

For the period through September 30, 2010

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

NO-AR-05-011 6/17/2005 Efficiency of the Los Angeles International Service Center

R-1 — Reduce mail processing workhours by 85,000, based on FY 2004 workhours. This will produce a cost avoidance of 

approximately $26.1 million, based on labor savings over a 10-year period. TID: October 2010*

HM-AR-06-006 8/29/2006 Postal Service’s Grievance-Arbitration Service Centers

R-8 — Use electronic commerce to process arbitrator invoices, thus reducing the number of steps required for invoice payment. 

This would be consistent with Postal Service principles, which state electronic commerce with suppliers is a major enabler of 

transactional cost reductions. TID: September 2012*

SA-AR-07-002 3/30/2007 Postal Service Security Controls and Processes for the Capital Metro Area

R-1 — Establish and provide consolidated standard operating procedures and guidance to the Area Security Coordinator, District 

Security Control Officers, and facility Security Control Officers to assist them in performing their duties and responsibilities 

consistently and in a timely manner. TID: June 2010 

R-5 — Develop appropriate performance measures for physical security to assess the achievement of security goals and incorporate 

them into performance plans for area-, district-, and field-level security personnel. TID: December 2010

SA-AR-07-003 5/9/2007 Postal Service Security Controls and Processes for the Pacific Area 

R-2 — Develop appropriate performance measures for physical security to assess the achievement of security goals and incorporate 

them into performance plans for area-, district-, and field-level security personnel. TID: December 2010

HM-AR-07-002 5/16/2007 Postal Service’s Workplace Safety and Workplace-Related Injury Reduction Goals and Progress 

R-1 — Closely monitor conversion to the SAP Environmental Health and Safety module and, as soon as possible, ensure the 

upgraded system captures costs by facility, district/performance cluster, and area office as well as the costs for the following 

key categories:

 Non-injury accidents.

 Injury accidents.

 Type of injury.

 Type of illness.

 Per employee.

TID: September 2011

IS-AR-07-016 8/20/2007 Audit of Database Administration Practices 

R-2 — Establish policies and procedures for protecting and using sensitive and business-controlled sensitive data in test, 

development, and production environments. TID: March 2011

* Management has implemented our recommended corrective action.
April 1 — September 30, 2010 | 39 

APPENDIX E

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-1 — Assess the risk of the duties of all Information Technology and Accounting Service Center positions (career and non-career) 

for the purpose of assigning these positions as sensitive. TID: March 2011

R-4 — Notify the 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: March 2011

CRR-AR-08-002 2/12/2008 Security Review of the Electronic Verification System

R-2 — Revise Publication 91, Confirmation Services Technical Guide, to require mailers to utilize a secure file transfer method when 

transmitting manifests for electronic verification to the Postal Service. TID: November 2011

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: May 2011

FT-AR-08-010 3/31/2008 Fiscal Year 2007 Postal Service Financial Statements Audit – St. Louis Information Technology and Accounting Service 

Center 

R-2 — Modify policies and procedures to include the destination facility validation in the highway extra trips payment process. 

TID: October 2010*

DA-AR-08-006 6/4/2008 Flats Sequencing System: Production First Article Testing Readiness and Quality

R-4 — Develop a recovery schedule to ensure the Preliminary Production Baseline Technical Data Package will be available before 

the production First Article Test begins. TID: September 2010*

R-5 — Ensure that initial Maintenance Diagnostic and Support System and the Program Control System functionalities are available 

for First Article Testing and develop a schedule for future design releases. TID: January 2011

R-7 — Ensure that supplier(s) follow the quality control plan and the configuration control process and validate that the first five 

production systems are built to the same drawing configuration. TID: June 2011

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 to reduce the Postal Service’s 

exposure to financial loss. TID: March 2011

SA-AR-08-008 7/23/2008 Leased Facility Maintenance Responsibility in the Great Lakes Area

R-2 — Require the Great Lakes Facilities Service Office to collect $62,625 in recoverable supported questioned costs. 

TID: January 2013*

SA-AR-08-009 7/23/2008 Postal Service Continuity of Operations for the Great Lakes Area

R-1 — Update the contact information of key continuity of operations personnel at least semiannually, or more often as changes 

occur. TID: December 2010

R-2 — Complete continuity of operations training, including Postal Alert and Notification System training. TID: December 2010

R-3 — Identify and prioritize essential functions. TID: December 2010

R-4 — Establish a formal review process to ensure continuity of operations plans are completed, updated annually, and maintained in 

the Postal Alert and Notification System, as required. TID: December 2010

R-5 — Establish an area emergency management coordinating committee to provide oversight and assistance to district and facility 

emergency management teams in establishing, implementing, and reviewing emergency management plans. TID: December 

2010

R-6 — Establish specific guidance for identifying and selecting alternate facilities including, at a minimum, the number of alternate 

facilities that should be identified, and criteria regarding location, mail volume, and mail capacity. TID: December 2010

R-7 — Require personnel responsible for continuity of operations at primary and alternate facilities to conduct tests and exercises to 

ensure alternate facilities can effectively process the primary facilities’ mail. TID: December 2010
40 | Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

SA-AR-08-010 7/24/2008 Postal Service Continuity of Operations for the Pacific Area

R-1 — Ensure continuity of operations plans are completed, updated annually, and maintained in the Postal Alert Notification 

System, as required. TID: December 2010

SA-AR-08-013 8/22/2008 Security Clearances for Postal Service Employees 

R-1 — Establish and implement a policy to periodically assess risks associated with the duties of all Postal Service positions to 

determine which positions require a security clearance. TID: March 2011

R-2 — Revise the Administrative Support Manual, as appropriate, to reflect changes to the list of positions requiring a security 

clearance. TID: March 2011

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 2010 

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: March 2011

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: March 2011

R-3 — Customize the Electronic Travel Voucher System Controls (ETVS) to require the traveler to input a value in the room tax field 

(even if the room tax is zero) or provide the traveler with a check box to indicate taxes not applicable in cases where the 

lodging stay is tax exempt. TID: March 2011

R-4 — Customize the ETVS to remove the option to combine room rate and room taxes into a single entry. TID: March 2011

FF-AR-09-055 12/26/2008 Fiscal Year 2008 Financial Installation Audits — Post Offices, Stations, and Branches

R-5 — Issue guidance to the field to destroy all copies of Postal Service Form 1096 receipts and determine when all forms have 

been destroyed. TID: February 2012

FT-MA-09-001 1/13/2009 Postal Service Management Instruction — Expenses for Internal and External Events

R-2 — Further update Management Instruction FM-640-2008-1, Expenses for Internal and External Events, to require that all 

expenses associated with internal and external events be included in a unique general ledger account(s). TID: September 

2011

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 (ISA) Process. TID: December 2010

DR-MA-09-001 3/26/2009 (reissue 

date)

Management of City Letter Carriers’ Street Performance

R-1 — Revise existing Postal Service policies and standard operating procedures to reduce from eight to four the number of required 

Delivery Operations Information System reports to aid supervisors in managing carrier street performance. TID: October 

2011

R-2 — Modify the Delivery Operations Information System Route/Carrier Daily Performance Analysis Report to show “exceptions” 

(such as the only actual route times varying from projected route times). TID: October 2011

R-5 — Deploy additional Global Positioning System technology for 400 motorized city routes in the Chicago District for more effective 

monitoring and tracking during street delivery. TID: August 2010
April 1 — September 30, 2010 | 41 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

MS-AR-09-006 3/31/2009 Intelligent Mail/Seamless Acceptance Project Management 

R-1 — Quantify strategic benefits to the Postal Service and mailers. TID: October 2009

R-4 — Incorporate effort-based workhour requirement estimates into work plans for future project releases. TID: September 2009

R-5 — Develop a risk management plan to address project risks. The plan should define a process for conducting risk management 

activities. TID: None

R-6 — Develop a procurement plan consistent with the Postal Service’s purchasing guidelines to manage procurements related to 

the project. TID: September 2009

MS-AR-09-008 5/28/2009 Mail Processing Equipment’s Ability To Read Postage On First-Class Mail Letters

R-3 — Determine the feasibility of modifying the Advanced Facer Canceller System to include postage due and fraudulent postage 

detection software (including detection of reused stamps).TID: September 2010

R-4 — Determine the feasibility of mandating that all postage payment methods be encoded with standardized symbol coding, 

special ink, barcode or other tracking device to allow the Advanced Facer Canceller System to read postage amounts. TID: 

June 2011

R-5 — Reevaluate the phosphorescence coding methodology to include raising the coding denomination from the current 10-cent 

stamp to the current price of a First-Class stamp. TID: June 2011

R-6 — Determine the causes of shortpaid and overpaid postage validation imprinter labels on First-Class letters and develop 

awareness training for retail employees. TID: August 2009

CA-AR-09-005 6/1/2009 Supply Management’s Oversight of Oversight of Delegations of Authority

R-2 — Remind delegatees of their responsibility to ensure compliance with their delegation of authority letters and require them to 

certify they have instituted a system of controls and oversight to ensure: 

 Best value determinations are performed and documented. 

 Annual reports are developed and provided to Supply Management detailing financial activities, including the number of 

contracts or agreements entered into and associated expenditures. 

 Annual ethics training is completed and documented for staff involved in administering contracts or agreements. 

