semiannual report to congress

OFFICE OF INSPECTOR GENERAL

October 1, 2005 – March 31, 2006
The mission of the U.S. Postal 

Service Office of Inspector General 

is to conduct and supervise objective 

and independent audits, reviews, and 

investigations relating to Postal Service 

programs and operations to:

Prevent and detect fraud, waste, and 

misconduct;

Promote economy, efficiency, and 

effectiveness;

Promote program integrity; and

Keep the Governors, Congress, and 

Postal Service management informed 

of problems, deficiencies, and 

corresponding corrective actions.

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Mission Statement
I am pleased to report that on March 10, 2006, 

a memorandum was signed jointly by the 

Chairman of the Board of Governors and the 

Postmaster General announcing the completion of the transfer of investigative jurisdiction for 

employees from the Postal Service to the Office 

of Inspector General (OIG). 

A timetable has been established for moving 

employee misconduct investigations — including employee theft of the mail — from the U.S. 

Postal Inspection Service (USPIS) to the OIG. By 

January 2, 2007, the OIG will have full responsibility for the investigation of internal crimes. 

Responsibility for security and the investigation 

of external crimes remains with the USPIS. 

Resources needed for this work will be provided 

in two stages, and it is our desire that the positions be filled to the extent possible by former 

postal inspectors.

The unified investigative force and clarity of mission will permit the OIG to become dramatically 

more agile in its continuing quest to remain 

a world-class organization. We will have the 

ability to deploy seasoned expert investigative resources and yet take a fresh look at 

approaches for investigating and deterring misconduct. 

This new change will make it much simpler to 

communicate our mission to stakeholders. I 

value our stakeholder partnerships and the new 

changes will allow a broadening and strengthening of bonds.

I am grateful to Chairman Jim Miller and Postmaster General Jack Potter for the time, energy, 

and seasoned judgment they brought to this 

effort.

Our value to the Postal Service continues as 

evidenced by significant increases in the following key outcomes: a $42 million increase in 

monetary impact over the same period last year, 

100 percent acceptance of OIG significant recommendations made this reporting period, and 

a $30 million increase in Workers’ Compensation 

cost avoidance compared to the FY 2005 total. 

In the first half of this fiscal year, October 1, 

2005, through March 31, 2006, we issued 200 

audit reports and management advisories. 

These efforts resulted in a total monetary impact 

of $176,029,064. 

In addition, we closed 3,481 cases and referred 

1,290 to management for administrative action; 

we made 249 arrests and indictments/informations; and returned more than $8.5 million in 

fines, restitutions, and recoveries to the Postal 

Service.

This semiannual report focuses on the four 

strategic goals outlined in the Postal Service’s 

Strategic Transformation Plan 2006–2010: 

Improve Service, Generate Revenue, Reduce 

Costs, and Achieve Results with a CustomerFocused, Performance-Based Culture. We 

discuss the state of the Postal Service through 

our eyes and explain how our work adds value. 

Finally, we have a separate chapter that discusses preserving integrity and security.

A message from the inspector general
II | Semiannual Report to Congress

Audit

Reports issued.........................................................................................................200

Significant recommendations issued .........................................................................45

Total reports with financial impact..............................................................................59

Funds put to better use................................................................... $150,951,892

Questioned costs1..............................................................................$22,498,172

Revenue impact..................................................................................$2,579,000

Total2....................................................................................................... $176,029,064

Investigations3

Investigations completed ......................................................................................2,558

Arrests ..................................................................................................................... 141

Indictments/informations .........................................................................................108

Convictions/pretrial diversions4 ................................................................................100

Administrative actions ........................................................................................... 1,202

Cost avoidance...........................................................................................$57,775,818

Fines, restitutions, and recoveries5.........................................................$1,051,875,966

Amount to Postal Service6 .................................................................$8,523,982

Hotline contacts

Facsimile – FAX........................................................................................................309

e-Mail.................................................................................................................... 5,705

Standard Mail...........................................................................................................958

Voice mail messages ............................................................................................ 1,521

Telephone calls ................................................................................................... 21,234

Total contacts...................................................................................................29,727

Includes unsupported costs of $404,472.

The Postal Service agreed to recommendations or proposed alternative corrective actions that, if implemented, could result in more than $176 million in savings.

Statistics include joint investigations with the U.S. Postal Inspection Service and other law enforcement agencies.

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

The majority of these recoveries ($1,029,000,000) are the result of judgments in two False Claims Act investigations worked jointly with other federal agencies. 

Amount included in fines, restitution, and recoveries.

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October 1, 2005 – March 31, 2006

summary of performance
October 1, 2005 – March 31, 2006 | 

Assessing strategic transformation progress.....................................................2

Reduce costs........................................................................................................2

Generate revenue................................................................................................ 11

Achieve results with a customer-focused performance-based culture................ 13

Improve service................................................................................................... 18

Preserving integrity and security.........................................................................20

Investigative activities ..........................................................................................20

Security...............................................................................................................23

Organizational chart..............................................................................................26

Map of office locations..........................................................................................27

Appendices .............................................................................................................28

Appendix A – Reports issued to Postal Service management..........................28 

 Reports with quantifiable potential monetary benefits.................29

Report listing...............................................................................32

Appendix B – Findings of questioned costs ......................................................37

Appendix C – Recommendations that funds be put to better use ....................39

Appendix D – Reports with significant recommendations pending

 corrective actions........................................................................40

Appendix E – Significant management decisions in audit resolution.................42

Appendix F – Investigative statistics..................................................................42

Appendix G – Summary of U.S. Postal Inspection Service investigative

 actions under 39 u.s.c. § 3013..................................................43

Appendix H – Closed congressional and Board of Governors inquiries............44

Supplemental information ....................................................................................46

Investigative synopses ...............................................................................................46

Freedom of Information Act .......................................................................................49

Workplace environment.............................................................................................50

Glossary..................................................................................................................... 51

Table of contents
 | Semiannual Report to Congress

Reduce Costs

The Postal Service’s strategy to reduce 

costs is improving operational efficiency. 

This strategy includes expanding standardization and process control; reducing 

the cost of meeting universal service obligations by focusing on major cost drivers, 

especially delivery operations and supply 

chain management; capturing improvements from existing equipment and 

technology; and targeting new investments to further drive productivity gains. 

The strategy emphasizes continued 

partnerships with customers by developing low-cost forms of customer access 

via technology and product simplification. 

Additionally, the Postal Service plans to 

examine facility capacities to transition 

from overlapping single-product networks 

to an integrated multiproduct network.

The Postal Service has enjoyed success 

in reducing its costs in recent years. 

As outlined in the 2005 USPS Annual 

Report, the Postal Service met its 2002 

Transformation Plan commitment to 

remove $5 billion in costs (one year 

ahead of schedule). It further pledged 

to cut an additional $5 billion in costs 

through 2010. The Postal Service also 

reduced its $11.3 billion fiscal year (FY) 

2001 debt to zero in FY 2005, virtually 

eliminating interest expenses in FY 2005.

Our work assisted the Postal Service 

in identifying significant opportunities 

to reduce costs in the areas of controlling delivery costs, optimizing the mail 

processing network, improving transportation efficiency, and maximizing the 

cost-effectiveness of contracts. In addition, we assessed whether the Postal 

Service appropriately factored efficiencies 

and cost savings into the ratemaking process. We found that the Postal Service 

appropriately factored cost reduction programs into its 2005 rate case. 

Additionally, the Postal Service budget 

process requires managers to achieve 

planned efficiencies and cost savings, 

and factor workhour reductions from cost 

reduction programs into its budgets. 

A number of factors impact the Postal 

Service’s ability to reduce costs. Among 

these are the additional cost burdens it 

bears, and the significant infrastructure 

investment required to meet its universal 

service obligation. 

Assessing strategic Transformation progress

In this Semiannual Report to Congress, our audits and reviews assess the status of 

the Postal Service’s progress toward the strategic goals articulated in its Strategic 

Transformation Plan: 2006-2010, issued in September 2005. The Postal Service’s plan 

describes how it intends to improve the value of mail services and sustain a financially 

stable enterprise that best serves the nation’s mailing needs while providing affordable 

and reliable service.

The Postal Service’s strategic goals are to reduce costs, generate revenue, achieve 

results with a customer-focused performance-based culture, and improve service. 

Each of these strategic goals presents significant challenges to the Postal Service. 

Following is a discussion of work we completed during the October 1, 2005, through 

March 31, 2006, reporting period in each of these areas.
October 1, 2005 – March 31, 2006 | 3

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RATEGY: RED

UCE COSTS

ADDITIONAL COST BURDENS

The Postal Service bears cost burdens 

that are not borne by any other business. 

Cost burdens are mandates, wholly or 

partially unfunded and borne by the 

Postal Service due to legislation or other 

constraints. Five such cost burdens are:

The Postal Service must place the 

overfunding of its Civil Service Retirement System (CSRS) obligations in an 

escrow account.

The Postal Service must pay CSRS 

costs associated with retirees’ military 

service predating their employment 

with the Postal Service.

The Postal Service did not receive the 

rebate available to other employers 

who provide qualified prescription drug 

coverage to their annuitants under 

Medicare Part D.

Current laws prevent the Postal 

Service from freely contracting air 

transportation for international mail.

The Postal Service must provide air 

bypass service in Alaska.

These additional cost burdens impact 

the Postal Service’s ability to operate in 

a businesslike manner and represent a 

combined annual cost of approximately 

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$5.2 billion. To put this in perspective, 

lifting these five obligations would reduce 

the price of the 39-cent stamp by approximately three cents.

CONTROLLING DELIVERY COSTS

The need to contain delivery costs challenges the Postal Service each year, as 

the number of delivery points grows with 

increases in population. The number 

of delivery points increased by 2.9 million from FY 2003 through FY 2005. To 

appreciate the volume of mail that the 

Postal Service delivers, in FY 2005, the 

Postal Service delivered more than 

211 billion pieces of mail to 144 million 

delivery points. 

Controlling delivery costs is critical for 

the Postal Service because mail delivery 

requires a significant investment including 

personnel, mail processing equipment, 

transportation, and buildings. The Postal 

Service’s Strategic Transformation Plan: 

2006-2010 stated that delivery is its 

largest cost center and will be the focus 

of intensive efforts to find new savings. 

One area, city delivery, with more than 

85 million delivery points and more than 

228,000 city letter carriers, accounts for 

more than 72 percent of the budgeted 

workhours for delivery operations (rural 

and city) in FY 2006.

An OIG audit showed management can improve operations by adequately reviewing the daily mail volumes when determining 

workhours for each carrier’s route.
 | Semiannual Report to Congress

City Letter Carrier Operations. One of our 

initial value proposition agreements with 

the vice president of Delivery and Retail 

assessed the management of city letter 

carrier operations. We completed our 

agreement by reviewing operations in 

12 Great Lakes Area delivery facilities. 

We found management can improve 

operations by adequately reviewing the 

daily mail volumes when determining 

workhours for each carrier’s route. 

Delivery unit supervisors and managers in two of the assessed districts did 

not adequately match workhours with 

workload. From January 1 through May 

31, 2005, we identified 127,385 unjustified 

workhours in these two districts, valued at 

about $1.5 million in unrecoverable costs. 

Management in the two districts agreed 

with the findings and recommendations. 

They implemented new procedures and 

provided training to correct these issues. 

We concluded this value proposition 

agreement with a national capping report. 

Based on our findings and recommendations, the vice president of Delivery and 

Retail issued a letter stating that delivery 

and retail units will officially implement 

standardized delivery management practices beginning in FY 2006. 

A key component of city delivery standardization is the morning standard 

operating procedures (AM SOP) program 

and new Delivery and Retail Standard 

Operating Procedures. These procedures 

establish standard practices for managing 

all delivery and retail functions at the unit 

level and oversight responsibilities at each 

tier of management above the unit level. 

We are currently assessing the implementation of the Delivery and Retail Standard 

Operating Procedures in areas, districts, 

and delivery and retail units. 

Optimizing the Mail Processing

Network

The Postal Service’s mail processing network is one of the largest in the 

world with 675 facilities, 16,750 highway 

network routes, and 214,000 vehicles 

with an operating cost of about $25 billion annually. To process the mail more 

efficiently, the Postal Service developed 

automation equipment to replace some 

manual handling and reduce costs. During the reporting period, we assessed 

the Evolutionary Network Development 

(END) and Area Mail Processing (AMP) 

initiatives, and the efficiency of Bulk Mail 

Centers (BMC).

Evolutionary Network Development and 

Area Mail Processing. The Postal Service 

recognizes the need for a comprehensive 

redesign of its vast processing and transportation network. Declines in First-Class 

Mail volume, increased competition from 

the private sector, increased automation 

and mail processing by mailers, and shifts 

in population demographics have resulted 

in excess capacity in the Postal Service’s 

mail processing and transportation infrastructure. (In FY 2004, First-Class Mail 

volume was 5.7 billion pieces below the 

peak volume in FY 2001.) 

The Postal Service’s Strategic Transformation Plan: 2006-2010 calls its overall 

network redesign END. The goal of END 

is to create a flexible logistics network 

that reduces costs, increases operational 

effectiveness, and improves consistency 

of service. 

Value

Proposition

defined

The Value Proposition 

augments the OIG’s 

ability to work jointly with 

the Postal Service to 

identify areas that, with 

examination, could yield 

savings and maximize 

the value added to the 

Postal Service. It is an 

agreement between 

the audit director and 

their counterpart Postal 

Service vice president, 

consenting to a specific 

body of work in a 

specific timeframe. The 

agreement includes the 

area of focus, objectives/

goals, scope of work, OIG 

resources, Postal Service 

resources, anticipated 

value, and deliverables. 
October 1, 2005 – March 31, 2006 | 

The Postal Service had some early successes using an incremental approach 

to implement network changes. Postal 

Service accomplishments over the last 

6 years include:

Reducing 187 million workhours, which 

equates to 90,000 staff years. 

Closing more than 90 mail processing 

facilities.

Implementing 14 AMP proposals and 

conducting more than 60 feasibility 

studies to consolidate mail processing 

operations.

Reducing highway routes covering 

more than 65 million miles.

Although the Postal Service has made 

progress, streamlining the network 

presents many challenges. During this 

reporting period, we issued a status 

report on the END initiative that outlined 

the following challenges:

Working with stakeholders on network 

change issues, due to concerns that 

sometimes arise among the public 

when the Postal Service consolidates 

facilities. 

Elevating the END project management framework beyond mail 

processing.

Developing plans to ensure proper 

sequence and integration of END 

incremental changes.

Ensuring local network changes are 

integrated with END.

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rategy: Red

uce costs

Support for the Postal Service Board of Governors

and Capital Investments Committee

The OIG responds to requests for audit work and provides information to support two 

of its most important stakeholders, the Postal Service Board of Governors (BOG) and 

the Postal Service’s Capital Investments Committee (CIC). 

BOG Travel Expenses. We conduct audits in support of the BOG’s independent public 

accountant’s overall opinion on the Postal Service’s financial statements. The BOG 

requires annual audits of its travel and miscellaneous expenses and Postal Service 

Officers’ travel and representation expenses. We have audited these expenses 

since FY 1998, and found they were properly supported and in compliance with 

Postal Service policies, procedures, and guidelines. During the reporting period, 

the BOG chairman requested a review of the “Guidelines Relating to Governors’ 

Official Expenses.” To address this request, the Postal Service and the OIG formed 

a review committee. The committee was tasked with reviewing the guidelines 

relating to governors’ official expenses, and making recommendations that will help 

provide clarification and consistency with other Postal Service policies and federal 

regulations. The committee anticipates completing its review by May 2006.

Capital Investments. We review all Decision Analysis Reports (DAR) submitted to the 

CIC, a committee of senior postal executives appointed by the Postmaster General. 

We conduct these reviews using a two-tiered approach: 

For all capital investments less than $25 million, we provide an overall assessment 

of the reasonableness of the business case for the capital investment and the 

adequacy of the supporting information for the DAR.

For all capital investments of $25 million or greater, we provide an overall 

assessment of whether the capital project is in the best business interest of the 

Postal Service, the adequacy and depth of the supporting information for the DAR, 

and the overall contribution of the capital investment to the Postal Service. 

The results and recommendations are shared with the DAR sponsor, Postal Service 

Headquarters, the CIC, and the BOG, as appropriate. 

To date, our assessments and recommendations have been well received, resulting 

in a more fully informed approval process and improved business processes, and, in 

one instance, identifying $2 million that the Postal Service could put to better use. 

Overall, we found that the capital investments made during the reporting period have 

been in the best business interest of the Postal Service.
6 | Semiannual Report to Congress

Network changes made through the 

AMP process are one of the END building blocks. The Postal Service uses this 

process to consolidate mail processing 

functions and eliminate excess capacity, increase efficiency, and better use 

resources. We found the AMP process to 

be fundamentally sound; however, management of the process and guidance 

can be improved. We will continue to 

work closely with the Postal Service as it 

further transforms its network to increase 

operational efficiency. 

Efficiency of Bulk Mail Centers. The 

21 BMCs are highly mechanized mail 

processing plants where Parcel Post, 

Standard Mail (advertising mail), and Periodicals are prepared for distribution. We 

assessed the efficiency of mail processing operations at the Washington, D.C., 

BMC, and recommended that the Postal 

Service improve efficiency by reducing 

400,000 workhours. These reductions 

could help avoid costs of about $118 million over the next 10 years.

IMPROVING TRANSPORTATION

The Postal Service spends more than 

$2.7 billion annually for contracted surface transportation to move mail across 

highway and rail networks nationwide. 

During the reporting period, we assessed 

the BMC surface transportation routes 

and the Mail Transport Equipment Service 

Centers (MTESC). 

Optimization of Bulk Mail Center Surface 

Transportation Routes. A significant component of the Postal Service’s surface 

transportation network is its BMC network. Bulk mail is less time-sensitive than 

other mail such as First-Class Mail, and is 

generally moved over long distances on 

highway and rail routes.

Between March 2004 and March 2006, 

we audited BMC surface transportation 

routes and issued 13 reports, including 

a summary report. Our nationwide audit 

included detailed work in all nine Postal 

Service areas, and involved close cooperation with plant, area, and headquarters 

transportation officials. We examined 

The OIG analyzed more than 500 rail trips from Los Angeles to Atlanta, Greensboro and Jacksonville; and from Minneapolis to 

Seattle. 
October 1, 2005 – March 31, 2006 | 

about 1,100 highway transportation contracts covering more than 9,500 highway 

trips, and more than 500 rail trips from 

Los Angeles to Atlanta, Greensboro and 

Jacksonville; and from Minneapolis to 

Seattle.

We concluded that the Postal Service 

could save about $40.6 million over the 

term of affected highway contracts by 

modifying 430 scheduled highway trips 

to eliminate trips or reduce trip frequency; 

or by transporting some mail currently 

moved by rail in excess space on scheduled highway routes. Transportation costs 

could be reduced without negatively 

affecting mail on-time performance as 

mail volume was low and could be consolidated on other trips. 

The area vice presidents agreed with all 

of our recommendations and generally 

agreed with our monetary impact assessments. They noted, however, that due to 

the dynamic nature of the transportation 

network, the calculation of future savings 

was imprecise. 

