semiannual report to congress

OFFICE OF INSPECTOR GENERAL

 April 1 — September 30, 2006

Promoting Integrity and Accountability
The mission of the U.S. Postal 

Service Office of Inspector General 

is to conduct and supervise objective 

and independent audits, reviews, and 

investigations relating to Postal Service 

programs and operations to:

Prevent and detect fraud, waste, and 

misconduct;

Promote economy, efficiency, and 

effectiveness;

Promote program integrity; and

Keep the Governors, Congress, and 

Postal Service management informed 

of problems, deficiencies, and 

corresponding corrective actions.

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Mission Statement
It has been 10 years since Congress created the 

U.S. Postal Service Office of Inspector General. 

During this time, we aligned our Audit and Investigative offices with appropriate Postal Service 

components to effectively carry out our mission. 

In the past year, we expanded our investigative 

mission to include employee mail theft, completing the transition of jurisdiction of all internal 

crimes from the U.S. Postal Inspection Service 

(USPIS). 

To accomplish our new work, we added 

additional staff, expanded our investigative 

responsibilities, and established new offices 

across the country. 

We also expanded our communications capabilities by introducing more efficient and immediate 

responses to callers reporting fraud, waste, and 

misconduct affecting Postal Service programs 

and operations. This expansion, called the Virtual Front Office, provides access to someone 

specially trained to classify and route calls to 

appropriate OIG staff or external organization. 

During this semiannual period, April 1 to 

September 30, 2006, our Office of Investigations closed 3,799 cases and referred 1,775 to 

management for administrative action. Special 

Agents conducted investigations resulting in 281 

arrests, informations, and indictments. Fines, 

restitutions, and recoveries totaled $76.4 million; 

of this amount, $12.4 million was returned to the 

Postal Service. Closed investigations covered 

contract fraud, embezzlement, injury compensation fraud, computer crimes, and employee 

misconduct. 

Highlights of the Office of Audit’s accomplishments in this reporting period include issuing 

240 audit reports that identified over $357 million 

in cost savings or funds put to better use and 

$2 million in revenue impact. The Office of Audit 

tackled important issues in the Postal Service’s 

network to increase efficiencies and did timely 

work in the aftermath of Hurricanes Katrina and 

Rita. They carried out a number of Value Propositions (agreements between audit directors and 

Postal Service Vice Presidents, consenting to a 

specific body of work in a specific time frame) 

that continue to get positive feedback from 

Postal Service management.

This semiannual report focuses on six major 

management challenges (risks) the Postal Service faced during the reporting period ending 

September 30, 2006: Strategic Direction, Cost 

Control, Revenue Generation, Customer Service, 

Human Capital, and Integrity and Security. The 

OIG strives to assist the Postal Service in managing these risks. 

I thank Postal Service officials, the Governors, 

and Congress for their support, useful suggestions, and advice. I look forward to continuing to 

help address the major risks the Postal Service 

faces in FY 2007.

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

Audit

Reports issued.........................................................................................................240

Significant recommendations issued .........................................................................86

Total reports with financial impact..............................................................................79

Funds put to better use......................................................................$280,766,200

Questioned costs1 ................................................................................. $76,474,109

Revenue Impact .....................................................................................$2,029,937

Total2.......................................................................................................$359,270,246

Investigations3

Investigations completed ......................................................................................3,799

Arrests ..................................................................................................................... 152

Indictments/informations ......................................................................................... 129

Convictions/pretrial diversions4 ................................................................................109

Administrative actions ........................................................................................... 1,775

Cost avoidance...........................................................................................$57,527,822

Total fines, restitutions, and recoveries ......................................................$76,488,294

Amount to Postal Service5.....................................................................$12,410,819

Hotline Contacts

Telephone calls ...................................................................................................23,430

e-Mail...................................................................................................................10,176

Virtual Front Office calls ........................................................................................ 1,288

Mail .......................................................................................................................1,095

Voice mail messages ...............................................................................................505

Facsimile — FAX...................................................................................................... 317

Total Contacts...................................................................................................36,811

Includes unsupported costs of $146,106.

The Postal Service agreed to recommendations or proposed alternative corrective actions that, if implemented, could result in more than $359 million in savings.

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

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

Amount included in fines, restitution, and recoveries.

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April 1 — September 30, 2006

summary of performance
April 1 – September 30, 2006 | 

Management challenges (risks) confronting the Postal Service ......................2

Strategic direction.................................................................................................3

Cost control..........................................................................................................4

Revenue generation............................................................................................ 11

Customer service ............................................................................................... 12

Human capital..................................................................................................... 15

Integrity and security........................................................................................... 17

Audit activities .............................................................................................. 18

Investigative activities ...................................................................................24

Feature story...........................................................................................................35

Virtual Front Office (VFO).....................................................................................35

Organizational chart..............................................................................................36

Map of office locations..........................................................................................37

Appendices .............................................................................................................38

Appendix A – Reports issued to Postal Service management..........................38 

 Reports with quantifiable potential monetary benefits.................39

Report listing...............................................................................42

Appendix B – Findings of questioned costs ......................................................48

Appendix C – Recommendations that funds be put to better use ....................50

Appendix D – Reports with significant recommendations pending

 corrective actions........................................................................ 51

Appendix E – Significant management decisions in audit resolution.................53

Appendix F – Investigative statistics..................................................................53

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

 actions under 39 u.s.c. § 3013..................................................54

Appendix H – Closed Congressional and Board of Governors inquiries ...........55

Supplemental information ....................................................................................58

Freedom of Information Act.................................................................................58

Workplace Environment......................................................................................59

Glossary..............................................................................................................60

Table of contents
 | Semiannual Report to Congress

The Postal Service is a $70 billion business delivering 212 billion pieces of mail a year 

(46 percent of the world’s mail) to 144 million delivery points. This requires managing 

almost 800,000 employees and contractors, 38,000 facilities, and 214,000 vehicles. 

The complexity of managing such a large enterprise is complicated by macro issues 

such as declining First-Class Mail volume, and various regulatory and legal constraints 

that limit managerial autonomy. The Postal Service and the Board of Governors are 

aware of the risks they face in this environment and are attentive to the issues. The 

fundamental challenges they continue to assess and act on include strategic direction, cost control, revenue generation, customer service, and human capital issues. In 

addition, maintaining the integrity and security of the Postal Service is an inherent challenge with any organization of its size. 

The current business environment is especially challenging in light of the Postal 

Service’s commitment to reduce millions of work hours, while other factors outside 

of the control of the Postal Service — such as the prospect of postal reform, natural 

disasters such as hurricanes and floods, or the fluctuation of fuel prices — impact the 

management and financial condition of the Postal Service. In the midst of this dynamic 

environment, the Postal Service continues to fulfill its legal mandate of universal mail 

service. 

Consistent with our mission to conduct audits and investigations relating to its programs and operations, we have conducted an extensive body of work to help the 

Postal Service manage its major risks. 

One of the ways we work with the Postal Service is through Value Propositions. These 

augment our ability to work jointly with the Postal Service by identifying areas that, 

with examination, could yield savings and maximize the value added to the Postal 

Service. A Value Proposition is an agreement between the audit directors and Postal 

Service Vice Presidents, consenting to a specific body of work in a specific time frame. 

The agreement includes the area of focus, objectives/goals, scope of work, Office of 

Inspector General (OIG) resources, Postal Service resources, anticipated value, and 

deliverables. 

Following are more details about the management challenges facing the Postal Service and examples of our related findings and recommendations during the reporting 

period. 

Management Challenges (risks) Confronting 

the Postal Service
April 1 – September 30, 2006 | 

S

t

rategic 

Directio

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Strategic Direction

As part of its overarching strategic direction, the Postal Service plans to continue 

increasing its effectiveness and efficiency 

and ensuring that products and services 

are self-sustaining, while balancing legal 

considerations and stakeholder views. 

These are primary goals in the Postal 

Service’s Strategic Transformation Plan. 

The Postal Service has many important 

initiatives in progress, including optimizing 

its processing and delivery networks and 

increasing investments in technology to 

streamline operations. These initiatives are 

critical if the Postal Service is to continue 

providing mail services to customers at a 

reasonable price. Historically, mail volume 

(revenue) growth has covered the growth 

of the delivery point network (cost). Today, 

declining First-Class Mail volumes make 

this increasingly difficult to achieve.

The Postal Service’s most significant effort 

to streamline operations is its ongoing 

redesign of the immense mail processing 

network, called the Evolutionary Network 

Development (END) initiative. This initiative involves migration to a flexible mail 

processing and distribution network that 

increases operational efficiency, reduces 

costs, and improves consistency of service. 

We work closely with the Postal Service 

as it endeavors to transform its network 

to increase operational efficiency. For 

example, the Postal Service implemented 

nine Area Mail Processing consolidations 

between January and June of this year. 

We reviewed two of these consolidations 

(in Bridgeport, Connecticut, and Pasadena, California) and found that they can 

be expected to reduce Postal Service 

costs and promote efficiencies. However, 

the Postal Service did not always follow 

its internal processes in preparing and 

reviewing the proposals, and needs to 

provide more specificity in its guidance 

for completion and review of the proposal 

worksheets. We will be reviewing more 

such consolidations, as well as evaluating 

whether the proposed consolidations fully 

consider the potential impacts on customer service. 

Although the Postal Service has made 

some progress in transforming its network 

this year, its END implementation efforts 

progressed cautiously. In mid-February, 

more than 40 additional proposals for 

consolidating processing operations were 

under consideration for implementation 

in late spring or early summer, and plans 

were to have another group of proposals 

in the late summer or early fall. However, 

the Postal Service has since scaled back 

these plans. Headquarters executives 

approved implementation of only one of 

the proposals that were under consideration in mid-February, and it has not yet 

been implemented. Additional proposals 

have been submitted and are currently 

under consideration.

Several factors have impacted the Postal 

Service’s network realignment efforts. 

These include:

Strong resistance to consolidation 

efforts from key stakeholders. For 

example, one union launched an advertising campaign aimed at raising public 

concern about mail consolidations.

Requests from members of Congress 

to suspend certain consolidations 

pending the completion of OIG or Government Accountability Office reviews.

The filing for an advisory opinion 

with the Postal Rate Commission on 

changes in postal services related to 

END implementation. Since the filing in 

mid-February, the Postal Service has 

responded to hundreds of questions 

associated with the filing and has participated in hearings to address these 

concerns. 

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Management

Response to

OIG Work

We adhere to professional 

audit standards and present 

our audit work to management 

for comments prior to 

issuing a final report. Unless 

otherwise noted in the audit 

work discussed in this report, 

management has agreed, 

or partially agreed, with our 

recommendations and is 

taking, or has already taken, 

corrective action to address 

the issues we raised.
 | Semiannual Report to Congress

Cost Control

A management challenge facing the 

Postal Service is to control costs, especially given the significant infrastructure 

investment required to meet its universal 

service obligation. Delivery now extends 

to more than 144 million delivery points 

with about 290,000 city and rural Letter 

Carriers, and more than 6,000 highway 

route contractors with box delivery. Based 

on these facts and our work in related 

areas, we believe cost control continues 

to be a significant challenge for the Postal 

Service. The greatest opportunities to 

reduce costs are in the areas of optimizing the network to control delivery costs, 

increasing efficiencies of technology 

investments, and maximizing the costeffectiveness of contracts. 

Optimization of Surface Transportation and 

Mail Transport Equipment Service Center 

Networks. The Postal Service spends 

close to $3 billion annually for contracted 

surface transportation to move mail and 

mail transport equipment across highway 

and rail networks nationwide. During this 

reporting period, we evaluated whether 

the Postal Service can reduce costs 

by reducing the number of highway 

contract trips originating at the Atlanta, 

Greensboro, and Dallas Mail Transport 

Equipment Service Centers (MTESCs) 

and servicing Processing & Distribution 

Centers (P&DCs) throughout the Great 

Lakes and Pacific Areas. We also looked 

at whether management complied with 

the Postal Service’s over-the-road (OTR) 

container processing policy. 

We concluded that the Postal Service 

could save approximately $25 million over 

the term of affected highway contracts by 

canceling, not renewing or modifying, 420 

scheduled highway trips; and by stopping 

the inappropriate shipment of serviceable OTR containers to the MTESC. The 

Postal Service could eliminate the trips 

without affecting on-time service by consolidating mail and equipment loads to 

better utilize trailer capacity. The Postal 

Service took corrective action to quickly 

implement transportation reductions. 

Further, at the request of management, 

we evaluated proposed changes to the 

current MTESC equipment inspection 

and payment authorization process. We 

determined changes to the MTESC quality assurance process did not provide 

the independent quality controls needed 

to ensure that the operating contractor’s 

work was done properly, equipment 

met standards, or payments should be 

approved. The Postal Service placed the 

proposed changes on hold and said they 

would advise us of any additional system 

modifications.

Hurricane Katrina-related Fuel Supply 

Shortages and Cost Increases. The Postal 

Service uses about 810 million gallons 

of fuel annually to operate its nationwide 

transportation network. Increases in 

fuel costs have a dramatic impact on 

the Postal Service’s costs. According to 

the Postal Service, each penny increase 

in the cost of a gallon of fuel costs the 

Postal Service about $8 million annually.

During our audit of postal operations in 

the wake of Hurricane Katrina, Postal 

Service transportation and supply management officials expressed concern 

about damage to the Gulf Coast fuel 

industry and infrastructure and potential 

nationwide fuel shortages resulting from 

the storm’s impact. Officials also were 

concerned about rising fuel prices, but 

said shortages were more critical in terms 

of impacting the Postal Service’s ability to 

move mail. 

Federal contingencies may alleviate some 

of the impact on Postal Service operations caused by fuel supply shortages. 

The U.S. Strategic Petroleum Reserve, 
April 1 – September 30, 2006 | 

administered by the U.S. Department of 

Energy, is the largest stockpile of government-owned emergency crude oil in the 

world. It provides the federal government 

with a response option when disruption in 

commercial oil supplies threatens the U.S. 

economy. It has been used only twice: 

first in 1991, at the beginning of Operation 

Desert Storm; and second in 2005, in 

response to Hurricane Katrina.

During our audit, we monitored nationwide fuel supplies. Although significant 

fuel shortages did not materialize, Hurricane Katrina disrupted the Gulf Coast 

fuel industry and created a significant 

nationwide spike in fuel prices. As indicated by the following chart, on August 

29, 2005, the day Hurricane Katrina hit 

the Gulf Coast, the nationwide average 

price for diesel fuel was $2.59 per gallon. 

However, after the hurricane struck, diesel 

fuel prices rose to more than $3.10 per 

gallon and did not return to pre-Hurricane 

Katrina levels for more than 11 weeks.

A similar analysis of all transportationrelated fuel prices suggests the Postal 

Service might have incurred a total of 

more than $32.8 million in Hurricane 

Katrina-related fuel costs. Since Postal 

Service Managers have little control 

over disruption to national oil inventories 

created by events as catastrophic as 

Hurricane Katrina, we did not make any 

fuel-related recommendations. As part 

of our ongoing effort to assist the Postal 

Service in controlling and reducing fuel 

costs, our FY 2007 audit work will cover 

two programs: the effectiveness of the 

Postal Service’s program for purchasing bulk diesel fuel, and Postal Service’s 

management of the Voyager Fuel Card 

program. Both programs cover thousands of highway network transportation 

contractors. (See page 17 for related 

investigative work in this area.)

Management of the National Trailer Fleet. 

We audited the National Trailer Lease 

Requirements in the Capital Metro Area, 

evaluating trailer fleet management and 

identifying opportunities to reduce costs 

and concluded that improvements could 

be made. Due to fleet management 

control weaknesses, the Postal Service 

leased more trailers than they needed. 

The Postal Service may have missed an 

opportunity to save more than $402,000 

Cost 

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2.00

2.20

2.40

2.60

2.80

3.00

3.20

$ Diesel Fuel Retail Price - US Average

(Source: Energy Information Administration, Department of Energy)

June 20, 2005 August 29, 2005 November 14, 2005

Hurricane Katrina

August 29, 2005

Diesel

Prices Spike

$20.4 Million

Return to 

Pre-Katrina Price - $2.59

November 14, 2005
 | Semiannual Report to Congress

when it allocated more trailers to the Capital Metro Area than it needed. However, 

the Postal Service still has the opportunity 

to save more than $1.5 million by returning unneeded trailers.

Domestic Mail Processing Efficiency. 

Although the Postal Service believes 

the END initiative will produce significant 

savings, it recognizes that this may be 

difficult and take many years to realize. 

Therefore, the Postal Service continues 

to pursue cost savings within its current 

network. For example, the Postal Service and the OIG worked together in the 

Pacific and Western Areas to:

Improve the efficiency of operations 

at the Los Angeles, California Worldway Airport Mail Center (AMC). We 

concluded the Worldway AMC did 

not fully adjust workhours in response 

to changes in workload, use mechanized equipment effectively, and staff 

operations commensurate with the 

workload. We recommended a reduction of 760,000 workhours, which 

could produce a cost avoidance of 

about $192 million over 10 years. 

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This facility also had vacant floor 

space, which management could use 

to house other processing operations.

Assess whether using smaller carrier 

sequence barcode sorters located in 

Associate Offices or Delivery Distribution Centers was more efficient than 

using the larger delivery barcode sorters located in P&DCs. Both of these 

machines sort mail automatically in 

delivery sequence. 

We reviewed the use of the carrier 

sequence barcode sorters in the Seattle 

District, where the Postal Service has 

discontinued using this equipment at 

many of its facilities. However, we found 

that further opportunities existed to use 

the delivery barcode sorters rather than 

the carrier sequence barcode sorters to 

process mail at the North Bend, Blaine, 

and South Sound facilities. This would 

reduce mail processing and maintenance 

workhours, increase processing efficiency, and increase the use of DBCSs. 

We estimate that using the existing and 

anticipated DBCS capacity would save 

10,521 workhours, which could produce 

a cost avoidance of approximately 

$3.7 million over 10 years.

Continue to improve mail processing 

efficiency and service within plants. 

For Standard Mail, this includes using 

a series of color-coded tags to ensure 

that mail is processed efficiently in 

a first-in, first-out sequence to meet 

processing, dispatch, and delivery targets. A color-coded tag represents the 

day of the week that mail arrived on 

Postal Service premises and denotes 

targeted clearance from the facility in 

1 or 2 days, depending on the type of 

Standard Mail. Left is an example of a 

blue color-coded tag used at the Portland, Oregon, P&DC.

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Due to fleet management control weaknesses, the Postal Service leased more 

trailers than it needed.

This is a blue color-coded tag 

used at the Portland, Oregon, 

P&DC.
April 1 – September 30, 2006 | 

We also completed two audits in a series 

of reviews assessing whether P&DCs are 

complying with the National Color Code 

Policy and best practices. At the P&DCs 

in Portland, Oregon, and San Diego, 

California, we concluded that the Postal 

Service was generally processing Standard Mail using the correct color-code 

processes. Although we observed some 

Standard Mail containers without colorcoded tags and other containers where 

the date and time were not shown on the 

color-coded tag, we did not observe any 

delayed mail, operational plan failures, 

or negative service impacts from these 

practices. We recommended that the 

Postal Service tighten controls over its 

color-coding processes and provide training as necessary. 

Efficiency of International Record Units. 

We worked with the Postal Service to 

assess the efficiency of 11 International 

Records Units (IRU) across the nation. 

IRUs communicate with foreign postal 

administrations on mailing matters, and 

reconcile and maintain international mail 

records. In addition, IRU personnel enter 

inbound international mail volumes and 

make adjustments to volumes, which the 

International Accounting Branch uses to 

bill foreign postal administrations.

Our review found IRUs operated in an 

antiquated, inefficient, and manual work 

environment. Most of the work functions 

at the IRUs, which support more than 

2 million hard copy records, were manually-driven and paper based. As a result, 

the Postal Service used more workhours 

than necessary to accomplish the IRU 

mission. Over the last several years, the 

Postal Service began to take action to 

improve IRU efficiency, such as automating its processes and moving from 

paper-based documents to paperless. 

Notwithstanding these actions, we made 

four recommendations to further improve 

and update the IRU operations. 

International Air Mail. The Postal Service 

spends more than $200 million annually to transport international mail, at 

rates mostly set by the Department of 

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Our review found International Records Units operated in an antiquated, inefficient, and manual work environment.
 | Semiannual Report to Congress

Transportation (DOT), not the market. 

Evidence suggests that the Postal Service 

pays more than it would on the open 

market. The Postal Service procures 

most of its transportation from private 

sector carriers. It spent $211.5 million to 

transport international mail by air in fiscal 

year (FY) 2004, and another $358 million for military mail. Lifting restrictions 

on the Postal Service’s ability to contract 

for international mail air transportation 

would be beneficial because the Postal 

Service would then be able to negotiate 

its rates directly with any carrier it considers appropriate. Deregulating international 

mail air transportation would achieve 

market-based pricing and operational 

flexibility.