TID: December 2010

R-3 — Require the Travel, Retail, and Temporary Services Category Management Center to develop procedures for collecting 

reports required under the delegations of authority and for reviewing delegatees’ control and oversight systems to ensure 

that delegation of authority letter minimum control requirements are met. If minimum control requirements are not met, 

discontinuation should be considered, with the results and justification documented in an oversight file. TID: December 2010 

NL-MA-09-001 8/5/2009 Fuel Management Initiatives for Surface Network Operations – Fuel Purchasing Strategy

R-3 — Ensure adequate consideration of project management principles and best practices outlined in the report in planning and 

implementing the national fuel purchasing strategy, including development of a project management plan with project goals, 

performance measures, baselines and target dates, changes to target dates, and documented reasons for changes. 

TID: November 2010

R-4 — Develop a risk mitigation plan to address major project risks to help achieve the stated goals of the national fuel purchasing 

strategy. TID: November 2010

R-5 — Develop measurement factors to monitor achievement of the stated goals of the national fuel purchasing strategy and 

consider including these factors as part of the National Performance Assessment plan, as appropriate. TID: November 2010

CRR-AR-09-006 8/19/2009 Electronic Verification System Rejected Transactions 

R-1 — Develop and implement requirements to identify and track all rejected electronic verification system transactions to ensure 

mailers correct and resubmit the transactions for processing. TID: November 2010
42 | Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

NO-AR-09-012 9/25/2009 Sunday Mail Processing Operations

R-1 — Reduce 83,000 workhours by the end of FY 2010 with an associated economic impact of approximately $38 million over a 

10-year period. TID: October 2011

DR-AR-09-009 9/28/2009 Delivery Vehicle Fuel Management

R-1 — Consider expansion of mobile fueling for city and rural delivery units with 30 or more routes using Postal Service-owned 

vehicles, as well as other delivery units as necessary, as part of the Postal Service’s national fuel purchasing strategy. 

TID: September 2010

DR-AR-09-010 9/28/2009 Management of Delivery Point Sequencing Percentage Increases for City Delivery – Nationwide Review 

R-2 — Require district officials to prioritize and execute tasks, such as updating address databases, monitoring and removing 

M-records; identifying and resolving sortation issues; and handling non-Delivery Point Sequencing mail in their delivery units. 

TID: December 2010

R-3 — Develop and execute an action plan to mitigate low city Delivery Point Sequencing percentages in delivery units. 

TID: December 2010

R-4 — Ensure accountability of Delivery Point Sequencing (DPS) Improvement team members for completing assigned tasks to 

increase and sustain city delivery DPS percentages and reduce operating costs. TID: December 2010

EN-AR-09-005 9/28/2009 Performance Goals for Market-Dominant Products 

R-1 — Document the method used to develop future performance goals for market-dominant products. TID: January 2013

IS-AR-09-013 9/29/2009 Business Partner Connectivity – Leased Line Firewalls

R-1 — Collaborate with executive sponsors to review and validate all business partner connections to Postal Service information 

resources and notify the Network Connectivity Review Board to terminate connections no longer required. TID: June 2011*

R-2 — Designate the portfolio managers responsible for informing the Network Connectivity Review Board when a business partner 

connection is no longer required. TID: October 2011*

R-3 — Designate the portfolio managers responsible for periodically reviewing and validating business partner connectivity to Postal 

Service networks. TID: October 2011*

SA-AR-09-008 9/29/2009 Postal Service Aviation Security Capping Report 

R-1 — Strengthen internal controls requiring management reviews to ensure corrective actions are taken to improve the 

performance of noncompliant offices. TID: November 2010

R-2 — Develop and implement performance measures or other appropriate evaluation factors to improve operations’ personnel 

performance in following established policies and procedures for detecting and preventing anonymous and potentially 

dangerous mail from entering the mailstream. TID: November 2010

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 HCR transportation to 

ensure that it is comprehensive and implements the industry best practices identified in our audit. TID: October 2010

R-2 — Assess and implement all opportunities for owned, leased, and contracted vehicles to use technology to reduce wind 

resistance, 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: October 2010

R-3 — Establish and implement tire inflation maintenance requirements for postal-owned heavy-duty vehicle fleet, leased, and 

contracted vehicles consistent with industry best practices. Adjust contracts, as appropriate, to account for the reduced fuel 

need. TID: October 2010

R-5 — Evaluate HCR routes and, where feasible, implement speed limit requirements consistent with industry best practices, without 

negatively impacting service and adjust contracts as appropriate to account for the reduced fuel need. TID: October 2010
April 1 — September 30, 2010 | 43 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

DR-AR-10-001 10/15/2009 Use of the Carrier Optimal Routing System

R-1 — Resolve the system and application problems with Web Carrier Optimal Routing (WebCOR) and implement the web-based 

program nationwide. TID: October 2010

R-2 — Select and train at least four individuals as Carrier Optimal Routing system subject matter experts as mandated by Postal 

Service Headquarters; complete the Data Preparation Process to include using current PS Forms 3999, Inspection of the 

Letter Carrier Route; and complete all route adjustments using the COR system. TID: December 2010

R-3 — Ensure area officials mandate districts to track and monitor vehicle mileage changes in the COR system. 

TID: January 2011 

FF-AR-10-033 12/4/2009 Use of No-Fee Money Orders Follow-Up Audit 

R-1 — Instruct area and district management to provide training to retail associates and local unit management on use of reason 

codes, payment processes, and closeout procedures. TID: December 2010

R-2 — Reinforce procedures regarding proper use of no-fee money orders in readily accessible messaging to sales and service 

associates. TID: December 2010

R-3 — Create a change in Point-of-Service to require supervisory approval in order for a no-fee money order to be issued, or develop 

other controls that would enhance supervisory oversight of the issuance of no-fee money orders. TID: December 2010

R-4 — Instruct local units to maintain supporting documentation for no-fee money order transactions for the required retention 

period. TID: December 2010

DR-AR-10-002 12/18/2009 City Delivery Efficiency Review – San Francisco Napoleon Street Station

R-1 — Reduce workhours by 54,975 at the San Francisco Napoleon Street Station with an associated economic impact of more 

than $21.3 million over 10 years. TID: December 2012

IS-AR-10-002 12/22/2009 General Control Review of Human Resources Shared Service Center

R-1 — Designate as sensitive those positions at the Human Resources Shared Service Center (HRSSC) that require access to 

personally identifiable information. TID: March 2011

R-2 — Initiate appropriate security clearance investigations for all employees in sensitive positions at the HRSSC. 

TID: March 2011

R-5 — Revise Handbook AS-805, Information Security, to clarify the approval process for wireless access points on the Postal 

Service network. TID: May 2011

NL-AR-10-002 12/28/2009 Postal Vehicle Service Transportation Routes – Cardiss Collins Processing and Distribution Center 

R-1 — Ensure that Cardiss Collins P&DC managers follow prescribed fleet management procedures for making Postal Vehicle 

Service (PVS) schedules effective, including conducting schedule and vehicle utilization reviews. TID: July 2010 

R-2 — Verify elimination of the 43,264 workhours already agreed to by local and area management from PVS trip schedules. 

TID: October 2010

EN-AR-10-001 1/7/2010 Status Report on Postal Service’s Network Rationalization Initiatives

R-1 — Develop and document specific criteria to identify consolidation opportunities in the plant network. TID: December 2010

R-2 — Develop a periodic (annual) review process using a top-down methodology to ensure consistency in identifying 

consolidation opportunities. TID: March 2011

DA-MA-10-001 1/28/2010 Sustainability: Promoting Energy and Recycling Compliance Fiscal Year 2009 

R-1 — Issue written guidance to installation managers to encourage the use of more remote building management systems. 

TID: March 2011

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
44 | Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

EN-AR-10-003 2/12/2010 Manasota Processing and Distribution Center Consolidation

R-1 — Ensure the implementation activities of processing and distribution center consolidations begin immediately after area mail 

processing proposal approval and require headquarters’ approval when implementation is delayed more than 3 months. 

TID: May 2011

HM-AR-10-001 2/18/2010 Postal Service Absenteeism

R-1 — Provide refresher training to supervisors to ensure they are aware of unscheduled leave policies and procedures and the 

importance of following them. TID: September 2010*

R-2 — Establish and implement internal controls to evaluate supervisors’ compliance with unscheduled leave policies and procedures 

(such as performance and accountability measures or periodic management reviews). TID: July 2010*

R-3 — Require supervisors and labor relations specialists to use the Enterprise Resource Management System to record employees’ 

inability to meet position requirements, corrective actions taken, and grievance data. TID: July 2010*

NO-AR-10-003 2/24/2010 Dallas Processing and Distribution Center Outgoing Mail Consolidation

R-1 — Consolidate the Dallas P&DC outgoing mail operation into the North Texas P&DC by no later than FY 2011. 

TID: December 2011

NL-AR-10-003 3/1/2010 Highway Contract Route Transportation – Greater Chicago

R-3 — Verify elimination of 42 trips within the identified HCRs, already agreed to by local and area management. 

TID: November 2010

R-4 — Reassess the remaining 20 trips and cancel or modify the trips as indicated by the reassessment, or document the 

reasons for retaining the trips. TID: November 2010

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: November 2010 

NO-AR-10-004 3/29/2010 Powered Industrial Vehicle Management System at the Indianapolis Processing and Distribution Center

R-1 — Use the PIVMS to the fullest extent possible to manage operations and continue to improve mail processing efficiency by 

reducing 20,000 workhours in tow and forklift operations by FY 2013. TID: September 2013*

IS-AR-10-007 4/19/2010 Network Security Assessment of the National Customer Support Center

R-1 — Use the Postal Service’s patch and configuration management processes to identify and remediate missing patches and 

configuration issues. TID: September 2010

SA-MA-10-001 4/29/2010 Postal Service Security Clearance Requirements for Air Transportation Contractors 

R-1 — Conduct a formal risk assessment to determine if security clearance requirements for air transportation contract personnel 

adequately mitigate risks associated with the contractor’s positions and access to Postal Service facilities and the mail. 