Throughout these audits, Postal Service 

transportation officials took proactive 

action to rapidly implement transportation 

reductions. We will continue to work with 

the Postal Service to evaluate surface 

transportation routes and identify opportunities to reduce costs. We are currently 

assessing Processing and Distribution 

Center (P&DC) transportation routes, and 

plan to evaluate Postal Service-owned 

and operated transportation routes. 

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rategy: Red

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Financial Statements Account for the Postal Service’s

Costs and Revenues

Here is an outline of the Postal Service’s financial position and a 

summary of the financial audits of Postal Service installations we 

performed in support of the independent accountant’s opinion on the 

financial statements. 

Postal Service’s Financial Position

The Postal Service achieved remarkable results in FY 2005, realizing a net income 

of $1.4 billion. Further, with the equivalent of $700 million in cost savings, the Postal 

Service achieved its $5 billion cost reduction goal, a full year ahead of schedule.

At slightly under $70 billion, revenues increased $964 million over FY 2004, but 

operating expenses increased from $65.9 billion in FY 2004 to $68.3 billion in 

FY 2005. The Postal Service expects revenues to continue to increase during FY 

2006, primarily due to the January 2006 postal rate increase. It also expects to limit 

operating expense increases including cost reductions of $1.1 billion by eliminating 

42 million workhours.

The Postal Service reduced its debt from $11.3 billion in FY 2001 to $1.8 billion in 

FY 2004. Cash flows from operations in FY 2005 enabled the Postal Service to repay 

all remaining debt, which is the first year since postal reorganization in 1971 that 

the Postal Service ended the year with no debt obligations outstanding. This resulted 

in virtually eliminating interest expenses in FY 2005, compared to FY 2001 through 

2003, during which the Postal Service paid an average of $327 million in interest 

each year.

The Postal Civil Service Retirement System Funding Reform Act of 2003 significantly 

influences the Postal Service’s debt levels. Beginning in FY 2006, the Act requires 

“cost savings” (the difference between what the Postal Service would have paid 

without the law and the contributions the Act requires) be held in escrow and not be 

obligated or spent until otherwise authorized by law. For FY 2006, cash flow from 

operations will not be sufficient to fund the escrow, estimated at $3.1 billion, and all 

capital investments. Therefore, the Postal Service expects to borrow at least $1 billion 

to cover the shortfall.

From FY 2004 to FY 2005, the Postal Service reduced the number of career 

employees from 707,485 to 704,716. However, for the first time in 6 years, 

workhours increased over the prior year. The 11 million workhour increase was due 

to the increased workload as a result of two million additional delivery points and 

six billion additional pieces of mail. Additionally, in FY 2005, workers’ compensation 

expense decreased by approximately $401 million. The Postal Service stated that this 

reduction was a result of its ongoing efforts to prevent on-the-job injuries and its joint 

initiative with the DOL OWCP to increase the number of injured employees returning 

to work.

This past year, the Postal Service did a commendable job of managing costs. Postal 

legislation may be close, as the House passed its reform bill in July 2005 and the 

Senate passed a similar version in February 2006. Each bill includes financial relief 

from the requirement to place $3.1 billion in escrow each year and a provision to 

transfer certain retirement costs back to the Treasury. However, the President has 

indicated he would veto any proposed legislation that is not budget neutral, while 

the Postal Service says if Congress passes budget-neutral legislation, this would 

jeopardize its ability to provide universal service at affordable rates. 
Financial Audits of Postal

Installations

Each year, an independent auditor issues an opinion 

on the Postal Service’s financial statements. We 

conduct financial audits of postal installations to 

support this opinion. Our audits determine whether 

financial transactions are reasonably and fairly 

presented in the accounting records and whether 

internal controls are in place and effective. This 

assists in assuring the accuracy and reliability of 

financial data used by management for decisionmaking.

To accomplish this, we audit a representative sample 

of Postal Service installations. Installations include 

post offices, business mail entry units (BMEU), selfservice postal centers (SSPC), contract postal units 

(CPU), automated postal centers (APC), and stamp 

distribution offices (SDO). We also observe Postal 

Service data collectors conducting statistical tests of 

cost, revenue, and volume data at different district 

locations. 

At management’s request, we reviewed the 

implementation of morning standard operating 

procedures (AM SOP) at numerous post offices in 

FY 2005. In FY 2006, we are evaluating adherence to 

aviation security procedures at retail locations across 

the country.

All financial installation audits are unannounced. At 

the conclusion of each audit, we issue a report to 

district and local management. At the end of each 

fiscal year, we issue capping reports to headquarters, 

summarizing the overall results of the individual 

audits. In FY 2005, we also issued capping reports to 

each of the nine Postal Service areas. Over the past 

6 years, we issued more than 1,500 field financial 

audit reports, making significant recommendations 

for operational improvements at the local level and 

for systemic issues at the area and headquarters 

levels.

In FY 2005, we issued 205 reports on facilities that 

generated approximately $4.9 billion in revenue 

during the prior fiscal year. In addition, we conducted 

20 cost and revenue analysis audits and concluded 

that the Postal Service generally conducted tests in 

accordance with prescribed policies and procedures. 

Overall, we concluded that financial transactions 

were fairly represented in Postal Service financial 

systems and internal controls were generally in place 

and effective at almost all of the units audited. During 

the course of our work, we made 49 referrals to 

our Office of Investigations (OI) when we suspected 

criminal wrongdoing. 

Also during FY 2005, our office and Postal Service 

management identified several high-risk areas 

that warranted audits outside the normal scope of 

financial installation audits. As a result, we conducted 

five additional projects that resulted in referrals 

to OI for criminal inquiry and the identification of 

nearly $500,000 in questioned costs, including 

questionable credit card purchases in one district. 

Post Offices, Stations, and Branches. Postal 

Service operations generate revenue at post offices, 

which include main offices, branches, and stations. 

During our unannounced audits of statistically 

selected post offices each year, we conduct counts 

of all stamps and cash. We also review almost every 

aspect of the Postal Service’s financial operations, 

including payroll, money orders, post office box 

services, business reply mail, and expenditures for 

the month audited.

During FY 2005, we identified control and 

compliance issues related to cash and stamp 

accountability; financial accounting and 

 | Semiannual Report to Congress

ENTRY: Transportation

Off Loading/Entry Unit

2,750 Entry Units 

(1,900 BMEUs, 850 DMUs)

ACCEPTANCE: 

Bulk Mail Verification 

Over 4,900 Dedicated Employees

PRODUCTION

ACCEPTANCE

DISTRIBUTION

ENTRY

TRANSPORTATION

PRODUCTION: 

Customer Preparation 

2.5 Million Business Mailers

13.4 + Million Mailings Annually

PostalOne! is the Postal Service’s 

primary system for recording 

business mail and Periodicals 

transactions. PostalOne! allows 

users to enter postage statements, 

deposits, and other financial 

transactions, and to retrieve reports 

necessary to manage the day-today business of their units.

Presorting mail is a work-sharing 

incentive that offers discounted 

postage rates to customers in 

exchange for performing a portion 

of the work associated with the 

mailing.

The Postal Service requires all 

mailings to be properly prepared 

by the mailer, taken to an approved 

BMEU, and prepaid before entering 

the mail stream.

Business Mail Entry Process 
At the Leesburg, Virginia BMEU, OIG auditors observed Postal Service data collectors conducting 

statistical tests of cost, revenue, and volume data.

OIG auditors evaluate the Postal Service’s mail acceptance and 

verification procedures through record reviews and observations of 

mail acceptance.

management; post office boxes and caller service; 

payroll; and credit cards at 92 statistically selected 

post offices, branches, and stations. 

Business Mail Entry Units. The Postal Service 

established BMEUs for authorized business mailers 

to present business mailings in volume. During 

FY 2005, our audits of 98 BMEUs identified internal 

control and compliance issues related to customer 

accounts and eligibility, mail acceptance and 

verification procedures, special postage payment 

systems, and revenue protection. 

We evaluate the Postal Service’s mail acceptance 

and verification procedures through record reviews 

and observations of mail acceptance. We also 

evaluate revenue through our tests of customer 

payments and account balances. This enables us to 

provide assurance that BMEUs accurately state their 

revenue and have effective internal controls.

Cost, Revenue, and Analysis. Annually, 

the Postal Service prepares a report to aid in 

determining whether each class of mail bears the 

direct and indirect cost attributed to each class of 

mail or service, as required by law. Since Postal 

Service accounting systems do not provide data by 

class and subclass of mail, the Postal Service has 

developed statistical models to attribute costs. The 

accuracy of this data is critical to the Postal Service 

as it is an important component of the rate-making 

process. To this end, we conduct cost, revenue, 

and analysis (CRA) audits to determine whether 

the Postal Service is conducting statistical tests to 

collect cost, revenue, and volume data in accordance 

with established policies and procedures. For our 

FY 2005 CRA audits, we concluded that the Postal 

Service generally conducted tests of the specific 

systems observed in accordance with policies and 

procedures. 

Audits of SSPCs, APCs, CPUs, and SDOs. 

On a yearly rotational basis, we conduct audits of 

SSPCs, APCs, CPUs, and SDOs. These audits consist 

primarily of counts of stamps and cash, and reviews 

of internal controls. 

SSPCs are unstaffed Postal Service vending 

machines that provide postage stamps and other 

retail products and services. Machines can be 

located in either Postal Service facilities or nonpostal 

sites such as shopping malls, large office buildings, 

or housing complexes. 

APCs are customer-friendly kiosks where customers 

can ship packages, buy stamps, and verify ZIP 

Codes.

CPUs are contractor-owned and operated facilities, 

under contract to the Postal Service. They provide 

certain postal services such as accepting mail and 

selling postage, supplies, and Postal Service money 

orders to the public. CPUs are usually located in a 

store or place of business. 

SDOs receive and ship stamps, Postal Service 

stationery, philatelic products, and money orders. 

They also provide stamps and stamp products for 

all post offices, branches, and stations within their 

service area. 

Our FY 2005 audits of five SSPC and 10 APC units 

identified internal control and compliance issues 

related to cash and stamp accountabilities, security, 

vending financial accounting and reporting, APC 

refunds, and spoiled variable rate labels. We’re 

conducting audits of CPUs in FY 2006 and SDOs in 

FY 2007. 

October 1, 2005 – March 31, 2006 | 9
10 | Semiannual Report to Congress

Mail Transport Equipment Service Center 

Network. We evaluated whether opportunities exist for the Postal Service to 

save money by reducing the number of 

highway round-trips originating at the 

San Francisco and Memphis MTESCs. 

We also assessed whether management 

complied with the Postal Service’s overthe-road (OTR) container processing 

policy. 

We concluded that the Postal Service 

could save approximately $1.8 million over 

the term of existing contracts by canceling, not renewing, or modifying 102 

round-trips, and by stopping the inappropriate shipment of serviceable OTR 

containers to the MTESC. The Postal 

Service could eliminate the trips without 

affecting customer service by consolidating loads to better utilize trailer capacity. 

The Postal Service generally agreed with 

our findings and recommendations.

Maximizing the Cost-Effectiveness of

Contracts

We issued 17 contract-related audits during the reporting period. Specifically, we 

evaluated cost proposals associated with 

the Dual Collection Bio-Hazard Detection 

System, maintenance of deployed biohazard detection system equipment, and 

the Remote Encoding System.

We also performed financial risk assessments, verified incurred costs, audited 

a termination proposal, and reviewed 

estimating practices and an accounting 

system. We identified a potential contract 

savings of $10 million that includes a 

review of a $44 million firm fixed-price 

proposal, with a $5 million option for the 

Remote Encoding System. The audit 

disclosed more than $7 million in questioned costs, consisting primarily of labor, 

subcontract, and cooperative agreement 

independent research and development 

costs. Also included in the $10 million 

potential contract savings were reviews of 

firm fixed price proposals totaling approximately $39 million, along with a $1 million 

termination for convenience proposal.

These audits disclosed almost $3 million 

in questioned costs, consisting primarily 

of material, direct labor, overhead, and 

inventory costs. 
October 1, 2005 – March 31, 2006 | 11

Generate Revenue

A major challenge facing the Postal 

Service is increasing revenue while 

streamlining core services, controlling 

costs, and providing greater value to its 

customers. In doing so, the Postal Service must provide high-quality customer 

service along with greater efficiency. 

The Postal Service’s strategy to generate revenue is fostering growth through 

customer value. It plans to create more 

customer value in core products and services. This will increase mail volume and 

revenue to continue financing universal 

service and the growing delivery network. 

Customer value is defined as increased 

product utility, improved ease of use and 

access, and more reliable, predictable 

performance at affordable prices.

The Postal Service has identified opportunities to provide greater customer value 

and increase revenue through various 

innovations. These include:

Worksharing, where mailers (or mailer 

agents) do part of the work the Postal 

Service would normally perform.

Click-N-Ship, which allows customers to print and pay for labels using 

their home or business computer and 

printer. Coupled with Carrier Pickup, 

customers can schedule online, free 

next-day pick up of packages at their 

homes or businesses.

Customized MarketMail, which offers 

direct mailers the opportunity to capture a target audience by permitting 

advertising mail to be any shape and 

virtually any material. 

We believe opportunities exist to increase 

revenue with hybrid mail services and 

the PC Postage program. We further 

believe the Postal Service could do 

more to ensure it is accurately collecting, 

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recording, and reporting all revenue; and 

strengthening internal controls to minimize 

risks relating to financial transactions. 

Hybrid Mail Services. Hybrid mail services 

combine electronically-generated mail 

with hard-copy mail for delivery by the 

Postal Service. For each hybrid service, 

the Postal Service has revenue-sharing 

agreements with partner companies 

that provide the hard-copy production of 

customers’ orders, and share an agreedupon percentage of the production 

revenue from those orders with the Postal 

Service. The Postal Service also receives 

all postage revenue from these transactions. 

We reviewed three hybrid services 

programs: Netpost CardStore, Netpost 

Premium Postcards, and Netpost Mailing 

Online. Our audit found that controls were 

not adequate to track revenue from hybrid 

services revenue-sharing agreements. 

Specifically, the Postal Service could 

not validate the amount of production 

or postage revenue the hybrid services 

business partners submitted. We recommended that the Product Management 

group, which manages hybrid services, 

work with a group such as the Marketing 

Technology and Channel Management 

group or a third-party contractor to generate test transactions for each of the 

hybrid services. We also recommended 

that management determine the feasibility 

of each hybrid services partner establishing a mailing permit strictly for hybrid 

services mailings. Management agreed 

with our recommendations.

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PC Postage. PC Postage is a trademark 

of the Postal Service for products developed by commercial vendors that allow 

customers to print postage from personal 

computers. Customers can print postage 

onto envelopes, labels, and documents 

such as self-mailers. The Postal Service 

Postage Technology Management (PTM) 

office manages the PC Postage program.

We audited the PC Postage refund review 

process and found that it was effective 

and efficient overall. However, the PTM 

could improve its statistical sampling 

when reviewing refund requests, and 

update requirements for access to providers’ physical and electronic records. 

Security and access controls over the 

storage and destruction of non-dated 

indicia at one PC Postage provider 

were inadequate. We also found that 

although the Postal Service National 

Meter Accounting and Tracking System 

can verify that a customer account is 

closed and a requested refund amount 

is correct, it cannot determine whether a 

reimbursement was previously paid for 

the account. Management agreed with 

our recommendations. 

 Customers can print postage onto envelopes, labels, and documents such as self-mailers.
October 1, 2005 – March 31, 2006 | 13

Achieve Results with 

a Customer-Focused 

Performance-Based Culture

Maximizing human capital resources by 

maintaining an efficient workforce is the 

Postal Service’s keystone to capitalizing 

on performance and productivity. The 

Postal Service had a productive year last 

year despite facing some major challenges. As outlined in its 2005 USPS 

Annual Report, efficiency continued on 

an upward swing, with an unprecedented 

sixth consecutive year of growth in total 

factor productivity (TFP), which is the 

equivalent of more than $700 million in 

cost savings.

To achieve results with a customerfocused performance-based culture, 

the Postal Service plans to engage and 

motivate the workforce. It is focusing 

on four critical human resource strategies: engaging employees, developing 

and managing talent, establishing and 

maintaining market-based compensation, 

and managing complement to assure 

flexibility.

We extensively reviewed the effectiveness of the Postal Service during times of 

disaster, including the impact of Hurricane 

Katrina. We also assessed the Postal 

Service’s ability to resolve workforce 

and workplace issues, such as ensuring 

employee safety and addressing health 

insurance premium and workers’ compensation program issues. 

Postal Service Effectiveness in Times

of Disaster

During its long history, the Postal Service 

has faced both natural and man-made 

disasters that adversely impacted mail 

delivery. These incidents led to a renewed 

emphasis on developing initiatives to more 

effectively secure the nation’s mail system. 

By focusing on key vulnerabilities, our 

audits have shown how the Postal Service 

can further protect the integrity of the mail 

stream. 

In support of Postal Service security, we 

participate in the Mail Security Task Force 

and attend training relating to Integrated 

Emergency Management Plans (IEMPs) 

and Dangerous Mail investigations. We 

are also a member of the President’s 

Council on Integrity and Efficiency (PCIE) 

Homeland Security Roundtable, which 

shares information on related security 

work performed by all OIGs. For the 

latest collaboration, the PCIE tasked 

the Inspectors General with assuring 

appropriate oversight of financial and 

procurement processes and operations 

relating to Hurricane Katrina. We then 

established a task force of auditors and 

investigators who conducted an extensive 

body of work on this issue. We also conducted work related to Hurricane Rita. 

As part of the PCIE task force effort, we 

reviewed the Postal Service’s actions to 

safeguard employees before Hurricane 

Katrina made landfall in the four affected 

districts: Alabama, Louisiana, Mississippi, 

and North Florida, where Katrina was 

predicted to significantly impact hundreds 

of Postal Service facilities and thousands 

of employees. We concluded that the 

Postal Service took appropriate actions 

per the IEMPs and supplemental hurricane plans related to effective notification 

of employees. 

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TFP Defined

The Postal Service 

defines Total Factor 

Productivity (TFP) as a 

ratio of the workload to 

resources used. Workload 

includes the number and 

type of delivery points, 

and mail volume adjusted 

for weight, size, level of 

mailer preparation, and 

mode of transportation. 

Resources include labor, 

equipment, facilities, and 

transportation costs. The 

assessment is conducted 

by an independent firm, 

using audited postal 

financial data.
14 | Semiannual Report to Congress

Further, under extraordinarily difficult 

circumstances, the Postal Service moved 

the mail, assessed damage to the mail 

processing network, and quickly reestablished mail processing operations in 

the Gulf Coast region. To maintain mail 

processing operations impacted by the 

hurricane, the Postal Service:

Implemented continuity of operations 

plans.

Performed additional work to process 

mail in advance of the storm. 

Moved First-Class Mail processing 

operations to contingency sites.

Placed an embargo on the acceptance 

of Standard Mail destined for the New 

Orleans area.

Established temporary mail processing 

facilities.

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Processed more than 500,000 

Change-of-Address forms for customers displaced by the storm. 

We are currently evaluating Postal Service 

actions taken to locate and account for 

employees after Hurricane Katrina made 

landfall.

