A Message from the

Inspector General

KARLA W. CORCORAN

Inspector General

As I approach the end of my 7-year term, I can look back and appreciate the challenge given to us by Congress in January 1996, when we were directed to createan independent Office of Inspector General for the U.S. Postal Service. Never

before had such an independent office existed within the Postal Service, but we challenged ourselves to be the first and the best. We learned that being the first at something

brings with it inherent difficulties, the need for total commitment, a spirit for risk taking,

and exciting opportunities for growth. 

To recognize opportunity is the difference between success and failure. We embraced

the challenges, remained steadfast, took calculated risks, and worked tirelessly to build an

innovative, results-oriented organization based on our values of teamwork, leadership,

communication, creativity, and conceptualization. We wanted to build an organization

that could stand on its own to ensure its independence, but that also would meet the

needs of the Postal Service and its stakeholders, not our own. It would have been much

less challenging – and some would say more to their liking – to do things the traditional,

bureaucratic way. But we thought the easy way out was not in the best interest of our

stakeholders, so we tried something a little different in the hopes of developing an

organization that was a lot more effective. And I think, in just six years since our inception,

we have established an organization that we all can be proud of. What we tried was not

supposed to be weird or controversial. 

Our ideas were based on sound, modern principles of organizational management.

These ideas were not widely used in the federal government: pay banding, pay for performance, and values, to name a few. We held true to our belief that new ideas and progressive thinking were necessary for us to keep pace with the Postal Service as it faced challenges posed by the current business climate. As Franklin D. Roosevelt said, “It is common sense to take a method and try it. If it fails admit it frankly and try another. But above

all, try something.” Some things worked and they are still working; some things didn’t

work, and we tried something different. But we tried, and we keep on trying to do what

Congress asked us to do only a few years ago. What we were able to accomplish in six short

years transcends our expectations and will stand as a legacy in years to come. 

We knew that the Postal Service was different — it needed to generate revenues and

produce results every day. So we set out to create an office to fit the needs of the Postal

Service and its stakeholders. We performed strategic audits and investigations that added

value to its bottom line and identified needed improvements in Postal Service operations.

We believe our results prove our worth many times over. We are convinced that our audit

and investigative productivity were due in part to our values-based organization that recognizes and rewards the performance and accomplishments of our entire audit, investigative, and support staff. 

This reporting period, two major events occurred affecting the Postal Service – the

establishment of the President’s Commission on the United States Postal Service and the

legislation that lowers Civil Service Retirement Fund payments for the Postal Service. We

have worked with the Commission, which is tasked with examining the state of the Postal

Service and recommending legislative and administrative steps to help ensure its future

viability. We submitted written comments and have offered any assistance we can. The

recent windfall the Postal Service received with the lowering of its payments to the Civil

A Challenge Realized
Service Retirement Fund by about $6 billion in FY 2003 and FY 2004 has certainly had the

short-term benefit of relieving its current financial pressure and forestalling a rate increase.

However, many long-term challenges still remain and need to be addressed. 

We were also pleased to see the establishment of the U.S. House of Representatives

Special Panel on Postal Reform and Oversight, which is chaired by Representative John

McHugh. The eight-member bipartisan panel was created in part to work with the President’s

Commission but also to address reform and oversight issues. We, of course, stand ready to

assist the panel. 

This, our thirteenth Semiannual Report, sets forth the significant activities and

accomplishments of this office and the Inspection Service from October 1, 2002, through

March 31, 2003. It details our efforts to combat fraud, waste, abuse, and mismanagement

within the Postal Service; and fulfills our reporting requirement under the Inspector

General Act and Inspection Service requirements under the Mail Order Consumer

Protection Act. In this reporting period, the Office of Inspector General issued 210 audit

reports, 65 management advisory reports and other products, and closed 191 investigations.

This last six months’ work clearly illustrates our productivity as well as the diversity and

value of our accomplishments. As we move into the next six months, we recommit ourselves to carrying on this tradition and surpassing our goals. 

We would like to welcome Governor Albert V. Casey, who recently became a member

of the Board of Governors and replaces Governor Ernesta Ballard as Chair of the Audit

Committee. We bid farewell to Governor Ballard and wish her well in her future endeavors.

Governor James C. Miller, III is the most recent addition to the Board, and we welcome

the opportunity to work with him. 

We also want to thank several members of our senior management, who are pursuing

new opportunities, for their outstanding contributions to the OIG: Bob Emmons, Assistant

Inspector General for Audit, who is now Inspector General at the Pension Benefit Guaranty Corporation; and Donna Edsall, Deputy Assistant Inspector General for Technology,

who joined the Air Force Audit Agency in California. We would also like to thank all our

staff who have been called to military duty. We look forward to their safe return. 

In closing, I would like to share with you some words from poet Inez Clark

Thorson, which remind us of our obligation to stand firm in our convictions regardless

of the consequences:

The man who cannot settle in his mind

Where he should stand, but merely stays astride

The fence, is certain in the end to prove

Himself of little worth to either side.

But he alone will be of value who,

Though sometimes pressure may be brought to bear,

Knows in his heart where he should stand and then,

Despite the consequences, stands firmly there.

We look forward to continuing to work with Congress, the Governors, the Postmaster

General, and Postal Service management and staff to improve postal operations.

Sincerely, 

Karla W. Corcoran

April 30, 2003

PAGE2 A MESSAGE FROM THE INSPECTOR GENERAL
PAGE3

Table of Contents

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

MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE ..........................11

PERFORMANCE REVIEWS......................................................................................19

Office of Inspector General ........................................................................20

◆ Accepting and Processing Reviews ........................................................20

◆ Transportation and Delivery Reviews ....................................................23

◆ Marketing Reviews ..................................................................................26

◆ Legislative, Regulatory & Policy Reviews..............................................26

Inspection Service........................................................................................28

FINANCIAL MANAGEMENT REVIEWS ..................................................................29

Office of Inspector General ........................................................................30

◆ Financial Opinion Audits ......................................................................30

◆ Financial-Related Reviews......................................................................32

◆ Contracting and Facilities Reviews........................................................34

◆ Legislative, Regulatory & Policy Reviews..............................................38

Inspection Service........................................................................................40

TECHNOLOGY REVIEWS ......................................................................................41

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

◆ Developmental Reviews..........................................................................42

◆ Information Systems Reviews ................................................................43

◆ eCommerce Reviews ..............................................................................45

◆ Computer Intrusion Investigation Activities ........................................45

◆ Legislative, Regulatory & Policy Reviews..............................................46

Inspection Service........................................................................................47

LABOR MANAGEMENT REVIEWS ........................................................................49

Office of Inspector General ........................................................................50

◆ Workplace Environment Reviews..........................................................50

◆ Human Resource Process Reviews ........................................................50

◆ Health Care Reviews ..............................................................................51

◆ Legislative, Regulatory & Policy Reviews..............................................54

Inspection Service........................................................................................55

OVERSIGHT OF THE INSPECTION SERVICE AND

OTHER SIGNIFICANT ACTIVITIES........................................................................57

Office of Inspector General ........................................................................58

◆ Oversight Reviews ..................................................................................58

◆ Other Significant Reviews ......................................................................59

◆ Other Significant Activities....................................................................59

◆ Legislative, Regulatory & Policy Reviews..............................................59

Inspection Service........................................................................................61
PAGE4 TABLE OF CONTENTS

CUSTOMER SERVICE ............................................................................................63

Office of Inspector General ........................................................................64

◆ External Communications ......................................................................64

◆ Specialized Services ................................................................................68

◆ Computer-Assisted Assessment Techniques..........................................68

Inspection Service........................................................................................70

GOALS AND STRATEGIES ....................................................................................71

Office of Inspector General ........................................................................72

Inspection Service........................................................................................76

ORGANIZATIONAL DYNAMICS ............................................................................77

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

◆ Notable OIG Achievements ..................................................................81

◆ Challenges Facing the OIG ....................................................................84

Inspection Service........................................................................................87

ORGANIZATIONAL STRUCTURE ..........................................................................89

Office of Inspector General ........................................................................91

◆ OIG Field Locations................................................................................94

Inspection Service........................................................................................95

APPENDICES ........................................................................................................97

Appendix A - Reports Issued to Postal Management ..............................98

Appendix B - Findings of Questioned Costs ..........................................107

Appendix C - Recommendations That Funds Be Put to Better Use....109

Appendix D - Reports with Significant Recommendations Pending

Corrective Actions ............................................................110

Appendix E - Investigative Statistics ......................................................113

Appendix F - Summary of Postal Service Investigative Activities

Under Title 39 USC § 3013 ............................................114

Appendix G - Closed Congressional and 

Board of Governors’ Inquiries ..........................................117
Executive Summary

PAGE 5

Are copies of previous Semiannual Reports to

Congress available?

Yes, electronic copies of previous Semiannual 

Reports to Congress can be accessed at website

www.uspsoig.gov and printed copies can be obtained

by contacting the OIG.
EXECUTIVE SUMMARY

This Executive Summary provides a synopsis of the work reported during this 6-month period. This Semiannual Report

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

helps improve postal operations. It also provides

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

the detection and prevention of fraud, waste,

abuse, and mismanagement.

The OIG is responsible for conducting all

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

Inspection Service, conducts investigations to

prevent and detect fraud, waste, abuse, and mismanagement affecting the Postal Service. Both

conduct investigations that play a vital role in

helping the Postal Service make improvements.

Work performed by the OIG and the Inspection

Service is included in this report in order to present Congress and the Governors a unified

report of the Postal Service’s efforts to combat

fraud, waste, abuse, and mismanagement.

In this, the OIG’s thirteenth Semiannual

Report, the work has been categorized into

eight subject areas: performance, financial

management, technology, labor management,

oversight of the Inspection Service and other

significant reviews, customer service, organizational dynamics, and organizational structure.

These eight areas include OIG work addressing

the following 10 major management issues facing the Postal Service:

◆ physical security and safeguarding the

mail;

◆ maintaining customer confidence;

◆ improving financial performance and

accountability;

◆ resolving workforce and workplace issues;

◆ controlling workers’ compensation costs;

◆ managing acquisitions and contracts;

◆ leveraging technology;

◆ improving the quality of information for

making decisions;

◆ safeguarding the integrity, confidentiality,

PAGE6 EXECUTIVE SUMMARY

This Executive Summary highlights the

Office of Inspector General (OIG) and

Inspection Service accomplishments from

October 1, 2002, through March 31,

2003, that are contained in this

Semiannual Report to Congress.

The OIG management committee: (Standing, left to right): Kirt West, Colleen

McAntee, Ronald Merryman, Gladis Griffith, Wayne Goleski, Ronald Stith,

Mary Demory and Daniel O’Rourke. (Sitting, left to right): Thomas Coogan,

Karla Corcoran and John Seeba.
PAGE7

and availability of information; and

◆ balancing public service and commercial

enterprise.

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

the specific subject areas:

(1) Performance focuses on the critical core

business processes needed to succeed in a competitive environment. The OIG conducted 22

reviews in this area, including projects that will

help save the Postal Service nearly $38 million

in current and future years. Some examples

include:

◆ Concluding that the Postal Service overstated demand for mail processing equipment, resulting in approximately $9 million in excess equipment parts.

◆ Identifying that eliminating mishandling

of Address Change Service mail could

potentially save $14 million.

◆ Discovering a Postal Service contractor

abandoned a trailer full of mail, delaying

delivery for over 60 days. The contractor

paid damages totaling $51,000, which

included the cost of the investigation.

◆ Disclosing a former Postal Service

mechanic was removed from duty after

improperly receiving nearly $65,000 in

payments from a Postal Service contractor. The Postal Service has debarred the

contractor involved in the vehicle parts

scheme for a period of 3 years.

The Inspection Service conducted numerous investigations in the area of mail theft,

resulting in arrests of over 348 employees and

almost 3,043 non-employees or contractors.

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

and contracting and facilities reviews. The

OIG completed 183 audits and reviews that

identified over $13.4 million in questioned and

unsupported costs. In addition, the OIG completed 153 investigations, which resulted in

14 convictions, 7 indictments, and $4 million

in fines, recoveries, and restitutions, of which

$1.5 million was directed to the Postal Service.

Some examples of OIG work in this area

included:

◆ Determining the Postal Service overfunded the Postal Museum by $1.75 million over a 4-year period. 

◆ Identifying improvements needed in the

Postal Service’s architectural and engineering design services process to track

and monitor fees and provide better

oversight of design work.

◆ Investigating a tort claim for over

$1million filed against the Postal Service for alleged injuries resulting from an

accident involving a postal vehicle. The

OIG investigation revealed the police

report documented no apparent injuries

to the individual. Subsequently, the

claim was denied by the Postal Service.

◆ Investigating a $1.4 million tort claim

filed against the Postal Service for

alleged injuries resulting from a trip-andfall accident at a postal facility. The

OIG investigation disclosed the individual ignored warnings from a Postal Service employee concerning a potential

hazard.

◆ Investigating a former postal employee

for defrauding the Postal Service. The

employee created fictitious invoices and

forged postal documentation as part of an

embezzlement scheme. The former

Postal Service employee was sentenced

to 18 months in prison and ordered to

pay over $220,000 in restitution.

◆ Investigating six Postal Service employees for misuse of government credit

cards. One individual pled guilty to

criminal charges, and administrative

action was taken against five others,

which included two removals, a demotion, a 30-day suspension, and a letter of

warning.

◆ Participating in a joint investigation

with the Department of Justice task force

to uncover a fraudulent testing scheme

involving Postal Service and other government agency underground storage

tanks. The investigation resulted in a

company being placed on probation and

ordered to pay $1million in criminal

fines and nearly $1.3 million in restitution, of which $245,000 will be returned

to the Postal Service.

◆ Investigating a contractor that received

an erroneous payment of nearly
PAGE8

$680,000. The contractor pled guilty to

one count of theft of government property and four counts of money laundering.

The contractor was sentenced to 78

months imprisonment and 36 months

probation, and ordered to pay $593,000

in restitution. 

◆ Revealing that an individual filed a false

claim against the Postal Service for a

broken ankle sustained at a post office.

The OIG’s investigation revealed a witness for the injured individual made false

statements to federal investigators about

the alleged injury. The untruthful witness was indicted on two counts of making false statements.

In addition to other work, the Inspection

Service reported:

◆ Revenue investigations that resulted in

30 arrests and 30 successful criminal convictions.

◆ Initiating 233 employee embezzlement

investigations, which documented losses

of over $3.2 million.

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

reviews in this area. Some of the more significant OIG activities included:

◆ Establishing that unless PostalOne! program management tracks its performance

in accordance with Postal Service policies and ensures compliance, the project

may not meet projected savings.

◆ Concluding the Postal Automated Redirection System Phase One may not yield

anticipated returns on investment

because the study used to support the

project was statistically unsound.

◆ Revealing potential vulnerabilities on

selected servers at Postal Service Headquarters that could result in a loss of confidentiality, integrity, and availability of

vital operational systems.

In addition to other work, the Inspection

Service reported it:

◆ Participated in two international groups

that focus on security. The International

Affairs Group develops initiatives to

improve the safety, security, and reliability of international mail products. The

Postal Security Action Group focuses on

problems and issues affecting safety, security and integrity of international communication products.

(4) Labor Management focuses on issues related

to workplace environment, human resources,

and health care. During this reporting period,

the OIG conducted 12 reviews and 102 inquiries

in this area, which included:

◆ Disclosing that some Postal Service

employees on the workers’ compensation

periodic rolls are at the age at which

some federal employees are eligible for

voluntary retirement. Legislative reform

may allow eligible postal employees to

retire under an applicable retirement program, which may give financial relief to

the Postal Service. 

◆ Disclosing that 2 of 18 district offices

reviewed had not appropriately disciplined or taken action against employees

responsible for sexual harassment or

inappropriate actions or comments. 

◆ Finding that contracting procedures were

not always followed with a health care

provider.

◆ Determining that the Postal Service’s

Injury Compensation Control Office did

not effectively monitor death benefit

claim files, which may have resulted in

an estimated $1.3 million in questionable

benefits being paid to survivors.

◆ Disclosing that a hostile work environment may have existed in one district,

resulting in a Postal Service supervisor

being placed on a performance improvement plan.

◆ Determining that some managers responsible for sexual harassment or inappropriate actions or comments were not considered for exclusion from the Pay for

Performance Program.

◆ Concluding that all 18 district offices

reviewed had adequate policies and procedures in place to prevent sexual harassment.

◆ Discovering that four individuals committed insurance fraud by filing fraudulent medical claims to a federal employEXECUTIVE SUMMARY

Who determines what the OIG

audits or investigates?

The OIG receives requests to

conduct audits and investigations

from many sources. However, the

OIG independently determines

what it audits or investigates.
PAGE9

ees’ health benefit program. The OIG

participated in a joint task force to investigate false medical claims. As a result of

the joint investigation, three of the four

were ordered to pay restitution totaling

approximately $990,000 to the victims’

health care plans. Two of the four individuals were sentenced to serve a combined prison term of 66 months.

◆ Disclosing that two individuals were convicted in a health care fraud scheme

involving filing false claims on behalf of

Postal Service employees. The defendants were sentenced to 9 months and

21 months in prison, respectively, 3 years

supervised release, and were ordered to

pay over $78,000 in restitution to the

victims.

During this period, significant Inspection

Service work included the following in the area

of workers’ compensation fraud:

◆ Sentencing of a former Postal Service

clerk to 1-year probation and restitution

of over $5,000 for mail fraud. As a result

of the investigation, over $21,000 in

workers’ compensation funds was recovered for the Postal Service.

◆ Convicting a former Postal Service letter

carrier on 11 counts of mail fraud and 2

counts of workers’ compensation fraud. 

◆ Sentencing a former letter carrier in Oregon to 3 months incarceration, 3 months

home detention, 5 years probation, and

court ordered restitution of over $29,000

for workers’ compensation fraud. 

◆ Revealing a Postal Service employee

receiving workers’ compensation was refueling company vehicles, transporting

drivers, and driving a contract route.

The employee resigned from the Postal

Service, was ordered to pay over $42,000

in restitution, sentenced to 4 months

home confinement, 2 years probation, 50

hours community service, and a special

assessment of $100. In addition, the

individual has been permanently

debarred from receiving future workers’

compensation benefits.

(5) Oversight of the Inspection Service and

Other Significant Activities. During this

reporting period, the OIG completed one

review of the Inspection Service and one other

review related to Postal Service operations as

highlighted below:

◆ Finding the Postal Inspection Service has

expended over $2.7 million on a fraud

complaint system that will become

redundant.

◆ Determining the Postal Service Transformation Plan is helpful in identifying and

addressing the challenges facing the

Postal Service, but a comprehensive

implementation plan had not been finalized at the time of the audit.

The Inspection Service conducts numerous investigations covering significant issues in

the areas of physical security; narcotics offenses

and trafficking; child exploitation; prohibited

mailings; postal burglaries; mail fraud, including

fraud against consumers, fraud against businesses, and fraud against government; and money

laundering.

(6) Customer Service focuses on the OIG and

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

enhance service to internal customers and

Hotline operations.

(7) Organizational Dynamics focuses on the

OIG and the Inspection Service vision, values,

culture, and diversity.

(8) Organizational Structure focuses on the

OIG and the Inspection Service headquarters

and field structure.
PAGE10 EXECUTIVE SUMMARY
Major Management Issues

Facing the Postal Service

What is a 7-day letter?

The Inspector General Act provides that whenever

the Inspector General becomes aware of particularly

serious or flagrant problems, abuses, or deficiencies

relating to the administration of programs and 

operations of the agency, the Inspector General

should immediately notify the head of the agency.

The head of the agency then has seven calendar days

to transmit the Inspector General report, including

comments, to the appropriate committees or subcommittees of Congress.

PAGE 11
MAJOR MANAGEMENT

ISSUES FACING THE

POSTAL SERVICE

The Postal Service needs to identify specific long-term strategies to better balance its statutory mandate of providing

universal service with its need to remain a

viable commercial enterprise. At stake, according to the Postal Service, is every American’s

right to send and receive mail. The Postal

Service’s April 2002 Transformation Plan began

that process. As it proceeds with transformation, the Postal Service continues to face significant challenges, including financial concerns,

security threats, and labor management issues.

The Postmaster General testified before

Congress that the Postal Service’s current financial situation is improving and would improve

further with the passage of the Postal Civil

Service Retirement System Funding Reform

Act of 2003. This Act was signed into law.

However, the OIG believes that the current and

long-term financial prospects facing the Postal

Service are a critical issue that must be

addressed.

Congress is placing increased emphasis on

the Postal Service due to the significant challenges it is facing. Postal Service oversight in

the current Congress has been raised to the full

committee level in the House and the Senate.

In the House, a bipartisan Special Panel on

Postal Reform and Oversight has been established. The Postal Service and its stakeholders

should be encouraged by the support of the

President and Congress in addressing the future

of the mail. 

The President has established a

Commission to examine the state of the Postal

Service, articulate a vision for its future, and

recommend legislative and administrative

reforms needed to ensure the viability of postal

services. The OIG has submitted comments to

the Commission. The Commission plans to

complete its work in July 2003. The Postal

Service is presenting its specific long-term

strategies to better balance its statutory mandate

of providing universal service with its need to

remain a viable commercial enterprise.

To assist Congress, the Governors, and

postal management as they address these

challenges, the OIG has independently identified the following major management issues:

◆ physical security and safeguarding the

mail;

◆ maintaining customer confidence;

◆ improving financial performance and

accountability;

◆ resolving workforce and workplace issues;

◆ controlling workers’ compensation costs;

◆ managing acquisitions and contracts;

◆ leveraging technology;

◆ improving the quality of information for

making decisions;

◆ safeguarding the integrity, confidentiality,

and availability of information; and

◆ balancing public service and commercial

enterprise.

These issues generally reflect the issues

the OIG has identified in past years. These

major issues, their significance, and the key

OIG projects addressing them are included in

this section.

PHYSICAL SECURITY AND

SAFEGUARDING THE MAIL

With nearly 38,000 facilities and approximately 203 billion pieces of mail delivered each

year, the Postal Service faces the enormous

challenge of moving the mail efficiently and

economically while effectively safeguarding

postal employees, customers, and the mail.

Historically, the Postal Service has dealt with

numerous disasters, both natural and manmade, which have interfered with mail delivery.

However, the October 2001 anthrax attacks

through the mail exposed a new danger, and led

to a renewed emphasis on the security of the

nation’s postal system. The OIG has reviewed

the Postal Service’s response to bioterrorist

attacks on the mail and plans to conduct future

audits of the Postal Service’s response to the

biohazard attacks. 

The Postal Service has acted to ensure the

continued physical security and safety of the

mail and sought new methods to detect biohazardous materials and sanitize the mail. The

technological solutions include procuring new

equipment and changing processes that could

impact the efficiency of mail processing and

PAGE12 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE

The President has established a

Commission to examine the state of the

Postal Service, articulate a vision for its

future, and recommend legislative and

administrative reforms needed to

ensure the viability of postal services,

as reported in the Federal Times and

The Washington Post.

How does the OIG promote

open communication

throughout the organization?

In addition to e-mail and voice

mail, the OIG uses video teleconferencing, all-hands meetings,

teambuilding, and field office 

visits to foster communication

throughout the organization.
PAGE13

staffing requirements. Regardless of technology

or any other improvement or expenditures, the

threat of terrorists using the mail to carry out an

attack can be reduced, but not eliminated. To

better protect its employees and customers, the

OIG believes the Postal Service must also

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

emergency response and evacuation procedures. Additionally, it must continually monitor its spending criteria to ensure that funding

is available for critical life/safety projects. To

assist the Postal Service in addressing this issue,

among others, the OIG:

◆ Reviewed safety issues related to the capital freeze and the effect of the capital

freeze on the Postal Service’s ability to

maintain, preserve, and expand facilities

as needed in an economical and effective

manner.

◆ Reviewed the Postal Service’s disposal

plans for irradiation equipment.

◆ Is participating in Postal Service Mail

Security Task Force meetings.

MAINTAINING CUSTOMER

CONFIDENCE

The Postal Service views its access to the

American household as a unique asset it can

leverage as it faces increasing competition. To

remain competitive, the Postal Service must be

customer-focused and deliver the mail in a

timely manner and at affordable rates.

Moreover, the Postal Service needs to adapt its

services to address changing customer needs and

a changing mailing public. In today’s marketplace, customers have more choices about how

they conduct postal transactions, transmit messages, and deliver merchandise. Increasing customer confidence will be the key to growing

new business. 

To effectively transition to a changing customer base, the Postal Service must continue to

develop and provide products and services that

retain relevance and value for customers with

changing needs, identify efficient transportation and delivery modes, effectively schedule

staff, and maximize technological options. To

assist the Postal Service in addressing this issue,

among others, the OIG:

◆ Assessed the efficiency, effectiveness, and

impact of delayed and Address Change

Service mail. 

◆ Assessed the effectiveness of scheduled

highway contract routes.

◆ Is assessing the efficiency and effectiveness of carrier scheduling and collection

operations.

IMPROVING FINANCIAL

PERFORMANCE AND

ACCOUNTABILITY

Unlike most federal agencies, the Postal

Service relies essentially on its revenues, not

appropriations, to fund its operations. Without

adequate revenues, the Postal Service would

have to reduce services, raise rates, or seek taxpayer subsidies. Thus, the Postal Service needs

to meet the challenge of increasing its revenue

each year to cover increasing costs.

Recent financial data indicate that the

Postal Service’s current financial situation is

improving compared to the prior year. For

FY 2003, the Postal Service projects a net

income of $1 billion, compared to a net loss of

$676 million in FY 2002. The Postal Service

attributes its projected positive net income to its

cost reduction efforts; sustained productivity

increases, particularly labor productivity; and

postal rate increases that took effect in June

2002. In addition, the Postal Service was able to

reduce its outstanding debt by $200 million at

the end of FY 2002, to approximately $11.1 billion. The Postal Service projects it will continue to reduce its debt in FY 2003 because of its

projected net income. These are encouraging

trends.

Increasing productivity and controlling

costs have helped the Postal Service’s financial

position. However, Postal Service operations

were compromised in some sections of the

country because of the terrorist and anthrax

attacks. The administration and Congress

responded by providing the Postal Service over

$760 million in appropriations to secure mail

and protect the health and safety of employees

and customers. In addition, the Postal Service

recently requested $350 million more in

FY 2004 appropriations to pay for additional

costs related to those events. 

Similarly, additional support has come
from Congress to assist in controlling costs. In

November 2002, the Office of Personnel

Management advised the Postal Service that, if

current funding provisions remained in place, it

would pay substantially more than would be

needed to fund its share of future benefits to

employees and retirees participating in the Civil

Service Retirement System. It was estimated

that, unless adjusted, the Postal Service would

pay over $70 billion more than what is needed

to pay retirement benefits. In April 2003, a bill

was signed into law that reduced Postal Service

payments to the Civil Service Retirement

System by about $6 billion over the next 2

years. The legislation requires the Postal Service

to use the savings to pay down its $11 billion

debt and hold postage rates steady until

FY 2006. 

It is crucial, however, that the Postal

Service’s efforts to increase productivity and

control costs continue, and, more importantly,

prove sustainable in the long term. The Postal

Service must also continue to improve its financial operations to ensure it is accountable to the

public and is providing the best possible service

at the lowest cost. To address this issue, the

Postal Service continues with projects to

replace the current general ledger, implement a

monthly reporting cycle, realign its fiscal year

with the government fiscal year, and consolidate common accounting services. However,

these efforts must go hand-in-hand with other

efforts, such as cost reduction, revenue generation, and productivity gains.

In addition to improving financial performance and accountability and reducing costs,

growing revenues is important to assure longterm financial viability. To assist the Postal

Service in addressing this issue, among others,

the OIG:

◆ Identified and continues evaluating

opportunities for the Postal Service to

recover funds from overpayments. 

◆ Assessed sponsorship programs and their

contribution to increasing revenues. 

◆ Reviewed the security of the Retail Data

Mart system.

◆ Is monitoring the Postal Service’s initiatives related to financial system and

process redesign.

RESOLVING WORKFORCE AND

WORKPLACE ISSUES

The Postal Service has more than 850,000

full and part-time employees with personnel

compensation and benefits costs totaling over

$53 billion for FY 2002. This accounts for more

than three-quarters of the Postal Service’s total

operating expenses. Consequently, improving

the work environment and labor relations is key

to maximizing the Postal Service’s operational

and financial performance. In an increasingly

competitive environment, improving labor relations is essential if the Postal Service is to provide universal service at reasonable rates.

However, past attempts to improve labor relations have not been as successful as planned.

Future efforts to improve in these areas will

only succeed if the Postal Service can effectively

partner with its employees and engage them in

a shared vision of success. This vision must

include eliminating any confrontational environment on the workroom floor and giving

employees the freedom to raise concerns without fear of retaliation. As the Postal Service pursues efforts to partner with employees, it must

also develop programs for recruiting, training,

communicating, compensating, and rewarding

employees consistent with the Postal Service’s

vision for the future. In this regard, the Postal

Service needs to establish an effective way to

link employees’ pay to their performance. To

assist the Postal Service in addressing this issue,

among others, the OIG:

◆ Reviewed sexual harassment prevention

programs.

◆ Investigated alleged reprisals against

employees for reporting fraud, waste,

abuse, or mismanagement.

◆ Is reviewing efforts to reduce the number

of grievances and the applicability of best

practices to the grievance-arbitration

process.

CONTROLLING WORKERS’

COMPENSATION COSTS

The Postal Service was the largest participant in the Federal Workers’ Compensation

Program and accounted for approximately

$760 million, or over one-third, of the $2.2 billion in total federal workers’ compensation cash

outlays from claims for reporting year 2002. The

PAGE14 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE

What protection exists for

those who report wrongdoing

to the OIG?

The OIG may investigate

allegations of retaliation and abuse

of authority. In addition, the OIG

helps enforce regulations which

prohibit taking or threatening to

take any action against any

employee because the employee

has made a complaint or disclosed

information to the OIG, unless

the disclosure was made with a

willful disregard for its truth.
PAGE15

Postal Service’s workers’ compensation cash

outlays from claims have risen dramatically,

increasing by approximately 35 percent over

the last 3 years. This is a considerable cost for an

agency that pays this out of operating revenues.

Many factors have contributed to these

increased costs, including the rising age of the

Postal Service workforce; higher costs for medical equipment, medications, and medical treatments; overpayments, including duplicate

payments by the program administrator; and

increased incidents of fraud by doctors and hospitals. To assist the Postal Service in addressing

this issue, among others, the OIG:

◆ Identified factors that are contributing to

the continued increase in workers’ compensation costs.

◆ Is partnering with the Department of

Labor Office of Inspector General to

review why workers’ compensation costs

have increased.

◆ Assumed responsibility for investigating

all new allegations of employee workers’

compensation fraud within the Capital

Metro Area as part of a pilot program.

MANAGING ACQUISITIONS AND

CONTRACTS

The Postal Service manages contracts with

commitment values totaling over $18 billion

annually for its goods, non-transportation services and facilities related reviews. The Postal

Service’s challenge in this area is to balance efficient contracting practices with effective controls to prevent fraud, waste, and abuse. Over

the past several years, the Postal Service has

progressed toward adopting purchasing practices consistent with best commercial practices.

Recently, it has implemented the supply chain

management philosophy to further its business

and competitive objectives in the purchasing

process by consolidating procurements. While

this practice allows for certain efficiencies and

cost savings, adequate controls must be established and enforced to decrease the risk of loss

in the procurement area. The Postal Service

must ensure that its supply chain management

contracting practices are consistent with applicable laws and regulations, and increase its efforts

to ensure that postal contracts contain sufficient language to pursue action against contractors as necessary.

Over the last year, the OIG has proposed

numerous revisions to the Postal Service purchasing manual, including strengthening the

examination of records clause, requiring contractors to have approved accounting systems,

incorporating standard computer security provisions, and increasing the use of suspension and

debarment authority. In September 2002, the

Postmaster General indicated that the Postal

Service should continue to make improvements

to its purchasing system and will consider the

OIG’s findings and recommendations, but

stressed that the Postal Service needed to maintain its flexibility and business discretion in this

area. To continue to assist the Postal Service in

addressing this issue, among others, the OIG:

◆ Conducted audits of contractor claims,

proposals, and incurred cost submissions.

◆ Conducted investigations that led to an

increase in the number of debarments

and suspensions of postal contractors.

◆ Is continuing to conduct fraud awareness

briefings throughout the Postal Service

to give attention to potential fraud indicators.

LEVERAGING TECHNOLOGY

The Postal Service depends greatly on

technology to help process the mail in the most

productive manner. Further, as the Postal

Service addresses biohazard threats, it is identifying and deploying technology that best fits its

operational requirements, is compatible with

existing systems, and improves the security and

safety of its processing operations.

The Postal Service is working to leverage

technology to improve its service, productivity,

and profitability. While it depends on technology to deliver more than 660 million pieces of

mail daily to over 139 million addresses, the

Postal Service must continue to adapt to each

new wave of technology quickly to maintain its

competitive position in the market. To address

changing customer needs, the Postal Service

has committed resources to help ensure better

data management, track mail piece information, and improve communication between the

Postal Service and its customers.

The large size and diversity of the Postal

Service’s customer base presents technological

The Postal Service uses automation such

as the Postal Automated Redirection

System as part of its efforts to leverage

technology. 
PAGE16 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE

challenges and demands that solutions be simple, easy to use, and competitive. To be successful, the Postal Service should also ensure that

the corresponding cost savings projected from

technology investments are realized by efficiently redeploying the resources replaced by

the new technology. Decisions on technology

investments should continue to be scrutinized

more closely and be based on information that

is current, accurate, and reliable. To assist the

Postal Service in addressing this issue, among

others, the OIG:

◆ Reviewed the performance and costs of

the Postal Automated Redirection System for forwarding of customers’ mail.

◆ Reviewed the Postal Service’s testing of

the Human Transporter for delivery operations.

◆ Is reviewing several initiatives to modify

existing automation equipment to take

advantage of new technology to improve

performance. 

IMPROVING THE QUALITY OF

INFORMATION FOR MAKING

DECISIONS

Accurate measurement of mail delivery is

key to improving and sustaining service performance. Reliable data are also keys to effective

decision making. Data justifying the need for

major capital expenditures must be reliable so

that postal management can decide whether to

invest in the project. Furthermore, reliable data

are needed to assess whether the project’s estimated and actual return on investment is reasonable and has been realized. The OIG has

found that the Postal Service does not adequately capture or track the data necessary to

support effective decision making. For example,

postal managers do not always track data to

determine whether they are achieving expected

return on investment.

Changes in technology and the business

environment emphasize the need for providing

timely, accessible, relevant, and accurate data to

Postal Service decision makers. Similarly, an

effective system of accounting, financial, and

information controls is necessary for measuring

financial performance. In the Postal Service, the

general ledger system is the core of financial

reporting systems. The Postal Service has recognized limitations in its current general ledger

system and is moving to a commercial off-theshelf system that will improve support capabilities, adapt to changing business processes, and

support financial reporting.