When contract personnel do not have or maintain appropriate security clearances, there is an increased security risk to 

employees, customers, the mail, critical assets, and the general public. TID: September 2010

R-2 — Establish a process to periodically assess air transportation contractor compliance with Postal Service security requirements 

to mitigate security risks. TID: September 2010
April 1 — September 30, 2010 | 45 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

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 (C&A) process. TID: March 2011

R-2 — Update Handbook AS-805, Information Security, to require mandatory annual training on the C&A process for all portfolio 

managers. TID: July 2011

R-3 — Ensure all portfolio managers receive mandatory training regarding their role, responsibility, and accountability for 

implementing and reinitiating the C&A process. This training should also be available to all executive sponsors. 

TID: July 2011

R-4 — Hold portfolio managers accountable for completing the C&A process within the Technology Solutions Life Cycle prior to 

implementing critical applications into the production environment. TID: July 2011

R-5 — Complete the C&A process for all critical applications currently in production, as required by Handbook AS-805, 

Information Security. TID: March 2011

R-6 — Ensure portfolio managers work with executive sponsors to initiate the recertification process for critical applications 

assigned to their functional areas as required by Handbook AS-805, Information Security. TID: March 2011

R-7 — Develop a formal, centralized mechanism to track the status of all unmitigated residual risks identified in the applications’ 

risk mitigation plan. TID: July 2011

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: July 2011

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: July 2011

R-10 — Establish a policy to designate a central repository for storing the C&A documentation. TID: July 2011

R-11 — Update Handbook AS-805, Information Security, to designate a single entity responsible for uploading the C&A 

information in the central repository for all critical applications. TID: March 2011

R-12 — Input the C&A documentation for all critical applications into the central repository. TID: March 2011

R-13 — Update Handbook AS-805, Information Security, to designate a single entity for updating and validating the C&A 

information in the Enterprise Information Repository for all critical applications. TID: December 2010*

SA-AR-10-001 5/12/2010 Move Update Program and Investigations

R-1 — Enhance the Move Update Program to comprehensively verify compliance at mail acceptance and ensure collection of 

proper postage. TID: May 2011

R-2 — Ensure standards for determining Move Update compliance are consistent and clearly communicated to mailers. 

TID: Audit resolution

R-3 — Establish mandatory comprehensive training for responsible personnel to ensure appropriate assessment of revenue 

deficiencies. TID: Audit resolution

R-4 — Review the overstated revenue deficiency to determine whether the amount should be reduced. TID: Audit resolution

R-5 — Limit the use of postal inspectors to Move Update investigations with expectations of civil or criminal prosecution. 

TID: Audit resolution

NL-AR-10-005 5/25/2010 Air Networks – FedEx Transportation Agreement – Capital Metro, Eastern, Great Lakes, and Northeast Areas 

R-1 — Use surface transportation to the extent possible for mail that does not require air transportation to meet the Postal 

Service’s on-time standards. TID: October 2010

R-2 — Transport mail to the maximum extent possible using the service-responsive capacity of passenger airlines under contract 

with the Postal Service. TID: December 2010

R-3 — Sort mail into bypass containers as appropriate. TID: December 2010
46 | Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

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 5 12.2, Payment Time Frame, and other sections 

as necessary, to add 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 2011

NO-MA-10-001 6/11/2010 Assessment of Overall Plant Efficiency 2010

R-1 — Reduce 16.2 million workhours by FY 2012. TID: December 2012

DA-AR-10-005 6/16/2010 Delivery Vehicle Replacement Strategy

R-1 — Replace maintenance intensive vehicles beginning in FY 2011. TID: December 2010

R-2 — Reemphasize to vehicle maintenance and district managers the reinvestment threshold, the importance of completing PS 

Forms 4587, to include cumulative costs, and the need to obtain required approvals as detailed in Handbook PO-701. 

TID: December 2010

R-3 — Monitor maintenance intensive delivery vehicles at the area level. TID: December 2010

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 otherwise realize the benefit of this overpayment to the Postal Service. TID: Contingent on 

Congress; no target date can be provided.

DR-AR-10-006 7/1/2010 City Delivery Efficiency Review – Los Angeles District 

R-1 — Reduce the district’s workhours by 298,260 to achieve an associated economic impact of more than $105 million over 

10 years. TID: October 2010

DR-AR-10-005 7/1/2010 Flats Sequencing System Operational Issues 

R-1 — Track and monitor Flats Sequencing System processing operations to reduce labor hours associated with additional 

manual sorting of unworked flat mail sent to delivery units. R-1 — Track and monitor Flats Sequencing System processing 

operations to reduce labor hours associated with additional manual sorting of unworked flat mail sent to delivery units. 

TID: None

R-2 — Require plant and district managers to coordinate efforts in reviewing, updating, and complying with their Integrated 

Operating Plans to ensure sequenced flat mail arrives timely to delivery units. TID: September 2010

HR-AR-10-003 7/1/2010 Grievance Settlements and Payments 

R-1 — Develop and implement an internal control plan for grievance settlements and payments to ensure consistency among 

districts and compliance with contractual agreements. Such a plan should include, at a minimum, requirements for 

maintaining adequate supporting documentation; training for managers who have the authority to resolve disputes in the 

grievance procedures; requirements for periodically monitoring Grievance and Arbitration Tracking System reports and 

alerts; and procedures to ensure that negotiated settlement payments are valid, accurate, and properly allocated among 

the grievants. TID: None

NO-AR-10-007 7/2/2010 Consolidation of Lima Processing and Distribution Facility Mail Operations Into the Toledo Processing 

and Distribution Center 

R-1 — Move forward with the consolidation of the Lima, OH, P&DF mail operations into Toledo, OH, P&DC. TID: February 2011

DA-AR-10-006 7/2/2010 Facility Energy: Metering Technologies 

R-1 — Install time-of-use metering at eligible processing and distribution centers by December 31, 2010. TID: December 2010

NL-AR-10-006 7/14/2010 Postal Vehicle Service Transportation Routes – Southern Maryland Processing and Distribution Center 

R-3 — Reassess the remaining 3,249 workhours identified in our audit and eliminate them as indicated by the reassessment, or 

document the reasons for retaining them. TID: October 2010

IS-AR-10-010 7/22/2010 UNIX Operating System Master Controls 

R-1 — Review and update system permissions to ensure developers possess read-only privileges to files in the production 

environment. TID: September 2010
April 1 — September 30, 2010 | 47 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

CRR-AR-10-003 7/27/2010 Cost and Revenue Analysis Reporting Module

R-1 — Incorporate access controls such as password protection in the modules containing computer programming code. 

TID: October 2010

MS-AR-10-004 7/28/2010 Efficiency of Retail Customer Service Operations

R-1 — Implement best practices for retail customer service operations at all facilities. TID: October 2011

R-2 — Explore opportunities to consolidate business mail acceptance operations at Post Offices, stations, and branches.

TID: October 2011

R-3 — Periodically evaluate operating efficiency by assessing performance against productivity targets and adjusting resources in 

response to workload changes. TID: October 2010

R-4 — Re-deploy employees, as appropriate, to facilities where there is sufficient workload to support the workhours. 

TID: October 2011

IS-AR-10-011 7/29/2010 Access Controls Over the Electronic Data Distribution Infrastructure 

R-1 — Enable system-level audit logging (including system, event, error, and web logs) on EDDI servers. TID: October 2010

R-2 — Manage user accounts and configure password controls according to Handbook AS-805, Information Security, 

requirements. TID: October 2010

R-3 — Obtain approval through eAccess to use shared user accounts within the EDDI environment. TID: October 2010

IS-AR-10-012 8/4/2010 L’Enfant Headquarters Badge Access Controls

R-1 — Perform periodic reviews of all badge access to the L’Enfant Plaza Headquarters building and sensitive work areas and 

remove access for individuals who no longer require it. TID: October 2010 

NL-AR-10-007 8/4/2010 Postal Vehicle Service Transportation Routes – Washington Network Distribution Center

R-1 — Verify the phasing out of 6,968 workhours that management agreed were in excess of the workload. TID: July 2010

R-2 — Ensure that Network Distribution Center managers periodically assess PVS workload and staffing requirements to maintain 

appropriate staffing levels. TID: September 2010

FF-AR-10-210 8/6/2010 Revenue for Official Mail from the House of Representatives Mailroom

R-1 — Coordinate with the U.S. House of Representatives mailroom and the Southern Maryland BMEU to develop and implement 

processes to verify postage claimed for individually franked mailpieces, such as establishing alternate mailing system 

agreements. TID: October 2010

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 FERS surplus is extinguished. TID: September 2011

R-2 — Coordinate with the OPM 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 OPM to create a sub-account within the Civil Service Retirement and Disability Fund exclusive to the 

Postal Service. TID: September 2011
48 | Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

EN-AR-10-005 8/17/2010 Stations and Branches Optimization and Consolidation

R-1 — Develop detailed policies and procedures for the station and branch closing process. TID: January 2011

R-2 — Improve the reliability and usefulness of retail facilities data by validating, correcting, and updating information in the 

database. TID: January 2011

R-3 — Develop measurable criteria to mitigate inconsistencies in evaluating factors used for determining feasibility to discontinue 

operations. TID: January 2011

R-4 — Process and approve or disapprove discontinuance proposals in a timely manner. TID: January 2011