National Change of Address. The National 

Change of Address (COA) process 

provides a way for customers to change 

their address using a Postal Service form, 

the Internet, or the telephone. While we 

were conducting an application control 

review of this process, Hurricane Katrina 

hit the Gulf Coast. As a result of the 

displacement of more than one million 

customers, the workload for all types of 

COAs increased. From September 1 to 

November 15, 2005, the number of COAs 

processed from hurricane-affected ZIP 

Codes nearly tripled, compared to the 

same period in the previous year. 

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The National Change of Address process provides a way for customers to change their address using a Postal Service form, the 

Internet, or the telephone.
October 1, 2005 – March 31, 2006 | 15

Postal Service officials responded to 

this crisis by creating new procedures to 

redirect mail to affected customers. We 

assessed these procedures to ensure 

displaced customers received their mail 

in a timely manner. We are coordinating 

with the Postal Service to ensure that 

they incorporate these procedures into a 

formal policy, such as the IEMP, to provide improved guidance to Postal Service 

officials in responding to future disasters. 

In addition, the Postal Service Information 

Technology department addressed customer issues by implementing a waiver 

on the use of credit card validation and 

modified both the Internet and intranet 

websites to quickly provide pertinent 

information to both employees and customers. 

Overall, we concluded that the Postal 

Service quickly and effectively responded 

to Hurricanes Katrina and Rita under 

extraordinarily difficult circumstances. 

Its Office of Emergency Preparedness 

developed procedures to better manage incidents, implement protective 

measures, and integrate processes. The 

Postal Service relied on lessons learned 

from previous hurricanes; took actions 

consistent with the IEMP; safeguarded 

employees; assessed damages and reestablished facilities, mail processing and 

transportation logistics networks; and 

assessed costs for environmental assessments and cleanup. 

While we concluded the Postal Service 

did a commendable job of maintaining and reestablishing mail processing 

operations in the immediate aftermath of 

the hurricanes, we also identified several 

issues that could improve the Postal 

Service’s preparedness and response to 

future disasters. These include improving 

the coordination of internal communications, establishing contingency sites 

outside the hurricane zone, and ensuring 

back-up power availability at Postal Service facilities. 

Although management disagreed with the 

recommendations as stated, we considered their comments as responsive to our 

recommendations.

Employee Safety. The Postal Service has 

worked to improve both safety and the 

workplace environment, while focusing 

employee development and compensation programs on achieving performance 

objectives. 

We reviewed the extent to which the 

North Texas P&DC identified root causes 

and implemented prevention programs 

for accidents and Occupational Safety 

and Health Administration (OSHA) injuries 

and illnesses (I&Is) that occurred most 

often in the facility. We concluded that 

they identified and documented the root 

causes for most of the FY 2003 accidents 

and OSHA I&Is. In addition, we found 

a new hazard in the loading dock area 

and determined that some hazardous 

conditions previously identified in a safety 

inspection had reoccurred. Management 

took corrective actions on all the conditions we identified. 

Employer Health Insurance for Annuitants.

Acting on information provided by Postal 

Service management, we reviewed the 

adequacy of internal controls over administration of the Postal Service’s share of 

health insurance premiums paid for about 

444,000 retirees and survivors, and the 

accuracy of amounts paid for those premiums, which totaled $1.5 billion in 

FY 2005. 

We coordinated with the Office of Personnel Management (OPM) and determined 

that internal controls need improvement 

and that OPM billed the Postal Service 

$3.1 million for 70 individuals who were, 

in fact, not Postal Service retirees. Our 

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calculation represents average annual 

payments from June 1994 through 

August 2005, which was the average 

duration of health benefits paid for those 

individuals. 

As a result, OPM credited the November 

2005 billing for the overpaid amount. 

Additionally, OPM discontinued billing for 

those individuals for an estimated future 

cost avoidance of $3.5 million over the 

next 10 years. Although management did 

not agree with the future cost avoidance 

identified, they did agree with the intent of 

the finding and will enhance their controls 

to closely monitor the exception report 

from OPM and resolve any differences. 

Workers’ Compensation Programs. A significant cost impacting the Postal Service 

is workers’ compensation expenses for 

injured workers. Although the Postal Service has taken positive steps that reduced 

annual workers’ compensation expenses 

over the past 2 years, cash outlays have 

increased from $666 million in 2000 

to $840 million in 2005 (approximately 

26 percent). 

The sheer size of the bargaining unit 

workforce and nature of work performed 

are the primary factors that made the 

Postal Service the largest participant in 

the Department of Labor’s (DOL’s) Office 

of Workers’ Compensation Programs 

(OWCP) in 2005. The Postal Service 

represented about 46 percent of total 

federal workforce cases and continued 

to be the largest payer. At the same time, 

administrative fees OWCP charged to the 

Postal Service increased from $33 million 

in 2000 to $44 million in 2005 (33 percent 

increase). These fees represent about five 

percent of the Postal Service’s total medical and compensation costs. 

In a private business, this would not be as 

problematic as it is for the Postal Service 

because the business could choose to 

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for injured workers.

Administrative fees OWCP charged 

to the Postal Service.
October 1, 2005 – March 31, 2006 | 17

change administrative providers. However, unlike private businesses, the Postal 

Service does not have flexibility due to 

law that binds it to the DOL. 

We evaluated whether the Postal Service could replace its current workers’ 

compensation program, currently administered by the DOL OWCP, with a less 

costly one. 

Our review found that on the positive 

side, savings would most likely occur if 

the Postal Service had its own workers’ 

compensation program. These savings 

would be in the areas of continuation of 

pay (COP) elimination and a 3-day waiting 

period, reduced OWCP administrative fees and Postal Service third-party 

administrators, physician selection, 

buyout options, mandatory retirements, 

compensation limits and dependency 

status, and accountability controls. 

Challenges to replacing the current 

OWCP program include potential resistance by the Postal Service’s four major 

employee unions if workers’ compensation benefits are reduced. Also, legislative 

action would be needed to separate the 

Postal Service from the existing OWCP.

Additionally, we issued a supplement to 

a previously issued report that included 

recommendations to OWCP management to improve its schedule awards 

program. 

The report used a statistical sample to 

project that in chargeback year 2004, the 

Postal Service was overcharged nearly 

$250,000 and undercharged about 

$240,000 for schedule awards in the 

Pacific Area. Schedule award compensation is payable to employees based on 

the severity of the impairment for the 

partial loss or loss of use of certain members, organs, or functions of the body 

as a result of an OWCP-accepted injury. 

The overcharges represent about 1.2 

percent of the $20.6 million paid to Postal 

Service employees in chargeback year 

2004 in the Pacific Area. Further, these 

charges indicate that OWCP over- and 

underpaid four percent of the Pacific Area 

employees who received schedule award 

payments. 

An initiative led by the Postal Service 

resulted in a review of more than 

$173 million in medical billings to OWCP 

from January 1, 2000, through February 

28, 2006. This initiative uses a database 

we developed to help identify potentially 

fraudulent billing schemes. 

Since it began in July 2003, the Postal 

Service has discovered more than 

$3.5 million in duplicate medical payments, of which $527,000 was credited 

back to the Postal Service by OWCP 

as of March 2006. During the first two 

quarters of FY 2006, the Postal Service 

identified more than $1 million in duplicate payments from the previous billing 

period of FYs 2001 through 2004. DOL 

is not required to reimburse agencies for 

the administrative fees they charge to 

process duplicate payments, rendering 

$176,000 (about five percent of the duplicate payment amount) unrecoverable for 

the Postal Service. 

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Improve Service

The Postal Service’s strategy to improve 

service is to provide timely, reliable 

delivery, and improved customer service across all access points. It plans to 

improve the quality of postal services 

by focusing on the end-to-end service 

performance of all mail, and ensuring that 

postal products and services meet customer expectations by being responsive, 

consistent, and easy to use. However, 

improving service is a significant concern 

for the Postal Service while it simultaneously works to cut costs. Our work in 

this area is aimed at helping the Postal 

Service improve operational efficiencies 

related to customer service. 

Area Mail Processing Consolidations.

In conjunction with END, the Postal Service seeks to improve mail processing 

efficiency and service using AMP consolidations. It is conducting a system-wide 

review of mail processing and transportation operations over the next several 

years. In support of this effort, we are 

conducting a series of audits to examine 

the justification and impact of selected 

AMPs approved for implementation in 

FY 2006. In addition, we plan to assess 

whether projected improvements in efficiency or service were achieved from an 

AMP consolidation implemented in FY 

2004. As part of these reviews, we will 

evaluate the service implications associated with these consolidations. 

Address Management System & Delivery 

Point Sequencing. The Postal Service 

spends more than $1 billion annually 

to handle undeliverable mail. Incorrect 

address information increases mail processing operating costs and adversely 

impacts customer service due to the 

diminished value of information for business mailers. Over the years, the Postal 

Service has strived for the highest quality 

address information for internal use and 

for its customers, in part because the use 

of correct and complete address information can reduce costs and improve 

service. As it processes increasing volumes of mail on automated equipment, 

the quality of address information takes 

on new importance.

In March 1993, the Postal Service implemented delivery point sequencing (DPS) 

to reduce manual mail sorting, improve 

efficiency, and reduce costs. In 1994, it 

established the Address Management 

System (AMS) to capture, correct, and 

complete address information. AMS 

enhances the efficiency of mail processing and delivery through automation. 

Address information in AMS is captured 

in sorting programs used to process mail 

in DPS. Mail that cannot be processed on 

automated equipment requires manual 

processing, which is more costly to the 

Postal Service.

In the Southwest Area, Rio Grande District we assessed the Postal Service’s 

management of AMS quality street review 

results to ensure address information is 

correct and complete. The street reviews 

include:

Identifying all possible delivery 

addresses included in Address Information System products.

Validating the number of possible delivery addresses assigned to each carrier 

route.

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October 1, 2005 – March 31, 2006 | 19

Validating the correct delivery 

sequence for each carrier route.

Assigning ZIP+4 Codes to maximize 

compatibility with automated equipment.

Our assessment found Postal Service 

officials can implement best practices 

from other locations to improve the quality of their AMS data. Since street reviews 

were not conducted for all routes, more 

than 106,000 AMS data errors may exist 

in the district reviewed. We found that the 

Rio Grande District could incur processing and delivery costs of $988,945 over 

the next 10 years because of remaining 

AMS errors. Management agreed with 

our findings and recommendations that 

could result in $988,945 in funds put to 

better use. 

We plan to expand our review to assess 

the Postal Service’s management of AMS 

quality street review results nationwide.

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As the Postal Service continues processing increasing volumes of mail on automated equipment, the quality of address information 

takes on new importance in reducing costs and improving service.
20 | Semiannual Report to Congress

Investigative Activities

In addition to the many administrative 

and management safety measures 

already in place, the OIG and the U.S. 

Postal Inspection Service (USPIS) work 

to safeguard the Postal Service. These 

two law enforcement agencies are 

responsible for investigating criminal, civil, 

and administrative matters related to the 

Postal Service. The OIG’s mandate is to 

investigate contract fraud and employee 

misconduct. Some results of the OIG’s 

investigative efforts are highlighted here. 

The OIG also embarked on an initiative to analyze trends and root causes 

of employee misconduct and fraud 

across the Postal Service. This ongoing 

analysis will help management at all levels 

develop actionable countermeasures for 

these vulnerabilities. The ability to identify 

trends will also assist the OIG with the 

efficient distribution of its own resources. 

Acquisitions and Contract Fraud. The 

Postal Service was responsible for active 

contracts totaling more than $25 billion 

to date in FY 2006. To assess the Postal 

Service’s management of acquisitions 

and contracts, we continue to aggressively investigate allegations of contract 

improprieties. 

In one continuing investigation involving transportation services, an owner of 

various trucking companies fraudulently 

received approximately $1.5 million in 

fuel rebates from petroleum companies 

and kept them for his personal use. In 

January 2006, the owner pleaded guilty 

in U.S. District Court to five counts of 

making false statements, embezzlement, 

theft, defrauding the IRS, and making 

false statements to the IRS. In the same 

month, the Postal Service sent letters 

to several postal highway transportation 

contractors associated with this investigation and notified them of their immediate 

suspensions and proposed debarment. 

In another case, a contractor supporting 

a highway contract route fraudulently 

claimed $120,468 from the Postal Service 

for services he did not provide. A federal 

court charged the contractor with one 

count of false claims in January 2006. 

In an investigation involving services to 

the Postal Service, the OIG identified a 

contractor who fraudulently claimed to 

dispose of hazardous material. In March 

2006, a federal grand jury indicted the 

chief manager of the company. The 

indictment charges the manager with 

making false statements, obstruction of 

justice, and improper storage of hazardous waste. The Postal Service Accounts 

Payable Accounting and Reporting 

System (APARS) disclosed more than 20 

payments to the company for recycling 

materials between October 1998 and 

October 2003. The manager faces up to 

40 years in prison and a $1.25 million fine, 

if found guilty on all counts.

An investigation of a construction contractor determined the contractor falsely 

certified payments to its subcontractor and completed construction work 

when in fact it had not done either. In 

November 2005, a default judgment of 

$175,630 was filed in U.S. District Court 

against the company, the president, and 

the secretary. This judgment follows a 

civil complaint filed in September 2005 

against the same three defendants under 

the False Claims Act. 

The integrity of Postal Service processes and personnel is an essential element for 

ensuring the safety of its products, customers, services, and assets. Ultimately, this 

integrity helps to maintain a stable and sound Postal Service.

PRESERVING INTEGRITY AND SECURITY
October 1, 2005 – March 31, 2006 | 21

IMPAC and Voyager Fleet Cards. In 

addition to acquiring goods and services through contracts, the Postal 

Service uses International Merchant 

Purchase Authorization Cards (IMPAC) 

and Voyager Fleet Cards. The IMPAC 

Program processed transactions totaling 

approximately $99 million in Quarter 1 of 

FY 2006 and earned the Postal Service 

approximately $600,000 in refunds during 

that time. The Voyager Fleet Card Program — which pays for the fuel, oil, repair, 

maintenance, and washing of more than 

220,000 Postal Service vehicles — processed more than $181 million, through 

Quarter II of FY 2006, with documented 

savings and cost avoidance to the Postal 

Service of almost $15 million.

Our investigation in this area involved 

a Post Office Operations Manager’s 

(POOM’s) secretary who misused her 

IMPAC to purchase more than $15,000 

in gift cards for her personal use. She 

concealed her theft of gift cards by altering official records, including forging her 

supervisor’s approval for requisitions and 

monthly statements. The POOM’s secretary resigned in December 2005 and was 

indicted for theft by a federal grand jury in 

February 2006.

In another investigation conducted jointly 

with the USPIS and the New York City 

Police Department, agents identified a 

letter carrier and two non-Postal Service 

employees who used Voyager credit 

cards to make unauthorized purchases of 

approximately $10,000 in automobile fuel 

for their personal automobiles. In October 

2005, all three individuals pleaded guilty 

to embezzlement in federal court. 

FINANCIAL INVESTIGATIONS

Financial investigations cover a wide 

range of activity, including embezzlement, theft, misconduct, falsification of 

records, and conversion and misuse of 

Postal Service property. These investigations frequently involve employees and 

contractors. 

In one significant case, we investigated a 

senior postal official after receiving allegations of questionable travel charges. Our 

special agents determined the official had 

not complied with Postal Service guideP

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The IMPAC Program processed transactions totaling approximately $99 million in the first quarter of FY 2006 and earned the 

Postal Service approximately $600 thousand in refunds during that time period. 
22 | Semiannual Report to Congress

lines and the investigation eventually led 

to the individual’s resignation. 

In another case, special agents worked 

jointly with postal inspectors to investigate a station manager who was issuing 

money orders to himself and falsely claiming that the money orders were refunded 

to customers. In October 2005, the manager was sentenced in U.S. District Court 

to 18 months incarceration and ordered 

to pay more than $162,000 in restitution.

Finally, we investigated a self-service 

postal center (SSPC) technician who 

stole more than $580,000 over a 13-year 

period from various vending machines 

under his responsibility. In December 

2005, the technician pleaded guilty to a 

one-count criminal information charging 

him with misappropriation of postal funds. 

FRAUDULENT WORKERS’ COMPENSATION

The Postal Service is one of the largest 

participants in the Federal Employees’ 

Compensation Program and paid 

$456 million in compensation from July 1, 

2005, through December 31, 2005. 

Of this amount, $167 million was for 

medical payments to providers, and $289 

million was for compensation to claimants and beneficiaries. Administered by 

the DOL, OWCP provides direct compensation to providers, claimants, and 

beneficiaries. The Postal Service later 

reimburses OWCP in a process known as 

charge-back billing. 

During this reporting period, healthcare 

fraud investigations resulted in more 

than $57 million in cost avoidance and 

approximately 299 administrative personnel actions, including removals, letters of 

warning, and claim terminations.

In April 2005, we formed the first-ever 

Federal Worker’s Compensation Forum 

to reduce workers’ compensation costs 

and combat fraud related to the Federal 

Employees’ Compensation program. 

To date, 18 other OIGs have agreed to 

participate. These participating agencies 

annually spend more than $2 billion in 

OWCP benefits, a total that accounts 

for nearly 90 percent of all government 

OWCP costs. 

Since its inception nearly 10 years ago, the OIG’s Hotline staff has received more than 200,000 calls.
October 1, 2005 – March 31, 2006 | 23

Security

Because of the terrorist attacks in September 2001, the federal government 

began focusing attention on improving 

the safety and security of our nation’s 

critical infrastructures. Due to its sheer 

size and geographic dispersion, securing 

the nation’s mail system is a significant 

challenge. However, through innovation and focus on key vulnerabilities, 

the Postal Service has made significant 

strides toward protecting the integrity of 

the mailstream and making its systems 

safer and more secure.

The OIG and USPIS are continuing to 

work in partnership in order to ensure 

effective investigative results and assist 

the Postal Service in addressing its 

management challenge of securing the 

nation’s mail system.

Security and Controls in Technology 

Investments

We perform reviews of information systems general controls to support the 

annual financial statement audit, and to 

assess the security and controls on data 

in those systems.

FY 2005 Information Systems General 

Controls. During the reporting period, 

we confirmed that general controls over 

systems, data, and computer-related 

infrastructure at the Information Technology and Accounting Service Centers 

(ITASCs) provided reasonable assurance 

that data were complete, secure, and 

validated for accuracy; data integrity 

was provided; and business practices 

complied with Postal Service policies, 

procedures, and standards.

However, we found that management 

needs additional controls and actions 

in the areas of accessing mainframe 

resources, granting Unix System Services 

access privileges, managing mainframe 

accounts, managing and monitoring 

capital and sensitive equipment, timely 

repairing surveillance equipment, monitoring and updating badge access systems, 

using badges properly, and interfacing 

mainframe telecommunications and 

software security products. Additionally, a 

theme common to four of the six reports 

was access to critical mainframe systems 

not being disabled or modified as necessary when employees changed job duties 

within the Postal Service. As a result of 

our audit work, Postal Service management corrected these issues or targeted 

them for priority resolution.