Also, given the importance of data quality

in setting postal rates and requests to Congress

for appropriations for ongoing costs related to

the October 2001 anthrax attacks, the Postal

Service must continue demonstrating to

Congress, the Postal Rate Commission, stakeholders, and the public that it is making progress

in improving the quality of its revenue, cost, and

service measurements. To assist the Postal

Service in addressing this issue, among others,

the OIG:

◆ Reviewed efforts to convert financial

reporting from a 28-day accounting period to monthly reporting.

◆ Is evaluating the Retail Data system to

ensure sales data captured is accurate and

used for management decision making. 

◆ Is evaluating Postal Service’s design,

development, and implementation of a

new general ledger system.

SAFEGUARDING THE INTEGRITY,

CONFIDENTIALITY, AND

AVAILABILITY OF INFORMATION

Computers and electronic data are vital to

the critical operations of the Postal Service. The

same factors that benefit operations—speed and

accessibility—also make it possible for individuals and organizations to interfere with or eavesdrop on operations, possibly for purposes of fraud

or sabotage. For example, terrorist organizations

could use computer networks to attack the federal infrastructure. Attacks that have already

occurred on both government and private

industry websites reveal the damage a computer

security breach can inflict on brand integrity

and an organization’s revenue stream.

The OIG’s work on telecommunications

security continues to identify vulnerabilities in

the security of computer equipment that are

being addressed by postal management. There

remains a continuing need to emphasize computer security throughout the Postal Service.

Furthermore, the Postal Service’s Internet initiatives reinforced the need for increased security awareness and compliance. Success in this
PAGE17

area will depend on the level of protection

afforded sites such as the Postal Service’s website and the programs operating on it. In addition, the Postal Service needs to continually

protect customer information and guarantee

customer privacy. To assist the Postal Service in

addressing this issue, among others, the OIG:

◆ Continues to work with the Postal Service Computer Incident Response Team

to detect, report, and respond to attacks

on the Postal Service’s information infrastructure.

◆ Performed network vulnerability assessments at several critical Postal Service

installations and reviewed security of

servers at the Headquarters data center.

BALANCING PUBLIC SERVICE

AND COMMERCIAL ENTERPRISE

The 1970 Postal Reorganization Act

requires the Postal Service to operate in a business-like manner supported by its own revenues. As a public agency, it is charged with

binding the nation together with universal mail

service at affordable rates. Its government status

carries certain advantages, such as a monopoly

on letter mail, exclusive access to customers’

mailboxes, and a tax-free status. The universal

service obligation requires a significant, costly

infrastructure to deliver postal services, but

unlike private corporations, the Postal Service

is bound by statutory constraints that limit its

ability to quickly adjust rates to respond to

changing costs, negotiate with customers and

employees, develop and price new products,

close unprofitable outlets, and generate and

invest profits. The Postal Service performs a

wide range of significant law enforcement

duties for the protection of the public, even in

cases that have no direct impact on the Postal

Service. To survive, it needs to articulate how it

will balance providing public service with its

goal of operating like a commercial/private

enterprise in implementing strategies to meet

future service and delivery challenges.

The dual role of the Postal Service has

become more challenging in the face of

increased competition in the delivery and communication industries, especially with electronic communication steadily eroding

First-Class Mail volume. The postal community

has been aware of and debated these challenges

for years, but no consensus has emerged on how

the challenges should be addressed. To date,

efforts at comprehensive legislative reform have

been unsuccessful.

In its Transformation Plan published last

year, the Postal Service presented its strategy to

address concerns raised by Congress, the

General Accounting Office, and others. The

Plan is a good starting point, and provides information about challenges the Postal Service

faces, identifies short-term actions to take under

its existing authority, and outlines long-term

strategies that require congressional action.

How the Plan will be implemented remains to

be seen.

The Postal Service must act decisively to

balance its public service obligation with its

need to remain commercially viable. Until its

statutory framework is changed, it must work

within existing law to increase its accountability in contracting and other major expenditures

to achieve profitability in the near future. The

Postal Service must identify its core businesses

and ensure that new products and services are

self-sustaining. In short, the Postal Service must

continue to refine its operations under the

existing statutory model, while developing and

re-defining its role under the Transformation

Plan. The Postal Service cannot successfully

transform itself without congressional oversight

and attention, as well as a public debate about

the continued relevance of the Postal Service. 

To assist the Postal Service in addressing

this issue, among others, the OIG:

◆ Reviewed the Postal Service’s Transformation Plan.

◆ Has submitted a written statement and a

rebuttal comment and is supporting and

monitoring the work of the President’s

Commission on the Postal Service.

◆ Is examining the ratemaking process and

mailer discounts.

An OIG review found the Postal Service

had not finalized a comprehensive

transformation implementation plan. 
PAGE18 MAJOR MANAGEMENT ISSUES FACING THE POSTAL SERVICE
OFFICE OF INSPECTOR GENERAL

Accepting and Processing Reviews

Transportation and Delivery Reviews

Marketing Reviews

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

PAGE 19

Performance Reviews
OFFICE OF INSPECTOR

GENERAL

To deliver world-class service, businesses

and government agencies must excel in

performing their core business processes.

For the Postal Service, these core business

processes and systems encompass accepting,

processing, transporting, and delivering the

mail, as well as marketing postal products and

services. The OIG has audit teams specializing

in these areas and has conducted expedited

reviews of Postal Service business practices.

During the past 6 months, the OIG completed

22 reviews of the Postal Service’s performance of

core business processes. The reviews identified

opportunities to save nearly $38 million during

current and future years.

ACCEPTING AND PROCESSING

REVIEWS

On average, over 660 million pieces of mail

are accepted each day by the Postal Service in a

variety of ways, including mail collected from

more than 300,000 blue collection boxes, as

well as residential and business collection mailboxes. Express Mail, First-Class Mail, and some

Priority Mail and periodicals are sorted at more

than 470 processing and distribution centers,

while Standard Mail is generally handled at

21 bulk mail centers. In order to ensure timely

and accurate delivery of mail, accepting and

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

Situations that result in delayed mail processing

must be vigorously evaluated and the underlying

causes promptly resolved. In this regard, the

Postal Service continues to explore ways to

enhance the accepting and processing of mail

through innovative automation. 

During the past 6 months, the OIG conducted work in the areas of accepting and processing, which is highlighted below:

MAIL PROCESSING INVENTORY

EQUIPMENT OVERSTOCKED

An OIG audit of inventory management of

mail processing equipment parts and maintenance repair operations identified approximately $9 million in excess spare parts and

approximately 47,000 individual parts valued at

about $13 million that were awaiting final disposition. The excess inventory resulted from

managers maintaining stock levels above

demand because estimates for initial provisioning of spare parts were sometimes overstated.

The Postal Service estimated that $1.25 million

should be characterized as excess spare parts.

In addition, the shipping and receiving

department at a material distribution center

duplicated receiving operations of the central

repair facility. The Postal Service could potentially save $1.15 million over a 10-year period by

reassigning staff and eliminating the duplicate

receiving department. Postal Service management estimated that the savings would only

range from $152,000 to $381,000. Their estimate did not consider fringe benefits and service

wide costs. Postal Service management agreed

with all OIG recommendations, which included

reevaluating authorized stock levels, developing

a systematic process for estimating spare parts,

and disposing of excess spare parts for end-of-life

equipment. Also, the Postal Service agreed to

perform a cost benefit analysis of consolidating

the receiving functions. (AC-AR-03-004)

REVENUE LOST WHEN INELIGIBLE

AND NONAUTHORIZED

ORGANIZATIONS MAIL AT

NONPROFIT RATES

An OIG audit of authorizations to mail at

nonprofit rates found the Postal Service did not

review the continued eligibility of nonprofit

mailers whose tax exempt status had been

revoked by the Internal Revenue Service. In

many instances, the eligibility requirements for

authorization to mail at Nonprofit Standard

Mail rates are similar to those to obtain tax

exempt status under IRS law. Indeed, in many

instances, organizations seeking eligibility to

PAGE20 PERFORMANCE REVIEWS

This section highlights audits, reviews, 

and investigations performed by the OIG

and Inspection Service activities in the

Performance area. Report numbers are

shown in parentheses after the narrative,

as appropriate. Also, the OIG legislative,

regulatory, and policy reviews are included

at the end of this section. In order to

differentiate the work reported by the OIG

and Inspection Service, the pages containing the activities reported by the Inspection

Service have been color screened.

An OIG audit of inventory management

identified approximately $9 million in

excess spare parts.

Among the earliest legislative

protections for the public was the

Mail Fraud Statute of 1872.
mail at nonprofit rates submit evidence of tax

exempt status to support their application.

However, other evidence of nonprofit status

may accompany an application, such as a financial statement prepared by a responsible person

such as an independent certified public accountant, that demonstrates the applicant is organized and operated on a nonprofit basis. For

organizations that qualify and obtain proper

authorization, a reduced bulk-mailing rate is

available. However, the authorization to mail at

nonprofit rates may be revoked when it is determined an organization is no longer qualified;

and, a revenue deficiency may be assessed in the

amount of unpaid postage for the ineligible matter mailed at the Nonprofit Standard Mail rates. 

From January 2000 to September 2002, the

Internal Revenue Service revoked the tax

exempt status of 70 organizations. The OIG

identified three organizations that maintained

active authorizations to mail at nonprofit rates

even though their qualified status had been

revoked. The OIG found that one of the organizations continued to mail at nonprofit rates

for which it no longer qualified. For over 3

years, the organization had 339 mailings totaling over $480,000, all mailed at nonprofit rates

for which it was not eligible. If the organization

mailed the same amount of mailings at the

Standard Mail regular rates, the Postal Service

would have received over $784,700 for the

mailings, a difference of approximately

$304,000. Postal management agreed, and if

appropriate, action will be initiated to revoke

the authorization. Postal Service management

also agreed to establish policies and procedures

for reviewing the continued eligibility for nonprofit authorizations based on the loss of taxexempt status and has already begun reviewing

IRS bulletins. (AC-AR-03-003)

MAIL SUPPLY COSTS REDUCED

BY USING EXCESS SUPPLIES 

ON-HAND

An OIG review of 33 postal districts

revealed that mail product supply requirements

were sometimes overstated. The Postal Service

offers standard, specialized, and customized

Priority Mail and Express Mail packaging products to its customers. These products include

envelopes, boxes, mailing labels, and tape.

These packaging products are purchased by the

Postal Service and are available at no cost to the

customer. In FY 2001, the Postal Service spent

over $138 million on mail product supplies. The

OIG found budget requests for mail product

supplies did not consider on-hand balances of

specialized and standard packing supplies at district postal facilities. As a result, the audit projected that approximately $1.2 million in excess

standard packaging supplies and about

$430,000 in excess specialized packaging supplies could be used to reduce FY 2003 mail product supply expenses. 

In addition, the OIG found that personnel

in 12 of 33 districts established local product

fulfillment operations to manage mail product

supplies. District employees believed that by

locally managing the mail supplies, they provided faster service to their customers.

Customers were also allowed to store and pick

up orders at district facilities or receive deliveries from district supply inventories via Postal

Service transportation. According to Postal

Service directives, customer orders for standard

mail supplies should be ordered through the

Express Mail and Priority Mail supply center,

and orders for specialized supplies should be fulfilled by postal headquarters. Also, personnel in

7 of the 12 districts sampled estimated spending

over $102,000 to manage product fulfillment

locally in FY 2002. However, the Postal Service

was already paying a contractor to manage mail

product supplies at the national Express and

Priority Mail supply fulfillment centers. 

Postal Service management agreed to

ensure that excess supplies in district offices are

used before purchasing additional mail product

supplies. Postal management reduced the FY

2003 budget for standard and specialized mail

supplies to reflect the presence of field inventory. Postal management agreed to the OIG’s

recommendation to discontinue district product fulfillment and enforce the requirement for

facilities to order mail product supplies. In addition, district offices will be directed to exhaust

excess inventory and enforce standard operating procedures, which outline procedures for

customer orders and maintaining supplies.

(AC-AR-03-002)

PAGE21

An OIG review revealed that mail

product supply requirements were

sometimes overstated. 
POSTAL SERVICE FACES

CHALLENGES IN MANAGING

TOTAL FACTOR PRODUCTIVITY

An OIG review of data used in the Postal

Service’s total factor productivity model found

it was appropriate and consistent with published data. Specifically, the data used in the

model was consistent with financial information reported in the Postal Service’s financial

statements and economic indices used were

appropriate. However, despite significant capital investments, the Postal Service’s productivity gains fluctuated and were less than that

realized by the private sector. Factors contributing to the fluctuation and lower productivity gains included the Postal Service’s focus

on service instead of cost management, limits

on its ability to adjust labor resources, and failure to fully realize expected returns on some

capital investments.

The OIG noted that for fiscal years 2000

and 2001, the Postal Service increased its focus

on cost management and reduced labor hours,

capital investments, and material expenditures.

These efforts contributed to a combined

3.7 percent gain in productivity. Subsequent to

the OIG review, the Postal Service also

achieved an approximately 1 percent gain in

productivity in FY 2002. The OIG recommended the Postal Service proactively manage

costs to increase total factor productivity within

current laws and regulations. In addition, the

OIG recommended the Postal Service educate

its stakeholders on the need for additional flexibility to provide universal and public service at

a reasonable cost. Postal management agreed

with the recommendations and concluded the

OIG review recognized the challenges faced in

maintaining productivity gains in the future.

(AC-AR-03-001)

EXPRESS MAIL TRACKING

SYSTEM SCANNING PROCESS

NEEDS IMPROVEMENT

An OIG review of the Express Mail product tracking system revealed that the process

used to measure and report delivery performance data was adequate. However, the OIG

noted that an excessive amount of Express Mail

delivery data for the New York metro district

was entered manually and was not included in

the performance data reported in the system.

Because carriers, clerks, and drivers feared disciplinary action for late delivery of Express

Mail, they used the manual function to avoid

scanning and reporting late deliveries. As a

result, delivery times for Express Mail were

sometimes incorrect. Also, employees used

manual entries to save time and avoid potentially late delivery of Express Mail. District

management was not aware of the excessive use

of manual entries or the entry of inaccurate

delivery data. District managers stated they

neither possessed a “no-failure policy” nor

encouraged the recording of inaccurate delivery data. To address these issues, Postal Service

management informed all personnel of the

appropriate use of manual entries. Postal managers also distribute weekly ranking reports that

are reviewed to compare performance to other

districts. (AC-AR-03-005)

REDUCING WORKHOURS COULD

SAVE OVER $588,000 

An OIG audit revealed a reduction of work

hours in three bulk mail centers could save over

$588,000. Inefficiencies in accepting business

mailings at the three sites existed because managers did not periodically reevaluate staffing levels to improve productivity, and business mail

entry technicians performed duties that should

have been accomplished by dock personnel.

The OIG recommended and Postal Service

management agreed to reduce work hours,

reevaluate staffing needs periodically to determine whether further reductions are necessary,

and ensure appropriately trained personnel perform acceptance functions. (CQ-AR-03-001)

COST SAVINGS FROM

CONSOLIDATION OF 

RECOVERY CENTERS

In response to a congressional request, the

OIG reviewed the procedures for closing,

obtaining real savings, and honoring obligations

for employee placement related to the closure of

a mail recovery center located in the Pacific

Area. The review revealed there is potential for

savings by consolidating operations, and the

Postal Service honored its obligations to reassign employees to new positions. However, the

OIG found the Postal Service needed to

develop policies and procedures to ensure the

proper analysis and notifications are performed

PAGE22 PERFORMANCE REVIEWS

An OIG review found some employees

used manual entries on Express Mail

scanners to avoid reporting late 

deliveries.
PAGE23

to document, verify, and support a consolidation and/or closure decision. Postal management did not agree to develop policies and

procedures, stating it has no plans to consolidate the remaining two mail recovery centers.

However, the Postal Service agreed to develop a

standard operating procedure that could be used

should further consolidation of mail recovery

centers take place. (OE-MA-03-002)

COMMERCIAL CHANGE-OFADDRESS SERVICES OFFER

NUMEROUS ADVANTAGES

In response to a request from the Postal

Service, the OIG reviewed commercial Internet

companies offering change-of-address services.

This review explored three options under consideration by the Postal Service. Regarding

Option 1, the OIG found using the commercial

change-of-address services offered the Postal

Service numerous advantages, including avoiding costs, increasing revenue, and improving

customer service. However, the review found

potential drawbacks in the areas of privacy,

security, and risks to the Postal Service’s business reputation. Regarding Option 2, the review

disclosed that by not accepting change-ofaddress information from commercial sources,

the Postal Service could reduce its risk of processing inaccurate address change information.

Regarding Option 3, the review disclosed that

informing the commercial companies they were

violating Postal Service policy was not viable

because the companies were operating within

postal policy. Recognizing it is ultimately a

Postal Service management decision, the OIG

concluded the Postal Service should consider

utilizing commercial Internet companies’

change-of-address services as they provide the

greatest advantages with the fewest drawbacks.

Furthermore, it offered the opportunities to cut

costs, increase revenue, and improve customer

service. (OE-MA-03-003)

TRANSPORTATION AND 

DELIVERY REVIEWS

Transportation and delivery of mail are a

vital part of the Postal Service’s mission of binding the nation together by providing prompt,

reliable, efficient, and universal mail delivery at

affordable rates. The Postal Service spent over

$30 billion in FY 2002 to transport and deliver

mail to 38,000 post offices and to 139 million

addresses. To transport and deliver the mail, the

Postal Service utilizes contractors and a fleet of

over 200,000 owned vehicles and employs a

combination of air, surface, rail, and water

modes. In addition, the Postal Service has an

agreement with Federal Express to transport

Express, Priority, and First-Class Mail. Over

350,000 carriers delivered approximately

203 billion pieces of mail in FY 2002—an average of about 1,400 pieces of mail for every

household and business. The Postal Service is

challenged to increase efficiency in the transportation and delivery area because mail volume has not grown sufficiently in recent years to

support the extension of the delivery network

needed to cover the growth in the number of

delivery points, which grew by 1.8 million in FY

2002. As part of its work in this area, the OIG

reviewed and raised issues on a transportation

agreement; discussions are ongoing with postal

management. During the past 6 months, the

OIG issued 13 transportation and deliveryrelated products, which are highlighted below:

WEAKNESSES IN THE VOYAGER

CARD PROGRAM

An OIG review of the Postal Service

Voyager card program at a District in the

Southwest Area revealed these cards, used for

fuel purchases and vehicle maintenance, were

not adequately protected from improper, fraudulent, and questionable use. Specifically, cards

were left in open areas, unattended vehicles,

and safes without restricted access, and were

also shared among vehicles. Master personal

identification number lists were open to unauthorized review. Personal identification numbers were written on receipts. The numbers

were also written on receipts. The OIG review

also identified categories of questionable transactions and found site managers did not properly file or reconcile receipts. Consequently, the

Postal Service potentially paid unauthorized or

erroneous charges, and its Voyager card program

was vulnerable to fraud. Postal management

agreed with the OIG’s recommendations and

has taken steps to review questionable transactions and provide a uniform process for ensuring

that personnel follow the physical, administrative, and accounting controls specified for the

Voyager card program. (TD-AR-03-003)

An OIG review of the Postal Service’s

Voyager card program found that 

cards were left in open areas,

unattended vehicles, and safes 

without restricted access.
PAGE24

MORE TRAILERS LEASED THAN

NEEDED

An OIG audit, conducted in response to a

congressional request, determined the Postal

Service leased more trailers than needed to

transport mail and equipment, resulting in at

least $2.2 million in unnecessary annual transportation costs. The audit found that the Postal

Service used the leased trailers to store on-site

equipment instead of using them to transport

mail and equipment. Over each of the past 4

years, the Postal Service sold its own trailers for

$500, instead of using them for the storage of

equipment. Further, the OIG identified opportunities for the return of excess mail transportation equipment to service centers instead of

storing it in leased trailers. The OIG recommended and postal management agreed to

reassess all mail transport equipment and trailer

requirements; explore alternatives for storing

equipment and make better use of Postal

Service-owned warehouse facilities. The Postal

Service stated they were returning 300

unneeded trailers to the suppliers, which will

save $1.1 million annually. Postal Service management stated that any further reduction

would impact operations. However, they are

taking additional actions that may result in a

further reduction in the number of trailers.

(TD-MA-03-001)

SAFETY AND MAINTENANCE

CONCERNS FOR 40-FOOT

TRAILERS

An OIG review found that the existing 40-

foot trailer fleet is not maintained in accordance

with federal or contract safety standards. These

40-foot trailers average more than 25 years in

age. The audit found that service was not performed on the trailers and, consequently, preventative maintenance was not accomplished.

In addition, maintenance and repair documents

were not recorded or retained. These deficiencies occurred because the Postal Service did not

enforce contract maintenance requirements.

Since maintenance and repair activities were

not performed as required, many trailers had

deficiencies, which made them unsafe or unfit

for service. For example, these trailers, representing only 55 percent of the total trailer fleet,

accounted for more than 77 percent of the trailers that were out of service. The OIG recommended and postal management agreed to take

corrective actions to enforce compliance with

federal and lease contract safety requirements,

and ensure that contract noncompliance would

result in administrative action against its contractors. (TD-AR-03-001 and TD-VR-03-001)

INCREASED EFFICIENCIES IN

ADDRESS CHANGE SERVICE MAIL

COULD POTENTIALLY SAVE $14

MILLION

An OIG audit concluded that from

September 2000 through July 2002, 80 percent

of Address Change Service mail was processed

properly. However, the audit found that the

Postal Service unnecessarily spent more than

$20 million because employees manually

returned 20 percent of mail instead of notifying

mailers electronically. The mail was returned

manually because Postal Service policies were

outdated, performance data was not fully analyzed, and employees were not fully trained. The

audit also forecast that the Postal Service could

save about $14 million over the next 2 years if

these issues were corrected. 

Postal management questioned the estimated monetary impact and the validity of the

findings based on how the program works.

However, the OIG’s findings were based on an

analysis of how the program operates and the

monetary impact was based on reported Postal

Service performance data, error rates identified

in official Postal Service documents, and cost

factors published by the Postal Rate

Commission. Postal management has identified

actions planned or taken that will address all

OIG recommendations which included developing training materials for supervisors and

employees to ensure that Address Change

Service mail is properly handled, and ensure that

Postal Service managers at all levels routinely

analyze available Address Change Service performance data and use that information to provide feedback to local post offices on Address

Change Service performance.

(TD-AR-03-004)

TRAILER LOADED WITH MAIL

ABANDONED BY CONTRACTOR

A trailer of mail en route from Oregon to

Montana was not delivered for over 60 days

because the driver abandoned the trailer with

An OIG review found safety and maintenance concerns with the Postal Service’s

fleet of 40-foot trailers.

PERFORMANCE REVIEWS

An OIG audit found the Postal Service

manually returned 20 percent of mail

with Address Change Service instead

of notifying mailers electronically.
PAGE25

the mail still inside. The Postal Inspection

Service referred this case to the OIG because

the contractor was paid for delivery services

that were not provided. The OIG investigation

identified numerous violations of the contracted services to deliver the mail. The contractor paid damages totaling $51,000 which

included the cost of the investigation.

CONTRACTOR DEBARRED IN

VEHICLE PARTS SCHEME

A Postal Service mechanic was removed

from duty after receiving over $65,000 in payments from a company under contract to provide parts for Postal Service vehicles. The

mechanic advised the Postal Service to purchase parts from a company in which the

employee and spouse had a financial interest.

The postal mechanic took vehicle parts that

belonged to the Postal Service, cleaned them,

and then resold them to the Postal Service as

new parts. The contractor was debarred for 3

years. 

VEHICLE INVENTORY CONTROL

WEAKNESSES IDENTIFIED

An OIG review of the vehicle maintenance facility in a Postal Service district

revealed that officials did not properly account

for its fleet of delivery vehicles and could not

validate the need to supplement postal-owned

vehicles with a fleet of leased vehicles. Officials

were not properly using the Vehicle

Management Accounting System or maintaining accurate, timely, or complete information,

and, therefore, could not always identify or take

appropriate action in accounting for vehicles.

In addition, officials did not have adequate or

complete information to determine requirements for leased vehicles. The OIG recommended and postal management agreed to take

corrective actions to inventory its fleet of

vehicles, properly use the vehicle management

accounting system, and properly analyze the

requirements for leased vehicles.

(TD-AR-03-005)

DELAYED MAIL OBSERVED AT

SOUTHWEST AREA OFFICE

An OIG review of a Southwest Area office

disclosed approximately 20,000 pieces of

delayed mail. The OIG observed accumulated

mail that was 5 to 6 weeks old. The review

revealed the mail was not deliverable as

addressed and consisted of First-Class return-tosender mail and Address Change Service mail.

The undeliverable mail was not processed on a

daily basis and was delayed and accumulated to

unacceptable levels. An OIG follow-up review,

performed two months later, found that conditions had improved, but more than 9,000 pieces

of mail remained backlogged. Postal Service

management agreed with OIG recommendations to take necessary actions to reduce the

mail backlog and prevent reoccurrence. 

(TD-MA-03-002)

CANCELLING UNNECESSARY

HIGHWAY CONTRACT TRIPS

COULD RESULT IN SAVINGS

Three OIG audits revealed the Postal

Service could save about $2.4 million by canceling unnecessary trips between mail processing facilities. The trips could be terminated

because trip volume was low and mail could be

consolidated on other trips without negatively

affecting service. Specifically, processing facilities in the Northeast, Capital Metro, and New

York Metro Areas could terminate 84 unnecessary trips, and mail could be consolidated on

other trips without negatively affecting service.

Postal Service managers agreed to eliminate 46

trips, but disagreed with eliminating the

remaining 38 trips, stating this would reduce

operational flexibility. However, postal management agreed to reassess the remaining 38 trips

and will cancel trips as necessary and document

reasons for retaining other trips.

(TD-AR-03-002, TD-AR-03-007, and 

TD-AR-03-008)

PURCHASING TRAILERS COULD

POTENTIALLY SAVE MILLIONS

An OIG audit found that the Postal

Service could save $4 million by purchasing

1,500 trailers instead of leasing them, and concluded management was planning to lease the

trailers because they did not follow the analytical and approval procedures required by Postal

Service policy. Consequently, the OIG recommended that postal management prepare a

decision analysis report, which included a

required lease versus buy analysis, and submit it

to the Board of Governors for approval. Postal

An OIG audit found inefficiencies existed

because the Postal Service underutilized

trucks, and drivers performed

overlapping work.
management did not agree that a decision

analysis report and Governors’ approval were

required. Also, they stated their analysis concluded the benefit of contracting instead of purchasing would be over $10 million, but this

analysis was not performed in accordance with

existing policy. Postal management acknowledged that this acquisition was part of a national

trailer lease and is conducting additional analyses that will address these issues. When completed, the OIG will review the results. The

OIG is pursuing the disagreements through the

audit resolution process. (TD-AR-03-009)

MAIL TRANSPORTATION

INEFFICIENCIES FOUND IN

PACIFIC AREA

An OIG audit determined that inefficiencies existed in a network for transporting mail

between stations in the Pacific Area.

Specifically, the audit found letter carriers and

postal vehicle service drivers performed overlapping work, underutilized truck capacities, and

failed to consolidate routes. For example, of 13

trucks observed departing the facility over a 2-

day period, 7 trucks were filled to one-half

capacity and 3 trucks were filled to three-quarter’s capacity. In response to OIG’s recommendation to determine available options to reduce

unnecessary costs for bulk mail transportation,

postal management agreed to conduct further

comprehensive cost analysis, ensure cost comparisons follow labor agreement guidelines and

address employee reassignment issues. 

(CQ-MA-03-001)

MARKETING REVIEWS

The Postal Service operates in a globally

competitive environment and its ability to

maintain or increase its market share of the

$900 billion mailing industry is essential to providing universal service at affordable rates.

Therefore, the Postal Service designs its marketing products and services to build customer

awareness and loyalty. The Postal Service also

wants to ensure its services are available at

places where customers choose to do business.

During this reporting period, the OIG conducted work in the area of marketing, which is

highlighted below:

POSTAL SERVICE’S INVOLVEMENT

IN SPONSORSHIPS NEEDS

IMPROVEMENTS

An OIG audit of the Postal Service’s

involvement in sponsorships found no significant exceptions with sponsorship expenditures,

but disclosed it has not managed them effectively. Specifically, the Postal Service was

unable to track or verify revenue directly back

to a particular event or sponsorship. The OIG

also found the Postal Service lacked goals and

objectives for some sponsorships and did not

manage tickets and invitations appropriately.

As a result, the Postal Service could not determine its return on sponsorship investments,

measure the effectiveness of its sponsorships,

and take advantage of networking opportunities

to generate revenue.

The OIG found no laws or policies precluding the Postal Service from being involved

in sponsorships. However, in response to media

coverage and public policy debate on sponsorships, the OIG believes it is critical for the

Postal Service to justify use of sponsorships.

Furthermore, the Postal Service needs to weigh

its involvement in sponsorships in light of its

monopoly status, financial condition, investment returns, and core mission. 

Postal management agreed with the OIG’s

recommendations to identify and track all costs

associated with each sponsorship initiative;

ensure data is captured to track sales, leads, and

monetary benefits directly related to sponsorships; and ensure sponsorships have specific and

measurable goals and objectives and update the

policy to include this requirement. In response

to OIG’s recommendation to formally appoint

one executive with responsibility for the overall

management of the sponsorships program, the

Postal Service, while disagreeing, stated that this

would be accomplished by the Headquarters

marketing department. (OE-AR-03-003)

LEGISLATIVE, REGULATORY &

POLICY REVIEWS 

During this reporting period, the OIG

identified legislation, regulations, and policies

affecting Postal Service performance. One piece

of legislation reviewed is highlighted below:

PAGE26 PERFORMANCE REVIEWS
PAGE27

ENACTED LEGISLATION

Executive Order No. 13278 —

President’s Commission on the United

States Postal Service

This executive order established a presidential commission to examine the state of the

United States Postal Service. The Commission

will prepare and submit a report to the President

articulating a proposed vision for the future of

the Postal Service and recommending legislative and administrative reforms needed to

ensure the Postal Service’s viability. In fulfilling

its mission, the Commission was asked to consider the following: (1) the role of the Postal

Service in the 21st century and beyond; (2) the

flexibility the Postal Service should have to

change prices, control costs, and adjust service

in response to financial, competitive, or market

pressures; (3) the rigidities in cost or service that

limit the efficiency of the postal system; (4) the

ability of the Postal Service, over the long term,

to maintain universal mail delivery at affordable

rates and cover its unfunded liabilities with

minimum exposure to taxpayers; (5) the extent

to which postal monopoly restrictions continue

to advance the public interest under evolving

market conditions, and the extent to which the

Postal Service competes with private sector services; and (6) the most appropriate governance

and oversight structure for the Postal Service.

The OIG believes the Commission will

generate debate on ways to transform the Postal

Service and ensure its continued viability and

relevance into the 21st century. The OIG submitted a formal written comment to the

Commission highlighting the 10 major management issues the OIG believes must be

addressed if the Postal Service is to remain a

viable commercial enterprise. The OIG emphasized that as the Postal Service works to transform itself for the future, it must rely on

performance management principles to measure progress and inject accountability into programs and operations. The OIG continues to

monitor Commission activities and review public comments and testimony and has offered

technical assistance to the Commission. 

An OIG audit disclosed the Postal

Service’s management of sponsorships

needs improvement.
PAGE28 PERFORMANCE REVIEWS

INSPECTION SERVICE

Mail thieves frequently concentrate on targets that offer a large volume of mail including

not only items of obvious value in the mail, such

as jewelry, computers, cash, credit cards, and

checks, but also mail containing personal and

financial information. Postal Inspectors investigate mail theft to maintain the public’s confidence in the Postal Service and preserve the

sanctity of the mail. Postal Inspectors are working with major mailers to prevent mail theft and

related problems. While the overwhelming

majority of Postal Service employees work conscientiously to move the nation’s mail to its

proper destination, a small number of employees

abuse the public’s trust. It is the job of the

Inspection Service to identify these individuals

and take steps to have them prosecuted and

removed from the Postal Service. The following

chart provides the activity during this reporting

period.

TYPE OF INVESTIGATION

Non-Employee Mail Theft

Employee Mail Theft

ARRESTS

3,043

348

CONVICTIONS

2,465

307
Financial Management

Reviews

OFFICE OF INSPECTOR GENERAL

Financial Opinion Audits

Financial-Related Reviews

Contracting and Facilities Reviews

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

PAGE 29
PAGE30

OFFICE OF INSPECTOR

GENERAL

The Postal Service continues to face one

of the most challenging financial periods in its history. The year began with a

focused plan to reduce costs, increase efficiency

and improve service. As a result, and despite the

effects of the recession and the terrorist attacks,

the Postal Service closed the year with a loss

that was almost $700 million below original

projections. The actions taken by the Postal

Service in FY 2002 have laid a foundation for

savings in 2003 and beyond, setting the stage for

achievement of the Transformation Plan goal to

take $5 billion in costs out of the system by the

end of 2006. As evidence, the Postal Service is

projecting a net income of about $1 billion in

FY 2003. In addition, in the near term the

Postal Service will seek moderate legislative

reform that will support the Postal Service’s

ability to provide affordable universal mail service. Legislation has already been passed that

would permit the Postal Service to reduce its

payments to the Civil Service Retirement

System. A recent analysis conducted by the

Office of Personnel Management found that, at

present funding rates, the Postal Service could

overfund its liability by $71 billion. The legislation will permit the Postal Service to substantially reduce its debt and hold postage rates

steady until at least 2006, while protecting the

benefits of current and future retirees covered by

this retirement system.

The Postal Service relies on strong financial management controls to maximize revenue

and minimize costs. In the past 6 months, the

OIG has completed 183 financial management

reviews and 153 investigations. These efforts

identified over $13.4 million in questioned and

unsupported costs. These projects add value to

the Postal Service by identifying opportunities

for cost savings and improving financial management, contracting, and facilities practices,

and detecting and deterring fraud, waste, abuse,

and mismanagement.

FINANCIAL OPINION AUDITS

The Postal Reorganization Act of 1970

requires an annual audit of the Postal Service’s

financial statements. The OIG conducts audits

in support of the independent public accounting firm’s overall opinion on those statements.

These audits assess the integrity and reliability

of the financial information contained in the

Postal Service financial statements. The

Information Technology and Accounting

Service Centers in Eagan, Minnesota; St. Louis,

Missouri; San Mateo, California; and at Postal

Service Headquarters in Washington, DC,

oversee the collection of over $66 billion in revenue and the recording and disbursement of a

similar amount each year. Since its inception,

the OIG has served as co-contracting officer’s

representative with Postal Service Finance for

the work performed by the independent public

accounting firm. However, beginning in

FY 2003, the OIG is the sole contracting officer’s representative. Examples of reviews in this

area are highlighted below: 

◆ The OIG conducted audits at these centers and headquarters and found that

management’s policies, accounting procedures, and internal controls conformed

with generally accepted accounting principles. However, the OIG identified the

following areas for improvement:

◆independently tracking and accounting

for consigned vehicle parts;

◆maintaining documentation confirming

receipt of goods ordered electronically;

◆processing compensation payments in

accordance with established internal

controls; and

◆entering data for and extending the

record retention period of inbound international mail.

