October 1, 2006 — March 31, 2007 | 

semiannual report to congress

OFFICE OF INSPECTOR GENERAL

 October 1, 2006 — March 31, 2007

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, theft, and 

misconduct;

Promote economy, efficiency, and 

effectiveness;

Promote program integrity; and

Keep the Governors, Congress, and 

Postal Service management informed 

of problems, deficiencies, and 

corresponding corrective actions.

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Mission Statement
October 1, 2006 — March 31, 2007 | 

This report, submitted pursuant to the 

Inspector General Act, outlines our work 

and activities for the 6-month period 

ending March 31, 2007. It focuses on the 

four strategic goals outlined in the Postal 

Service’s Strategic Transformation Plan 

2006–2010: Improve Service, Generate 

Revenue, Reduce Costs, and Achieve 

Results with a Customer-Focused Performance-Based Culture. We discuss 

the state of the Postal Service through 

our eyes and explain how our work adds 

value. Finally, we have a separate chapter 

that discusses preserving integrity.

In this period, we issued 201 audit reports 

and management advisories. These 

efforts resulted in a total monetary impact 

of $441,189,917. We had 58 significant 

audit recommendations, all of which were 

accepted by the Postal Service. 

In addition, we closed 3,820 cases and 

management took administrative action 

on 1,776 cases. Our investigations led to 

412 arrests and indictments, and returned 

more than $22 million in fines, restitutions, 

and recoveries to the Postal Service.

I look forward to working with the 

Governors, Congress, and Postal Service 

management as we continue to address 

the challenges ahead.

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

Audit

Reports issued.........................................................................................................201

Significant recommendations issued .........................................................................58

Total reports with financial impact..............................................................................83

Funds put to better use.......................................................................$132,938,118

Questioned costs1 ..............................................................................$305,085,052

Revenue Impact ..................................................................................... $3,198,426

Total2.......................................................................................................$441,221,596

Investigations3

Investigations completed ......................................................................................3,820

Arrests .....................................................................................................................277

Indictments/informations .........................................................................................135

Convictions/pretrial diversions4 ................................................................................ 141

Administrative actions ........................................................................................... 1,776

Cost avoidance..........................................................................................$79,336,879

Total fines, restitutions, and recoveries ..................................................... $128,149,410

Amount to Postal Service5.....................................................................$22,191,944

Hotline Contacts

Telephone calls ...................................................................................................29,481

e-Mail....................................................................................................................9,805

Virtual Front Office calls ........................................................................................2,469

Mail ....................................................................................................................... 1,226

Voice mail messages ...............................................................................................598

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

Total Contacts...................................................................................................41,427

Includes unsupported costs of $24,192,391.

The Postal Service agreed to recommendations or proposed alternative corrective actions that, if implemented, could result in more than $441 million in savings.

Statistics include joint investigations with other law enforcement agencies.

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

Amount included in fines, restitutions, and recoveries.

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October 1, 2006 — March 31, 2007

summary of performance
October 1, 2006 — March 31, 2007 | III

Table of contents

Assessing Strategic Transformation Progress..................................................... 1

Reduce costs....................................................................................................1

Generate revenue .............................................................................................9

Achieve results with a customer-focused, performance-based culture ............11

Improve service...............................................................................................13

Preserving Integrity .................................................................................................17

Audit activities.................................................................................................17

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

Map of Office Locations......................................................................................... 39

Appendices ...............................................................................................................41

Appendix A – Reports with quantifiable potential monetary benefits................41

Report listing...........................................................................45

Appendix B – Findings of questioned costs .................................................... 50

Appendix C – Recommendations that funds be put to better use................... 52

Appendix D – Reported non-monetary benefits.............................................. 53

Appendix E – Reports with significant recommendations pending

corrective actions ....................................................................54

Appendix F – Significant management decisions in audit resolution ............... 57

Appendix G – Investigative statistics................................................................ 57

Appendix H – Summary of Postal Service investigative activities

under title 39 USC § 3013 ......................................................58

Appendix I – Closed Congressional and Board of Governors inquiries ........... 59

Supplemental Information ..................................................................................... 62

Freedom of Information Act.............................................................................62

Workplace environment ..................................................................................63

Glossary .........................................................................................................64
 | Semiannual Report to Congress

ASSESSING Strategic Transformation Progress

In this report, we assess the status of the Postal Service’s progress toward the 

strategic goals articulated in its Strategic Transformation Plan: 2006-2010, issued in 

September 2005. The Postal Service’s plan describes how it intends to improve the 

value of mail services and sustain a financially stable enterprise that best serves the 

nation’s mailing needs while providing affordable and reliable service. 

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

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

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

This section discusses audits and reviews we completed during the reporting period in 

each of these areas, as well as in the area of preserving integrity.

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 selected audit work 

discussed in this report, 

management has agreed 

or partially agreed with our 

recommendations and is 

taking or has already taken 

corrective action to address 

the issues we raised. 

Postal Accountability 

and Enhancement Act 

Highlights 

The Postal Accountability and 

Enhancement Act (Act) of 2006 is the 

first major legislative change to the Postal 

Service since 1971. The Postal Service’s 

mandate continues to be providing reliable 

universal service at affordable prices. 

At the same time, the Postal Service 

strives to enhance its ability to operate 

in a businesslike manner, while fostering 

growth and innovation in the mailing 

industry. The Act directs the Postal Service 

to persevere with its transformation efforts 

and cost-cutting measures. 

A number of important requirements 

of the Act impact the OIG. The Act: 

Requires the OIG to submit to Congress 

and the Postal Service, within 6 months 

of enactment, a report that details and 

assesses Postal Service progress in 

improving safety, reducing workplace 

injuries, and identifying opportunities for 

improvement. 

Requires the OIG, within 1 year of 

enactment, to study and submit to 

the President, the Congress, and the 

Postal Service a report concerning 

how the Postal Service administers the 

assessment of revenue deficiencies for 

Nonprofit Standard Mail. 

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Applies certain provisions of the Sarbanes-Oxley Act to the Postal Service, 

and requires the Postal Service to conform with certain aspects of Securities 

and Exchange Commission reporting, 

both of which will require the OIG to 

conduct substantial audit work.