We believe DOT regulation of international 

mail air transportation rates and requirements that the Postal Service use U.S. 

flag carriers (planes) are holdovers from 

an earlier period. These requirements are 

economically inefficient and many stakeholders oppose them. DOT regulations 

unnecessarily raises costs for postal ratepayers and taxpayers. The Postal Service 

should be free to procure international air 

transportation the way it purchases any 

other form of transportation. 

Delivery Vehicles. The Postal Service maintains a fleet of approximately 188,000 

vehicles dedicated to delivering mail, and 

can augment this fleet via lease or rental 

agreements with employees or commercial vendors. The Postal Service requires 

its Managers to fully use postal-owned 

vehicles before approving a lease. In May 

2005, the Postal Service analyzed postalowned delivery vehicles and compared 

the number of motorized routes to onhand vehicle inventory. In addition, as of 

July 2005, the Postal Service paid about 

$5 million annually to employees and 

commercial vendors to supplement its 

delivery fleet.

We reviewed this issue and found the 

Postal Service has made strides to 

reduce costs associated with delivery 

vehicle expenditures over the past 

3 years. However, more efficient delivery 

Excess and underused delivery vehicles and leased delivery vehicles from employees and commercial vendors were used when 

Postal Service-owned vehicles were available.
April 1 – September 30, 2006 | 

vehicle usage could save the Postal Service more than $22 million in funds put to 

better use and unrecoverable costs over 

the next 2 years. We found: 

Excess and underused delivery vehicles and leased delivery vehicles from 

employees and commercial vendors 

were used when Postal Serviceowned vehicles were available. 

Delivery officials did not monitor the 

reasonableness of payments or the 

need for contracts with employees for 

use of their personal vehicles.

Management did not consistently follow guidance and did not have visibility 

and control of excess Postal Serviceowned delivery vehicles within their 

areas. 

We recommended changes to help delivery officials make better use of delivery 

vehicles, use excess vehicles to reduce 

planned purchases of delivery vehicles 

for rural routes, and reallocate vehicles 

between areas to eliminate shortages. 

We also recommended that management 

terminate non-emergency employee and 

commercial leases where practical, and 

establish controls to reduce the potential 

for mismanagement or uneconomical 

expenditures.

Maximizing the Cost-Effectiveness of Contracts. We issued 14 contract-related 

audit reports during the reporting period. 

Specifically, we evaluated five cost proposals associated with major systems. 

We also conducted nine audits involving 

rates, lease expenses, decrement factors, billings, a settlement proposal, a 

contractor’s purchasing system, a quality 

system, and two accounting systems. 

These audits identified potential contract 

savings of more than $21 million. Some of 

our more significant work includes audits 

of:

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A $135 million firm fixed price proposal for the Automated Flats Sorting 

Machines (Phase 2), which disclosed 

more than $5 million in questioned 

costs; 

A $36 million firm fixed price proposal 

for the Flats Sequencing System Preproduction Program, which disclosed 

more than $6 million in questioned 

costs; 

Three firm fixed price proposals 

totaling $82 million, which disclosed 

$7 million in questioned costs; and

A settlement proposal of more than 

$2 million, which was questioned in its 

entirety as the Postal Service did not 

order the goods invoiced.

Contract Administration. We conducted 

two audits of the Postal Service’s process for noncompetitively awarding 

contracts to former employees. We found 

that controls over the noncompetitive 

contract process were generally effective. However, management could make 

improvements by ensuring that awarded 

contracts received appropriate market 

research, that statements of work were 

adequate, and that contracts contained 

proper justification in order to decrease 

the risk of mishandling Postal Service 

funds. In addition, management needs to 

ensure that they properly classify employees (and those contractors being treated 

as employees) and withhold the appropriate payroll taxes.

Technology Acquisition Management. The 

Technology Acquisition Management 

(TAM) organization in the Postal Service 

manages the acquisition, testing and 

acceptance, deployment, and integration of new technology systems. These 

systems include complex automation 

equipment, advanced mechanization, 

and mail processing protection systems 

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10 | Semiannual Report to Congress

designed to increase efficiencies in mail 

processing and distribution, delivery, and 

mail protection operations. TAM develops 

contract specifications and customer 

requirements, as well as deployment 

strategies and schedules. 

In a September 2004 report, we recommended that the Postal Service develop 

written policies and procedures to better 

manage acquisitions. In response, the 

Postal Service initiated efforts to further 

develop, standardize, and document its 

internal procedures to address program 

management activities such as conditional acceptance criteria. The Postal 

Service then sought our assistance in 

the development efforts, so together we 

formed a Value Proposition Agreement to 

develop the TAM Process Guide. 

The objective of the agreement was to 

promote acquisition practices that maximize benefits for the Postal Service. We 

used benchmarking to identify areas for 

improvement, which were incorporated 

into the TAM guide. This guide establishes 

the control environment and infrastructure 

for successful programs. We acknowledge the Postal Service’s commitment 

to enhancing its processes by using the 

documented procedures to strengthen 

its ability to deliver the right capabilities 

on schedule and at predictable costs. 

The Tam Process Guide is nearly complete, and the Postal Service will begin 

training employees to instill process discipline once the final version of the guide 

is published. 

Biohazard Detection System. The Biohazard Detection System (BDS) is an early 

warning system to detect biohazards 

at P&DCs. The purpose of the BDS is 

to reduce the threat to Postal Service 

personnel and the public from biohazardous materials sent through the mail. The 

BDS unit collects and tests air samples 

from the Advanced Facer Canceller 

System (AFCS) during mail processing 

operations. While in operation, the BDS 

consumes cartridges and buffer fluids. 

Nationwide, these BDS consumables 

cost about $526 million over the BDS’ 

5-year life. 

We assessed the cost of consumable 

usage and determined that the usage 

exceeded AFCS operational needs. 

This occurred primarily because BDS 

and AFCS start and shutdown operations 

were not synchronized. If uncorrected, 

overuse of BDS consumables would cost 

the Postal Service $79 million over the life 

of the program.

During the audit, we discussed opportunities for a technological solution to start 

and stop the BDS in conjunction with 

the AFCS, thereby eliminating manual 

coordination between operations and 

maintenance. Proposals included software and hardware modifications that 

management could readily incorporate. 

Implementing a technological solution would enable the Postal Service to 

significantly reduce the average daily 

consumable usage. Management agreed 

with the recommendations to pursue a 

technological solution and reemphasize 

established manual procedures.
April 1 – September 30, 2006 | 11

Revenue Generation

Another management challenge facing 

the Postal Service is enhancing its core 

services and providing greater value to 

its customers while also growing revenue. 

We believe the Postal Service could do 

more to ensure all revenue is being collected, recorded, and reported accurately. 

To ensure this occurs, we will continue 

reviewing new value-added products such 

as the Priority Mail Flat Rate Box and Premium Forwarding Service that the Postal 

Service is developing to ensure these 

products are growing revenue. Following 

is an example of one such audit.

Express Mail Service. Express Mail service 

is the Postal Service’s premium delivery 

service for documents and packages 

weighing up to 70 pounds. Customers 

using Express Mail service may pay postage with adhesive stamps, meter stamps, 

or through an Express Mail Corporate 

Account (EMCA). Customers have three 

options for opening and maintaining an 

EMCA: participating in the Centralized 

Account Processing System (CAPS), 

using a personal or business credit card, 

or establishing a trust account. The minimum balance in the trust account must 

equal either an average week’s postage 

and fees or $100, whichever is higher. In 

all areas, the district’s Expedited Service 

Specialists (ESS) are responsible for 

managing these trust accounts. 

We audited 450 EMCAs in the Postal 

Service’s nine areas and found that ESSs 

did not always properly manage EMCA 

trust accounts. ESSs had not collected 

revenue from 179 EMCAs with overdrawn 

balances. As a result, the Postal Service 

has recoverable revenue of $319,014 from 

customers who have overdrawn EMCAs, 

yet who continue to mail packages. Further, ESSs did not close accounts after 

negative balances existed for three consecutive months. We recommended that 

management contact EMCA customers 

to collect the postage due or, if appropriate, close the accounts and refer them to 

a collection agency. 

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v

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n

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Customers using Express Mail service may pay postage with adhesive stamps, meter stamps, or through an Express Mail 

Corporate Account (EMCA).
12 | Semiannual Report to Congress

Customer Service

We believe that a management challenge 

facing the Postal Service is balancing its 

mandated public service obligation with 

the need to remain viable. In addition to 

timely, reliable, and accurate delivery at 

low cost, customers expect convenient 

and effective service. The Postal Service 

has been successful in improving service 

under the Strategic Transformation Plan, 

even as it has reduced operational costs. 

Postal Service customers have easier 

access to products and information, and 

many more options for using the mail to 

maintain business and personal relationships. Under the Strategic Transformation 

Plan, the Postal Service aims to continue 

its initiatives to exceed customer expectations — by focusing on core business, 

isolating and eliminating quality problems, 

managing to standards built around the 

customer, and quickly replicating successes across the organization. The 

Postal Service is also committed to 

evolving to reflect changing customer 

demands, designing new products to 

meet new needs, and creating new solutions that customers value.

Delayed Mail. The Postal Service considers mail delayed when it is not processed 

or dispatched to meet its scheduled 

delivery date. Under normal circumstances, First-Class Mail should reach its 

destination anywhere within the continental U.S. within three business days.

In response to a November 2005 

Congressional inquiry, we reviewed 

allegations of delayed and undelivered 

mail in Las Cruces, New Mexico. The 

inquiry stated delayed mail resulted in 

businesses putting “stop payments” 

on undelivered, lost, or late checks; the 

Department of Labor levying fees for late 

reports that were actually posted timely; 

the need to reissue employee child supIn another review at the Dallas Bulk Mail Center, we found delayed mail was not accurately reported on the 

mail condition report.
April 1 – September 30, 2006 | 13

port checks; contracting bids lost in 

the mail; and delays of up to 2 weeks to 

deliver mail within the state.

Our review confirmed that delayed 

mail existed at the Las Cruces Carrier 

Annex and the Main Post Office, causing 

repeated customer complaints. Further, 

management had not taken timely action 

to correct the situation. Management met 

with us in December 2005 to discuss 

the Congressional inquiry and how to 

correct the delayed mail problem. Postal 

Service officials were confident that they 

could correct conditions associated 

with delayed mail and agreed with our 

findings and recommendations. We recommended that management establish 

procedures to track and monitor the 

implementation of recommendations 

from management reviews. Additionally, 

we recommended that management 

evaluate and respond timely to customer 

complaints. Postal Service officials 

stated that the delayed mail problem was 

due to turnover of district management 

staff, insufficient staff at the facility, and 

untimely response to recommendations 

made in a management review. 

Following a March 2006 Congressional inquiry, our Office of Investigations 

looked at allegations about mail delayed 

in the Los Angeles District. The Member 

heard that not only was mail delayed, 

but the delays were not properly 

recorded and delayed mail was hidden 

off-site. We confirmed that there was 

substantial delayed mail over the winter 

(2005-2006). However, we found the 

delayed mail was properly documented 

in the Mail Condition Reporting System 

(MCRS), and was not hidden from District management. In fact, the facility was 

reporting substantial amounts of delayed 

mail daily. We also noted that the mail 

flow later improved, as Postmasters at a 

number of receiving locations confirmed 

to us during interviews in April. We found 

no evidence to substantiate the claim 

that postal employees had stored or hidden mail in vehicles off-site. 

In another review at the Dallas, Texas, 

Bulk Mail Center, we found delayed mail 

was not accurately reported on the mail 

condition report. Our tests showed that 

delayed mail was underreported over a 

2-week period in June 2006, by 243,000 

mail items, including pieces, bundles, 

and trays. Although we did not find this to 

be deliberate, by underreporting delayed 

mail the Postal Service understated the 

problem, and consequently did not take 

timely action to correct the delays. During 

the review, the Postal Service began taking corrective action in this area. 

Ghost Numbers. A Mail Service Provider 

(MSP) specializes in preparing mailings 

for customers. Some MSPs perform 

the entire mail preparation and induction process, from printing mailpieces 

to depositing them into the mailstream, 

while others presort and mail under 

the MSP’s permit number. MSPs may 

combine their customers’ mail to take 

advantage of lower postage rates, such 

as bulk rates. 

When an MSP presents a mailing, the 

Postal Service requires a postage statement. A postage statement lists the 

name and permit number of the MSP in 

the “By” field (if the MSP is mailing under 

its own permit number), and the name 

and permit number of the mail owner in 

the “For” field (if the MSP is mailing under 

its customer’s permit number). When 

no permit number is associated with 

a mail owner on a postage statement, 

acceptance Clerks at the Business Mail 

Entry Unit create a “ghost” permit number in the PostalOne! system identifying 

the mail owner. The Postal Service uses 

these fields on postage statements to 

collect customer information for 

Custome

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ervice

Audit Work

The cumulative efforts of 

the OIG pursuing its mission 

benefits the Postal Service 

in many ways. For example, 

we conducted unannounced 

audits at a New York post 

office since FY 2002. This 

unit — with more than $15 

million in annual revenue 

— has had repeated internal 

control and compliance issues 

related to accountability 

examinations; trust and 

suspense items; inactive 

Business Reply Mail (BRM) 

accounts; payroll; and Voyager 

and IMPAC cards. In FY 2006, 

thanks to the Postmaster and 

his staff’s hard work, we did 

not identify any significant 

internal control or compliance 

issues and issued a “nofindings” report. 
14 | Semiannual Report to Congress

marketing purposes, and to track mail 

volume and sales revenue by customer. 

We reported that the Postal Service 

could improve its collection and use 

of customer information. We recommended that the Postal Service clarify 

procedures for Mail Acceptance Clerks 

to follow when mail service providers do 

not identify the mail owners in the postage statement’s “For” field; and revise 

Postal Service Form 3615, Mailing Permit 

Application and Customer Profile, to 

include a notice explaining the intended 

use of customer data collected. Postal 

management implemented recommendations for PS 3615 and clarified 

instructions for acceptance Clerks.

We recommended that the Postal Service clarify procedures for Mail Acceptance Clerks to follow when mail service providers do 

not identify the mail owners in the postage statements.
April 1 – September 30, 2006 | 15

Human Capital

Another management challenge the 

Postal Service faces is the resolution of 

workforce and workplace issues. Adding 

to that challenge is the need to create 

a flexible workforce as part of the END 

initiative. Further, controlling costs associated with workplace programs, such as 

workers’ compensation programs and 

grievance-arbitration service centers, is 

important to the Postal Service’s success. 

Workers’ Compensation Programs. A significant cost that impacts the Postal Service 

is workers’ compensation expenses for 

injured workers. The size of the bargaining unit workforce and nature of work 

performed are the primary factors that 

made the Postal Service the largest 

participant (47 percent of the total federal 

workforce cases) in the Department of 

Labor’s (DOL) Office of Workers’ Compensation Programs (OWCP) in 2006. 

Although the Postal Service has taken 

positive steps over the past 3 years

to reduce workers’ compensation 

expenses, in chargeback year 2006 

these expenses increased from 

$840 million to $884 million (5 percent). 

According to the Postal Service, the 

increase was caused in part by technological improvements that reduced the 

number of rehabilitation assignments 

available for injured employees. At the 

same time, administrative fees OWCP 

charged to the Postal Service, which 

are set by statute and therefore binding, 

increased from $37 million in 2001 to 

$48.3 million in 2006 (about 30 percent). 

These fees represent approximately 

5 percent of the Postal Service’s total 

medical and compensation costs. We 

have encouraged the Postal Service to 

seek legislative change for the replacement of the DOL’s OWCP, which could 

result in a substantial savings to the 

Postal Service.

During this reporting period, we conducted several reviews of the Postal 

Service workers’ compensation costs. 

Specifically, 

A review of controverted and challenged workers’ compensation claims 

in selected areas found the Postal 

Service ensured only eligible employees were placed on the periodic roll. 

However, we also found that the 

Postal Service did not always properly 

controvert and/or challenge claims, 

nor did they consistently track and 

monitor the claims in accordance 

with Postal Service policies and 

procedures. For example, of the 139 

claims reviewed totaling $533,760 in 

workers’ compensation benefits, we 

identified seven claims in which the 

Postal Service did not provide detailed 

information to support its position that 

employees were not entitled to these 

benefits. As a result, the Postal Service 

paid more than $57,000 for workers’ 

compensation claims accepted by the 

OWCP, that if properly controverted 

or challenged, may have been denied. 

Further, we projected the Postal 

Service did not recover more than 

$108,000 in continuation of pay (COP) 

benefits for chargeback year 2004 

workers’ compensation claims the 

OWCP denied. 

An initiative led by the Postal Service, 

which used an OIG-developed 

database, discovered more than 

$3.8 million in duplicate medical payments since July 2003, of which 

$711,689 was credited back to the 

Postal Service by OWCP as of September 2006. The OWCP is not 

required to reimburse agencies for the 

administrative fees they charge to 

process duplicate payments, 

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Audit Work 

During an audit in 

Oklahoma, we shared a 

best practice from the 

Pacific Area, which was 

subsequently implemented 

by the Oklahoma District 

and now helps prevent 

dog bites. This dog bite 

prevention concept was 

later featured on an 

Oklahoma news station as 

a special report on “Red 

Flagged Mail Routes.” This 

best practice incorporated 

the use of Map Point 

software, which enables 

users to discover patterns 

and target problem areas 

by tracking accidents and 

incidents — including 

those involving dangerous 

dogs. 
16 | Semiannual Report to Congress

rendering approximately $195,000, 

(about 5 percent of the duplicate payment amount) unrecoverable for the 

Postal Service.

A review of schedule award payments 

in the New York Metro Area concluded 

the Postal Service may have been 

overcharged $10,750 and undercharged $15,060, in chargeback years 

2004 and 2005. Although the amounts 

are not significant when compared to 

the total schedule award payments in 

the area ($6.7 million), they highlight 

the fact that some employees may not 

have received benefits to which they 

were entitled, while others may have 

received more.

Grievance-Arbitration Service Centers. We 

reviewed the quality of operations at the 

Postal Service’s six grievance-arbitration 

service centers and concluded that the 

service centers were in compliance with 

the relevant provisions of national and 

local union agreements related to the 

logging of appeals and scheduling of arbitrations. However, we believe the Postal 

■

Service could improve internal controls to 

ensure full operational efficiency. In addition, we found opportunities to reduce 

costs associated with lost hearing dates 

where the Postal Service paid cancellation fees. For example, the Postal Service 

incurred more than $356,000 in unrecoverable questioned costs for FYs 2004 and 

2005 for arbitrators who received late notification of cancelled hearing dates, some 

of which could have been avoided. Finally, 

we recommended that the Postal Service 

could save $5.5 million over a 10-year 

period by consolidating the six service 

centers. However, it must accomplish 

any consolidation with the cooperation 

of the four major unions, since management alone cannot initiate a consolidation 

without the unions’ agreement. Our report 

contained nine recommendations to 

improve the operations of the six service 

centers. Management agreed with five of 

the recommendations, said they needed 

to conduct more research and study 

regarding two of them, and disagreed with 

the remaining two. We are working with 

management to resolve the disagreement. 

The Postal Service’s six grievance-arbitration service centers were in compliance with national and local union agreement 

provisions for logging appeals and scheduling arbitrations.
April 1 – September 30, 2006 | 17

Integrity and security

The integrity of processes and personnel 

is an essential element for safeguarding 

Postal Service products, customers, 

services, and assets. This includes data 

accuracy, completeness, and the privacy 

of electronic information maintained within 

the Postal Service’s network infrastructure and voice systems. Ultimately, this 

integrity helps maintain a stable, sound, 

and transparent Postal Service. 

Audit Activities

Auditors assess the integrity of processes 

and programs to safeguard Postal Service products, customers, services, and 

assets. Auditors evaluate data accuracy 

and completeness as well as the security 

and privacy of electronic information 

maintained within the Postal Service’s 

network infrastructure and voice systems. 

Ultimately, this integrity helps maintain 

a stable, sound, and transparent Postal 

Service. Following is audit work conducted in this area.

Postal Service Effectiveness in Times of 

Disaster. During its long history, the Postal 

Service has faced both natural and manmade disasters that adversely impacted 

mail delivery. Such incidents led to a 

renewed emphasis on more effectively 

securing the nation’s mail system. Our 

audits focus on key vulnerabilities to help 

the Postal Service further protect the 

integrity of the mail stream.

In support of Postal Service security, 

we participate in the Mail Security Task 

Force and attend training relating to 

emergency planning and dangerous mail 

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Overall, we found that the Postal Service responded to Hurricanes Katrina and Rita rapidly and successfully under difficult and 

unprecedented circumstances.
18 | Semiannual Report to Congress

investigations. We are also a member 

of the President’s Council on Integrity 

and Efficiency (PCIE) Homeland Security 

Roundtable, which shares information 

on related security work performed by 

all OIGs. In one collaboration, the PCIE 

tasked the Inspectors General with 

assuring appropriate oversight of financial 

and procurement processes and operations relating to Hurricane Katrina. We 

then established a task force of auditors 

and investigators who conducted extensive work on this issue. 