This section highlights audits, reviews,

and investigations performed by the OIG

and the Inspection Service in the financial

management area. Report numbers are

shown in parentheses after the narrative,

as appropriate. Also, the OIG legislative,

regulatory, and policy reviews are included

at the end of this section. In order to differentiate the work reported by the OIG

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

Service have been color screened.

PAGE30 FINANCIAL MANAGEMENT REVIEWS

Why does the OIG report 

all of its findings and issues

to the Governors and

Congress?

The OIG is required by law to

keep the Governors and

Congress fully and currently

informed. The OIG also reports

its findings and issues to Postal

Service management so that they

may take appropriate action to

further improve the efficiency

and effectiveness of Postal

Service programs and operations.
PAGE31

Postal Service management generally

agreed with OIG recommendations to

improve all of these areas. 

(FT-AR-03-006, FT-AR-03-007, and 

FT-AR-03-008)

◆ The OIG reviewed travel and representation miscellaneous expenses for Postal

Service officers, as well as, travel and miscellaneous expenses for the Office of the

Board of Governors for the year ending

September 30, 2002. The reviews determined expenses were properly supported

and complied with postal policies and

procedures and Board of Governors’

guidelines. (FT-AR-03-002 and FT-AR03-003)

FY 2003 FINANCIAL

INSTALLATION AUDITS

The OIG conducted audits at 61 postal

facilities and found financial information was

reasonably and fairly represented in the

accounting records, and internal controls were

generally in place and effective. However, at

one facility, the OIG found financial transactions were not reasonably and fairly represented, and internal controls for vending

accountability were not in place and effective,

resulting in a shortage of over $15,000. In addition, at 51 facilities, the OIG identified noncompliance with Postal Service instructions

and minor internal control weaknesses. The

OIG issued individual reports to address these

issues and will issue a summary report providing

Postal Service management with recommendations to address systemic issues. (For specific

reports see Appendix A, pages 102-103)

BULK FUEL INVENTORIES NOT

ACCOUNTED FOR AT A WESTERN

AREA VEHICLE MAINTENANCE

FACILITY

During the FY 2002 financial statement

audits, the OIG performed testing at four vehicle maintenance facilities that contained bulk

fuel inventories. Of the four facilities tested, the

OIG found that one facility did not properly

account for inventories of bulk fuel because it

did not conduct reconciliations every accounting period as required. This occurred because

only one employee performed fuel inventory

reconciliations. When the employee was not

available, the reconciliations were not performed. As a result, there was no assurance that

bulk fuel managed by the facility was properly

used or that the inventory accounting system

properly reflected the available fuel on hand.

Postal management agreed to reconcile bulk

fuel inventories each accounting period and

train another individual as a backup for performing reconciliations. (FT-AR-03-005)

FINAL WRAP-UP OF FY 2002

FINANCIAL INSTALLATION

AUDITS

The OIG wrapped-up its FY 2002 financial

installation audits at 76 facilities and found

financial information was reasonably and fairly

represented in the accounting records, and

internal controls were generally in place and

effective. However, at two facilities, the OIG

found accounting records were not reasonably

and fairly represented and internal controls

were not in place and effective. Specifically, the

OIG found an overage in the accountability of

over $7,000 and an unauthorized cash reserve of

over $22,000. Also, the OIG was unable to

obtain documentation to support transactions

totaling over $300,000 posted in FY 2002 at a

philatelic station. In addition, at 72 facilities,

the OIG identified non-compliance with Postal

Service instructions and minor internal control

weaknesses. Postal management agreed to

improve all of the areas. (For specific reports see

Appendix A, pages 100-102)

In addition, the OIG issued five capping

reports to summarize systemic issues identified

during the FY 2002 financial installation audits.

The reports contained issues related to stock

destruction committee composition; contract

postal units; inactive accounts; suspense items;

stamp and cash accountability procedures; and

mail acceptance, verification, and clearance

procedures. Postal Service management agreed

with OIG recommendations to improve all of

the areas. (FF-AR-03-141, FF-AR-03-142, 

FF-AR-03-146, FF-AR-03-155 and 

FF-AR-03-156)

FACILITY PROTECTIVE REVIEWS

The OIG has instituted a Facility

Protective Review program to provide critical

coverage to small Postal Service facilities. The

benefits of the program include:

Pictured above and below:

The OIG conducted audits at 137 

postal facilities and found financial

information was reasonably and 

fairly represented in the accounting

records.
PAGE32

◆ Providing a systematic method for identifying and reviewing problems at local

offices;

◆ Providing valuable and timely feedback

to local and headquarters-level management; and

◆ Identifying nationwide audits by developing trends of problems at local facilities.

Areas of coverage during the protective

audits include asset accountability, employee/

customer service, information systems security,

and compliance with laws and regulations. 

FINANCIAL-RELATED REVIEWS 

Financial-related reviews examine areas

that have significant financial implications and

offer the Postal Service an opportunity to save

resources. The OIG has taken a proactive

approach to identify areas that offer potential

cost savings and improve postal operations. In

the past 6 months, the OIG has completed

20 financial-related audits. Some significant

reviews are highlighted below:

POSTAL MUSEUM OVERFUNDED

BY $1.75 MILLION

An OIG audit, conducted at the request of

the Board of Governors, revealed the Postal

Service overfunded the Postal Museum by

$1.75 million over a 4-year period. The audit

found the mechanism for establishing the

museum’s budget as specified in the agreement

was not followed and the Postal Service had no

recourse in the event of Smithsonian’s nonperformance other than to withhold funding. The

OIG recommended and postal management

agreed to examine the possibility of recovering

the $1.75 million overpayment. In addition,

postal management agreed that the current system for calculating financial contributions to

the museum is unclear and needs to be corrected. Further, postal management agreed the

current arrangement is outdated and needs to

be revised to better protect the interests of the

Postal Service. (FT-MA-03-001)

OIG VERIFIES POSTAL SERVICE

EMPLOYEE WITHOLDINGS AND

EMPLOYER CONTRIBUTIONS 

An OIG review, conducted in response to

a request by the Office of Personnel

Management, verified Postal Service employee

withholdings, employer contributions, and

enrollment information for health benefits, life

insurance, and retirement. In a review of three

randomly selected pay periods, the OIG found

two employees properly elected life insurance

coverage, but Postal Service personnel did not

update the life insurance codes to reflect the

proper election. As a result, the premiums for

optional coverage were never withheld from the

employees’ paychecks and the optional insurance coverage, totaling almost $130,000, was

not provided for the past 7 and 17 years, respectively. Human resource office representatives

agreed to research the records and make appropriate corrections. 

Further, the OIG found a miscommunication between the Office of Personnel

Management and the Postal Service resulted in

an overpayment of approximately $325,000 in

funds transferred for inactive health plans. This

information was provided to the Office of

Personnel Management and required no management action. However, the Office of

Personnel Management agreed to provide guidance for clarification on adjustments for the

inactive health plans. The OIG intends to follow-up on these issues during its FY 2003

review. (FT-AR-03-001)

CORPORATE CONTACT

MANAGEMENT PROGRAM

OVERFUNDED

An OIG follow-up audit of the Corporate

Contact Management Program found the

Postal Service does not need the level of funding approved and program managers did not

always involve external stakeholders or define

key requirements in the development of the

program’s strategy. In addition, the audit disclosed the Postal Service did not always initiate

or update security reviews for the Corporate

Contact Management systems. The OIG recommended management determine how to

accurately reflect and report the current

Corporate Contact Management program to

the Board of Governors; immediately include

information security officials and contact center

managers in the integration and consolidation

strategy; and obtain written input regarding any

issues raised concerning contract proposals

before awarding any contracts. Postal management should also complete and update

FINANCIAL MANAGEMENT REVIEWS

An OIG audit determined the

Postal Service overfunded

the Postal Museum by $1.75

million over a 4-year period. 
PAGE33

applicable external contact centers’ information security assurance reviews. While postal

management disagreed with the OIG’s four recommendations, actions taken or planned are

responsive to the intent of the recommendations and should correct the issues identified in

the audit. (OE-AR-03-001)

OIG INVESTIGATIVE EFFORTS

ASSIST CIVIL CLAIMS AGAINST

THE POSTAL SERVICE 

The OIG assists the Postal Service in

reducing civil claims by working with the Postal

Service Law Department and United States

Attorney Offices to conduct investigations into

tort claims filed against the Postal Service.

These investigations often result in significant

reductions in the initial claim amount. During

the past 6 months, the OIG has closed 24 tort

claim investigations and reported significant

activity on the following cases:

◆ An OIG investigation resulted in a $1.2

million cost avoidance in a lawsuit

against the Postal Service. The individual

claimed serious personal injuries to self

and a family member when the individual’s vehicle struck an embankment and a

utility pole while attempting to avoid a

head-on collision with a rural postal carrier. The OIG’s investigation cast considerable doubt on the credibility of the

claimant. The investigation revealed the

individual had previously filed numerous

insurance claims for the same injuries

claimed in this accident. It was also discovered that the claimant had been

arrested and was facing several criminal

charges, including insurance fraud. In

addition, the OIG arranged for an independent expert analysis of the claimant’s

vehicle. This analysis determined that the

claimant was not wearing a seatbelt at the

time of the accident.

◆ As a result of an OIG investigation, the

Postal Service Law Department denied

an Idaho individual’s claim for over

$1 million for injuries allegedly suffered

during an accident with a Postal Service

vehicle. The OIG investigation revealed

the police report completed at the scene

determined there were no apparent

injuries at the time of the accident. In

addition, the individual had not sought

medical attention for alleged injuries

until nearly a year after the accident and

the claimant had already been paid by an

insurance company for the damages. 

◆ An OIG investigation resulted in a $1.4

million cost avoidance in a lawsuit

against the Postal Service involving an

individual who allegedly tripped and fell

over a steel mat at a postal facility. The

individual claimed numerous injuries and

requested reimbursement for medical

expenses and pain and suffering resulting

from the alleged injuries. The OIG investigation, which included a comprehensive

review of the documents filed in the case

and interviews of the witnesses to the

accident, revealed the medical report did

not substantiate the claim that all of the

individual’s injuries were caused by the fall.

In addition, the investigation disclosed

the individual ignored the warnings of a

maintenance person at the facility, and

certain events took place after the fall

that contradicted the documentation

filed by the individual.

◆ An OIG investigation resulted in the

indictment of a witness for making false

statements in connection with a friend’s

lawsuit against the Postal Service for a

broken ankle sustained at a Nebraska 

post office. The individual sought

$100,000 in damages.

FY 2003 OBSERVATIONS OF

STATISTICAL TESTS FOR THE COST

AND REVENUE ANALYSIS

The OIG performed cost and revenue

analysis audits in nine districts and found that,

generally, the tests were conducted in accordance with Postal Service procedures. However,

employees did not always adhere to instructions

for data collection, equipment use, and telephone readings in five districts. The OIG issued

individual reports to address these issues and

will issue a summary report providing Postal

Service management with recommendations to

address systemic issues. (For specific reports see

Appendix A, page 104)

The OIG assists the Postal Service Law

Department and United States Attorney

Offices by conducting investigations into

tort claims filed against the Postal

Service. For example, OIG investigations

have saved the Postal Service money by

uncovering false claims resulting from

accidents with postal vehicles. 
FORMER POSTAL SERVICE

EMPLOYEE SENTENCED FOR

FRAUD

A former Postal Service employee was sentenced to 18 months in prison and ordered to

pay over $220,000 in restitution for defrauding

the Postal Service. The OIG investigation disclosed that from July 1997 to May 2000, the former postal employee created fictitious orders

and forged signatures of Postal Service officials

to create the appearance that goods and services

had been delivered as invoiced. To accomplish

the scheme, the former Postal Service employee

rented a post office box under a false name and

received funds from fictitious invoices, and

deposited the funds into personal bank

accounts. 

INDIVIDUAL INDICTED FOR MAIL

FRAUD ON INDEMNITY CLAIM

As a result of an OIG investigation, an

individual was indicted and charged with one

count of mail fraud. The OIG’s investigation

began after a Postal Service clerk in the

Northeast Area provided information about an

individual who filed an indemnity claim for

coins worth approximately $5,000 not received.

OKLAHOMA INDIVIDUAL

INDICTED FOR NINE COUNTS OF

MAIL FRAUD 

An OIG investigation revealed that an

Oklahoma individual defrauded the Postal

Service by submitting false indemnity claims for

approximately $5,400 and supporting them

with altered sales receipts. The individual was

indicted by a federal grand jury for 6 counts of

false statements and 9 counts of mail fraud. The

false indemnity claims were submitted for

international mail that was reported as

damaged, missing contents, or undelivered.

OIG WORKS WITH POSTAL

SERVICE TO ADDRESS ABUSES

OF GOVERNMENT-ISSUED CREDIT

CARDS 

The OIG is partnering with the Postal

Service to identify employees and former

employees who abused their government credit

cards. During this reporting period, the OIG

investigated six individuals for misuse of their

government credit cards. The unauthorized purchases on the credit cards were for personal use,

such as automated teller machine withdrawals

and a car rental. The amounts involved ranged

from $1,600 to $3,000. One individual pled

guilty in federal court to misappropriation of

over $3,000 in postal funds; sentencing is pending. The Postal Service took administrative

actions against the other five, including two

removals, a demotion, a 30-day suspension, and

a letter of warning. 

CONTRACTING AND FACILITIES

REVIEWS

The Postal Service manages contracts with

commitment values totaling over $18 billion

annually for its goods, non-transportation

services, and facilities related reviews.

Consequently, this makes the Postal Service

one of the largest civilian contracting agencies

in government. During the first half of FY 2003,

Postal Service purchases included over

$189 million in noncompetitive contracts and

more than $170 million in purchase credit card

transactions. The Postal Service is also one of

America’s largest owners, developers, and managers of real estate, committing over $135 million for repair, renovation, and construction of

new facilities, and paying over $414 million in

rent for the first half of FY 2003.

The OIG is responsible for contract audits

designed to assist Postal Service contracting

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

reviews of contractor financial systems. In the

past 6 months, the OIG conducted 21 reviews

of contracting and facilities-related issues with

the assistance of a contract audit agency. Also,

the OIG has many open criminal investigations

targeting fraud and corruption in these areas.

Highlights of some contracting and facilities

reviews follow:

CONTRACT AUDITS IDENTIFY

OVER $11.7 MILLION IN

QUESTIONED COSTS 

In the past 6 months, the OIG worked

with the Defense Contract Audit Agency and

completed 13 audits of contracts valued at over

$150 million. These audits resulted in over

$11.7 million in questioned and unsupported

costs. The contract audits primarily include:

incurred cost audits that evaluated the reasonableness of costs incurred by contractors; proPAGE34 FINANCIAL MANAGEMENT REVIEWS

The OIG conducted investigations

of allegedly fraudulent indemnity

claims.
PAGE35

What is the Mail Fraud

Statute?

The Mail Fraud Statute contained

in Title 18 of the United States

Code, Section 1341, makes it a

criminal violation to use the U.S.

Mail or the services of any private

or commercial carrier to carry out

a fraudulent scheme.

posal audits that evaluated the reasonableness

of contractor cost estimates; and defective pricing audits performed to determine whether contract prices significantly increased because of

contractor pricing data that was not accurate or

complete. These audits are summarized in the

graph in the margin and focus on whether contractors’: 

◆ Proposed and incurred costs were allowable and reasonable; and

◆ Pricing data were accurate, complete,

and current.

The following is a summary of seven significant contract audits completed in the last 6

months: 

◆ An audit of a contractor’s $34 million

fixed price incentive firm-target type

contract disclosed the contractor overstated purchased parts per unit cost

because it was not using data that were

accurate, complete, and current as of the

date of the agreement price. The contractor contended that a reduction in the

per unit price for material costs occurred

at negotiations. However, the contractor

did not use the lower material per unit

price in its final priced bill of materials.

There was no evidence available of the

contractor making the Postal Service

aware of the lower price either at or

before the date of agreement on price. As

a result, the audit recommended a price

adjustment of about $344,000 including

associated burdens and profits. 

(CA-CAR-03-002)

◆ An audit of a contractor’s $10.5 million

firm fixed price proposal resulted in questioned costs of nearly $249,000. The

audit disclosed issues regarding rates and

allocation factors that could yield additional questioned costs. Therefore, the

OIG recommended the conclusion of

negotiations be postponed until these

issues are considered, or a downward

adjustment clause be inserted into the

contract. (CA-CAR-03-004)

◆ An audit of a contractor’s $1.6 million

claim for delay disclosed questioned costs

of about $1.1 million. The majority of

the questioned costs represent a lack of

supporting documentation for claimed

costs from two subcontractors. Remaining questioned costs represented labor

hours that could not be supported or

were within the scope of the contract,

tasks that were separately negotiated or

already paid, indirect rates not based on

actual costs, and warranty costs improperly claimed as delay costs. The contractor may also have included costs for tasks

within the scope of contract, and overtime hours were included in the claim.

Due to these significant inadequacies,

the OIG did not consider the claim to be

acceptable as a basis for the settlement of

a fair and reasonable price. 

(CA-CAR-03-006)

◆ A review of a contractor’s $82 million

firm fixed price proposal revealed questioned costs of nearly $4.5 million,

including unsupported costs of about

$765,000. Questioned costs were primarily due to application of a decrement factor to proposed direct material costs and

warranty costs proposed separately from

the warranty rate. Unsupported costs

were the result of the contractor not providing auditable documentation to support certain proposed transportation

costs. The audit also disclosed certain

activities that may achieve future savings. Therefore, the OIG recommended

a downward only savings clause be

included in the contract. Furthermore,

the contractor’s forward pricing overhead

rates are subject to certification by the

Department of Defense. If certification is

not obtained, then a price adjustment

will be executed. (CA-CAR-03-010)

◆ A review of a contractor’s equitable

adjustment claim for contracts for post

office buildings questioned costs on nearly the entire claim amount of $5 million.

The majority of questioned costs represented lost profits because the contractor

incorrectly based its computations on

gross profits. In addition, unabsorbed

overhead was questioned in its entirety

because the contractor did not experience it in total for the period of performance in the contracts. Furthermore, the

contractor did not provide sufficient documentation to support labor costs. 

(CA-CAR-03-011)

4

OTHERS

3 INCURRED PROPOSALS

COSTS

3

3

CLAIMS

Types and Number of Contract 

Audits Completed

The OIG completed 13 audits of contracts

valued at over $150 million.
The OIG reviewed the Postal Service’s

disposition plans for irradiation

equipment.

◆ An audit of a contractor’s $15.5 million

firm fixed price proposal for the preproduction and field test phase of a biohazard detection system program disclosed

questioned costs of nearly $1.5 million

and unsupported costs of over $470,000.

Questioned costs were primarily due to

the application of a decrement factor to

proposed purchased parts and subcontract

costs based on vendor quotes. In addition, direct material costs based on engineering estimates were questioned

because the contractor was unable to provide sufficient documentation. The audit

also disclosed certain activities that may

achieve future savings. Therefore, the

OIG recommended a downward only

savings clause be included in the contract. The contractor’s forward pricing

overhead rates are subject to certification

by the Department of Defense. If certification is not obtained, then a price

adjustment will be executed. 

(CA-CAR-03-012)

◆ A review of a contractor’s labor practices

revealed they required corrective action

to improve reliability of the contractor’s

labor accounting system. Specifically, the

OIG found numerous instances in which

employee time charges could not be verified. In addition, the audit raised concerns regarding sufficiency of documentation to ensure time was charged to the

proper cost objective. The contractor

concurred with the recommendations for

corrective action. (CA-CAR-03-009)

ARCHITECTURAL AND

ENGINEERING DESIGN SERVICES

PROCESS CAN BE IMPROVED

An OIG audit of architectural and engineering design fees disclosed that the Postal

Service had no system or criteria to track and

monitor these fees, and that deficiencies existed

in the architectural and engineering design services. Overall, postal management has limited

visibility or control over architectural and engineering design work, which increases the risk

that the Postal Service may pay additional,

unnecessary, or duplicate costs, or that the product may not satisfy Postal Service requirements.

In addition, a review of project files at a Pacific

Area air mail center revealed that replacement

of the heating, ventilation, and air conditioning

system was not included as part of the overall

expansion project. Instead, it was funded as a

separate project.

The OIG recommended postal management establish and implement a policy to track

design fees and to monitor them on a regular

basis for reasonableness. The OIG also recommended management strengthen internal

process controls over design services, and revise

policies and procedures to require cost or pricing

data audits when negotiating architectural and

engineering contract services. Finally, the OIG

suggested postal management complete a modification to the Decision Analysis Report for

replacement of the heating, ventilation, and air

conditioning system and present it to the Board

of Governors for approval. The Postal Service

generally agreed with the OIG’s recommendations and initiated or planned appropriate

actions to address them. (CA-AR-03-001)

DISPOSITION PLANS FOR

ACQUIRED IRRADIATION

EQUIPMENT NEED TO BE

DEVELOPED

In response to the anthrax attacks,

Congress passed legislation to assist the Postal

Service in protecting its employees and customers from exposure to hazardous material.

The Postal Service entered into a contract in

October 2001 and purchased eight electron

beam systems for $30 million to sanitize the

mail. However, Postal Service engineering officials later determined the systems would not

meet requirements and decided not to use the

eight irradiation systems. Senior Postal Service

officials approved a plan to transfer two electron

beam systems to the National Institute of

Standards and Technology; however, they had

not developed plans for disposing of or transferring the remaining six electron beam systems.

Postal Service management agreed with the

OIG’s recommendations to transfer or dispose of

the remaining six systems. (CA-MA-03-006)

PAGE36 FINANCIAL MANAGEMENT REVIEWS
PAGE37

POSTAL SERVICE HAS

GENERALLY MANAGED

RESTRAINTS IMPOSED BY THE

CAPITAL FREEZE

An OIG audit determined the Postal

Service has generally managed the restraints

imposed by the capital freeze by implementing

several major initiatives to maintain, preserve,

and expand facilities in the short-term. These

initiatives included: implementing a nationwide process to allow exceptions for projects

that met criteria for life/safety emergencies and

legal requirements; monitoring the expenditures of capital construction funds by requesting

area officials determine their highest priority

construction projects; and using modular trailers and consolidating or moving routes to alleviate overcrowding in the Western Area.

However, the OIG is concerned that long-term

continuation of the capital freeze will contribute to deteriorating Postal Service facilities,

difficulty in providing needed space for high

growth areas, safety issues, rising construction

costs, and delaying the upgrading of facilities for

accessibility for individuals with disabilities. 

The OIG recommended Postal Service

management continue to resolve the specific

issues identified in the report and, as funding

becomes available, reprioritize projects according to life/safety, emergencies, and legal requirements. Postal Service management agreed to

continue to emphasize the need to maintain

assets and address life and safety issues, emergencies, and legal requirements. They have also

expanded the criteria for facilities-related

spending to include asset maintenance, areas of

high growth, and significant space deficiencies.

Postal management already had been addressing and will continue to address specific safety

issues identified in this report, and the OIG will

continue to actively pursue resolution of these

items. (CA-MA-03-007)

OIG CONTRACTOR

INVESTIGATIONS TARGET 

FRAUD AND CORRUPTION

The OIG conducts investigations relating

to the Postal Service’s contracting and facilities

areas. These investigations target contractors

who have attempted to defraud the Postal

Service by submitting false invoices, performing

poor work, or using substandard construction

material. These investigations help ensure that

the financial interests of the Postal Service are

protected. In some instances, these investigations result in significant recoveries and

improve the safety of employees and customers.

During the past 6 months, the OIG has

reported significant activities in this area, some

of which are highlighted below:

◆ As part of a Department of Justice

national task force, the OIG investigated

a contractor concerning alleged fraudulent testing of underground storage tanks.

The investigation involved analyzing millions of company records and conducting

surveillance at 89 sites, 33 of which were

postal facilities. The OIG investigation

disclosed the company charged the Postal

Service and other government agencies

for storage tank testing that was inadequate or never performed. The investigation resulted in 10 criminal convictions.

The company was placed on probation

and ordered to pay a $1 million criminal

fine and restitution of nearly $1.3 million, of which over $245,000 will be

returned to the Postal Service. 

◆ An OIG investigation discovered a waste

disposal contractor did not reimburse the

Postal Service for rebates on services provided to the contractor by local recycling

companies. A Postal Service manager

provided rebate documentation to the

OIG investigator. As a result, the waste

disposal contractor reimbursed over

$229,000 to the Postal Service. 

◆ As the result of an OIG investigation,

the Postal Service and a construction

contractor agreed to settle disputes and

mutually release all claims under the

Contract Dispute Act. According to 

the mutual agreement, an insurance

company will release over $107,000 to

the Postal Service from a performance

bond issued to the construction company. The contractor has been debarred for

a 3-year period.

◆ An OIG investigation of a trucking

contractor, a husband and wife team in

Delaware, who presented false claims for

payments, resulted in the contractor

agreeing to pay over $54,000 to the

Postal Service. The trucking contractor

The OIG reviewed the impact of

the capital freeze on construction

projects.
defrauded the Postal Service by submitting false claims for extra service miles,

which had not been driven. 

◆ The OIG conducted an investigation

after receiving information from the

Postal Service about a $680,000 erroneous payment to a contractor. The

investigation disclosed the contractor was

mistakenly paid for services that were

performed by another contractor. The

contractor was contacted to repay the

amount but fled to New Zealand. The

OIG coordinated with the Department of

Justice and New Zealand authorities to

apprehend and extradite the contractor

to the United States. The contractor

pled guilty to one count of theft of government property and 4 counts of money

laundering. The contractor was sentenced to 78 months imprisonment and

36 months probation, and ordered to pay

fines and restitution totaling over

$593,000. 

◆ The OIG participated on a joint investigation involving two subcontractors providing photocopying and printing services to a prime Postal Service contractor. The subcontractors were providing

kickbacks to employees of the prime contractor for favorable treatment and paid

the employees of the prime contractor

more than $1.3 million in kickbacks. As

a result of the investigation, both subcontractors were indicted for conspiracy to

defraud the United States and for filing

false individual tax returns. 

LEGISLATIVE, REGULATORY &

POLICY REVIEWS

During this reporting period, the OIG

identified legislation, regulations, and policies

affecting Postal Service financial management.

Legislation reviewed is listed below: 

PROPOSED LEGISLATION

S. 631 – A Bill to Amend Title 39,

United States Code, with respect to

Cooperative Mailings

This legislation is intended to clarify ambiguities in the Postal Reorganization Act of

1970, which established a nonprofit mail rate

for charitable and benevolent organizations.

The legislation would allow these organizations

to share ownership of their mailing with commercial printing and mailing businesses and still

qualify for the nonprofit mailing rate. In effect,

it would permit these organizations to mail at

nonprofit rates whether they prepare the mailing themselves or hire someone else to do it for

them, since the purpose of the mailing remains

a nonprofit one. The bill maintains existing federal law that prohibits unauthorized parties from

using the nonprofit rate to sell goods or services

by mail. Moreover, the legislation does not limit

the Postal Service’s authority to enforce any

other section of federal postal law. 

The bill is similar to legislation introduced

in the last Congress. The current bill adds a section defining when a contractual relationship

between a nonprofit organization and a commercial entity will be deemed a conflict of interest, which creates a presumption against

eligibility for reduced rates. There is also a provision in the new legislation that would protect

the Postal Service from legal action to recover

the cost of postage paid on mail matter sent

before the date of enactment.

The OIG has examined the Postal Service’s

cooperative mailing rules and the financial

impact of such legislation. The OIG contends

there will be minimal financial impact from this

legislation. 

H.R. 5702 – Privatization of the U.S.

Postal Service

This bill would convert the operations of

the Postal Service into a private corporation.

The legislation would direct the President to

submit to Congress: (1) a comprehensive plan

providing for the transfer of property subject to

this Act; and (2) recommendations for legislation as necessary. The bill would establish the

Postal Privatization Commission to carry out

functions relating to the transformation of the

Postal Service into a private corporation.

Similar measures have been introduced in

previous sessions of Congress, but have not

reached a floor vote. The OIG believes the

Postal Service is a vital and sustainable organization that can evolve to meet changing times,

given prudent, adaptable management practices

and continued independent oversight. 

PAGE38 FINANCIAL MANAGEMENT REVIEWS

The money order system was

developed primarily to provide

a safe means for Union soldiers

and their families to exchange

money through the mail during

the Civil War.

OIG special agents worked with the

Department of Justice and New Zealand

authorities to apprehend and extradite

to the United States a postal contractor

who received an erroneous payment of

$680,000. The contractor used the

funds to purchase the above items.
PAGE39

ENACTED LEGISLATION

Public Law 108-18 – Postal Civil

Service Retirement System Funding

Reform Act of 2003

This act lowers the Postal Service’s

payments to the Civil Service Retirement Fund

by about $6 billion over FY 2003 and FY 2004.

It requires the Postal Service to use the bulk of

the savings from the reduction to pay down its

debt, but also encourages it to use a portion of

the savings to fund retiree health care costs.

The law alters the formula used to determine the size of annual payments to the Civil

Service Retirement Fund. The fund has earned

higher than expected yields on pension investments in government securities, and as a result,

the Postal Service has been overfunding the

retirement program. However, the Postal

Service’s contributions to the fund could not

have been scaled back without the passage of

this legislation. Even with passage of this bill,

there still remains other long-term costs the

Postal Service will have to address, such as

increasing workers’ compensation costs, retiree

health care costs, reducing long-term debt, and

the potential cost associated with removing the

freeze on capital expenditures.

H.R. 1360 – A Bill to Amend Certain

Provisions of Title 39, United States

Code, Relating to Transportation of

Mail

This bill would amend statutes pertaining

to the transportation of mail to prohibit the

Postal Service from directly or indirectly dictating how, when, or where its contractors purchase services, supplies, fuel, and equipment.

The bill also eliminates the annual limit on

mail transportation contracts.

The OIG believes this legislation would

inhibit the Postal Service’s ability to obtain the

best rate for goods and services. If the Postal

Service is able to negotiate a favorable price on

certain services and supplies, it should have the

power to direct its contractors to use these vendors in order to minimize costs to the Postal

Service. Eliminating the annual expiration on

mail transportation contracts could also be

detrimental, because the annual expiration

forces the Postal Service to reconsider its contractor selection process and costs incurred.

This periodic examination could lead to better

services that could save costs for the Postal

Service.

The Postal Civil Retirement System

Funding Reform Act of 2003 lowers the

Postal Service’s payments to the Civil

Service Retirement Fund.
INSPECTION SERVICE

Within the financial management

area, the Inspection Service performs revenue investigations to

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

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

prosecutive actions against violators through

civil, administrative, and criminal remedies. 

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

defraud the Postal Service. In the last 6 months,

there were 30 arrests and 30 successful criminal

convictions resulting from revenue investigations. 

Further, the Inspection Service investigates

embezzlements involving employee theft from

cash drawers and schemes involving postal

money orders. Postal Inspectors initiated

233 investigations of employee embezzlements

this reporting period, which documented losses

of over $3.2 million. Examples of investigations

in this area are summarized below: 

◆ A former Florida sales and service associate was sentenced to 5 years probation

and over $29,000 in restitution for stealing postal funds. Postal Inspectors discovered the individual failed to input

Express Mail and Priority Mail transactions into the POS One terminal and

converted the funds for personal use.

◆ As the result of an investigation, a former

South Carolina postmaster was sentenced

to 10 months in prison, 3 years probation

and ordered to pay over $39,000 in restitution for stealing postal funds. Postal

Inspectors discovered the individual had

been kiting money orders, and underreporting money order sales as well as

failing to report sales.

◆ A former Philadelphia postal clerk pled

guilty to misappropriating postal funds.

The investigation disclosed a failure of

separation of duties. The clerk consolidated financial records and prepared

bank statements with minimal supervision that enabled the individual to

embezzle $129,000.

◆ A former postmaster from West Virginia

was sentenced to 6 months in prison; 2

years supervised release and ordered to

pay over $67,000 in restitution for

embezzling postal funds. The Inspection

Service investigation discovered unaccounted postage sales and post office box

rentals over $166,000. The court ordered

restitution was equal to the amount of

the postmaster’s retirement contributions.

◆ As a result of an Inspection Service

investigation, a former sales and service

associate in Texas was sentenced to 9

months in prison, 2 years supervised

release and ordered to pay over $28,000

in restitution for embezzling postal funds.

Legitimate postage sales were voided and

more than $41,000 in stamp stock shortages were found. In addition, retail transactions were not entered in the terminal

and excess funds were converted for personal use. The amount of restitution was

based on the retail data presented as part

of the prosecution’s report.

◆ A postal manager from the U.S. House of

Representatives Post Office pled guilty to

mishandling treasury checks. The congressional staff used the treasury checks

to reimburse the House Post Office for

vouchers they used to purchase postage

stamps and services. Money orders were

issued in the manager’s name using the

treasury checks and postal funds were

converted to personal use. The failure to

properly account for cash transactions

was disclosed in the Inspection Service

investigation. The investigation revealed

the manager embezzled more than

$200,000 over a period of 5 years. The

manager pled guilty and repaid $150,000.

PAGE40 FINANCIAL MANAGEMENT REVIEWS

The Postal Inspection Service provides

assurance to postal customers for the

“sanctity of the seal” in transmitting

correspondence and messages.
OFFICE OF INSPECTOR GENERAL

Developmental Reviews

Information Systems Reviews

eCommerce Reviews

Computer Intrusion Investigation Activities

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

Technology Reviews

PAGE 41
PAGE42

OFFICE OF INSPECTOR

GENERAL

The Postal Service recognizes that technology is key to productivity and affordability. Through technology, the Postal

Service handles more than 660 million pieces of

mail every day and maintains its network of

nearly 38,000 post offices and facilities. Its technology strategy is to provide convenient and

secure access to all customers on a daily basis

through increasingly sophisticated retail systems, expansion in new electronic access channels, and electronic linkages that integrate

customer and postal processes. In addition, the

Postal Service is using modern technology, such

as USPS.com, Signature ConfirmationTM,

MoversGuide Online.com, and eBillPayTM.

These initiatives will improve and build on its

existing services and relationships with customers and continue meeting traditional customer demands. 

The September 11, 2001, terrorist attacks

demonstrated how the nation’s infrastructure

may be vulnerable to attacks. Computer systems are also a critical component of every

aspect of postal operations that must be protected from potential cyber-terrorism to prevent disruption in service. Technology

investments not only need to be scrutinized to

minimize the risk of compromise, but also to

ensure that sound business decisions are made.

This is particularly important as the Postal

Service reviews several technologies to identify

an efficient, effective, and safe method to

detect and prevent biohazards. 

OIG reviews have covered developmental

systems, information systems, electronic commerce, and computer intrusion detection activities. In the past 6months, the OIG performed

9 reviews in the technology area, some of which

are highlighted below: 

DEVELOPMENTAL REVIEWS

The Postal Service develops business systems and mail processing equipment to improve

performance, enhance service, and reduce operating costs. The typical development process

begins with the identification of a business

need. After the business need has been identified, a solution is developed, followed by the

proof of concept and first article tests and final

deployment. The OIG understands the importance of reviewing these systems as they are

developed and has completed three audits of

major projects currently under development

during the reporting period. These reviews are

highlighted below: 

POSTALONE! BUSINESS PROCESS

IMPROVEMENTS NEEDED

At the request of postal management, the

OIG reviewed the PostalOne! Phase Two

Business Customer Support System and

Transportation Management. The PostalOne!