CRR-AR-10-004 8/18/2010 Advertising Cost Reporting

R-1 — Coordinate with the Law Department and Segment Advertising to develop adequate guidance, controls, and processes 

to ensure reporting of advertising costs is done in compliance with PRC-approved costing methodology and correct any 

remaining misstatements in FY 2010 advertising costs. TID: September 2010

R-2 — Develop an approval process to ensure changing advertising cost allocation methodologies is done in accordance with 

PRC-approved costing methodology. TID: September 2010

R-4 — Develop and implement detailed system requirements for the Tracker System to provide project management information 

that ensures ability to appropriately attribute advertising costs. TID: December 2011

DA-AR-10-009 8/25/2010 Facility Optimization: Chicago District

R-1 — Ensure installation heads have the proper guidance for identifying and reporting excess space. TID: March 2011

R-2 — Include additional metrics, such as dates and space conditions, to track, monitor, and report excess space within the 

Chicago District; and initiate disposal action for excess space identified. TID: March 2011

DA-AR-10-010 8/25/2010 Facility Optimization: New York District

R-1 — Postal Service policy requires installation heads to report excess space without providing the necessary guidance to 

effectively accomplish this task. TID: March 2011

R-2 — The excess space reporting system does not track metrics such as dates or space conditions to allow for the prioritization 

of disposal actions. TID: March 2011

DA-AR-10-008 8/25/2010 Facility Optimization: Northern New Jersey District

R-1 — Ensure installation heads have the proper resources for identifying and reporting excess space. TID: March 2011

R-2 — Include additional metrics, such as dates and space conditions, to track, monitor, and report excess space within the 

Northern New Jersey District; and initiate disposal actions for excess space identified. TID: March 2011

DR-AR-10-007 8/26/2010 City Delivery Efficiency Review – Bay-Valley District 

R-1 — Reduce the district’s workhours by 223,011 to achieve an associated economic impact of more than $7.9 million annually 

or $79 million over 10 years. TID: January 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. In its Five-Year 

Strategic Plan, the Postal Service conveys its desire to generate new revenue by leveraging its strengths; however, it does 

not reference intellectual property or patents. TID: March 2011

MS-MA-10-001 9/2/2010 Electronic Postmark Program License Fees

R-1 — Develop a process to monitor and validate licensees’ Electronic Postmark usage. TID: December 2010

R-3 — Initiate actions to collect past due Electronic Postmark license fees. TID: September 2010
April 1 — September 30, 2010 | 49 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

IS-MA-10-001 9/2/2010 Securing Sensitive Data on Postal Inspection Service Laptops 

R-1 — Create and maintain an inventory of all existing Postal Inspection Service laptops. TID: March 2011

R-2 — Install full disk encryption on all new Postal Inspection Service laptop computers before deployment. TID: August 2011 

R-3 — Develop an expedited deployment schedule to reduce the risk of sensitive data loss from the unencrypted laptops. 

TID: March 2011

R-4 — Remove and destroy hard drives or completely degauss all sensitive data stored on the older Postal Inspection Service 

laptops before disposing of them. TID: August 2011

R-5 — Enter all new laptops in the centralized inventory system upon deployment to Inspection Service users. TID: August 2011

FF-AR-10-222 9/14/2010 Statistical Tests for Fiscal Year 2010 

R-1 — Verify that district statistical program managers track data collector performance and take appropriate actions in response 

to performance issues. TID: October 2010

FF-AR-10-224 9/17/2010 Postal Service Area and District Office Field Structure

R-1 — Develop a comprehensive strategic plan to guide future area and district field structure decisions. The plan should address 

environmental factors, mail volumes, technological advancements, operational considerations and other issues impacting 

Postal Service strategic goals. TID: September 2011

R-2 — Implement one or more of these three options, or combinations of portions of these options, for consolidating the area and 

district field structure: 

 Consolidate district offices that are within 50 miles of one another. 

 Consolidate area and district offices that have less than the mean mail volume and workhours. 

 Relocate area offices to headquarters. 

TID: September 2011

R-3 — Develop a policy and process for performing a comprehensive evaluation of the area and district office structure at least 

every 5 years. TID: March 2012

R-4 — Develop a policy and procedures to maintain adequate supporting documentation for all area and district consolidations or 

expansions as part of a comprehensive strategic plan. TID: March 2012

EN-AR-10-006 9/17/2010 Southeast Area Processing and Distribution Center Consolidations

R-1 — Complete the full consolidation feasibility study on the Daytona Beach P&DF into the Mid-Florida P&DC and take action to 

eliminate excess space in the Mid-Florida P&DC. TID: December 2011

R-2 — Determine alternate uses for excess space at the Birmingham P&DC and annex. TID: June 2011
50 | Semiannual Report to Congress

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

CA-AR-10-005 9/20/2010 U.S. Postal Service Purchasing Policies

R-1 — Establish a competition advocate within the Postal Service to independently review and approve justifications for noncompetitive purchases and support the use of competition in the Postal Service. The competition advocate should also 

prepare and submit an annual report to the chief financial officer and vice president, Supply Management, describing 

barriers to competition and goals and plans for increasing competition. TID: December 2010

R-2 — Immediately discontinue contracting with former Postal Service executives until adequate controls are implemented. Such 

controls should address the appropriate duty and function of former executives in contracted positions, ensure no former 

executive is paid more than the equivalent of their previous Postal Service rate of pay if contracted non-competitively, 

and require a thorough cost and price analysis of proposed rates. TID: October 2010

R-3 — Review the need for and propriety of all existing contracts with former executives. TID: December 2010

R-4 — Amend the Administrative Support Manual to emphasize the importance of compliance with all policies, circulars, and 

instructions pertinent to encouraging competition and managing non-competitive purchases. TID: December 2010

R-5 — Take steps to ensure full and accurate tracking and public reporting of non-competitive contracting actions. Data 

reported should include, but not be limited to, total dollars committed both competitively and non-competitively; and the 

contractor, dollar value, and non-competitive justifications for non-competitive contracts. The tracking mechanism should 

be able to identify when a non-competitive contract has crossed the review and approval threshold based on modification 

after initial award. TID: November 2011

R-6 — Revoke delegations of authority for contracts that acquire goods and services for the Postal Service and bring these 

contracts into compliance with all Postal Service purchasing policies. TID: April 2011

R-7 — Require that non-competitive purchase contract files include a determination by the contracting officer (CO) that prices 

are fair and reasonable and a CO’s certification that the justification is accurate and complete to the best of their 

knowledge and belief. A detailed analysis supporting these certifications should be part of the noncompetitive purchase 

documentation. TID: December 2010

R-8 — Require Supply Management officials approving non-competitive contracts to review purchases for potential or apparent 

conflicts of interest and evaluate any potential conflicts through the agency’s ethics official before approval. The opinion 

and recommendations of the agency ethics official should be documented in the contract file. In addition, any person 

found to have an actual or apparent conflict of interest should not be allowed to participate in negotiations with the 

contractor. TID: February 2011

R-9 — Institute an oversight mechanism to ensure and track compliance with updated non-competitive 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

R-2 — Identify and maintain a listing of current service providers who have access to or process, transmit, or store cardholder 

data and who provide payment card-related products, software, and support. TID: January 2011

R-3 — Ensure the Payment Card Industry compliance requirements are included in all pre- and post-award contract 

documentation that includes, but is not limited to, statements of work, amendments, and modifications. TID: May 2011

R-4 — Validate and monitor all service providers’ Payment Card Industry compliance status throughout the lifetime of the contract. 

TID: May 2011

R-5 — Notify the acquirer, credit card associations, and credit card companies regarding the status of the Postal Service’s 

Payment Card Industry compliance in accordance with the contract agreements. TID: December 2010
April 1 — September 30, 2010 | 51 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

CRR-AR-10-006 9/23/2010 Controls Over System for International Revenue and Volume, Outbound and International Origin-Destination Information 

System 

R-1 — Develop a quarterly shortpaid postage report for outbound First-Class Mail and Priority Mail International and provide it to 

Global Business Systems and Intelligent Mail Planning and Standards. TID: October 2010

R-2 — Implement procedures to use System for International Revenue and Volume, Outbound, and International Origin-Destination 

Information System test results to monitor shortpaid postage at each international service center. TID: January 2011

R-3 — Establish revenue protection procedures at the Chicago and San Francisco International Service Centers.

TID: February 2011

R-4 — Assess the viability of extending enhanced revenue protection programs to outbound international mail, similar to the new 

procedures for domestic mail. TID: April 2011

DR-AR-10-009 9/24/2010 City Delivery Efficiency Review – Atlanta District 

R-1 — Reduce the Atlanta District’s workhours by 87,212 to achieve an associated economic impact of more than $2.7 million 

annually or $27 million over 10 years. TID: October 2011

DR-AR-10-008 9/24/2010 Vehicle Parts Program

R-1 — Establish a process to analyze similar vehicle parts by form, fit, and function from the two consignment suppliers to aid in 

negotiations with suppliers, as necessary, to ensure the Postal Service receives the lowest available cost on vehicle parts. 