During the course of our reviews after 

Hurricanes Katrina and Rita, we found 

that more than 300 Postal Inspectors 

and Postal Police Officers responded 

to safeguard Postal Service employees, 

provide security guidance to postal Managers, and ensure that infrastructures 

were secure and operational. Further, 

U.S. Postal Inspection Service (USPIS) 

personnel escorted fuel and other recovery-related goods (such as lights and 

generators) into Alabama, Louisiana, and 

Mississippi. The USPIS also initiated an 

educational campaign to prevent fraud 

schemes related to Katrina relief efforts. 

In a review of the actions taken by the 

Postal Service and the USPIS to locate 

employees in the days after Katrina, 

we concluded that these actions were 

timely and effective. We also determined 

that the Mississippi District’s actions to 

track employees’ locations in the days 

and months following the hurricane 

were effective, but the Southwest Area’s 

actions needed improvement. Although 

employees were responsible for informing the Postal Service of their locations 

as they moved about the country, 

Katrina’s catastrophic effects were so 

overwhelming they may have precluded 

many employees from keeping in contact 

with their employer. Our report included 

one recommendation for the Postal 

Service to improve its ability to account 

for employees after a natural emergency. 

Management agreed to implement the 

recommendation.

Further, we reviewed the Postal Service’s 

and USPIS’s procurement transactions 

related to Hurricane Katrina response, 

recovery, and reconstruction efforts to 

determine whether the USPIS had effective controls over these transactions. 

Overall, we found that the Postal Service 

and the USPIS had effective controls over 

procurement transactions and that these 

were valid, authorized, and supported by 

the appropriate documentation. However, 

the Postal Service could make improvements to ensure International Merchant 

Purchase Authorization Card (IMPAC) 

holders sign U.S. bank statements within 

5 days of receipt, as policy requires. In a review of the actions taken by the Postal Service and the USPIS to locate employees in the days 

after Katrina, we concluded that these actions were timely and effective.
April 1 – September 30, 2006 | 19

In addition, we audited the Postal 

Service’s response to Hurricane Katrina, 

focusing on its transportation, infrastructure, and logistical support activities, 

such as fuel management. We reviewed 

whether Postal Service transportation 

and logistics were effective in preparation 

for, during, and immediately after Hurricane Katrina; and whether Postal Service 

officials protected its resources. 

Our audit found the Postal Service took 

steps in anticipation of Hurricane Katrina 

and responded rapidly to the storm’s 

impact on the Gulf Coast. As a result, 

it preserved funds and other resources 

and made the task of reconstituting its 

network less difficult. We concluded that 

timely action to suspend and terminate 

unneeded highway contract routes in 

the hurricane emergency zone saved 

the Postal Service about $2.8 million 

and made those funds available for 

other emergency transportation needs. 

Despite the efforts of its supply management and contracting officials to protect 

federal resources, the Postal Service may 

have incurred more than $32.8 million 

in excess fuel costs related to Hurricane 

Katrina due to disruption to the Gulf 

Coast’s oil industry. Additionally, the audit 

disclosed that since the Postal Service 

transportation and logistics network is 

well established, the federal government 

can use the network more effectively to 

relieve disruption during natural disasters 

or terrorist attacks. 

We recommended that Postal Service 

officials verify the actual termination of 

unneeded highway contract routes and 

coordinate with federal authorities to 

better leverage Postal Service capacity 

during future national emergencies.

While the Postal Service took noteworthy 

actions in responding to the hurricanes, 

opportunities exist to enhance emergency preparedness (EP) and responses 

in the event of a future natural disaster. 

Specifically, management needs to:

Revise the Integrated Emergency 

Management Plan (IEMP) to sufficiently 

address area and headquarters-level 

functions, including coordination 

with the federal government during 

responses that require Postal Service 

involvement in the National Response 

Plan.

Ensure that field operations personnel complete, approve, validate, and 

implement IEMPs, which incorporate 

both stand-alone plans for hurricanes, 

as well as lessons learned.

Develop an alternative incident management system to assist the Postal 

Service in managing emergencies 

throughout each stage of EP.

Establish performance measures for 

all hazards to achieve emergency 

management goals that effectively 

enhance the Postal Service’s EP and 

incorporate them into the core goals 

for headquarters, area, and field-level 

emergency Managers.

Identify and develop mandatory EP 

training at each level of the Postal Service for hazards, as necessary, based 

on risks and vulnerabilities. 

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Our audit found the Postal Service took steps in anticipation of 

Hurricane Katrina and responded rapidly to the storm’s impact 

on the Gulf Coast.
20 | Semiannual Report to Congress

Overall, we found that the Postal Service 

responded to Hurricanes Katrina and Rita 

rapidly and successfully under difficult 

and unprecedented circumstances. As 

a result, the Postal Service safeguarded 

employees, continued to deliver the mail 

in the Gulf Coast region, and protected 

the sanctity of the mail and the nation’s 

mail system. 

Information Security. The Postal Service 

established the Information Security 

Assurance (ISA) process to ensure that 

application security risks are evaluated 

and security controls are documented 

and tested prior to application deployment. A review of the ISA process 

confirmed that the Postal Service has 

made progress in clearing the backlog 

of ISA projects and implementing a 

more comprehensive vulnerability testing 

program. However, additional work is 

needed to ensure that the Postal Service 

completes all ISA processes thoroughly 

and timely. The Postal Service also needs 

to address issues related to the accuracy, 

consistency, reliability, and availability 

of data with the Enterprise Information 

Repository. 

Two other reviews also provided recommendations for improving ISA processes. 

An application control review of the 

Change of Address system determined 

that the Postal Service deployed its 

Postal Automated Redirection System 

without completing a code review, 

security evaluation, certification, and 

accreditation and acceptance letters. 

We recommended that the Postal 

Service complete these documents. 

Finally, a review of the requirements and 

design of the Enterprise Payment Switch 

Solution provided three recommendations for incorporating existing security 

requirements into security assessment 

checklists, applying the updated checklists to the Payment Switch system 

assessments, and updating security 

guidance. 

Enterprise Payment Switch Solution Phase 1: 

Requirements and Design. In calendar year 

2005, the Postal Service processed 

around 250 million debit and credit card 

transactions, including transactions 

originating at self-service centers and 

traditional post offices nationwide, as well 

as transactions originating through mail 

orders, telephone orders, and the Internet. The total value of transactions 

processed in FY 2005 exceeded 

$8.3 billion. 

We worked with the Postal Service to 

evaluate the security of the proposed 

credit and debit processing solution to 

verify that the routing and storage of 

customer information is secure within 

the Postal Service systems and the Payment Switch environment. Our project is 

divided into multiple phases to facilitate 

timely reporting in step with the Postal 

Service development and implementation of the Payment Switch solution. We 

conducted Phase 1 of the project during 

the development of the Payment Switch 

solution. 

Audit work to date encompassed the 

Payment Switch design as well as systems and components that will feed 

into or receive output from the Payment 

Switch. We also evaluated the design of 

the Payment Switch in the context of the 

Payment Card Industry (PCI) Data Security Standard (DSS) and Postal Service 

policies. We will focus on system integration and customer acceptance testing, 

data transmissions, and mainframe 

controls during the second phase of the 

project.

Overall, we believe the Postal Service is 

making security a priority as it designs 

Enterprise Payment 

Switch

The Payment Switch is 

off-the-shelf hardware/

software that captures 

electronic payment 

transactions and submits 

them to the card 

processors for payment. 

Scheduled for production 

in 2007, the Payment 

Switch supports a broad 

range of electronic 

payment types, including 

credit card, debit card, 

checks, and Internet 

payments. Due to the 

number of transactions 

the Postal Service 

processes each year, it is 

required to comply with 

the terms of the Payment 

Card Industry (PCI) Data 

Security Standard (DSS), 

and have an annual 

on-site security audit and 

quarterly network scans 

performed. 
April 1 – September 30, 2006 | 21

and develops the Payment Switch 

system with security as a priority. The 

findings and recommendations presented in our Phase 1 report provide the 

Postal Service with areas where improvements could be made to further enhance 

the security of the system and prepare it 

for compliance with PCI requirements. 

Management agreed with nine recommendations, but disagreed with our 

recommendation to synchronize system 

time clocks across Payment Switch 

vendors. Management noted that synchronizing system clocks with all parties 

involved with the Payment Switch project 

is a complicated initiative and is not 

considered part of the project. We agree 

that synchronizing system clocks is not 

a simple task but encourage the Postal 

Service to reconsider this requirement as 

they move forward with development of 

the Payment Switch solution. 

Router and Switch Controls. Routers 

and switches are critical components 

of Postal Service telecommunication 

services. With increased reliance on 

electronic commerce and networking, 

equipment failures or breaches of these 

components can severely affect the 

Postal Service’s ability to deliver information across and outside the organization. 

As a result, Postal Service operations 

and reputation depend on secure and 

reliable routers and switches. 

We determined that, overall, information 

technology center policies and procedures provide adequate control over 

routers and switches. However, to further 

enhance the security and administration of these devices, the Postal Service 

could implement improvements that 

would strengthen the management of 

network topology, inventory, access, and 

change control. Furthermore, retaining 

critical configuration files off-site and 

reviewing them annually mitigates 

potential weaknesses in the management 

of these devices. 

Security Assessment Audit of Telephone 

Lines and Modems. Each year we conduct 

various security assessments to ensure 

that computer systems provide a level of 

security commensurate with the criticality of the system and the information it 

contains. We conduct phone sweeps of 

the Postal Service’s telephone network to 

ensure that modems and other potential 

telephone network vulnerabilities have 

been properly secured. This year, we 

conducted modem security assessments 

in the Eagan, Minnesota, and San Mateo, 

California, Information Technology and 

Accounting Service Centers (IT/ASC). 

Modems represent a point of vulnerability for most computer networks 

because they are designed to provide 

access around, rather than through, 

typical network perimeter defenses 

such as firewalls and intrusion detection 

software. Working in cooperation with 

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Routers and switches are critical components of Postal Service telecommunication services. 
22 | Semiannual Report to Congress

Postal Service officials, our phone sweep 

security modem assessments identified 

opportunities to strengthen access controls to sensitive networks by employing 

stronger and more effective safeguards. 

Our assessment is that Postal Service 

telecommunication professionals do an 

effective job managing security controls 

for modems. 

Providing Reliable and Transparent Information – CA-PKI. The Postal Service requires 

accurate information to make decisions 

that affect day-to-day operations, to meet 

Congressional reporting requirements, 

and to conduct long-term planning. To 

be effective, the information must also 

be timely, reliable, and available to those 

who need it, yet protected from those 

who do not. 

Homeland Security Presidential Directive 

12 (HSPD-12) established a federal policy 

to create and use a government-wide 

secure and reliable form of identification 

for federal employees and contractors. 

A secure and reliable form of identification would include an external digital 

certificate from an external Certification 

Authority (CA)/Public Key Infrastructure 

(PKI). A digital certificate is an electronic 

identity card that establishes credentials 

when doing business or other transactions on the Web. A CA is a trusted 

third party responsible for issuing and 

managing digital certificates. Further, as 

a main component of the PKI, a CA certifies that the individual granted the digital 

certificate is who he or she claims to be. 

PKI is a combination of technology (hardware and software), process (policies, 

practices, and procedures), and legal 

components (agreements). 

During this reporting period, we issued 

two reports on the results of our followup audit of the Certificate Authority Public 

Key Infrastructure (CA-PKI) Compliance 

at the Eagan, Minnesota, IT/ASC. We 

performed these audits, requested by 

management, to validate Postal Service 

actions taken in response to KPMG International recommendations for the PKI 

environment. 

The key generation ceremony (KGC) is 

a formal process which provides assurance that certificates are generated and 

protected in a trusted and reliable way, 

and is a critical step in the deployment of 

a PKI. During a KGC, root keys are generated, cloned, and stored securely.

The first report in June 2006 highlighted 

the generation of the initial PKI key and 

resolution of nearly all the KPMG documentation recommendations. However, 

corrective actions for a number of the 

operational recommendations were still 

in process. We concluded that, with the 

completion of the formal key generation ceremony and with the exception of 

those items that still require corrective 

action, the Postal Service had made 

significant progress implementing the 

CA-PKI environment under the requirements of HSPD-12. 

We followed up with a second report in 

September 2006 that described improvements made to the documentation and 

operational environments since we 

issued the first report. In general, with 

the exception of 27 operational items 

that we were unable to validate because 

they require specific additional activities or events to occur, we determined 

the Postal Service corrected issues 

identified in the KPMG compliance 

audit. Management concurred with our 

recommendation to complete the PKI 

operational environment by establishing 

the HSPD-12 Registration Authorities and 

Subscribers and implementing the disaster recovery backup environment. 
April 1 – September 30, 2006 | 23

Human Capital Enterprise SAP Human 

Resources Project. The Postal Service is 

implementing an Enterprise Resources 

Planning (ERP) system to replace more 

than 70 legacy systems that currently 

support the agency’s human resources 

and payroll systems. When fully implemented, the Postal Service will use SAP 

R/3, a commercial ERP solution, to incorporate human resource functionality for 

all Postal Service employees into a single 

integrated system. Data preparation and 

testing issues delayed the initial implementation of the Triboro performance 

cluster in the New York Metro Area until 

January 2006, with the next two clusters 

and the shared services center scheduled to come online in February 2007. We 

continue to monitor the Postal Service’s 

implementation of the SAP human 

resource system and have issued three 

reports since September 2005 addressing: the need for core security oversight 

and change management; controls over 

access to sensitive data; and roles and 

separation of duties. 

U.S. Postal Inspection Service Oversight. 

Under the Inspector General Act of 1978, 

as amended, we are required to provide 

oversight of the USPIS. We conducted 

three qualitative assessment reviews of 

investigative and related administrative 

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

procedures to improve management 

controls and agreed to provide additional 

training to Postal Inspectors to address 

the issues identified during our reviews. 

We reviewed the Consumer Fraud 

Awareness Fund (CFAF) and found that, 

overall, the USPIS managed the CFAF 

efficiently and effectively, and has effective controls to reduce the risk of CFAF 

fraud, waste, and mismanagement. 

Specifically, it has: 

Documented policies and procedures 

regarding the transaction and approval 

process.

Implemented procedures to ensure 

separation of duties to reduce the risk 

of error, waste, mismanagement, and 

fraud.

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The Postal Service is implementing an Enterprise Resources Planning (ERP) system to replace more than 70 legacy systems that 

currently support the agency’s human resources and payroll systems.
24 | Semiannual Report to Congress

Provided senior management with 

regular reports on the status of the 

fund.

Reported to senior management 

all expenditures that could give the 

appearance of inappropriate use. 

As a support function to the USPIS, the 

Security Investigation Service Center 

(SISC) was generally effective in supporting USPIS’s mission. However, 

USPIS management could improve its 

background security clearance process to reduce its carryovers for these 

clearances, provide formal annual and 

refresher training, and revise procedures 

for handling complaints of mail loss and 

rifling.

Using a facility risk-rating model, the 

USPIS implemented several initiatives to 

identify potential vulnerabilities of Postal 

Service facilities through security reviews 

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

we began assessing physical security 

programs and plan to report on the 

effectiveness of security in place for facilities, employees, customers, and mail. 

We are currently reviewing the Postal 

Service’s and USPIS’s security controls 

and processes to ensure that they 

are effective and follow Department 

of Homeland Security and executive 

guidance. Additionally, we will continue 

reviewing new initiatives for detection and 

protection systems and the development, 

implementation, and coordination of 

emergency preparedness plans. 

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Investigative Activities 

The investigative efforts of Special Agents 

assist the Postal Service in detecting and 

deterring misconduct and helps maintain 

the integrity of the postal system and its 

employees. The vast majority of postal 

personnel are dedicated, hard working 

public servants whose daily efforts instill 

trust in America’s postal system. However, it takes only one incident of theft or 

misconduct to potentially diminish that 

trust. Investigations of these breeches 

of integrity are a key component in 

maintaining the trust in the system and 

safeguarding the Postal Service’s revenue 

and assets. With Special Agents stationed 

in more than 80 offices nationwide, that 

mission is carried out by investigating 

internal postal crimes involving:

Mail theft by employees

Injury compensation fraud

Embezzlements and financial crimes

Contract fraud

Kickbacks

Computer crimes

Internal affairs

Narcotics

Special Agents also investigate bribery, extortion, conflicts of interest, and 

allegations against postal executives. 

Investigative Analysts examine data and 

analyze trends to augment investigators’ 

work in the field. Analysts and Special 

Agents partner to find solutions to help 

detect and prevent fraud. They operate as 

a headquarters intelligence unit, providing investigative analysis and research, 

reviewing investigative trends, and facilitating strategic initiatives.

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Employee Mail Theft. “No government 

agency touches the public in the way 

the Postal Service does. No other government agency has the one-to-one, 

personalized service with its customers, 

6 days-a-week, 52 weeks-a-year,” said 

Delores Killette, Postal Service Vice 

President and Consumer Advocate. 

“Americans trust the Postal Service to be discreet in handling 

their mail and to safeguard 

their personal information.” 

For the second year in 

a row, Americans rated 

the Postal Service as the 

number one agency they 

trust to protect their privacy, according to a new 

study by the Ponemon 

Institute, LLC.

The American public 

expects to receive their 

letters and parcels on time and 

intact. Citizens have an expectation that 

their mail will not be stolen, rifled, read, 

or obstructed while in the possession of 

Postal Service employees. That expectation and trust extends to every one of the 

690 million letters that travel across the 

country daily. Whether it’s a First-Class 

letter or a Priority Mail piece, Express 

Mail overnight service, a magazine, or a 

family heirloom in Registered Mail, all are 

handled by the women and men of the 

Postal Service. 

Most postal employees work diligently to 

move the mail to its proper destination. 

Unfortunately, a small number of individuals betray the public’s trust. Investigating 

and identifying those employees who 

steal mail and seeking their prosecution is 

now our responsibility.

In March 2006, the Chairman of the 

Board of Governors and the Postmaster 

General announced their decision to 

complete the investigative realignment 

between the OIG and the USPIS. This 

realignment involved a transfer of all 

employee misconduct investigations, 

including theft of mail, to the OIG. The 

announcement presented a schedule to 

complete this transfer of responsibility 

and established September 1, 2006, as 

the start date of our responsibilities for 

employee mail theft. The transition 

is scheduled to be complete by 

January 1, 2007. 

To prepare for this transition 

and the new investigative 

responsibilities, our Office of 

Investigations has hired more 

than 260 new investigators 

since April 1, 2006. With 

the transfer of investigative responsibilities to the 

OIG, the USPIS reduced 

its complement of inspectors investigating internal mail 

theft. Many of the Postal Inspectors specializing in these types of internal 

investigations have transferred to the OIG.

A steering committee of experienced 

internal mail theft specialists has been 

created to chart the course for the mail 

theft mission. Special Agents assigned 

mail theft duties have completed a rigorous training program to prepare for taking 

on these new duties. 

Office of Investigations management is 

taking a lead role in partnering with the 

mailing industry by attending strategic 

meetings with key mailers, such as Netflix, 

and major financial industry associations, 

such as the International Association of 

Financial Crimes Investigators, to ensure a 

seamless transfer of responsibilities. Additionally, these partnerships will identify 

and exchange best practices, and share 

loss prevention strategies. 

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On September 1, Special Agents immediately were called into action, as described 

in the case brief below.

First mail theft apprehension since transition of jurisdiction. A Southwest Area 

District Postal Manager advised us that 

a Letter Carrier was suspected of taking government checks from his postal 

unit while on annual leave, delivering 

them, and receiving payments from 

customers for expedited delivery. On 

September 1, Special Agents observed 

the carrier preparing for his route, 

pulling government checks from his 

case and setting them aside. The carrier clocked out and left the building 

on annual leave. Our Special Agents 

immediately attempted to locate those 

government checks in the mail to be 

delivered by the relief carrier, but were 

unable to find them. When the suspect 

carrier stopped at a local bank, Special 

Agents observed a small bundle of 

checks in plain view on the front seat 

of his car. 

The carrier was detained and brought 

back to the post office. A total of 30 

pieces of mail, including 26 Treasury 

checks valued at $13,327, were confiscated from the suspect. The carrier 

was immediately placed on emergency 

suspension by management. 

Injury Compensation Fraud Investigative 

Results. As part of the largest civilian 

workforce in the federal government, 

working in a multitude of diverse jobs, 

postal employees are exposed to situations that can cause on-the-job injuries. 

As required by law, the Postal Service 

funds workers’ compensation benefits 

for employees who sustain job-related 

injuries. The monetary and medical 

benefits paid by the Postal Service to 

workers’ compensation claimants totaled 

$884 million in 2006. Of this amount, 

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$325 million was for medical payments to 

providers, and $559 million was for compensation to claimants and beneficiaries. 

Administered by the U.S. Department of 

Labor (DOL), the Office of Workers’ Compensation Programs (OWCP) provides 

payment to providers and compensation 

to claimants and beneficiaries. The Postal 

Service later reimburses OWCP in a process known as “charge-back billing.” 

The vast majority of employees on 

workers’ compensation receive benefits 

because of legitimate job-related injuries. 

However, a small percentage of postal 

employees and healthcare providers 

abuse the system. These schemes cost 

the Postal Service millions of dollars each 

year in compensation payments, medical costs, administrative expenses, and 

enforcement costs.