Phase Two Business Customer Support System

provides electronic capabilities between large

business mailers and the Postal Service for

induction of mail. As part of Phase Two,

Transportation Management was approved and

added. This system scans mail tray labels, captures weight information, and assigns mail via

air or surface at the business mailers’ facilities

while interfacing with Surface-Air

Management System for mail transportation

assignments. 

The review identified that Postal

Management took appropriate actions on the

Phase One audit. However, there were additional opportunities for the Postal Service to

align systems to corporate goals, objectives, and

policies; mitigate risks; and to measure and evaluate performance and customer satisfaction.

Specifically, the OIG reviewed the initial Decision Analysis Reports for the Business Customer

Support System and found that overall performance measures were not established, sensitivity analysis was not performed, and investment

TECHNOLOGY REVIEWS

This section highlights audits, reviews,

and investigations performed by the OIG

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

narrative, as appropriate. Also, the OIG

legislative, regulatory, and policy reviews

are included at the end of this section. In

order to differentiate the work reported by

the OIG and Inspection Service, the page

containing the activities reported by the

Inspection Service has been color

screened.

An OIG audit established that unless

PostalOne! program management tracks

its performance in accordance with

Postal Service policies and ensures

compliance, the project may not meet

projected savings.
PAGE43

progress was not properly tracked. The OIG

established that unless PostalOne! program

management tracks its performance in accordance with Postal Service policies and ensures

compliance, the project may not meet projected

savings presented in the Decision Analysis

Report. The OIG made nine recommendations

to address these issues, including improving customer satisfaction with business mailers, achieving corporate goals, and mitigating risks. Postal

Service management agreed with all of the recommendations and was working to resolve the

issues. (DA-AR-03-001)

POSTAL AUTOMATED

REDIRECTION SYSTEM PHASE

ONE MAY NOT YIELD

ANTICIPATED RETURNS ON

INVESTMENT

An OIG audit of the Postal Automated

Redirection System Phase One revealed the

return on investment presented in the Decision

Analysis Report was based on a contractor’s

study that did not apply sound statistical principles. For example, the contractor did not follow

its original sample design. As a result, the return

on investment may not be correct. The Postal

Service and the contractor entered into a sole

source contract to provide a comprehensive

automated solution for First-Class Mail forwarding. This included the identification, verification, processing, and labeling of each piece of

mail to be redirected within the automated

mailstream. Postal management agreed with the

recommendations to ensure quality assurance

groups compile a test report for first article testing and all future testing. Postal management

disagreed with the OIG’s recommendation to

recalculate the return on investment because it

disagreed that the study was relied upon in the

Decision Analysis Report development. The

Postal Service said it had no plans to use the

study for future programs but disagreed that the

study was statistically unsound. However,

Postal Service engineering officials indicated

during the audit they knew the study was not

statistically valid but used it to establish a baseline for the Decision Analysis Report cost

model. The OIG is pursuing these disagreements through the formal audit resolution

process. (DA-AR-03-002)

HUMAN TRANSPORTER BATTERY

LIFE NOT ACHIEVED AND

POTENTIAL SAVINGS ARE

QUESTIONABLE

The OIG conducted an audit of applicability of the human transporter for Postal Service

operations. The audit revealed that the

expected battery life was not achieved as

required by the statement of work. In addition,

the statement of work stated one of the purposes

of testing the human transporter was to identify

potential cost savings in mail delivery. Cost savings could have potentially resulted from reducing delivery time for mail carrier routes.

Delivery time savings ranged from 10 minutes

to one hour per day delivery. The OIG considers the inconsistent savings in delivery time to

be inadequate when compared to the cost of

purchasing a human transporter unit. The OIG

recommended delaying any further testing of

the human transporter until the Postal Service

validates a battery life of six to seven hours.

Also, a projected return on investment should

be calculated to determine whether a financial

incentive exists for considering any further testing. Postal management agreed with the OIG’s

recommendations and has initiatives planned

addressing the issues in the report. 

(DA-AR-03-003)

INFORMATION SYSTEMS

REVIEWS

The Postal Service relies on a complex

computer infrastructure to accomplish and

streamline operations, manage one of the

largest civilian workforces in the world, and

move billions of pieces of mail each year. The

Postal Service has initiated several information

technology projects to enhance efficiency and

increase revenue. The Postal Service must continue to ensure computer security is maintained

and improved to reduce the risk of fraud, inappropriate disclosure of sensitive data, unauthorized disclosure of customer information, and

disruption of critical operations and services.

The most significant reviews are highlighted

below:

The OIG found that the battery life of

the human transporter was not

achieved and its potential savings are

questionable.
An OIG audit of the e-Travel voucher

system revealed weaknesses in the

system development process required

for system implementation and 

maintenance.

PAGE44

GENERAL CONTROL

WEAKNESSES IDENTIFIED AT 

A MAINTENANCE SUPPORT

CENTER

While conducting an audit of general and

management controls at a maintenance support

center, the OIG identified vulnerabilities in the

overall security at the facility and in each of the

six management and general controls areas

tested. The OIG considered the lack of a security structure and risk assessment as the underlying cause for many of the control weaknesses

identified in the audit. Included in the review

was a vulnerability assessment of network and

computer systems at the maintenance support

center. These vulnerabilities, if left uncorrected,

could result in unauthorized access to Postal

Service information. The Postal Service agreed

with OIG’s recommendations and has initiatives completed or in progress to address the

weaknesses. (IS AR-03-001)

WEAKNESSES FOUND IN 

e-TRAVEL SYSTEM

An OIG audit of the e-Travel voucher

system revealed weaknesses in the system development process required for system implementation and maintenance. The audit also

identified weaknesses in several critical general

control areas. For example, the e-Travel

voucher system was moved from pilot to full

production status even though the hardware

could not support the estimated number of

users. Regardless, new users continued to be

added to the e-Travel system without full consideration of the identified vulnerabilities or

Postal Service requirements. In addition, eTravel management did not ensure that Postal

Service policies and procedures were followed

or adequate general controls were in place to

protect the integrity of the e-Travel system and

its sensitive data. 

Postal Service management agreed to the

majority of OIG recommendations and has initiatives in progress, planned, or completed to

address the issues. Postal management did not

agree with five recommendations and stated

their beliefs that the report misrepresents the

effectiveness of the systems development

process and many of the controls implemented

by management to successfully deploy the eTravel system to over 40,000 users. However, at

an exit conference Postal Service management

confirmed the accuracy of the report information and suggested that only minimal changes

be made. Also, postal management did not

agree that all past expenditures be captured and

all future expenditures for the e-Travel project

be formally approved and tracked in accordance

with Postal Service requirements. The OIG

does not plan to pursue the unresolved recommendations through the formal audit resolution

process. However, follow-up on these recommendations will be included in a subsequent

review of the e-Travel system. 

(IS-AR-03-002)

NETWORK SECURITY

WEAKNESSES IDENTIFIED AT

ENGINEERING RESEARCH AND

DEVELOPMENT CENTER

The OIG conducted a network vulnerability assessment on each of the network and computer systems at an engineering research and

development center. Using a variety of tools

and tests, the OIG identified potential network

vulnerabilities that, if left uncorrected, could

result in unauthorized access to Postal Service

information and/or allow an unauthorized user

to leverage the compromised system to gain

access to additional information and systems.

For example, the tests revealed instances of

password vulnerabilities. The OIG provided system administrators with the assessment results

to use as a tool for establishing priorities for corrective actions and implementing immediate

repairs to the network components. 

(IS-CS-03-001)

VULNERABILITIES IDENTIFIED ON

HEADQUARTERS SERVERS

OIG vulnerability tests on selected servers

at Postal Service Headquarters revealed vulnerabilities that, if left uncorrected, could result in

a loss of confidentiality, integrity, and availability of vital operational systems. Further, the

OIG audit found that postal directives to

strengthen server security had not been fully

implemented. Postal Service management

agreed with all of the OIG’s recommendations

and indicated corrective actions were planned

or taken. (IS-AR-03-003)

TECHNOLOGY REVIEWS
PAGE45

INFORMATION SYSTEMS

CONVERSION TO MONTHLY

REPORTING

At the request of the Board of Governors,

the OIG reviewed the information systems

impacted by the Postal Service’s change from a

28-day accounting period reporting to monthly

reporting. The OIG identified that the process

to monitor the effort to convert all systems to

monthly reporting produced misleading results.

Specifically, the conversion status for each system does not represent the actual status of the

modification effort. If left uncorrected, this

process would provide little value to the Postal

Service to meet its goal, and could produce a

negative impact on the overall success of the

project.

The OIG found the Postal Service had

developed an adequate process to identify systems requiring modification and processes were

in place to ensure the work was completed by

required deadlines. Further, the OIG found that

Postal Service managers had developed ways to

mitigate risks as systems were identified. Postal

management agreed with OIG’s recommendations to develop an accurate measure for the status of the systems being modified for monthly

reporting and updating the monthly reporting

status worksheet to reflect the correct status for

all systems undergoing modification. 

(IS-AR-03-004)

RETAIL DATA MART SYSTEM

SECURITY ISSUES

The audit found the business continuity

and contingency plans were incomplete, the

system’s configuration was not in conformance

with Postal Service security policies, and significant security weaknesses existed in related systems. These weaknesses included excessive

account access privileges, lack of intrusion

detection and anti-virus software, and untimely

and outdated personnel security clearances. If

these weaknesses remain uncorrected, day-today operations and revenues may be impacted.

The OIG provided 13 recommendations,

including that Postal Service management

develop business continuity and contingency

plans and install intrusion detection software

and anti-virus software as necessary. In addition,

the Postal Service needs to perform a complete

system review of the Retail Data Mart system,

correct any identified vulnerabilities, and recertify the system. Postal management’s actions

taken or planned should correct the issues identified in the report. (OE-AR-03-002)

eCOMMERCE REVIEWS

The Postal Service continues to provide

customers with new online products and services to enhance their personal and professional

lives. In addition, the Postal Service continues

to improve the performance and usability of its

web presence to ensure secure access and protect customer privacy. The Postal Service has

also eliminated or consolidated initiatives that

do not fully support the core products and contribute to revenue. Ongoing OIG efforts during

this period focused on mailing online services,

online change of address and alternatives to

using Internet auctions for mail recovery purposes.

COMPUTER INTRUSION 

INVESTIGATION ACTIVITIES

The OIG investigates criminal violations

of state and federal laws enacted to protect the

authenticity, privacy, integrity, and availability

of electronically stored and transmitted information. eCommerce ventures make the protection of postal information systems critical to the

financial viability of the Postal Service. Because

such ventures involve connectivity between

postal systems and eCommerce partners, the

OIG conducts investigations of attacks on the

security of those systems in order to maintain

the integrity of eCommerce information. The

OIG informs Postal Service management and

eCommerce partners regarding emerging

threats to information systems, and assists them

in identifying and eliminating potential vulnerabilities. These efforts include assisting the

Postal Service in developing security policies,

information systems, and eCommerce procedures that conform to the best practices in

industry and government. 

During this reporting period, the OIG

completed a number of investigations and

activities, some of which are highlighted below: 

◆ The OIG analyzed incidents related to a

Postal Service computer system, including thousands of dollars in fictitious sales

transactions (money order and stamp

sales), unauthorized software tools initiatWhat is computer hacking?

Computer hacking occurs when

someone attempts to gain access

to a computer file or network 

illegally or without authorization.

The OIG detects and investigates

hacking attempts on the Postal

Service’s computer systems.
PAGE46

Is the OIG a diverse 

organization?

Yes. In comparing the OIG's

diversity to others, the OIG

would be number one on Fortune

magazine's 2002 annual list of

"America's 50 Best Companies

for Minorities." This is the result

of OIG's commitment to hire,

promote, and retain the best

diverse talent available.

TECHNOLOGY REVIEWS

ed unexpectedly, unauthorized users

appearing to log on during routine clerk

activities, unexplained continuous

rebooting of systems, and repeated

threats to Postal Service personnel. A

series of critical computer system vulnerabilities were identified through the technical analysis performed by the OIG and

the Postal Service’s Computer Incident

Response Team. The Postal Service corrected these vulnerabilities, resulting in a

more secure system.

◆ In the wake of terrorist activities in the

United States, the OIG provided Internet-based research support to the Federal

Bureau of Investigation’s Joint Terrorism

Task Force. The OIG has developed

unique methodology to conduct Internetbased analysis that is essential to terrorism investigations as well as fraud investigations. Online reconnaissance of network infrastructures is essential in the

preparation for significant search warrants for target companies. This analysis

is one of the unit’s specialty products that

can provide invaluable insight so that

forensic personnel executing a search

warrant are knowledgeable about the target company’s computer infrastructure.

LEGISLATIVE, REGULATORY &

POLICY REVIEWS

During this reporting period, the OIG did

not identify legislation, regulations, and policies

affecting Postal Service technology. 
PAGE47

INSPECTION SERVICE

The Inspection Service plays an important

role in the support of Postal Service Internet

products and services. The Inspection Service

evaluates the need for and processes security

clearances of employees and contractors accessing postal systems or sensitive information. In

addition, the Inspection Service monitors the

development of new postal products and services and provides consultation to postal managers on security, loss prevention, revenue

protection, and evidence retention capabilities.

The Inspection Service also monitors and

reviews the physical security of individual systems before and after implementation. 
PAGE48 TECHNOLOGY REVIEWS
OFFICE OF INSPECTOR GENERAL

Workplace Environment Reviews

Human Resources Process Reviews

Health Care Reviews

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE

Labor Management

Reviews

PAGE 49
PAGE50 LABOR MANAGEMENT REVIEWS

OFFICE OF INSPECTOR

GENERAL

The Postal Service has characterized

improving labor management relations

as one of the most important challenges

in achieving its mission in the 21st century. A

key Postal Service strategy in the labor management area is to foster an inclusive, welcoming,

and productive workplace consistent with its

values of fairness, opportunity, safety, and security. With more than 850,000 full and part-time

employees working at nearly 38,000 facilities

nationwide, the Postal Service realizes that to

operate effectively, in a rapidly changing environment, it needs to give employee issues a

higher priority and enhance each employee’s

contribution to organizational performance.

Additionally, in light of terrorist attacks, including attacks involving the transport of anthrax

through the mail, the Postal Service must take

appropriate precautions to ensure the safety and

well being of its employees.

The OIG supports the Postal Service in its

overall goal to develop a motivated and productive workforce. The labor management area

includes workplace environment, human

resources, and health care. While the OIG has

worked diligently with the Postal Service and

Congress to address these areas of concern,

reviewing labor management areas continues to

be one of the OIG’s greatest challenges. In this

regard, the OIG has received 4,052 individual

labor management complaints since 1997.

During this reporting period, the OIG completed 12 reviews and 102 inquiries in the labor

management area.

WORKPLACE ENVIRONMENT

REVIEWS

The Postal Service has identified signs of

workplace stress in many of its facilities and is

developing comprehensive steps to improve the

workplace environment, including improving

relations between managers and employees and

aligning human resources with business requirements. During this reporting period, the OIG

has conducted 102 inquiries into complaints of

alleged hostile work environment or other

health and safety issues, some of which are highlighted below:

◆ A confidential reporting process was created for employees at a Postal Service

International Service Center when allegations surfaced regarding employee mistreatment from management. The

process, called Direct Line, gives employees an opportunity to raise issues regarding their work environment.

◆ As a result of an OIG review, a Postal

Service supervisor was placed on a performance improvement plan after

employees alleged the supervisor had created a hostile working environment. 

◆ Postal Service district management conducted a conflict management workshop

for maintenance shop employees to

improve workplace communications after

an OIG review determined that a hostile

work environment may have existed for

some employees.

HUMAN RESOURCE PROCESS

REVIEWS

Postal Service managers are responsible for

preserving and protecting official records and

privacy information. In addition, managers

must avoid conflicts of interest, which could

affect both the public’s trust and confidence in

Postal Service human resource processes. Postal

Service managers are also responsible for complying with existing policies and procedures

regarding sexual harassment, overtime, leave,

compensation and benefits, and training. The

OIG conducted the following audit to assess

controls over these processes:

This section highlights audits, reviews, and

investigations performed by the OIG and

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

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

end of this section. In order to differentiate

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

reported by the Inspection Service has been

color screened.

The OIG conducted audits to determine

whether the Postal Service had

adequate policies and procedures in

place to prevent sexual harassment.
PAGE51

REVIEWS OF SEXUAL

HARASSMENT PREVENTION

MEASURES

The OIG conducted audits of 18 districts

to determine whether adequate policies and

procedures were in place to prevent sexual

harassment, and to see if sexual harassment

complaints were effectively addressed. Sixteen

of the eighteen districts had appropriately disciplined or taken action against employees

responsible for sexual harassment or inappropriate actions/comments. The review found that

all of the districts covered in the evaluation had

adequate policies and procedures. However,

some areas needed improvements, as noted

below.

◆ Some managers responsible for sexual

harassment or inappropriate actions/comments were not considered for exclusion

from the Pay for Performance Program.

Postal management generally agreed with

the recommendation that managers and

supervisors engaging in these activities

should be considered for exclusion from

pay for performance and bonus programs. 

◆ In some districts, the Equal Employment

Opportunity Office received complaints

of sexual harassment or inappropriate

actions/comments and did not notify district management of the complaints.

Postal management generally agreed that

the Equal Employment Opportunity

office notify district management when a

report of this nature has been received. 

◆ Sexual harassment complaints at some

districts reviewed were not effectively

addressed. Postal management agreed

that all sexual harassment complaints

should be effectively addressed. However,

postal management disagreed that all

sexual harassment complaint investigations be documented. The Postal Service

stated this would require management to

depart from Postal Service policy for

those complaints that could be resolved

simply and directly between parties without a formal written record. The OIG

plans to address this issue in a capping

report.

◆ Two districts did not discipline or take

appropriate corrective action against all

employees involved in sexual harassment

or inappropriate actions/comments.

Postal management agreed with the

OIG’s recommendation to establish

controls to ensure the appropriate disciplinary or corrective action is taken for

sexual harassment or inappropriate

actions/comments. 

HEALTH CARE REVIEWS

Controlling workers’ compensation costs

continues to be key to the Postal Service’s

financial well being because the Postal Service

is self-insured and makes payments out of operating funds, which directly affect the Postal

Service’s net income. In FY 2002, the Postal

Service paid over $760 million in workers’ compensation costs, a $66 million increase over the

$694 million paid in FY 2001.

The OIG assists in protecting the health

and welfare of the Postal Service’s workforce by

conducting audits and investigations to prevent

and detect fraud, waste, abuse, and mismanagement related to Postal Service health care program costs. Involvement in health care fraud

investigations is vital to controlling costs

related to Postal Service health care premiums.

To enhance these efforts, the OIG has partnered with the Department of Labor Office of

Inspector General to conduct joint investigations of workers’ compensation programs. On

December 7, 2002, the OIG assumed responsibility for all new allegations of employee workers’ compensation fraud within the Capital

Metro Area as part of a pilot program. This new

area of responsibility is in addition to OIG’s

jurisdiction over investigations of fraud committed by health care providers.In addition, the

OIG was asked to participate in a Postal Service

task force on workers’ compensation costs

chaired by the Deputy Postmaster General.

The OIG investigates allegations of fraud

involving health care providers who are paid by,

or on behalf of, the Postal Service for medical

services rendered to Postal Service employees

related to:

◆ Federal Employees’ Compensation Act.

This act is administered by the Department of Labor with costs charged back to

the Postal Service.

◆ Postal Service-contracted doctors and

facilities. Approximately 1,500 physiAre OIG Hotline complaints

confidential?

The OIG will not disclose the

identity of an employee without

the consent of the employee,

unless the OIG determines such a

disclosure is unavoidable during

the course of the investigation.
PAGE52 LABOR MANAGEMENT REVIEWS

cians and facilities are contracted and

paid directly by the Postal Service to provide medical services to its employees.

◆ Federal Employees Health Benefits

Program. The Postal Service pays 80

percent of over 850,000 employees’

insurance premiums.

In the past 6 months, the OIG completed

7 projects and 25 investigations in this area,

which resulted in 6 convictions. The investigations identified federal and state violations of

money laundering, conspiracy, racketeering,

grand theft, and mail fraud by licensed or unlicensed health care providers. In addition, the

OIG conducted 3 reviews of health care-related

issues. Some of the OIG’s more significant

investigations and reviews are highlighted

below:

◆ The OIG joined with the Postal Inspection Service, the Defense Criminal

Investigative Service, the Department of

Labor OIG, and the Florida Department

of Insurance Fraud to investigative fraudulent medical claims submitted by fictitious medical providers to the Federal

Employees Health Benefits Program,

TRICARE, and private medical insurance companies. During this reporting

period, four individuals were convicted of

violating Florida State laws ranging from

conspiracy and money laundering to

racketeering and grand theft in a fraudulent health care billing scheme. Three of

the four individuals were ordered to make

restitution totaling approximately

$990,000 to the victims’ health care

plans. Two of the four individuals were

sentenced to serve a combined prison

term of 66 months. 

◆ During this reporting period, two siblings

were convicted for their involvement in

a health care fraud scheme involving

durable medical equipment. The defendants, who owned and operated a telemarketing company, contacted disabled

people and offered to provide them free

medical equipment if the equipment was

covered under their insurance policy and

their doctor submitted a prescription.

The defendants then used customers’

information to file insurance claims,

including claims on behalf of Postal Service employees. The defendants were

sentenced to 9 months and 21 months in

prison, respectively, 3 years supervised

release, and both were ordered to pay

restitution to the victims in an amount

exceeding $78,000. 

◆ An OIG investigation was initiated

based on a Hotline allegation received

from an Injury Compensation Manager

in a district office. The OIG partnered

with the Department of Labor and identified a significant number of questionable billing transactions in the Office of

Workers’ Compensation Program. Further investigation by the OIG disclosed

four overpayments totaling over

$105,000, which has since been repaid.

Additional administrative recoveries are

pending. 

OIG HEALTH CARE FRAUD

DATABASE ASSISTS PROACTIVE

INITIATIVES

The Postal Injury Compensation System is

the OIG database that contains over 7 years of

billing history for medical services provided to

Postal Service employees with workers’ compensation claims for job-related injuries. The

system provides data to support health care

fraud criminal investigations and for complex

trend analysis to identify potential proactive initiatives. The OIG is taking this system to the

next level in creating a new, more comprehensive and flexible system, that will provide users

the ability to analyze a large volume of data and

reduce or eliminate the need for manual review

and data analysis. The OIG is constructing the

Healthcare Internal Data Analysis System, a

detailed data analysis tool and automated

reporting system to identify potentially fraudulent billing schemes. This database system will

be valuable in developing proactive initiatives

and assisting investigations.

ARRANGEMENT WITH A

PREFERRED PROVIDER NEEDS

ENHANCEMENT 

An OIG audit revealed the Postal Service

did not use appropriate contracting practices in

its establishing an agreement for a pilot program

with a preferred health care provider. The OIG

found inadequate contract documentation,

unfavorable provisions, and a lack of standard

OIG involvement in health care fraud

investigations helps to control the

Postal Service’s health care costs.

Two people accused

of insurance fraud

Two people charged with fraud
PAGE53

Postal Service clauses and provisions. As a

result, the contract exposed the Postal Service

to unnecessary risks from legal claims, protests,

adjustments, and contract termination. The

OIG recommended postal management

instruct the contracting officer to continue

efforts developing contract documentation,

including documenting negotiations, providing

justifications for non-competitive purchase and

analyses, and renegotiating contracts to

increase its percentage of medical cost savings.

Postal management generally disagreed with

the report’s findings. However, they generally

agreed with all of the OIG’s recommendations

and the current contracting officer is working to

revise the contract to ensure maximum benefits

and protections for the Postal Service. 

(HK-AR-03-001)

WORKERS’ COMPENSATION

PROGRAM NEEDS LEGISLATIVE

REFORM

An OIG audit of the Postal Service

employees on the workers’ compensation periodic rolls disclosed 49 percent, or over 6,500, of

the Postal Service employees on the periodic

rolls are at the age at which some federal

employees are eligible for voluntary retirement.

In addition, 70 percent, or over 9,300, of the

Postal Service’s employees on the workers’ compensation periodic rolls are totally disabled with

little or no future reemployment potential, or

whose reemployment has not been determined.

In the past, concerns have been raised that the

Federal Employees’ Compensation Act has

become, in effect, a retirement system for some

workers’ compensation employees. For example, the OIG’s review found one employee has

been on the workers’ compensation rolls for

45 years. This employee and others may be eligible for voluntary retirement under existing

federal retirement programs. 

The OIG found Postal Service’s workers’

compensation costs account for 35 percent of

the total program costs. The Postal Service pays

workers’ compensation costs out of its operating

revenue and these costs have been increasing

each year. Therefore, legislative reform that will

allow eligible employees to retire under an

applicable retirement program may give the

Postal Service financial relief. In addition, the

Postal Service’s administrative fees have

increased 137 percent from $19 million in FY

1997 to $45 million in FY 2002. The OIG recommended the Postal Service pursue whether

congressional assistance should be sought to pay

administrative fees to the Office of Workers’

Compensation Programs. Postal Service management was responsive to the OIG’s recommendation and has actions planned to address

the concerns. (HK-MA-03-001)

MONITORING OF DEATH

BENEFIT PAYMENTS CAN BE

IMPROVED

An OIG review determined the Postal

Service’s Injury Compensation Control Office

staff did not effectively monitor or review death

benefit claims. The OIG reviewed death claim

files at the Office of Workers’ Compensation

Programs and found that claim files did not

always contain documentation required by law

and overpayments were made to deceased and

remarried survivors. The review also found that

the Postal Service injury compensation control

office did not provide adequate training and

procedures for monitoring and reviewing death

benefit claims after approval by the Office of

Workers’ Compensation. As a result, the Office

of Workers’ Compensation Program paid an

estimated $1.3 million to survivors for benefits

that were questionable. Postal management

stated that the actual amount of questionable

payments need to be determined through individual case reviews.

The OIG recommended the Postal

Service coordinate with the Office of Workers’

Compensation to review all death benefit

claims. Postal Service management did not

agree, stating that monitoring of survivors’

benefits is not the primary responsibility of the

control office staff and the office does not have

the legal authority or staffing to conduct monitoring. However, the Postal Service stated that

they will request the Office of Workers’

Compensation follow up and enforce the

requirements.

The OIG also believes monitoring would

minimize payments made to survivors who

were not entitled to receive benefits, thus saving money. The OIG is pursuing this disagreement through the formal resolution process.

Postal Service management also did not agree

to provide control office staff with training and

The OIG found that the Postal Service

may save money by monitoring death

benefit claims.
PAGE54 LABOR MANAGEMENT REVIEWS

guidance, since monitoring is not considered

the office’s primary responsibility. In response

to the OIG’s recommendation to review

chargeback reports to ensure timely credits for

third-party awards, postal management stated

that they took steps in December 2002 to reinvigorate the third-party program and implement a tracking system. 

(HK-MA-03-002)

LEGISLATIVE, REGULATORY, &

POLICY REVIEWS

During this reporting period, the OIG

identified and reviewed legislation, regulations,

and policies affecting Postal Service labor management. One policy is highlighted below: 

ENACTED POLICY

Employee and Labor Relations Manual,

Section 650, Nonbargaining Disciplinary, Grievance, and Appeal Procedures

Effective March 20, 2003, the internal disciplinary appeal process for Postal Service

employees was modified to include mediation

and neutral hearing officers in the process. The

Postal Service designated two former Postal

Service managers to function as hearing officers.

The OIG believes that overall, the new procedures will result in a strengthened process for

employees. 

The appeal process for Postal Service

employees was modified to include

mediation and neutral hearing officers

in the process.
PAGE55

INSPECTION SERVICE

Postal Inspectors investigate a number of

labor management areas, including workplace

safety, workers’ compensation, postal robberies,

and drugs in the workplace. 

The Inspection Service regards the prevention of robberies as one of its highest organizational priorities and affords task force attention

to facility, letter carrier, and other postal robberies to deter these attacks on employees.

Letter carrier robberies are generally committed

for the purpose of stealing mail and postal keys

to mail receptacles, while robberies of facilities

are committed for cash and money orders.

Postal Inspectors investigate the possession,

personal use, and sale of narcotics by Postal

Service employees or others while on postal

property. Postal Inspectors also partner with

Postal Service management and employee

groups in early interventions and other efforts

to prevent violence in the workplace. During

this period, there were 199 arrests and 144 convictions for assaults and threats, and 27 arrests

and 37 convictions related to robberies. In addition, 16 individuals were arrested and 16 convicted for the sale of drugs on postal property. 

The Inspection Service investigates fraudulent claims and receipt of workers’ compensation benefits by individual employees.

Prosecution of workers’ compensation fraud

serves as a deterrent and prevents future benefit

payments from being made to violators. During

this period, 17 individuals were arrested and

20 were convicted for workers’ compensation

fraud. Examples of workers’ compensation fraud

cases worked by the Inspection Service are

highlighted below:

◆ A former New Jersey clerk was sentenced

to 1-year probation and ordered to pay

over $5,000 restitution for mail fraud.

The employee claimed total disability as

a result from a fall while on the job. The

investigation disclosed the individual was

self-employed as a massage therapist

while alleging total disability and failed

to report the job or ability to work to the

Department of Labor. As a result of the

Inspection Service investigation, over

$21,000 in workers’ compensation funds

was recovered and the Postal Service

received a future cost savings of over $1

million.

◆ A former Postal Service employee in

Rhode Island was sentenced for making

false statements to obtain federal workers’ compensation. The former employee

was the operations manager for a postal

highway contract trucking company,

managing the business from a home

office. The Postal Service manager was

responsible for the $3 million contract

and coordinated other non-postal contracts. The investigation revealed the

manager was driving a contract route, refueling company vehicles, and transporting drivers. The employee resigned from

the Postal Service and was sentenced to

4 months of home confinement with

electronic monitoring, 2 years probation,

50 hours of community service, a $100

special assessment and restitution over

$42,000. The former Postal Service

employee is permanently debarred from

receiving future workers’ compensation

benefits. As a result, future cost savings

to the Postal Service are over $517,000. 

◆ A former letter carrier from Oregon was

sentenced to 3 months incarceration, 3

months home detention, 5 years probation, court ordered restitution of over

$29,000 and a special assessment of

$1,300 for workers’ compensation fraud.

The individual claimed total disability

after falling from his postal vehicle. The

investigation revealed the individual participated in activities inconsistent with

the alleged physical limitations. As a

result, future cost savings to the Postal

Service are over $915,000.
PAGE56 LABOR MANAGEMENT REVIEWS
Oversight of the

Inspection Service and

Other Significant

Activities

PAGE 57

OFFICE OF INSPECTOR GENERAL

Oversight Reviews

Other Significant Reviews

Other Significant Activities

Legislative, Regulatory & Policy Reviews

INSPECTION SERVICE
PAGE58 OVERSIGHT OF THE INSPECTION SERVICE AND OTHER SIGNIFICANT ACTIVITIES

OFFICE OF INSPECTOR

GENERAL

OVERSIGHT REVIEWS 

One of the primary reasons the OIG was

established within the Postal Service

was to provide oversight of all

Inspection Service activities. The Inspector

General Act, as amended, provides for the OIG

to conduct, supervise, coordinate audits and

investigations relating to the programs and

operations of the Postal Service, including the

Inspection Service, and to recommend policy

direction to promote economy and efficiency in

the administration of those programs and operations. The Inspector General Act provides to

the OIG specific “oversight responsibility for all

activities of the Inspection Service, including

any internal investigations performed by the

Inspection Service.” This additional authority

means that any and all activities of the

Inspection Service are subject to the OIG’s

scrutiny and review. 

The OIG provides independent and objective information and analyses to the Governors,

Congress, and postal management regarding

Inspection Service operations. It is essential

that the Inspection Service, as a law enforcement agency, be held to the highest standards of

conduct to maintain the public’s trust and the

Postal Service’s reputation of reliability. In addition, the OIG keeps the Governors, Congress,

and postal stakeholders fully informed of Postal

Service law enforcement efforts to detect and

prevent fraud, waste, abuse, and mismanagement by reporting the activities of the OIG and

the Inspection Service in these areas. During

the last 6 months, the OIG completed one oversight review, as well as numerous monitoring

activities, which are highlighted below:

EFFECTIVENESS OF POSTAL

INSPECTION SERVICE FRAUD

PREVENTION ACTIVITIES

An OIG audit of the effectiveness of the

Postal Inspection Service’s fraud prevention

activities, fraud program goals, fraud complaint

system, case selection and jacketing procedures,

and the customer initiative group found: 

◆ Case selection procedures had inadequate

management oversight of fraud allegations selected for investigation. This

resulted in 29 of 153 Postal Inspection

Service case files being closed or declined

with no action taken. The projected cost

of resources expended on these 29 cases

was $727,000. The OIG recommended

that the Postal Inspection Service

increase oversight and adhere to the

Inspection Service Manual on the selection of cases. 

◆ To date, the Postal Inspection Service

has expended over $2.7 million on maintenance and development costs on a

fraud complaint system that will ultimately become redundant with the

Federal Trade Commission’s Consumer

Sentinel. The OIG recommended the

Postal Inspection Service devise and

implement a plan to ensure completion

of a Memorandum of Understanding

between the Inspection Service and the

Federal Trade Commission to use the

Consumer Sentinel.

◆ The Postal Inspection Service did not

have a process in place to measure the

effectiveness of the Business Mailing

Industry Task Force. The Postal

Inspection Service should devise a

process to be implemented by 2004 to

measure and report the effectiveness of

the task force. 

Postal Inspection Service management disagreed with the recommendations. The OIG

This section highlights audits, reviews,

and investigations performed by the OIG

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

reviews and investigations performed by

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

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

order to differentiate the work reported by

the OIG and Inspection Service, the page

containing the activities reported by the

Inspection Service has been color

screened. The OIG legislative, regulatory, and policy reviews are included at the

end of this section.

How long has the Inspection

Service protected the U.S.

mails?

For over 200 years, Postal

Inspectors have protected the mail

and U.S. citizens to ensure that

the public’s confidence in the mail

is not undermined. 