Requires the OIG to regularly audit the 

data collection systems and procedures 

the Postal Service uses in collecting 

information used for its report to the 

Postal Regulatory Commission. In 

this reporting period, we audited the 

Transportation Cost System (TRACS), 

a Postal Service data collection 

system used to estimate purchased 

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REDUCE COSTS

The Postal Service’s strategy to reduce 

costs is to improve operational efficiency. 

This strategy includes:

expanding standardization and process control; 

reducing the cost of meeting universal 

service obligations by focusing on 

major cost drivers, especially delivery 

operations and supply chain management;

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capturing improvements from existing 

equipment and technology; and 

targeting new investments to improve 

productivity. 

The strategy emphasizes continued partnerships with customers by developing 

low-cost forms of customer access via 

technology and product simplification. 

Additionally, the Postal Service plans to 

examine facility capacities to transition 

from overlapping single-product networks 

to an integrated multiproduct network.

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October 1, 2006 — March 31, 2007 | 

REDUCE COSTS

The Postal Service has focused on 

reducing its costs and has reported that 

it has achieved some success. Our work 

in this area assisted the Postal Service 

in identifying significant opportunities to 

reduce costs by maximizing the costeffectiveness of contracts, improving 

transportation efficiency, optimizing the 

mail processing network, controlling facility and operational costs, reducing the 

number of administrative vehicles, and 

improving internal controls. 

Maximizing the Cost-Effectiveness of

Contracts. We issued 10 contract-related 

audit reports during the reporting period. 

Specifically, we evaluated seven cost 

proposals associated with major systems, 

and we conducted audits on incurred 

costs, labor and overhead rates, and a 

termination claim. These audits identified 

questioned costs of more than $276 million. These identified costs are provided 

to the contracting officers for their consideration in negotiating the best terms for 

the Postal Service. Examples of significant work in this area include: 

An audit of a $912 million firmfixed-price proposal for the Flats 

Sequencing System (FSS) production 

disclosed more than $175 million in 

questioned costs. After configuration 

changes, the contractor submitted a 

revised proposal of more than 

$921 million. Close coordination 

between the team members expedited 

the audit of the revised proposal and 

disclosed more than $91 million in 

questioned costs for the contracting officer’s consideration in contract 

negotiations. Before awarding the 

contract, all questioned costs were 

evaluated during an independent 

review performed by the Postal 

Service Engineering and Supply Management teams. 

An audit of a $120 million firmfixed-price proposal for the Multiline 

Replacement Program — delivery barcode sorters (DBCS) disclosed more 

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transportation costs for major classes 

and subclasses of mail and type of 

service. We found that overall, internal 

controls were effective and TRACS data 

was valid and reliable. Validity refers to 

whether TRACS data represents purchased transportation costs for major 

classes and subclasses of mail and type 

of service. Reliable data is complete, 

accurate, and consistent; meets its 

intended purpose; and is not subject to 

inappropriate alteration.

Additional Act provisions that could 

impact our work require the Postal 

Service to:

Review workforce plans to achieve 

modern service standards for marketdominant products, and to assess the 

impact of facility changes on the postal 

workforce. 

Prepare comprehensive plans for 

reemployment assistance and early 

retirement benefits for postal employees 

who are displaced as a result of network 

reductions. 

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Establish regulations for the safe 

transportation of hazardous material in 

the mail. 

Define measures it must take to 

incorporate affirmative action and equal 

employment opportunity criteria into the 

performance appraisals of senior supervisory or managerial employees. 

Transfer the current escrow and any 

future surplus for civil service retirement 

to the Postal Service Retiree Health 

Benefits Fund. 

Establish a new formula for funding 

retiree health benefits. 

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 | Semiannual Report to Congress

than $1 million in questioned costs. 

This was a team effort that allowed 

the auditors to evaluate portions of the 

proposal while the contractor prepared 

them, greatly expediting negotiations. 

An audit of a $60 million firm-fixedprice proposal for the Automated 

Package Processing System (APPS) 

Phase ll disclosed more than $1 million 

in questioned costs. The parties failed 

to reach agreements on terms and 

conditions, and the contract was never 

awarded.

An audit of an $8 million price 

adjustment claim for the design and 

installation of electrical and telecommunications equipment disclosed 

more than $5 million in questioned 

costs. 

Automated Package Processing System. We 

assessed whether Automated Package 

Processing System (APPS) machines 

met objectives for replacing Small Parcel 

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and Bundle Sorter (SPBS) machines and 

minimizing maintenance requirements.

We also reviewed whether contract activities supported program requirements 

and were performed according to Postal 

Service policies and procedures, and 

whether the Postal Service recovered 

funds for contractor nonperformance.

At the beginning of our audit, APPS 

machines were breaking mail bundles, 

and management was using the SPBS 

to process mail it could not sort on APPS 

machines. In addition, APPS machines 

needed more maintenance than planned.

By the end of our audit, test results 

showed that a vendor-installed retrofit 

improved APPS performance, but maintenance remained a concern. Management 

agreed to remove SPBS machines as 

APPS performance warranted, and to 

reassess its investment considering the 

additional maintenance requirements. 

Additionally, management agreed to 

ensure that equipment contracts include 

Photo of Small Parcel and Bundle Sorter (SPBS) machines.
October 1, 2006 — March 31, 2007 | 

REDUCE COSTS

maintenance specifications prior to contract award.

We found the Postal Service properly:

established payment withholding for 

technical performance shortfalls;

sought appropriate recoveries for 

contractor schedule slippages;

specified the conditions for full 

acceptance; 

negotiated to recover funds for 

contractor schedule slippages; and, 

specified conditions for full acceptance 

of APPS machines. 

However, at the time the Postal Service 

awarded the APPS production and 

deployment contract, it also awarded 

a second contract to the same contractor, resulting in an apparent unapproved 

$12 million advance payment. 