We initiate criminal investigations when 

we suspect individuals or healthcare 

providers of defrauding the DOL’s Federal Employees’ Compensation Act 

benefits fund. Criminal prosecutions are 

an effective deterrent to fraud and may 

permanently prevent the improper payment of any additional compensation. 

Any cases that may require administrative 

action are referred to the Postal Service 

and the DOL. Special Agents work closely 

with injury compensation specialists from 

the Postal Service on all phases of these 

investigations.

An example of an innovative crime prevention approach was undertaken by our 

Denver Field Office and the Postal Service’s Colorado/Wyoming District Injury 

Compensation and Control Office. The 

team produced a DVD entitled “Workers’ Compensation Fraud – Somebody’s 

Watching,” which focused on the negative 

impact on the Postal Service of fraudulent 

compensation claims. The presentation 

reached nearly 14,500 district employees 

in September 2006.

injury compensation 

fraud Investigative

Results

April 1 – September 30, 2006

966 fraud investigations resolved

$52 million in 

compensation 

payments avoided 

8 arrests

9 indictments/informations

6 convictions

34 employees 

removed

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During this reporting period, injury compensation fraud investigations resulted 

in more than $52 million in cost savings/

avoidances. Investigations by Special 

Agents resulted in the arrests of eight 

suspects and in 125 administrative personnel actions, including removals, and 

letters of warning. Following are examples 

of injury compensation fraud cases investigated by our Special Agents during this 

reporting period.

Doctor Defrauds OWCP of More Than 

$100,000 in Healthcare Scam. A Hotline 

tip disclosed that a doctor was submitting fraudulent bills and receiving 

payment for higher-level services than 

were actually administered to postal 

employees (upcoding). 

The OWCP overpayment for services 

was estimated at $105,000. Our investigation revealed the doctor’s billing 

Clerks admitted that the doctor threatened to harm them if they alerted law 

enforcement and others to his deceptive billing practices. 

We executed a federal search warrant at the doctor’s offices. On August 

2, 2006, a federal grand jury in the 

Western District of New York issued 

a 64-count indictment of healthcare 

fraud. The indictment charged that the 

doctor directed his office staff to bill at 

the highest code available without any 

regard to the level of service he actually provided to his patients. In addition 

to treble damages, the U.S. Attorney’s 

Office is pursuing recovery of our 

investigative costs using forfeiture procedures.

Eighteen-Year Scam by Maintenance 

Employee Leads to a Year in Prison and 

Restitution of More Than $242,000.

On June 5, 2006, a Maintenance 

plumber with the Postal Service, since 

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1981, pleaded guilty to making false 

statements and concealing material information to obtain workers’ 

compensation benefits. The plumber 

began receiving disability payments 

in September 1988 after claiming he 

suffered a lower-back injury in June. 

Although the Postal Service offered 

him a job as a “modified office aide,” 

he claimed he was unable to work 

without significant pain. From 2001 

through 2004, the employee completed several government forms 

on which he denied doing any work 

and stated that his condition had not 

improved. However, investigators 

gathered evidence that contradicted 

these claims, including surveillance 

and photographs of the employee 

doing physical labor in his yard and 

community. The loss attributed to this 

case is approximately $450,000. On 

September 11, 2006, the plumber was 

sentenced to 12 months incarceration 

and ordered to pay $242,015 in 

restitution.

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The OIG is now responsible for investigating and identifying employees who steal mail and seeking 

their prosecution. 
28 | Semiannual Report to Congress

Western Area Letter Carrier Found Guilty 

for Not Reporting Income. On June 2, 

2006, a Letter Carrier was found guilty 

on three counts of false statement 

or fraud to obtain workers’ benefits. 

The former carrier injured his knee 

when a dog bit him in January 2002. 

In November 2002, he filed a workers’ 

compensation claim. On each form, 

the carrier indicated he had no employment beyond his federal job during 

the periods he claimed for compensation. Although the Office of Workers’ 

Compensation Programs denied two 

claims, he received more than $3,500 

in benefits for the other three claims. 

Investigators found he earned money 

by welding and hanging Christmas 

lights while supposedly incapacitated. 

In August, the carrier was sentenced 

to 3 years probation, fined $2,000, and 

ordered to pay $3,596 in restitution.

Supervisor in Southwest Area Removed 

for OWCP Fraud. On May 26, 2006, the 

Postal Service removed a supervisor 

from duty for “Unacceptable Conduct 

– Failure to Follow Instructions.” The 

former supervisor injured his wrist 

while on duty in August 2003 and was 

placed on the periodic roll. The DOL 

OWCP informed the former supervisor 

that OWCP payment recipients must 

immediately notify the DOL of any 

change in work status. The investigation revealed the supervisor returned 

to work in July 2004, but continued 

to collect OWCP benefits until September 2005. During an interview, the 

former supervisor admitted he was 

not entitled to receive this money and 

intended to repay it later. In April 2006, 

the OWCP issued a Letter of Demand 

ordering him to repay $35,027.

Capital Metro Area Carrier Removed for 

Off-Duty Activities. On January 23, 

2006, a Letter Carrier allegedly sus-

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tained an injury when a co-worker 

kicked a stack of mail tubs into the carrier’s leg. The carrier then hit his thigh 

on a metal piece of mail processing 

equipment. On January 26, 2006, the 

carrier submitted a Notice of Traumatic 

Injury and Claim for Continuation of 

Pay/Compensation. On January 27, 

the carrier accepted an offer to work in 

limited-duty status (with medical 

restrictions); however, he did not return 

to work until April 3. While off duty, he 

drove himself to medical appointments 

and played pool on a weekly basis. On 

April 5, Special Agents interviewed the 

carrier, who admitted to driving a vehicle and playing pool while receiving 

Continuation of Pay. He provided a 

sworn written statement and was subsequently placed in an off-duty, 

non-pay status. On May 23, he 

received a Notice of Removal, effective 

June 28, 2006.

Embezzlements and Financial Crimes. 

Employee embezzlements may involve 

postal employees who steal money from 

cash drawers; sophisticated schemes 

involving the manipulation of postal money 

orders or money order funds; or the 

falsification of financial records. Financial 

investigations also cover theft, misconduct, 

falsification of records, and conversion and 

misuse of Postal Service property. 

When post offices experience unusual 

or significant shortages, our investigators 

employ various investigative techniques 

to uncover embezzlements. Improper 

or lax postal procedures are reported to 

management for corrective action. When 

employees are found to be responsible for 

missing postal funds, they are reported to 

management for appropriate administrative action. In cases that warrant criminal 

prosecution, offenders not only face the 

possible loss of their jobs, but also may 

face jail time and court-ordered restitution. 
April 1 – September 30, 2006 | 29

A Mail Handler explains the Standard Mail color-coding 

process for the Dulles, Virginia, Processing and Distribution 

Center to an OIG Auditor and Special Agent.

Fifteen Northeast Area VMF Employees 

Removed for Time-Card Abuse. An extensive investigation of time-card abuse 

identified a ring of postal employees 

who were abusing the timekeeping 

system. Special Agents conducted 

numerous surveillances and reviewed 

Time and Attendance Collection 

System records to identify suspicious 

time entries. Eventually, the investigation determined that many employees 

were routinely swiping one another’s 

time cards to record fraudulent clock 

hits. In May 2006, 15 employees were 

removed because of these activities, 

with several others receiving lesser 

administrative actions.

Former Postmaster Gets Jail and $28,500 

Debt for Theft. On April 28, 2006, a U.S. 

District Court judge ordered a former 

Postmaster to spend 6 months in 

prison and pay restitution of $28,562 

for funds he stole from his Capital 

Metro Area post office. The former 

Postmaster pleaded guilty on February 2, 2006, to two counts of theft of 

government property. He was removed 

from the Postal Service on January 23, 2006, as a result of the 

investigation.

The investigation began from an audit 

of another Capital Metro Area post 

office for a vending machine funds 

shortage. While determining that the 

shortage resulted from a lack of internal controls for that particular machine, 

investigators found that the defendant, 

who at that time was Manager of the 

post office, appeared to be living 

beyond his means. 

Based on these shortages and the 

Postmaster’s financial position, we 

reviewed financial records from the 

post office where the Manager now 

served as Postmaster.

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Our review of financial records, as well 

as records from the county Treasurer’s 

Office, revealed an embezzlement of 

$26,924. In addition, the former Postmaster accepted checks for Post 

Office Box rentals that he did not 

record, as he should have. One witness saw the Postmaster selling 

stamps without entering the transactions — approximately 20 to 30 times 

— from July 2003 through January 2004. 

Former BMEU Clerk Draws 30 Months in 

Prison for Theft. On August 8, 2006, a 

U.S. District Court Judge sentenced a 

former Clerk at a Western 

Area Bulk Mail Entry Unit 

(BMEU) to a 30-month 

prison term for theft of 

public records and theft 

of property used by the 

Postal Service. 

Investigators determined 

that the Clerk accepted 

bulk mailings from customers without charging the 

customers’ accounts for 

postage. In all, he failed to 

charge for 503 mailings, 

totaling $449,265 in potential revenue. The court 

found that the former Clerk 

was angry and sought to 

injure the Postal Service 

because of his perceived 

injustices involving the 

overtime policy and being 

overlooked for a promotion. 

Because the Clerk did not take the 

money for personal use, the BMEU 

was able to recover $361,807 of the 

uncharged postage from business 

mailers by the end of this reporting 

period. 

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Investigators executed a search warrant at the Clerk’s residence where 

they found 93 flat plastic Postal Service 

tubs, two Postal Service identification 

badges, many Postal Service uniforms, 

and eight Postal Service/government 

keys. Special Agents also found a document that listed more than $400,000 

in postal mailings that the Clerk did not 

appropriately enter into the system. 

OIG and USPIS investigators arrested 

the Clerk the same day.

Contract Fraud. The Postal Service is 

presently managing more than $39.8 billion in postal contracts. These contracts 

range from multimillion dollar national 

contracts for services such as transportation networks and information technology 

infrastructures to local contracts for supplies and services at individual postal 

facilities. The sheer volume and the huge 

dollar value of contracts provide opportunities for contractors and employees to 

defraud the Postal Service. The Office of 

Investigations aids the Postal Service by 

assessing its management of acquisitions 

and contracts and stepping in to shut 

down fraud as Special Agents aggressively investigate allegations of contract 

improprieties. 

Contract fraud schemes range from 

failure of contractors to meet contract 

specifications to payment of bribes to 

postal employees; from irregular chargebacks to double and false billing. Other 

significant schemes uncovered include 

kickbacks, conflict of interest, and misuse 

of contract modifications.

During the reporting period, Special 

Agents conducted 30 contract fraud 

investigations, resulting in two arrests, 

24 debarments and suspensions, and 

more than $6.6 million in funds returned 

to the Postal Service. In addition, we were 

involved in joint cases that resulted in settlements totaling more than $25 million. 

Examples of contract fraud investigations 

conducted by Special Agents during this 

reporting period follow.

IMPAC and Voyager Fleet Cards. In addition to acquiring goods and services 

through contracts, the Postal Service 

uses International Merchant Purchase 

Authorization Cards (IMPACs) and 

Voyager Fleet Cards. The IMPAC Program processed transactions totaling 

approximately $384 million during this 

reporting period and earned the Postal 

Service approximately $2.4 million in 

refunds. The Voyager Fleet Card 

Program pays for the fuel, oil, repair, 

maintenance, and washing of more 

than 220,000 Postal Service vehicles. 

The program processed more than 

$357 million during this reporting 

period, with documented savings and 

cost avoidance to the Postal Service of 

almost $27 million. 

Highway Contractor to Pay $120,000 for 

Withholding Fuel Rebates. On June 5, 

2006, a Postal Service highway transport contractor agreed to pay $120,000 

under a settlement agreement with the 

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Misconduct by postal employees is one of the many crimes investigated by OIG Special Agents. 

Criminal violations are presented to U.S. Attorneys for prosecution; results of other misconduct 

investigations are provided to postal management for administrative action.
April 1 – September 30, 2006 | 31

U.S. Attorney’s Office in Dallas for failing to pass on fuel rebates to the Postal 

Service. Of the total, $116,400 goes to 

the Postal Service and $3,600 to the 

Department of Justice.

Our data analysis confirmed the Texas 

contractor received nearly $80,000 in 

fuel discounts between 2001 and 

2004. Nevertheless, the company did 

not account for these discounts on fuel 

certifications it submitted to the Postal 

Service for payment. Postal Service 

highway transport contractors receive 

fuel purchase rebates or discounts 

from fuel providers via Fuel Purchase 

Plans. Any discounts the contractors 

receive are to be passed back to the 

Postal Service.

Large Postal Service Contractor Signs 

$5 Million Settlement Agreement for 

Contract Irregularities. On July 17, 2006, 

a large postal contractor signed a 

settlement agreement with the Postal 

Service and the OIG to resolve a 

dispute over postal automation equipment contracts. The contractor did 

not admit any wrongdoing. The Postal 

Service has received $5 million and 

will offset the contractor’s previously 

included legal costs from future pricing 

agreements beginning in calendar year 

2006. The primary subcontractor costs 

were much lower than the costs that 

the primary contractor submitted to the 

Postal Service.

Atlanta Contractor Pays Postal Service 

$630,000 to Avoid False Billing Suit. On 

July 14, 2006, the contractor for a 

postal mail transportation equipment 

service center (MTESC) in Atlanta paid 

the Postal Service $630,000 as part of 

a settlement agreement. The company 

was one of four contractors the Postal 

Service used to manage its nationwide 

MTESC program. As background, an 

MTESC sorts, repairs, and distributes 

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mail transport equipment (MTE), which 

includes empty mailbags, mail trays, 

and metal containers.

Based on an anonymous Hotline allegation, our Special Agents discovered 

that the company was replacing previously billed and processed MTE with 

new barcodes and placards, thus generating new claims for payment and 

causing the Postal Service to be billed 

twice. The Hotline complaint alleged 

that the company shift supervisors 

were not only aware of the double-billing scheme, but also helped to replace 

placards and barcodes on goods for 

which the Postal Service had already 

been billed. The company also made 

large inventory adjustments through a 

software inventory and billing program 

as a means of justifying shortages and 

missing inventory. For example, the 

company would electronically enter 

inventory into the system and bill the 

Postal Service without actually stocking or restocking all of the equipment. 

When it was time to balance (or adjust) 

the inventory, Managers and Supervisors would delete the previously added 

adjustments, thereby enabling the 

company to pocket what the Postal 

Service paid. 

Contractor Agrees to Repay $63,000 for 

False Vehicle Repair Claims. In a plea 

agreement signed on June 15, 2006, 

the General Manager of a postal 

contract repair facility agreed to pay 

restitution of $63,362 for submitting 

false claims to the Postal Service. On 

June 20, 2006, the U.S. Attorney’s 

Office filed a Criminal Information in 

U.S. District Court in Santa Ana, California, charging the General Manager 

with one count of false claims.

The General Manager of the contract 

repair facility, worked in tandem with a 

former postal accident investigator to 

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defraud the Postal Service for personal 

financial gain. The former investigator 

signed a plea agreement on February 

16, 2006, to pay restitution of $113,000 

and serve 12–18 months in prison for 

false claims. The former employee 

received more than $300,000 by 

submitting more than 100 fictitious or 

inflated accident repair claims to the 

Postal Service from the repair facility. 

In return, he received free repairs of his 

personal vehicles and kickbacks from 

the repair contractor when the Postal 

Service paid the claims. 

Secretary Pleads Guilty to Theft after 

a Spending Spree with IMPAC Card. A 

former secretary at a Western Area 

Processing and Distribution Center 

pleaded guilty to theft of government 

property in U.S. District Court on 

April 5, 2006. Her sentencing has not 

yet been scheduled. A grocery chain 

investigator alerted the USPIS that the 

postal employee might be misusing a 

Postal Service International Merchant 

Purchase Authorization Card (IMPAC). 

The investigator said the woman used 

her IMPAC to purchase $11,835 in grocery gift cards; she then used the gift 

cards to purchase personal items. The 

USPIS referred the case to us. 

Our investigation determined that 

between October 1, 2004, and 

September 30, 2005, the secretary 

misused her IMPAC to purchase more 

than $15,000 in gift cards for personal 

use. She concealed her theft by altering official records, including forging 

her supervisor’s approval to requisitions and monthly statements, and 

falsifying previously approved 

requisitions. 

The secretary confessed to unauthorized gift card purchases, forgeries, 

and alterations of account records 

during an interview with our Special 

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Agents on September 26, 2005. She 

resigned from the Postal Service on 

December 24, 2005.

Computer Crimes. As the Postal Service 

information infrastructure expands and 

the number of products and services 

available over the World Wide Web 

increases, the agency faces increased 

exposure to online risks. Unauthorized 

access into Postal Service networks and 

improper usage of computers by employees are just two types of computer crimes 

that the Postal Service may fall victim 

to. Training for and investigating these 

computer crimes is a top OIG priority to 

ensure the Postal Service’s networks and 

databases remain secure. 

Our Computer Crimes Unit initiates investigations and provides digital forensics 

support to OIG investigations. During 

the reporting period, the unit grew its 

investigations support by 26 percent, 

supporting more than 600 requests and 

313 investigations with digital forensics 

support services. Following is an example 

of a computer crimes investigation:

Postal Manager Resigns After Special 

Agents Discover Child Pornography on 

his Postal Service Computer. The USPIS 

told us a Manager was allegedly misusing his Postal Service computer to 

download pornography. Our Computer 

Crimes Unit Special Agents, working 

with the Postal Service ACE Infrastructure Support Team, recovered more 

than 118,000 images on the Manager’s 

computer, many of which were pornographic and several of which appeared 

to be child pornography. In May 2006, 

we retained the services of a certified 

forensic pediatrician who verified the 

images were of underage children. 

The Manager was subsequently interviewed and arrested by our Special 

Agents on a federal arrest warrant. 

He was remanded to a Metropolitan 

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Correctional Center until August 31, 

2006, when he appeared before a U.S. 

Magistrate and was released on bond. 

The case will be brought before a federal grand jury. Following his detention 

hearing, the Manager resigned from 

the Postal Service. 

Internal Affairs and Executive Investigations.

We maintain a Special Inquiries Division 

(SID) and an Internal Affairs Division (IAD) 

as part of the Office of Investigations. 

SID/IAD conducts criminal and administrative investigations of Postal Service 

executives, USPIS personnel, and whistleblower reprisal investigations. Among 

the investigative activity for the reporting 

period was the following case.

Postal Executive Investigated for Questionable Business Expenses and Misconduct.

We received allegations of the misconduct of a Postal Service Vice President 

during the period from January 2003 

through December 2005. The investigation disclosed that the executive 

engaged in a pattern of misusing 

Postal Service funds. He also engaged 

in intimidating, and embarrassing 

behavior with several female employees and contractors. The findings were 

presented to management and the 

Board of Governors and, according to 

the Postal Service, the executive was 

separated from the Postal Service. As 

a result of the investigation, the Postal 

Service made changes to its officers’ 

travel policies and guidelines.

Postal Service Officers’ Travel Expense 

Guidelines. Due to the preceding investigation of a senior Postal Service official 

and in response to a request from management, we evaluated whether Postal 

Service officers’ travel guidelines were 

reasonable when compared to other 

entities’ travel policies. We reviewed 

guidelines prescribed by other federal 

and local government entities, private 

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corporations, not-for-profit organizations, 

and trade journals. We met regularly with 

Finance personnel to provide feedback 

on our benchmarking results and to 

discuss potential changes to the current 

guidelines. 

In general, we noted the travel guidelines 

instituted by the Postal Service for its officers differed, in some cases, from travel 

guidelines prescribed by the entities and 

sources against which we benchmarked. 

Based on our benchmarking, we determined the guidelines did not always 

incorporate key best practices. 

We offered suggestions for the Postal 

Service to consider when updating the 

officers’ travel guidelines, including:

prohibiting reimbursement for alcoholic 

beverages, 

establishing specific guidelines for tipping, 

establishing a per diem or maximum 

allowable amount for meals and 

lodging and incidental charges when 

traveling and/or representing the 

Postal Service, and

referencing existing policies and 

procedures that provide a clear and 

consistent framework for reimbursing 

representation expenses such as business meals. 

The Postal Service recently updated its 

officers’ travel guidelines to incorporate 

many of our suggestions.

Whistleblower Activity. A whistleblower is 

an employee or a former employee who 

reports misconduct to people or entities 

that have the power to take corrective 

action. Generally, the misconduct is a 

violation of law, rule, regulation, and/or 

a direct threat to public interest — fraud, 

health, safety violations, and corruption 

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are just a few examples. The employee 

must reasonably believe his or her 

employer has committed a violation of 

some law, rule, or regulation; testify or 

commence a legal proceeding on the 

legally protected matter; or refuse to 

violate the law. OIG whistleblower activity 

during this period:

OIG investigations initiated: 34

Investigations closed with no finding 

of retaliation or deferred to other adjudicative body: 15

Open investigations: 17

OIG found reprisal: 2

Narcotics. Illegal drugs in the workplace can negatively impact employee 

productivity and safety. They also 

affect employee judgment and can 

increase stress levels, leading to acts 

of violence or hostility. Use and sale of 

narcotics by employees on duty can 

contribute to other crimes such as theft, 

embezzlements, and fraudulent workers’ 

compensation claims.