The Inspection Service communicates

its law enforcement and crime prevention achievements to the American

public, Congress, the Postal Service,

and the law enforcement community

in its annual report.
INTERNAL INVESTIGATIONS 

CONDUCTED

SUMMARY OF CLOSED INTERNAL 

INVESTIGATION ALLEGATIONS

ACTIONS TAKEN ON CLOSED

INTERNAL INVESTIGATIONS

NUMBER OF

INVESTIGATIONS

Active Investigations at Beginning of Period 55

Investigations Opened 31

Investigations Closed 32

Active Investigations at End of Period 54

TYPES OF ALLEGATIONS NUMBER OF 

CASES CLOSED

Code of Conduct (violations involving 

evidence, funds, firearms)

Inspectors 8

Postal Police 3

Support Personnel 1

Code of Conduct (violations involving 

integrity, property, conduct, behavior)

Inspectors 9

Postal Police 4

Support Personnel 1

Other 6

DISCIPLINARY ACTIONS FREQUENCY

Non-bargaining – adverse

Removal/Resignation 2

Suspensions >14 days 0

Non-bargaining – non-adverse

Letter of Warning 1

Letter of Warning 

in lieu of time-off suspensions 2

Official Counseling 7

Bargaining (per collective bargaining 

agreements) – adverse

Removal/Resignation 3

Suspensions>14 days 0

Bargaining (per collective bargaining 

agreements) – non-adverse

Letter of Warning 0

Letter of Warning 

in lieu of time-off suspensions 0

Official Counseling 0

PAGE59

does not plan to pursue these issues through the

formal audit resolution process, but will conduct

follow-up audit work. (SA-AR-03-001)

REVIEW OF COMPLAINTS

REGARDING THE INSPECTION

SERVICE

The OIG’s oversight of the Inspection

Service provides customers, employees, and

other interested persons with an independent

avenue to address complaints regarding the

Inspection Service. At the same time, the OIG

provides the Inspection Service with an unbiased review of accusations that, if left unresolved, could harm its reputation as a

professional law enforcement agency and

reduce the public’s confidence in the Postal

Service. During this reporting period, the OIG

closed several inquiries related to the Inspection

Service. The inquiries resulted from complaints

made by Postal Service and Inspection Service

employees and the general public concerning a

variety of issues, including the adequacy and

selection of investigations.

INSPECTION SERVICE INTERNAL

INVESTIGATIONS

The OIG conducts investigations of misconduct by senior Inspection Service personnel

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

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

information of employee misconduct.

The OIG receives information regarding

Inspection Service internal investigations,

including conclusions reached and recommended actions. Inspection Service internal

investigations for this period included allegations of sexual misconduct, physical assault, and

obstructing an internal investigation. The

charts in the margin on the right summarize the

internal investigations conducted by the

Inspection Service, the types of allegations

reviewed, and the types of actions taken during

this reporting period.

OTHER SIGNIFICANT REVIEWS

During this reporting period, the OIG

reviewed the Postal Service Transformation

Plan. This review is highlighted below:

COMPREHENSIVE

IMPLEMENTATION PLAN 

FOR POSTAL SERVICE

TRANSFORMATION PLAN NEEDS

TO BE FINALIZED

An OIG review of the Postal Service

Transformation Plan found the Plan is a good

first step toward identifying the challenges facing the Postal Service and helpful in developing

plans to address these challenges. However, the

Postal Service needs to determine the impact of

unsuccessful reform legislation and address universal service, organizational issues, and human

capital fixed costs. In addition, the Postal

Service had not finalized a comprehensive

transformation implementation plan, which

should include prioritizing strategies, allocating

resources, completing project plans, and ensuring transformation issues are effectively communicated. Postal management agreed with the

intent of five of the six OIG recommendations

and had planned or taken actions to address the

issues. The OIG does not plan to pursue the

remaining recommendation through the formal

audit resolution process; however, it does plan

additional work in this area. (OE-MA-03-001)

OTHER SIGNIFICANT ACTIVITIES

The OIG is responsible for reviewing allegations involving Postal Service executives for

criminal violations and misconduct, including

retaliation against individuals who have previously provided the OIG with information about

possible fraud, waste, abuse, and mismanagement. During this period, the OIG investigated

22 allegations of reprisal. The allegations were

not substantiated, thus clearing the postal managers of any wrongdoing.

LEGISLATIVE, REGULATORY &

POLICY REVIEWS

During this reporting period, the OIG

identified legislation, regulations, and policies

affecting Postal Service law enforcement. One

regulation reviewed during this period is highlighted below:

ENACTED REGULATION

Rules of Practice Before the Judicial

Officer, 67 Fed. Reg. 62178 (Oct. 4,

2002)

The Postal Service amended the rules of
PAGE60 OVERSIGHT OF THE INSPECTION SERVICE AND OTHER SIGNIFICANT ACTIVITIES

practice for proceedings relative to the Program

Fraud Civil Remedies Act to reflect the change

in primary responsibility to investigate violations of the Act from the Inspection Service to

the OIG. The Act is very effective in combating fraud perpetrated on the Postal Service. The

statute is particularly useful in imposing civil

fines and penalties up to twice the amount of

any fraudulent claim that was paid in connection with workers’ compensation claims. The

OIG has assumed responsibility for investigating workers’ compensation fraud in the Postal

Service’s Capital Metro Area as part of a pilot

program and is working with the Postal Service

Law Department to establish a program to pursue Act actions in this area.
PAGE61

INSPECTION SERVICE

The Inspection Service conducts investigations and reviews of significant issues related to

physical security; narcotics offenses and trafficking; child exploitation; prohibited mailings;

postal burglaries; mail fraud including fraud

against consumers, fraud against businesses, and

fraud against government; and money laundering. The Inspection Service considers investigations of biohazardous material sent through the

U.S. mail among its highest priorities. The

Inspection Service also devotes significant

resources to prevent crimes by conducting

employee and customer awareness training programs and implementing security measures.

Investigations, Arrests and Convictions

ARRESTS CONVICTIONS*

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

TYPE OF INVESTIGATION

Mailing of Controlled Substances

 Includes narcotics, steroids, drug-related 

 proceeds, and drug paraphernalia 759 658

Bombs, Threats, Hoaxes, and Explosive Devices 45 48

Child Exploitation, Mailing of Obscene Matter, 

and Sexually Oriented Advertisement 149 129

Prohibited Mailings

 Includes hazardous material, firearms, and weapons,

 intoxicants, explosives other than bombs, extortion,

 and false documents 81 73

Postal Burglaries 51 48

Mail Fraud 

 Includes fraud against consumers, businesses, 

 and government 738 693

Miscellaneous External Crimes

 Includes counterfeit and contraband postage, 

 money order offenses, vandalism, and arson 244 195

Miscellaneous Employee Crimes

 Includes theft of postal property and sabotage 

 of equipment 42 28
PAGE62 OVERSIGHT OF THE INSPECTION SERVICE AND OTHER SIGNIFICANT ACTIVITIES
Customer Service 

OFFICE OF INSPECTOR GENERAL

External Communications

Specialized Services

Computer-Assisted Assessment Techniques

INSPECTION SERVICE

PAGE 63
OFFICE OF INSPECTOR

GENERAL 

EXTERNAL COMMUNICATIONS

The OIG is responsible for keeping members of Congress and the Postal ServiceBoard of Governors fully and currently

informed. The OIG keeps Congress informed by

issuing Semiannual Reports to Congress, testifying at oversight and other hearings, and briefing

members and their staff on issues related to the

Postal Service. The OIG also regularly provides

synopses of its audit and management advisory

reports to Congressional committees and subcommittees with oversight interest in the Postal

Service. Additionally, the OIG keeps the

Governors informed through regular briefings at

monthly Board meetings, activity reports from

the Inspector General, and responses to requests

for information. 

CONGRESSIONAL TESTIMONY

Each year, since its inception, the Inspector

General has testified before Congress on various

matters. While the OIG did not provide written

statements to Congress during this reporting

period, in the past the OIG has provided testimony and statements highlighting significant

work and identifying opportunities for the

Postal Service to improve accountability and

public trust. These testimonies and statements

can be found in their entirety on the OIG’s website at http://www.uspsoig.gov. 

In addition, in February, the OIG submitted a statement to the Presidential Commission

on the Postal Service highlighting the ten major

management issues that the OIG believes must

be addressed if the Postal Service is to remain a

viable commercial enterprise. The OIG will

continue to monitor Commission activities

with great interest and review public comments

and testimony, and has offered technical assistance to the Commission as it prepares its report

to the President. 

RESPONDING TO REQUESTS

FROM CONGRESS AND THE

POSTAL SERVICE GOVERNORS

The OIG provides accurate and timely

responses to requests from Congress and the

Postal Service Governors. The OIG responds to

many of these requests by conducting audits or

investigations. However, the OIG does not generally perform audits or investigations when an

inquiry involves a non-systemic issue that may

be resolved through existing administrative or

judicial processes, such as the equal employment opportunity complaint process, contractual grievance-arbitration procedures, or the

Merit System Protection Board. Instead, the

OIG incorporates individual concerns into a

database to identify systemic issues for review.

When systemic issues have been identified, the

OIG may conduct independent audits or investigations of Postal Service programs and operations to help ensure their economy, efficiency,

and integrity.

During this 6-month reporting period, the

OIG responded to 47 Congressional and

Governors’ inquiries. Appendix G of this report

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

response to Congressional and Governors’

requests are highlighted below:

◆ A review was conducted in response to a

congressional inquiry relating to Postal

Service management’s treatment of

employees at a New York mail service

center. The OIG found that a hostile

work environment might have existed at

this postal facility. In an effort to combat

some of the alleged problems, postal

management developed several initiatives to resolve labor relations problems

at the facility. Specifically, Postal Service

management created the Direct Line for

employees to voice their concerns and

provide confidential information regarding workplace environment. The OIG

PAGE64 CUSTOMER SERVICE

This section describes the OIG and

Inspection Service’s efforts to provide customer service, including initiatives by

support functions to enhance service to

internal customers. Customer satisfaction and service is the underlying creed of

most successful organizations and businesses. In order to differentiate work

reported by the Inspection Service, pages

concerning the Inspection Service have

been color screened.

In February 2003, the OIG submitted

written comments to the President’s

Commission on the Postal Service

highlighting the ten major management

issues that the OIG believes must be

addressed if the Postal Service is to

remain a viable commercial enterprise.
PAGE65

plans to monitor the situation at this

facility.

◆ In response to a constituent’s complaint

of harassment and retaliation in a

Virginia post office, the OIG conducted

a review that addressed the issues contained in the complaint. The OIG’s

review determined a hostile workplace

environment might have existed for

some employees at the postal facility.

However, the OIG found district Postal

Service management had taken action to

resolve the issues and has continued to

monitor the situation. 

◆ The OIG received an inquiry from the

President’s office regarding possible workers’ compensation fraud. The OIG’s

health care team conducted a review,

which included examining health care

provider billings. The OIG review found

no fraudulent activity; however, the OIG

plans to continue conducting reviews

relating to health care fraud. 

◆ The United States Equal Employment

Opportunity Commission contacted the

OIG about a postal employee’s concerns

regarding a Postal Service supervisor who

allegedly had an inappropriate relationship with another postal employee. The

complainant stated the inappropriate

relationship created a hostile working

environment at a Montana post office.

The OIG review revealed that a hostile

workplace environment might have

existed during the specified time period.

District management has initiated several

actions to resolve the situation. For

example, a conflict management workshop was held at the postal facility to

improve workplace communications and

the Postal Service supervisor will receive

leadership training.

◆ In responding to a congressional inquiry

regarding the process for choosing a location for a Pennsylvania post office, a constituent alleged the site was inappropriately

chosen because of insufficient space for a

pedestrian walkway, the constant threat

of flooding by an adjacent stream, and

other factors, including the issue of leasing versus owning. The OIG review confirmed that the Postal Service followed

policies and procedures when purchasing

the site. An independent environmental

assessment concluded the site would support the construction of the planned

facility. While the design did not include

city sidewalks, it included pedestrian

walkways from the parking lot to the post

office. A facilities design and construction manager assured the OIG that the

design and construction of the postal

facility would avoid flood plain areas.

The Postal Service appropriately considered a number of factors such as economic conditions and overall costs in

determining to lease rather than purchase the property.

◆ The President’s office contacted the OIG

regarding a letter received from a constituent who voiced concerns about a

Virginia mail processing center.

Specifically, the constituent had concerns regarding mail processing and

workplace environment. The constituent

alleged there was delayed mail in the

processing center and that Postal Service

management improperly responded to an

anthrax scare. The constituent alleged a

number of factors created a hostile working environment. The OIG visited the

processing center and found some

delayed mail in the facility. Steps were

taken by Postal Service management to

resolve the delayed mail; however, the

OIG did not address the anthrax issue,

which was previously identified through

other congressional channels and examined by the Postal Service. The OIG’s

review concluded the Postal Service followed standard procedures, such as evacuating infected areas and assigning

employees to other duty stations. The

hostile workplace environment issue was

also previously examined. The OIG

determined that local, district, and area

officials were taking effective steps to

improve the workplace environment. 

In addition to the above requests, the OIG

has implemented a process to rapidly respond to

requests made by the Governors and senior

postal management. This is driven by the need

to quickly communicate information to assist

with decision making or to clarify issues, policies, and procedures. During this reporting

An OIG review disclosed the Postal

Service did not know whether Jeeps sold

to salvage yards were destroyed.
PAGE66

period, the OIG provided information on the

following matter: 

◆ An OIG review, performed in response to

a request from the Board of Governors,

examined disposal issues associated with

Postal Service quarter-ton delivery Jeeps.

The review disclosed the Postal Service

did not know whether Jeeps sold to salvage yards were destroyed. The OIG

found that the majority of the Jeeps were

destroyed according to signed agreements. However, the actual number

destroyed could not be substantiated

because retention of the agreement varied by vehicle maintenance facility and

observations of Jeep destruction were not

always documented. (TD-OT-03-001)

OIG HOTLINE PROVIDES A VITAL

AND CONFIDENTIAL COMMUNICATIONS LINK

The OIG Hotline provides a vital and confidential communications link between the

OIG and individuals who contact the Hotline

to report allegations of fraud, waste, abuse, and

mismanagement.

Responding to Hotline Inquiries

The Hotline receives complaints from

employees, customers, and the general public

concerning alleged violations of laws, rules, or

regulations; mismanagement; waste of funds;

abuse of authority; and danger to public health

and safety. Complaints and allegations received

by the Hotline are analyzed to identify systemic

issues affecting the Postal Service, and are

referred for appropriate action. The OIG also

considers Hotline contacts when planning

audits and projects. 

During this reporting period the Hotline

received almost 9,700 contacts, some of which

were addressed by the OIG in audits and investigations on issues such as waste, fraud, abuse,

mismanagement, deficient postal operations,

personnel matters, and other concerns. In

addition:

◆ Twenty-nine percent were addressed by

the Inspection Service and involved

criminal issues such as mail theft, assaults

and threats, and workers’ compensation

fraud;

◆ Twenty-four percent were addressed by

the Postal Service’s Office of Consumer

Advocate involving complaints related

to customer service issues, particularly

mail delivery;

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

ZIP Codes, postage meters, and other

Postal Service-related matters; and

◆ Nearly 3 percent of Hotline contacts

were assigned to OIG staff for further

review for fraud, waste, abuse, and mismanagement.

Some examples of OIG Hotline work are

highlighted below:

◆ Received complaints from five customers

who alleged they were defrauded by moving companies referred to them by a link

from the Postal Service website the

postal customers used to electronically

process a change of address. The matter

was brought to the attention of Postal

Service Headquarters officials who discontinued the “Movers Source” program

and severed the link from the Postal

Service website.

◆ Received a complaint that alleged Postal

Service funds were being wasted because

both letter carriers and postal vehicle service drivers were being used to transport

mail in the same areas. The Hotline tip

resulted in an OIG audit, which determined postal employees were performing

overlapping work and routinely crossing

paths while transporting mail.

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

5 p.m., Eastern Standard Time, Monday

through Friday (except federal holidays). Calls

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

Threats and any other potentially violent work

situations are routed immediately to the Postal

Police Control Center for action 24 hours a day

either by an OIG Hotline analyst or through a

caller-directed menu system. OIG Hotline contact information is provided in the margin to

the left.

PROPOSED LEGISLATION,

REGULATIONS, AND POLICY

As required by the Inspector General Act,

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

Governors of the impact of such legislation and

regulations on Postal Service programs and

CUSTOMER SERVICE

The OIG Hotline team handled almost

9,700 contacts this reporting period.

OIG HOTLINE 

◆Toll-Free, 1-888-USPS-OIG

(1-888-877-7644) 

◆TTY (Hearing Impaired) 

1-866-OIG-TEXT

(1-866-644-8398) 

◆To write to the OIG Hotline:

ATTN: OIG Hotline

1735 North Lynn Street

Arlington, VA 22209-2020

◆To e-mail the OIG Hotline:

hotline@uspsoig.gov 

◆To fax information toll-free:

1-866-756-6741
operations. During the 6-month reporting

period, the OIG evaluated 25 legislative proposals and 51 regulatory initiatives. Highlights of

the legislative and regulatory proposals are

included at the end of the appropriate section

that describes the OIG and Inspection Service

reviews performed in the last 6 months.

FREEDOM OF INFORMATION ACT

REQUESTS

The OIG is committed to making all

final audit and management advisory reports

available to the public, unless the law prohibits disclosure. The OIG website, http://

www.uspsoig.gov, contains all releasable final

audit and management reports. A list of all

reports, including those that are not

releasable, is also included on the web page. 

Before posting a report on the website, the

OIG reviews each report in accordance with the

Freedom of Information Act, the Privacy Act,

and the Postal Reorganization Act. The OIG

may coordinate its review with Postal Service

management and attorneys. In deciding what

information to release, the OIG balances the

public’s right to access federal agency records

with individual privacy rights as well as the

Postal Service’s need to safeguard certain protected information. As a result, OIG reports

may be withheld in whole or in part to protect

privacy as well as proprietary or confidential

information. The OIG responds to many written requests for reports and other information

under the Freedom of Information Act. As of

July 15, 2002, the OIG began deciding all OIGrelated Freedom of Information Act appeals to

more efficiently safeguard individual privacy

and sensitive OIG information while ensuring

maximum access. Freedom of Information Act

appeals are handled by the OIG Legal Services

Team and such authority is outlined under Title

39 Code of Federal Regulations § 230.5(e). 

In this reporting period, the OIG processed

62 Freedom of Information Act requests and

reviewed 3 Freedom of Information Act

appeals, as indicated in the charts located in the

right margin.

INSPECTOR GENERAL

SUBPOENAS 

Pursuant to the Inspector General Act, the

Inspector General is authorized to issue subpoenas for audits and investigations for which the

OIG has jurisdiction. This includes authority to

issue subpoenas in support of certain investigations of the Inspection Service. An Inspector

General subpoena is a valuable audit and investigative tool. It enables the OIG to secure documentary information and evidence that,

unlike grand jury subpoenas, can be readily used

in civil and administrative proceedings, as well

as criminal cases.

Inspector General subpoenas are not selfenforcing. If a subpoena is not complied with,

OIG attorneys and special agents, and Postal

Inspectors, first attempt to negotiate with the

subpoena recipient to obtain the requested documents. If this is not successful, the OIG seeks

enforcement in United States district court.

The courts generally enforce the subpoena as

long as the inquiry is within the authority of the

agency, the information sought is reasonably relevant to the agency’s inquiry, and the demand is

not unduly burdensome. 

Since its inception, the OIG has been successful in enforcing every subpoena that has

been challenged in court. This success is due to

the subpoena review process. The review is

comprehensive in terms of scope of review, level

of supervisory review, and signature authority.

All subpoenas undergo thorough, progressive

investigative and legal reviews. The subpoena

process requires OIG special agents and Postal

Inspectors to submit a written justification with

their subpoena request. After supervisory

review, the OIG legal staff evaluates each subpoena to ensure the subpoena can withstand a

legal challenge. The Inspector General, the

Deputy Inspector General, the Assistant

Inspector General for Investigations, and the

Deputy Assistant Inspector General for

Investigations are the only individuals authorized to sign Inspector General subpoenas. 

During this reporting period the OIG successfully defended a contractor’s challenge to an

OIG subpoena for financial records. The contractor challenged the OIG’s right to subpoena

bank records, which is controlled by the Right

to Financial Privacy Act. On January 16, 2003,

a United States Magistrate Judge ordered a bank

to provide the records because the OIG demonstrated that the records were relevant to an OIG

investigation.

PAGE67

FREEDOM OF INFORMATION ACT REQUESTS

For the period October 1, 2002, through 

March 31, 2003

FREEDOM OF INFORMATION ACT APPEALS

For the period October 1, 2002, through 

March 31, 2003

OIG Number of

Activity Requests

Carryover from prior period 5

Received during the period 65

Total on hand during the period 70 

Processed during the period

Released 25

Withheld 9

Referred to Postal Service 

or other agency 20 

Otherwise closed* 8 

Total processed during the period 62

Balance at end of the period (Pending) 8

*Otherwise closed includes no responsive documents,

improper requests, requests withdrawn, etc.

OIG Number of 

Actions Appeals

Total appealed 3 

Total upheld 3 

Appeals pending 0
PAGE68

SPECIALIZED SERVICES

COMPUTER FORENSICS

The OIG has an investigative team of

technology specialists who conduct forensic

examinations and computer investigations and

provide other technology support to OIG investigations. The OIG’s forensics support component is critical in supporting the data-intensive

investigative efforts of the OIG. Few OIG

investigations are initiated that do not involve

some form of analysis of computer data seized

from the subjects, companies, and victims of

crimes. Such data can be in the form of malicious software, e-mail, databases, documents,

and images from a wide variety of technologies. 

The falling cost of data storage devices is

having a significant impact on the amount of

data seized during the OIG’s investigations, as

well as for investigations conducted by the rest

of the law enforcement community. The low

cost of such storage devices is generating a revolution in the world of forensics. The OIG is

meeting these challenges by gathering and

employing technologies that support decentralized analysis of very large amounts of data. 

In addition, the OIG has provided support

to other agencies such as the Federal Housing

Finance Board Office of Inspector General. The

team seized and conducted forensic analysis on

14 computer hard drives comprising 380 gigabytes of data. The OIG’s analysis of the data on

the hard drives identified a series of critical 

e-mails and data.

The OIG also conducts forensic examinations of computer media seized during investigations. These examination techniques are used

to image computer media for later examination.

During this reporting period, the OIG imaged

over 29 hard disk drives in support of 6 OIG

investigations. 

POLYGRAPH SERVICES

The OIG polygraph program aids criminal

investigators and is an effective tool to assist in

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

polygraph community and on the Federal

Polygraph Executive Committee. An example

of the effective use of polygraph examinations

follows: 

◆ The OIG administered polygraph examinations to two postal employees who

worked at a post office in New Mexico.

The examinations were requested to help

identify the person responsible for hacking into the Postal Service’s computer

system and using the system to communicate threats of violence. However, the

OIG’s examinations of both postal

employees indicated no deception to the

relevant issues.

COMPUTER-ASSISTED 

ASSESSMENT TECHNIQUES

The OIG uses automated methods and

tools to extract and analyze electronic data

located in over 900 postal systems in support of

its audit and investigative efforts. The OIG has

achieved success by developing programming

techniques to independently access the large

database systems in San Mateo, California, and

Minneapolis, Minnesota, as well as numerous

remote Oracle database systems throughout the

postal network. The OIG has used these techniques when performing the following work this

reporting period, including:

◆ Developing computer programs to

extract data from the Voyager eFleet card

system within the Southwest Area. See

write-up page 23.

◆ Using original and creative methods to

extract data from the Facilities

Management System, the OIG identified

and completed “New Construction

Owned” facility projects and performed

additional calculations of the authorized

paid amount for construction and design.

See write-up page 36.

◆ Developing complex computer programs

to extract data from the Facilities

Management System. The review’s

objective was to determine the effect of

the capital freeze on the Postal Service’s

ability to maintain, preserve, and expand

buildings as needed in an economical and

effective manner. See write-up page 37.

CUSTOMER SERVICE

For the period October 1, 2002,

through March 31, 2003

Types of Number

Subpoenas Issued

OIG 

Inspector

General Act 63 

Right to 

Financial 

Privacy Act 2 

Inspection Service 

Inspector

General Act 120 

Right to 

Financial 

Privacy Act 2 

Total 187

SUBPOENAS ISSUED

A subpoena is a crucial investigative

tool that allows the OIG to secure

documentary information and evidence. 
PAGE69

◆ Applying data-mining techniques to the

Retail Data Mart to keep abreast of new

data technologies being used by the

Postal Service. The Retail Data Mart

tracks all retail transactions at postal

facilities. It is the first part of the Postal

Service’s Enterprise Data Warehouse to

enhance business decisions and to create

a demand chain solution. The OIG has

expanded its current programming proficiency to tackle the analysis of the Retail

Data Mart and various parts of the

Electronic Data Warehouse as it comes

on-line. See write-up page 45.

◆ Extracting data from the Postal Injury

Compensation System and the Postal

Service Payroll System, assisting auditors

to identify detailed employees on the

workers’ compensation periodic rolls. See

write-up page 53.

What outreach efforts does

the OIG use for recruitment of

staff?

The OIG advertises its vacancies

in numerous newspapers and

periodicals as well as the Internet;

recruits at colleges, universities,

and professional organizations,

including those with large

minority representation; and

attends professional conferences

throughout the United States.

Today’s storage devices hold more data.

For example, a one-gigabyte device can

store the equivalent of a stack of paper

100 feet tall, or 75 boxes of paper.
PAGE70

INSPECTION SERVICE

The Inspection Service has adopted

numerous initiatives to improve customer service. The Inspection Service

alerts consumers and businesses to current

crimes by attracting media attention to postal

crime trends, publicizing positive law enforcement accomplishments, circulating media

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

communicating its law enforcement and crime

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

enforcement community.

In an effort to maintain the integrity of the

mail and ensure the confidence and trust that

government agencies, businesses, and customers

place in the Postal Service, the Inspection

Service conducts mail fraud investigations that

focus on a variety of complex schemes. To promote consumer protection, the Inspection

Service utilizes specialized investigative tools

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

evidence recovery units to solve crimes committed against the public.

CUSTOMER SERVICE

Inspection Service crime laboratories analyze evidence

to assist with solving crimes.
Goals and Strategies

How does the OIG differ from the Inspection Service?

OIG employees are postal employees, but the OIG is an

independent, separate part of the Postal Service. OIG's

criminal investigators are Special Agents, not Postal

Inspectors. The OIG utilizes auditors and evaluators in

addition to Special Agents. Postal Inspectors are primarily

responsible for the sanctity of the mail, and the safety and

security of postal employees and facilities. The OIG has

oversight of the Postal Inspection Service's operations.

PAGE 71
PAGE72

What are OIG’s values?

The OIG’s core values are

teamwork, leadership,

communication, creativity, and

conceptualization (TLC3). OFFICE OF INSPECTOR

GENERAL

STRATEGIC GOALS

I

n March 2001, the OIG published a revised

Five-Year Strategic Plan for FYs 2001-2005.

Each aspect of this plan is in accordance

with the President’s management agenda and

the principles of the Government Performance

and Results Act. The OIG’s strategic plan is

outcome-oriented and focuses on the fundamental mission to increase the efficiency and

effectiveness of Postal Service programs and

operations, while eliminating and preventing

fraud, waste, abuse, and mismanagement. This

plan was designed to address the Postal Service’s

strategic direction and objectives outlined in

the Postal Service’s Strategic Plan for

FYs 2001-2005, which reflected a growing

uncertainty about the future implications of

emerging technologies, changing customer

requirements, and competitors’ actions on mail

volume and postal revenues. The OIG is working on updating its strategic plan that will be

released in FY 2004.

The OIG’s strategic planning process has

four distinct steps. First, the OIG determines

the major management issues facing the Postal

Service. Second, the OIG assesses Postal

Service operations and activities, broadly

defines realistic goals, sets priorities in line with

the Postal Service business vision, and develops

effective strategies and action plans that align

the OIG’s activities to best help the Postal

Service improve its effectiveness and efficiency.

Third, the OIG measures progress in meeting

those goals. And fourth, the OIG updates and

revises goals, strategies, and performance measures to continually align its efforts with the

changing business needs of the Postal Service. 

GOALS AND STRATEGIES

This section describes the OIG and

Inspection Service vision and goals for

assisting the Postal Service in achieving its

operational, performance, and financial

goals in the 21st century. In addition, this

section describes the process by which the

OIG translates its vision into an annual

performance plan. In order to differentiate

between the OIG and Inspection Service,

the page concerning the Inspection Service

has been color-screened.

Office of Inspector General

FY 2003 Goals and Strategies

GOALS STRATEGIES GOALS STRATEGIES

The OIG will be the 

independent voice that 

provides its stakeholders 

with timely, accurate, and 

relevant information 

that contributes to the 

success of the Postal Service.

 Annually identify major 

 management issues 

 and independently develop 

 work priorities that assist 

 the Postal Service in 

 addressing major 

 management issues.

 Independently provide 

 the right information to 

 the right people at the 

 right time.

 Independently manage 

 and optimize OIG 

 resources, including 

 leveraging cutting-edge 

 technology.

 Maintain a values-

 based organization that 

 attracts, develops, and 

 retains a talented and 

 diverse workforce.

The OIG is an independent 

entity that maximizes 

resources, leverages cuttingedge technology, and 

provides a healthy 

organizational culture and 

environment.
PAGE73

The OIG’s strategic plan identified two

overarching goals. Under each goal, OIG identified two strategies designed to achieve each

goal. 

PERFORMANCE MEASURES AND

RESULTS

As a part of the planning process, it is necessary to establish performance measures to

determine how well the OIG is achieving its

goals. These measures provide a baseline and

give the OIG the ability to monitor and track

trends over time. It is imperative to ascertain a

benchmark of current performance, resources

used, products produced, and results achieved to

identify appropriate performance measures that

lead to the OIG’s achievement of its strategic

goals. To that end, the OIG continually reviews

stakeholder input, data from tracking systems,

and cumulative management experience to

ensure the OIG’s stated objectives are on target.

As the OIG obtains new information, it evaluates and updates OIG goals, strategies, and performance measures. 

The annual performance measures are not

intended to measure the work of the OIG in its

totality. Rather, they are a means of focusing on

select areas so efforts can be concentrated and

substantive improvement made. The strategies

contained in the OIG’s strategic plan provide

guidance and an overarching structure, while

allowing for flexibility in achieving the goals.

OIG managers use this plan to identify and

communicate general work product milestones

and to monitor efforts toward strengthening the

OIG’s capability to fulfill its mission. 

The OIG monitors its performance and

seeks ways to improve. By maintaining objective data on key performance areas, the OIG is

able to periodically measure and assess its

progress in achieving goals. Annually, the OIG

establishes performance measures to emphasize

program objectives, promote teamwork, and

encourage innovation throughout the OIG.

These measures are linked to a team award that

is structured to reward commitment to the

strategic priorities of the OIG and to reinforce

the importance of providing high-quality and

value-added services that contribute to the success of the Postal Service. 

The FY 2002 performance results were validated by an independent federal agency, which

found the OIG accomplished over 84 percent of

its performance measures. Based upon information gained from FY 2002, the OIG updated its

performance measures for FY 2003 and

increased its challenges. 

OIG PLANNING PROCESS

To ensure long-term success, it is necessary

for the Postal Service and the OIG to plan

reviews, audits, and investigations appropriately. As part of its planning process, the OIG

seeks input from key stakeholders, including

Congress, the Governors, Postal Service managers, the Postal Rate Commission, employee

unions, management associations, and major

mailers to identify risk areas and emerging challenges that would benefit from the OIG’s

review. Suggestions received are considered during the annual OIG planning process, and

become part of the universe of projects for consideration. This creates a unique opportunity for

the OIG to provide independent analysis and

information to assist Postal Service management officials in fulfilling their responsibilities. 

Projects from the universe are selected on

the basis of risk and OIG resources available for

the year. The OIG selects the highest priority

projects for inclusion in the annual performance plan and the annual audit workload

plan. As part of the selection process, the OIG

considers the project’s potential impact on:

◆ Postal Service labor and capital resources

◆ Postal-wide operations and goals

◆ Public trust

This audit workload plan is presented to

the Postal Service Governors each year. The

plan is adjusted throughout the year as the

OIG’s work reveals new issues or the Postal

Service encounters new challenges.

OIG AUDIT WORKLOAD PLAN 

In a previous section of this Semiannual

Report, the ten major management issues facing

the Postal Service were discussed. In preparing

its audit workload plan, the OIG consolidated

the major management issues facing the Postal

Service into four major areas along with the

oversight of the Inspection Service. The OIG

will continue to focus its audit attention on

these five major areas to help address critical

issues facing the Postal Service: 

OIG

POSTAL 

PROJECT

UNIVERSE

OIG

ANNUAL

PERFORMANCE

PLAN

AUDIT 

WORKLOAD

PLAN

AUDITS & AUDIT RELATED PROJECTS

INVESTIGATIONS

OTHER PROJECTS

INTERNAL ENABLING FUNCTIONS

QUICK RESPONSE

FACT-FINDINGS

AUDITS & AUDIT RELATED PROJECTS

INVESTIGATIONS

OTHER PROJECTS

INTERNAL ENABLING FUNCTIONS

OIG

POSTAL 

PROJECT

UNIVERSE

OIG

ANNUAL

PERFORMANCE

PLAN

AUDIT 

WORKLOAD

PLAN

Planning System

Interrelationship
PAGE74

◆ improving safety and security of the mail

for employees and customers; 

◆ reducing workers’ compensations costs; 

◆ improving financial performance and

accountability; 

◆ enhancing productivity through

technology and improving the quality 

of electronic information; and

◆ overseeing the Inspection Service. 

The following presents each of these five

areas and the focus of the OIG’s audit efforts.

Improving Safety and Security of the

Mail for Employees and Customers

The anthrax mail contamination has

threatened customer confidence in the Postal

Service’s ability to continue to provide safe and

secure mail services. A decline in customer confidence could cause customers to seek services

other than traditional mail, which will reduce

volume and revenue. The Postal Service must

restore and maintain customer confidence in its

ability to keep secure and safely deliver the

nation’s mail. The OIG has focused on the following: 

◆ Biohazard detection and filtration

◆ Anthrax irradiation

◆ Collection boxes

◆ Mail processes

◆ Air mail

◆ International mail

◆ Crime prevention

◆ Security cameras

Reducing Workers’ Compensation Costs

Workers’ compensation costs have

increased 35 percent in the last 3 years. As the

largest participant in the Federal Workers’

Compensation Program, the Postal Service

accounted for $760 million of the total $2.2 billion in federal workers’ compensation outlays

for claims in FY 2002. Controlling workers’

compensation costs is a priority issue for the

Postal Service and is critical to improving its

financial condition. The OIG will focus on the

following: 

◆ Costs 

◆ Injury compensation costs

◆ Medical costs

◆ Return to work

◆ Outplacement Efforts 

◆ Programs

◆ Administration

◆ Rehabilitation program

◆ Pre-injury safety program 

Improving Financial Performance and

Accountability

Increasing productivity while controlling

costs is crucial for the Postal Service to reduce

anticipated losses. The cost of maintaining and

servicing a growing universal delivery network

has escalated while mail volumes have

decreased. The Postal Service needs strong controls and aggressive efforts to ensure that contracts and programs are managed effectively.

Recent financial trends are encouraging; however, the Postal Service needs to sustain the

progress made and continue to improve financial performance and accountability. The OIG

will focus on the following:

◆ Financial system integrity 

◆ Financial statements

◆ Field installations

◆ Cost and revenue analysis

◆ Treasury-related issues

◆ Protective reviews

◆ Budget 

◆ Planning

◆ Execution

◆ Systems

◆ Contracting activities 

◆ Fair and reasonable contract pricing

◆ Reasonableness and allowability of 

incurred costs

◆ Adequacy of contractor systems

◆ Contract administration

◆ Identification of potential corruption 

in the Postal Service’s contracting and 

procurement process

GOALS AND STRATEGIES

The Postal Service Annual Report

highlights the Postal Service’s

accomplishments for the year.
PAGE75

◆ Facilities and real estate 

◆ Justification, approval, and budgeting

◆ Construction management

◆ Logistics

◆ Transportation systems and operations

◆ Material management

◆ Staffing

◆ Highway network scheduling

◆ New postal initiatives

◆ Shared services

◆ General ledger redesign

◆ Monthly reporting

Enhancing Productivity Through

Technology and Improving the Quality

of Electronic Information 

Enhancing productivity through the use of

technology is key to the Postal Service’s ability

to improve its service, productivity, and profitability. While it depends on technology to

handle more than 660 million pieces of mail

every day, the Postal Service also depends on

high quality information in order to improve

and sustain service performance. In addition,

changes in technology make timely and accurate data critical for effective decision making.