Specifically, the Postal Service awarded 

a $308.8 million contract for the design; 

manufacture; test and acceptance; 

delivery; installation; and support of the 

production level APPS. On the same day, 

the Postal Service awarded a $12 million 

contract to the same contractor for APPS 

core recognition technology software, 

Version 1.0, and nonrecurring engineering. Three days later, the contractor 

delivered the software on a CD-ROM; 

however, program management personnel stated they did not test or use 

the CD-ROM or know its whereabouts. 

About $2 million in interest was lost on 

the advanced funds. 

Management generally agreed with our 

recommendations to improve contract 

activities; however, management disagreed with the characterization of the 

$12 million contract payment and associated $2 million in lost interest, stating the 

contract was part of negotiations that 

resulted in a price reduction that was 

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ultimately in the Postal Service’s best 

interest. 

Improving Mail Processing Efficiency. 

The Postal Service and the OIG worked 

together to improve mail processing efficiency, by recommending that 

management move the off-site flat mail 

processing operations to the Jacksonville, 

Florida, Processing and Distribution Center (P&DC). Relocating the flat operations 

could help avoid facility and transportation costs totaling more than $3 million. 

Management of the Flats Recognition 

Improvement Program. We assessed the 

Flats Recognition Improvement Program (FRIP) to determine whether the 

Postal Service met requirements in a 

timely and effective manner. To reduce 

flats processing costs, the Board of 

Governors authorized capital funds to 

enhance address recognition technology 

used in flat mail automation equipment. 

The Postal Service then awarded $150 

million to a vendor to improve optical 

character reader (OCR) acceptance 

rates and reduce error rates for automated flat sorter machines (AFSM 100) 

and upgraded flat sorter (UFSM 1000) 

machines.

The Postal Service did not deploy the 

FRIP program, as initially planned, but it 

generally met performance requirements 

in laboratory tests. FRIP upgrades to 

AFSM 100 operations reduced workhours 

as expected, but we did not find similar 

operational benefits from upgrades to the 

UFSM 1000. This could be attributed to 

changing business needs for UFSM 1000 

operations. As a result, we questioned 

$21.4 million paid to a vendor for FRIP 

Phase 1 improvements on the UFSM 

1000, since the intended operational 

value was not clearly demonstrated. 

We recommended that management 

reevaluate the need for further FRIP 

enhancements, evaluate FRIP Phase 2 
 | Semiannual Report to Congress

after the first deliverable, and modify the 

contract based on needs and performance. Management disagreed with the 

questioned program costs, but was 

responsive to the recommendations.

Optimization of the Transportation Network. 

The Postal Service has one of the largest 

transportation and logistics networks in 

the world, reaching every city and town in 

the United States. Its facilities are linked 

by a complex transportation system that 

depends on the nation’s air, rail, highway, 

and maritime infrastructure. 

The Postal Service spends close to 

$8.1 billion annually to transport 

213.1 billion pieces of mail worldwide. 

Network transportation is the fastest 

growing cost in the Postal Service’s 

annual operating budget, and is second 

to human capital in the annual budget. 

Network transportation costs increased 

about 10 percent across the board in 

fiscal year (FY) 2006, even after 

aggressive cost-savings initiatives. This 

was partly due to dramatic increases in 

fuel costs, which increased 57 percent in 

FY 2006. While most mail is time-sensitive, network officials must continually 

balance meeting and improving on-time 

performance with lowering costs. They 

have little control over rising fuel costs.

We work closely with management to 

improve the cost-effectiveness of air and 

surface network operations, as well as 

logistical support functions, such as fuel 

procurement and vehicle management. 

For example, during this reporting period, 

we monitored implementation of the 

Postal Service’s Integrated Air Strategy, 

designed to reduce reliance on passenger airlines, expand transportation by 

dedicated cargo carriers, and in some 

cases, shift mail to less costly ground 

transportation. We will continue our audit 

work on optimizing surface transportation 

operations and reducing fuel costs in 

FY 2007.

We work closely with management to improve the cost-effectiveness of air and surface network operations, as well as logistical 

support functions, such as fuel procurement and vehicle management. 
October 1, 2006 — March 31, 2007 | 

REDUCE COSTS

During the past 6 months, our transportation audit reports identified close to 

$117 million in future savings. 

Enhancing Surface Transportation Network 

Operations. The Postal Service’s surface 

transportation network consists of contracted transportation, costing the Postal 

Service about $3 billion annually. It also 

includes transportation using Postal 

Service employees and vehicles (known 

as Postal Vehicle Service [PVS]), which 

costs about $900 million annually. The 

transportation network is dynamic and 

fluid, and managers adjust to changing 

network demands by ascertaining which 

type of surface transportation to use to 

maximize efficiency, provide operational 

flexibility, and address long-term operational requirements. 

As part of our Value Proposition Agreement with the Postal Service Vice 

President of Network Operations, we 

audited whether the Postal Service can 

reduce costs by reducing the number of 

highway contract trips servicing Processing and Distribution Centers (P&DC). In 

our audit of Eastern Area P&DCs, we 

concluded that the Postal Service could 

save approximately $2.3 million over 

the term of existing Eastern Area P&DC 

highway contracts by canceling, not 

renewing or modifying 78 highway trips. 

The Postal Service could eliminate these 

trips without affecting on-time service by 

consolidating mail and equipment loads 

to better utilize trailer capacity. 

In addition, we audited the effectiveness of PVS operations at the Memphis 

P&DC and found that management 

Our audit of the Postal Service’s air network operations concluded that management could improve the effectiveness of the Atlanta Airport Mail Center 

(AMC) operations.
 | Semiannual Report to Congress

could improve PVS effectiveness and 

save more than $7.3 million over 10 years 

by removing 18,874 excess hours from 

existing PVS schedules. They could 

eliminate hours without negatively affecting service because schedules contained 

unassigned time when drivers were not 

needed for a specific trip or related activity, duplicate trips, and trips that were not 

as full as possible. Of these, management 

believed 4,911 hours were still necessary. 

Of the $9.6 million in savings detailed 

above, about $1 million is related to fuel 

costs. 

Improving the Effectiveness of Airport Mail 

Center Operations. Our audit of the Postal 

Service’s air network operations, in the 

context of its overall integrated air strategy, concluded that management could 

improve the effectiveness of the Atlanta 

Airport Mail Center (AMC) operations. 