Our mission in dealing with illegal drugs 

in the workplace focuses on detection, 

investigation, and prevention. Detection of 

illegal drug sales, distribution, and usage 

in the workplace is the first step in this 

overall approach. Employees selling or 

distributing illegal drugs are vigorously 

investigated and prosecution is pursued. 

Postal employees who are using drugs 

may be referred to the Postal Service 

Employee Assistance Program for treatment.

Prevention remains a key long-term strategy for providing a safe and drug-free 

work environment for postal employees. 

Deterring employee drug use is the 

desired outcome for the prevention effort. 

Following is a typical narcotics investigation involving a postal employee:

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Letter Carrier Charged with Selling Marijuana on Route. A Western Area Letter 

Carrier was charged in County Circuit 

Court with selling marijuana. After a 

joint investigation between the OIG and 

with local police, the postal employee 

was arrested for allegedly selling drugs 

from his postal truck while delivering 

mail. The Letter Carrier remained in jail 

after failing to post a $10,000 bond. 

He has been placed on unpaid leave 

pending the outcome of the criminal 

case against him.

■
April 1 – September 30, 2006 | 35

VIRTUAL FRONT OFFICE (VFO)

To make it easier for callers to report 

concerns of possible fraud, waste, and 

misconduct affecting Postal Service 

programs and operations, we established 

a Virtual Front Office (VFO). All calls are 

now routed to one centralized location 

that provides extended hours with personnel on duty.

On April 3, 2006, the VFO began operating. All callers — whether they dial OIG 

Headquarters or any of its main field 

offices — are promptly greeted by VFO 

staff located in the OIG’s Headquarters 

office in Arlington, Virginia. VFO staff are 

on duty from 7:30 a.m. to 8 p.m., Eastern 

Time, Monday through Friday, except 

holidays. 

After calls come in, they are routed to an 

appropriate destination (Hotline Program 

Analyst, a requested party, or externally 

to the Postal Service’s Consumer Affairs 

Department, the USPIS, Headquarters 

operator, and so forth). 

Callers on certain investigative matters 

are put in immediate contact with an OIG 

investigator. From its inception through 

September 30, the VFO has referred 

nearly 1,300 calls to Special Agents.

Another VFO benefit was freeing up limited administrative support personnel in 

the field so they can now provide needed 

support to auditors and investigators in 

their offices.

The OIG also set up a new toll-free phone 

number to provide Postal Service Managers with direct access to the VFO. 

feature sto

ry

OIG staff discusses Hotline complaint related to workplace environment issues.

Hotline Analyst referring Postal Service Manager to a Special 

Agent in the field.

FEATURE STORY
36 | Semiannual Report to Congress

As of September 30, 2006

Abbreviations

AIG Assistant Inspector General

CAATS Computer Assisted Assessment Techniques

CIO Chief Information Officer

FOIA Freedom of Information Act

IT Information Technology

HQ Headquarters

Inspector General

AIG 

Investigations

AIG

Audit

CAATS

Chief Information 

Officer

Application 

Development

IT Operations

Consolidated 

Security

Fraud & 

Investigative 

Research

Deputy General 

Counsel

General Counsel

Congressional, 

FOIA, & Hotline

Legal Services

AIG

Mission Support

Director 

Quality & Strategy

Human 

Resources

Administrative 

Services

Investments

Deputy AIG 

Headquarters

Investigative 

Operations

Technical 

Operations

Deputy AIG 

Investigations East

Boston Field Office

New York 

Field Office

Philadelphia 

Field Office

Washington

Field Office

Deputy AIG 

Investigations South

Atlanta

Field Office

Miami

Field Office

Dallas 

Field Office

Houston 

Field Office

Special Inquiries 

Division & Internal 

Affairs Division

Deputy AIG 

Investigations West

Chicago 

Field Office

Denver 

Field Office

San Francisco 

Field Office

St. Louis 

Field Office

 Los Angeles 

Field Office

Audit Reporting

Deputy AIG 

Financial Operations

Information 

Systems

Field Financial West

Field Financial 

Central

Field Financial East

Financial 

Statements

Deputy AIG 

Core Operations

Evolutionary 

Network 

Development

Engineering

Transportation

Capital Investments

Network 

Processing

Delivery & Retail 

Deputy AIG 

HQ Operations

Human Capital

Planning, Budgeting 

& Accountability

Marketing

Supply 

Management & 

Facilities

Oversight of 

Investigative 

Activities

Principal Deputy 

Inspector General Performance

Computer 

Crimes Unit

Planning and 

Performance Deputy 

Inspector General

U.s. postal service Office Of Inspector General Organizational Chart
The OIG currently has more than 1,100 employees located in more than 80 offices nationwide.

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

April 1 – September 30, 2006 | 37

The oig has offices

in each of the postal

service’s nine areas.

Albuquerque, New Mexico

Anchorage, Alaska

Arlington, Virginia

Atlanta, Georgia

Baltimore, Maryland

Baton Rouge, Louisiana

Bedford, Texas

Billings, Montana

Birmingham, Alabama

Boston, Massachusetts

Buffalo, New York

Charleston, West Virginia

Charlotte, North Carolina

Chicago, Illinois

Clarksburg, West Virginia

Cleveland, Ohio

Columbus, Ohio

Coppell, Texas

Covington, Kentucky

Dallas, Texas

Denver, Colorado

Des Moines, Iowa

Detroit, Michigan

Eagan, Minnesota

El Paso, Texas

Gary, Indiana

Grand Rapids, Michigan

Greensboro, North Carolina

Harrisburg, Pennsylvania

Hoboken, New Jersey

Houston, Texas

Independence, Missouri

Indianapolis, Indiana

Jackson, Mississippi

Jacksonville, Florida

Kansas City, Kansas

Knoxville, Tennessee

Las Vegas, Nevada

Little Rock, Arkansas

Long Island, New York

Los Angeles, California

Louisville, Kentucky

Memphis, Tennessee

Miami, Florida

Milwaukee, Wisconsin

Nashville, Tennessee

New Haven, Connecticut

New Orleans, Louisiana

New York, New York

Norfolk, Virginia

Oklahoma City, Oklahoma

Omaha, Nebraska

Orlando, Florida

Philadelphia, Pennsylvania

Phoenix, Arizona

Pittsburgh, Pennsylvania

Portland, Maine

Portland, Oregon

Providence, Rhode Island

Raleigh, North Carolina

Richmond, California

Richmond, Virginia

Riverside, California

Sacramento, California

Salt Lake City, Utah

San Antonio, Texas

San Diego, California

San Francisco, California

San Jose, California

San Juan, Puerto Rico

San Mateo, California

Santa Clarita, California

Seattle, Washington

Shreveport, Louisiana

Sioux Falls, South Dakota

Spokane, Washington

Springfield, Massachusetts

St. Louis, Missouri

St. Paul, Minnesota

Syracuse, New York

Tallahassee, Florida

Tampa, Florida

Trenton, New Jersey

Vancouver, Washington

Wilmington, Delaware

Pacific

Southwest

Great Lakes

Eastern Northeast

New York Metro

Capital Metro

Southeast

Western
38 | Semiannual Report to Congress

REPORTS ISSUED TO POSTAL SERVICE MANAGEMENT

For the period April 1 — September 30, 2006

OIG audit teams conduct performance and financial audits, evaluations, and other reviews to address the business of 

the Postal Service. Each team issues audit reports (AR) or management advisory reports (MA) in accordance with the 

identified needs of the project.

Summary

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

issued report.

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

preceding 6-month periods ending March 31 and September 30. These reports are 

sent to Congress and made available to the public.

This report summarizes OIG activities and illustrates significant problems, abuses, and 

deficiencies, along with recommendations and corrective actions related to the administration of U.S. Postal Service programs and operations during the reporting period. 

During the last 6 months, the Postal Service agreed with OIG recommendations that 

identified potential monetary benefits of more than $359 million.

The appendices on the following pages fulfill the requirements of the Act.

Definitions

Funds Put to

Better Use

Funds that could be used more 

efficiently by implementing 

recommended actions.

Questioned Costs

A cost that is unnecessary, 

unreasonable, unsupported, 

or an alleged violation of law, 

regulation, contract, and so 

forth.

Unsupported Costs

A cost that is not supported 

by adequate documentation. 

Unsupported costs are 

included in Questioned Costs.

Revenue Impact

Amounts from revenuegenerating functions such as 

retail sales, rent, leases, or 

fees that were underpaid or 

not realized. In addition, this 

category includes increased 

revenue from existing functions 

and generating revenue from 

new sources. 

Appendix A

Appendices

Management Challenge

Number of 

Reports Issued

Funds Put to 

Better Use

Questioned 

Costs

Unsupported 

Costs

Revenue 

Impact

Strategic Direction 2 — — — —

Cost Control 205 $275,245,119 $75,951,472 $88,570 $1,710,923

Revenue Generation 1 — — — $319,014

Customer Service 5 — — — —

Human Capital 3 $5,521,081 $522,637 $57,536 —

Integrity and Security 24 — — — —

Total 240 $280,766,200 $76,474,109 $146,106 $2,029,937
April 1 – September 30, 2006 | 39

appe

ndi

x

A

Reports with Quantifiable Potential Monetary Benefits

Report Title

Funds Put to 

Better Use

Questioned 

Costs

Unsupported 

Costs Revenue Impact

COST CONTROL

DELIVERY AND RETAIL

Address Management System Information – Great Lakes Area 

DR-AR-06-008; 9/30/06 $2,678,506 — — —

Management of Delivery Vehicle Utilization DR-AR-06-005; 6/14/ 2006 $18,075,613 $4,720,875 — —

Management of Retail Workhours in Relation to the Workload – 

New York Area, Triboro District DR-AR-06-006; 8/9/2006 — $20,166 $20,166 —

ENGINEERING

Biohazard Detection System DA-AR-06-006; 9/30/2006 $33,822,953 $45,916,184 — —

FISCAL YEAR 2005 POSTAL SERVICE FINANCIAL STATEMENTS AUDIT

St. Louis Information Technology and Accounting Service Center 

FT-AR-06-015; 4/21/2006 — $45,559 $45,559 —

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT

Albert Thomas Station – Houston, Texas FF-AR-06-201; 6/30/2006 — — — $18,033

Anderson Business Mail Entry Unit – Anderson, South Carolina 

FF-AR-06-160; 5/11/2006 — — — $3,668

Ashland Business Mail Entry Unit – Ashland, Massachusetts 

FF-AR-06-129; 4/21/2006 — — — $1,662

Beechnut Station – Houston, Texas FF-AR-06-209; 7/13/2006 — — — $2,199

Berryessa Station – San Jose, California FF-AR-06-228; 8/2/2006 — $746 $746 $4,196

Bethlehem South Side Station – Bethlehem, Pennsylvania 

FF-AR-06-166; 5/17/2006 — — — $1,691

Cardiss Collins Postal Store – Chicago, Illinois FF-AR-06-250; 8/17/2006 — — — $79,413

Cleburne Main Post Office – Cleburne, Texas FF-AR-06-168; 5/18/2006 — $154 $154 $1,242

Dallas Business Mail Entry Unit – Dallas, Texas FF-AR-06-234; 8/10/2006 — — — $141,482

Dayton Business Mail Entry Unit – Dayton, New Jersey 

FF-AR-06-156; 5/9/2006 — — — $2,003

Denver Downtown Station – Denver, Colorado FF-AR-06-186; 6/6/2006 — — — $186,303

Eagle Station Post Office – Bloomington, Illinois FF-AR-06-180; 5/26/2006 — $2,876 — —

Easley Business Mail Entry Unit – Easley, South Carolina 

FF-AR-06-191; 6/6/2006 — — — $108,759

Fort Worth Business Mail Entry Unit – Fort Worth, Texas 

FF-AR-06-123; 4/5/2006 — — — $91,197

Grand Crossing Station – Chicago, Illinois FF-AR-06-133; 4/11/2006 — $68,431 $17,583 $27,095

Hamilton – Fairfield Branch – Fairfield, Ohio FF-AR-06-245; 8/16/2006 — — — $437,000

Hartford Main Post Office – Hartford, Connecticut FF-AR-06-230; 8/9/2006 — — — $30,810

Horseheads Business Mail Entry Unit – Horseheads, New York 

FF-AR-06-128; 4/24/2006 — — — $1,521

Howell Post Office – Howell, Michigan FF-AR-06-278; 9/28/06 — $390 — $9,665

Leesburg Business Mail Entry Unit – Leesburg, Virginia 

FF-AR-06-147; 4/26/2006 — — — $4,947

Linda Vista Station – San Diego, California FF-AR-06-252; 8/17/2006 — $7,147 — —

Little Rock Main Post Office – Little Rock, Arkansas 

FF-AR-06-244; 8/15/2006 — $2,314 $775 —

Long Prairie Business Mail Entry Unit – Long Prairie, Minnesota 

FF-AR-06-178; 5/31/2006 — $2,414 — $203,650

Los Gatos Main Post Office – Los Gatos, California FF-AR-06-136; 5/3/2006 — $2,802 $1,493 $257

Madison Business Mail Entry Unit – Madison, Wisconsin

FF-AR-06-176; 5/23/2006 — — — $43,656
40 | Semiannual Report to Congress

Reports with Quantifiable Potential Monetary Benefits

Report Title

Funds Put to 

Better Use

Questioned 

Costs

Unsupported 

Costs Revenue Impact

Mail Bar Coding Contract Postal Unit – Ft. Myers, Florida 

FF-AR-06-151; 5/1/2006 — — — $2,484

Meadow Brook Station – Birmingham, Alabama FF-AR-06-169; 5/22/2006 — — — $2,070

Miamisburg Business Mail Entry Unit – Miamisburg, Ohio 

FF-AR-06-143; 4/27/2006 — — — $74,275

Middleton Post Office – Middleton, Wisconsin FF-AR-06-177; 5/24/2006 — — — $5,580

Moiliili Finance Station – Moiliili, Hawaii FF-AR-06-261; 9/1/2006 — — — $1,056

Oak Brook Post Office – Oak Brook, Illinois FF-AR-06-280; 9/28/2006 — $257 — $2,665

Oakland Business Mail Entry Unit – Oakland, California 

FF-AR-06-137; 5/11/2006 — — — $63,614

Ontario Main Post Office – Ontario, California FF-AR-06-200; 7/10/2006 — $9,458 — $6,698

Overton Post Office – Overton, Nevada FF-AR-06-259; 8/28/2006 — $555 $555 $168

Pewaukee Business Mail Entry Unit, Pewaukee, Wisconsin 

FF-AR-06-276; 9/22/2006 — — — $34,220

Pikeville Business Mail Entry Unit – Pikeville, Kentucky

FF-AR-06-231; 8/3/2006 — — — $759

Pittsburg Main Post Office – Pittsburg, California FF-AR-06-152; 5/17/2006 — $771 $771 $3,812

Placentia Main Post Office – Placentia, California FF-AR-06-220; 7/20/2006 — $2,019 — $2,102

Post Falls Business Mail Entry Unit – Post Falls, Idaho 

FF-AR-06-153; 5/2/2006 — — — $1,030

Reno Business Mail Entry Unit – Reno, Nevada FF-AR-06-206; 7/11/2006 — — — $66,866

River Oaks Post Office – Houston, Texas FF-AR-06-215; 7/28/2006 — — — $1,134

Rochester Post Office – Rochester, Michigan FF-AR-06-138; 4/20/2006 — — — $743

Ruidoso Main Post Office – Ruidoso, New Mexico FF-AR-06-274; 9/28/2006 — — — $12,900

Santa Ana Processing and Distribution Center Window Unit – Santa Ana, California 

FF-AR-06-148; 5/1/2006 — $6,603 — $4,914

Southeastern Business Mail Entry Unit – Southeastern, Pennsylvania 

FF-AR-06-126; 4/3/2006 — — — $5,980

Southfield Business Mail Entry Unit – Southfield, Michigan 

FF-AR-06-207; 7/13/2006 — — — $6,206

Spearfish Business Mail Entry Unit – Spearfish, South Dakota 

FF-AR-06-155; 5/2/2006 — — — $2,923

Spring City Post Office – Spring City, Pennsylvania 

FF-AR-06-226; 8/1/2006 — $1,085 — $201

Tierrasanta Postal Store – San Diego, California FF-AR-06-272; 9/21/2006 — $768 $768 $160

Tigard Branch – Portland, Oregon FF-AR-06-243; 8/14/2006 — $1,157 — $4,748

Warren Business Mail Entry Unit – Warren, Michigan 

FF-AR-06-193; 6/22/2006 — — — $3,166

NETWORK OPERATIONS PROCESSING

Efficiency of Carrier Sequence Barcode Sorters NO-AR-06-005; 8/2/2006 $3,688,930 — — —

Efficiency Review of the Los Angeles, California, Worldway Airport Mail Center 

NO-AR-06-006; 9/12/2006 $192,173,980 — — —

SUPPLY MANAGEMENT & FACILITIES

Controls Over Noncompetitive Contracts Awarded to Former Postal Service 

Employees CA-AR-06-002; 5/26/2006 — $137,636 — —

Firm Fixed Price Proposal for the Singulate Scan Induction Unit Optical Character 

Reader System Submitted by Lockheed Martin Systems Integration – Owego 

CA-CAR-06-022; 5/9/2006 — $1,679,508 — —

Participation on an Integrated Process Team for the Flats Sequencing System 

Preproduction Proposal Submitted by Northrop Grumman Corporation, Electronic 

Systems Company CA-CAR-06-030; 8/22/2006 — $6,314,373 — —
April 1 – September 30, 2006 | 41

appe

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x

A

Reports with Quantifiable Potential Monetary Benefits

Report Title

Funds Put to 

Better Use

Questioned 

Costs

Unsupported 

Costs Revenue Impact

Report on Audit of Firm Fixed Price Proposal for Biohazard Detection System Dual 

Collection Production Program Submitted by Northrop Grumman Electronic Systems 

Company CA-CAR-06-026; 6/26/2006 — $5,277,065 — —

Report on Audit of Firm Fixed Price Proposal for Biohazard Detection System Dual 

Identifier Pilot Program Submitted by Northrop Grumman Electronic Systems 

Company CA-CAR-06-024; 5/26/2006 — $36,305 — —

Report on Audit of Firm Fixed Price Revised Proposal for 150 Automated Flats 

Sorting Machine-Automatic Induction Phase 2 Systems, Submitted by Northrop 

Grumman Electronic Systems Company CA-CAR-06-023; 5/26/2006 — $5,196,545 — —

Report on Audit of Verification of Fiscal Year 2004 Claimed Common Area 

Maintenance (CAM) Expenses at Postal Service Leased Facilities at the Los Angeles 

Terminal Annex CA-CAR-06-025; 6/9/2006 — $42,131 — —

Settlement Proposal Under Contract 102591-03-Q-0454 Submitted by Hasler 

Incorporated CA-CAR-06-027; 7/5/2006 — $2,470,818 — —

Supplemental Report on Agreed-Upon Procedures Review of Cendant Mobility 

Services Billings to the U.S. Postal Service Under Contract 198525-97-B-0696 

CA-CAR-06-020; 5/26/2006 — $961,280 — —

Universal Computing Connectivity Contract CA-AR-06-003; 9/1/2006 — $882,350 — —

TRANSPORTATION

Mail Transport Equipment – Transportation of Over-the-Road Containers 

NL-AR-06-014; 9/29/2006 $10,465,495 $1,738,252 — —

Mail Transport Equipment Service Center Network – Highway Transportation Routes 

– Atlanta NL-AR-06-009; 8/18/2006 $801,097 — — —

Mail Transport Equipment Service Center Network – Highway Transportation Routes 

– Dallas NL-AR-06-012; 9/28/2006 $1,476,981 — — —

Mail Transport Equipment Service Center Network – Highway Transportation Routes 

– Greensboro NL-AR-06-010; 9/18/2006 $1,607,510 — — —

Surface Transportation – Processing and Distribution Center Transportation Routes 

– Great Lakes Area NL-AR-06-008; 7/25/2006 $5,289,849 — — —

Surface Transportation – Processing and Distribution Center Transportation Routes 

– Pacific Area NL-AR-06-011; 9/21/2006 $3,650,035 — — —

Vehicle Management – National Trailer Lease Requirements – Capital Metro Area 

NL-AR-06-013; 9/29/06 $1,514,170 $402,478 — —

REVENUE GENERATION

DELIVERY AND RETAIL

Overdrawn Express Mail® Corporate Accounts DR-AR-06-007; 8/9/2006 — — — $319,014

HUMAN CAPITAL

HUMAN CAPITAL

Postal Service’s Grievance-Arbitration Service Centers 

HM-AR-06-006; 8/29/2006 $5,521,081 $356,510 — —

Postal Service’s Injury Compensation Program’s Controversion and Challenge 

Process in Selected Areas HM-AR-06-004; 5/19/2006 — $166,127 $57,536 —

TOTAL $280,766,200 $76,474,109 $146,106 $2,029,937
42 | Semiannual Report to Congress

Pasadena, California, Processing and Distribution 

Center Consolidation 

EN-AR-06-001; 9/26/06

STRATEGIC DIRECTION

EVOLUTIONARY NETWORK DEVELOPMENT

Bridgeport, Connecticut, Processing and 

Distribution Facility Outgoing Mail Consolidation 

NO-AR-06-010; 9/30/06

NETWORK OPERATIONS PROCESSING

Report Listing

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

For the period of April 1 — September 30, 2006.