TID: February 2011

CRR-AR-10-005 9/27/2010 Impact of Postal Accountability and Enhancement Act Price Caps 

R-2 — Develop a detailed transparent plan, with established milestones, for each individual product to move towards coverage of 

their costs and a contribution to overhead costs. TID: None

NL-AR-10-010 9/29/2010 Air Networks – Federal Express Transportation Agreement – National Analysis 

R-1 — Continue to routinely provide headquarters and area management with data, including Transportation Cost System/Cost 

and Revenue Analysis data, used to monitor and track the volume and additional costs for flying surface mail classes on 

Federal Express. TID: March 2011

R-2 — Continue to work collaboratively with the areas to identify and address capacity issues, real or perceived, with commercial 

carriers and ensure carriers comply with stated capacities. TID: March 2011

R-3 — Adjust mail volume arrival profiles or FedEx tender times where possible to ensure Terminal Handling Services contractors 

have time to build planned by-pass containers. TID: March 2011

R-4 — Standardize postal oversight at Terminal Handling Services operations to ensure adequate on-site Postal Service 

representation to monitor FedEx operations and ensure local compliance with established processes and procedures.

TID: March 2011

R-5 — Reinforce existing policies and procedures and provide additional guidance and training as necessary for processing and 

assigning mail to FedEx building bypass containers, and ensuring mail arrives at Terminal Handling Services locations to 

meet FedEx contract mail tender time requirements. TID: March 2011

SA-MA-10-002 9/29/2010 Allegations of Inappropriate Methodologies in a San Francisco Investigation 

R-1 — Establish and implement mandatory training for postal inspectors responsible for investigating Combined Value Added 

Refund mailers to ensure they understand the business mail process to accurately calculate Postal Service losses. 

TID: March 2011

R-2 — Establish and implement guidance and lessons learned for postal inspectors to use when conducting investigations of 

Combined Value Added Refund mailers and calculating Postal Service losses. TID: March 2011
52 | Semiannual Report to Congress

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 MTE policies and procedures in the Postal Operations Manual (POM) and 

Postal Handbook PO-502, Container Methods, which address MTE inventory and accountability controls, including validating 

customer MTE needs and tracking and reconciling MTE loaned to mailers and other external customers. TID: March 2011

R-2 — Continue pursuing implementation of a planned automated MTE management system and ensure its functionality for 

inventory and accountability processes and for enhancing the Postal Service’s visibility into MTE internally and at mailers. 

TID: March 2011

R-3 — Reestablish an on-hand MTE volume count process, both internally and externally, until an automated MTE management 

system is fully developed, deployed, and operational. TID: March 2011

R-4 — Ensure that Area Distribution Networks Offices have appropriate resources assigned responsibly to monitor and manage 

MTE and maintain compliance with Postal Operations Manual requirements. TID: March 2011

R-5 — Document the current process for identifying annual, routine MTE 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 MTE is purchased. TID: March 2011 

NL-AR-10-008 9/29/2010 Postal Vehicle Services - Scheduling and Staffing - Atlanta District 

R-1 — Implement changes identified during the zero-base review and verify removal of the 23,920 workhours of savings achieved, 

which we estimate to be $12.6 million over 10 years. TID: December 2010

R-2 — Fully utilize the flexibility under the existing American Postal Workers Union (APWU) Collective Bargaining Agreement work 

rules to increase the use of split-days off for PVS drivers within the terms of the current Memorandum of Understanding and 

maximize the use of part–time, regular PVS drivers where possible. TID: December 2010

R-3 — Consider negotiating and modifying work rules as necessary in the upcoming renewal of the APWU Collective Bargaining 

Agreement to include increasing the allowable percentage of all types of part-time employees to allow maximum use of part 

time regular employees in facilities with PVS operations. TID: December 2010

R-4 — Consider negotiating and modifying work rules as necessary in the upcoming renewal of the APWU Collective Bargaining 

Agreement to include providing permanent flexibility to schedule split days off for employees in facilities with PVS Operations.

TID: December 2010

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: September 2011

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: March 2011

R-3 — Develop and implement written procedures for the receipt of invoices for annual HCR services and to verify services were 

rendered prior to payment. TID: Audit Resolution

R-4 — Identify and notify contracting officers to oversee and administer all HCR payments in the Postal Service Accounts Payable 

Excellence system. TID: October 2010

R-5 — Review the $7.6 million in payments made more than of 30 days after contract end dates and collect overpayments.

TID: October 2010

R-6 — Provide detailed, consistent training for all designated officials on their roles and responsibilities and usage of the Utility 

Management System. TID: February 2011

R-7 — Regularly reconcile payments made for utility services to identify and collect overpayments. TID: December 2010

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: March 2011
April 1 — September 30, 2010 | 53 

APPENDIX E

Report Number Issue Date

Report Title, Recommendation Summary

R = Recommendation number

TID = Target Implementation Date

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 CSRS, FERS, and retiree health benefit calculations, 

including those associated with determining any overfunding situations, to ensure that calculations are reasonable and 

accurate. TID: September 2011
54 | Semiannual Report to Congress

APPENDIX F

Significant Management Decisions in Audit Resolution

For the period April 1 — September 30, 2010

As required by the IG Act, the following page discusses information concerning any significant management decision with which the Inspector General disagrees 

and is currently in audit resolution.

Move Update Program and Investigations

SA-AR-10-001

 5/12/2010

Recommendation 1 We recommend the vice president, Business Mail Entry and Payment Technologies, in coordination with the vice president, Pricing, enhance 

the Move Update program to comprehensively verify compliance at mail acceptance and ensure collection of proper postage.

Recommendation 2 We recommend the vice president, Business Mail Entry and Payment Technologies, in consultation with the vice president, Pricing, ensure 

standards for determining Move Update compliance are consistent and clearly communicated to mailers.

Recommendation 3 We recommend the chief postal inspector and the vice president, Business Mail Entry and Payment Technologies; establish mandatory 

comprehensive training for responsible personnel to ensure revenue deficiencies are appropriately assessed.

Recommendation 4 We recommend the Western Area finance manager review the overstated revenue deficiency to determine whether the amount should be 

reduced.

Recommendation 5 We recommend the chief postal inspector limit the use of postal inspectors to Move Update investigations with expectations of civil or 

criminal prosecution.

Controls over System for International Revenue and Volume, Outbound and International Origin-Destination Information System 

CRRAR10006

9/23/2010

Recommendation 2 We recommend the Global Business vice president and managing director direct the International Operations executive director to implement 

procedures to use the System for International Revenue and Volume as well as the Outbound and International Origin-Destination Information

System test results to monitor shortpaid postage at each International Service Center.

Certification Process for Electronic Payments

CA-AR-10-006

9/30/2010

Recommendation 3 We recommend the Supply Management vice president direct the Transportation Portfolio manager to develop and implement written

procedures for the receipt of invoices for annual HCR services and to verify services were rendered prior to payment.

APPENDIX F
April 1 — September 30, 2010 | 55 

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 review that remain outstanding or have not been fully implemented. 

Office of Audit

Internal Peer Reviews

On March 31, 2010, the Department of Defense OIG (DOD OIG) issued a quality control review of our audit organization that began in April 2009. Below is a listing of 

the recommendations made by the DOD OIG that have not been fully implemented as of the semiannual period ending September 30, 2010, and the status of those 

recommendations:

Recommendation 1 We recommend that the assistant inspector general for OA update its policies and procedures to ensure compliance with generally 

accepted government auditing standards and applicable legal and regulatory requirements.

Status: Not fully implemented. OA has updated all policies and procedures as of October 25, 2010. Our Office of General Counsel is 

currently reviewing the policies prior to posting.

Recommendation 4 (a)&(b) We recommend that the assistant inspector general for OA (a) require a one-time review of completed training recorded in employee training logs; 

and (b) follow up on missing certificates of completion to ensure evidence of completed training is included in employee training logs.

Status: Not fully implemented. As agreed to in our response, we initiated a one-time review of the completed training recorded in employee training 

logs in April 2010, and this review is ongoing. We anticipate completing the review by January 2011. 

Recommendation 5.2(d) We recommend that the assistant inspector general for OA improve reporting in performance reports by (d) publishing management comments in 

field financial reports or capping reports.

Status: Not fully implemented. Although we disagreed with publishing management comments in field financial reports or capping reports because 

these reports are issued in final only, we agreed on a process with the Postal Service to reissue the final report with management comments, 

if management disagreed with the finding(s) or recommendation(s). Accordingly, to ensure compliance with government auditing standards, we 

revised our financial installation audit report template on October 22, 2010, to reflect this process in our scope thereby fully addressing the intent of 

this recommendation. 

A copy of this quality control review report, in its entirety, can be viewed on our website at www.uspsoig.gov/USPSOIG_Peer_Review_Report.pdf.

External Peer Reviews

None conducted during this period.

Office of Investigations

Internal Peer Reviews

On September 8, 2008, the Department of Homeland Security (DHS) issued a quality control review of our investigative agency and determined that our internal safeguards 

and management procedures was in compliance with the quality standards established by the President’s Council on Integrity and Efficiency (PCIE) and the Executive’s 

Council on Integrity and Efficiency (PCIE) and the U.S. Attorney General.

External Peer Reviews

From September 13 to October 4, 2010, our agency conducted a peer review of the Social Security Administration OIG’s (SSA OIG’s) Office of Investigations. We reviewed 

their Investigative Operations at their headquarters and at three of their field offices. During the next semiannual reporting period, we will issue a letter to the SSA OIG on the 

review results.
56 | Semiannual Report to Congress

APPENDIX H

Investigative Statistics*

For the period April 1 — September 30, 2010

Investigations 

Completed Arrests

Indictments/ 

Informations

Convictions/ 

Pretrial 

Diversions**

Admin. 

Action 

Taken 

Cost 

Avoidance

Fines, Restitution, 

& Recoveries

Amt. to USPS 

(from previous 

column)***

To Mgmt. 

for Admin. 