Further, the Postal Service could save at 

least $107 million over a 10-year period, 

if management increased the Atlanta 

AMC’s productivity and reduced workhours commensurate with operational 

requirements. The Postal Service could 

achieve these results by using equipment 

efficiently in accordance with productivity 

standards, eliminating unnecessary staffing, and reducing workhours, including 

unsupported overtime. Subsequent to 

the audit, the Postal Service implemented 

a variety of management tools to better 

monitor data, share information, improve 

efficiencies, and match operational targets with workload projections. 

Facility Reviews. Our review of the sale of 

the Philadelphia Main Post Office found 

the Postal Service did not conduct the 

sale in compliance with existing procedural requirements, and noted the 

apparent conflict of interest of a broker/

developer working for the Postal Service. 

We recommended the Postal Service 

require an appraisal of the property, 

reevaluate the terms of the sale, take 

steps to meet Postal Service requirements when disposing of future excess 

properties, take steps to mitigate the 

apparent conflict of interest on this 

transaction, and educate its staff on the 

importance of avoiding conflicts of interest with brokers and developers. The 

Postal Service had the property independently appraised, reevaluated the terms of 

the sale and the apparent conflict of interest, provided training on its real estate 

management policies and procedures 

to all pertinent employees, and established procedures that include increased 

oversight and documentation regarding 

potential conflicts of interest. These steps 

are expected to strengthen the Postal 

Service’s real estate asset management 

program and are fully responsive to our 

recommendations.

eBuy Monthly Reconciliation Procedures.

eBuy is an electronic commerce portal 

that provides Postal Service employees 

with electronic requisitioning, approval, 

and invoice certification capability. Our 

audit of eBuy monthly reconciliation 

procedures showed that internal controls over eBuy reconciliations needed 

significant strengthening. We determined 

that the Postal Service did not reconcile 

85 percent of the eBuy monthly accounts 

reviewed, and did not have adequate 

supporting documentation for those 

accounts’ billing summaries. As a result, 

$9.7 million of the $10.8 million total purchases reviewed were at risk. In addition, 

Material Logistics Bulletins (MLB) for eBuy 

supplies and services did not always 

contain the reconciliation requirements. 

Further, management did not consistently 

keep relevant MLBs current on the MLB 

website. Management agreed with the 

report’s recommendations and associated assets at risk. They have initiatives in 

progress and corrective actions planned 

to address the issues in this report.
October 1, 2006 — March 31, 2007 | 

REDUCE COSTS

Controls for Cellular Services. The Postal 

Service is committed to having secure, 

reliable, and cost-effective voice and data 

telecommunications capabilities for its 

business needs. Cellular technology has 

advanced rapidly in the last few years 

and is now part of a broad spectrum 

of remote telecommunication devices. 

The Postal Service is challenged with 

effectively managing a variety of cellular 

services and devices. Currently, Postal 

Service employees use more than 26,500 

cellular devices nationwide. Three major 

wireless vendors provide the majority of 

these services. 

Our audit showed the Postal Service can 

capture savings by implementing centralized management and control practices, 

performing comprehensive inventories 

and needs assessments, and improving 

inventory and usage review practices. This 

would help eliminate unnecessary cellular 

phones, BlackBerryTM devices, pagers, 

and cellular broadband cards, with an 

estimated cost savings of $6.8 million. 

In response to a previous OIG telecommunication audit, the Postal Service 

disconnected thousands of unnecessary voice lines and reported an annual 

savings of almost $5.7 million. It also 

centralized and optimized related management and control functions. As a 

result of a contract modification that 

added wireless services and devices, the 

Postal Service expects to further reduce 

its expenses by $4 million annually. 

The Postal Service is challenged with effectively managing a variety of cellular 

services and devices.
 | Semiannual Report to Congress

Generate Revenue

A major challenge facing the Postal 

Service is increasing revenue while 

streamlining core services, controlling 

costs, and providing greater value to its 

customers. To do so, the Postal Service 

must provide high-quality customer service along with greater efficiency. 

The Postal Service’s strategy for generating revenue is to foster growth through 

customer value. It plans to do this by 

creating more customer value in core 

products and services, thereby increasing mail volume and revenue to continue 

financing universal service and the growing delivery network. Customer value 

is defined as increased product utility; 

improved ease of use and access; and 

more reliable, predictable performance 

at affordable prices.

We believe there are more opportunities 

to increase revenue in the areas of collecting revenue on stamps and annual 

mail fee sharing. We further believe the 

Postal Service could increase emphasis 

on accurately collecting, recording, and 

reporting all revenue; and strengthening 

internal controls to minimize risks relating 

to financial transactions. 

Collecting Revenue on Stamps. We evaluated delivery and signature confirmation 

deficiencies for stamp stock shipped to 

consignees under the national Stamps 

on Consignment (SOC) program. We 

found that Postal Service officials properly 

managed this program and accounted for 

stamp inventory under consignment with 

American Banknote Company (ABN). 

However, ABN deducted unapproved 

transactions from its stamp accountability. Further, delivery personnel did not 

always confirm proof of delivery of stamp 

stock to consignees, and consignees 

did not always make timely payments for 

stamp stock received.

These conditions existed primarily 

because ABN and Postal Service officials 

did not fully comply with provisions of 

the SOC contract to account for lost 

or missing shipments. Postal Service 

employees did not follow prescribed 

procedures to obtain proof of delivery. 

Further, consignees had no incentive to 

make timely payments for stamp stock. 

When officials do not follow contract 

provisions to account for stamp inventory under consignment, they maintain 

inaccurate stamp balances. When stamp 

shipments to consignees do not contain 

proper proof of delivery and the Postal 

Service is unable to provide proof of delivery, the Postal Service could be liable to 

reimburse consignees for the value of lost 

or missing shipments. Further, the longer 

consignees’ past due accounts remain 

unpaid, the more interest income the 

Postal Service forfeits. Our audit identified 

more than $310,000 in questioned costs 

and $67,000 in unrecoverable revenue. 