Address Management System Information 

– Great Lakes Area 

DR-AR-06-008; 9/30/06

Delivery and Retail Standard Operating 

Procedures – Eastern Area 

DR-MA-06-006; 9/28/06

Delivery and Retail Standard Operating 

Procedures – Great Lakes Area 

DR-MA-06-008; 9/29/06

Delivery and Retail Standard Operating 

Procedures – New York Metro Area 

DR-MA-06-005; 9/28/06

Delivery and Retail Standard Operating 

Procedures – Northeast Area 

DR-MA-06-004; 9/8/2006

Delivery and Retail Standard Operating 

Procedures – Pacific Area 

DR-MA-06-002; 9/27/06

Delivery and Retail Standard Operating 

Procedures – Southeast Area 

DR-MA-06-007; 9/25/2006

Delivery and Retail Standard Operating 

Procedures – Southwest Area 

DR-MA-06-009; 9/30/06

Delivery and Retail Standard Operating 

Procedures – Western Area 

DR-MA-06-003; 9/27/06

Management of Delivery Vehicle Utilization 

DR-AR-06-005; 6/14/ 2006

Management of Retail Workhours in Relation to 

the Workload – New York Area, Triboro District 

DR-AR-06-006; 8/9/2006

DELIVERY AND RETAIL

Alaska District

FF-AR-06-253; 8/17/2006

Arkansas District 

FF-AR-06-134; 4/12/2006

Capital District 

FF-AR-06-188; 6/2/2006 

Central Plains District 

FF-AR-06-266; 9/5/2006

Columbus District 

FF-AR-06-170; 5/17/2006

Dallas District 

FF-AR-06-248; 8/24/2006 

Greater Michigan District 

FF-AR-06-197; 6/16/2006

Los Angeles District 

FF-AR-06-198; 6/20/2006

Maine District 

FF-AR-06-247; 8/15/2006

Nevada-Sierra District 

FF-AR-06-192; 6/6/2006

Seattle District 

FF-AR-06-190; 6/6/2006 

South Jersey District 

FF-AR-06-216; 7/18/2006

Tennessee District 

FF-AR-06-251; 8/17/2006

COST CONTROL

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

Biohazard Detection System 

DA-AR-06-006; 9/30/06

Technology Acquisition Management Process 

Guide – Phases 3 and 4, Production, 

Deployment, and Maintenance 

DA-WP-06-002; 9/22/06

ENGINEERING

Independent Report on Withholdings and 

Contributions for Health Benefits, Life Insurance, 

Retirement, and Employee Headcount Data 

FT-AR-06-017; 9/26/06

St. Louis Information Technology and Accounting 

Service Center 

FT-AR-06-015; 4/21/2006

FINANCIAL STATEMENT
April 1 – September 30, 2006 | 43

Eastern Area Financial Installation Audit 

FF-AR-06-142; 4/25/2006

New York Metro Area Financial Installation Audit 

FF-AR-06-140; 4/24/2006

Northeast Area Financial Installation Audit 

FF-AR-06-141; 4/24/2006

Post Offices, Stations, and Branches 

FF-AR-06-196; 6/20/2006

Self-Service and Automated Postal Centers 

FF-AR-06-127; 4/7/2006

FISCAL YEAR 2005 FINANCIAL INSTALLATION AUDIT

appe

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A

Albert Thomas Station – Houston, Texas 

FF-AR-06-201; 6/30/2006

Anderson Business Mail Entry Unit – 

Anderson, South Carolina 

FF-AR-06-160; 5/11/2006

Ann Arbor Post Office – Ann Arbor, Michigan 

FF-AR-06-260; 8/29/2006

Aptos Business Mail Entry Unit – Aptos, California 

FF-AR-06-267; 9/11/2006

Archbold Business Mail Entry Unit – 

Archbold, Ohio 

FF-AR-06-163; 5/11/2006

Ashburn Automated Postal Center – 

Ashburn, Virginia 

FF-AR-06-181; 5/31/2006

Ashland Business Mail Entry Unit – 

Ashland, Massachusetts 

FF-AR-06-129; 4/21/2006

Aurora Post Office – Aurora, Missouri 

FF-AR-06-224; 7/24/2006

Battle Creek Main Post Office – 

Battle Creek, Michigan 

FF-AR-06-270; 9/28/2006

Beechnut Station – Houston, Texas 

FF-AR-06-209; 7/13/2006

Berryessa Station – San Jose, California 

FF-AR-06-228; 8/2/2006

Bethlehem Lehigh University Contract Postal Unit 

– Bethlehem, Pennsylvania 

FF-AR-06-195; 6/13/2006

Bethlehem South Side Station – 

Bethlehem, Pennsylvania 

FF-AR-06-166; 5/17/2006

Big Bend Post Office – Big Bend, Wisconsin 

FF-AR-06-262; 8/30/2006

Canon City Post Office – Canon City, Colorado 

FF-AR-06-183; 5/30/2006

Cardiss Collins Postal Store – Chicago, Illinois 

FF-AR-06-250; 8/17/2006

Carlton Post Office – Carlton, Oregon 

FF-AR–06-204; 7/17/2006

Cheyenne Southside Contract Postal Unit 

– Cheyenne, Wyoming 

FF-AR-06-221; 7/25/2006

City Stop Contract Postal Unit – 

Las Vegas, Nevada 

FF-AR-06-214; 7/31/2006

Cleburne Main Post Office – Cleburne, Texas 

FF-AR-06-168; 5/18/2006

Clinton Business Mail Entry Unit 

FF-AR-06-150; 5/1/2006

Columbus Business Mail Entry Unit – 

Columbus, Indiana 

FF-AR-06-184; 5/31/2006

Coronado Station Self-Service Postal Center – 

El Paso, Texas 

FF-AR-06-268; 9/26/06

Dallas Business Mail Entry Unit – Dallas, Texas 

FF-AR-06-234; 8/10/2006

Dallas Main Post Office – Dallas, Texas 

FF-AR-06-205; 7/13/2006

Dania Post Office – Dania, Florida 

FF-AR-06-154; 5/2/2006

Dayton Business Mail Entry Unit – 

Dayton, New Jersey 

FF-AR-06-156; 5/9/2006

Denver Downtown Station – Denver, Colorado 

FF-AR-06-186; 6/6/2006

Downtown Station – Flagstaff, Arizona 

FF-AR-06-132; 4/5/2006

Eagle Station Post Office – Bloomington, Illinois 

FF-AR-06-180; 5/26/2006

Easley Business Mail Entry Unit – 

Easley, South Carolina 

FF-AR-06-191; 6/6/2006

Farmingdale Business Mail Entry Unit 

– Farmingdale, New York 

FF-AR-06-246; 8/15/2006

Farmingdale Main Post Office – 

Farmingdale, New York 

FF-AR-06-235; 8/7/2006

Fayetteville Main Office Window – 

Fayetteville, North Carolina 

FF-AR-06-125; 4/3/2006

Fleming Island Branch – Orange Park, Florida 

FF-AR-06-179; 5/24/2006

Foodtown Contract Postal Unit #375 – 

Brooklyn, New York 

FF-AR-06-144; 5/9/2006

Fort Dodge Business Mail Entry Unit – 

Fort Dodge, Iowa 

FF-AR-06-135; 4/14/2006

Fort Worth Business Mail Entry Unit – 

Fort Worth, Texas 

FF-AR-06-123; 4/5/2006

Gaylord Business Mail Entry Unit – 

Gaylord, Michigan 

FF-AR-06-208; 7/12/2006

Glendive Post Office – Glendive, Montana 

FF-AR-06-187; 6/6/2006

Grand Crossing Station – Chicago, Illinois 

FF-AR-06-133; 4/11/2006

Greenfield Business Mail Entry Unit – 

Greenfield, Massachusetts 

FF-AR-06-161; 5/19/2006

Greenville Business Mail Entry Unit – 

Greenville, North Carolina 

FF-AR-06-222; 7/25/2006

Greenville Business Mail Entry Unit – 

Greenville, South Carolina 

FF-AR-06-236 8/7/2006

Hamburg Business Mail Entry Unit – 

Hamburg, New York 

FF-AR-06-146; 4/28/2006

Hamilton – Fairfield Branch – Fairfield, Ohio 

FF-AR-06-245; 8/16/2006

Harrison Post Office – Harrison, Maine 

FF-AR-06-232; 8/3/2006

Hartford Main Post Office – Hartford, Connecticut 

FF-AR-06-230; 8/9/2006

Hilliard Post Office – Hilliard, Ohio 

FF-AR-06-239; 8/15/2006

Hingham Business Mail Entry Unit – 

Hingham, Massachusetts 

FF-AR-06-159; 5/11/2006

Horseheads Business Mail Entry Unit –

Horseheads, New York 

FF-AR-06-128; 4/24/2006

Howell Post Office – Howell, Michigan 

FF-AR-06-278; 9/28/2006

Hunlock Creek Post Office – 

Hunlock Creek, Pennsylvania 

FF-AR-06-249; 8/16/2006

Huntsville Permit Office – Huntsville, Texas 

FF-AR-06-275; 9/26/2006

Huntsville West Station – Huntsville, Alabama 

FF-AR-06-164; 5/16/2006

Hyde Park Post Office – Hyde Park, New York 

FF-AR-06-257; 8/23/2006

Idaho Falls Business Mail Entry Unit – 

Idaho Falls, Idaho 

FF-AR-06-223; 7/25/2006

Jackson Business Mail Entry Unit – 

Jackson, Mississippi 

FF-AR-06-167; 5/16/2006

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT
44 | Semiannual Report to Congress

Johnston Post Office Automated Postal Center –

Johnston, Rhode Island 

FF-AR-06-218; 8/3/2006

Junction City Business Mail Entry Unit – Junction 

City, Kansas 

FF-AR-06-242; 8/15/2006

Lake Zurich Post Office – Lake Zurich, Illinois 

FF-AR-06-131; 4/6/2006

Lamesa Contract Postal Unit – Enid, Oklahoma 

FF-AR-06-158; 5/8/2006

Lansing Business Mail Entry Unit – 

Lansing, Michigan 

FF-AR-06-217; 7/19/2006

Leesburg Business Mail Entry Unit – 

Leesburg, Virginia 

FF-AR-06-147; 4/26/2006

Libertyville Business Mail Entry Unit – 

Libertyville, Illinois 

FF-AR-06-139; 4/26/2006

Linda Vista Station – San Diego, California 

FF-AR-06-252; 8/17/2006

Linda’s Hallmark Contract Postal Unit – 

Phoenix, Arizona 

FF-AR-06-157; 5/4/2006

Little Rock Main Post Office – 

Little Rock, Arkansas 

FF-AR-06-244; 8/15/2006

Loehmann’s Plaza – Rochester, New York 

FF-AR-06-124; 4/3/2006

Long Prairie Business Mail Entry Unit – 

Long Prairie, Minnesota 

FF-AR-06-178; 5/31/2006

Los Gatos Main Post Office – 

Los Gatos, California 

FF-AR-06-136; 5/3/2006

Madison Business Mail Entry Unit – 

Madison, Wisconsin 

FF-AR-06-176; 5/23/2006

Mail Bar Coding Contract Postal Unit – 

Ft. Myers, Florida 

FF-AR-06-151; 5/1/2006

Manahawkin Business Mail Entry Unit –

Manahawkin, New Jersey 

FF-AR-06-219; 7/26/2006

Mandan Post Office – Mandan, North Dakota 

FF-AR-06-241; 8/10/2006

Manitowoc Business Mail Entry Unit –

Manitowoc, Wisconsin 

FF-AR-06-182; 5/26/2006

Marshall Contract Postal Unit – 

Marshall, Minnesota 

FF-AR-06-171; 5/17/2006

Marshfield Business Mail Entry Unit – 

Marshfield, Wisconsin 

FF-AR-06-229; 8/2/2006

Maxton Post Office – Maxton, North Carolina 

FF-AR-06-194; 6/15/ 2006

Meadow Brook Station – Birmingham, Alabama 

FF-AR-06-169; 5/22/2006

Mendenhall Post Office – 

Mendenhall, Pennsylvania 

FF-AR-06-263; 8/31/2006

Miamisburg Business Mail Entry Unit 

– Miamisburg, Ohio 

FF-AR-06-143; 4/27/2006

Middle Island Main Post Office, 

Middle Island, New York 

FF-AR-06-265; 9/8/2006

Middleton Post Office – Middleton, Wisconsin 

FF-AR-06-177; 5/24/2006

Millburn Business Mail Entry Unit – 

Millburn, New Jersey 

FF-AR-06-162; 5/12/2006

Minneapolis Contract Postal Unit #112 –

Minneapolis, Minnesota 

FF-AR-06-255; 8/18/2006

Moiliili Finance Station – Moiliili, Hawaii 

FF-AR-06-261; 9/1/2006

Montclair Station – Denver, Colorado 

FF-AR-06-264; 9/5/2006

Mosinee Business Mail Entry Unit – 

Mosinee, Wisconsin 

FF-AR-06-165; 5/15/2006

Mount Juliet Business Mail Entry Unit – 

Mount Juliet, Tennessee 

FF-AR-06-172; 5/17/2006

Natchez Business Mail Entry Unit – 

Natchez, Mississippi 

FF-AR-06-130; 4/6/2006

Neptune Station – Brooklyn, New York 

FF-AR-06-185; 6/1/2006

New Haven Business Mail Entry Unit – 

New Haven, Connecticut 

FF-AR-06-258; 8/24/2006

Oak Brook Post Office – Oak Brook, Illinois 

FF-AR-06-280; 9/28/2006

Oakland Business Mail Entry Unit – 

Oakland, California 

FF-AR-06-137; 5/11/2006

Omaha Business Mail Entry Unit – 

Omaha, Nebraska 

FF-AR-06-210; 7/13/2006

Ontario Main Post Office – Ontario, California 

FF-AR-06-200; 7/10/2006

Overton Post Office – Overton, Nevada 

FF-AR-06-259; 8/28/2006

Parkway Finance Station – Bronx, New York 

FF-AR-06-145; 5/9/2006

Pewaukee Business Mail Entry Unit – 

Pewaukee, Wisconsin 

FF-AR-06-276; 9/22/06

Pikeville Business Mail Entry Unit – 

Pikeville, Kentucky 

FF-AR-06-231; 8/3/2006

Pittsburg Main Post Office – Pittsburg, California 

FF-AR-06-152; 5/17/2006

Placentia Main Post Office – Placentia, California 

FF-AR-06-220; 7/20/2006

Post Falls Business Mail Entry Unit – 

Post Falls, Idaho 

FF-AR-06-153; 5/2/2006

Radford University Contract Postal Unit –

Radford, Virginia 

FF-AR-06-199; 6/20/2006

Reno Business Mail Entry Unit – Reno, Nevada 

FF-AR-06-206; 7/11/2006

Rexburg Business Mail Entry Unit – 

Rexburg, Idaho 

FF-AR-06-212; 7/14/2006

Riegelsville Post Office – 

Riegelsville, Pennsylvania 

FF-AR-06-273; 9/25/06

River Oaks Post Office – Houston, Texas 

FF-AR-06-215; 7/28/2006

Rochester Post Office – Rochester, Michigan 

FF-AR-06-138; 4/20/2006

Ruidoso Main Post Office – Ruidoso, New Mexico 

FF-AR-06-274; 9/28/06

Salisbury Business Mail Entry Unit – 

Salisbury, Maryland 

FF-AR-06-202; 6/28/2006

Sam Rayburn Contract Postal Unit – 

Jasper, Texas 

FF-AR-06-238; 8/8/2006

Santa Ana Processing and Distribution Center 

Window Unit – Santa Ana, California 

FF-AR-06-148; 5/1/2006

Schenectady Main Post Office – 

Schenectady, New York 

FF-AR-06-149; 4/27/2006

Sebago Lake Contract Postal Unit – 

Standish, Maine 

FF-AR-06-240; 8/9/2006

Shade Community Post Office – Shade, Ohio 

FF-AR-06-173; 5/22/2006

Shasta Lake Main Post Office – 

Shasta Lake, California 

FF-AR-06-237; 8/9/2006

Shawnee Main Post Office – Shawnee, Oklahoma 

FF-AR-06-271; 9/18/2006

Southeastern Business Mail Entry Unit –

Southeastern, Pennsylvania 

FF-AR-06-126; 4/3/2006

Southfield Business Mail Entry Unit – 

Southfield, Michigan 

FF-AR-06-207; 7/13/2006

Spearfish Business Mail Entry Unit – 

Spearfish, South Dakota 

FF-AR-06-155; 5/2/2006

Spring City Post Office – 

Spring City, Pennsylvania 

FF-AR-06-226; 8/1/2006

Squirrel Hill Station – Pittsburgh, Pennsylvania 

FF-AR-06-213; 7/17/2006

Stevens Point Business Mail Entry Unit – 

Stevens Point, Wisconsin 

FF-AR-06-233; 8/7/2006

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT
April 1 – September 30, 2006 | 45

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDIT

Strongstown Community Post Office –

Strongstown, Pennsylvania 

FF-AR-06-189; 6/6/2006

Tampa Main Office Window Unit – Tampa, Florida 

FF-AR-06-211; 7/17/2006

Tell City Post Office – Tell City, Indiana 

FF-AR-06-227; 8/1/2006

Tierrasanta Postal Store – San Diego, California 

FF-AR-06-272; 9/21/2006

Tigard Branch – Portland, Oregon 

FF-AR-06-243; 8/14/2006

Turbotville Post Office – Turbotville, Pennsylvania 

FF-AR-06-269; 9/13/2006

Turlock Main Post Office – Turlock, California 

FF-AR-06-174; 5/19/2006

Warren Business Mail Entry Unit – 

Warren, Michigan 

FF-AR-06-193; 6/22/2006

West Roxbury Post Office Automated Postal 

Center – West Roxbury, Massachusetts 

FF-AR-06-256; 8/23/2006

Westside Station Post Office – 

Alexandria, Louisiana 

FF-AR-06-277; 9/28/2006

Winthrop Post Office – Winthrop, Maine 

FF-AR-06-254; 8/21/2006

York Business Mail Entry Unit – 

York, Pennsylvania 

FF-AR-06-203; 6/30/2006

Yuma Business Mail Entry Unit – Yuma, Arizona 

FF-AR-06-225; 7/31/2006

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System Software Controls at the Eagan, 