Action

Theft, Delay, or Destruction 

of Mail by Employees or 

Contractors

760 229 227 264 417 $1,230,964 $150,329 456

Injury Compensation 

Fraud 1 

407 29 35 23 118 $98,842,707 $525,418,286 $4,060,478 134

Official Misconduct 386 57 45 57 327 $47,326 $1,534,449 $129,398 409

Financial Fraud 372 132 140 151 201 $1,060,643 $3,046,785 $2,814,710 269

Contract Fraud 2 66 6 19 12 33 $26,235,319 $140,833,923 $19,962,978 46

TOTAL 1,991 453 466 507 1,096 $126,185,995 $672,064,407 $27,117,893 1,314

* 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, Restitution, and Recoveries includes $520 million from one pharmaceutical investigation.

2

 Amount under Fines, Restitution, and Recoveries includes $87.5 million from one investigation.

For the period October 1, 2009 — September 30, 2010

Investigations 

Completed Arrests

Indictments/ 

Informations

Convictions/ 

Pretrial 

Diversions**

Admin. 

Action 

Taken 

Cost 

Avoidance

Fines, Restitution, 

& Recoveries

Amt. to USPS 

(from previous 

column)***

To Mgmt. 

for Admin. 

Action

Theft, Delay, or Destruction 

of Mail by Employees or 

Contractors

1428 416 395 463 785 $2,246,668 $345,141 840

Injury Compensation 

Fraud 1 & 2 

786 54 52 44 217 $198,638,622 $1,821,246,819 $21,377,067 288

Official Misconduct 934 104 77 131 648 $47,326 $2,294,544 $210,223 738

Financial Fraud 707 253 260 278 439 $1,061,643 $6,791,493 $5,660,506 542

Contract Fraud 3 128 19 32 19 49 $27,571,397 $142,117,223 $21,020,995 69

TOTAL 3,983 846 816 935 2,138 $227,318,988 $1,974,696,747 $48,613,932 2,477

* 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, Restitution, and Recoveries includes $1.8 billion from two pharmaceutical investigation.

2

 Amount under Amt. to Postal Service (from previous column) includes $15 million from one pharmaceutical investigation.

3

 Amount under Fines, Restitution, and Recoveries includes $87.5 million from one investigation.

APPENDIX H
April 1 — September 30, 2010 | 57 

APPENDIX I

Administrative Subpoenas Requested by the Postal Inspection Service

There were three requests during the reporting period.

Type of Scheme

Complaints 

Filed

Consent 

Agreements FROs

Cease & 

Desist Orders

Advance fee 1 1 — 1

Charity 1 1 — 1

Contests/sweepstakes 8 6 — 8

Coupon fraud 6 6 — 6

False billings 6 5 — 19

Lotteries (foreign and domestic) 9 8 — 10

Merchandise:

 Failure to furnish 7 7 — 9

 Failure to pay 9 9 — 9

Misrepresentation 5 3 — 12

Miscellaneous 24 27 — 27

Work at home 4 4 — 7

TOTAL 80 60 — 109

APPENDIX I

Summary of U.S. Postal Inspection Service Actions Under 39 USC 3005 and 3007

For the period April 1 — September 30, 2010

Financial Reporting on Investigative 

Activities for the Postal Inspection 

Service 

Type

Personnel $141,312,905

Nonpersonnel $34,900,054 

TOTAL $176,212,959

Capital obligations $7,102,036

Other Administrative Actions

Administrative Action Requests 120

Temporary Restraining Orders issued —

Cases Using Direct Purchase Authority —

Civil Penalties (Section 3012) Imposed $111,000 

Test Purchases —

Withholding Mail Orders Issued 40

Voluntary Discontinuances —
58 | Semiannual Report to Congress

APPENDIX J

APPENDIX J

Closed Congressional and Board of Governors’ Inquiries

For the period April 1— September 30, 2010

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 (44)

Requestor Allegation/Concern Major Findings Closure Date

Representative, 

Michigan

Non-receipt of checks sent to the complainant's business as 

payment.

The investigation found no evidence of mail theft or tampering by 

postal employees. A State police agency found a person external to 

the Postal Service was responsible for the thefts and the matter was 

referred to a State Attorneys' Office for prosecution.

7/8/10

Representative, 

New York

Non-receipt of bank notes purchased in an auction. The investigation found no evidence of mail theft or tampering 

by postal employees. We referred the allegations to the Postal 

Inspection Service based on indications the theft occurred externally.

5/20/10

Representative, 

Maryland

Mail tampering; theft of collectors coins from a package. The investigation found no evidence of mail tampering, delay, or 

theft by postal employees. Postal management worked with the 

complainant to develop a secure method of delivering his packages.

4/19/10

Senator, New York Non-receipt of package; Postal Service refused to reimburse 

complainant for the insured amount of the package.

The investigation found no evidence of mail tampering, delay, or theft 

by postal employees. The investigation also found the Postal Service 

reimbursed the complainant for the insured amount of the package. 

6/21/10

Senator, Maryland Mail tampering; theft of collectors coins from a package. The investigation found no evidence of mail tampering, delay, or 

theft by postal employees. Postal management worked with the 

complainant to develop a secure method of delivering his packages.

4/19/10

Chairman, 

Senate Committee

Fraud, waste, and abuse by a Postal Service vice president. A previous OIG investigation did not substantiate allegations related 

to the Vice President. We conducted a new investigation based on 

additional allegations. The investigation did not substantiate any of 

the allegations.

4/5/10

Representative, Virginia Whistleblower reprisal. An OIG investigation showed the case did not meet the four 

necessary elements of whistleblower reprisal. The complainant 

failed to show that a protected communication was the basis for the 

disciplinary action. 

5/3/10

Senator, California Postal employees conspired to steal complainant's retirement funds 

and frame the complainant for crimes.

The investigation did not substantiate the allegations. 5/20/10

Senator, California Theft of checks and a credit card sent in the mail. The investigation found no evidence of mail theft or tampering 

by postal employees. A local police agency determined a person 

external to the Postal Service was most likely responsible for the 

thefts.

4/15/10

Representative, 

Kentucky

Manager created a hostile work environment, engaged in favoritism, 

and violated postal policy regarding substance abuse on postal 

property.

The investigation did not substantiate the allegations. Postal 

management briefed employees on postal substance abuse policy.

7/19/10

Senator, South Carolina Non-receipt of international Registered Mail containing money. The investigation found no evidence of mail tampering, delay, or theft 

by postal employees. Working with the International Mail and Mail 

Recovery Centers, our agents were unable to trace the package after 

its arrival at the International Service Center.

7/20/10
April 1 — September 30, 2010 | 59 

APPENDIX J

Requestor Allegation/Concern Major Findings Closure Date

Representative, 

Pennsylvania

Non-receipt of money orders and a package. The investigation found no evidence of mail tampering, delay, or theft 

by postal employees. The investigation found the company which 

issued the money orders reimbursed the complainant. 

4/16/10

Representative, Alaska OIG agents misused their position and acted unprofessionally when 

investigating complainant.

We conducted an internal investigation and forwarded our findings to 

the OIG management for action deemed appropriate.

8/3/10

Representative, Alaska Package mailed from Florida arrived opened and missing contents. The investigation determined it was likely the loss occurred while the 

package was under postal control; however, we found no evidence 

of mail tampering or theft by postal employees. Working with the 

Mail Recovery Center, our agents were unable to locate the contents 

package.

4/26/10

Senator, Wyoming Postal employees discarded mass mailings and overcharged 

complainant for mass mailing permits; postmaster did not comply 

with mass mailing policy.

Investigation found no evidence employees discarded mail. We also 

determined the complainant was properly charged for several years 

of mass mailing permits previously unpaid, and the postmaster acted 

in accordance with mass mailing policy.

7/5/10

Representative, Indiana Non-receipt of insurance bills led to termination of complainant's 

policy.

Investigation found no evidence of mail tampering, delay, or theft 

by postal employees. An OIG agent worked with the complainant's 

insurance company to have his policy reinstated.

5/6/10

Alderman, 

Chicago City Council

Non-receipt of package mailed internationally. Investigation found no evidence of misconduct by postal employees. 

We were unable to determine the location of the package because it 

was mailed without tracking information.

6/3/10

Senator, Iowa Postal employees tampered with or stole letters mailed to Texas. Investigation did not substantiate the allegations. Working with the 

Mail Recovery Center, our agents were unable to locate the letters or 

their contents.

7/8/10

Senator, Texas Management disciplined complainant for refusal to follow 

instructions that violated postal policy and procedure; whistleblower 

retaliation.

Investigation found the complainant filed a grievance through the 

local union and complaints before the Equal Employment Opportunity 

Commission (EEOC) and the Merit Systems Protection Board 

(MSPB). The OIG does not interfere in Postal Service administrative 

processes or matters under the jurisdiction of other agencies absent 

exceptional circumstances, which were not present in this case.

8/17/10

White House Whistleblower reprisal. Previous OIG investigation showed the case did not meet the four 

necessary elements of whistleblower reprisal. The complainant failed 

to show management took adverse action against him.

6/22/10

Senator, Texas Postmaster intentionally delayed Express Mail and created a hostile 

work environment.

The investigation found no evidence the postmaster intentionally 

delayed or instructed employees to delay Express Mail. The 

investigation also found the hostile work environment had been 

addressed through a change in the postmaster's duty location.

8/12/10

Representative, 

Maryland

Non-receipt of a book contained in a package mailed to Florida. Investigation did not substantiate the allegation. The investigation 

determined the lightweight package used was likely damaged by 

mail processing machines, which caused the package to open and 

separate from the book. Our agents worked with the Mail Recovery 

Center, but were unable to locate the book.