Data Communications Controls. We 

reviewed five data communications 

software products to determine if 

management adequately implemented 

controls over the software. The Postal 

Service uses these communications software products to format, manage, and 

move data, files and programs across 

its networks. Some of these products 

contain their own internal security controls, which depend on or supplement 

mainframe security. It is important that 

management control these products 

because of their powerful privileges.

Overall, controls over data communications software were in place at the 

ITASCs and functioning in accordance 

with Postal Service procedures. For 

example, mainframe security rules 

restricted access to important software 

resources, including some commands. 

Furthermore, data center procedures 

enforced segregation of duties and 

effectively granted appropriate access to 

programs and files. 

We made four recommendations to management to improve the security interface 

between mainframe telecommunications 

and security software products, which 

included reviewing and updating security 

configurations and tables. Management 

P

RESERVING: securit

y
24 | Semiannual Report to Congress

agreed with all recommendations and is 

in the process of correcting the issues. 

Automated Postal Center Kiosks. In April 

2004, the Postal Service began deploying APCs. These self-service kiosks offer 

Postal Service customers a broad range 

of products, services, and information 

through a smart vending platform that is 

available 24 hours-a-day, 7 days-a-week. 

The 2,500 APC kiosks generated more 

than $283 million in total revenue during 

FY 2005, and appear to be popular with 

consumers. 

We assessed whether customer data and 

information resources related to APC systems were protected from unauthorized 

use. Our audit gathered data from 

selected kiosks and conducted security 

scans of selected servers on-site at the 

vendor laboratory. Our analysis of data 

collected during transmissions of payment card authorization requests and 

approvals, periodic sales activity, and 

end-of-day closeouts confirmed that 

the Postal Service adequately secured 

sensitive debit and credit card information 

during transmission. However, we 

identified a number of areas where management could improve security over 

APC kiosks, servers, and the storage 

of sensitive customer data. 

The findings and recommendations in 

two subsequent reports provide the 

Postal Service with the information necessary to:

Reduce the risk of potential misuse 

of their information resources and customer data. 

Help ensure the security of the APC 

system.

Improve the management of limited 

resources. 

Improve compliance with the provisions of their security and record 

management requirements, as well as 

their obligations as a participant in the 

debit/credit card industry. 

Strengthen security over customer 

data and information resources related 

to these conditions on APC systems. 

Management agreed with all of our 

recommendations. 

Postal Inspection Service Oversight.

Under the Inspector General Act of 1978, 

as amended, we are required to provide oversight of USPIS. We conducted 

three qualitative assessment reviews of 

investigative and related administrative 

processes. As a result, USPIS management made changes to investigative 

policies and procedures, implemented 

procedures to improve management 

controls, and agreed to provide additional 

training to inspectors to address the 

issues identified during our reviews. 

As a support function to USPIS, the 

Security Investigation Service Center 

(SISC) and the Human Resources Service 

Center (HRSC) were generally effective 

in supporting USPIS’s mission. However, 

for the SISC, USPIS management could 

improve its background security clearance process to reduce its carryovers 

■

■

■

■

■
October 1, 2005 – March 31, 2006 | 25

for these clearances, provide formal 

annual and refresher training, and revise 

procedures for handling mail loss and 

rifling complaints. Also, the USPIS could 

increase HRSC operational efficiencies 

and further assist the Postal Service with 

its goals to manage cost and improve 

productivity. Specifically, Postal Service 

and USPIS officials could realize a cost 

savings of approximately $14.4 million 

over the next 10 years by transitioning 

USPIS’s personnel-related transactions 

to the Postal Service Human Resources 

Shared Service Center, or another feasible alternative.

Using a facility risk-rating model, the 

USPIS implemented several initiatives to 

identify potential vulnerabilities of Postal 

Service facilities through security reviews 

and observation of mail processing conditions. In coordination with the USPIS, 

we plan to assess security programs and 

report on the effectiveness of security in 

place for facilities, employees, customers, 

and mail. Additionally, we will continue 

reviewing new initiatives for detection and 

protection systems and the development, 

implementation, and coordination of 

emergency preparedness plans. We are 

currently reviewing the Postal Service’s 

and USPIS’s emergency management 

policies and training efforts to ensure that 

they are adequate and follow Department 

of Homeland Security and executive guidance. 

The Postal Service’s 2,500 Automated Postal Center kiosks generated more than $283 million in 

total revenue during FY 2005. 

P

RESERVING: SECURIT

Y
26 | Semiannual Report to Congress

As of March 31, 2006

Abbreviations

AIG Assistant Inspector General

CAATS Computer Assisted Assessment Techniques

CIO Chief Information Officer

FOIA Freedom of Information Act

IT Information Technology

HQ Headquarters

Inspector General

AIG

Investigations

AIG

Audit

CAATS

Chief Information 

Officer

Application 

Development

IT Operations

Consolidated 

Security

Client Support/

Telecom

Deputy General 

Counsel

General Counsel

Congressional, 

FOIA, & Hotline

Legal Services

AIG

Mission Support

Director

Mission Support

Human

Resources

Administrative 

Services

Investments

Deputy AIG 

Headquarters

Investigative 

Operations

Strategic 

Enforcement

Deputy AIG 

Investigations East

Computer

Crimes Unit

Boston Field Office

New York 

Field Office

Philadelphia

Field Office

Washington

Field Office

Deputy AIG 

Investigations South

Atlanta

Field Office

Miami

Field Office

Dallas

Field Office

Houston

Field Office

Special Inquiries 

Division & Internal 

Affairs Division

Deputy AIG 

Investigations West

Chicago 

Field Office

Denver

Field Office

San Francisco 

Field Office

St. Louis 

Field Office

 Los Angeles 

Field Office

Audit Reporting

Deputy AIG 

Financial Operations

Information 

Systems

Field Financial West

Field Financial 

Central

Field Financial East

Financial

Statements

Deputy AIG 

Core Operations

Evolutionary 

Network

Development

Engineering

Transportation

Capital Investments

Network

Processing

Delivery & Retail 

Deputy AIG 

HQ Operations

Human Capital

Planning, Budgeting 

& Accountability

Marketing

Supply 

Management & 

Facilities

Oversight of 

Investigative 

Activities

Principal Deputy 

Inspector General

Planning and 

Performance Deputy 

Inspector General

Performance

U.S. POSTAL SERVICE OFFICE OF INSPECTOR GENERAL ORGANIZATIONAL CHART
Covington,KY

Charleston,WV

Field Offices

Field Offices (Investigations Only)

Audit & Investigations Offices

Investigations Only

Boston, MA

Springfield, MA

New Haven, CT

New York, NY

Philadelphia, PA

Washington, DC

Raleigh, NC

Greensboro, NC

New Orleans, LA Miami, FL

Atlanta, GA

Memphis,TN

Dallas,TX

Houston, TX

Seattle, WA

Chicago, IL

Detroit, MI

Pittsburgh, PA

Albany, NY

San Francisco, CA

San Diego, CA

Los Angeles, CA

Denver, CO

Phoenix, AZ

Kansas City,KS

St.Louis,MO

Cleveland, OH

Indianapolis,IN

Puerto Rico

Las Vegas, NV

Salt Lake City, UT

Birmingham, AL

Providence, RI

Baltimore, MD

Portland, ME

Jacksonville, FL

Columbia, SC

Des Moines, IA

Albuquerque,NM

Charleston, SC

Little Rock, AR

The OIG currently has more than 850 employees located 

in 13 field offices as well as other locations nationwide. 

U.s. postal service Office Of Inspector General Office Locations

October 1, 2005 – March 31, 2006 | 27
28 | Semiannual Report to Congress

REPORTS ISSUED TO POSTAL SERVICE MANAGEMENT

For the period October 1, 2005 — March 31, 2006

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

Following is a summary, by principal area, of reports issued to Postal Service management. The following pages list each 

issued report.

The Inspector General Act of 1978 requires semiannual reports on the immediately 

preceding six-month periods ending March 31 and September 30. 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. 

During the last six months, the Postal Service agreed with OIG recommendations that 

identified potential monetary benefits of more than $216 million.

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, etc.

Unsupported Costs

A cost that is not supported 

by adequate documentation. 

Unsupported costs are 

included in Questioned Costs.

Funds Put to 

Better Use

Funds that could be used more 

efficiently by implementing 

recommended actions.

Impact Revenue

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.

Management Goals Number of Reports 

Issued

Questioned Costs Unsupported 

Costs

Funds Put to 

Better Use

Revenue 

Impact

Achieve Results with 

a Customer-Focused 

Performance-Based Culture

17 $6,185,103 – $21,300,000 –

Generate Revenue 5 $102,000 – $1,121,794 –

Improve Service 8 – – $988,945 –

Reduce Costs 170 $16,211,069 $404,472 $127,541,153 $2,579,000

Total 200 $22,498,172 $404,472 $150,951,892 $2,579,000

Appendix A

Appendices
October 1, 2005 – March 31, 2006 | 29

appen

dix 

A

Reports With Quantifiable Potential Monetary Benefits

Report Title Questioned Costs Unsupported Costs

Funds Put 

to Better Use Revenue Impact

ACHIEVE RESULTS WITH A CUSTOMER-FOCUSED PERFORMANCE-BASED CULTURE

ENGINEERING

Flat Recognition Improvement Program DA-AR-06-002; 

1/25/2006 $6,185,103 – – –

Oversight of Investigative Activities

Postal Inspection Service Human Resources Service Center 

SA-AR-06-001; 3/30/2006 – – $21,300,000 –

GENERATE REVENUE

MARKETING

PC Postage Refund Review MS-AR-06-002; 3/31/2006 $102,000 – – –

NETWORK OPERATIONS - PROCESSING

Efficiency of the Chicago Airmail Records Unit at the J.T. Weeker 

International Service Center 

NO-AR-06-002; 12/22/2005 – – $1,121,794 –

IMPROVE SERVICE

DELIVERY AND RETAIL

Address Management System – Southwest Area, Rio Grande 

District DR-AR-06-001; 1/25/2006 – – $988,945 –

REDUCE COSTS

DELIVERY AND RETAIL

City Letter Carrier Operations – Detroit District 

DR-AR-06-002; 2/8/2006 $723,586 – – –

City Letter Carrier Operations – Greater Indiana District 

DR-AR-06-003; 3/28/2006 $765,487 – – –

FIELD FINANCIAL

IMPAC Card Purchases – Chicago District 

FF-AR-06-038; 12/30/2005 $480,985 $402,766 – –

FINANCIAL STATEMENT

Fiscal Year 2005 Postal Service Financial Statements Audit – San 

Mateo Information Technology and Accounting Service Center 

FT-AR-06-010; 1/26/2006 $2,800 – $5,600 –

J.T. Weeker (Chicago) International Service Center – Inbound 

International Mail 

FT-AR-06-013; 3/22/2006 – – – $147,729

Postal Service’s Share of Health Insurance Premiums for Retired 

Employees 

FT-AR-06-016; 3/31/2006 $3,147,520 – $3,501,097 –

Terminated Station Contracts 

FT-AR-06-011; 2/3/2006 $290,370 – $82,307 –

FISCAL YEAR 2005 FINANCIAL INSTALLATION AUDIT

Eau Claire Post Office – Eau Claire, Wisconsin 

FF-AR-06-013; 11/9/2005 – – – $2,119

Los Angeles Main Post Office – Los Angeles, California 

FF-AR-06-014; 11/14/2005 $618 $618 – $1,508,273

Milwaukee Business Mail Entry Unit – Milwaukee, Wisconsin 

FF-AR-06-007; 10/31/2005 $208 – – $35,268

Pewaukee Business Mail Entry Unit – Pewaukee, Wisconsin 

FF-AR-06-008; 10/18/2005 – – – $148,613

Saratoga Springs Business Mail Entry Unit – Saratoga Springs, 

New York FF-AR-06-018; 11/21/2005 – – – $663

Stillwater Business Mail Entry Unit – Stillwater, Minneapolis 

FF-AR-06-005; 10/13/2005 $203 – – $1,298

Wanamaker Branch – Indianapolis, Indiana 

FF-AR-06-004; 10/13/2005 $8,453 – – –
30 | Semiannual Report to Congress

Reports With Quantifiable Potential Monetary Benefits

Report Title Questioned Costs Unsupported Costs

Funds Put 

to Better Use Revenue Impact

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT

Athens Business Mail Entry Unit – Athens, Ohio 

FF-AR-06-104; 3/20/2006 $1,990 – – $915

Baltimore Main Office Window – Baltimore, Maryland 

FF-AR-06-045; 1/27/2006 $7,144 – – $159,485

Bentonville Business Mail Entry Unit – Bentonville, Arkansas 

FF-AR-06-042; 1/12/2006 – – – $1,361

Bremerton Business Mail Entry Unit – Bremerton, Washington 

FF-AR-06-058; 1/19/2006 – – – $2,456

Cardiss Collins Postal Store – Post Office Box Section – Chicago, 

Illinois 

FF-AR-06-048; 1/9/2006 – – – $51,721

Del Rosa Station – San Bernardino, California 

FF-AR-06-065; 1/30/2006 $868 $391 – –

Diamond Bar Branch – Diamond Bar, California 

FF-AR-06-111; 3/24/2006 $5,026 – – $4,410

El Monte Business Mail Entry Unit – El Monte, California 

FF-AR-06-026; 12/15/2005 $116 – – $1,591

Elizabeth Business Mail Entry Unit – Elizabeth, 

New Jersey 

FF-AR-06-083; 2/22/2006 – – – $1,323

Farmingdale Business Mail Entry Unit – 

Farmingdale, New York 

FF-AR-06-027; 12/29/2005 – – – $24,105

Hazelwood Business Mail Entry Unit – Hazelwood, Missouri 

FF-AR-06-082; 2/21/2006 $8,551 – – –

Jonesboro Business Mail Entry Unit – Jonesboro, Arkansas 

FF-AR-06-093; 3/3/2006 – – – $4,369

Lake Jackson Permit – Lake Jackson, Texas 

FF-AR-06-117; 3/28/2006 $599 – – $1,359

Lemoyne Post Office – Lemoyne, Pennsylvania 

FF-AR-06-054; 1/12/2006 – – – $6,430

Marlboro Main Post Office – Marlboro, New Jersey 

FF-AR-06-109; 3/20/2006 $697 $697 – –

Midway Main Office Window – San Diego, California 

FF-AR-06-100; 3/10/2006 – – – $44,857

Milpitas Main Post Office – Milpitas, California 

FF-AR-06-089; 3/2/2006 – – – $1,583

Monroe Business Mail Entry Unit – Monroe, Michigan 

FF-AR-06-086; 3/7/2006 – – – $1,796

New York Main Post Office – New York, New York 

FF-AR-06-052; 1/9/2006 $21,754 – – $4,200

Portland Business Mail Entry Unit – Portland, Maine 

FF-AR-06-019; 11/28/2005 – – $5,138 –

Richardson Business Mail Entry Unit – Richardson, Texas 

FF-AR-06-039; 1/12/2006 $935 – – $4,722

Richmond Business Mail Entry Unit – Richmond, California 

FF-AR-06-072; 2/2/2006 – – – $11,929

Rogers Business Mail Entry Unit –Rogers, Minnesota 

FF-AR-06-036; 1/12/2006 – – – $540

Salt Lake City Main Post Office – Salt Lake City, Utah 

FF-AR-06-066; 1/24/2006 – – – $186,152
October 1, 2005 – March 31, 2006 | 31

Reports With Quantifiable Potential Monetary Benefits

Report Title Questioned Costs Unsupported Costs

Funds Put 

to Better Use Revenue Impact

San Antonio General Mail Facility Window Unit – San Antonio, 

Texas 

FF-AR-06-103; 3/22/2006 $50,146 – – $19,855

Wadesboro Post Office – Wadesboro, North Carolina 

FF-AR-06-116; 3/27/2006 $37,470 – – $198,037

Westerville Business Mail Entry Unit – Westerville, Ohio 

FF-AR-06-063; 1/23/2006 – – – $1,841

NETWORK OPERATIONS - PROCESSING

Efficiency Review of the Washington Bulk Mail Center 

NO-AR-06-003; 2/22/2006 – – $118,383,220 –

SUPPLY MANAGEMENT AND FACILITIES

Audit of Firm Fixed Price Proposal for the Ventilation and Filtration 

System at Morgan Station Submitted by Accu–Sort Systems, 

Incorporated 

CA-CAR-06-015; 3/29/2006 $30,912 – – –

Audit of Firm Fixed Price Proposal Submitted by Northrop 

Grumman Electronic Systems Company 

CA-CAR-06-005; 11/29/2005 $1,846,231 – – –

Audit of Firm Fixed Price Proposal Submitted by Northrop 

Grumman Electronic Systems Company 

CA-CAR-06-002; 11/3/2005 $291,937 – – –

Audit of Firm Fixed Price Proposal Submitted by Siemens Logistics 

and Assembly Systems Incorporated Postal Automation Division 

CA-CAR-06-010; 1/30/2006 $7,323,989 – – –

Audit of Fiscal Year 2001 Incurred Cost of New Breed Corporations 

CA-CAR-06-006; 12/9/2005 $7,767 – – –

Audit of Fiscal Year 2002 Incurred Cost of New Breed Corporations 

CA-CAR-06-007; 12/9/2005 $89,576 – – –

Audit of Termination for Convenience Settlement Proposal Under 

Contract Number 3AAERD-03-P-6080 Submitted by Government 

Telecommunications, Incorporated 

CA-CAR-06-003; 11/8/2005 $547,466 – – –

Post Award Audit of Cost or Pricing Data on Biohazard Detection 

System Fiscal Year 2006 Consumable Replenishment Under 

Contract Number 3BMHRD-03-Z-5541 at Northrop Grumman 

Electronic Systems Company 

CA-CAR-06-014; 3/14/2006 $111,766 – – –

TRANSPORTATION

Mail Transport Equipment Service Center Network – Highway 

Transportation Routes – Memphis, Tennessee 

NL-AR-06-005; 3/28/2006 $282,645 – $416,752 –

Mail Transport Equipment Service Center Network – Highway 

Transportation Routes – San Francisco, California 

NL-AR-06-003; 3/23/2006 $123,254 – $968,386 –

Surface Networks – Intermodal Rail and Highway Transportation 

Between the Great Lakes and Western Areas 

NL-AR-06-002; 3/10/2006 – – $1,942,841 –

Surface Transportation – Bulk Mail Center Highway Transportation 

Routes – Western Area 

NL-AR-06-001; 2/14/2006 – – $2,235,812 –

TOTAL $22,498,172 $404,472 $150,951,892 $2,579,000

appen

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A
32 | Semiannual Report to Congress

Automated Package Processing System 

Deployment 

DA-AR-06-004; 3/21/2006

Flat Recognition Improvement Program 

DA-AR-06-002; 1/25/2006

Flat Remote Encoding System for Automated Flat 

Sorting Machine 100 

DA-AR-06-003; 2/10/2006

Intelligent Mail Data Acquisition System 

DA-AR-06-001; 12/22/2005

Technology Acquisition Management Process 

Manual – Phase I, Proof of Concept 

DA-WP-06-001; 3/28/2006

ACHIEVE RESULTS WITH A CUSTOMER-FOCUSED PERFORMANCE-BASED CULTURE

ENGINEERING

North Texas Processing and Distribution Center’s 

Analysis of Root Causes of Accidents, Injuries, 

and Illnesses and the Implementation of Accident 

Prevention Programs 

HM-AR-06-003; 3/8/2006

Office of Workers’ Compensation Programs’ 