Minnesota and San Mateo, California Information 

Technology and Service Centers 

IS-AR-06-016; 9/11/2006

INFORMATION SYSTEMS

International Mail Air Transportation Rates 

MS-WP-06-002; 6/29/2006

White Paper – USPS Cost Burdens 

MS-WP-06-001; 6/22/2006

MARKETING

Capping Report on the Efficiency of the 

International Records Units Operations 

NO-AR-06-008; 9/27/2006

Color-Coding of Standard Mail at the Portland, 

Oregon, Processing and Distribution Center 

NO-MA-06-003; 9/26/2006

Efficiency of Carrier Sequence Barcode Sorters 

NO-AR-06-005; 8/2/2006

Efficiency Review of the Los Angeles, California, 

Worldway Airport Mail Center 

NO-AR-06-006; 9/12/2006

Facility Utilization at the Los Angeles, California, 

Worldway Airport Mail Center 

NO-AR-06-007; 9/22/2006

NETWORK OPERATIONS PROCESSING

Accounting System Internal Controls of Siemens 

Energy and Automation, Incorporated, Postal 

Automation Division 

CA-CAR-06-029; 8/4/2006

Audit of Siemens Energy and Automation 

Incorporated, Postal Automation, Forward Pricing 

Rate Proposal for Fiscal Years 2006 Through 

2010 

CA-CAR-06-021; 5/16/2006

Contractor Purchasing System Review of Siemens 

Logistics and Assembly Systems Incorporated, 

Postal Automation 

CA-CAR-06-019; 4/20/2006

Controls Over Noncompetitive Contracts Awarded 

to Former Postal Service Employees 

CA-AR-06-002; 5/26/2006

Determination of a Decrement Factor for Use 

on Northrop Grumman Corporation, Electronic 

Systems, Electronic Systems Company United 

States Postal Service Subcontracts 

CA-CAR-06-018; 4/4/2006

Firm Fixed Price Proposal for the Singulate 

Scan Induction Unit Optical Character Reader 

System Submitted by Lockheed Martin Systems 

Integration – Owego 

CA-CAR-06-022; 5/9/2006

Participation on an Integrated Process Team 

for the Flats Sequencing System Preproduction 

Proposal Submitted by Northrop Grumman 

Corporation, Electronic Systems Company 

CA-CAR-06-030; 8/22/2006

Postal Service New Construction Lifecycle 

CA-MA-06-003; 8/31/2006

Preaward Survey of Accounting System at 

Francotyp-Postalia, Incorporated 

CA-CAR-06-031; 9/11/2006

Report on Audit of Firm Fixed Price Proposal 

for Biohazard Detection System Dual Collection 

Production Program Submitted by Northrop 

Grumman Electronic Systems Company 

CA-CAR-06-026; 6/26/2006

Report on Audit of Firm Fixed Price Proposal 

for Biohazard Detection System Dual Identifier 

Pilot Program Submitted by Northrop Grumman 

Electronic Systems Company 

CA-CAR-06-024; 5/26/2006

Report on Audit of Firm Fixed Price Revised 

Proposal for 150 Automated Flats Sorting 

Machine-Automatic Induction Phase 2 Systems, 

Submitted by Northrop Grumman Electronic 

Systems Company 

CA-CAR-06-023; 5/26/2006

Report on Audit of Verification of Fiscal Year 

2004 Claimed Common Area Maintenance 

(CAM) Expenses at Postal Service Leased 

Facilities at the Los Angeles Terminal Annex 

CA-CAR-06-025; 6/9/2006

Report on Quality System at FKI Logistex 

CA-CAR-06-028; 7/21/2006

Settlement Proposal Under Contract 102591-03-

Q-0454 Submitted by Hasler Incorporated 

CA-CAR-06-027; 7/5/2006

Supplemental Report on Agreed-Upon 

Procedures Review of Cendant Mobility Services 

Billings to the United States Postal Service Under 

Contract 198525-97-B-0696 

CA-CAR-06-020; 5/26/2006

Technology Acquisition Management Process 

Guide – Phase 2, Development 

CA-WP-06-001; 6/29/2006

Universal Computing Connectivity Contract 

CA-AR-06-003; 9/1/2006

SUPPLY MANAGEMENT & FACILITIES
46 | Semiannual Report to Congress

Strategic Alignment of Engineering Programs 

DA-AR-06-005; 9/22/2006

ENGINEERING

Mail Transport Equipment – Transportation of 

Over-the-Road Containers 

NL-AR-06-014; 9/29/2006

Mail Transport Equipment Service Center 

Network – Highway Transportation Routes –

Atlanta 

NL-AR-06-009; 8/18/2006

Mail Transport Equipment Service Center 

Network – Highway Transportation Routes –

Dallas 

NL-AR-06-012; 9/28/2006

Mail Transport Equipment Service Center 

Network – Highway Transportation Routes –

Greensboro 

NL-AR-06-010; 9/18/2006

Mail Transport Equipment Service Center 

Network – Proposed Change to Quality Inspection 

and Payment Authorization Controls 

NL-AR-06-007; 7/20/2006

Surface Transportation – Processing and 

Distribution Center Transportation Routes – Great 

Lakes Area 

NL-AR-06-008; 7/25/2006

Surface Transportation – Processing and 

Distribution Center Transportation Routes –

Pacific Area 

NL-AR-06-011; 9/21/2006

Vehicle Management – National Trailer Lease 

Requirements – Capital Metro Area 

NL-AR-06-013; 9/29/2006

TRANSPORTATION

Overdrawn Express Mail® Corporate Accounts 

DR-AR-06-007; 8/9/2006

REVENUE GENERATION

DELIVERY AND RETAIL

Las Cruces, New Mexico Delayed Mail 

DR-MA-06-001; 6/5/2006

CUSTOMER SERVICE

DELIVERY AND RETAIL

Postal Service’s Use of Ghost Numbers 

MS-MA-06-002; 9/19/2006

MARKETING

Color Coding of Standard Mail at the Margaret L. 

Sellers Processing and Distribution Center 

NO-MA-06-004; 9/28/2006

Mail Processing Internal Controls at the Dallas 

Bulk Mail Center 

NO-AR-06-009; 9/28/2006

NETWORK OPERATIONS PROCESSING

Postal Service’s Grievance-Arbitration Service 

Centers 

HM-AR-06-006; 8/29/2006

Postal Service’s Injury Compensation Program’s 

Controversion and Challenge Process in Selected 

Areas 

HM-AR-06-004; 5/19/2006

Postal Service’s Schedule Awards Program in the 

New York Metro Area – Report I 

HM-AR-06-007; 9/29/2006

HUMAN CAPITAL

HUMAN CAPITAL

Postal Service Officers’ Travel Expense 

Guidelines 

FT-WP-06-001; 9/29/2006

INTEGRITY AND SECURITY

FINANCIAL STATEMENT
April 1 – September 30, 2006 | 47

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Hurricane Katrina – Effectiveness of the Postal 

Service Transportation and Logistics Network 

NL-AR-06-006; 6/29/2006

Postal Inspection Service Emergency 

Preparedness for Hurricane Katrina 

SA-AR-06-005; 6/5/2006

Postal Inspection Service’s Procurement 

Transactions Related to Hurricane Katrina 

Response, Recovery, and Reconstruct Efforts 

SA-AR-06-004; 5/30/2006

Postal Service Actions to Locate and Track 

Employees After Hurricane Katrina 

HM-AR-06-005; 8/28/2006

Postal Service Emergency Preparedness for 

Hurricanes Katrina and Rita 

SA-AR-06-007; 8/3/2006

Postal Service’s Replacement and Repair of 

Facilities Affected by Hurricane Katrina 

FA-MA-06-001; 5/26/2006

HURRICANES KATRINA AND RITA

Certificate Authority Public Key Infrastructure 

Compliance at the Information Technology and 

Accounting Service Center in Eagan, Minnesota 

IS-AR-06-015; 9/1/2006

Change of Address – Application Control Review 

IS-AR-06-013; 7/17/2006

Enterprise Payment Switch Solution Phase 1: 

Requirements and Design 

IS-AR-06-017; 9/27/2006

Follow-up at the Engineering Research and 

Development Center, Merrifield, Virginia 

IS-AR-06-010; 5/5/2006

Human Capital Enterprise SAP Human Resources 

Project – System Controls Over Roles and 

Separation of Duties 

IS-AR-06-008; 5/2/2006

Information Security Assurance Process 

IS-AR-06-009; 5/4/2006

Information System Access Controls at the 

Eagan, Minnesota, and San Mateo, California, 

Information Technology and Accounting Service 

Centers 

IS-AR-06-018; 9/27/2006

Information System Policy and Procedure 

Controls 

IS-AR-06-014; 8/14/2006

Router and Switch Controls at Selected Postal 

Service Information Technology Centers 

IS-AR-06-011; 5/25/2006

Security Assessment Audit of Telephone 

Lines and Modems (PhoneSweep) at Eagan, 

Minnesota, Host Computing Services 

IS-CS-06-002; 6/9/2006

Security Vulnerability Assessment of Legacy 

Applications at the Eagan Host Computing 

Services, Eagan, Minnesota 

IS-CS-06-004; 8/30/2006

Status of Follow-up Audit of Certificate Authority 

Public Key Infrastructure Compliance 

IS-AR-06-012; 6/8/2006

Technical Report – Security Assessment Audit of 

Telephone Lines and Modems (PhoneSweep) at 

San Mateo, California, Host Computing Services 

IS-CS-06-003; 8/18/2006

INFORMATION SYSTEMS

Follow-up Review of the Postal Inspection Service 

Consumer Fraud Awareness Fund 

SA-AR-06-006; 6/15/2006

Postal Inspection Service Noncompetitive 

Contract Process 

SA-AR-06-003; 5/2/2006

Postal Inspection Service’s Security Investigations 

Service Center 

SA-AR-06-002; 4/20/2006

Qualitative Assessment Review of the Postal 

Inspection Service’s Chicago Division 

QAR-QA-06-005; 6/14/2006

OVERSIGHT OF INVESTIGATIVE ACTIVITIES
48 | Semiannual Report to Congress

Appendix B

Office of Inspector General 

As required by the IG Act, the following pages show the total number of audit reports and the total dollar value of questioned costs in audit reports.

Description Number of Reports Questioned Costs

Unsupported Costs 

Included in

Questioned Costs

Reports for which no management decision was made at the 

beginning of the reporting period 21 $66,873,895 $4,719,637

Reports requiring management decision that were issued during the 

reporting period 36 $76,474,109 $146,106

TOTAL 57 $143,348,004 $4,865,743 

Reports for which a management decision was made during the 

reporting period (i+ii) 36 $71,828,174 $146,248

(i)   Dollar Value of disallowed cost $16,556,705 $100,689

(ii)   Dollar value of cost not disallowed $55,271,469 $45,559

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

the reporting period. Negotiations are ongoing. 21 $71,519,830 $4,719,495

Reports for which no management decision was made within six 

months of issuance (See Note 1 for a list of individual reports) 4 $675,721 —

Reports for which no management decision was made within one 

year of issuance (See Note 2 for a list of individual reports) 8 $58,657,940 $4,718,940 

FINDINGS OF QUESTIONED COSTS

For the period April 1 — September 30, 2006

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

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

Subject Report Number Report Date Questioned Costs

Unsupported Costs Included 

in Questioned Costs

Audit of Termination for Convenience Settlement Proposal 

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

Government Telecommunications, Incorporated CA-CAR-06-003 11/8/2005 $547,466 —

Audit of Fiscal Year 2001 Incurred Cost of

New Breed Corporations CA-CAR-06-006 12/9/2005 $7,767 —

Audit of Fiscal Year 2002 Incurred Cost of

New Breed Corporations CA-CAR-06-007 12/9/2005 $89,576 —

Audit of Firm Fixed Price Proposal for the Ventilation 

and Filtration System at Morgan Station Submitted by 

Accu-Sort Systems, Incorporated CA-CAR-06-015 3/29/2006 $30,912 —

TOTAL $675,721 —
April 1 – September 30, 2006 | 49

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

Subject Report Number Report Date Questioned Costs

Unsupported Costs 

Included in

Questioned Costs

Contract Audit – Bell and Howell Mail and Messaging 

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

Contract Audit – D. L. Kaufman, Incorporated CA-CAR-03-011 2/11/2003 $4,028,935 —

Audit of Termination for Convenience Price Adjustment Claim 

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

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

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

Audit of Firm Fixed Price Proposal Submitted by International 

Business Machines, Global Services, Business Consulting 

Services – Federal, Under Proposal Number APC 035R3 CA-CAR-05-017 5/3/2005 $3,127,088 —

Audit of Equitable Price Adjustment Claim Submitted by Advanced 

Construction Technologies, Ltd. Under Contract Number 362575-

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

Audit of Firm Fixed Price Proposal Submitted by Northrop 

Grumman Corporation, Electronic Systems Company, Under 

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

TOTAL $58,657,940 $4,718,940

Appendix B
50 | Semiannual Report to Congress

Appendix C

Office of Inspector General 

Description Number of Reports Dollar Value

Reports for which no management decision was made at the beginning of the reporting period 8 $67,376,226 

Reports issued during the reporting period 13 $280,766,200 

TOTAL 21 $348,142,426 

Reports for which a management decision was made during the report period 14 $282,776,620 

(i)   Value of recommendations agreed to by management $245,109,450 

(ii) Value of recommendations that were not agreed to by management $37,667,170 

Reports for which no management decision was made by the end of the reporting period. 7 $65,365,806 

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

(See Note 1 for a list of individual reports) 1 $2,235,812 

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

(See Note 2 for a list of individual reports) 4 $56,094,743 

RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE

For the period April 1 — September 30, 2006

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

As required by the IG Act, this page shows the total number of audit reports and the total dollar value of recommendations for funds that management can 

put to better use.

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

Subject Report Number Report Date 

Recommend Funds 

Put to Better Use

Surface Transportation – Bulk Mail Center Highway Transportation Routes – Western Area NL-AR-06-001 2/14/2006 $2,235,812

TOTAL $2,235,812 

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

Subject Report Number Report Date

Recommend Funds 

Put to Better Use

Vehicle Management – Trailer Requirements – Northeast Area NL-AR-04-006 9/30/2004 $7,300,150

Vehicle Management – Delivery Vehicles – Buy versus Lease NL-AR-04-005 9/30/2004 $40,296,954

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

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

TOTAL $56,094,743
April 1 – September 30, 2006 | 51

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Office of Inspector General

Issue Date

Number of

Recommendations Report Title Report Number

9/25/2003 2

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

Mail Entry Unit AO-AR-03-002

9/29/2005 3 Delivery Vehicle Utilization – General Services Administration Leased Vehicles DR-AR-05-018

8/09/2006 1 Overdrawn Express Mail Corporate Accounts DR-AR-06-007

9/25/2006 2 Delivery and Retail Standard Operating Procedures – Southeast Area DR-MA-06-007

9/29/2006 3 Delivery and Retail Standard Operating Procedures – Great Lakes Area DR-MA-06-008

9/26/2006 3 Pasadena, California, Processing and Distribution Center Consolidation EN-AR-06-001

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

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

9/30/2006 2 Biohazard Detection System DA-AR-06-006

12/30/2005 3 IMPAC Card Purchases – Chicago District FF-AR-06-038

1/30/2003 1

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

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

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

1/10/2005 1

Fiscal Year 2004 Postal Service Financial Statements Audit – Eagan Information Technology 

and Accounting Service Center FT-AR-05-005

3/15/2005 1

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

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

3/22/2006 1 J.T. Weeker (Chicago) International Service Center – Inbound International Mail FT-AR-06-013

4/21/2006 3

Fiscal Year 2005 Postal Service Financial Statements Audit – St. Louis Information 

Technology and Accounting Service Center FT-AR-06-015

3/31/2006 1 Postal Service’s Share of Health Insurance Premiums for Retired Employees FT-AR-06-016

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

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

8/11/2005 1

Action Taken By Pacific Area Regarding Complaints of a Hostile Work Environment in the 

Sacramento District HM-AR-05-010

5/19/2006 3

Postal Service’s Injury Compensation Programs’ Controversion and Challenge Process in 

Selected Areas HM-AR-06-004

8/29/2006 9 Postal Service’s Grievance-Arbitration Service Centers HM-AR-06-006

9/29/2006 5 Postal Service’s Schedule Awards Program in the New York Metro Area – Report I HM-AR-06-007

2/22/2002 3 Review of the Facilities Management System for Windows IS-AR-02-003

9/30/2003 6 General Controls at the Engineering Research and Development Center, Merrifield, Virginia IS-AR-03-008

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

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

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

6/03/2005 4 Security Assessment Summary Report IS-AR-05-010

9/30/2005 1 National Voice Services – Savings Opportunities IS-AR-05-016

Reports with Significant Recommendations Pending Corrective Actions

For the period through September 30, 2006

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

reporting period.

Appendix D
52 | Semiannual Report to Congress

Issue Date

Number of

Recommendations Report Title Report Number

2/10/2006 6 Security Vulnerability Assessment and Audit of Automated Postal Center Systems IS-AR-06-003

5/02/2006 1

Human Capital Enterprise SAP Human Resources Project – System Controls Over Roles and 

Separation of Duties IS-AR-06-008

5/05/2006 1 Follow up at the Engineering Research and Development Center, Merrifield, Virginia IS-AR-06-010

5/25/2006 3 Router and Switch Controls at Selected Postal Service Information Technology Centers IS-AR-06-011

9/27/2006 2 Enterprise Payment Switch Solution Phase 1: Requirements and Design IS-AR-06-017

9/27/2006 2

Information System Access Controls at the Eagan, Minnesota, and San Mateo, California, 

Information Technology and Accounting Service Centers IS-AR-06-018

12/23/2005 2 Security Over Sensitive Customer Data on Automated Postal Center Kiosks IS-MA-06-001

7/09/2002 3 Review of eBusiness Agreements EM-AR-02-012

3/31/2004 1 Efficiency of the Oakland International Service Facility and the Regatta Facility NO-AR-04-007

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

3/30/2005 1 Efficiency Review of the Akron, Ohio, Processing and Distribution Center NO-AR-05-009

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

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

9/12/2006 1 Efficiency Review of the Los Angeles, California, Worldway Airport Mail Center NO-AR-06-006

6/13/2003 1 Postal Inspection Service Tracking of Investigative Workhours and Activity SA-AR-03-003

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

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

9/30/2004 2 Vehicle Management – Trailer Requirements – Northeast Area NL-AR-04-006

1/25/2005 2

Mail Transport Equipment Service Center Network – Network Realignment – Pittsburgh, 

Detroit, Cleveland. Audit Note: $33 million monetary benefit identified during audit and not 

reported in the SARC NL-AR-05-001

9/21/2005 1 Bulk Mail Center Highway Transportation Routes – Pacific Area NL-AR-05-012

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

04/21/2005 2 Vehicle Management – National Trailer Lease – Unresolved Audit Recommendations NL-MA-05-001

2/14/2006 3 Surface Transportation – Bulk Mail Center Highway Transportation Routes – Western Area NL-AR-06-001

3/10/2006 1 Intermodal Rail and Highway Transportation Between the Great Lakes and Western Areas NL-AR-06-002

3/28/2006 1

Mail Transport Equipment Service Center Network – Highway Transportation Routes 

– Memphis NL-AR-06-005

6/29/2006 2

Hurricane Katrina – The Effectiveness of the Postal Service Transportation and Logistics 

Network NL-AR-06-006

7/20/2006 2

Mail Transport Equipment Service Center Network – Proposed Change to Quality Inspection 

and Payment Authorization Controls NL-AR-06-007

7/25/2006 3

Surface Transportation – Processing and Distribution Center Transportation Routes – Great 

Lakes Area NL-AR-06-008

8/18/2006 2

Mail Transport Equipment Service Center Network – Highway Transportation Routes 

– Atlanta NL-AR-06-009

9/18/2006 3

Mail Transport Equipment Service Center Network – Highway Transportation Routes 

– Greensboro NL-AR-06-010

9/21/2006 3

Surface Transportation – Processing and Distribution Center Transportation Routes – Pacific 

Area NL-AR-06-011

9/28/2006 2 Mail Transport Equipment Service Center Network – Highway Transportation Routes – Dallas NL-AR-06-012

9/29/2006 4 Vehicle Management – National Trailer Lease Requirements – Capital Metro Area NL-AR-06-013

09/29/2006 1 Mail Transport Equipment – Transportation of Over the Road Containers NL-AR-06-014
April 1 – September 30, 2006 | 53

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Appendix E

INVESTIGATIVE STATISTICS1

For the period April 1 — September 30, 2006

Misconduct

Statistics

Employee Mail 

Theft Statistics4

Investigations completed 3,799 438

Arrests/Information/Indictments 281 323

Convictions/Pretrial Diversions2 109 232

Administrative actions 1,775 404

Cost avoidance $57,527,822 –

Fines, restitution, and recoveries $76,488,294 –

Amount to Postal Service3 $12,410,819 –

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

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

3 Amount included in Fines, Restitution, and Recoveries.

4 Cases worked solely by the Postal Inspection Service.

Appendix F

SIGNIFICANT MANAGEMENT DECISIONS IN AUDIT RESOLUTION

For the period April 1 — September 30, 2006

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

and which is currently in audit resolution.

Office of Inspector General 

The OIG has no significant management decisions in audit resolution as of September 30, 2006.
54 | Semiannual Report to Congress

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

For the period April 1 — September 30, 2006

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

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

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

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

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

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

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

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

Other Administrative Actions

Administrative Action Requests 74

Temporary Restraining Orders Requested 1

Temporary Restraining Orders Issued 1

Cases Using Direct Purchase Authority — 

Civil Penalties (Section 3012) Imposed $25,000

Test Purchases —

Withholding Mail Orders Issued 16

Voluntary Discontinuances 16

Investigative Expenses1

Type Dollar Amount

Personnel $158,473,256

Nonpersonnel 33,289,758

TOTAL $191,763,014

Capital Obligations $8,272,142

1

 Numbers have been normalized to reflect the transfer of the Information 

Technology Division to the Postal Service’s Chief Technology Office 

organization.

Subpoenas

Case # Date Issued Scheme

06-004 6/8/2006 Work at home

06-005 7/18/2006 Failure to render

06-006 7/18/2006 Failure to render

06-007 8/16/2006 Solicitation in guise of invoice

06-008 9/5/2006 Failure to pay 

Appendix G

Type of Scheme Complaints Filed

Consent 

Agreements

False 

Representation 

Order

Cease & Desist 

Orders

Advance fee 1 — — —

Contests/sweepstakes 1 — — —

Coupon fraud 1 1 1

False billings 8 6 4 11

Internet auction 7 7 2 6

Lotteries (foreign and domestic) 1 — — —

Medical 2 — — —

Merchandise:

 failure to furnish 1 1 — —

 failure to pay 3 3 1 3

Miscellaneous 7 6 — 4

Telemarketing 3 3 1 3

Work at home 16 16 3 16

TOTAL 51 43 11 44
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CLOSED CONGRESSIONAL AND BOARD OF GOVERNORS INQUIRIES

For the period April 1 — September 30, 2006

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

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

Appendix H

Inspector General

Requestor Allegation/Concern Our Major Findings Closure Date

Senator, Iowa Communication to Postal Inspectors of decision to 

transfer jurisdiction to OIG for employee crimes and 

misconduct to the OIG.