6/7/10

Senator, Maryland Non-receipt of packages containing a necklace, gift cards, and 

computer accessories.

Investigation found no evidence of misconduct by postal employees. 

We were unable to determine the location of the package because it 

was mailed without tracking information. Our agents worked with the 

Mail Recovery Center, but were unable to locate the complainant's 

items. Because the complainant was unable to provided any 

information about the gift card, our agents were unable to determine 

if it had been redeemed.

7/5/10

Senator, Kansas Postal employees tampered with and removed contents of one 

package and did not deliver another.

Investigation found no evidence of mail theft of tampering by postal 

employees. The investigation determined both packages were 

damaged by Postal Service sorting machines, causing them to be 

separated from some or all of their contents. Our agents worked 

with the Mail Recovery Center, but were unable to locate the 

complainant's missing items. 

7/22/10
60 | Semiannual Report to Congress

APPENDIX J

Requestor Allegation/Concern Major Findings Closure Date

State Senator, New York A postal employee tampered with mail and fraudulently filed a change 

of address.

Review found the matter was outside the jurisdiction of the OIG, as the 

postal employee retired. 

6/14/10

Senator, New Mexico Non-receipt of a package containing a firearm. Investigation found no evidence of mail tampering or theft by 

postal employees, but found postal employees did not follow policy 

when processing the package. Management briefed employees 

on the importance of following processing procedure to ensure 

accountability for lost mail.

8/13/10

Representative, 

South Carolina

Non-receipt of a package the Postal Service purportedly delivered 

while the complainant had mail on hold.

Investigation did not substantiate the allegations and found evidence the 

complainant received the package.

8/13/10

Two Representatives, 

New Hampshire

Management falsified time and attendance records, resulting in a 

theft of employee hours at two New Hampshire facilities.

The investigation did not substantiate the allegation management 

intentionally falsified time and attendance records. The investigation 

did find numerous instances where management failed to follow 

postal policy and procedure when altering time and attendance 

records. We forwarded our findings to management for action 

deemed appropriate.

9/15/10

Senator, Indiana Hostile work environment; excessive discipline and favoritism. Review found no basis for formal investigation. The complainant 

pursued the matter through a Postal Service administrative process.

6/22/10

Representative, Kansas Status of 2007 OIG investigation into allegations of mail theft. Complainant had contacted the Postal Service and the Postal 

Inspection Service, but not the OIG. A review was unable to elicit 

information on results of those contacts or develop new leads.

6/22/10

Senator, Texas Postal Service improperly withheld money from complainant's 

paycheck.

Investigation found no evidence of misconduct or error by postal 

employees and that the complainant received documentation 

supporting the withholdings.

8/12/10

Representative, 

Colorado

Postmaster engaged in misconduct and mismanagement. Investigation found some allegations were administrative in nature 

and presented issues not within the mission of the OIG, and referred 

these allegations to postal management. Investigation did not 

substantiate the remaining allegations.

9/14/10

Senator, Florida Management intentionally delayed Express Mail and falsified tracking 

information to prevent the Postal Service from incurring penalties.

Investigation substantiated the allegation a postal manager instructed 

an employee to scan an Express Mail package as "attempted delivery" 

when no delivery attempt had been made. We forwarded our findings to 

management for action deemed appropriate.

9/17/10

Senator, Virginia Non-receipt of bill payments made with postal money orders. Review found the addressee received the money orders but 

misplaced them, resulting in the complainant's account showing bill 

payments were past due.

6/23/10

Representative, Virginia Theft of a postal money order. Review found the money order was never cashed, and the Postal 

Service provided the complainant with instructions on how to request 

a refund.

7/19/10

Senator, Maryland Non-receipt of several letters and checks. Investigation found no evidence of mail tampering or theft by postal 

employees and found it was likely a person external to the Postal 

Service stole the mail.

9/2/10

Senator, California Several boxes of collectible items arrived opened, missing contents, 

and filled with mail not belonging to senders.

The investigation found no evidence of mail tampering or theft. 

Damage most likely occurred within mail processing equipment, after 

which postal employees attempted to repack and reseal the boxes. 

Loose items found in processing equipment are sent to the Mail 

Recovery Center. The complainant received several missing items 

from the Mail Recovery Center.

9/14/10

Senator, Vermont Whistleblower reprisal. An OIG investigation showed the case did not meet the four 

necessary elements of whistleblower reprisal. The complainant failed 

to show that management took adverse action against her. 

9/24/10
April 1 — September 30, 2010 | 61 

APPENDIX J

Requestor Allegation/Concern Major Findings Closure Date

Representative, 

Pennsylvania

Non-receipt of bank statements. Investigation found no evidence of mail tampering or theft by postal 

employees and found the complainant belatedly received several of 

the missing bank statements. The investigation determined it likely 

a person external to the Postal Service was responsible for the mail 

delivery issues.

9/13/10

Senator, Florida Postal Service official made a false statement. Investigation did not substantiate the allegation. 8/26/10

Representative, Texas Postmaster disposed of package containing rare perishable goods. Review found the postmaster acted in accordance with postal policy. 7/22/10

Representative, Illinois Non-receipt of a package postal employees left unsecured in 

complainant's apartment building.

Investigation determined it likely the letter carrier left the package 

unsecured in the vestibule of the apartment building. We reported 

these findings to management for action deemed appropriate.

9/21/10

Representative, Illinois Tracking information for package indicated attempted delivery, yet 

postal employees could not locate the package when complainant 

attempted to retrieve it from the Post Office.

Investigation found no evidence of misconduct but determined no 

delivery had been attempted and the package was misplaced at the 

post office. Package was eventually located.

9/21/10

Ranking Member, 

Senate Subcommittee 

Request for a detailee from the OIG Office of Investigations with 

extensive contract fraud experience.

Proposed detailing an OIG criminal investigator. 9/22/10

General Counsel (13)

Requestor Allegation/Concern Major Findings Closure Date

Ranking Member, 

Senate Committee; 

Ranking Member, 

Senate Subcommittee

Report any instances when the Postal Service resisted and/or 

objected to, or restricted OIG activities or access to information 

from October 1, 2009 to April 8, 2010. Report all audits and 

investigations not disclosed to the public from January 1, 2009 to 

April 30, 2010.

Provided information as requested. 6/15/10

Representative, 

Pennsylvania

OIG agents violated complainant's Health Insurance Portability 

and Accountability Act (HIPAA) rights during a healthcare fraud 

investigation by contacting his physician without his consent or 

allowing his attorney to be present during the conversation.

Review found the agent acted in accordance with OIG policy and 

federal law regarding healthcare fraud investigations. The OIG is 

permitted to conduct legitimate law enforcement inquiries as a health 

oversight agency under the HIPAA, and charged with preventing 

fraud, waste, and abuse in the Postal Service under the Inspector 

General Act of 1978.

4/27/10

White House Hostile work environment and discrimination against minority 

employees at two Oregon facilities.

Two previous OIG reviews, previously communicated to complainant, 

addressed the issues.

4/29/10

Representative, Indiana Postal Service erroneously returned mail to sender in 2007, causing 

the complainant not to receive notice about matters pending in court. 

Review found the Postal Service acknowledged responsibility for the 

mistakenly returned mail and remedied the situation by providing an 

explanation letter for the complainant to present to the court.

5/27/10

Senator, New Mexico Postal managers and employees engaged in misconduct during the 

course of a hearing before the EEOC.

The OIG does not interfere in postal administrative processes or 

matters under the jurisdiction of other agencies absent exceptional 

circumstances, which were not present in this case. The alleged 

misconduct is under the jurisdiction of the EEOC OIG.

5/27/10

Senator, Pennsylvania OIG agents violated complainant's HIPAA rights during a healthcare 

fraud investigation by contacting his physician without his consent or 

allowing his attorney to be present during the conversation.

Review found the agent acted in accordance with OIG policy 

and federal law. The OIG is permitted to conduct legitimate law 

enforcement inquiries as a health oversight agency under the HIPAA, 

and is charged with preventing fraud, waste, and abuse in the Postal 

Service under the Inspector General Act of 1978.

6/15/10

Representative, 

Pennsylvania

Request for acknowledgment form OIG agents used when contacting 

complainant's physician during an investigation.

Provided a redacted copy of the form. 7/6/10

Chairman, 

House Committee

Request for an unredacted report of an OIG investigation. Provided an unredacted copy of the report. 6/29/10
62 | Semiannual Report to Congress

APPENDIX J

Requestor Allegation/Concern Major Findings Closure Date

Senator, Colorado Improper removal. Investigation found the complainant filed a complaint before the 

MSPB. The OIG does not interfere in Postal Service administrative 

processes or matters under the jurisdiction of other agencies absent 

exceptional circumstances, which were not present in this case.

7/28/10

Senator, New York Request for status of appeal of complainant's termination of 

employment with the OIG and a pending Equal Employment 

Opportunity complaint before the Postal Service.

Provided requested information. 7/27/10

Representative, 

Colorado

Postmaster eliminated mail delivery routes, placing complainant's 

business address on an auxiliary route that received diminished mail 

delivery and pickup service.

Review found complainant's business address was temporarily 

on an auxiliary address; however, such routes do not receive 

diminished service. Postal officials determined it likely complainant's 

letter carrier did not pick up mail on days where there was no 

mail to deliver, in accordance with postal policy; they advised the 

complainant how to request mail pick-up.