We evaluated delivery and signature confirmation deficiencies 

for stamp stock shipped to consignees under the national 

Stamps on Consignment program. 
October 1, 2006 — March 31, 2007 | 10

Generate 

Revenue

We recommended improvements to the 

Postal Service’s management of the SOC 

program, including: determining whether 

appropriate adjustments to ABN’s 

accountability should be made; requesting that ABN officials adhere to contract 

provisions for approving lost, missing, 

damaged, and short shipments; timely 

signing for stamp shipments; recouping 

payments for past due accounts; and 

training pertinent staff. 

Annual Mail Fee Sharing — Package 

Services. The Postal Service collects 

annual fees from customers who mail 

certain classes of mail at discounted 

rates. The Domestic Mail Manual (DMM) 

sets forth the fee structure and does not 

specifically allow for fees for Package 

Services or Standard Mail to be paid 

once and shared among all permit imprint 

accounts held by the same owner. However, we found the Postal Service allowed 

multiple permit imprint accounts to 

improperly share fees for certain classes 

of mail. Specifically, these accounts 

shared fees for Centralized Account 

Processing System (CAPS) customers 

who held multiple permit imprint accounts 

to mail Package Services items at the 

same Business Mail Entry Unit (BMEU). 

In addition, we identified instances of 

this occurring with non-CAPS customers at eight of the 10 BMEUs we tested. 

This occurred because CAPS was programmed to share fees across multiple 

permit imprint accounts, similar to the 

way fees are shared for First-Class Presort mailing. Further, while the DMM does 

not specifically allow for fee sharing for 

Package Services, it has been interpreted 

inconsistently regarding fee collection for 

these services. 

As a result, the Postal Service has not 

collected annual fees of $27,300 for 177 

CAPS accounts and $1,380 for nine 

locally managed accounts that mailed 

Package Services for a 17-month period. 

In addition, the other 354 CAPS accounts 

and 41 locally managed accounts we 

reviewed had the potential to mail Package Services without paying the required 

fees. If the Postal Service does not take 

corrective action, it may not realize an 

additional $44,480 in revenue over the 

next 2 years. 

The Postal Service collects annual mailing fees from customers who mail certain 

classes of mail at discounted mailing rates. 
11 | Semiannual Report to Congress

Achieve Results with 

a Customer-Focused, 

Performance-Based Culture

The Postal Service’s strategy for achieving results with a customer-focused 

performance-based culture is to engage 

and motivate the workforce. The Postal 

Service continues to focus on four critical human resource strategies: engaging 

employees, developing and managing 

talent, establishing and maintaining market-based compensation, and managing 

the workforce to assure flexibility.

The Postal Service faces the challenge 

of managing a large and dynamic workforce. Added to that challenge is the need 

to create a flexible workforce as part of 

the network optimization initiative. Further, 

controlling costs associated with workplace programs is also important to the 

Postal Service’s success. To that end, the 

Postal Service is standardizing the workers’ compensation case management 

process and will move the process from 

the areas to the districts before the end of 

the fiscal year. This change will strengthen 

case management activities and integrate 

injury compensation, medical, resource 

management, and Family Medical Leave 

Act issues at the district level. The collective expertise in these areas can be used 

to develop the right approach to each 

claim. 

During this reporting period, we assessed 

the Postal Service’s ability to resolve 

workforce and workplace issues, particularly those related to the workers’ 

compensation program. We also conducted work in other important human 

capital areas, such as the workplace environment, employee benefit programs, the 

comprehensive strategic workforce plan, 

and the prescription drug card program. 

Workers’ Compensation Programs. A significant cost continuing to impact the 

Postal Service is workers’ compensation 

expenses for injured workers. The size 

of the workforce and nature of the work 

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 (CBY) 2006, workers’ compensation 

payments increased five percent from 

about $840 million (in 2005) to $884 million. According to the Postal Service, the 

increase occurred partly because claimants received an extra compensation 

payment in CBY 2006, due to the nature 

of the payment cycle. Technological 

improvements that reduced the number 

of rehabilitation assignments available for 

injured employees also contributed to the 

increase. 

From FY 2005 to FY 2006, the Postal 

Service reduced the number of career 

employees from 704,716 to 696,138, and 

reduced workhours by almost 5 million. 

However, in FY 2006, workers’ compensation expenses increased approximately 

$441 million. This amount includes the 

$342 million for future workers’ compensation costs, and may also be affected by 

a change in the forecasting model used 

for the calculation. Although the number 

of paid claims decreased, the actual cost 

of the claims increased due to a cost of 

living adjustment in January 2006. The 

Postal Service continues to reduce the 

number of claims as a result of its efforts 

to prevent on-the-job injuries and its joint 

initiative with the DOL OWCP to increase 

the number of claimants returning to 

work.
October 1, 2006 — March 31, 2007 | 12

Achieve 

Results 

with a 

CustomerFocused, 

PerformanceBased 

Culture

At the same time, the administrative fees 

that OWCP charged the Postal Service, 

which are set by statute and therefore 

binding, increased from $44.3 million in 

2005 to $48.3 million in 2006. These fees 

represent approximately five percent of 

the Postal Service’s total medical and 

compensation costs. 

During this reporting period we issued a 

report to the DOL OIG requesting that it 

address two issues identified during our 

review of the Schedule Awards Program 

in the Postal Service’s New York Metro 

Area. These issues were: (1) OWCP 

handbooks and course materials do 

not contain information on how OWCP 

participating agencies should calculate 

and verify schedule award payments; and 

(2) the OWCP does not notify participating agencies of new weekly or monthly 

schedule award payments resulting from 

annual cost-of-living adjustments (COLA). 

Since the DOL OWCP has program 

responsibility for schedule awards, we 

recommended that it provide participating agencies with instructions on how 

to calculate and verify schedule award 

payments and advise agencies of COLA 

changes to employees’ schedule awards 

payments. This would help agencies 

monitor increases in schedule award 

payments to ensure they are correct and 

would enable agencies to identify and 

correct errors before the OWCP bills 

them.