OIG efforts will focus on the following: 

◆ Information systems 

◆ Information infrastructure and 

architecture

◆ System performance and integrity

◆ Systems development and 

implementation

◆ Disaster recovery and business 

continuity plans

◆ Computer security 

◆ Access

◆ Data protection

◆ Data integrity

◆ Accepting and Processing

◆ Mail tracking (scanning)

◆ Breakthrough productivity initiatives

◆ Network integration and alignment

◆ Transportation/Delivery 

◆ City carrier productivity

◆ Vehicle maintenance facilities

Overseeing the Inspection Service

The Inspector General Act requires the

OIG to conduct oversight reviews of the

Inspection Service in addition to OIG’s audit

and investigative responsibilities over postal

operations. OIG efforts in this area will focus on

the following:

◆ Public trust 

◆ Function and role

◆ Operational effectiveness

◆ Management controls

◆ Internal affairs
PAGE76

GOALS OBJECTIVES

Inspection Service 

FY2003 Goals and Objectives

Safety

Security

Integrity

• Ensure employee screening is effective

• Enhance security of postal facilities

• Reduce theft of mail

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

 compensation program and reduce costs due to

 fraudulent schemes

• Protect consumers and business from fraud schemes 

• Reduce the use of postal money orders and the postal system 

 to launder money

• Reduce and deter the use of the U.S. Mail for the procurement or 

 delivery of materials that promote the sexual exploitation of children

Ensure a safe and secure drug-free work environment

Reduce and deter criminal attack of 

postal products, services, and assets

Reduce the use of the postal system to defraud consumers, 

businesses, and government agencies and prevent its use 

to transport prohibited, illegal, and dangerous mailings 

and their proceeds

GOALS AND STRATEGIES

Inspection Service

FY2003 Goals and Objectives

INSPECTION SERVICE

The Inspection Service must supplement

its reactive capability with proactive

strategies to deter and prevent criminal

activity. To accomplish this, the Inspection

Service has developed five long-term strategic

goals and related objectives. The new strategic

plan begins with three critical imperatives:

safety, security, and integrity. 
Organizational Dynamics

The OIG staff consists of auditors,

criminal investigators, evaluators,

attorneys, experts, technicians, and

administrative personnel from federal

and state government agencies, private

industry, nonprofit organizations and

the Postal Service.

PAGE 77
OFFICE OF INSPECTOR

GENERAL

AN INDEPENDENT VOICE

The OIG is an independent agency

within the Postal Service and is under

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

From 1988 until the establishment of the OIG

in 1996, the Chief Postal Inspector performed

dual roles as the Inspector General and Chief

Postal Inspector and reported to the Postmaster

General. In January 1997, Karla W. Corcoran

was sworn in as the first independent Inspector

General of the Postal Service. In carrying out its

responsibilities under the Inspector General

Act, the OIG:

◆ Provides Congress, the Governors, and

Postal Service management with timely,

objective, and complete information on

and analysis of Postal Service operations.

◆ Conducts audits and investigations of all

Postal Service operations and activities,

including ratemaking, contract administration, labor management, accepting

and processing, transportation, delivery,

financial management, developmental,

information systems, computer intrusion,

electronic commerce, and marketing.

◆ Maintains oversight of Inspection Service

operations and performs independent

reviews of complaints against its

employees.

◆ Reviews computer security and conducts

computer intrusion activities to identify

vulnerabilities in postal systems.

◆ Serves as an objective venue for all

Postal Service employees and other

stakeholders to report fraud, waste, abuse,

mismanagement, and other improprieties

and concerns, with protection from management retaliation.

◆ Identifies cost savings and recommends

improvements for contract and program

administration, employee integrity, and

program efficiency.

◆ Participates in audit resolution, a mechanism for resolving findings and recommendations when the OIG and Postal

Service management disagree.

The OIG adds value to Postal Service

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

the Postal Service maintain its integrity

through independent investigations, audits,

and reviews. To improve Postal Service programs and operations, the OIG provides independent and objective information, analysis,

and recommendations. The OIG is continuing

to work with Postal Service management to

inform them of the duties and responsibilities of

the OIG and to demonstrate how the OIG adds

value to Postal Service processes.

OIG VISION AND VALUES

The vision of the OIG is “A Constellation

of Talented People Making a Difference.” This

vision reflects the OIG’s mission to shed light

on Postal Service challenges and identify opportunities for improvement by emphasizing five

fundamental values:

Teamwork—Diverse talents and levels

working cooperatively and collaboratively toward producing timely, relevant, and

quality work products and services that

add value to the Postal Service and the

OIG.

Leadership—Encouraging each employee to

be the best they can be regardless of position or grade, understanding that all levels of employees are expected to play a

role in developing and directing every

effort performed.

Creativity—Cultivating fresh perspectives in

the development of new processes and

techniques that will improve Postal Service and OIG operations.

Communication—Ensuring cross-level and

cross-functional sharing of all information

as well as facilitating honesty, openness,

PAGE78 ORGANIZATIONAL DYNAMICS

This section describes the OIG and the

Inspection Service organizational vision,

values, culture, and diversity that assist

with providing value-added service to the

Postal Service. In order to differentiate 

the work reported by the OIG and the

Inspection Service, the pages containing 

the work reported by the Inspection Service

have been color screened.

The OIG’s values make up the core

of its culture and define how it

performs its work.

What is the OIG’s Workplace

Enhancement Team?

The OIG’s Workplace

Enhancement Team provides

support and services to the OIG

in internal work life, organizational climate, diversity, equal

employment opportunity, and

other workplace related issues.
respect, and consideration of the contributions and opinions of others.

Conceptualization—Keeping one’s “eye on

the ball” and recognizing interrelationships to accomplish desired results.

OIG CULTURE AND EMPLOYEES

Embracing Best Workplace Practices for

OIG Employees

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

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

maintaining a workplace that is enriched by the

talents, contributions, and full participation of

all of its employees and reflects the tremendous

diversity of the postal community. Diversity is a

tool for achieving the OIG’s mission and

enhancing its organizational effectiveness by

using the creative energies of employees who

contribute different approaches, solutions, and

innovations.

The OIG workforce is diverse in age, race,

ethnicity, gender, and background, as well as

education, professional accomplishments, work

experience, and work style. The OIG workforce

includes Certified Public Accountants,

Certified Internal Auditors, Certified Fraud

Examiners, Certified Information Systems

Auditors, Certified Information Systems

Security Professionals, Certified Government

Audit Professionals, Certified Government

Financial Managers, and Certified Acquisition

Auditors. OIG employees also hold law

enforcement specialty certifications in areas

such as polygraph examinations. In addition,

many OIG employees have undergraduate or

advanced degrees, while other employees are

continuing to work toward professional and

academic achievements. OIG employees work

in teams of auditors, evaluators, criminal investigators, lawyers, technicians, and administrative personnel. These employees have diverse

backgrounds and experiences from federal and

state government agencies, private industry,

non-profit organizations, and the Postal

Service. 

The OIG’s office boasts a workforce of 720

employees consisting of 51 percent women and

49 percent minorities. This is highly atypical for

similar organizations that traditionally have

more men than women and more non-minorities than minorities. The Postal Service

Inspector General Office’s 51 percent female

ratio is also higher than the 45.7 percent for the

civilian labor workforce and 45 percent for

other federal government offices, as computed

by the Census Bureau. In addition, the 33 percent women in the Office of Inspector General’s

executive service is higher than the 24 percent

women executives at other federal government

offices. In fact, comparing the OIG’s diversity to

others, the OIG would be number one on

Fortune magazine’s 2002 annual list of

“America’s 50 Best Companies for Minorities.”

This is as a result of the OIG’s commitment to

hire, promote, and retain the best diverse talent

available.

The OIG continues to be proactive in

ensuring a productive, inclusive, and quality

work culture and environment for its employees. The OIG’s employees are the organization’s

most valuable resource. Therefore, it is essential

the best workplace practices and programs are

incorporated into business operations to support

employees in doing their best work. 

As part of its efforts to build and maintain

an organizational culture that is supportive of its

employees, in 2003, the OIG launched an

employee resource service called LifeWorks,

which is designed to help employees manage

their work and personal lives. LifeWorks is a fast,

confidential, and easy-to-use resource that provides services on a wide range of work and life

matters through a company that is a leader in

workplace effectiveness. Access to LifeWorks is

available to every employee as well as their

immediate family members at no charge to

either. 

Moreover, the OIG has a wide array of progressive workplace practices and programs in

place such as those listed below that reflect the

OIG’s leadership role in acknowledging and

appreciating its employees and helping them

achieve a quality work/life. These include:

◆ Senior management commitment to

employees

◆ Employee Advisory Council

◆ Administrative Advisory Council

◆ Alternate work schedules 

PAGE79

Comparison of OIG 

Diversity Statistics to

Federal Civilian Workforce

0

10%

20%

30%

40%

50%

60%

70%

WHITE BLACK HISPANIC ASIAN NATIVE AMERICAN

OIG 

Federal Workforce 

OIG exceeds minority representation in

nearly every category.
PAGE80

◆ Telework option

◆ Workplace enhancement seminars

◆ Work-Life Resource Library 

◆ Sexual harassment prevention training 

◆ Alternative Dispute Resolution 

(mediation)

◆ Commitment to workforce diversity 

◆ Workplace Enhancement Team

◆ Professional training and development

◆ Supervisory training 

◆ Recognition and awards program

◆ All-Hands and Town-Hall Meetings 

◆ Business casual dress option

◆ State-of-the-art technology

◆ Competitive pay scale

◆ Promotional and career advancement

opportunities

◆ Employee assistance program

◆ Modern facilities

Another example of the OIG’s commitment to a quality work environment is its continuance of an organizational performance

measure in FY 2003 that focuses on workplace

enhancement. This measure is designed to

engage all employees in sharing responsibility

for enhancing their work environment and

work relationships. This measure required all

employees to complete at least 20 credits of

activities intended to enhance their skills in

areas such as effective communication, resolving differences, teamwork, and managing stress.

This goal for FY 2003 was increased to achieving a 95 percent employee participation rate. 

OIG employees have responded favorably

to the organization’s concerted actions to

assume a leadership role in embracing comprehensive best workplace practices and programs.

By building and maintaining a supportive culture, the OIG has successfully provided the tools

and resources necessary to maximize employee’s

performance and morale; contributed toward

enhanced mission accomplishment and productivity; promoted an employee-focused and

healthy work environment; and created a competitive edge in the recruitment and retention

of a quality workforce.

ADHERING TO THE HIGHEST

PROFESSIONAL STANDARDS

The OIG reports to Congress and the nine

presidentially appointed Governors. The

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

the Postmaster General. This independence

from postal management is crucial to the OIG’s

credibility and allows the OIG to objectively

conduct audits and investigations of program

operations and to report its findings to the

Governors, Postal Service management, and

Congress. To help respond to the challenges the

Postal Service faces, the OIG annually identifies major management issues and independently develops work priorities that assist the

Postal Service in addressing these issues.

OIG work is performed in accordance with

professional standards, such as the General

Accounting Office’s Government Auditing

Standards and the President’s Council on Integrity

and Efficiency’s Quality Standards for Inspections

and Quality Standards for Investigations.

Each audit is subject to supervisory review

at each stage of the audit process and must meet

established standards for due professional care,

quality, and independence. Each report is subject to review by the OIG’s statisticians, attorneys, editors, and other experts, and is

independently referenced by individuals not

associated with the project. Draft reports are

submitted to Postal Service management, who

has the opportunity to provide written comments in response to the report’s findings and

recommendations. These comments are evaluated and incorporated in the final report. 

In addition, the OIG ensures the highest

ethical standards by performing full security

background investigations of its employees.

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

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

ethics training each year and meet the OIG’s

established standards for continuing professional education. 

Further, the OIG ensures its own compliance with professional, legal, and ethical standards through established processes. Every 3

years, the OIG is selected for a peer review of its

ORGANIZATIONAL DYNAMICS

On July 20, 1969, Astronaut

Neil A. Armstrong cancelled the

first piece of mail carried to the

moon with a postmark, which

read “Moon Landing, USA.”
PAGE81

audit processes by another Inspector General

organization. The OIG also has an effective

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

Complaints against senior OIG management

officials are handled pursuant to an Executive

Order and are investigated by the Integrity

Committee of the President’s Council on

Integrity and Efficiency, headed by a high-ranking official of the Federal Bureau of

Investigation. 

PUBLIC RELATIONS AND

OUTREACH

For the first half of the fiscal year, the

Public Relations team educated Postal Service

stakeholders by issuing news releases that highlighted OIG work, writing stories targeted for

outside publications, and developing, designing,

and publishing brochures that clearly and simply explain the function of the OIG. In addition, the team provided the Postal Service

Governors and key executives with a monthly

report of OIG activities and achievements.

To keep OIG employees informed of critical news affecting the Postal Service, its competitors, and the OIG, the Public Relations

team publishes daily a compilation of news clippings called Keeping in the Know Daily, which is

posted on the OIG Intranet. This publication

assists OIG auditors and investigators in their

work and sometimes inspires future audits and

investigations.

For the second half of the fiscal year, the

Public Relations team will focus on obtaining

and coordinating speaking engagements for the

OIG Leadership Team. This outreach effort is

geared at delivering key messages to organizations within the Postal Service and the

Inspector General communities. Groups desiring an OIG speaker are invited to contact the

OIG’s Director of Public Relations at (703)

248-2100.

NOTABLE OIG ACHIEVEMENTS

OIG SUBMITS STATEMENT TO

PRESIDENT’S COMMISSION ON

THE POSTAL SERVICE

In February 2003, the OIG submitted written comments to the President’s Commission

on the Postal Service highlighting the 10 major

management issues that the OIG believes must

be addressed if the Postal Service is to remain a

viable commercial enterprise. The comments

are based on the results of audits and investigations that examine these major management

issues. They summarize OIG work in these key

areas to help the Commission as it prepares its

report to the President.

Based on its work, the OIG believes that

regardless of the organizational model, the

Postal Service may be sustainable if it is

accountable for results. As the Postal Service

works to transform itself for the future, it must

rely on performance management principles to

measure progress and inject accountability into

all programs and operations.

The OIG will continue to monitor

Commission activities with great interest and

review public comments and testimony, and has

offered technical assistance to the Commission

as it prepares its report to the President. 

OIG SUPPORTS NATIONAL

SECURITY EFFORTS AND

PROTECTS AMERICAN PUBLIC

The OIG continues to be called upon often

to assist and lend staff to other government

agencies in times of national crisis. For example,

the OIG has provided the following support:

◆ An OIG special agent possessing Arabic

language skills was detailed to an FBI

Joint Terrorism Task Force. The agent

participated in the arrests of four members of the Palestinian Jihad and related

searches. A computer specialist from the

OIG’s Technical Crimes Unit also provided significant assistance to the Task

Force.

◆ In an espionage trial in Alexandria, Virginia, an OIG investigator and former

military computer expert demonstrated

to jurors how the defendant obtained

classified satellite photos of missile sites

in China and Iraq from a top-secret network.

◆ Technical crimes experts from the OIG

have actively supported federal law

enforcement agencies in investigating

terrorist activity.

The OIG conducts outreach activities

throughout the year for recruiting and

educational purposes.
PAGE82

◆ Criminal investigators from the OIG

assisted law enforcement during the

search for snipers who murdered citizens

in the Washington, DC, area.

In addition, 12 OIG reservists and

National Guard members have been called to

active military duty since September 11, 2001.

Four of the 12 have had their orders extended,

and two returned to their OIG duties after being

deployed for one year. The OIG is proud of its

employees as they serve and protect the nation. 

INSPECTOR GENERAL ADDRESSES

MAILCOM CONFERENCE

Inspector General Karla W. Corcoran

addressed the fall MAILCOM convention in

October 2002. Her speech addressed how the

OIG’s work assists postal stakeholders. The

speech also discussed the OIG’s purpose, how it

decides what to audit and investigate, and how

the OIG’s work is in the mailers’ best interest.

The Inspector General also spoke about recent

OIG testimonies before Congress and discussed

the OIG’s present and future work that affects

mailers’ bottom line financially. In addition, she

explained how the OIG’s role differs from that

of the Postal Inspection Service.

This was a great opportunity to inform

mailers more about the OIG. The Inpector

General was invited back to address

MAILCOM’s spring convention in May, where

she will discuss how the OIG is an asset to

mailers and how it helps to improve postal

operations.

ANNUAL EMPLOYEE

RECOGNITION EVENT

The OIG’s annual employee training and

recognition conference was held in

Washington, DC, on December 17 and 18,

2002. The theme of the event was “TLC3

Equals Productivity.” It featured presentations

by Governor John Walsh of the Postal Service

Board of Governors; Jack Canfield, an internationally recognized author and motivational

speaker and author of the “Chicken Soup for

the Soul” series; and Patricia McGuire,

President of Trinity College.

The OIG presented awards to two Postal

Service managers: Michele Denny, Manager,

Marketing Technology and Channel

Management, and Bill Gilligan, Deputy

General Counsel, for their tremendous support

to the OIG throughout the year. The OIG also

acknowledged four National Aeronautics and

Space Administration Inspector General

employees for helping the OIG develop its new

investigative management tracking system. In

addition, numerous OIG teams and individuals

were recognized for their exceptional work.

OFFICE OF PERSONNEL

MANAGEMENT EXTENDS SENIOR

EXECUTIVE SERVICE AGREEMENT

The Office of Personnel Management

recently reviewed the OIG’s executive personnel system to determine its compliance with a

2001 agreement that allows executives to move

between the OIG and other federal agencies

without the loss of their Senior Executive

Service status. The Office of Personnel

Management found that the OIG’s system fully

complied and extended the agreement. This

agreement allows the OIG to continue to

attract top-level executives.

OIG COMPUTER FORENSICS

TEAM WORKS WITH CYBER

INTERAGENCY WORKING

GROUP

The OIG represented the Postal Service’s

information infrastructure concerns by working

on the Cyber Interagency Working Group,

chartered by the President’s Critical

Infrastructure Protection Board. As a result of

the OIG’s representation on this working group,

the White House designated a new

Postal/Shipping sector within the nation’s critical infrastructure in the President’s new

National Strategy to Secure Cyberspace. The

OIG Technical Crimes Unit was designated as

the representative for the Executive Council on

Integrity and Efficiency to the newly designated

Interagency Cyber Team, which will be the

vehicle for initially communicating future

national cyber emergencies. The OIG’s contributions to the Cyber Interagency Working

Group have become the blueprint for development of a long-term Cyber Information

Assurance Implementation Plan, which will be

a principal function of the new Department of

Homeland Security. 

ORGANIZATIONAL DYNAMICS

Inspector General Karla Corcoran 

conducts outreach activities to educate

stakeholders about the OIG.
PAGE83

OIG EXECUTIVE BECOMES AN

INSPECTOR GENERAL 

The OIG’s Acting Assistant Inspector

General for Audit, Robert Emmons, was named

Inspector General for the Pension Benefit

Guaranty Corporation. In his new position, he

will be responsible for reviews and investigations of how the agency manages, handles, and

protects retirement incomes for about 44 million workers in more than 35,000 benefit pension plans. Mr. Emmons served in a variety of

positions at the OIG, including Deputy

Assistant Inspector General for Performance

and Assistant Inspector General for eBusiness.

This is the second OIG executive selected to

serve as Inspector General for another federal

agency. 

OIG PARTICIPATES IN

INVESTIGATIVE DIRECTORS

CONFERENCE

The OIG actively participated in the

annual Association of Directors of

Investigations conference, which was held

March 18-20 in Knoxville, Tennessee. This

conference brings together all Assistant

Inspectors General for Investigations within the

OIG community to discuss significant investigative issues. The theme of this year’s conference was “Working Together to Assure

Accountability, Security, and Justice.” Inspector

General Karla Corcoran participated in a panel

discussion with other Inspectors General to discuss issues such as identifying risk assessments

within agencies, the impact of September 11,

2001, and future challenges faced by Offices of

Inspector General. In addition, the OIG provided a briefing on its new case management

system, POSTIT. This system has been

reviewed by many other Offices of Inspector

General and could possibly be used as a standard format in the community to input, track,

and report investigative information. 

OIG SHARES EXPERTISE WITH

LAW ENFORCEMENT

COMMUNITY

An OIG evaluator and a special agent

have been detailed to the Federal Housing

Finance Board Office of Inspector General to

assist with a high-level investigation regarding

conflict of interest allegations relating to political fund raising activities. The OIG is also providing computer forensic support.

OIG RECRUITS AT HARVARD

UNIVERSITY FEDERAL JOB FAIR

During October 2002, Harvard

University’s John F. Kennedy School of

Government sponsored a federal job fair.

Among the agencies present were the

Department of Defense’s Office of Inspector

General, the Central Intelligence Agency, the

General Services Administration, the General

Accounting Office, the Office of Personnel

Management, and many others. The OIG

maintained a booth and provided literature and

recruiting items to an estimated 300 current

and former students of the Kennedy School.

Specific information about the Inspector

General Act and Postal Service careers in law

enforcement, audit, accounting, law, and other

areas of expertise, was provided by special

agents and evaluators assigned to the OIG’s

Boston field office. 

DEPUTY INSPECTOR GENERAL

REPRESENTS OIG AT INSPECTOR

GENERAL CONFERENCE

In March 2003, the Deputy Inspector

General participated in the Inspectors General

Conference, along with other inspectors general and executives in the inspector general

community. The conference looked at current

trends, accomplishments, and best practices in

the community. Key topics discussed included

the possible establishment of a new Inspector

General Oversight Agency, criminal indictments and investigations, engagement meetings, Federal Executive Leadership training, law

enforcement training, peer reviews, the Fugitive

Felony Program, information technology security, and ways of measuring return on investment. The conference also included discussions

of several legislative proposals, personnel flexibility, 9-year terms for inspectors general,

changes in semiannual reporting, and statutes

for Executive orders. 

OIG COMPLETES PEER REVIEW

OF NATIONAL SCIENCE

FOUNDATION

Every 3 years, federal offices of inspector

general are required to undergo a review of their

quality control system to determine whether

In October, the OIG staffed a recruiting

booth at a Harvard University career

fair.
they are conducting audits in accordance with

government auditing standards. The OIG was

selected to review the National Science

Foundation’s Office of Inspector General and

found it had an adequate quality control system

and met government auditing standards. 

NATIONAL SAFETY AND HEALTH

MEETING

The OIG participated in the Postal

Service’s National Safety and Health meeting.

Postal Service personnel and contractors from

headquarters, area offices, injury compensation,

and medical programs met to discuss the status,

goals, and new initiatives of these programs.

The health care fraud investigation team discussed a number of proactive initiatives to identify various fraudulent provider schemes, ways

that the Injury Compensation Specialists,

Medical Directors, and the OIG could partner

to combat fraud within the program. In addition, a new referral process and form utilized for

tracking and follow-up on investigative leads

sent from Postal Service personnel were introduced. This initiative served to foster a partnership to uncover, report, and address safety, injury

compensation and medical issues that will add

value to the Postal Service.

CHALLENGES FACING THE OIG 

As the OIG moves forward in its efforts to

help the United States Postal Service enhance

its position as the world’s leading postal service,

it must address the following challenges, some of

which have an impact on OIG internal operations, and others on OIG oversight of the Postal

Service. These include:

◆ Balancing the OIG’s Responsibility to

Report Information with the Postal Service’s Concern About Withholding Proprietary Data. The OIG carefully weighs

the public’s right of access to information

under the Freedom of Information Act

against the Postal Service’s commercial

and security needs when considering

whether to release audit reports and

other information. To accurately assess

the sensitivity of information, the OIG

works closely with postal management

and its law department. The challenge of

balancing the OIG’s responsibility to

keep the public informed against the

Postal Service’s interest in non-disclosure

becomes particularly critical as the Postal

Service enters into new business ventures

that might involve commercially sensitive information and responds to the

threat of terrorism.

◆ Educating Stakeholders About the

OIG’s Role. A continuous challenge for

the OIG is to inform stakeholders about

the OIG’s mission, responsibilities, and

audit and investigative efforts. The OIG

has proactively reached out to stakeholders regarding how it prevents and detects

fraud, waste, abuse, and mismanagement

and otherwise adds value to the Postal

Service. The OIG will continue its outreach efforts until all stakeholders

become familiar with the OIG’s roles and

responsibilities. As part of those efforts,

the OIG is conducting outreach by delivering presentations at postal management

association and postal union state and

national conventions.

◆ Managing OIG Resources to Accommodate Changing Postal Service Priorities.

The current environment of the Postal

Service challenges the OIG to manage its

resources to accommodate and rapidly

respond to changing priorities. In addition, the urgency of the anthrax threat,

escalating workers’ compensation costs,

labor management issues, and other challenges facing the Postal Service require

the OIG to use innovative methods to

assist in addressing these challenges in a

timely manner. These methods include

using the latest technology, reallocating

staff and financial resources, and maintaining a workforce with diverse talents,

backgrounds, and experiences. 

◆ Overseeing Postal Inspection Service

Activities. One of the primary reasons an

independent OIG was established within

the Postal Service was to provide oversight of Inspection Service activities. The

OIG’s statutory mandate for providing

oversight is comprehensive, and requires

that it oversee all Inspection Service

activities, including the conduct of internal investigations. 

Despite this clear mandate, the OIG continues to face challenges in exercising its

oversight responsibility. Among the most

PAGE84 ORGANIZATIONAL DYNAMICS

The OIG’s Administrative Advisory

Council serves as a liaison between

administrative staff and

management.
PAGE85

pressing challenges the OIG has faced in

fulfilling this responsibility has been the

Inspection Service questioning the OIG’s

oversight authority and not providing

unrestricted access to Inspection Service

personnel and information. The OIG

continues to work with Inspection Service and senior postal management to

resolve these challenges.

◆ Protecting OIG Organizational Independence and Authority. The Inspector

General Act clearly establishes the OIG’s

independence from postal management

and its unrestricted right of access to personnel and records. At times, the OIG

encounters individuals who do not clearly understand this independence and

authority. The OIG addresses these

instances when they occur and is continuing its outreach and education efforts to

ensure that management understands the

OIG’s independence and authority and

that it is inappropriate to influence OIG

work.

◆ Recruiting and Retaining Talented

Staff. The OIG is committed to attracting and retaining the best and brightest

staff, and continues to promote a diverse

workforce. After the attacks of September 11, 2001, other agencies, such as the

Transportation Security Administration,

have recruited many OIG employees

because of their experience and expertise. The OIG is challenged to continue

to attract and retain talented staff at a

time when these agencies and others are

offering thousands of job opportunities to

people with the same qualifications the

OIG is seeking.

To respond to the loss of experienced

staff, the OIG has continued aggressive

hiring initiatives to maintain staffing levels needed to provide quality audit and

investigative services to stakeholders.

Part of the OIG’s recruiting and retention efforts include maintaining a

healthy organizational culture and environment through methods such as

employee advisory councils, workplace

enhancement training, teambuilding,

and career change opportunities.

◆ Providing User-Friendly Results to

Stakeholders. Keeping stakeholders fully

and currently informed is the foundation

of providing value-added audit and

investigative services. One of the biggest

challenges the OIG faces is providing

timely, understandable, and useful information to its stakeholders. To meet this

challenge, the OIG will continue to

explore and utilize new avenues of communicating user-friendly information.

One such avenue is technology. The

OIG’s innovative use of video reports

provides a visual illustration of audit

results that transcends the limitations of

text reports. In addition, the OIG website provides comprehensive information

about the OIG’s mission, culture, and

work. The OIG also uses an informational CD to educate stakeholders and

prospective employees about the OIG.

◆ Preparing for a New Inspector General.

The Postal Service is the only federal

agency where the Inspector General

serves a statutory term. In January 1997,

the Inspector General was appointed by

the Postal Service Governors to a 7-year

term that expires in less than 1 year.

The Governors will need to identify a

successor, and the OIG is preparing for a

change in leadership to ensure a seamless

transition.

In addition, because the Inspector General’s position is for a 7-year term, some

highly qualified candidates, particularly

senior executives from other agencies,

may be deterred from seeking the position if they are not eligible to retire at

the end of the term. Also, careful consideration should be given to the impact

a candidate will have on the actual or

perceived independence of the OIG.

Because the Inspector General is not

appointed by the President and confirmed by the Senate, congressional oversight of the hiring of the next Inspector

General may be limited.

The OIG has embarked on a communication program designed to prepare its

employees for the organization’s first

change in leadership using a wide variety

of communication tools, including allhands meetings, video teleconferencing,

and the employee newsletter.
PAGE86

◆ Dealing with Negative Press Coverage.

The OIG has been challenged recently by

negative media coverage that questions

how it is managed. These stories refer to

allegations against the OIG, which are

currently being investigated by the

Integrity Committee of the President’s

Council on Integrity and Efficiency. The

OIG is cooperating fully with the ongoing investigation. Unfortunately, these

stories tend to be sensationalized, unbalanced, and taken out of context. When

given the opportunity, the OIG has provided detailed information to the press.

Responding to media inquires has

required the OIG to devote staff time

and resources to gathering the information necessary to respond fully and accurately. Unfortunately, the press has

underutilized this information, presenting

a skewed impression of the OIG.

This negative media coverage has challenged the OIG to maintain high staff

morale. However, OIG employees have

enthusiastically continued working to

improve postal processes and find ways in

which the Postal Service can save

money, eliminate fraud, and stop waste,

abuse, and mismanagement. 

The OIG understands the need for oversight and has its own Internal Affairs and

Quality Assurance team. In addition,

Congress, the General Accounting

Office, and the President’s Council on

Integrity and Efficiency and the Executive Council on Integrity and Efficiency

communities watch the OIG. The OIG

respects the role of each of these groups,

including the media, and continues to

cooperate as fully and appropriately as

possible under the circumstances. The

OIG appreciates those who reciprocate

that respect and cooperation. 

ORGANIZATIONAL DYNAMICS
PAGE87

INSPECTION SERVICE

The Inspection Service, the traditional

law enforcement arm of the Postal

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

and security functions essential to a stable and

sound postal system. Through its security and

enforcement functions, the Inspection Service

provides assurance to businesses for the safe

exchange of funds and securities through the

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

the seal” in transmitting correspondence and

messages; and to postal employees of a safe work

environment.

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

execute federal search warrants, and serve subpoenas. Postal Inspectors work closely with

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

cases and prepare them for court. There are

approximately 1,900 Postal Inspectors stationed

throughout the United States who enforce over

200 federal laws covering investigations of

crimes that adversely affect or fraudulently use

the U.S. mail and postal system.

To assist in carrying out its responsibilities,

the Inspection Service maintains a security

force staffed by over 1,400 uniformed Postal

Police Officers, who are assigned to critical

postal facilities throughout the country. The

officers provide perimeter security, escort highvalue mail shipments, and perform other essential protective functions.

The Inspection Service operates four

forensic crime laboratories, strategically located

in cities across the country. The laboratories are

staffed with forensic scientists and technical

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

providing expert testimony for cases brought to

trial.

The Inspection Service’s 800 professional

and technical employees also include program

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

in supporting the criminal investigation and

security functions of the Inspection Service.

They perform a wide variety of tasks, including

developing, maintaining and continually

upgrading management systems; developing,

procuring and deploying electronic security and

surveillance equipment; publishing policy

handbooks and consumer awareness guides and

brochures; supplying photography and video

services; and facilitating direct communications

with Congress and the public.

The Internal Affairs Division operates a

staff of 10 Postal Inspectors, an Inspector in

Charge and Assistant Inspector in Charge, 5

support employees, and 33 Postal Police

Officers, and has a two-fold mission. First, it

ensures integrity and excellence within the

Inspection Service by conducting independent

internal investigations of its employees.

Second, it protects the safety of postal employees and customers by providing security and

preventive services at national Headquarters.

The Office of Counsel provides legal

advice and services in support of Inspection

Service investigations, programs and goals, and

processes requests for access to Inspection

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

staff of paralegal specialists, information disclosure specialists, a labor relations specialist, a

program specialist, and an administrative support specialist.

The Inspection Service’s national information technology infrastructure supports

over 4,300 users at more than 180 sites nationwide. Inspection Service offices are linked

nationally via a dedicated frame-relay network, with online connections to the Postal

Service, the National Crime Information

Center, the National Law Enforcement

Telecommunications System, and the

Internet.

The Inspection Service extends full cooperation to all federal, state, and local investigative and prosecutorial authorities in law

enforcement matters to ensure greater protection to the public. Working with other agencies, Postal Inspectors regularly participate in

joint task force cases aimed at curtailing widespread criminal acts of an organized nature.

More information on the Inspection Service

can be found at http://www.usps.com/postalinspectors.

Inspection Service seal and badges
PAGE88 ORGANIZATIONAL DYNAMICS
Organizational Structure

The OIG is committed to excellence through a

vision of “A Constellation of Talented People

Making a Difference Through Teamwork,

Leadership, Communication, Creativity, and

Conceptualization (TLC3).”

PAGE 89
PAGE90 ORGANIZATIONAL STRUCTURE

Office of Inspector General

Organizational Structure
PAGE91

OFFICE OF INSPECTOR

GENERAL

The OIG is a unique, nontraditional,

diverse organization that conducts

audits, evaluations, investigations, and

other core functions identified by the Inspector

General Act of 1978, as amended. It is a matrix

organization with a non-hierarchical structure

organized into five core business functions.

The OIG works in teams to maximize the

abilities of its employees and uses cutting-edge

technology and the most advanced management principles available to add value to postal

programs and operations. Teams that focus on

improving Postal Service business processes and

overall organizational achievement demonstrate the OIG’s values of teamwork, leadership,

communication, creativity, and conceptualization. 

This reporting period, the OIG reorganized

both its audit and investigative functions. The

investigative reorganization aligns field investigative operations with postal area offices and

allows the OIG to work more effectively with

Postal Service workers’ compensation and contracting officials. The new organizational structure also reflects the fact that as of December 7,

2002, the OIG assumed responsibility for investigating workers’ compensation fraud cases in

the Capitol Metro Area. The OIG reorganized

its audit function to eliminate separate headquarters and field structures. Staff and projects will

now be aligned under a single supervisory structure. The following section describes the OIG

organizational structure as of March 31, 2003.

DEPUTY INSPECTOR GENERAL

Thomas Coogan

QUALITY ASSURANCE AND INTERNAL

AFFAIRS TEAM

Director, George Davis - conducts internal

reviews of OIG operations and procedures to

ensure they are effective and appropriate, and

reviews allegations against OIG employees.