8/18/10

Senator, Texas FOIA request for records of OIG investigation into supervisory 

falsifications of time and attendance records by named individuals.

Provided a FOIA determination which found releasing records 

would be improper without a waiver from third parties named in the 

request.

8/23/10

Representative, Virginia Lack of federal prosecution of former postal executive despite gravity 

of OIG investigative findings of misconduct.

Charging decisions in investigations of criminal conduct are made by 

the U.S. Department of Justice, which declined to accept this case 

for prosecution.

8/30/10

Inspector General Audits/Risk Analysis Research Center Reports (12)

Requestor Allegation/Concern Major Findings Closure Date

Ranking Member, 

Senate Committee; 

Chairman, Senate 

Subcommittee

Request for information relating to an OIG investigation of Postal 

Service sole-source contracting and a review of Postal Service 

procurement policies and regulations in order to maximize 

competition and ensure the best value for Postal Service contracts.

Review of Postal Service procurement policies found additional 

controls were necessary to strengthen oversight and transparency 

of noncompetitive purchasing. The review found additional controls 

would maximize competition, ensure best value, and avoid conflicts 

of interests in contracting. 

9/20/10

Ranking Member, 

Senate Committee

Concerns about consolidation of two Ohio facilities. Review determined a business case supported the consolidation, 

finding: sufficient capacity to process mail at one facility, customer 

service would be maintained, no career postal employees would 

lose their jobs, processing efficiency would improve, and prior 

consolidation of mail from the facility in question produced favorable 

results.

7/2/10

Senator, Iowa Fraud, waste, and abuse at an Iowa facility. Large number of 

employees in disabled or limited duty status. Mismanagement 

enabled postal employees to watch television in the facility while on 

official duty, and management improperly deconstructed processing 

equipment for sale. 

The review did not substantiate the allegations. Auditors found a 

reasonable amount of postal employees were in a disabled or limited 

duty status, postal employees followed policy regarding use of the 

television, and management properly allowed deconstruction of 

equipment for sale. However, the review found management did not 

complete proper paperwork for equipment disposal and therefore 

enhanced controls were needed to minimize risk of improper disposal of 

equipment in the future. 

8/19/10

Senator, Ohio Concerns about consolidation of two Ohio facilities. Review determined a business case supported the consolidation, 

finding: sufficient capacity to process mail at one facility, customer 

service would be maintained, no career postal employees would 

lose their jobs, processing efficiency would improve, and prior 

consolidation of mail from the facility in question produced favorable 

results.

7/2/10

Representative, Ohio Concerns about consolidation of two Ohio facilities. Review determined a business case supported the consolidation, 

finding: sufficient capacity to process mail at one facility, customer 

service would be maintained, no career postal employees would 

lose their jobs, processing efficiency would improve, and prior 

consolidation of mail from the facility in question produced favorable 

results.

7/2/10
April 1 — September 30, 2010 | 63 

APPENDIX J

Requestor Allegation/Concern Major Findings Closure Date

Ranking Member, 

House Committee

Report all open recommendations from prior audits and monetary 

benefits associated with them; which open and unimplemented 

recommendations the OIG considers most important; number of 

recommendations accepted and implemented after January 2009. 

Request for Inspector General (IG) opinion about improvements to 

the IGA.

OIG compiled and provided the requested information. 4/16/10

Representative, Virginia Concerns about consolidation of two Virginia facilities. Review determined a business case supported the consolidation, 

finding: sufficient capacity to process mail at one facility, customer 

service would improve, no full-time postal employees would lose 

their jobs, processing efficiency would improve, and estimates used 

to build the business case for the consolidation were reasonable.

8/3/10

Ranking Member, 

Senate Subcommittee

Request for review of Postal Service area and district office 

consolidations to determine if opportunities exist to consolidate 

further and increase efficiency.

Review identified several additional opportunities to reduce costs 

through further consolidations of districts located within 50 miles 

of another district, eliminate offices whose work hours and mail 

volume are below mean levels, eliminate duplicative staff positions, 

and better position area management strategically by relocating area 

offices at headquarters.

9/20/10

Ranking Member, 

Senate Committee; 

Ranking Member, 

Senate Subcommittee

Request for IG testimony on the Postal Service's current financial 

crisis and future viability.

The Inspector General testified at a public hearing. 4/15/10

Ranking Member, 

House Committee; 

Ranking Member, 

House Subcommittee

Request for answers to additional questions for the record following 

the Inspector General's April 15 testimony.

Provided requested responses. 5/24/10

Senator, Iowa Construction of a new facility was wasteful and inefficient. Review found the construction plans for the new facility were 

adequately justified and found no cost overrun during execution of 

the plans at the time of the review.

7/1/10

Representative, Ohio Request for an OIG audit report on the consolidation of two Ohio 

facilities.

Provided requested report. Review determined a business case 

supported the consolidation, finding: sufficient capacity to process 

mail at one facility, customer service would be maintained, no career 

postal employees would lose their jobs, processing efficiency would 

improve, and prior consolidation of mail from the facility in question 

produced favorable results.

7/7/10

Referrals (12)

Requestor Allegation/Concern Major Findings Closure Date

Representative, 

Pennsylvania

Postal manager acted unprofessionally, refused to call the police, 

and improperly touched the complainant during an altercation at a 

Pennsylvania Post Office.

Postal Inspection Service. 6/24/10

Representative, 

Oklahoma

Request for assistance obtaining a hearing before the EEOC. Postal Service Government Relations Office. 5/24/10

Representative, 

Missouri

Request for assistance with a dispute about replacing a key to 

complainant's mailbox.

Postal Service Government Relations Office. 6/1/10

Representative, Virginia Complainant felt threatened by fellow employee against whom he 

previously filed a complaint.

Postal Inspection Service. 6/16/10

Representative, Virginia Mail fraud scheme. Postal Inspection Service. 6/16/10

Representative, 

Pennsylvania

Chicago postal facility allows customers to waste postal material 

when packing parcels.

Postal Inspection Service. 8/3/10
64 | Semiannual Report to Congress

APPENDIX J

Requestor Allegation/Concern Major Findings Closure Date

Senator, Florida Management created hostile work environment by denying sick leave 

without justification and disciplining the complainant for using sick 

leave.

Postal Service Government Relations Office. 7/26/10

Representative, 

California

Hostile work environment at a California facility. Postal Service Government Relations Office. 8/12/10

Representative, Florida Hostile work environment at a Florida facility. Postal Service Suncoast District Office. 9/10/10

Representative, Virginia Government Accountability Office report addressing how postal 

worker benefits and the collective bargaining process affect postal 

finances.

Government Accountability Office. 9/21/10

Representative, Texas Misuse of government credit cards; hostile work environment at a 

Texas facility.

Postal Service Southwest Area Office. 9/10/10

Senator, Texas Misuse of government credit cards; hostile work environment at a 

Texas facility.

Postal Service Southwest Area Office. 9/10/10
April 1 — September 30, 2010 | 65 

FREEDOM OF INFORMATION ACT/ WORKPLACE ENVIRONMENT

Requests Number of Requests

Carryover from prior period 8

Received during period 211

Total on hand during period 219

Actions Number of Requests

Processed during the period 211

 Requests denied in full 16

 Requests denied in part 81

 Requests granted in full 11

 No records 25

 Requests referred 66

 Requests withdrawn 7

 Fee-related reasons —

 Records not reasonably described —

 Not a proper FOIA request for some other reason 1

 Not an agency record 4

 Duplicate request —

Balance Number of Requests

Balance at the end of the period (pending) 8

Processing Days Number of Days

Median processing days to respond to a FOIA request 7

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, 2010

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 April 1 — September 30, 2010

Complaints received Total

Carryover from prior period 16

Complaints received from OIG Hotline, Congress, governors, management, 

internal, and other

292

Total on hand during this period 308

Workplace environment actions Total

Complaints reviewed and closed during the period 345

Referred to Postal Service management 96

Referred to Office of Investigations 13

Referred to Postal Inspection Service 8

Referred to Office of Audit —

Summary of findings to Congress/BOG/Postal Service management 2

Referred to database for statistical analysis and possible systemic review 226

Complaints pending at the end of the period 4
66 | 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

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.

The following are among the many trademarks owned by the United States Postal Service: APC®, Automated Postal Center®, Carrier PickupTM, Certified MailTM, Click-N-Ship®, 

Confirm®, Customized MarketMail®, Delivery ConfirmationTM, DMM®, EPM®, Express Mail®, First-ClassTM, First-Class Mail®, IMTM, IMbTM, Intelligent Mail®, MERLIN®, Mover’s 

Guide®, NCOALink®, Netpost®, Netpost Mailing OnlineTM, Parcel Post®, Parcel Select®, PC Postage®, Post OfficeTM, PostalOne!®, Postal ServiceTM, POSTNETTM, Priority Mail®, 

Quick, Easy, ConvenientTM, ReadyPost®, Registered MailTM, Signature ConfirmationTM, Stamps by Mail®, Standard Mail®, The Postal Store®, United States Postal Service®, U.S. 

MailTM, U.S. Postal Service®, United States Postal Service Office of Inspector General, United States Postal Service Office of Inspector General Special Agent, USPS®, USPS Electronic Postmark®, USPS.COM®, www.usps.com®, ZIP+4®, and ZIP CodeTM. This is not a comprehensive list of all Postal Service trademarks.
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

Contact: 877-876-2455

http://postalinspectors.uspis.gov/

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-USPS OIG

www.uspsoig.gov
CHAPTER TITLE

68 | Semiannual Report to Congress

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