An initiative led by the Postal Service, 

which used an OIG-developed database, 

discovered more than $3.9 million in 

duplicate medical payments since July 

2003, $737,562 of which the DOL OWCP 

had credited back to the Postal Service 

as of February 2007. The DOL OWCP 

is not required to reimburse agencies 

for the administrative fees they charge 

to process duplicate payments, rendering approximately $195,339 (about five 

percent of the duplicate payment amount) 

unrecoverable for the Postal Service.

Employee training in the workers’ compensation area has also been improved 

with the ongoing conversion of the former 

8-day Basic Injury Compensation course 

into a web-based training program. Some 

training modules are already available, 

such as the Injury Compensation: Monitoring Fraud and Abuse course. 

The Postal Service also continues to 

engage its employees through its continuous workforce environment improvement 

and safety programs, such as the Ergonomic Risk Reduction Process and the 

Voluntary Protection Programs. As a 

result, from FY 2002 through FY 2006, 

the Postal Service reduced the total number of injuries and illnesses by 20,692, a 

34 percent reduction. 

0

200

400

600

800

1000

0

10

20

30

40

50

$840

million

2005 2006

2005 2006

$884

million

$44.3

million

$48.3

million

Cost of workers’ compensation 

for injured workers

Administrative fees OWCP charged 

to the Postal Service
13 | Semiannual Report to Congress

Improve Service

The Postal Service’s strategy to improve 

service is to provide timely, reliable 

delivery and improved customer service 

across all access points. It plans to 

improve the quality of postal services 

by focusing on the end-to-end service 

performance of all mail and ensuring that 

postal products and services meet customer expectations by being responsive, 

consistent, and easy to use. However, 

improving service is a significant concern 

for the Postal Service while it simultaneously works to cut costs, and service 

issues have come under increasing scrutiny from external stakeholders in recent 

months. Our work in this area is aimed at 

helping the Postal Service improve operational efficiencies related to customer 

service.

Service Implications Resulting from Network 

Optimization. The Postal Service’s business environment is challenging due to 

declining First-Class Mail volume, increasing competition with traditional mail 

products from the private sector, increasing automation and mail processing by 

mailers, and shifting population demographics. In addressing these challenges, 

the Postal Service continually looks for 

opportunities to streamline operations, 

reduce costs, increase operational effectiveness, and improve service.

In recent years, the Postal Service’s most 

significant strategic effort to optimize its 

mail processing network has been the 

Evolutionary Network Development (END) 

initiative. Additionally, the Postal Service 

uses Area Mail Processing (AMP) policy 

to consolidate mail processing functions 

to eliminate excess capacity, increase 

efficiency, and better use resources. 

However, with the recent Board of Governors’ approval of a new flats processing 

strategy, the recent rate case, and the 

enactment of the Postal Accountability 

and Enhancement Act, the Postal Service 

is reevaluating its processing and transportation network strategy. 

Our recent audits in this area have shown 

that although the Postal Service has 

generally been successful in evaluating 

opportunities for cost reduction through 

the AMP process, it needs to strengthen 

its analysis of the service impacts of AMP 

consolidations. Additionally, we found 

inconsistencies and inaccuracies in the 

data supporting the consolidations and 

in the process that was followed. For 

example: 

In response to a congressional inquiry 

and management requests, we 

audited the pre-decisional consolidation proposal for the Sioux City, Iowa, 

Processing and Distribution Facility 

(P&DF). We determined that the Postal 

Service generally complied with AMP 

guidance, maintained supporting 

documentation, and provided confirming evidence for the consolidation. 

However, we identified some inconsistencies in AMP proposal data and 

found that inaccurate information may 

have been shared with stakeholders. 

■

In recent years, the Postal Service’s most significant strategic effort to optimize its mail 

processing network has been the Evolutionary Network Development (END) initiative.
October 1, 2006 — March 31, 2007 | 14

Improve 

Service

We assessed the post-implementation 

review (PIR) of the Steubenville Main 

Post Office — Youngstown, Ohio, 

P&DF outgoing mail consolidation 

and found evidence of cost savings, 

improved service performance, and 

increased productivity. However, we 

found discrepancies with the approval 

of the AMP proposal and the data 

used to support it, and with the timing of the PIR and the data used to 

support it. Management has ongoing 

actions to address AMP policy issues 

based on prior audit recommendations. In this report, we recommended 

that management conduct training on 

AMP policy.

We audited the service implications of 

AMP consolidations and concluded 

that the Postal Service could improve 

the way it documents service impacts 

in AMP proposals and PIRs. Management did not fully document changes 

to service standards, analyze service 

performance data for the affected 

facilities, or review actual service 

performance after a consolidation of 

PIRs. The consolidation proposals 

also did not consistently address other 

potential changes affecting customer 

service, such as collection box pick-up 

times, access to business mail entry 

units, and changes to retail services 

■

■

that may be associated with AMP consolidations. 

Mail Delays. In response to an August 

2006 congressional inquiry, we reviewed 

allegations of delayed mail at the Los 

Angeles P&DC. The audit found that 

during the period July 2005 through 

May 2006, the Los Angeles P&DC had 

difficulty with the timely processing of 

mail, resulting in mail delays and service 

declines. However, the Los Angeles 

P&DC had made significant improvements and, as of August 2006, the Los 

Angeles Customer Service District met 

or exceeded national service score averages. In addition, the Los Angeles P&DC 

had less delayed First-Class Mail, Priority 

Mail, and Package Services Mail than 

similar-sized facilities. Our review focused 

on the processing of mail at the P&DC, 

and not on the actual delivery of mail to 

Postal Service customers.

Mail Processing Efficiency. We assessed 

whether the Postal Service was complying with the National Color Code Policy 

and best practices as they relate to 

improving mail processing efficiency 

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 

The Postal Service strives to obtain accurate address information for internal use and for its customers, as its Customer Contact 

Centers use this data to provide operations information to mailers and the public.

Original Address

John Doe

1234 AMERICA BOULEVARD, SUITE 1000

Anytown, Virginia 12345

USPS Official Address

John Doe

1234 AMERICA BLVD, STE 1000

Anytown, VA 12345-4321
15 | Semiannual Report to Congress

targets. A color-coded tag represents the 

day of the week the mail arrives on Postal 

Service premises and denotes targeted 

clearance from the facility in 1 or 2 days. 