Schedule Award Payments to Postal Service 

Employees in the Pacific Area – Report l 

HM-AR-06-001; 1/17/2006

White Paper on Postal Service Participation in 

the Department of Labor’s Office of Workers’ 

Compensation Programs 

HM-OT-06-001; 10/17/2005

HUMAN CAPITAL

Report Listing

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

For the period October 1, 2005 — March 31, 2006

Mail Processing Operations in the Wake of 

Hurricanes Katrina and Rita 

NO-MA-06-002; 3/27/2006

Postal Service Actions to Safeguard Employees 

From Hurricane Katrina 

HM-AR-06-002; 2/15/2006

Postal Service’s Emergency Purchasing in 

Response to Hurricanes Katrina and Rita 

CA-MA-06-001; 3/7/2006

HURRICANES KATRINA AND RITA

Postal Inspection Service Human Resources 

Service Center 

SA-AR-06-001; 3/30/2006

Qualitative Assessment Review – Postal 

Inspection Service’s Atlanta Division 

QAR-QA-06-003; 1/25/2006

Qualitative Assessment Review – Postal 

Inspection Service’s New York Division 

QAR-QA-06-001; 10/13/2005

Qualitative Assessment Review – Postal 

Inspection Service’s San Francisco Division 

QAR-QA-06-002; 10/20/2005

Qualitative Assessment Review of the Postal 

Inspection Service’s Charlotte Division 

QAR-QA-06-004; 3/31/2006

OVERSIGHT OF INVESTIGATIVE ACTIVITIES

Updated Estimated Fiscal Year 2005 Supply 

Chain Management Impact Associated With 

National Office Supply Contract 

CA-OT-06-001; 11/28/2005

SUPPLY MANAGEMENT AND FACILITIES

Cost Reduction Programs 

MS-MA-06-001; 3/20/2006

Hybrid Services 

MS-AR-06-001; 3/30/2006

PC Postage Refund Review 

MS-AR-06-002; 3/31/2006

Efficiency of the Chicago Airmail Records Unit 

at the J.T. Weeker International Service Center 

NO-AR-06-002; 12/22/2005

Status Report on the Evolutionary Network 

Development Initiative NO-MA-06-001; 

3/20/2006

NETWORK OPERATIONS - PROCESSING

GENERATE REVENUE

MARKETING
October 1, 2005 – March 31, 2006 | 33

Controls Over Sensitive Production Data Within 

the Test Environment for the Human Capital 

Enterprise SAP Human Resources Project 

IS-AR-06-002; 2/13/2006

Data Input Validation for the Facilities Database 

IS-AR-06-006; 3/30/2006

National Change of Address – Emergency 

Preparedness IS-AR-06-005; 3/30/2006

Observation of the Certificate Authority-Public 

Key Infrastructure External Environment at the 

Eagan, Minnesota, Information Technology and 

Accounting Service Center 

IS-AR-06-007; 3/31/2006

Security Over Sensitive Customer Data on 

Automated Postal Center Kiosks 

IS-MA-06-001; 12/23/2005

Security Vulnerability Assessment and Audit of 

Automated Postal Center Systems 

IS-AR-06-003; 2/10/2006

Security Vulnerability Assessment at the 

Engineering Research and Development Center, 

Merrifield, Virginia

IS-CS-06-001; 2/10/2006

INFORMATION SYSTEMS

Address Management System – Southwest Area, 

Rio Grande District 

DR-AR-06-001; 1/25/2006

IMPROVE SERVICE

DELIVERY AND RETAIL

Cost and Revenue Analysis 

FF-AR-06-091; 3/6/2006

REDUCE COSTS

AUDIT OF STATISTICAL TESTS FOR FISCAL YEAR 2005

Central Florida District 

FF-AR-06-061; 1/23/2006

Chicago District 

FF-AR-06-114; 3/21/2006

New York District 

FF-AR-06-059; 1/23/2006

South Florida District, Miami International Service 

Center 

FF-AR-06-098; 3/10/2006

AUDIT OF STATISTICAL TESTS FOR FISCAL YEAR 2006 COST AND REVENUE ANALYSIS

City Letter Carrier Operations – Detroit District 

DR-AR-06-002; 2/8/2006

City Letter Carrier Operations – Greater Indiana 

District 

DR-AR-06-003; 3/28/2006

City Letter Carrier Operations – National Capping 

Report 

DR-AR-06-004; 3/31/2006

DELIVERY AND RETAIL

IMPAC Card Purchases – Chicago District 

FF-AR-06-038; 12/30/2005

FIELD FINANCIAL

Agreed-upon Procedures Report for Federal 

Intragovernmental Transactions 

FT-AR-06-006; 12/2/2005

Compliance with the Bank Secrecy Act 

FT-AR-06-014; 3/31/2006

Fiscal Year 2005 Postal Service Financial 

Statements Audit – Eagan Information 

Technology and Accounting Service Center

FT-AR-06-009; 1/10/2006

Fiscal Year 2005 Postal Service Financial 

Statements Audit – San Mateo Information 

Technology and Accounting Service Center 

FT-AR-06-010; 1/26/2006

Fiscal Year 2005 Postal Service Financial 

Statements Audit – Washington, D.C., 

Headquarters 

FT-AR-06-002; 11/16/2005

Internal Control Group 

FT-MA-06-001; 3/28/2006

International Parcel Post Accruals 

FT-AR-06-007; 12/27/2005

J.T. Weeker (Chicago) International Service 

Center – Inbound International Mail 

FT-AR-06-013; 3/22/2006

Operations at the Scanning and Imaging Center 

Operated by Data Dimensions Fiscal Year 2005 

Postal Service Financial Statements Audit, 

Corporation 

FT-AR-06-004; 11/22/2005

Opinion on the Postal Service’s Special-Purpose 

Financial Statements 

FT-AR-06-005; 11/17/2005

Postal Service Board of Governors Travel and 

Miscellaneous Expenses for Fiscal Year 2005 

FT-AR-06-001; 11/16/2005

Postal Service Officers Travel and Representation 

Expenses for Fiscal Year 2005 

FT-AR-06-003; 11/16/2005

Postal Service’s Share of Health Insurance 

Premiums for Retired Employees 

FT-AR-06-016; 3/31/2006

Retek Merchandising System Access 

FT-AR-06-008; 1/9/2006

Segregation of Duties Over Capital Project 

Payments 

FT-AR-06-012; 2/15/2006

Terminated Station Contracts 

FT-AR-06-011; 2/3/2006

FINANCIAL STATEMENT

appen

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34 | Semiannual Report to Congress

AM Standard Operating Procedures

FF-AR-06-096; 3/20/2006

Bing Southview Post Office – Binghamton, 

New York 

FF-AR-06-002; 10/19/2005

Boston Station – McKeesport, Pennsylvania 

FF-AR-06-006; 10/14/2005

Business Mail Entry Units 

FF-AR-06-113; 3/30/2006

Capital Metro Area 

FF-AR-06-105; 3/20/2006

Clymer Post Office – Clymer, New York 

FF-AR-06-009; 11/7/2005

East Greenbush Post Office – East Greenbush, 

New York 

FF-AR-06-012; 11/9/2005

Eau Claire Post Office – Eau Claire, Wisconsin 

FF-AR-06-013; 11/9/2005

Farmingdale Main Post Office – Farmingdale, 

New York 

FF-AR-06-016; 11/10/2005

Great Lakes Area 

FF-AR-06-118; 3/28/2006

Los Angeles Main Post Office – Los Angeles, 

California 

FF-AR-06-014; 11/14/2005

Milwaukee Business Mail Entry Unit – Milwaukee, 

Wisconsin 

FF-AR-06-007; 10/31/2005

Mobile Post Office – Boston, Massachusetts 

FF-AR-06-020; 11/22/2005

New Haven Main Post Office – New Haven, 

Connecticut 

FF-AR-06-001; 10/6/2005

Niceville Post Office – Niceville, Florida

FF-AR-06-015; 11/7/2005

Omaha Air Mail Facility Postal Store – Omaha, 

Nebraska 

FF-AR-06-011; 11/2/2005

Pacific Area 

FF-AR-06-119; 3/30/2006

Pewaukee Business Mail Entry Unit – Pewaukee, 

Wisconsin

FF-AR-06-008; 10/18/2005

Pottstown Business Mail Entry Unit – Pottstown, 

Pennsylvania 

FF-AR-06-003; 10/7/2005

Salem Business Mail Entry Unit – Salem, Ohio

FF-AR-06-010; 11/7/2005

Saratoga Springs Business Mail Entry Unit 

– Saratoga Springs, New York 

FF-AR-06-018; 11/21/2005

Southeast Area 

FF-AR-06-099; 3/13/2006

Southwest Area 

FF-AR-06-087; 3/1/2006

Stillwater Business Mail Entry Unit – Stillwater, 

Minneapolis 

FF-AR-06-005; 10/13/2005

Wanamaker Branch – Indianapolis, Indiana 

FF-AR-06-004; 10/13/2005

Western Area 

FF-AR-06-112; 3/23/2006

FISCAL YEAR 2005 FINANCIAL INSTALLATION AUDIT

Abilene Business Mail Entry Unit – Abilene, 

Kansas 

FF-AR-06-031; 12/9/2005

Ashville Post Office – Ashville, Ohio 

FF-AR-06-077; 2/14/2006

Athens Business Mail Entry Unit – Athens, Ohio 

FF-AR-06-104; 3/20/2006

Baltimore Main Office Window – Baltimore, 

Maryland 

FF-AR-06-045; 1/27/2006

Belcamp Business Mail Entry Unit – Belcamp, 

Maryland 

FF-AR-06-078; 2/9/2006

Belmond Business Mail Entry Unit – Belmond, 

Iowa 

FF-AR-06-085; 2/23/2006

Bentonville Business Mail Entry Unit – Bentonville, 

Arkansas 

FF-AR-06-042; 1/12/2006

Branson Post Office – Branson, Missouri 

FF-AR-06-046; 1/9/2006

Bremerton Business Mail Entry Unit – Bremerton, 

Washington 

FF-AR-06-058; 1/19/2006

Brighton Business Mail Entry Unit – Brighton, 

Colorado 

FF-AR-06-040; 1/4/2006

Brooklyn Kingsway Finance Station – Brooklyn, 

New York 

FF-AR-06-075; 3/7/2006

Burlington Business Mail Entry Unit – Burlington, 

North Carolina 

FF-AR-06-071; 2/8/2006

Cardiss Collins Postal Store – Post Office Box 

Section – Chicago, Illinois 

FF-AR-06-048; 1/9/2006

Chenoa Post Office – Chenoa, Illinois 

FF-AR-06-024; 11/30/2005

Columbus Business Mail Entry Unit – Columbus, 

Georgia 

FF-AR-06-115; 3/22/2006

Corona Main Post Office Automated Postal 

Center – Corona, California 

FF-AR-06-021; 11/22/2005

Cupertino Business Mail Entry Unit – Cupertino, 

California 

FF-AR-06-034; 12/19/2005

Danville Business Mail Entry Unit – Danville, 

California 

FF-AR-06-080; 2/14/2006

Del Rosa Station – San Bernardino, California 

FF-AR-06-065; 1/30/2006

Diamond Bar Branch – Diamond Bar, California 

FF-AR-06-111; 3/24/2006

El Monte Business Mail Entry Unit – El Monte, 

California 

FF-AR-06-026; 12/15/2005

Elizabeth Business Mail Entry Unit – Elizabeth, 

New Jersey 

FF-AR-06-083; 2/22/2006

Elyria Business Mail Entry Unit – Elyria, Ohio 

FF-AR-06-032; 12/19/2005

Etiwanda Station – Rancho Cucamonga, 

California 

FF-AR-06-064; 1/31/2006

Fairfield Business Mail Entry Unit – Fairfield, 

California 

FF-AR-06-102; 3/15/2006

Farmingdale Business Mail Entry Unit 

– Farmingdale, New York 

FF-AR-06-027; 12/29/2005

Fergus Falls Business Mail Entry Unit – Fergus 

Falls, Minnesota 

FF-AR-06-107; 3/17/2006

Fremont Main Post Office Automated Postal 

Center – Fremont, California 

FF-AR-06-017; 11/21/2005

Garden Grove Business Mail Entry Unit – Garden 

Grove, California 

FF-AR-06-037; 12/28/2005

Gordonsville Business Mail Entry Unit 

– Gordonsville, Virginia 

FF-AR-06-090; 3/6/2006

Goshen Post Office – Goshen, Connecticut 

FF-AR-06-088; 3/7/2006

Greenwood Village Branch – Englewood, 

Colorado 

FF-AR-06-108; 3/16/2006

Guin Post Office – Guin, Alabama 

FF-AR-06-023; 11/30/2005

Haleyville Post Office – Haleyville, Alabama 

FF-AR-06-025; 12/5/2005

Hartford Business Mail Entry Unit – Hartford, 

Connecticut 

FF-AR-06-069; 2/15/2006

Hazelwood Business Mail Entry Unit 

– Hazelwood, Missouri 

FF-AR-06-082; 2/21/2006

Ithaca Business Mail Entry Unit – Ithaca, Michigan 

FF-AR-06-060; 1/23/2006

Jasper Business Mail Entry Unit – Jasper, 

Alabama 

FF-AR-06-041; 1/5/2006

Jonesboro Business Mail Entry Unit – Jonesboro, 

Arkansas 

FF-AR-06-093; 3/3/2006

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT
October 1, 2005 – March 31, 2006 | 35

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT

Kinsman Post Office – Kinsman, Ohio 

FF-AR-06-079; 2/14/2006

Lake Jackson Permit – Lake Jackson, Texas 

FF-AR-06-117; 3/28/2006

Lakewood Station Automated Postal Center 

– Dallas, Texas 

FF-AR-06-029; 12/7/2005

Lemoyne Post Office – Lemoyne, Pennsylvania 

FF-AR-06-054; 1/12/2006

Loudonville Post Office – Loudonville, Ohio 

FF-AR-06-047; 1/10/2006

Mabank Main Post Office – Mabank, Texas 

FF-AR-06-097; 3/16/2006

Marlboro Main Post Office – Marlboro, New 

Jersey 

FF-AR-06-109; 3/20/2006

Midway Main Office Window – San Diego, 

California 

FF-AR-06-100; 3/10/2006

Milpitas Main Post Office – Milpitas, California 

FF-AR-06-089; 3/2/2006

Monmouth Business Mail Entry Unit 

– Monmouth, Illinois 

FF-AR-06-101; 3/10/2006

Monroe Business Mail Entry Unit – Monroe, 

Michigan 

FF-AR-06-086; 3/7/2006

Mountain Lakes Business Mail Entry Unit 

– Mountain Lakes, New Jersey 

FF-AR-06-073; 2/10/2006

New York Main Post Office – New York, New York 

FF-AR-06-052; 1/9/2006

Newark Business Mail Entry Unit – Newark, 

California 

FF-AR-06-035; 12/27/2005

Newark Main Post Office Automated Postal 

Center – Newark, California 

FF-AR-06-074; 2/13/2006

Newport Business Mail Entry Unit – Newport, 

Kentucky 

FF-AR-06-081; 2/23/2006

Park Forest Business Mail Entry Unit – Park 

Forest, Illinois 

FF-AR-06-062; 1/19/2006

Plymouth Business Mail Entry Unit – Plymouth, 

Indiana 

FF-AR-06-120; 3/28/2006

Portland Business Mail Entry Unit – Portland, 

Maine 

FF-AR-06-019; 11/28/2005

Prairie Du Chien Business Mail Entry Unit 

– Prairie Du Chien, Wisconsin 

FF-AR-06-122; 3/28/2006

Quincy Business Mail Entry Unit – Quincy, Illinois 

FF-AR-06-053; 1/10/2006

Richardson Business Mail Entry Unit 

– Richardson, Texas 

FF-AR-06-039; 1/12/2006

Richmond Business Mail Entry Unit – Richmond, 

California 

FF-AR-06-072; 2/2/2006

Rogers Business Mail Entry Unit -Rogers, 

Minnesota 

FF-AR-06-036; 1/12/2006

Salt Lake City Main Post Office – Salt Lake City, 

Utah 

FF-AR-06-066; 1/24/2006

San Antonio General Mail Facility Window Unit 

– San Antonio, Texas 

FF-AR-06-103; 3/22/2006

San Mateo Main Post Office Automated Postal 

Center – San Mateo, California 

FF-AR-06-057; 1/19/2006

Sandpoint Business Mail Entry Unit – Sandpoint, 

Idaho 

FF-AR-06-110; 3/23/2006

Savage Business Mail Entry Unit – Savage, 

Maryland 

FF-AR-06-056; 1/19/2006

Scottdale Business Mail Entry Unit – Scottdale, 

Pennsylvania 

FF-AR-06-030; 12/12/2005

Sheboygan Business Mail Entry Unit 

– Sheboygan, Wisconsin 

FF-AR-06-070; 2/1/2006

Snapper Creek Branch – Miami, Florida 

FF-AR-06-068; 2/1/2006

South Calumet Station – Hammond, Indiana 

FF-AR-06-092; 3/9/2006

South Deerfield Post Office – South Deerfield, 

Massachusetts 

FF-AR-06-051; 1/23/2006

Southwick Post Office – Southwick, 

Massachusetts 

FF-AR-06-049; 1/27/2006

St. Petersburg Business Mail Entry Unit – St. 