Addressed concerns in a meeting with law enforcement 

employee organization.

5/23/2006

Representative, Wisconsin Request for Inspector General testimony from the 

House Judiciary Committee.

Inspector General Williams appeared and provided 

testimony.

9/27/2006

Investigations

Requestor Allegation/Concern Our Major Findings Closure Date

Senator, Virginia Kickbacks and contracting irregularities at a Vehicle 

Maintenance Facility.

We investigated but did not substantiate charges. 

Reported findings to Postal Service district 

management, resulting in several personnel actions.

4/7/2006

Senator, Nebraska Supervisor improperly accessed and disseminated 

employee background investigation information.

Our investigation revealed main records system at 

facility was protected adequately, but secondary system 

was not. We forwarded recommended improvements 

to management.

4/6/2006

Senator, Washington Contractor fraudulently failed to provide supplies 

and services as agreed in a Portland, Oregon, 

facility.

We reviewed, but did not substantiate allegation. We 

found the contractor performed the work management 

requested.

8/30/2006

Representative, Texas Management directed Letter Carriers to insert 

direct mail materials into the pages of circulars; 

whistleblower retaliation for reporting. 

Our review did not substantiate retaliation charge. 

Referred direct mail issue to Postal Service for 

evaluation.

6/21/2006

Representative, California Allegations of racial, cultural, sexual harassment, 

and threats at facility.

We conducted an informal review and reported findings 

to the requestor.

4/26/2006

Representative, South Carolina Rural Route Carrier stole a dog. We investigated, found no evidence to back this charge. 5/10/2006

Representative, Illinois Employee used Postal Service equipment and time 

to conduct political business.

Our investigation found activities were non-partisan and 

did not violate Hatch Act; use of postal equipment and 

time referred to management.

8/7/2006

Representative, Illinois Employee used Postal Service equipment and time 

to conduct political business.

OIG investigation found activities were non-partisan and 

did not violate Hatch Act; use of postal equipment and 

time referred to management.

8/8/2006

Representative, Nevada Whistleblower retaliation. We were unable to substantiate that the employee 

made a timely, protected communication.

9/15/2006

Representative, California Hiding and false reporting of delayed mail; hostile 

work environment in Los Angeles District.

We found delayed mail was properly documented in 

the Mail Condition Reporting System. Management 

surveyed the workplace climate and recommended 

management action.

7/12/2006

Representative, California Hiding and false reporting of delayed mail; hostile 

work environment in Los Angeles District. 

(NEW allegation/concern.)

We found delayed mail was properly documented in 

the Mail Condition Reporting System. Management 

surveyed the workplace climate and recommended 

management action.

7/12/2006

Representative, Oklahoma Allegations of misconduct and possible 

whistleblower reprisal.

We conducted two investigations, finding a prima facie 

case of reprisal for whistleblowing.

6/28/2006
56 | Semiannual Report to Congress

Audits

Requestor Allegation/Concern Our Findings Closure Date

Representative, New Mexico Substantial delays in mail delivery in Las Cruces, 

New Mexico.

We addressed this as part of the Management Advisory 

- Las Cruces, New Mexico, Delayed Mail, issued 

6/05/06.

6/9/2006

Representative, California Lack of openness and community involvement in 

Postal Service process for conducting Area Mail 

Processing study of the Pasadena P&DC.

These issues were addressed in the Audit Report 

- Pasadena, California, Processing and Distribution 

Center Consolidation, issued 9/26/06.

8/16/2006

Representative, Oklahoma Incumbent contractor denied an opportunity to bid 

on contract renewal. 

We reviewed and found the Postal Service properly 

followed contracting rules.

4/7/2006

Governors Mail process skewed to expedite External FirstClass Mail and enhance performance scores at the 

Jacksonville, Florida, P&DC.

Our review found these operations did not favor 

collection mail.

6/28/2006

Representative, New York Review of the current change of address (COA) 

program operated by the Postal Service.

We provided a response based on an audit addressing 

data integrity in the COA process. We found existing 

controls are sufficient to ensure overall integrity, but 

recommended improvements regarding acceptance and 

notification of PS Form 3575, Official Mail Forwarding 

Change of Address Order.

8/3/2006

Mayor, St. Petersburg, Florida Requested OIG audit of the Area Mailing Processing 

(AMP) Survey for the St. Petersburg P&DC.

We have several site-specific consolidation reviews 

underway, but cannot commit to reviewing St. 

Petersburg-to-Tampa consolidation in 2007.

8/9/2006

Representative, Virgin Islands Mail processing and delivery concerns sent to the 

GAO with copy to the OIG.

We will coordinate audit work with GAO in the 

upcoming fiscal year.

8/17/2006

Mission Support

Requestor Allegation/Concern Our Findings Closure Date

Senator, Virginia Status of constituent application for employment 

with the OIG.

Provided status report only. 5/26/2006

General Counsel

Requestor Allegation/Concern Our Findings Closure Date

Senator, Virginia Allegations of intimidation, harassment, and 

violation of privacy by management.

We did not substantiate allegations and noted 

jurisdictional issues with other federal agencies.

5/25/2006

Senator, California Mail delivery issues at the Santa Barbara Post 

Office and East Beach Facility.

Officials at the Postal Service Government Relations 

Office asserted jurisdiction.

4/5/2006

Senator, Texas Special agent made a defamatory communication 

and illegally disclosed personal information during 

course of investigation. 

We found the communication was in the nature of a 

question, not a defamatory statement and part of proper 

investigative work.

4/11/2006

Representative, California Requested investigation into constituent’s 1997 

removal from Postal Service. 

We found matter was addressed outside OIG jurisdiction 

(through arbitration) and records were no longer 

available, limiting our further review.

8/11/2006

Senator, Minnesota Delays in processing an individual workers’ 

compensation claim.

We determined officials at the local Postal Service 

Human Resource office are assisting.

4/6/2006

Representative, Florida Insufficiency of OIG investigation of allegations 

against a postal supervisor.

Review determined no additional work was necessary. 4/12/2006

Representative, New York Status of records from a worker’s compensation 

investigation.

Our FOIA Office processed documents for release. 6/15/2006

Senator, Texas Supervisor directed a contractor use a pretext to 

gain information about an employee’s medical 

leave. 

We found that management addressed the issue 

consistent with postal policy.

8/30/2006
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Senator, Minnesota Follow-up questions regarding delay of workers’ 

compensation claim.

We did not identify cause of delay, but reviewed 

Northland District Office processing record.

7/5/2006

Representative, New York Supervisors failed to respond fully to harassment by 

co-workers.

We were unable to proceed, due to inexact recall of 

participants and destruction of materials in question.

9/15/2006

Senator, Texas Special Agent made a defamatory communication 

and illegally disclosed personal information during 

course of investigation. 

We found the communication was in the nature of 

a question, not a defamatory statement, and part of 

proper investigative work.

6/8/2006

Senator, Georgia Requested investigation into constituent’s 1997 

removal from Postal Service.

We found matter was addressed outside OIG jurisdiction 

(through arbitration) and records were no longer 

available, limiting our further review.

8/11/2006

Representative, Florida Union requested review of incidents at Central 

Florida facility.

Officials in the USPIS asserted jurisdiction. 7/26/2006

Senator, Texas Assault by supervisor at Port. We received this correspondence in error. 7/18/2006

Senator, Texas Mail tampering and theft of an individual’s mail. We notified the delivery supervisor, who agreed to 

address the concerns. The USPIS previously reviewed 

and did not substantiate a similar complaint.

8/8/2006

Representative, California Racial discrimination at a Los Angeles facility; 

suggestion for Manager selection.

We found no evidence of racial discrimination and 

referred the selection issue to the Postal Service’s 

Government Relations Office.

8/3/2006

Senator, Mississippi Inquiry on behalf of constituent. No action (outside statutory authority). 8/11/2006

Representative, Pennsylvania Inquiry on behalf of constituent. No action (outside statutory authority). 8/11/2006

Senator, Mississippi Inquiry on behalf of constituent. No action (outside statutory authority). 8/29/2006

Referrals

Requestor Allegation/Concern Referred To Closure Date

Representative, New York Unfair working conditions and harassment at a 

postal facility.

The Equal Employment Opportunity Commission OIG. 4/20/2006

State Representative, Oklahoma Mail content issues. The Postal Service Government Relations Office. 5/23/2006

Representative, Missouri Fraudulent transfer of periodical postage privileges. The Postal Service Government Relations Office. 5/23/2006

Senator, West Virginia Postal Service employment. The Postal Service Government Relations Office. 7/16/2006

Senator, Virginia Cash sent by mail never reached addressee, but 

sender received damaged envelope from the 

undeliverable mail department.

The Postal Inspection Service. 8/3/2006

Representative, California Postal Service employment. The Postal Service Government Relations Office. 8/17/2006

Representative, California Labor contract violations. The Postal Service Government Relations Office. 8/31/2006

General Counsel

Requestor Allegation/Concern Our Findings Closure Date
58 | Semiannual Report to Congress

supplemental information

Freedom of Information Act

The Freedom of Information Act (FOIA) Office for the Postal Service Office of Inspector General operates independently of, but 

frequently coordinates with, its counterparts at the Postal Service and Postal Inspection Service. The FOIA Office receives requests 

for records from the public, the media, and Postal Service employees. The Freedom of Information Act, according to the Department 

of Justice, “generally provides that any person has a right, enforceable in court, to obtain access to federal agency records, except to 

the extent that such records (or portions of them) are protected from public disclosure by one of nine exemptions.”

Activities

For the period April 1 – September 30, 2006

Requests Number of Requests

Carryover from prior period 7

Received during period 121

Total on hand during the period 128

OIG actions Number of Requests

Processed during the period 116

Requests released in full 21

Requests partially granted 38

Requests not granted 12

Requests referred to another agency 29

No records 16

Not proper FOIA requests –

Withdrawn –

Balance Number of Requests

Balance at the end of the period (pending) 12

Processing Days Number of Days

Median processing days to respond to a FOIA request 15 
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Workplace Environment

The Workplace Environment Team receives referrals involving workplace environment and operational issues from multiple sources, 

including the Hotline, Congress, the Board of Governors (BOG), and management. Complaints reviewed by the team include sexual 

harassment; discrimination; harassment and intimidation; nepotism; mail delivery and processing; and workplace safety issues. 

The team’s role was expanded to include internal complaints received from OIG employees. This process provides OIG employees 

another avenue to report their concerns, in addition to Equal Employment Opportunity avenues. During this reporting period, there 

was a 90 percent increase in the number of referrals received compared to the last reporting period. 

Activities

For the period April 1 – September 30, 2006

Referrals Total

Carryover from prior period 57

Complaints received from Hotline 397

Congressional/BOG/Postal Service Management 7

Internal 4

Other 2

Total on hand during this period 467

Workplace Environment Actions Total

Complaints closed during the period 431

Referred to Postal Service management 114

Referred to OIG Office of Investigations 39

Referred to OIG Office of Audit 1

Summary of findings reported to Congress/BOG/Postal Service Management 8

Conducted limited inquiry into allegations/issues and referred to database 115

Referred to database for statistical analysis and possible systemic reviews 154

Referrals pending at the end of the period 36
60 | Semiannual Report to Congress

Advance fee scheme – Obtaining fees purporting to 

secure buyers or obtain loans.

AMC – An Air Mail Center is a postal facility at an airport 

that receives, concentrates, transfers, dispatches, and 

distributes mail transported by air.

APC – Automated Postal Center, a kiosk that dispenses 

postage and provides several mailing services. APCs allow 

customers to weigh, calculate, and apply exact postage, 

and ship Express Mail and Priority Mail items, packages, 

and First-Class letters right at the kiosks. They also 

provide easy access to postal products and services.

Bargaining unit employee – A Postal Service employee 

who is represented by a labor organization (union) that 

negotiates with the Postal Service for the wages, hours, 

and other terms and conditions of employment. These 

employees include City Carriers, Clerks, Mail Handlers, 

Rural Carriers, Special Delivery Messengers, Maintenance 

Employees, and Motor Vehicle Operators.

BDS – See Biohazard Detection System.

BMC – Bulk Mail Center, where packages and standard 

mail are processed.

BMEU – See Business mail entry unit.

Bulk mail – Mail that is rated for postage partly by weight 

and partly by the number of pieces in the mailing. The 

term is generally used to refer to Standard Mail (A).

Business Mail Entry Unit (BMEU) – The area of a postal 

facility where mailers present bulk, presorted, and permit 

mail for acceptance. The BMEU includes dedicated 

platform space, office space, and a staging area on the 

workroom floor.

Biohazard Detection System – The Biohazard Detection 

System (BDS) is a system that is used to detect the presence of harmful bio-agents that may exist in mailpieces 

that are processed in Processing and Distribution Centers 

(P&DCs) operated by the Postal Service. The BDS continuously monitors the air for hazardous aerosol contaminants 

that may be released by mail being handled by one or 

more Postal Service mail processing systems.

Carrier Sequence Barcode Sorter (CSBCS) – This is 

a small, high-speed barcode sorter machine designed specifically for decentralized processing in associate offices. 

It has a throughput of about 19,000 pieces per workhour. 

CPU – CPUs are contractor-owned and operated facilities, 

under contract to the Postal Service to provide selected 

postal services such as accepting mail and selling 

postage, supplies, and Postal Service money orders to 

the public. CPUs are usually located in a store or place of 

business. 

Delivery Barcode Sorter (DBCS) – This is a multi-level, 

high-speed barcode sorting machine located in mail 

processing facilities. DBCS throughput is about 39,000 

pieces per workhour. 

END initiative – The Evolutionary Network Development 

(END) initiative is the next step in the Postal Service’s efforts to create a flexible logistics network to reduce costs, 

increase overall effectiveness, and improve consistency 

of service.

Express Mail Service – A mail class that provides 

expedited delivery service for mailable matter subject to 

certain standards. It is available in five basic domestic 

service offerings (Same Day Airport Service, Custom 

Designed Service, Next Day Service, Second Day Service, 

and Military Service). Express Mail International Service 

is available between the United States and most foreign 

countries. Express Mail is a Postal Service trademark.

False billings scheme – Mailing solicitations in the guise 

of billings.

FECA – Postal Service employees injured while performing 

their duties may be eligible for compensation under the 

Federal Employee’s Compensation Act (FECA).

FEHB – The Federal Employees Health Benefits (FEHB) 

program helps federal employees, retirees, and their 

survivors meet healthcare needs through a wide selection 

of health plans across the country. 

First-Class Mail – A class of mail that includes all matter 

wholly or partly in writing or typewriting, all actual and 

personal correspondence, all bills and statements of 

account, and all matter sealed or otherwise closed against 

inspection. First-Class Mail comprises three subclasses: 

postcards, letters and sealed parcels, and Priority Mail. 

Any mailable matter may be sent as First-Class Mail. 

First-Class Mail is a Postal Service trademark.

Flat–size mail – A mailpiece that exceeds one of the 

dimensions for letter-size mail (11-1/2 inches long, 6-1/8 

inches high, 1/4 inch thick) but that does not exceed the 

maximum dimension for the mail processing category (15 

inches long, 12 inches high, 3/4-inch thick). Dimensions 

are different for automation rate flat-size mail eligibility. 

Flat-size mail may be unwrapped, sleeved, wrapped, or 

enveloped.

Fraud Internet schemes – Fraudulent schemes using the 

Internet with a connection to the mail.

FY – Fiscal Year.

Highway contract routes – A route served by a postal 

contractor to carry mail by highway between designated 

points.

IEMP – The Postal Service’s Integrated Emergency 

Management Plan that improves coordination or planning 

and response activities among functional areas in the 

event of an emergency.

IMPAC – The International Merchant Purchase Authorization Cards (IMPAC) are how the Postal Service acquires 

goods and services through contracts.

Logistical support network – Activities or programs 

that support the transportation of mail, such as fuel 

procurement, mail transport equipment procurement and 

management, and vehicle management and maintenance.

Lottery scheme – Advertisements seeking money or 

property by mail for participation in schemes to win prizes 

through chance.

Glossary
April 1 – September 30, 2006 | 61

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Merchandise failure to pay scheme – Mail order 

merchandise acquired without providing payment.

Merchandise misrepresentation scheme – Mail order 

merchandise or services that are materially misrepresented in advertising.

OWCP – Administered by the U.S. Department of Labor, 

the Office of Workers’ Compensation Programs (OWCP) 

provides direct compensation to providers, claimants, and 

beneficiaries.

PCIE / ECIE – The President’s Council on Integrity and 

Efficiency and Executive Council on Integrity and Efficiency 

(PCIE-ECIE) address integrity, economy, and effectiveness 

issues that transcend individual government agencies. 

This organization also seeks to increase the professionalism and effectiveness of IG personnel throughout the 

government. 

Postal Rate Commission (PRC) – An independent federal 

agency that makes recommendations on Postal Service 

requests for changes in postal rates and mail classifications. The five commissioners are nominated by the 

President and approved by the U.S. Senate.

Postal Reorganization Act – The statute that requires 

postal rates and fees to “provide sufficient revenues so 

that the total estimated income and appropriations...will 

equal as nearly as practicable total estimated costs.” 

(Public Law 91-375, signed August 12, 1970.)

Priority Mail – First-Class Mail that weighs more than 

13 ounces and, at the mailer’s option, any other mail 

matter weighing 13 ounces or less. Priority Mail provides 

expedited delivery.

Processing and Distribution Center/Facility (P&DC/F)

– A central mail facility that processes and dispatches 

part or all of both incoming mail and outgoing mail for a 

designated service area. It also provides instructions on 

the preparation of collection mail, dispatch schedules, and 

sorting plan requirements to mailers.

Remote Encoding Centers – When all computer-based 

means of resolving address information have been 

exhausted at a mail facility, an image of an address is 

sent to a remote encoding center (REC), where operators 

use video display terminals and keyboards to process 

the address information. The results of this encoding 

are sent back electronically to the facility that has the 

mailpiece, thereby keeping the mailpiece in the automated 

mailstream.

Retail facility – A postal unit of a Post Office and its 

subordinate units as well as military Post Offices that sell 

postage stamps and provide other postal retail services 

to customers. The subordinate units are within the 

service area of a main post office and include post office 

stations, post office branches, contract postal units, and 

nonpersonnel units.

SSPC – Self-Service Postal Centers are unstaffed Postal 

Service vending machines that provide postage stamps 

and other retail products and services. 

Standard Mail – A class of mail that includes advertisements, circulars, newsletters, magazines, small parcels, 

and merchandise.

Unsupported costs – Costs that are questioned because 

of inadequate supporting documentation for the proposed/ 

claimed costs.

USPIS – U.S. Postal Inspection Service, a law enforcement 

arm of the Postal Service that provides assurance to 

American businesses for the safe exchange of funds and 

securities through the U.S. Mail; to postal customers of 

the “sanctity of the seal” in transmitting correspondence 

and messages; and to postal employees of a safe work 

environment.

Verification – The procedural checks of a mailing 

presented by a mailer to determine proper preparation and 

postage payment.

Value proposition – Develops audit work that maximizes 

benefits to the Postal Service and assists top management 

in reaching their goals.

VESS – Vending Equipment Sales and Service (VESS) 

System data is an online database that offers real-time 

tracking of product sales, miscellaneous costs, and 

maintenance and service for vending machines.

VMF – A Vehicle Maintenance Facility (VMF) is where the 

Postal Service maintains and repairs vehicles.

Voyager Fleet Cards – These are credit cards used 

by postal employees to acquire automotive goods and 

services, such as gasoline or repairs.

Work at home scheme – Schemes, such as envelope 

stuffing, that do not provide home employment.

The following are among the many trademarks owned by the United States Postal Service: United States Postal Service®, U.S. Postal Service®, USPS®, First 

Class Mail®, USPS.com®, Click-N-Ship®, Automated Postal Center®, APC®, Express Mail®, Priority Mail®, Standard Mail®, Parcel Post®, The Postal 

Store®, Media Mail®, Customized Market Mail®, United States Postal Service Office of Inspector General®, Post OfficeTM, Postal ServiceTM, Signature 

ConfirmationTM, Certified MailTM, Delivery ConfirmationTM, Registered MailTM, Post Office BoxTM, ZIP CodeTM, Carrier PickupTM and Postmaster GeneralTM. The 

Sonic Eagle Logo, and the Mail Truck Design are also registered trademarks belonging to the U.S. Postal Service.
62 | Semiannual Report to Congress

notes
office of inspector general

Report 

Fraud, Waste, and 

Misconduct

in the Postal Service

Contact the Hotline at:

1.888.USPS.OIG

1.888.877.7644 

Fax: 1.866.756.6741

or www.uspsoig.gov

TTY (HEARING IMPAIRED)

1.866.OIG.TEXT

1.866.644.8398
U.S. Postal Service OFFICE OF INSPECTOR GENERAL

1735 N. Lynn Street, Arlington, VA 22209-2020 

703.248.2100 Fax: 703.248.2291 Internet: www.uspsoig.gov

Promoting Integrity and Accountability