STRATEGIC VISION AND VALUES TEAM

Director, Linda Libician (Acting) - leads

and facilitates programs and activities to promote and encourage strategic thinking and to

integrate OIG’s mission, vision, and values in

daily work; identifies and incorporates Postal

Service changes into OIG operations; prepares

and updates the OIG strategic plan; develops

and monitors OIG annual performance measures and conducts special studies, teambuilding, and outreach to ensure accountability and

excellence in individual and organizational

performance.

PUBLIC RELATIONS TEAM

Director, Thomas Sharkey (Acting) -

plans and directs public relations activities;

serves as liaison and responds to requests from

media; plans and directs all OIG outreach

activities; and keeps OIG staff informed of

news articles of interest.

GENERAL COUNSEL 

Thomas Coogan (Acting)

DEPUTY GENERAL COUNSEL 

Gladis Griffith

LEGAL SERVICES TEAM

Director, Marta Erceg - provides legal

advice to the Inspector General and OIG staff

in all areas of criminal, civil, and administrative

law; processes subpoenas; manages ethics and

FOIA appeals programs; and reviews existing

and proposed legislation, regulations, and policies affecting the economy and efficiency of the

Postal Service.

OVERSIGHT TEAM

Director, Patrick McKenna (Acting) -

provides oversight of all Inspection Service

activities, conducts investigations of misconduct by senior Inspection Service personnel,

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

CONGRESSIONAL, FOIA, AND

HOTLINE TEAM 

Director, Carrie Fox - serves as liaison and

responds to requests from Congress and the

This section describes the organization of

the OIG and the Inspection Service. In

order to differentiate between the OIG and

the Inspection Service, the page concerning

the Inspection Service has been color

screened.

The OIG works in diverse teams to

conduct audits and investigations.
Board of Governors; coordinates Congressional

testimony and presentations; responds to all

Freedom of Information Act requests; and

operates the OIG Hotline, providing a vital

link for reporting fraud, waste, abuse and mismanagement. 

ASSISTANT INSPECTOR GENERAL

FOR AUDIT

John Seeba 

AUDIT OPERATIONS AND 

FOLLOW-UP TEAM

Director, Kim Stroud - provides support,

services, and coordination of audit activities;

facilitates the development of audit reporting

policy and procedures; develops and oversees

implementation of the audit workload plan;

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

and analyzes statistical audit data to accomplish

the OIG’s audit mission. 

HUMAN CAPITAL 

DEVELOPMENT TEAM

Director, Debra Pettitt - responsible for

assessment, formulation, and implementation

of human capital strategies to ensure full development of professional auditing staff. This

includes: professional development programs,

classroom and on the job training programs,

and curriculum development. Also responsible

for applying the human capital asset and

accountability framework as developed by the

Office of Personnel Management. 

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR FINANCIAL

MANAGEMENT

Colleen McAntee

CONTRACTING AND FACILITIES TEAM

Director, Lorie Siewert - plans and directs

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

facility repair, renovation, and new construction.

FINANCIAL TEAMS

Director, Financial Statements, John

Cihota, and Director, Financial Field,

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

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

areas for improvement.

INVESTIGATIVE SUPPORT AND

FINANCIAL-RELATED TEAM

Director, Darrell Benjamin - provides

audit support to investigations, oversees the

Defense Contract Audit Agency audits, and

conducts financial-related performance

reviews.

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR CORE

OPERATIONS

Wayne Goleski

ACCEPTING AND PROCESSING TEAM

Director, Bob Batta - plans and directs

audits and reviews focusing on the economy,

efficiency, and effectiveness of mail acceptance,

collection, and processing operations, as well as

logistics activities supporting these operations.

LABOR MANAGEMENT TEAM 

Director, Chris Nicoloff - plans and directs

audits and reviews focusing on labor relations,

and labor management issues within the Postal

Service to assist in maintaining a healthy and

safe organizational climate for employees and

improving operational economy, efficiency, and

effectiveness.

TRANSPORTATION AND 

DELIVERY TEAM

Director, Joe Oliva - plans and directs audits

and reviews focusing on delivery and domestic

and international transportation operations,

specifically addressing economy, efficiency, and

effectiveness of Postal Service fleet operations

and contracts for air, highway, and rail services.

HEALTH CARE TEAM

Director, Erica Blackman - plans and

directs audits and reviews focusing on health

care issues within the Postal Service to assist in

improving operational economy, efficiency, and

effectiveness.

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR TECHNOLOGY

AND OVERSIGHT

Ronald Merryman

PAGE92 ORGANIZATIONAL STRUCTURE

The dog sled was used to carry

mail in Alaska until 1963, when

it was replaced by the airplane.
PAGE93

DEVELOPMENTAL TEAM

Director, Tracy LaPoint - plans and directs

audits and reviews of new or redesigned Postal

Service systems, programs, and operations that

are under development.

ORGANIZATIONAL EFFECTIVENESS

TEAM

Director, Linda Libician - plans and directs

audits and reviews that examine how the Postal

Service’s activities, organization and policies

relate to its strategic vision and mission.

Reviews focus on a variety of areas, including

the Transformation Plan, marketing, eCommerce, legal operations, stamp operations, retail

operations, and international business. 

INFORMATION SYSTEMS TEAM

Director, Gary Rippie - plans and directs

audits and reviews of major Postal Service

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

provide accurate data to management. 

INSPECTION SERVICE TEAM

Director, Michael Thompson - plans and

directs audits and reviews of Inspection Service

functions and operations.

ASSISTANT INSPECTOR GENERAL

FOR INVESTIGATIONS

Kirt West (Acting)

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR INVESTIGATIONS 

Daniel O’Rourke

INVESTIGATIVE OPERATIONS TEAM

Director, Howard Cox - supervises all field

and headquarters investigative programs, and

the development of investigative policy and

procedures, to accomplish the OIG’s investigative mission.

CONTRACT FRAUD TEAM

Director, Michael Everitt (Acting) - monitors all ongoing contract fraud investigations,

as well as supervises civil, criminal, and administrative remedies for contract fraud cases.

HEALTH CARE FRAUD TEAM

Director, Aaron Jordan - monitors all

ongoing health care cases, as well as supervises

civil, criminal, and administrative remedies for

health care fraud; responsible for the OIG’s

assumption of workers’ compensation fraud

investigations.

TECHNICAL CRIMES UNIT

Director, Ovie Carroll - detects and investigates computer hacking and other high-technology crimes involving Postal Service computers and telecommunications systems, and

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

forensics.

INVESTIGATIVE SERVICES AND

SECURITY TEAM

Director, Russ Barbee - provides overall

administrative support to all investigative

activities, including training, firearms, investigative databases, policy, and other infrastructure matters, as well as OIG personnel and

physical security.

SPECIAL INQUIRIES TEAM

Director, Mimi Band - conducts investigations of allegations of reprisal by Postal Service

employees and other investigations concerning

Postal Service executives.

NATIONAL PROJECTS UNIT

Director, Dennis Riley - coordinates and

conducts investigations of major projects that

have significant impact on the Postal Service,

which involve multiple postal areas or judicial

districts. The unit utilizes Postal Service/OIG

field resources, which are temporarily assigned

to the unit to expeditiously conduct the identified investigations or projects.

Investigative Directors, Rosa Howard

(Eastern and Capital Metro), Anthony

Cannarella (New York Metro and Northeast), William Hencken (Southeast and

Great Lakes), Robert Schultz (Acting)

(Southwest and Western), and Torri

Piper (Pacific) - plan and direct investigations in coordination with Headquarters staff

and responsible for overall investigative field

staff development.

OIG teams utilize communication and

creativity to achieve results.
ASSISTANT INSPECTOR GENERAL

FOR INTERNAL BUSINESS

Ronald Stith

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR INTERNAL

BUSINESS

Mary Demory

ADMINISTRATIVE SERVICES TEAM

Director, Stew Dorris - provides facility,

procurement, financial, budget, and other

internal services necessary to accomplish the

OIG’s mission.

HUMAN RESOURCES TEAM

Director, Karen Bickle - provides full-service human resources support to the OIG in

the areas of employee relations, pay and benefits, hiring and recruitment, retirement, awards,

performance management, counseling, and

training.

WORKPLACE ENHANCEMENT TEAM

Director, Sharon Solomon - provides work

life, organizational climate, diversity, Equal

Employment Opportunity, and other workplace-related services.

DEPUTY ASSISTANT INSPECTOR

GENERAL FOR TECHNOLOGY

Vacant

COMMUNICATIONS & POLICY TEAM

Director, Jim Nugent - provides report

writing, editorial, video, and graphic services;

coordinates and publishes OIG reports as well as

other documents for Congress, the Governors,

and Postal Service management; and manages

development of internal policies and procedures.

EXPERTS AND COMPUTER-ASSISTED

ASSESSMENT TECHNIQUES TEAM

This self-directed team provides support to

OIG in the areas of statistical sampling; quantitative and statistical methods; computer-assisted assessment techniques for data retrieval and

analysis; economic forecasting; cost/benefit

analysis; estimation of monetary benefits;

architectural and engineering expertise; and

activity-based costing.

INFORMATION TECHNOLOGY TEAM

Director, David Sidransky - provides computer operations, telecommunications, information systems, computer security, and technical support.

OIG FIELD LOCATIONS

The OIG Headquarters is located in

Washington, DC. In addition, the OIG has

15 field offices located in San Francisco and

Los Angeles, California; Denver, Colorado;

Tampa, Florida; Atlanta, Georgia; Chicago,

Illinois; Boston, Massachusetts; Minneapolis,

Minnesota; St. Louis, Missouri; New York,

New York; Portland, Oregon; Pittsburgh,

Pennsylvania; Raleigh, North Carolina;

Dallas, Texas; and Washington, DC. OIG

locations are depicted in the chart below.

PAGE94 ORGANIZATIONAL STRUCTURE

RALEIGH RALEIGH , NC , NC

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

ST. LOUIS, MO ST. LOUIS, MO ATLANTA, GA ATLANTA, GA LOS ANGELES, CA LOS ANGELES, CA

DALLAS, TX DALLAS, TX

WASHINGTON, DC WASHINGTON, DC CHICAGO, IL CHICAGO, IL

DENVER, CO DENVER, CO

SAN FRANCISCO, CA SAN FRANCISCO, CA

TAMPA, FL TAMPA, FL

BOSTON, MA BOSTON, MA

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

OIG LOCATIONS NATIONWIDE
PAGE95

INSPECTION SERVICE The national headquarters offices of the

Inspection Service underwent a realignment to ensure the headquarters functional roles and responsibilities continue to be

reflective of the Inspection Service’s business

imperatives in the areas of safety, security, and

integrity, based on the changing needs of our

Postal Service customers and employees. This

realignment was effective September 7, 2002.

The new structure established the position

of Deputy Chief Inspector, Headquarters

Operations, to which all headquarters

functional groups report through the positions

of Assistant Chief Inspector, Investigations and

Security (ISES), and Assistant Chief Inspector,

Administrative Operations. Exceptions to this

are the Inspectors in Charge for Internal Affairs

Division, Congressional and Public Affairs, and

Forensic & Technical Services, and the manager, Strategic Planning and Management

Process, who report directly to the Deputy Chief

Inspector, Headquarters Operations. The Office

of Counsel reports directly to the Chief Postal

Inspector as does the newly created position of

Ombudsman. The Inspection Service retained

its field structure, which includes 18 field divisions that report directly to three Deputy Chief

Inspectors for field operations. There are five

Inspection Service Operations Support groups

that support field offices.

The Inspection Service’s executive

Advisory Committee serves in an advisory

capacity to the Chief Postal Inspector on strategic issues that impact the direction of the organization. The National Leadership Team

consists of the Deputy Chief Inspectors, all

Inspectors in Charge, and Postal Career

Executive Service employees.

Chief Postal Inspector 

Lee R. Heath
PAGE96 ORGANIZATIONAL STRUCTURE

Inspection Service

Organizational

Structure

L. HEATH

Chief Postal Inspector

L.KATZ

Inspector in Charge

Office of Counsel

J. BIRCH

Executive Ombudsman

I. GILLIS

Executive Coach

J. ROWAN

Deputy Chief 

Inspector

Headquarters Operations

K. BURKE

Deputy Chief Inspector

Field Operations East

W. MITCHELL

Deputy Chief Inspector

Field Operations South

M. AHERN

Deputy Chief Inspector

Field Operations West

L. SPALLANZANI

Manager

Strategic Planning &

Management Processes

T. DENNENY

Inspector in Charge

Internal Affairs

R. GEFFEN

Inspector in Charge

Forensic & Technical

Services

R. MUEHLBERGER

Laboratory Director

A. CLEMMONS

Assistant Chief Inspector

Investigations & Security

K. BOND

Inspector in Charge

Group 1 - Safety

K. ROBERTS

Inspector in Charge

Group 2 - Security

L. MAXWELL

Inspector in Charge

Group 3 - Integrity

Z. HILL

Inspector in Charge

Group 4 - 

Emergency Preparedness

D. HILL

Inspector in Charge

Group 5 -

International Affairs

D. MIHALKO

Inspector in Charge

Congressional & 

Public Affairs

N. JOHNSON

Assistant Chief Inspector

Administrative 

Operations

V. BELLINGER

Manager

Human Resources

Performance

F. TOOGOOD

Inspector in Charge

Career Development

L. VISOS

Inspector in Charge

Finance &

Administrative Services

R. COCCIA

Inspector in Charge

Information Technology

Inspectors in Charge

Mid-Atlantic

A.CRAWFORD

Northeast

K. JONES

North

Jersey/Caribbean

M. PHANCO

New York

W. KEZER

Phildelphia

I. CARLE

Washington

T. BRADY

Western Allegheny

R. DALGLEISH

T. VAN de MERLEN

Acting Inspector 

in Charge

Group 6 - Intelligence

Inspectors in Charge

Florida

J. BELZ

Gulf Coast

R. DODD

Rocky Mountain

M. COBOS

Southeast

D. COLLINS

Southwest

A. HOLMES

Inspectors in Charge

Detriot

Y. ALLEN

Midwest

R. BOWDREN

San Francisco

A.KIEL

Chicago

A.DAVIDSON

Northwest

R. MORGAN

Southern California

J. SOMERSET
Appendices

PAGE 97

Are mailboxes considered federal

property?

Yes. Federal law (Title 18 of the United

States Code, Section 1705) makes it a

crime to vandalize mailboxes or injure,

deface, or destroy any mail deposited in

them. Violators can be fined up to

$250,000 or imprisoned for up to three

years for each act of vandalism.
APPENDIX A

Reports Issued to Postal Service Management

For the period October 1, 2002, through March 31, 2003

OVERVIEW

Office of Inspector General

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

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

reports (AR) or management advisory reports (MA) in accordance with the identified needs of

the project.

Inspection Service

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

when all audit functions were transitioned to the OIG.

SUMMARY

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

following pages list each issued report.

Number of Recommend Additional

Reports Questioned Unsupported Funds Put to Unrecoverable Potential

Principal Area Issued Costs Costs1 Better Use Costs Revenue

Performance 22 $0 $0 $37,599,052 $20,806,751 $304,664

Financial Management 183 $13,498,366 $2,000,614 $0 $0 $0

Technology 9 $0 $0 $0 $0 $0

Labor Management 12 $1,265,294 $1,265,294 $75,000 $0 $0

Oversight 1 $0 $0 $0 $0 $0

Other Significant Reviews 1 $0 $0 $0 $0 $0

Grand Total 228 $14,763,660 $3,265,908 $37,674,052 $20,806,751 $304,664

PAGE 98 APPENDICES

Definitions

Questioned Costs - A cost that is

unnecessary, unreasonable, unsupported, or an alleged violation of

law, regulation, contract, etc.

Unsupported Costs - A cost that

is not supported by adequate documentation.

Funds Put to Better Use - Funds

that could be used more efficiently

by implementing recommended

actions.

Unrecoverable Costs - A cost that

perhaps should not have been

incurred and is not recoverable.

Potential Additional Revenue -

Amounts from revenue generating

functions such as retail sales, rent,

leases, or fees that were underpaid

or not realized. 

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

2 Represents potential additional revenue.

3 Represents unrecoverable costs.
REPORT LISTING

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

PERFORMANCE

Recommend

Report Subject Title/ Questioned Unsupported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date

ACCEPTING AND PROCESSING

AC-AR-03-001 Postal Service’s Total $0 $0 $0 $0 1/28/03

Factor Productivity

AC-AR-03-002 Mail Product Supplies $0 $0 $1,595,702 $0 2/14/03

AC-AR-03-003 Review of Nonprofit Authorizations $0 $0 $0 $304,6642 2/14/03

AC-AR-03-004 Inventory Management and $0 $0 $9,956,359 $0 3/28/03

Maintenance Repair Operations

AC-AR-03-005 Express Mail Product Tracking System $0 $0 $0 $0 3/31/03

CQ-AR-03-001 Work Performed by Business $0 $0 $588,730 $0 3/28/03

Mail Entry Employees in the 

Seattle, Minneapolis, and Des Moines

Bulk Mail Centers

OE-MA-03-002 Consolidation of the San Francisco $0 $0 $0 $0 1/23/03

Mail Recovery Center

OE-MA-03-003 Commercial Internet Companies $0 $0 $0 $0 2/25/03

Offering Change-of-Address Services

MARKETING

OE-AR-03-003 Postal Service’s Involvement $0 $0 $0 $0 3/31/03

in Sponsorships

TRANSPORTATION AND DELIVERY

CQ-MA-03-001 Reno, Nevada Mail Transportation $0 $0 $0 $0 3/5/03

TD-AR-03-001 New York Metro Area Trailer $0 $0 $0 $0 10/28/02

Acquisition - Safety and Length

TD-AR-03-002 Highway Network Scheduling - $0 $0 $776,992 $0 11/25/02

Northeast Area

TD-AR-03-003 Voyager Card Control Weaknesses - $0 $0 $0 $0 12/2/02

San Antonio District

TD-AR-03-004 Address Change Service $0 $0 $14,620,960 $20,806,7513 3/12/03

TD-AR-03-005 Vehicle Maintenance Facilities - $0 $0 $0 $0 3/19/03

Vehicle Inventory Control 

Weaknesses in the Chicago District

TD-AR-03-006 Transportation Agreement $0 $0 $0 $0 3/27/03

Capping Report

TD-AR-03-007 Highway Network Scheduling - $0 $0 $1,144,218 $0 3/28/03

Capital Metro Area

TD-AR-03-008 Highway Network Scheduling - $0 $0 $470,123 $0 3/31/03

New York Metro Area

TD-AR-03-009 New York Metro Area Trailer $0 $0 $4,021,234 $0 3/31/03

Acquisition - Lease versus Buy

TD-MA-03-001 New York Metro Area Operational $0 $0 $4,424,734 $0 1/29/03

Use of Trailers

TD-MA-03-002 Delayed Mail - Bridgecreek Station, $0 $0 $0 $0 3/19/03

Wichita Falls, Texas

TD-VR-03-001 New York Metro Area Trailer $0 $0 $0 $0 10/28/02

Acquisition - Safety and Length - 

Video

PERFORMANCE TOTALS $0 $0 $37,599,052 $21,111,415

PAGE 99
FINANCIAL MANAGEMENT

FINANCIAL OPINION

FT-AR-03-002 Postal Service Officers’ Travel and $0 $0 $0 $0 1/9/03

Representation Expenses for Fiscal 

Year 2002

FT-AR-03-003 Postal Service Board of Governors’ $0 $0 $0 $0 1/9/03

Travel and Miscellaneous Expenses 

for Fiscal Year 2002

FT-AR-03-004 Fiscal Year 2002 Postal Service $0 $0 $0 $0 1/22/03

Financial Statements Audit - 

Washington, D.C., Headquarters

FT-AR-03-005 Accounting for Bulk Fuel Inventories $0 $0 $0 $0 1/23/03

at the San Bernardino Vehicle 

Maintenance Facility

FT-AR-03-006 Fiscal Year 2002 Postal Service $0 $0 $0 $0 1/23/03

Financial Statements Audit - 

San Mateo Information Technology 

and Accounting Service Center

FT-AR-03-007 Fiscal Year 2002 Postal Service $0 $0 $0 $0 1/24/03

Financial Statements Audit - 

Eagan Information Technology and 

Accounting Service Center

FT-AR-03-008 Fiscal Year 2002 Postal Service $0 $0 $0 $0 1/30/03

Financial Statements Audit - St. Louis 

Information Technology and 

Accounting Service Center

FISCAL YEAR 2002 FINANCIAL INSTALLATION AUDITS

FF-AR-03-003 Las Vegas Self-Service Postal Center $0 $0 $0 $0 10/16/02

FF-AR-03-005 Southern Maryland Business Mail $0 $0 $0 $0 10/16/02

Entry Unit

FF-AR-03-006 Rex Post Office $0 $0 $0 $0 10/16/02

FF-AR-03-009 Anchorage Business Mail Entry Unit $0 $0 $0 $0 10/16/02

FF-AR-03-013 Philadelphia Business Mail Entry Unit $0 $0 $0 $0 10/16/02

FF-AR-03-015 Anchorage Stamp Distribution Office $0 $0 $0 $0 10/16/02

and Alaska District Accounting Office

FF-AR-03-026 Dallas Business Mail Entry Unit $0 $0 $0 $0 10/16/02

FF-AR-03-001 Skagway Contract Postal Unit $0 $0 $0 $0 10/17/02

FF-AR-03-030 Patten Post Office $0 $0 $0 $0 10/17/02

FF-AR-03-002 Oxford Post Office $0 $0 $0 $0 10/18/02

FF-AR-03-016 Texhoma Main Office $0 $0 $0 $0 10/18/02

FF-AR-03-017 Huntertown Main Office $0 $0 $0 $0 10/18/02

FF-AR-03-025 Fresno Business Mail Entry Unit $0 $0 $0 $0 10/18/02

FF-AR-03-027 Killingworth Contract Postal Unit $0 $0 $0 $0 10/18/02

FF-AR-03-029 Park Hills Post Office $0 $0 $0 $0 10/18/02

FF-AR-03-022 Central Valley Main Office $0 $0 $0 $0 10/21/02

FF-AR-03-023 Selma Post Office $0 $0 $0 $0 10/22/02

FF-AR-03-040 Wells Business Mail Entry Unit $0 $0 $0 $0 10/22/02

FF-AR-03-041 Farmingdale Post Office $0 $0 $0 $0 10/22/02

FF-AR-03-043 Bajadero Main Post Office $0 $0 $0 $0 10/22/02

FF-AR-03-044 Dallas Main Post Office $0 $0 $0 $0 10/22/02

FF-AR-03-007 Cadillac Business Mail Entry Unit $0 $0 $0 $0 10/23/02

FF-AR-03-008 Charlotte Stamp Distribution Office $0 $0 $0 $0 10/23/02

and Mid-Carolinas District 

Accounting Office

FF-AR-03-010 Little Five Points Post Office $0 $0 $0 $0 10/23/02

PAGE 100 APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FF-AR-03-011 Freedom Post Office $0 $0 $0 $0 10/23/02

FF-AR-03-012 Dulles Business Mail Entry Unit $0 $0 $0 $0 10/23/02

FF-AR-03-014 Spokane Stamp Distribution and $0 $0 $0 $0 10/23/02

District Accounting Office

FF-AR-03-020 Summerville Business Mail $0 $0 $0 $0 10/23/02

Entry Unit

FF-AR-03-021 Tampa Stamp Distribution Office and $0 $0 $0 $0 10/23/02

Suncoast District Accounting Office

FF-AR-03-024 Jefferson City Business Mail Entry Unit $0 $0 $0 $0 10/23/02

FF-AR-03-028 Portland Stamp Distribution Office $0 $0 $0 $0 10/23/02

and Maine District Accounting Office

FF-AR-03-032 Dallas Stamp Distribution Office and $0 $0 $0 $0 10/23/02

District Accounting Office

FF-AR-03-033 Louisville Stamp Distribution Office $0 $0 $0 $0 10/23/02

and Kentuckiana District 

Accounting Office

FF-AR-03-034 Collins and Parker Pharmacy $0 $0 $0 $0 10/23/02

Contract Postal Unit

FF-AR-03-035 Nebraska City Business $0 $0 $0 $0 10/23/02

Mail Entry Unit

FF-AR-03-037 Macon Stamp Distribution Office $0 $0 $0 $0 10/23/02

and South Georgia District 

Accounting Office

FF-AR-03-047 Enfield Post Office $0 $0 $0 $0 10/24/02

FF-AR-03-031 Staatsburg Main Office $0 $0 $0 $0 10/29/02

FF-AR-03-036 Blythebourne Station $0 $0 $0 $0 10/29/02

FF-AR-03-038 Grantville Post Office $0 $0 $0 $0 10/29/02

FF-AR-03-042 Bixby Post Office $0 $0 $0 $0 10/29/02

FF-AR-03-045 Middlesex-Essex and Shrewsbury $0 $0 $0 $0 10/29/02

Stamp Distribution Offices and 

Middlesex-Central District 

Accounting Office

FF-AR-03-046 Fort Wayne, Indianapolis, and Terre $0 $0 $0 $0 10/29/02

Haute Stamp Distribution Offices and 

Greater Indiana District 

Accounting Office

FF-AR-03-050 Los Angeles Contract Postal Unit # 4 $0 $0 $0 $0 10/29/02

FF-AR-03-051 West Sacramento Business $0 $0 $0 $0 10/29/02

Mail Entry Unit

FF-AR-03-053 Martinsville Main Post Office $0 $0 $0 $0 10/29/02

FF-AR-03-055 Ilwaco Main Office $0 $0 $0 $0 10/29/02

FF-AR-03-004 Wanek Pharmacy Contract Postal Unit $0 $0 $0 $0 10/30/02

FF-AR-03-018 Onyx Main Office $0 $0 $0 $0 10/30/02

FF-AR-03-019 Corinth Post Office $0 $0 $0 $0 10/30/02

FF-AR-03-039 Prescott Main Office $0 $0 $0 $0 10/30/02

FF-AR-03-049 White Plains Stamp Distribution $0 $0 $0 $0 10/30/02

Office and Westchester District 

Accounting Office

FF-AR-03-052 Marietta Self-Service Postal Center $0 $0 $0 $0 10/30/02

FF-AR-03-054 Plano Post Office $0 $0 $0 $0 10/30/02

FF-AR-03-057 Rancho Cordova Business $0 $0 $0 $0 10/30/02

Mail Entry Unit

FF-AR-03-048 Little Rock Stamp Distribution $0 $0 $0 $0 10/31/02

Office and Arkansas District 

Accounting Office

PAGE 101

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FF-AR-03-056 Ravenna Main Office $0 $0 $0 $0 10/31/02

FF-AR-03-058 Duck Contract Postal Unit $0 $0 $0 $0 10/31/02

FF-AR-03-059 Lewiston Business Mail Entry Unit $0 $0 $0 $0 10/31/02

FF-AR-03-060 Cascade Post Office $0 $0 $0 $0 10/31/02

FF-AR-03-061 Houston Stamp Distribution Office $0 $0 $0 $0 10/31/02

and District Accounting Office

FF-AR-03-062 O’Fallon Post Office $0 $0 $0 $0 10/31/02

FF-AR-03-063 Parkway Drugs Contract Postal Unit $0 $0 $0 $0 10/31/02

FF-AR-03-064 Romie Lane Contract Postal Unit $0 $0 $0 $0 10/31/02

FF-AR-03-065 Danville Main Post Office $0 $0 $0 $0 10/31/02

FF-AR-03-066 Grand Island Business Mail Entry Unit $0 $0 $0 $0 10/31/02

FF-AR-03-067 Norwood Business Mail Entry Unit $0 $0 $0 $0 10/31/02

FF-AR-03-068 West Liberty Post Office $0 $0 $0 $0 10/31/02 

FF-AR-03-069 K & S Decorah Contract Postal Unit $0 $0 $0 $0 10/31/02

FF-AR-03-070 Chicago Main Philatelic Station $0 $0 $0 $0 10/31/02

FF-AR-03-073 Green Bay Business Mail Entry Unit $0 $0 $0 $0 11/7/02

FF-AR-03-071 Dublin Main Office $0 $0 $0 $0 11/13/02

FF-AR-03-072 Port Washington Business $0 $0 $0 $0 11/13/02

Mail Entry Unit

FF-AR-03-074 Indianapolis Business Mail Entry Unit $0 $0 $0 $0 11/19/02

FF-AR-03-075 Peoria Stamp Distribution Office $0 $0 $0 $0 11/20/02

and Central Illinois District 

Accounting Office

FF-AR-03-076 Chicago Business Mail Entry Unit $0 $0 $0 $0 11/20/02

FF-AR-03-141 Self-Service Postal Centers $0 $0 $0 $0 3/21/03

Capping Report

FF-AR-03-142 Contract Postal Units Capping Report $0 $0 $0 $0 3/21/03

FF-AR-03-146 Post Offices, Branches, and Stations $0 $0 $0 $0 3/21/03

Capping Report

FF-AR-03-155 Stamp Distribution and District $0 $0 $0 $0 3/28/03

Accounting Offices Capping Report

FF-AR-03-156 Business Mail Entry Units $0 $0 $0 $0 3/28/03

Capping Report

FISCAL YEAR 2003 FINANCIAL INSTALLATION AUDITS

FF-AR-03-093 Philnor Pharmacy Contract Postal Unit $0 $0 $0 $0 1/8/03

FF-AR-03-094 Howell Mill Self-Service Postal Center $0 $0 $0 $0 1/8/03

FF-AR-03-084 University of Rochester Contract $0 $0 $0 $0 1/10/03

Postal Unit

FF-AR-03-078 Chesapeake Self-Service Postal Center $0 $0 $0 $0 1/17/03

FF-AR-03-081 Laconia Business Mail Entry Unit $0 $0 $0 $0 1/17/03

FF-AR-03-082 Hudson Business Mail Entry Unit $0 $0 $0 $0 1/17/03

FF-AR-03-086 Chadds Ford Post Office $0 $0 $0 $0 1/21/03

FF-AR-03-089 Ritter’s Contract Postal Unit $0 $0 $0 $0 1/21/03

FF-AR-03-083 Rockville Post Office $0 $0 $0 $0 1/23/03

FF-AR-03-085 McCoy Post Office $0 $0 $0 $0 1/23/03

FF-AR-03-087 Waco Self-Service Postal Center #2 $0 $0 $0 $0 1/23/03

FF-AR-03-088 Albany Stamp Distribution Office and $0 $0 $0 $0 1/23/03

District Accounting Office

FF-AR-03-090 Lowell Self-Service Postal Unit $0 $0 $0 $0 1/23/03

FF-AR-03-092 Syosset Post Office $0 $0 $0 $0 1/23/03

FF-AR-03-096 Kent Business Mail Entry Unit $0 $0 $0 $0 1/31/03

FF-AR-03-095 LaGrange Post Office $0 $0 $0 $0 2/6/03

PAGE 102 APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FF-AR-03-091 Villa Park Contract Postal Unit $0 $0 $0 $0 2/12/03

FF-AR-03-099 Lebanon Junction Business $0 $0 $0 $0 2/12/03

Mail Entry Unit

FF-AR-03-098 North Reading Business $0 $0 $0 $0 2/14/03

Mail Entry Unit

FF-AR-03-104 Fort Collins Contract Postal Unit #5 $0 $0 $0 $0 2/14/03

FF-AR-03-107 Lake Zurich Business Mail Entry Unit $0 $0 $0 $0 2/20/03

FF-AR-03-109 Quakertown Business Mail Entry Unit $0 $0 $0 $0 2/24/03

FF-AR-03-110 Weston Branch $0 $0 $0 $0 2/24/03

FF-AR-03-101 Rochester Business Mail Entry Unit $0 $0 $0 $0 2/26/03

FF-AR-03-100 Aurora Business Mail Entry Unit $0 $0 $0 $0 2/28/03

FF-AR-03-103 Culpeper Business Mail Entry Unit $0 $0 $0 $0 2/28/03

FF-AR-03-111 Sidney Business Mail Entry Unit $0 $0 $0 $0 2/28/03

FF-AR-03-117 First National Center Contract $0 $0 $0 $0 2/28/03

Postal Unit

FF-AR-03-115 Suburban Business Mail Entry Unit $0 $0 $0 $0 3/4/03

FF-AR-03-116 Carol Stream Business Mail Entry Unit $0 $0 $0 $0 3/4/03

FF-AR-03-124 Baltimore Business Mail Entry Unit $0 $0 $0 $0 3/6/03

FF-AR-03-108 Rimpau Station $0 $0 $0 $0 3/11/03

FF-AR-03-118 Tustin Business Mail Entry Unit $0 $0 $0 $0 3/11/03

FF-AR-03-127 Colorado Springs Self-Service $0 $0 $0 $0 3/11/03

Postal Center

FF-AR-03-132 Fort Lauderdale Post Office $0 $0 $0 $0 3/12/03

FF-AR-03-133 Santa Ana Window Section $0 $0 $0 $0 3/12/03

FF-AR-03-122 Post Haste Contract Postal Unit $0 $0 $0 $0 3/13/03

FF-AR-03-126 Murfreesboro Business Mail Entry Unit $0 $0 $0 $0 3/13/03

FF-AR-03-125 West Cornwall Post Office $0 $0 $0 $0 3/17/03

FF-AR-03-128 Mahwah Business Mail Entry Unit $0 $0 $0 $0 3/17/03

FF-AR-03-135 Hartford Business Mail Entry Unit $0 $0 $0 $0 3/17/03

FF-AR-03-134 Gary Business Mail Entry Unit $0 $0 $0 $0 3/19/03

FF-AR-03-145 Jersey City Business Mail Entry Unit $0 $0 $0 $0 3/19/03

FF-AR-03-136 Addison Business Mail Entry Unit $0 $0 $0 $0 3/20/03

FF-AR-03-149 Irving Self-Service Postal Center $0 $0 $0 $0 3/20/03

FF-AR-03-138 Nashville Business Mail Entry Unit $0 $0 $0 $0 3/21/03

FF-AR-03-139 Okeechobee Post Office $0 $0 $0 $0 3/21/03

FF-AR-03-143 Megaron Contract Postal Unit $0 $0 $0 $0 3/21/03

FF-AR-03-113 Austin Post Office $0 $0 $0 $0 3/25/03

FF-AR-03-114 Versailles Business Mail Entry Unit $0 $0 $0 $0 3/25/03

FF-AR-03-120 Memphis Self-Service Postal Center #71 $0 $0 $0 $0 3/25/03

FF-AR-03-123 Rock Hill Business Mail Entry Unit $0 $0 $0 $0 3/25/03

FF-AR-03-137 Miami Stamp Distribution Office $0 $0 $0 $0 3/25/03

and South Florida District 

Accounting Office

FF-AR-03-140 Waterloo Business Mail Entry Unit $0 $0 $0 $0 3/25/03

FF-AR-03-144 Lancaster Business Mail Entry Unit $0 $0 $0 $0 3/25/03

FF-AR-03-147 Lisbon Business Mail Entry Unit $0 $0 $0 $0 3/25/03

FF-AR-03-129 Dodgeville Business Mail Entry Unit $0 $0 $0 $0 3/26/03

FF-AR-03-131 Bensenville Business Mail Entry Unit $0 $0 $0 $0 3/26/03

FF-AR-03-148 Rutland Business Mail Entry Unit $0 $0 $0 $0 3/27/03

FF-AR-03-159 Bellmawr Business Mail Entry Unit $0 $0 $0 $0 3/28/03

FF-AR-03-162 Brooklyn Business Mail Entry Unit $0 $0 $0 $0 3/28/03

PAGE 103

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
FINANCIAL RELATED

FF-AR-03-077 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 12/2/02

Year 2002 - Cost and Revenue 

Analysis Capping Report

FF-AR-03-079 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 1/6/03

Year 2003 Cost and Revenue 

Analysis - Atlanta District

FF-AR-03-080 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 1/6/03

Year 2003 Cost and Revenue Analysis - 

Northern Virginia District

FF-AR-03-102 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 2/13/03

Year 2003 Cost and Revenue 

Analysis - Long Beach District

FF-AR-03-105 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 2/13/03

Year 2003 Cost and Revenue 

Analysis - Baltimore District

FF-AR-03-106 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 2/13/03

Year 2003 Cost and Revenue 

Analysis - Houston District

FF-AR-03-112 Audit of Statistical Testing for Fiscal $0 $0 $0 $0 2/21/03

Year 2003 Cost and Revenue 

Analysis - Central Illinois District

FF-AR-03-119 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 2/26/03

Year 2003 Cost and Revenue 

Analysis - San Francisco District

FF-AR-03-121 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 2/27/03

Year 2003 Cost and Revenue 

Analysis - South Jersey District

FF-AR-03-151 Audit of Statistical Tests for Fiscal $0 $0 $0 $0 3/24/03

Year 2003 Cost and Revenue 

Analysis - Cleveland District

FT-AR-03-001 Withholdings and Contributions for $0 $0 $0 $0 11/18/02

Health Benefits, Life Insurance, 

Retirement, and Employee 

Headcount Data

FT-MA-03-001 Postal Service Payments to $1,750,157 $0 $0 $0 11/19/02

the Smithsonian Institution

OE-AR-03-001 Corporate Contact Management $0 $0 $0 $0 12/26/02

Follow up

CONTRACTING AND FACILITIES

CA-AR-03-001 Architectural and Engineering $0 $0 $0 $0 3/7/03

Design Fees

CA-CAR-03-001 Evaluation of Incurred Costs $0 $0 $0 $0 10/16/02

CA-CAR-03-002 Post Award Evaluation $343,759 $0 $0 $0 10/16/02

CA-CAR-03-003 Evaluation of Incurred Costs $0 $0 $0 $0 10/16/02

CA-CAR-03-004 Evaluation of Proposal $248,680 $0 $0 $0 11/18/02

CA-CAR-03-005 Evaluation of Incurred Costs $0 $0 $0 $0 11/18/02

CA-CAR-03-006 Evaluation of Claimed Costs $1,143,069 $755,763 $0 $0 12/9/02

CA-CAR-03-007 Evaluation of Final Voucher $0 $0 $0 $0 12/9/02

CA-CAR-03-008 Evaluation of Incurred Costs $0 $0 $0 $0 1/9/03

CA-CAR-03-009 Evaluation of Labor Practices $0 $0 $0 $0 1/9/03

CA-CAR-03-010 Evaluation of Proposal $4,469,333 $765,400 $0 $0 1/9/03

CA-CAR-03-011 Evaluation of Equitable $4,028,935 $0 $0 $0 2/11/03

Adjustment

CA-CAR-03-012 Evaluation of Proposal $1,478,596 $479,451 $0 $0 2/26/03

CA-CAR-03-013 Evaluation of Proposal $0 $0 $0 $0 3/12/03

PAGE 104 APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
CA-MA-03-001 Review of Common Area $0 $0 $0 $0 1/27/03