Petersburg, Florida 

FF-AR-06-084; 2/23/2006

Sugar Grove Post Office – Sugar Grove, Illinois 

FF-AR-06-055; 1/19/2006

Sulphur Springs Station – Tampa, Florida 

FF-AR-06-106; 3/16/2006

Sylacauga Business Mail Entry Unit – Sylacauga, 

Alabama 

FF-AR-06-043; 1/5/2006

Tipton Business Mail Entry Unit – Tipton, Iowa 

FF-AR-06-0121; 3/28/2006

Trion Post Office – Trion, Georgia 

FF-AR-06-028; 12/9/2005

Tucker Business Mail Entry Unit – Tucker, Georgia 

FF-AR-06-076; 2/10/2006

Uniontown Business Mail Entry Unit – Uniontown, 

Pennsylvania 

FF-AR-06-050; 1/10/2006

University of Georgia Contract Postal Unit 

– Athens, Georgia 

FF-AR-06-067; 1/27/2006

Vincentown Post Office – Southampton, New 

Jersey 

FF-AR-06-022; 11/30/2005

Wadesboro Post Office – Wadesboro, North 

Carolina 

FF-AR-06-116; 3/27/2006

Walla Walla Contract Postal Unit – Walla Walla, 

Washington 

FF-AR-06-095; 3/13/2006

Wallingford Business Mail Entry Unit 

– Wallingford, Connecticut 

FF-AR-06-094; 3/7/2006

West Bend Post Office – West Bend, Wisconsin 

FF-AR-06-044; 1/4/2006

Westerville Business Mail Entry Unit 

– Westerville, Ohio 

FF-AR-06-063; 1/23/2006

Yellville Post Office – Yellville, Arkansas 

FF-AR-06-033; 12/13/2005

appen

dix 

A
36 | Semiannual Report to Congress

Data Communications Software Controls at the 

Eagan, Minnesota and San Mateo, California 

Information Technology and Accounting Service 

Centers 

IS-AR-06-001; 10/19/2005

Fiscal Year 2005 Information Systems General 

Controls Capping Report 

IS-AR-06-004; 3/6/2006

INFORMATION SYSTEMS

Area Mail Processing Guidelines 

NO-AR-06-001; 12/21/2005

Efficiency Review of the Washington Bulk Mail 

Center 

NO-AR-06-003; 2/22/2006

Proposed Enhancement of the Singulation Scan 

Induction Unit at Bulk Mail Centers 

NO-AR-06-004; 3/31/2006

NETWORK OPERATIONS - PROCESSING

Agreed Upon Procedures Review of First Health 

Group Corporation 

CA-CAR-06-009; 1/24/2006

Agreed Upon Procedures Review to Verify 

Costs Included on Invoices Submitted for 

Reimbursement by C.H. Robinson Worldwide 

Under Contract Number 5BMSTR-05-B-3003 

CA-CAR-06-011; 3/1/2006

Audit of Accounting System and Financial 

Capability Risk Assessment of C.H. Robinson 

Worldwide 

CA-CAR-06-008; 12/16/2005

Audit of Firm Fixed Price Proposal for the 

Ventilation and Filtration System at Morgan 

Station Submitted by Accu-Sort Systems, 

Incorporated 

CA-CAR-06-015; 3/29/2006

Audit of Firm Fixed Price Proposal for the 

Ventilation and Filtration System Hybrid Solution 

at Morgan Station Submitted by Accu-Sort 

Systems, Incorporated 

CA-CAR-06-016; 3/29/2006

Audit of Firm Fixed Price Proposal Submitted by 

Norhrop Grumman Electronic Systems Company 

CA-CAR-06-005; 11/29/2005

Audit of Firm Fixed Price Proposal Submitted by 

Northrop Grumman Electronic Systems Company 

CA-CAR-06-002; 11/3/2005

Audit of Firm Fixed Price Proposal Submitted 

by Siemens Logistics and Assembly Systems 

Incorporated Postal Automation Division 

CA-CAR-06-010; 1/30/2006

Audit of Fiscal Year 2001 Incurred Cost of New 

Breed Corporations 

CA-CAR-06-006; 12/9/2005

Audit of Fiscal Year 2002 Incurred Cost of New 

Breed Corporations 

CA-CAR-06-007; 12/9/2005

Audit of Incurred Labor Billing Cost Submitted 

by ASR International Corporation Under Contract 

2APSER-05-P-1775 

CA-CAR-06-012; 3/1/2006

Audit of Information Technology Systems 

General Internal Controls at Siemens Logistics 

and Assembly Systems Incorporated, Postal 

Automation 

CA-CAR-06-017; 3/30/2006

Audit of Termination for Convenience 

Settlement Proposal Under Contract Number 

3AAERD-03-P-6080 Submitted by Government 

Telecommunications, Incorporated

CA-CAR-06-003; 11/8/2005

Estimated Supply Chain Management Impact 

Associated with the Oracle Contract 

CA-MA-06-002; 3/21/2006

Financial Risk Assessment of Ryder Logistics of 

Ann Arbor, Michigan 

CA-CAR-06-004; 11/18/2005

Flash Report on Estimating Practices for Warranty 

Costs at Siemens Logistics and Assembly 

Systems Incorporated, Postal Automation 

CA-CAR-06-001; 10/18/2005

New York Metro Area Contract for Labor 

Relations Issues 

CA-AR-06-001; 12/15/2005

Post Award Audit of Contract 512593-00-

Z-2804 at Siemens Energy and Automation, 

Incorporated, Postal Automation Division 

CA-CAR-06-013; 3/7/2006

Post Award Audit of Cost or Pricing Data on 

Biohazard Detection System Fiscal Year 2006 

Consumable Replenishment Under Contract 

Number 3BMHRD-03-Z-5541 at Northrop 

Grumman Electronic Systems Company 

CA-CAR-06-014; 3/14/2006

SUPPLY MANAGEMENT AND FACILITIES

Mail Transport Equipment Service Center 

Network – Highway Transportation Routes 

– Memphis, Tennessee 

NL-AR-06-005; 3/28/2006

Mail Transport Equipment Service Center 

Network – Highway Transportation Routes – 

San Francisco, California

NL-AR-06-003; 3/23/2006

Surface Networks – Intermodal Rail and Highway 

Transportation Between the Great Lakes and 

Western Areas 

NL-AR-06-002; 3/10/2006

Surface Transportation – Bulk Mail Center 

Surface Transportation Routes – Summary 

Report 

NL-AR-06-004; 3/28/2006

Surface Transportation – Bulk Mail Center 

Highway Transportation Routes – Western Area 

NL-AR-06-001; 2/14/2006

TRANSPORTATION
October 1, 2005 – March 31, 2006 | 37

FINDINGS OF QUESTIONED COSTS

For the period October 1, 2005 — March 31, 2006

Questioned Costs: A cost that is unnecessary, unreasonable, unsupported, or an alleged violation of law, regulation, contract, etc. 

Appen

dix 

B

Office of Inspector General and U.S. Postal Inspection Service

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.

Description Number of Reports Total Questioned Costs

Unsupported Costs

Included in 

Questioned Costs

Reports for which no management decision was made at the 

beginning of the reporting period 21 $81,848,069 $7,517,808

Reports requiring management decision that were issued during the 

reporting period 34 $22,498,172 $404,472

TOTAL 55 $104,346,241 $7,922,280

Reports for which a management decision was made during the 

reporting period (i+ii) 34 $37,472,346 $3,202,643

(i) Dollar value of disallowed cost $26,484,242 $3,178,191

(ii) Dollar value of cost not disallowed $10,886,206 $24,452

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

the reporting period. Negotiations are ongoing. 21 $66,873,895 $4,719,637

Reports for which no management decision was made within six 

months of issuance (See Note 1 for a list of individual reports) 3 $5,039,354 –

Reports for which no management decision was made within one 

year of issuance (See Note 2 for a list of individual reports) 5 $53,618,586 $4,718,940

Note 1 - Reports for which no management decision was made within six months of issuance:

Subject Report Number Report Date Total Questioned Costs

Unsupported Costs Included 

in Questioned Costs

Audit of Firm Fixed Price Proposal Submitted by 

International Business Machines, Global Services, Business 

Consulting Services – Federal, Under Proposal Number APC 

035R3 CA-CAR-05-017 5/3/2005 $3,127,088 –

Audit of Equitable Price Adjustment Claim Submitted by 

Advanced Construction Technologies, Ltd. Under Contract 

Number 362575-00-B-0399 CA-CAR-05-020 6/15/2005 $1,780,367 –

Audit of Firm Fixed Price Proposal Submitted by Northrop 

Grumman Corporation, Electronic Systems Company, Under 

Solicitation Number 3BMHRD-03-Z5541 CA-CAR-05-021 6/27/2005 $131,899 –

TOTAL $5,039,354 –

Appendix B
38 | Semiannual Report to Congress

FINDINGS OF QUESTIONED COSTS

For the period October 1, 2005 — March 31, 2006

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

Note 2 - Reports for which no management decision was made within one year of issuance:

Subject Report Number Report Date Total Questioned Costs

Unsupported Costs

Included In Questioned Costs

Contract Audit – Bell and Howell Mail 

and Messaging Technologies CA-CAR-03-002 10/16/2002 $343,759 –

Contract Audit – D.L. Kaufman, 

Incorporated CA-CAR-03-011 2/11/2003 $4,028,935 –

Audit of Termination for Convenience 

Price Adjustment Claim Submitted by 

Abcon Associates, Incorporated CA-CAR-04-022 6/16/2004 $4,478,385 $2,702,465

Vehicle Management – Delivery 

Vehicles – Buy versus Lease NL-AR-04-005 9/30/2004 $42,751,032 –

Vehicle Management – Trailer 

Requirements – Northeast Area NL-AR-04-006 9/30/2004 $2,016,475 $2,016,475

TOTAL $53,618,586 $4,718,940 

Appendix B
October 1, 2005 – March 31, 2006 | 39

Recommendations That Funds Be Put to Better Use

For the period October 1, 2005 — March 31, 2006

Funds Put to Better Use: Funds that could be used more efficiently by implementing recommended actions.

As required by the IG Act, the following pages show the total number of audit reports and the total dollar value recommendations for funds that 

management can put to better use.

Office of Inspector General 

Description Number of Reports Dollar Value

Reports for which no management decision was made at the beginning of the reporting period 9 $90,081,108

Reports requiring management decision that were issued during the reporting period 12 $150,951,892

TOTALS 21 $241,033,000

Reports for which a management decision was made during the report period (I + ii) 13 $173,656,774

(i) Value of recommendations agreed to by management $145,715,030

(ii) Value of recommendations that management did not agree $27,941,744

Reports for which no management decision was made by the end of the reporting period.1 8 $67,376,226 

Reports for which no management decision was made within six months of issuance 

(See Note 1 for a list of individual reports) 2 $8,497,639 

Reports for which no management decision was made within one year of issuance 

(See Note 2 for a list of individual reports) 3 $55,257,637 

Note 1 - Reports for which no management decision was made within six months of issuance:

Subject Report Number Report Date

Recommend Funds 

Put to Better Use

Bulk Mail Center Highway Transportation Routes – Pacific Area NL-AR-05-012 9/21/2005 $3,123,562 

Delivery Vehicle Utilization – General Services Administration Leased Vehicles DR-AR-05-018 9/29/2005 $5,374,077 

TOTAL $ 8,497,639

Note 2 - Reports for which no management decision was made within one year of issuance:

Subject Report Number Report Date

Recommend Funds Put to 

Better Use

Vehicle Management – Trailer Requirements – Northeast Area NL-AR-04-006 09/30/2004 $7,300,150

Vehicle Management – Delivery Vehicles – Buy versus Lease NL-AR-04-005 09/30/2004 $40,296,954

Bulk Mail Center Highway Transportation Routes – Great Lakes Area NL-AR-04-004 09/29/2004 $7,660,533

TOTALS $55,257,637

Included herein are amounts where management agreed to take the recommended corrective action but could not comment on some of the potential savings until analyses were completed. 

The majority of identified savings were agreed to and decisions were reflected in a prior reporting period. 

1�

Appen

dix 

C

Appendix C
40 | Semiannual Report to Congress

Reports with Significant Recommendations Pending Corrective Actions

For the period through March 31, 2006

As required by the IG Act, the following pages include a list of each audit report for which no management decision had been made by the end of the 

reporting period.

Office of Inspector General

Issue Date

Number of 

Recommendations Report Title Report Number

2/22/2002 3

Review of the Facilities Management

Systems for Windows IS-AR-02-003

3/29/2002 1

Review of Contracts Associated

With Biohazard Threat CQ-MA-02-002

7/9/2002 3 Review of eBusiness Agreements EM-AR-02-012

9/26/2002 1 Utility Payments to Commonwealth Edison FT-AR-02-015

9/27/2002 3

Effectiveness of the Postal Service’s

Asset Locator FT-AR-02-017

9/30/2002 2 Associate Supervisor Program in the Great Lakes Area LH-AR-02-005

1/30/2003 1

Fiscal Year 2002 Postal Service Financial Statements Audit – St. Louis 

Information Technology and Accounting Service Center FT-AR-03-008

6/13/2003 1

Postal Inspection Service Tracking of

Investigative Workhours and Activity SA-AR-03-003

8/21/2003 2 Propriety of Postal Service Utility Payments FT-AR-03-011

9/25/2003 2

Efficiency of Work Performed by Business Mail Entry Clerks in the San 

Francisco Business Mail Entry Unit AO-AR-03-002

9/29/2003 1 Enhanced Carrier Route Standard Mail Worksharing Discounts AC-AR-03-006

9/30/2003 8 General Controls at the Engineering Research and Development Center IS-AR-03-008

3/30/2004 2 Compliance with the Bank Secrecy Act FF-AR-04-100

3/31/2004 1

Efficiency of the San Francisco International Service Center and the 

General Services Administration Facility NO-AR-04-006

3/31/2004 1

Efficiency of the Oakland International Service Facility and the Regatta 

Facility NO-AR-04-007

4/21/2004 1 Postal Inspection Service’s Postal Police Officers SA-AR-04-001

9/24/2004 1 Technology Acquisition Management DA-AR-04-003

9/24/2004 1 Efficiency of the New York International Service Center NO-AR-04-009

9/29/2004 3 Bulk Mail Center Highway Transportation Routes – Great Lakes Area NL-AR-04-004

9/29/2004 2 Vehicle Management – Trailer Requirements – Northeast Area NL-AR-04-006

9/30/2004 1 Advanced Facer Canceler System Improvements DA-AR-04-004

9/30/2004 1 Postal Service’s Business Partner Connectivity IS-AR-04-014

9/30/2004 5 Vehicle Management – Delivery Vehicles – Buy versus Lease NL-AR-04-005

10/25/2004 1 Reports Distribution IS-AR-05-001

1/10/2005 2

Fiscal Year 2004 Postal Service Financial Statements Audit – Eagan 

Information Technology and Accounting Service Center FT-AR-05-005

1/25/2005 2

Mail Transport Equipment Service Center Network – Network 

Realignment – Pittsburgh, Detroit, Cleveland NL-AR-05-001

3/15/2005 1

Fiscal Year 2004 Postal Service Financial Statements Audit – St. Louis 

Information Technology and Accounting Service Center FT-AR-05-009

3/29/2005 1 Efficiency Review of the Akron, Ohio, Processing and Distribution Center NO-AR-05-009

Appendix D
October 1, 2005 – March 31, 2006 | 41

Issue Date

Number of 

Recommendations Report Title Report Number

4/18/2005 3 Security Controls in Voice Systems – Louisiana District IS-AR-05-007

4/21/2005 2

Vehicle Management – National Trailer Lease – Unresolved Audit 

Recommendations NL-MA-05-001

6/3/2005 4 Security Assessment Summary Report IS-AR-05-010

6/17/2005 1 Efficiency of the Los Angeles International Service Center NO-AR-05-011

7/22/2005 5 Complaints Regarding Personnel Issues in the Caribbean District HM-AR-05-009

8/11/2005 1

Action Taken by Pacific Area Regarding Complaints of a Hostile Work 

Environment in the Sacramento District HM-AR-05-010

9/21/2005 1

Surface Transportation – Bulk Mail Center Highway Transportation Routes 

– Pacific Area NL-AR-05-012

9/23/2005 1

Fiscal Year 2005 Financial Installation Audit – Cardiss Collins Postal Store 

– Chicago, Illinois FF-AR-05-228

9/28/2005 3 Commercial Air Network Operations NL-AR-05-015

9/29/2005 1 Balloon Rate and Parcel Surcharges DR-AR-05-017

9/29/2005 3

Delivery Vehicle Utilization – General Services Administration Leased 

Vehicles DR-AR-05-018

9/30/2005 3 National Voice Services – Savings Opportunities IS-AR-05-016

10/19/2005 3

Data Communications Software Controls at the Eagan, Minnesota and 

San Mateo, California Information Technology and Accounting Service 

Centers IS-AR-06-001

12/22/2005 1 Intelligent Mail Data Acquisition System DA-AR-06-001

12/23/2005 4

Security Over Sensitive Customer Data on Automated Postal Center 

Kiosks IS-MA-06-001

12/30/2005 5 IMPAC Card Purchases – Chicago District FF-AR-06-038

2/10/2006 2 Flat Remote Encoding System for Automated Flat Sorting Machine 100 DA-AR-06-003

2/10/2006 6

Security Vulnerability Assessment and Audit of Automated Postal Center 

Systems IS-AR-06-003

2/14/2006 3

Surface Transportation – Bulk Mail Center Highway Transportation Routes 

– Western Area NL-AR-06-001

2/22/2006 1 Efficiency Review of the Washington Bulk Mail Center NO-AR-06-003

3/10/2006 1

Surface Networks – Intermodal Rail and Highway Transportation Between 

the Great Lakes and Western Areas NL-AR-06-002

3/22/2006 1

J.T. Weeker (Chicago) International Service Center – Inbound 

International Mail FT-AR-06-013

3/23/2006 3

Mail Transport Equipment Service Center Network – Highway 

Transportation Routes – San Francisco, California NL-AR-06-003

3/28/2006 2 City Letter Carrier Operations – Greater Indiana District DR-AR-06-003

3/28/2006 1

Mail Transport Equipment Service Center Network – Highway 

Transportation Routes – Memphis, Tennessee NL-AR-06-005

3/30/2006 1 Data Input Validation for the Facilities Database IS-AR-06-006

3/31/2006 1

Postal Service’s Share of Health Insurance Premiums for Retired 

Employees FT-AR-06-016

Appen

dix D
42 | Semiannual Report to Congress

Appendix E

Significant Management Decisions In Audit Resolution

For the period October 1, 2005 — March 31, 2006

As required by the IG Act, the following discusses information concerning any significant management decision with which the Inspector General 

disagrees and is currently in audit resolution.

Office of Inspector General

The OIG has no significant management decisions in audit resolution as of March 31, 2006.

INVESTIGATIVE STATISTICS1

For the period October 1, 2005 — March 31, 2006

Misconduct

Statistics

Employee Mail 

Theft Statistics5

Investigations completed 249 1029

Arrests/Information/Indictments 100 439

Convictions/Pretrial diversions2 57 275

Administrative actions 1,202 799

Cost avoidance $57,775,818 –

Fines, restitution, and recoveries3 $1,051,875,966 –

Amount to Postal Service4 $8,523,982 –

Statistics include joint investigations with the Postal Inspection Service and other law enforcement agencies.

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

The majority of these recoveries ($1,029,000,000) are the result of judgments in two False Claims Act investigations that were worked jointly with other federal agencies.

Amount included in Fines, Restitution and Recoveries.

Cases worked solely by the U.S. Postal Inspection Service.

1�

2�

3�

4�

5�

Appendix F
October 1, 2005 – March 31, 2006 | 43

SUMMARY OF U.S. POSTAL INSPECTION SERVICE ACTIONS UNDER 39 U.S.C. § 3013

For the period October 1, 2005 — March 31, 2006

The Postal Reorganization Act requires the Postmaster General to furnish information, on a semiannual basis, on the investigative activities of the Postal Service by 

the U.S. Postal Inspection Service. With passage of the Deceptive Mail Prevention and Enforcement Act in December 1999, the Postal Service’s reporting obligations 

were changed. The Act requires the Postal Service to submit its semiannual report on investigative activities to the Office of Inspector General rather than to the 

Board of Governors, expands the subject matter that must be reported, and revises the reporting schedule to coordinate with the OIG Semiannual Report to Congress. 

The information in the report includes actions directed at combating crimes involving the mail; costs and expenditures devoted to Postal Service investigative 

activities; use of subpoena power; and any additional information the OIG may require.

The following information summarizes the administrative and judicial actions initiated and resolved during the reporting period. These actions include the 

issuance of cease and desist orders directed to mailers, actions to intercept payments fraudulently induced, and orders seeking to intercept fraudulent mailings.