At the South Jersey P&DC, we concluded 

that the Postal Service generally processed Standard Mail using the correct 

color-code processes, but recommended 

that the Postal Service tighten controls 

over its color-coding process and provide 

training to avoid possible delays and 

negative service implications. 

Delivery & Retail Standard Operating 

Procedures. We assessed the implementation of Standard Operating Procedures 

(SOP) in the nine Postal Service areas 

and selected district and delivery and 

retail units within the Capital Metro, Great 

Lakes, Southeast, and Southwest Areas. 

We found that all nine Postal Service 

areas implemented the City Delivery 

Operations SOP appropriately; however, 

we identified areas for improvement in 

Morning Standard Operating Procedures 

(AMSOP), integrated operating plans 

(IOP), volume recording, Delivery Point 

Sequencing (DPS), and matching workhours to workload. Key recommendations 

included developing a plan to achieve 

AMSOP certification by the end of FY 

2006, following the SOP for revising IOPs, 

measuring mail volume, and adhering to 

policies for matching workhours to workload.

Facility and Address Management. Address 

management forms the basis of how 

the Postal Service moves mail. The 

Facilities Database system contains facilities-related information, such as facility 

identification, physical characteristics, 

addresses, hours of operation, and products and services provided. The Postal 

Service strives to obtain accurate address 

information for internal use and for its customers, as its Customer Contact Centers 

use this data to provide operations information to mailers and the public.

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

DPS is the process of arranging barcoded 

mail according to the Letter Carrier’s line 

of travel to eliminate manual mail sorting, 

improve efficiency, and reduce costs. In 

1994, the Postal Service established the 

Address Management System (AMS) to 

capture, correct, and complete address 

information to enhance the efficiency of 

mail processing and delivery via automation. AMS captures address information in 

sortation programs used to process mail 

in DPS. 

We found that district officials in the 

Northeast and Southeast Areas effectively 

managed delivery AMS quality review 

results for approximately 24 percent 

(4,818 of 19,774) of their routes according 

to Postal Service guidelines. However, 

opportunities existed for them to implement best management practices from 

the New York Metro Area’s New York 

District to improve the quality of AMS data 

used in processing and delivering mail. 

Almost 212,115 AMS data errors may exist 

in the selected Northeast and Southeast 

Area Districts on the 14,956 routes for 

which street reviews were not conducted. 

If the area officials implemented a program similar to the New York District, they 

could reduce errors by almost 32 percent, 

saving the Postal Service more than $5.4 

million over the next 10 years. 

Additionally, AMS helped Postal Service 

management improve the utility and completeness of facility data that the AMS 

provided to the Facilities Database. We 

made recommendations to increase use 

of standard facility naming conventions, 

add input and validation controls over 

facility data, and establish an independent 

quality assurance function to enhance 

data reliability. 
October 1, 2006 — March 31, 2007 | 16

Improve 

Service 

Processing most mail on automated 

equipment means that the quality of 

address information is very important. 

Mail that employees cannot process on 

automated equipment requires manual 

processing, which is less efficient and 

more costly to the Postal Service. Use of 

correct and complete address information 

can reduce costs to the Postal Service. 

Since the Postal Service’s goal is to sort 

95 percent of letters by DPS by 2010, 

a decrease in AMS data errors will help 

officials achieve their goal and will reduce 

operating costs. 

Contact Centers. Contact centers provide 

customers access to local post office 

hours and locations, information on 

domestic and international rates, ZIP 

Code lookup, stamp sales transactions, 

and a number of other services. In January 2003, the Postal Service entered a 

4-year, $254.6 million fixed-price incentive

contract to consolidate and streamline 

the call center network into a more fully 

integrated and managed network.

During this reporting period, we issued 

a report on the contact centers’ ability to 

improve customer service. We found that 

the Postal Service could not determine 

whether the contact center contract had 

improved customer service since it did 

not have effective measures to capture 

the accuracy of contact center responses 

to customers. In addition, we determined 

that the Postal Service could reduce the 

cost of the contact center contract by 

relaxing the current service level requirements. Management partially agreed 

with our finding to relax the service level 

and disagreed with our recommendation and monetary impact. During that 

process, management identified initiatives 

to address the issues in the report; those 

initiatives are now in progress.

Working Together to Achieve

the Postal Service’s Goals

Over the past few years, while focusing on our 

audit and investigative work, we also worked 

hard to improve our professional relationship 

with our client, the Postal Service. The 

following summaries highlight areas where we 

worked with Postal Service officials to address 

significant issues, and in one case, the Postal 

Service took our findings in one district and 

formulated nationwide corrective actions. 

Flats Sequencing System 

We worked with the Postal Service to expedite 

the review of two proposals for the production 

of the Flats Sequencing System (FSS). FSS 

is the latest advancement in mail automation 

technology that the Postal Service expects will 

greatly expedite and reduce the cost of flats 

processing. The original proposal of more than 

$900 million had significant cost concerns, 

and a major configuration change occurred 

during its review. All parties worked to ensure 

a full review of both proposals and to promptly 

address major pricing concerns the audits 

raised. 

Governors’ Official Expense Policy 

The Postal Service Governors requested 

that the Postal Service review the Guidelines 

Relating to Governors’ Official Expenses. A 

working group comprised of Postal Service 

management, the Board of Governors office, 

and OIG members was formed to accomplish 

this review. The working group discussed 

suggestions and ultimately drafted revised 

guidelines. The Governors reviewed, further 

revised, and approved the guidelines as 

policy effective January 2007. This policy 

governs reimbursement of expenses incurred 

by individual governors in the performance 

of their postal-related duties, beyond the 

annual $30,000 stipend and $300 per 

meeting fees authorized by statute. It also 

serves as a guideline for annual OIG reviews 

of the Governors’ travel and miscellaneous 

expenses.