Maintenance Costs

CA-MA-03-002 Review of Prorated Common $26,707 $0 $0 $0 2/11/03

Area Maintenance Costs

CA-MA-03-003 Review of Prorated Common $0 $0 $0 $0 2/11/03

Area Maintenance Costs

CA-MA-03-004 Review of Interim Invoice $9,130 $0 $0 $0 2/11/03

CA-MA-03-005 Review of Incurred Architectural $0 $0 $0 $0 2/21/03

Design Expenses

CA-MA-03-006 Deployment Plans for Acquired $0 $0 $0 $0 3/20/03

Irradiation Equipment

CA-MA-03-007 Impact of Freezing Capital $0 $0 $0 $0 3/31/03

Construction Projects

FINANCIAL MANAGEMENT TOTALS $ 13,498,366 $2,000,614 $0 $0

TECHNOLOGY

INFORMATION SYSTEMS

IS-AR-03-001 Network General Controls $0 $0 $0 $0 10/24/02

IS-AR-03-002 Review of Controls Over the $0 $0 $0 $0 1/21/03

Electronic Travel Voucher System

IS-AR-03-003 Server Security Testing $0 $0 $0 $0 3/10/03

IS-AR-03-004 Information Systems Impacted by $0 $0 $0 $0 3/17/03

the Postal Service Change to 

Monthly Reporting

IS-CS-03-001 Network General Controls $0 $0 $0 $0 11/22/02

OE-AR-03-002 Retail Data Mart System - $0 $0 $0 $0 3/31/03

Security Issues

DEVELOPMENTAL

DA-AR-03-001 PostalOne! Phase Two $0 $0 $0 $0 10/24/02

DA-AR-03-002 Postal Automated Redirection $0 $0 $0 $0 2/25/03

System, Phase 1

DA-AR-03-003 Human Transporter Alpha Test $0 $0 $0 $0 3/28/03

TECHNOLOGY TOTALS $0 $0 $0 $0

LABOR MANAGEMENT

HUMAN RESOURCE PROCESS REVIEWS

LH-AR-03-001 Sexual Harassment Prevention $0 $0 $0 $0 1/15/03

Measures in the Chicago and Detroit 

Districts - Great Lakes Area

LH-AR-03-002 Sexual Harassment Prevention $0 $0 $0 $0 1/16/03

Measures in the Long Island and 

Northern New Jersey Districts - 

New York Metro Area

LH-AR-03-003 Sexual Harassment Prevention $0 $0 $0 $0 1/30/03

Measures in the Northern Virginia 

and Richmond Districts - 

Capital Metro Operations

LH-AR-03-004 Sexual Harassment Prevention $0 $0 $0 $0 2/25/03

Measures in the Albany and Southeast 

New England Districts - 

Northeast Area

LH-AR-03-005 Sexual Harassment Prevention $0 $0 $0 $0 3/5/03

Measures in the Central Florida and 

South Georgia Districts - 

Southeast Area

PAGE 105

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
LH-AR-03-006 Sexual Harassment Prevention $0 $0 $0 $0 3/5/03

Measures in the Greensboro and 

Harrisburg Districts - Eastern Area

LH-AR-03-007 Sexual Harassment Prevention $0 $0 $0 $0 3/5/03

Measures in the Dakotas and Portland 

Districts - Western Area

LH-AR-03-008 Sexual Harassment Prevention $0 $0 $0 $0 3/18/03

Measures in the Oakland and 

Santa Ana Districts - Pacific Area

LH-AR-03-009 Sexual Harassment Prevention $0 $0 $0 $0 3/25/03

Measures in the Arkansas and 

Rio Grande Districts - Southwest Area

HK-AR-03-001 Postal Service’s Arrangement With a $0 $0 $75,000 $0 3/31/03

Preferred Provider Organization

HK-MA-03-001 Retirement Eligible Postal Service $0 $0 $0 $0 3/21/03

Employees on the Workers’ 

Compensation Periodic Rolls

HK-MA-03-002 Postal Service’s Death $1,265,294 $1,265,294 $0 $0 3/31/03

Benefit Payments to the 

Decedent’s Survivor(s)

LABOR MANAGEMENT TOTALS $1,265,294 $1,265,294 $75,000 $0

OVERSIGHT

SA-AR-03-001 Postal Inspection Service Fraud $0 $0 $0 $0 03/31/03

Against Business and Consumer 

Programs and the Customer 

Initiative Group

OTHER SIGNIFICANT REVIEWS

OE-MA-03-001 Postal Service Transformation Plan $0 $0 $0 $0 10/29/02

OVERSIGHT AND OTHER REVIEWS TOTALS $0 $0 $0 $0

OIG TOTALS $14,763,660 $37,674,052

$3,265,908 $21,111,415

PAGE 106 APPENDICES

Un- Recommend

Report Subject Title/ Questioned supported Funds Put to Issue

Number Project Type Costs Costs Better Use Other Date
APPENDIX B

Findings of Questioned Costs

For the period October 1, 2002 through March 31, 2003

OFFICE OF INSPECTOR GENERAL AND INSPECTION SERVICE

Unsupported

Costs

Total Included in

Number of Questioned Questioned

Description Reports Costs Costs

Reports for which no management decision was made at 30 $219,617,994 $119,881,658

the beginning of the reporting period 

Reports requiring management decision that were issued 10 $14,763,660 $3,265,908

during the reporting period

TOTALS 40 $234,381,654 $123,147,566 

Reports for which a management decision was made 17 $67,726,065 $554,878

during the reporting period (i+ii)*

(i) Dollar value of disallowed cost $35,500,328 $203,843

(ii) Dollar value of cost not disallowed $32,225,737 $351,035

Reports for which no management decision was made 23 $166,655,589 $122,592,688

by the end of the reporting period. 

Negotiations are ongoing.

Reports for which no management decision was made 6 $121,346,968 $117,650,903

within six months of issuance 

(See Note 1 for a list of individual reports)

Reports for which no management decision was made 9 $30,820,348 $1,675,877 

within one year of issuance 

(See Note 2 for a list of individual reports)

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

Unsupported

Costs

Total Included in

Report/ Questioned Questioned

Report Date Case Number Project Type Costs Costs

5/9/02 CA-CAR-02-041 Contract Audit $96,324 $20,202

5/9/02 CA-CAR-02-042 Contract Audit 1,689,663

6/28/02 CA-CAR-02-045 Contract Audit 1,053,263 134,340

8/2/02 FT-MA-02-004 Terminated Station Contract 58,248 58,248

9/6/02 CA-CAR-02-050 Contract Audit 117,828,789 117,250,842

9/13/02 CA-CAR-02-051 Contract Audit 620,681 187,271

OIG TOTAL $121,346,968 $117,650,903

* The reported amounts include $30,630,000 in “disallowed costs” and $7,776,029 in “costs not

disallowed” resulting from a negotiated settlement of current and future contract claims. The

amounts reported were based on OIG calculated allocation percentages that reflected the relationship of an audit report’s results to the negotiation results. 

PAGE 107
Note 2 - Reports for which no management decision was made within one year of issuance:

Unsupported

Costs

Total Included in

Report/ Questioned Questioned

Report Date Case Number Project Costs Costs

2/29/00 TR-AR-00-005 Southwest Area Expenditures for $848,000

Extra Highway Trips Using Leased 

Equipment

5/17/00 CA-AR-00-001 United States Postal Service 977,598

Warranty Repair of Tractors

10/12/01 CA-CAR-02-004 Contract Audit 17,359,760

2/28/02 CA-CAR-02-026 Contract Audit 491,590

3/6/02 CA-CAR-02-027 Contract Audit 2,217,874

3/25/02 CA-CAR-02-032 Contract Audit 772,214

OIG TOTAL $22,667,036 $0 

Unsupported

Costs

Total Included in

Report/ Questioned Questioned

Report Date Case Number Project Type Costs Costs

11/17/99 181-1294644-AC(1) Contract Audit $7,063,747 $1,675,877

4/3/00 184-1126310-AC(1) Contract Audit 514,696

8/30/00 184-1210121-AC(1) Contract Audit 574,869

INSPECTION SERVICE TOTAL $8,153,312 $1,675,877 

TOTAL $30,820,348 $1,675,877 

PAGE 108 APPENDICES
PAGE 109

APPENDIX C

Recommendations That Funds

Be Put to Better Use

For the period October 1, 2002, through March 31, 2003

OFFICE OF INSPECTOR GENERAL

Number of

Description Reports Dollar Value

Reports for which no management decision was made at the beginning 

of the reporting period* 3 $128,121,000 

Reports requiring management decision that were issued during the reporting period 10 $37,674,052 

TOTALS 13 $165,795,052 

Reports for which a management decision was made during the report period 5 $29,355,786 

(i)Value of recommendations agreed to by management $5,971,267 

(ii)Value of recommendations that management did not agree $23,384,519

Reports for which no management decision was made by the end of the reporting period.* 8 $136,439,266 

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

(See Note 1 for a list of individual reports) 0 $0 

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

(See Note 2 for a list of individual reports) 3 $126,725,169 

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

Recommend

Report Report/ Funds Put to

Date Case Number Subject Better Use

None $0 

TOTAL $0 

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

Recommend

Report Report/ Funds Put to

Date Case Number Subject Better Use

3/29/2002 TD-AR-02-002 Trailer Lease Justification $82,349,739 

9/29/2000 MK-AR-00-001 Review of Stamp Fulfillment Services Performance 28,457,395 

7/27/2001 TR-AR-01-004 Bulk Fuel Purchase Plan 15,918,035 

TOTALS $126,725,169 

*Included are amounts from two reports where management agreed to take the recommended corrective action in a prior reporting period but could not comment on some of the potential savings until

analyses were completed. The majority of identified savings were agreed to and decisions for two

reports were reflected in a prior reporting period. 
APPENDIX D

Reports with Significant Recommendations

Pending Corrective Actions

For the period October 1, 2002, through March 31, 2003

This appendix lists reports containing significant recommendations pending final action by management. On October 1, 2000, the OIG assumed complete responsibility for tracking corrective

actions for all significant recommendations. As a result, the OIG performed an extensive analysis

to identify reports with significant recommendations requiring confirmation that appropriate corrective actions have been taken. This appendix identifies those reports. The OIG is working

with Postal Service management to validate whether appropriate corrective actions have been

taken, and if so, remove them from this appendix.

OFFICE OF INSPECTOR GENERAL

Report Report Number of Issue 

Number Title Recommendations Date

LM-MA-99-002 Effectiveness of USPS Grievance Arbitration Procedures 2 3/26/99

LR-MA-99-001 Grievance Arbitration Management Information 2 3/26/99

OV-MA-99-001 Review of USPS Personnel Security Program - 

Process for Updating Sensitive Clearances 1 3/31/99

TR-AR-99-003 Emergency and Extra Trip Expenditures on Highway Routes 6 9/29/99

CA-AR-99-002 Removal of Underground Storage Tanks 1 9/30/99

CA-AR-99-003 Responsibilities of Contracting Officers’ Representatives 2 9/30/99

RP-MA-00-001 Indefinite Quantity Contracts 1 11/8/99

TR-AR-00-005 Southwest Area Expenditures for Extra Highway Trips 3 2/29/00

Using Leased Equipment

TR-AR-00-006 Commercial Air Carrier Performance: 2 3/27/00

Payment for Ground Handling Services

CA-MA-00-001 Contract Audit Practices 6 3/31/00

DA-AR-00-002 Tray Management System 5 3/31/00

TR-AR-00-009 Extra Trips Expenditures within the Mid-Atlantic Area 2 7/27/00

AC-AR-00-004 Use of Robotic Tray Handling System 2 9/29/00

DA-AR-00-006 Point of Service ONE Phase II 2 9/29/00

MK-AR-00-001 Review of Stamp Fulfillment Services Performance Measures 1 9/29/00

OV-AR-00-005 Review of the United States Postal Inspection Service 2 9/29/00

Budget Process

MK-AR-00-002(R) Management Controls over the 3 10/31/00

Sales Force Augmentation Program - Revised

DA-AR-01-004 Postal One! Business Customer Support Systems Phase One 5 4/9/01

IS-AR-01-001 Network Security 1 4/18/01 

OV-AR-01-002 Inspection Service Support to Postal Service Threat 2 4/30/01

Assessment Teams 

TR-LA-01-001 Review of a Transportation Agreement 2 6/26/01

TR-AR-01-004 Bulk Fuel Purchase Plan 5 7/27/01

TR-MA-01-002 Excise Taxes and Third Party Ground Handling Costs under a 1 8/8/01

Transportation Agreement 

IS-AR-01-003 Review of Security Access Controls 3 8/29/01

CA-AR-01-005 Supplier Diversity Program for Supplies, Services, and 8 9/6/01

Equipment Purchases 

DA-AR-01-006 Singulate, Scan, Induction Unit 5 9/27/01

TR-MA-01-003 Security Risks Associated with a Transportation Agreement 1 9/27/01

OV-AR-01-004 Postal Inspection Service Fraud Against Government Program 1 9/28/01

FT-AR-02-001 Shared Real Estate Appreciation Loan Program 5 10/17/01

PAGE 110 APPENDICES
PAGE 111

EM-AR-02-001 Protection of Internet Users' Information - 3 10/18/01

PostmarkAmerica.com Technical Issues

IS-AR-02-001 Fiscal Year 2001 Information System Controls 3 11/8/01

CQ-MA-02-001 Review of Letter Contract 1 12/28/01

IS-AR-02-003 Review of the Facilities Management System for Windows 4 2/22/02

EM-AR-02-002 Postal Retail Store Operations 2 2/28/02

LH-MA-02-003 Review of Decontamination Activities at the Pentagon Station 2 3/12/02

AC-AR-02-002 Certified Mail Processing Operations 3 3/21/02

DA-AR-02-004 Postal Service Test, Evaluation, and Quality 3 3/27/02

TD-AR-02-002 Trailer Lease Justification 2 3/29/02

EM-AR-02-007 The Role of Marketing in the Postal Service 3 3/29/02

EM-AR-02-008 PostmarkAmerica.com Financial and Management Issues 4 3/29/02

EM-AR-02-009 Public-Key Infrastructure Initiatives by the Postal Service 2 3/29/02

CQ-MA-02-002 Review of Contracts Associated with Biohazard Threat 1 3/29/02

IS-AR-02-007 Network General Controls 2 4/3/02

DA-AR-02-005 Surface-Air Management System 1 4/19/02

LH-AR-02-003 Southwest Area's Efforts in Obtaining Appropriate 2 5/8/02

Chargeback Credits for Identified Wage Compensation 

Overpayment and Refundable Disbursements

FT-AR-02-012 Relocation Compilation Report 1 5/31/02

OV-AR-02-003(R) Postal Inspection Service Health Examination Program 3 7/30/02

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

TD-MA-02-003 New York Metro Area Trailer Acquisition Requirements 2 7/10/02

LH-AR-02-004 Postal Service's Corporate Succession Planning Process 7 9/3/02

DA-AR-02-008 Postal Service's Efforts to Implement Prevention and 1 9/4/02

Detection Technology

DA-AR-02-010 Automated Seamless Dispatch Program 1 9/18/02

DA-MA-02-001 Biohazard Detection System 6 9/24/02

DA-MA-02-002 Biohazard Filtration System 3 9/24/02

TD-AR-02-003 Highway Network Scheduling - Pacific Area 3 9/24/02

CQ-AR-02-001 Work Performed by Business Mail Entry Employees in the 1 9/26/02

Colorado Wyoming Performance Cluster

FT-AR-02-015 Payments to a Utility Company 1 9/26/02

FT-AR-02-016 Advanced Annual Leave 1 9/26/02

TD-AR-02-004 Voyager Card Control Weaknesses - Chicago 1 9/26/02

CA-AR-02-004 Undefinitized Contract Actions 1 9/30/02

FT-AR-02-017 Effectiveness of the Postal Service's Asset Locator Program 3 9/27/02

IS-AR-02-015 Fiscal Year 2002 Information System Controls 2 9/27/02

AC-MA-02-002 Review of Nonprofit Standard Mail 1 9/30/02

CA-AR-02-005 Use of Noncompetitive Contracting Process for 3 9/30/02

Tabbing Systems Purchases

LH-AR-02-005 Associate Supervisor Program in the Great Lakes Area 6 9/30/02

TD-AR-02-005 Delivery Vehicle Gasoline 4 9/30/02

DA-AR-03-001 PostalOne! Phase Two 4 10/24/02

IS-AR-03-001 Network General Controls 6 10/24/02

TD-AR-03-001 New York Metro Area Trailer Acquisition - Safety and Length 2 10/28/02

FT-MA-03-001 Postal Service Payments to the Smithsonian Institution 3 11/19/02

TD-AR-03-002 Highway Network Scheduling - Northeast Area 2 11/25/02

TD-AR-03-003 Voyager Card Control Weaknesses - San Antonio District 2 12/2/02

LH-AR-03-001 Sexual Harassment Prevention Measures in the Chicago and 1 1/15/03

Detroit Districts – Great Lakes Area

IS-AR-03-002 Review of Controls Over the Electronic Travel Voucher System 2 1/21/03

FT-AR-03-006 Fiscal Year 2002 Postal Service Financial Statements Audit - 2 1/23/03

San Mateo Information Technology and Accounting 

Service Center

TD-MA-03-001 New York Metro Area Operational Use of Trailers 2 1/29/03

Report Report Number of Issue 

Number Title Recommendations Date
FT-AR-03-008 Fiscal Year 2002 Postal Service Financial Statements Audit - 2 1/30/03

St. Louis Information Technology and Accounting 

Service Center

LH-AR-03-003 Sexual Harassment Prevention Measures in the Northern 2 1/30/03

Virginia and Richmond Districts – Capital Metro Operations

AC-AR-03-003 Review of Nonprofit Authorizations 1 2/14/03

DA-AR-03-002 Postal Automated Redirection System, Phase 1 2 2/25/03

LH-AR-03-004 Sexual Harassment Prevention Measures in the Albany and 2 2/25/03

Southeast New England Districts - Northeast Area

CQ-MA-03-001 Reno, Nevada Mail Transportation 1 3/5/03

LH-AR-03-005 Sexual Harassment Prevention Measures in the Central Florida 1 3/5/03

and South Georgia Districts - Southeast Area

LH-AR-03-006 Sexual Harassment Prevention Measures in the Greensboro 2 3/5/03

and Harrisburg Districts – Eastern Area

LH-AR-03-007 Sexual Harassment Prevention Measures in the Dakotas 1 3/5/03

and Portland Districts - Western Area

CA-AR-03-001 Architectural and Engineering Design Fees 2 3/7/03

TD-AR-03-004 Address Change Service 5 3/12/03

LH-AR-03-008 Sexual Harassment Prevention Measures in the Oakland and 3 3/18/03

Santa Ana Districts - Pacific Area

TD-AR-03-005 Vehicle Maintenance Facilities - Vehicle Inventory Control 4 3/19/03

Weaknesses in the Chicago District

LH-AR-03-009 Sexual Harassment Prevention Measures in the Arkansas 3 3/25/03

and Rio Grande Districts - Southwest Area

TD-AR-03-006 Transportation Agreement Capping Report 4 3/27/03

CQ-AR-03-001 Work Performed by Business Mail Entry Employees in the 2 3/28/03

Seattle, Minneapolis, and Des Moines Bulk Mail Centers

TD-AR-03-007 Highway Network Scheduling - Capital Metro Area 2 3/28/03

HK-MA-03-002 Postal Service’s Death Benefit Payments to 1 3/31/03

Decedent’s Survivor(s)

OE-AR-03-002 Retail Data Mart System - Security Issues 4 3/31/03

OE-AR-03-003 Postal Service’s Involvement in Sponsorships 3 3/31/03

TD-AR-03-008 Highway Network Scheduling - New York Metro Area 2 3/31/03

TD-AR-03-009 New York Metro Area Trailer Acquisition - Lease versus Buy 2 3/31/03

INSPECTION SERVICE

CONTRACT AUDITS

Report Number Contractor Report Date

0184-1126310-AC(1) Contract Audit 4/3/00

0184-1210121-AC(1) Contract Audit 8/30/00

PAGE 112 APPENDICES

Report Report Number of Issue 

Number Title Recommendations Date
PAGE 113

APPENDIX E

Investigative Statistics1

For the period October 1, 2002, through March 31, 2003

OFFICE OF INSPECTOR GENERAL

Statistics

Arrests 6

Information/Indictments 7

Convictions3/Pretrial Diversions 20

Suspension/Debarments

Individuals 2 

Firms 0

Administrative Actions

Postal Service Employee 8

Contractor 0

Fines, Restitution, and Recoveries2 $1,593,857

Cost Avoidances 2 $6,989,190

INSPECTION SERVICE4

Statistics

Arrests 213

Convictions3 193

Administrative Actions

Employees 438

Contractors 51

Fines, Restitution, and Recoveries $16,174,864

Collections $0

Civil Actions 7

1 Statistics include joint investigations with other federal law enforcement agencies.

2 Some of these occurred in the prior semiannual reporting period, however, they were not reported

until the current reporting period.

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

4 Statistics for investigations related to fraud, waste, abuse, and mismanagement of Postal Service

operations.
APPENDIX F

Summary of Postal Service Investigative

Activities Under 39 USC § 3013

For the period October 1, 2002, through March 31, 2003

The Postal Reorganization Act requires the Postmaster General to furnish information on the

investigative activities of the Postal Service on a semiannual basis. With passage of the

Deceptive Mail Prevention and Enforcement Act in December 1999, the Postal Service's reporting obligations were changed. 

The Act requires the Postal Service to submit its semiannual report to the OIG rather than to

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

the report includes actions directed at combating crimes involving the mail; costs and expenditures devoted to Postal Service investigative activities; use of subpoena power; and any additional

information the OIG may require. 

ABUSE OF MAILS

The Postal Service reports to the Office of Inspector General information related to investigative

activities designed to protect the public against unscrupulous mailers perpetrating fraudulent

schemes. The following information summarizes the administrative and judicial actions initiated

and resolved during the reporting period. These actions include the issuance of cease and desist

orders directed to mailers, actions to intercept payments fraudulently induced, and orders seeking

to intercept fraudulent mailings.

INSPECTION SERVICE

False Cease &

Type of Complaints Consent Representation Desist

Scheme Filed Agreements Orders Orders

Contest/Sweepstakes 0213

False billings 3313

Fraud – Internet Schemes 2202

Lotteries (Foreign and Domestic) 30 1 26 1

Medical 1000

Miscellaneous 5414

Work at home 5625

TOTAL 46 18 31 18

OTHER ADMINISTRATIVE ACTIONS

Administrative Action Requests 50

Temporary Restraining Orders Requested 0

Temporary Restraining Orders Issued 0

Civil Injunctions (1345) Requested 1

Civil Injunctions (1345) Issued 1

Cases Using Direct Purchase Authority 0

Refusals of Direct Purchase Authority 0

Civil Penalties (Section 3012) Imposed 0

Expenditures Incurred for: 0

Test Purchases 0

Expert Testimony 0

Witness Travel 0

Withholding Mail Orders Issued 22

Voluntary Discontinuances 91

PAGE 114 APPENDICES
PAGE 115

POSTAL SERVICE ADMINISTRATIVE SUBPOENA AUTHORITY

The Postal Service reports to the Office of Inspector General information on the number of cases

in which the Postal Service issued administrative subpoenas in connection with deceptive mailing. The following section identifies the number and nature of cases in which the Postal Service

exercised this authority to request relevant business and associated records.

Case Number Date Issued Scheme

USPS-02-014 09/13/02 Identity Takeover

USPS-03-001 02/24/03 Work-at-Home

USPS-03-002 03/28/03 Telemarketing

USPS-03-003 03/28/03 Telemarketing

USPS-03-004 03/28/03 Telemarketing

USPS-03-005 03/28/03 Telemarketing

USPS-03-006 03/28/03 Telemarketing

FINANCIAL REPORTING ON INVESTIGATIVE ACTIVITIES

The Postal Service reports to the Office of Inspector General information related to the amount

of financial expenditures and obligations incurred pursuing the investigative activities of the

Postal Service. Information related to these activities is summarized below.

Type Semi Annual Report

Personnel $160,643,500

Nonpersonnel $35,325,500

Total Expenditures $195,969,000

Capital Obligations $8,932,719

OTHER INVESTIGATIVE ACTIVITIES

The Postal Service also reports to the Office of Inspector General additional information

related to significant investigative activities and other investigative matters. This section

outlines a number of significant investigative activities the Postal Service has initiated and is

pursuing, to include the Mail Task Forces and the Deceptive Mail Enforcement Team.

Inspection Service and Office of Inspector General criminal statistical information is 

summarized in Appendix E

MAIL SECURITY TASK FORCE

The Postmaster General established the Mail Security Task Force in October 2001, and appointed the Chief Postal Inspector to lead the team. The task force is committed to reducing the risks

to the safety and security of postal employees and customers. The Steering Committee, comprising Postal Inspectors, senior level postal executives, and presidents of the labor unions and management associations, meets on a regular basis. Seven working groups are contained within the

task force including Mail Center Security, Contingency Planning System-Wide, Mail

Preparation, Mail Screening, Communicating/Messaging, Safety and Security in the Workplace

Environment, and Mail Transportation Security. All of the working groups have presented findings to the Steering Committee, which is in the process if issuing an interim status report.
INTERNATIONAL SECURTIY GROUPS

The Inspection Service is an active participant in two international groups focused on security.

The International Security Group targets initiatives to improve the safety, security, and reliability

of international mail products for the U.S. Postal Service. The group also develops strategies and

initiatives to improve quality of service and security of mail for the 189 member countries of the

Universal Postal Union. The Postal Security Action Group of the Universal Postal Union focuses on problems and issues affecting the safety, security, and integrity on international communications products. This group is chaired by the Chief Postal Inspector. 

DECEPTIVE MAIL PREVENTION

The Deceptive Mail Prevention and Enforcement Act, which became effective April 12, 2000, subjects violators to civil penalties in addition to Cease and Desist Orders and False Representation

Orders. To support this new law, the Postal Inspection Service created the Deceptive Mail

Enforcement Team to identify violators and ensure swift, appropriate, investigative attention.

Questionable promotions identified by team, as well as those received as consumer complaints, are

examined for compliance. During the reporting period 83 promotions were reviewed for possible violations, and 12 have been referred for preliminary investigative attention. 

INTERNET FRAUD PREVENTION

The Internet is teeming with schemes, and swindlers have learned how easy it is to exploit innocent

victims. Fraud on the Internet often results in mail fraud, as cyber scammers use the mail to receive

payments or ship items. As a result of the growing trend among fraudsters to use the Internet, the

Postal Inspection Service participates in a multi-federal project known as the Internet Fraud

Complaint Center, which was established by the Federal Bureau of Investigation and National White

Collar Crime Center. The project is aimed at stemming Internet fraud by gathering, analyzing, and

referring Internet complaints. The Internet Fraud Complaint Center offers a central repository for

complaints related to Internet fraud. 

DEFINITIONS OF SCHEME 

Contest/Sweepstakes. Schemes in which the respondent is required to pay a fee to obtain prizes

of money, gifts or other items of value. “Prizes” are either never shipped or are inferior to what

was promised.

False billings. Mailing solicitations in the guise of billings.

Fraud – Internet Schemes. Fraudulent schemes using the Internet with a nexus to the mail. 

Lottery. Advertisements seeking money or property by mail for participation in schemes to win

prizes through chance.

Medical. Sales by mail of misrepresented health products or services, including fraudulent medical degrees.

Miscellaneous. Any other scheme not described in a specific category. 

Work at home. Schemes, such as envelope stuffing, that do not provide home employment.

PAGE 116 APPENDICES
PAGE 117

APPENDIX G

Closed Congressional and Board of Governors

Inquiries

For the period October 1, 2002, through March 31, 2003

This appendix lists the 47 Congressional and Governors inquiries the OIG closed during this

reporting period. The OIG reviewed these inquiries to help identify systemic issues and to

determine the need for future Postal-wide audits.

CONGRESSIONAL

PERFORMANCE

Requestor Allegations/Concern Response Date

White House Allegation of mismanagement which has resulted in mail delays 06-Nov-02 

Senator, Kentucky Allegation of mail processing mismanagement 14-Nov-02 

Senators, Virginia Allegation of mishandled mail and mismanagement 26-Nov-02 

Senator, Kentucky Allegation of mail processing mismanagement 16-Dec-02

Senator, California Allegation of delayed and missing mail 08-Jan-03 

Representative, Texas Allegation of mishandled mail 17-Jan-03 

Senator, California Allegation of poor customer service 28-Jan-03 

Representative, Texas Allegation of delayed delivery and destruction of mail 31-Jan-03 

Senator, North Carolina Allegation of mail tampering 31-Jan-03 

Senator, California Allegation of mail delivery problems experienced by disabled customer 11-Feb-03 

FINANCIAL MANAGEMENT

Requestor Allegations/Concern Response Date

Representative, Colorado Allegation of improper pay adjustments 29-Oct-02

Representative, Illinois Allegation of improper garnishment of retirement annuity 12-Nov-02

Senator, Arkansas Allegation of failure to comply with arbitration settlement 14-Nov-02

Representative, Request for review of facility site selection 16-Dec-02

Pennsylvania

Senators, South Dakota Allegation of improper collection of stamp shortage 31-Mar-03

LABOR MANAGEMENT

Requestor Allegations/Concern Response Date

Representative, California Allegation of a hostile work environment 09-Oct-02

Senator and Allegation of managerial harassment 23-Oct-02

Representative, Kentucky 

Senator and Allegation of retaliation and hostile work environment 14-Nov-02

Representative, Virginia 

Representative, New Jersey Allegation of managerial harassment 26-Nov-02

Representative, New York Allegation of unfair and improper treatment of employees 27-Nov-02

White House Allegation of managerial harassment and hostile work environment 09-Dec-02

Senator, California Allegation of hostile work environment 16-Dec-02

White House Allegation of worker’s compensation fraud and abuse 24-Jan-03

Senator, California Allegation of managerial harassment and discrimination 28-Jan-03

Senator, California Allegation of various employment issues 11-Feb-03

Senator, Oklahoma Allegation of worker’s compensation claim problems 20-Feb-03

Senator, Montana Allegation of hostile work environment, managerial harassment and 14-Mar-03

intimidation 

Senator, Michigan Allegation of managerial harassment and retaliation 24-Mar-03
OVERSIGHT OF INSPECTION SERVICE 

Requestor Allegations/Concern Response Date

Senators, New York Allegation of misconduct by Postal Inspectors 04-Oct-02

Representative, Florida Concerns regarding an investigation 05-Nov-02

Senator, Michigan Allegation of improper investigation 10-Dec-02

Representative, Ohio Allegation of improper forgery investigation 30-Dec-02

Representative, Florida Allegation of improper investigation 29-Jan-03

OTHER SIGNIFICANT ISSUES

Requestor Allegations/Concern Response Date

Representative, Request for investigation on reported contamination levels 10-Oct-02

Connecticut 

Senator, Maryland Information concerning OIG employment 21-Oct-02

Representative, California Request for assistance in resolving damage claim 23-Oct-02

Senator, Maryland Allegation of incorrect information submitted to Office of 19-Nov-02

Personnel Management

Representative, California Request for investigation regarding closure of a facility 19-Nov-02

Representative, Alabama Request for investigation of misuse of government vehicles 14-Nov-02

Senator, Illinois Request for assistance on status of an employment application 17-Jan-03

Representative, Virginia Concerns over OIG personnel decisions 14-Jan-03

GOVERNORS

LABOR MANAGEMENT

Requestor Allegations/Concern Response Date

Governor Allegation of hostile work environment 27-Nov-02

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Notes