Appen

dix 

G

Type of Scheme

Complaints 

Filed

Consent 

Agreements FROs

Cease & Desist 

Orders

Advance Fee 1 1 1 2

Contests/Sweepstakes 2 1

Coupon Fraud 1 1 1

False Billings 5 2 4 7

Internet Auction 4 4 4

Lotteries (Foreign and Domestic) 2 1 1

Medical 2 1 1

Merchandise:

Failure to furnish 3 3 3

Failure to pay 1 1 1

Misrepresentation 1 1

Miscellaneous 3 3 3

Telemarketing 0 0 0 0

Work at Home 19 15 1 20

TOTAL 41 31 10 45

Other Administrative Actions

Administrative Action Requests 51

Temporary Restraining Orders Requested 2

Temporary Restraining Orders Issued 2

Cases Using Direct Purchase Authority 1

Civil Penalties (Section 3012) Imposed $17,500 

Test Purchases $20 

Withholding Mail Orders Issued 9

Voluntary Discontinuances 15

Investigative Expenses

Type Dollar Amount

Personnel $163,755,718 

Nonpersonnel 40,150,827

TOTAL $203,906,545 

Capital Obligations $1,921,371 

Subpoenas

Case # Date Issued Scheme

06-01 10/25/05 False Representation

06-02 10/25/05 False Representation

06-03 2/22/06 False Representation

Appendix G
44 | Semiannual Report to Congress

CLOSED CONGRESSIONAL AND BOARD OF GOVERNORS INQUIRIES

For the period October 1, 2005 — March 31, 2006

This appendix lists the 31 congressional and Board of Governors inquiries the OIG closed during this reporting period. We reviewed these inquiries to help 

identify systemic issues and to determine the need for future Postal Service-wide audits.

Appendix H

Investigations

Requestor Allegation/Concern Our Major Findings Closure Date

Representative, New York Allegations of fraud, waste, and abuse and 

whistleblower retaliation.

The OIG conducted two investigations, finding a 

prima facie case of reprisal for whistleblowing and 

falsification of mail data reports.

10/24/2005

Senator, New York Allegations of fraud, waste, and abuse and 

whistleblower retaliation.

The OIG conducted two investigations, finding a 

prima facie case of reprisal for whistleblowing and 

falsification of mail data reports.

10/24/2005

Governors Status/response regarding OIG investigation 

into medical records and psychological evaluation of USPIS employee.

The OIG closed investigation earlier and now directs 

further questions to the USPIS.

3/23/2006

Audits

Requestor Allegation/Concern Our Findings Closure Date

Representative, Kansas Concerns regarding security of postal facilities. The OIG audited USPIS’ Security Investigation Service 

Center and referred firearms question to USPIS.

11/21/2005

Senator, Iowa Concerns about security checks of temporary 

drivers and security of the mail.

The OIG audited USPIS’ Background Security Clearance Program; found progress on eliminating backlogs 

and other corrective actions.

12/8/2005

Representative, Maryland Review of how the Postal Service may have 

contributed to a dispute between private parties 

involved in the Postal Service International 

Customized Mail (ICM) program.

The OIG, based on audit of the International Customized Mail Agreements program and allegations, found 

no material issues of fact to cause us to recommend a 

reversal of a Postal Service action.

10/27/2005

Representative, Maryland Review of how the Postal Service may have 

contributed to a dispute between private parties 

involved in the Postal Service International 

Customized Mail (ICM) program.

The OIG, based on audit of the International Customized Mail Agreements program and allegations, found 

no material issues of fact to cause us to recommend a 

reversal of the Postal Service action.

10/27/2005

Representative, Maryland Review of how the Postal Service may have 

contributed to a dispute between private parties 

involved in the Postal Service International 

Customized Mail (ICM) program.

The OIG, based on audit of the International Customized Mail Agreements program and allegations, found 

no material issues of fact to cause us to recommend a 

reversal of Postal Service action.

10/27/2005

Senator, Mississippi Alleged disparate treatment of craft and 

management employees in Mississippi during 

Hurricane Katrina.

The OIG addressed as part of Management Advisory 

– Postal Service’s Emergency Purchasing in Response 

to Hurricanes Katrina and Rita & Audit Report 

– Postal Service Actions to Safeguard Employees from 

Hurricane Katrina. 

3/22/2006

Mission Support

Requestor Allegation/Concern Our Findings Closure Date

Representative, Virginia Allegation that USPS OIG mishandled vacancy 

announcement.

The USPS OIG cancelled vacancy announcement 

due to a hiring freeze. The announcement was not 

reactivated.

3/23/2006
October 1, 2005 – March 31, 2006 | 45

Appen

dix h

General Counsel

Requestor Allegation/Concern Our Findings Closure Date

Representative, Virginia Allegations of hostile work environment and 

whistleblower retaliation.

We reviewed climate indicators and determined 

management will be addressing issues, which we will 

follow. We did not substantiate whistleblower and 

intimidation allegations.

11/1/2005

Senator, Maryland Allegations of intimidation and humiliation by 

management.

We found no basis of wrongdoing on the part of 

management in alerting the OIG to fraudulent Voyager 

charges and possible falsification of leave documentation.

11/18/2005

Governors Alleged mistreatment of casual employees 

and unfair firing at the White River Junction, 

Vermont, P&DC.

We found management had already identified this as 

a troubled site. Management agreed to improve its 

overtime assignment process.

12/22/2005

Representative, California Dissatisfied with the way the Postal Service 

handled claim.

The OIG evaluated and added complaint to database. 10/4/2005

Representative, Florida Allegations of discriminatory practices by a 

supervisor at the Tampa Suncoast District Post 

Office.

Concluded there was a need for a review of the 

workplace climate and management agreed.

2/3/2006

Representative, Texas OIG employee reassignment. Advised the constituent is appealing through the Merit 

Systems Protection Board.

10/20/2005

Representative, Virginia Texas employee concerned about safety while 

carrying out postal duties.

We requested additional information, added the 

complaint to our database.

11/8/2005

Representative, Virginia Texas employee alleged safety rules for 

operating vehicles create an unsafe or unhealthy 

condition for drivers in hot climates.

We found Postal Service management correctly 

applied safety and security policies in the instances 

cited.

2/14/2006

Representative, Arizona A sender alleged Postal Service failed to deliver 

a package sent via registered mail.

We confirmed the package was delivered and signed 

for by an employee of the recipient.

11/23/2005

Representative, Georgia Sender alleged valuable registered mail was 

signed for by letter carrier and left on doorstep.

We found the letter carrier and recipient had an oral 

agreement to sign for and leave packages at the door.

12/12/2005

Senator, Massachusetts Target of subpoena sought information on 

nature of our investigation.

Status as an open investigation prevents us from 

providing information outside of the established legal 

channels.

1/6/2006

Senator, Texas Alleged misuse of Postal Service e-mail system 

by employee.

Insufficient information; added complaint to our 

database.

1/30/2006

Representative, Texas Worker alleges unfair and prejudiced treatment 

at the Waco P&DC.

Officials in the Postal Service are handling this 

complaint.

3/16/2006

Referrals

Requestor Allegation/Concern Referred To Closure Date

Representative, Virginia Allegations of a hostile work environment and 

request for investigation into workplace climate 

and new AM SOP procedures for letter carriers.

Postal Service Government Relations Office 10/4/2005

Representative, Kentucky Concerns regarding hiring practices. Postal Service Eastern Area Human Resources 10/25/2005

Representative, California Problems with holding mail at the Barrington 

Post Office.

Postal Service Government Relations Office 10/18/2005

Representative, Alabama Allegations of mail and identity theft. Postal Inspection Service 10/31/2005

Senator, Tennessee Issues concerning the Medina, Tennessee, ZIP 

Code.

Postal Service Government Relations Office 11/17/2005

County Board of Supervisors, 

Mississippi 

Requesting reconstruction of several post 

offices to pre-Hurricane Katrina condition and to 

make them permanent postal facilities.

Postal Service Government Relations Office 12/13/2005

Senator, Mississippi Alleged discrimination in contract award. Postal Service Government Relations Office 1/6/2006

Senator, Virginia Requesting assistance with pay issues. Postal Service Government Relations Office 3/7/2006
46 | Semiannual Report to Congress

Investigative case highlights

For the period October 1, 2005 — March 31, 2006

Retired Postmaster Faces Criminal Prosecution in 

Connection with Stamp Stock Shortages

A New Jersey postmaster was placed on administrative 

leave after the South Jersey District Internal Control Working Group discovered $147,000 in stamp stock shortages. 

During an interview with South Jersey District management 

on August 4, 2005, the postmaster denied embezzling 

any of the missing funds but opted to retire as part of a 

settlement agreement with the USPS. He also agreed to 

repay the total shortage. According to a former co-worker, 

the postmaster blamed the shortages on mismanagement. 

A review of vending deposits and requisitions disclosed 

excessive inventory balances, as well as reports of sales 

and stamp stock replenishment for a vending machine 

that turned out to be non-functioning. An audit of one 

vending machine revealed a shortage of $61,000 that the 

postmaster had not reported. Furthermore, the postmaster 

underreported a window clerk’s vending revenue, possibly 

to avoid drawing attention to the reduced revenues he was 

reporting for the vending machines he was servicing. 

OIG agents learned that the postmaster and his wife had 

filed for bankruptcy in 1996, as did one of his daughters. 

One of the liabilities the daughter listed when she filed 

for bankruptcy was a bank loan for which her father, the 

postmaster, had co-signed. According to the postmaster, 

he had also taken out loans against his Thrift Savings Plan 

to finance his and his youngest daughter’s college expenses. 

On August 9, 2005, the U.S. Attorney accepted this case for 

criminal prosecution. As per the settlement agreement that 

he signed in August 2005, the postmaster retired effective 

November 2005. Additionally, the Office of Personnel 

Management will deduct funds from his monthly annuity 

until the $147,000 is repaid.

Technician Suspected of Embezzlement Fatally Shoots 

Self

A Texas Self Service Postal Center (SSPC) technician 

committed suicide after the OIG opened an investigation into 

embezzlement of postal funds. 

On September 30, 2005, a Customer Service Operations 

Manager (CSOM) notified the OIG that the SSPC technician 

claimed to have transferred stamp stock in the amount of 

$457,420 to the district Stamp Distribution Office (SDO) on 

July 25, 2005. The SDO reported the stock shipment was 

never received. 

On October 3, 2005, the technician informed the CSOM he 

had sent an additional $165,000 in stamp stock from his 

office to the SDO. However, investigative attention revealed 

the registered article he sent to the SDO did not contain any 

stock. 

On October 4, 2005, an OIG forensic examiner and a postal 

manager began counting the technician’s accountability. 

The technician failed to report for work the morning of 

October 5, 2005. When OIG agents arrived at his home later 

that morning, they found him dead in his vehicle from of a 

self-inflicted gunshot wound.

On October 6, 2005, the forensic examiner and postal 

manager concluded their count of the technician’s accountability. It revealed a shortage of $219,010 in stamp stock 

and cash.

The total loss is $676,430, which is equal to the falsified 

$457,420 stock shipment plus $219,010 in missing stamp 

stock and cash.

Letter Carrier and Cohort Misuse Voyager Cards, Plead 

Guilty to Conspiracy 

A letter carrier and his girlfriend (not a postal employee) 

used stolen Voyager cards and personal identification 

numbers to purchase fuel for their personal vehicles. They 

also allegedly used the cards to purchase fuel for, and 

accept cash from, convenience store customers. Together 

they were responsible for $9,561 of unauthorized charges. 

A federal grand jury indicted the carrier and his girlfriend on 

August 25, 2005. Both pleaded guilty to one count of conspiracy to commit fraud and related activity in connection 

with access devices. On March 16, 2006, the letter carrier 

was sentenced to two years probation, $5,019 restitution, 

and a $100 special assessment fee. His girlfriend was 

scheduled for sentencing on March 30, 2006. 

A third individual (also a letter carrier and a relative of one of 

the suspects) was indicted on the same charges, although 

the other two suspects claimed she was not involved with 

them in the illegal use of the cards. During a consent search 

of her personal vehicle, agents seized undelivered mail. 

On January 12, 2006, she entered into an Agreement for 

Pretrial Diversion (APD) with the U.S. Attorney’s Office in 

Dallas. According to the APD, this individual willfully and 

unlawfully delayed or destroyed U.S. Mail entrusted to her 

as a Postal Service employee. 

Trucking Contractor Suspended for Overcharging USPS, 

Underreporting Earnings

On April 6, 2005, a federal grand jury indicted the owner 

of two trucking companies for making false statements, 

embezzlement, and theft. While managing these companies, 

which supported postal trucking highway contract routes 

(HCRs), the defendant failed to pass fuel rebates on to the 

Postal Service, as required by his contract. The discounts 

exceeded $902,000. He also cashed more than $170,000 

in HCR payments to which he was not entitled (since he did 

not operate the contract). 

On September 16, 2005, the Postal Service terminated the 

HCR contract of one company. On September 30, 2005, the 

U.S. Attorney filed a civil complaint in U.S. District Court 

against the owner and one of the trucking companies, citing 

damages and penalties in the amount of $4.2 million. 

On January 12, 2006, the owner of the trucking companies 

pleaded guilty to knowingly and willfully making a false, 

fictitious, and fraudulent material statement. (He failed to 

supplemental information
October 1, 2005 – March 31, 2006 | 47

incorporate a fuel discount, thereby failing to reflect the 

actual cost of fuel.) He also pleaded guilty to filing a false 

income tax return for the tax year 1998. (He knowingly and 

willfully failed to report approximately $199,800 received 

through rebate checks.) 

On January 25, 2006, the Postal Service sent the owner a 

letter notifying him of the immediate suspension and proposed debarment of three individuals and both companies. 

Customer Service Manager Ordered to Pay $162,533 for 

Stolen Cash and Money Orders

From May 2001 to July 2004, the manager of customer 

services at a postal station in Kansas City embezzled 

approximately $135,405 in postal funds by issuing money 

orders to himself in the amount of fictitious refunds to 

customers. He also took $27,128 in cash that was intended 

for deposit. 

On August 10, 2004, the day after he admitted to taking the 

money, the manager resigned from the Postal Service. He 

had worked for the agency for approximately 29 years.

On June 20, 2005, the manager pleaded guilty to a criminal 

information charging him with one count of “Money Orders.” 

He was sentenced on October 24, 2005, to 18 months incarceration and 36 months probation. He was also ordered 

to pay restitution, as well as a $100 special assessment. 

Post Office Supervisor Admits to Impersonating Officer 

and Creating False Documents

A main post office supervisor in California was cited for driving under the influence and arrested following an accident 

in a Postal Service-owned Ford Explorer. He falsely claimed 

that he worked for the Postal Service OIG and that the OIG 

had assigned the vehicle to him. The investigation revealed 

that the supervisor had submitted a false statement to the 

Vehicle Maintenance Facility manager in order to get a 

Postal Service vehicle with take-home privileges. 

In October 2005, the supervisor told OIG agents that he had 

responded to an intrusion alarm at a post office station and 

was returning home in the postal vehicle when someone in 

a sport utility vehicle forced his car to swerve and flip onto 

its side. He denied being under the influence of alcohol, 

as cited by the police. Later that day, agents learned that 

no alarm had been activated at the post office where he 

claimed to have gone.

A postmaster, employees with the Van Nuys District Labor 

Relations Office, and impound lot managers said the 

supervisor had portrayed himself as a Postal Service law 

enforcement officer. Investigators found a number of law 

enforcement items in the supervisor’s vehicle, including a 

protective vest, an installed emergency light set, a scanner, 

a video camera, forced-entry devices, and an Inspection 

Service cap and jacket. During a consent search of his 

residence, agents and police officers found an unregistered 

.38 caliber handgun.

On October 31, 2005, the supervisor admitted to impersonating an OIG special agent and a postal inspector. He 

admitted to creating fraudulent OIG and USPIS documents, 

and to making false statements, letters, and memorandums 

using forged and altered letterheads. He also confessed to 

possessing a firearm while on Postal Service property. 

The supervisor resigned from the Postal Service effective 

November 26, 2005, with criminal charges pending. The 

Postal Service placed a $48,000 hold on his retirement 

funds as payment for fuel charged toward the Postal Service 

vehicles the supervisor fraudulently acquired and drove. 

The Assistant U.S. Attorney declined prosecutorial action 

due to the lack of “bad acts” on the part of the supervisor; 

however, this case is closed pending a prosecution decision 

by the Los Angeles County district attorney’s office.

Postal Service Collects $5 Million from Drug 

Manufacturer that Overbilled the Federal Employee 

Health Benefit Program 

A drug manufacturer pleaded guilty to two criminal counts 

of conspiracy and was ordered to pay $704 million to 

resolve criminal charges and civil liabilities in connection 

with several illegal schemes to promote, market, and sell 

its drug, Serostim. Serostim is a drug that was conditionally 

approved to combat wasting and metabolic problems in 

HIV-positive and / or AIDS patients. 

A qui tam lawsuit filed against the manufacturer alleged 

that the company made multiple false claims, including 

overbilling the U.S. government, falsifying drug approval 

documentation, and offering inducements for improper 

billing. As a result of its fraudulent drug promotion and 

marketing misconduct, the company caused the Federal 

Employee Health Benefit Program – to which the Postal 

Service is the second largest contributor – to sustain 

substantial civil damages.

In April 2005, five former executives of the manufacturing company were indicted on eight counts, including 

conspiracy, offering payments and remunerations to 

physicians, and aiding and abetting. On December 15, 

2005, a U.S. District Court sentenced the company 

consistent with the terms of a global settlement agreement, 

in which the drug manufacturer agreed to plead guilty to 

two counts of conspiracy. It also agreed to pay a criminal 

fine of $136,935,000 and a total of $567,065,000 to settle 

its federal and state civil liabilities in this case.

On January 9, 2006, the OIG received a $5 million check 

from the U.S. District Court in Boston, payable to the Postal 

Service. This $5 million check represented a portion of the 

$136,935,000 criminal fine imposed on the company in 

December 2005 and was awarded to the Postal Service 

because of its role in the investigation.

Postal Center Technician Admits He Stole from Vending 

Machines 

A customer service operations manager (CSOM) in Texas 

contacted the OIG when the Dallas District Stamp Distribution Office (SDO) failed to receive a $484,500 stamp stock 

shipment a SSPC technician claimed to have sent. The SDO 

ordered the technician to return $484,500 in stock to the 

SDO. The technician claimed to have sent the stamp stock 

shipment to the SDO via registered mail. 

The technician did not meet with the CSOM, as arranged, 

to produce paperwork verifying the stock shipment. 

supplemental Information
48 | Semiannual Report to Congress

Additionally, the technician failed to meet with the OIG agent 

investigating the case. On September 23, 2006, the Postal 

Service placed the technician on emergency suspension.

A count completed on September 30, 2005, found 

$95,863.83 missing from the technician’s accountability. 

On December 22, 2005, the technician pleaded guilty to a 

one-count information charging him with misappropriation 

of postal funds totaling $580,363.83. The technician 

admitted to stealing money from vending machines on his 

route over a 13-year period. He hid the theft by underreporting his accountability of on-hand stamp stock and cash. 

The total loss figure of $580,363.83 is equal to the falsified 

$484,500 stock shipment plus the $95,863.83 in missing 

stamp and cash.

The technician remains on emergency suspension with his 

removal from the Postal Service pending. He is scheduled to 

be sentenced on April 20, 2006. 

Clerk Deprives Postal Service of Revenue, Is Indicted for 

Theft of Property

A bulk mail entry unit (BMEU) clerk in Alaska admitted to not 

charging customers for bulk mailings in order to deprive the 

Postal Service of revenue. He said he did it to “get back” at 

postal management for treating him poorly. During a search 

of his residence, agents found a document which listed 

$449,265 in postal mailings that he did not appropriately 

enter into the system. Through an audit of postal and 

customer records, the OIG confirmed that the clerk cost the 

Postal Service $418,189 in lost revenue. 

As the owner of a firearms dealership, the clerk also used 

the BMEU computer and fax machine to conduct non-postal 

business. The fax number on his company business cards 

was actually the BMEU fax number. 

According to witnesses, the clerk had implied that he would 

shoot his co-workers if he was ever fired. Indeed, agents 

found 65 firearms and 11 silencers at his residence. However, the clerk was a licensed firearms dealer and owned 

all these items legally. The Bureau of Alcohol, Tobacco, 

Firearms and Explosives is currently investigating his 

firearms activities because of indications that he failed to file 

required paperwork and failed to pay required taxes – both 

of which are criminal offenses. A psychological evaluation 

determined that he had no violent tendencies and that his 

threats were made in jest. Therefore, the clerk was released 

from jail under a number of restrictions. These included the 

requirements that he be electronically monitored until the 

case was resolved and that he keep a curfew of 9 p.m.

On December 15, 2005, the clerk was indicted on one count 

of Theft of Public Property and seven counts of Theft of 

Property used by the Postal Service. On December 19, he 

was put removed from duty pending the conclusion of this 

investigation. On January 25, 2006, he resigned from the 

Postal Service. Trial is set for May 1, 2006.

Letter Carrier Who Moonlighted as Pimp Used Money 

Orders to Pay Creditors

A letter carrier in Atlantic City, New Jersey, organized a 

prostitution enterprise that operated in at least four states. 

The letter carrier and his co-conspirators (none of them 

postal employees) used postal money orders to pay the 

letter carrier’s creditors and to pay for the expenses of the 

enterprise. 

Agents identified four window clerks and two carriers at a 

Manhattan Post Office who appear to be involved in selling 

postal money orders to the letter carrier or helping him 

launder money. To date, the OIG has identified approximately $290,000 in money orders attributable to the letter 

carrier and his criminal enterprise.

On December 12, 2005, the letter carrier and five others 

were arrested. All were indicted on December 14, 2005. 

On December 21, 2005, the letter carrier and his co-conspirators were indicted with new charges. The indictment 

addressed potential forfeiture of any property or proceeds 

connected to the prostitution and money laundering. To 

date, this property includes five residences.

On January 5, 2006, the letter carrier and four other 

defendants were arraigned and pleaded not guilty. All were 

denied bail and remain incarcerated. Postal management is 

in the process of removing the letter carrier. 

The trial for the subjects is scheduled for June 5, 2006.

Mail Carrier Illegally Sold Access to Satellite Television

The Direct TV Fraud Department notified the Postal Service 

that a mail carrier was illegally selling Direct TV satellite 

cable receivers and access cards to employees at a post 

office in the Miami area. Direct TV advised that the mail carrier currently has 28 Direct TV satellite receivers assigned 

to his residence. According to Direct TV, the mail carrier 

caused the company to lose approximately $23,600. 

A search of the mail carrier’s residence found a variety of 

evidence supporting the allegations, including 12 Direct TV 

satellite boxes; 16 activation cards; and one “boot loader” 

(an illegal activation card-cloning and reactivation tool). The 

mail carrier confessed to pirating Direct TV satellite boxes 

and activation cards to earn extra money and provided 

interviewing agents with a list of postal employees who had 

purchased the pirated equipment. According to the mail 

carrier, they rented the receivers and access cards from him 

for approximately $30 per month.

Excluding the mail carrier, we identified a total of 11 

postal employees who were involved in the Direct TV fraud 

scheme. They were arrested in December 2005 on state 

charges of Racketeering, Conspiracy to Commit Racketeering, and Theft of Communications Services. The Postal 

Service issued a letter of termination to the mail carrier and 

issued a letter of 14-day suspension, without pay, to each 

Postal Service craft employee. One of the Postal Service 

managers was downgraded from an EAS-22 position to an 

EAS-17 position, and one of the Postal Service supervisors 

was downgraded from an EAS-23 position to an EAS-20 

position. Another Postal Service manager was given a 

14-day suspension without pay, and yet another supervisor 

was given a 30-day suspension without pay.
October 1, 2005 – March 31, 2006 | 49

Freedom of Information Act

Activities

For the period October 1, 2005 — March 31, 2006

Requests Number of Requests

Carryover from prior period 13

Received during period 138

Total on hand during the period 151

OIG actions Number of Requests

Processed during the period 144

Request released in full 9

Request partially granted 39

Request not granted 33

Request referred to another agency 33

No records 18

Not a proper FOIA request 10

Withdrawn 2

Balance Number of Requests

Balance at the end of the period (pending) 7

Processing Days Number of Days

Median processing days to respond to a FOIA request 9 

supplemental Information
50 | Semiannual Report to Congress

Referrals Total

Carryover from prior period 58

Complaints received from OIG Hotline 209

Congressional/BOG/Postal Service Management 6

Total on hand during this period 273

Workplace Environment Actions Total

Complaints Closed During the Period 216

Referred to Postal Service management 68

Referred to OIG Office of Investigations 6

Referred to OIG Office of Audit 5

Summary of findings reported to Congress/BOG/Postal Service Management 6

Conducted limited inquiry into allegations/issues and referred to database 30

Referred to database for statistical analysis and possible systemic reviews 101

Referrals pending at the end of the period 57

Workplace Environment

For the period October 1, 2005 – March 31, 2006

The OIG’s Workplace Environment Team receives referrals involving workplace environment issues from multiple sources, 

which include the OIG Hotline, Congress, the Board of Governors (BOG), and management. These referrals include complaints of sexual harassment, discrimination, harassment and intimidation, nepotism and workplace safety issues. Working 

with management, the team reviewed and addressed complaints to ensure issues did not continue to adversely affect the 

work environments of postal employees.

Activities

For the period October 1, 2005 – March 31, 2006
October 1, 2005 – March 31, 2006 | 51

Glossary

Advance fee scheme – Obtaining fees purporting to 

secure buyers or obtain loans.

AMC – An Air Mail Center is a postal facility at an airport 

that receives, concentrates, transfers, dispatches, and 

distributes mail transported by air.

AMSOP – Early morning standard operating procedures 

that assist the managers and postmasters in making 

better business decisions for city delivery operations.

APC – Automated Postal Center, a kiosk that dispenses 

postage and provides several mailing services. APCs allow 

customers to weigh, calculate, and apply exact postage, 

and ship Express Mail and Priority Mail items, packages, 

and First-Class letters right at the kiosks. They also 

provide easy access to postal products and services.

ATO – Air Transfer Office only supports core airport 

operations such as tender and receipt of mail and ramp 

activities.

Bargaining unit employee – A Postal Service employee 

who is represented by a labor organization (union) that 

negotiates with the Postal Service for the wages, hours, 

and other terms and conditions of employment. These 

employees include city carriers, clerks, mail handlers, 

rural carriers, special delivery messengers, maintenance 

employees, and motor vehicle operators.

BDS – See Biohazard Detection System.

BMC – Bulk Mail Center, where packages and standard 

mail are processed.

BMEU – See Business mail entry unit.

Bulk mail – Mail that is rated for postage partly by weight 

and partly by the number of pieces in the mailing. The term 

is generally used to refer to Standard Mail (A).

Business mail entry unit (BMEU) – The area of a postal 

facility where mailers present bulk, presorted, and permit 

mail for acceptance. The BMEU includes dedicated 

platform space, office space, and a staging area on the 

workroom floor.

Biohazard Detection System – The Biohazard Detection 

System (BDS) is a system that is used to detect the presence of harmful bio-agents that may exist in mailpieces 

that are processed in Processing and Distribution Centers 

(P&DCs) operated by the Postal Service. The BDS continuously monitors the air for hazardous aerosol contaminants 

that may be released by mail being handled by one or more 

Postal Service mail processing systems.

Carrier Sequence Barcode Sorter (CSBCS) – This is 

a small, high-speed bar code sorter machine designed 

specifically for decentralized processing in associate 

offices (AOs). It has a throughput of about 19,000 pieces 

per workhour. 

Click-N-Ship – Click-N-Ship is an online, self-service 

mailing application that allows customers to enter a 

delivery address and weight, choose a service shipping 

option, method of payment, and then print out postagepaid shipping labels.

CPU – CPUs are contractor-owned and operated 

facilities, under contract to the Postal Service to provide 

selected postal services such as accepting mail and selling 

postage, supplies, and Postal Service money orders to 

the public. CPUs are usually located in a store or place of 

business. 

Delivery Barcode Sorter (DBCS) – This is a multi-level, 

high-speed barcode sorting machine located in mail 

processing facilities. DBCS throughput is about 39,000 

pieces per workhour. 

Delivery Point Sequencing (DPS) – Delivery point 

sequencing, sometimes referred to as carrier walk 

sequence, describes mail that is sorted in carrier delivery 

order, thereby eliminating the need for the carrier to 

further sort this mail.

DOIS – Delivery Operations Information System (DOIS), 

deployed in 2002, provides delivery supervisors and 

managers with data (such as workload status reports and 

carrier performance information) to improve daily delivery 

operational performance.

END initiative – The Evolutionary Network Development 

(END) initiative is the next step in the Postal Service’s efforts to create a flexible logistics network to reduce costs, 

increase overall effectiveness, and improve consistency 

of service.

ETOEs – Extraterritorial Offices of Exchange (ETOEs) 

are commercial businesses affiliated with foreign postal 

administrations that compete in the international shipping 

and delivery market with the Postal Service and commercial shippers not affiliated with foreign posts.

Express Mail Service – A mail class that provides 

expedited delivery service for mailable matter subject to 

certain standards. It is available in five basic domestic 

service offerings (Same Day Airport Service, Custom 

Designed Service, Next Day Service, Second Day Service, 

and Military Service). Express Mail International Service 

is available between the United States and most foreign 

countries. Express Mail is a Postal Service trademark.

False billings scheme – Mailing solicitations in the guise 

of billings.

FECA – Postal Service employees injured while performing 

their duties may be eligible for compensation under the 

Federal Employee’s Compensation Act (FECA).

FEHB – The Federal Employees Health Benefits (FEHB) 

program helps federal employees, retirees, and their 

survivors meet health care needs through a wide selection 

of health plans across the country. 

First-Class Mail – A class of mail that includes all matter 

wholly or partly in writing or typewriting, all actual and 

personal correspondence, all bills and statements of 

account, and all matter sealed or otherwise closed against 

inspection. First-Class Mail comprises three subclasses: 

postcards, letters and sealed parcels, and Priority Mail. 

Any mailable matter may be sent as First-Class Mail. 

First-Class Mail is a Postal Service trademark.

Flat–size mail – A mailpiece that exceeds one of the 

dimensions for letter-size mail (11-1/2 inches long, 6-1/8 

inches high, 1/4 inch thick) but that does not exceed the 

maximum dimension for the mail processing category (15 

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52 | Semiannual Report to Congress

inches long, 12 inches high, 3/4-inch thick). Dimensions 

are different for automation rate flat-size mail eligibility. 

Flat-size mail may be unwrapped, sleeved, wrapped, or 

enveloped.

Fraud internet schemes – Fraudulent schemes using the 

Internet with a connection to the mail.

FY – Fiscal Year.

FWC Forum – Federal Workers’ Compensation (FWC) 

Forum consists of more than 18 IG offices that work 

together to reduce costs and combat fraud related to the 

Federal Employee’s Compensation Act (FECA) across the 

federal government.

Highway contract transportation routes – A route 

served by a postal contractor to carry mail by highway 

between designated points.

ICM – International Customized Mail agreements are 

contracts between the Postal Service and mailers for a 

period of one to two years. These agreements represent 

individually negotiated discounts with mailers within 

certain categories of outbound international mail in 

exchange for meeting prescribed annual minimum revenue 

or volume commitments. 

IEMP – The Postal Service’s Integrated Emergency 

Management Plan that improves coordination or planning 

and response activities among functional areas in the 

event of an emergency.

IMPAC – The International Merchant Purchase Authorization Cards (IMPAC) are how the Postal Service acquires 

goods and services through contracts.

LK – A lobby kiosk (LK) can perform all post office transactions — purchasing stamps, mailing parcels, renting 

post office boxes, initiating retail sales transactions — 24 

hours-a-day, 7 days-a-week with payment by debit, credit, 

cash cards, and cash.

Logistical support network – Activities or programs 

that support the transportation of mail, such as fuel 

procurement, mail transport equipment procurement and 

management, and vehicle management and maintenance.

Lottery scheme – Advertisements seeking money or 

property by mail for participation in schemes to win prizes 

through chance.

Merchandise failure to pay scheme – Mail order 

merchandise acquired without providing payment.

Merchandise misrepresentation scheme – Mail order 

merchandise or services that are materially misrepresented in advertising.

MERLIN –Mail Evaluation, Readability, and Lookup 

INstrument determines whether individual mailings qualify 

for the discounts claimed by the mailer.

Negotiated Service Agreement (NSA) – A contractual 

agreement between the Postal Service and customers that 

gives pricing incentives in exchange for a shift in customer 

behavior that benefits the Postal Service.

NGK – Next Generation Kiosk (NGK) that could be 

designed to leverage the success of the APC. The NGK 

could sell stamps printed on demand, allow payment by 

cash, and enhance revenue-reporting capabilities for 

management. 

OWCP – Administered by the U.S. Department of Labor, 

the Office of Workers’ Compensation Programs (OWCP) 

provides direct compensation to providers, claimants, and 

beneficiaries.

PARS – Postal Automated Redirection System.

PCIE / ECIE – The President’s Council on Integrity and 

Efficiency and Executive Council on Integrity and Efficiency 

(PCIE-ECIE) address integrity, economy, and effectiveness 

issues that transcend individual government agencies. 

This organization also seeks to increase the professionalism and effectiveness of IG personnel throughout the 

government. 

POS ONE – Point of Service (POS) ONE is an electronic 

system that records sales and payment transactions at 

retail facilities.

Postal Rate Commission (PRC) – An independent federal 

agency that makes recommendations on Postal Service 

requests for changes in postal rates and mail classifications. The five commissioners are nominated by the 

President and approved by the U.S. Senate.

Postal Reorganization Act – The statute that requires 

postal rates and fees to “provide sufficient revenues so 

that the total estimated income and appropriations...will 

equal as nearly as practicable total estimated costs.” 

(Public Law 91-375, signed August 12, 1970.)

Priority Mail – First-Class Mail that weighs more than 

13 ounces and, at the mailer’s option, any other mail 

matter weighing 13 ounces or less. Priority Mail provides 

expedited delivery.

Processing and Distribution Center/Facility (P&DC/F)

– A central mail facility that processes and dispatches 

part or all of both incoming mail and outgoing mail for a 

designated service area. It also provides instructions on 

the preparation of collection mail, dispatch schedules, and 

sorting plan requirements to mailers.

Remote Encoding Centers – When all computer-based 

means of resolving address information have been 

exhausted at a mail facility, an image of an address is 

sent to a remote encoding center (REC), where operators 

use video display terminals and keyboards to process 

the address information. The results of this encoding 

are sent back electronically to the facility that has the 

mailpiece, thereby keeping the mailpiece in the automated 

mailstream.

Retail facility – A postal unit of a Post Office and its 

subordinate units as well as military Post Offices that sell 

postage stamps and provide other postal retail services 

to customers. The subordinate units are within the 

service area of a main post office and include post office 

stations, post office branches, contract postal units, and 

nonpersonnel units.

SDO – SDO is a Stamp Distribution Office. It receives 

and ships stamps, Postal Service stationery, philatelic 
October 1, 2005 – March 31, 2006 | 53

products, money orders; and provides stamps and stamp 

products for all post offices, branches, and stations within 

their service area. 

SSPC – Self-Service Postal Centers are unstaffed Postal 

Service vending machines that provide postage stamps 

and other retail products and services. 

Standard Mail – A class of mail that includes advertisements, circulars, newsletters, magazines, small parcels, 

and merchandise.

Unsupported costs – Costs that are questioned because 

of inadequate supporting documentation for the proposed/ 

claimed costs.

USPIS – U.S. Postal Inspection Service, a law enforcement 

arm of the Postal Service that provides assurance to 

American businesses for the safe exchange of funds and 

securities through the U.S. Mail; to postal customers of 

the “sanctity of the seal” in transmitting correspondence 

and messages; and to postal employees of a safe work 

environment.

Verification – The procedural checks of a mailing 

presented by a mailer to determine proper preparation and 

postage payment.

Value proposition – Develops audit work that maximizes 

benefits to the Postal Service and assists top management 

in reaching their goals.

VESS – Vending Equipment Sales and Service (VESS) 

System data is an online database that offers real-time 

tracking of product sales, miscellaneous costs, and 

maintenance and service for vending machines.

VMF – A Vehicle Maintenance Facility (VMF) is where the 

Postal Service maintains and repairs vehicles.

Voyager Fleet Cards – These are credit cards used 

by postal employees to acquire automotive goods and 

services, such as gasoline or repairs.

Work at home scheme – Schemes, such as envelope 

stuffing, that do not provide home employment.

“The following are among the many trademarks owned by the United States Postal Service: United States Postal Service®, U.S. Postal Service®, USPS®, First 

Class Mail®, USPS.com®, Click-N-Ship®, Automated Postal Center®, APC®, Express Mail®, Priority Mail®, Standard Mail®, Parcel Post®, The Postal 

Store®, Media Mail®, Customized Market Mail®, United States Postal Service Office of Inspector General®, Post OfficeTM, Postal ServiceTM, Signature 

ConfirmationTM, Certified MailTM, Delivery ConfirmationTM, Registered MailTM, Post Office BoxTM, ZIP CodeTM, Carrier PickupTM and Postmaster GeneralTM. The 

Sonic Eagle Logo, and the Mail Truck Design are also registered trademarks belonging to the U.S. Postal Service.”

supplemental Information
54 | Semiannual Report to Congress

notes
office of inspector general

Report 

Fraud, Waste, and 

Misconduct

in the Postal Service

Contact the Hotline at:

1.888.USPS.OIG

1.888.877.7644 

Fax: 1.866.756.6741

or www.uspsoig.gov

TTY (HEARING IMPAIRED)

1.866.OIG.TEXT

1.866.644.8398
U.S. Postal Service OFFICE OF INSPECTOR GENERAL

1735 N. Lynn Street, Arlington, VA 22209-2020 

703.248.2100 Fax: 703.248.2291 Internet: www.uspsoig.gov