Mail Processing Task Force 

The Postal Service formed a task force in 

February 2007 to review mail conditions and 

operations at the Chicago Metro Surface 

Transportation Center (Busse Hub). It was 

comprised of management, the OIG, and 

the Inspection Service. The task force’s 

objectives were to assess the role of the 

Busse Hub and to identify opportunities to 

improve service. The task force found the 

Busse Hub had expanded beyond its original 

intent and had some inefficient operations. 

The task force also noted inefficient floor 

layout and mail flows; unnecessary handling 

of mail; ineffective staffing and scheduling; 

and inadequate visual aids and signs to help 

expedite mail processing. The report made 

recommendations to streamline processing 

operations and improve service. 

Mail Sorting Efficiency

In 2006, we reviewed the efficiency of 

carrier sequence barcode sorters (CSBCS) in 

cooperation with the Seattle District. We found 

opportunities existed to process letter mail on 

the Delivery Barcode Sorters (DBCS) at the 

plants, rather than the less efficient CSBCS 

at some associated offices. This resulted in 

reduced mail processing and maintenance 

workhours, increased processing efficiency, 

and increased use of the DBCSs. We 

estimated the Postal Service would save 

more than 10,000 workhours, which could 

produce a cost avoidance of $3.7 million over 

10 years. The Postal Service subsequently 

took the OIG report theme — processing mail 

upstream in plants on more efficient sorters 

— and developed a methodology to eliminate 

as many CSBCSs as appropriate nationwide. 

The Postal Service team identified excess 

letter processing capacity on the DBCSs 

nationwide and matched offices nearby that 

had CSBCSs. To date, the Postal Service 

identified 360 excess and/or idle CSBCSs. The 

estimated workhour savings for the project 

equates to millions of dollars. This is a winwin project that simultaneously streamlines 

the processing network and increases the 

efficiency of the Postal Service. 
17 | Semiannual Report to Congress

Preserving Integrity 

The OIG works to preserve the integrity 

of Postal Service processes and personnel, which are essential elements for 

safeguarding Postal Service products, 

customers, services, and assets. 

During its long history, the Postal Service 

has faced both natural and man-made 

disasters that adversely impacted mail 

delivery. These incidents led to a renewed 

emphasis on developing initiatives to 

more effectively secure the nation’s mail 

system. This is a significant challenge 

due to the sheer size and geographic 

dispersal of the Postal Service. In support 

of the Postal Service, we participate in the 

Mail Security Task Force and attend training relating to emergency planning and 

dangerous mail investigations. We are 

also a member of the President’s Council 

on Integrity and Efficiency (PCIE) Homeland Security Roundtable, which shares 

information on related security work performed by all OIGs. 

By conducting financial audits of Postal 

Service installations and information 

systems audits, the OIG helps assure 

integrity in this vital process. Investigative 

efforts assist the Postal Service in protecting the mail, safeguarding the Postal 

Service’s revenue and assets, and helping 

maintain the integrity of postal personnel.

This section discusses audit and investigative activities to preserve integrity in the 

Postal Service during this period.

Audit Activities

By focusing on key vulnerabilities of 

Postal Service installations, our audits 

have shown how the Postal Service can 

further protect the integrity of the mailstream. Ultimately, assessing the integrity 

and accuracy of management data helps 

to maintain a stable and sound Postal 

Service. 

Financial Statements Account for the Postal 

Service’s Costs and Revenues. The following is an outline of the Postal Service’s 

financial position and a summary of the 

financial audits of Postal Service installations performed in support of the 

independent accountant’s opinion on the 

financial statements. 

Postal Service’s Financial Position. The 

Postal Service realized its fourth consecutive year of positive net income 

and a third consecutive year of positive 

retained earnings. The Postal Service also 

achieved a net income of $900 million, 

although it added more than 1.8 million 

delivery points and handled 1.4 billion 

additional pieces of mail compared to the 

prior year. 

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Oct 97 to Mar 98

Oct 98 to Mar 99

Oct 99 to Mar 00

Oct 00 to Mar 01

Oct 01 to Mar 02

Oct 02 to Mar 03

Oct 03 to Mar 04

Oct 04 to Mar 05

Oct 05 to Mar 06

Oct 06 to Mar 07

Number of Calls

October — March Reporting Periods

10-Year Hotline Trends by Reporting Period

This chart shows the combined number of contacts made to the OIG Hotline by phone, e-mail, fax, 

mail, and voice mail during the first half of each fiscal year since 1998. The dramatic rise in the 

contact population began in early 2004, and continued with the implementation of the Virtual Front 

Office (our new call center) in 2006.
October 1, 2006 — March 31, 2007 | 18

Preserving Integrity: 

Audit 

Activities

Revenues increased to $72.8 billion (more 

than $2.8 billion over FY 2005) primarily due to a rate increase across all rate 

classifications, implemented in January 

2006. However, operating expenses 

increased from $68.3 billion in FY 2005 

to $71.6 billion in FY 2006 primarily due to 

increases in compensation and benefits 

and transportation expenses, the same 

factors that drove the increase from FY 

2004 to FY 2005. The Postal Service 

expects the economy to continue to 

affect revenue growth, but it expects revenues to increase by $2.5 billion, or 3.4 

percent, primarily due to the anticipated 

rate increase. It also expects expenses 

to increase 2.3 percent over FY 2006 

primarily due to cost-of-living pay adjustments and potential contractual pay 

increases. However, the Postal Service 

plans to limit operating expense increases 

by reducing 40 million workhours through 

process improvements, automation, and 

projected volume decline. 

The Postal Service began FY 2006 with 

no outstanding debt obligations. However, 

because cash flows were not sufficient to 

fund the more than $2.9 billion escrow 

requirement of the Postal Civil Service 

Retirement System (CSRS) Funding 

Reform Act of 2003 (PL 108-18) and capital and operational needs — and because 

it was heading into an environment of 

perceived uncertainty — the Postal Service borrowed $2.1 billion on September 

30, 2006, to satisfy these requirements 

and provide operating cash for future 

operations. For 2007, the Postal Service 

does not expect cash flows from operations to be sufficient to fund legal 

mandates and all capital investments. 

Therefore, the Postal Service expects to 

borrow at least $1.2 billion to cover the 

shortfall.

The Postal Accountability and Enhancement Act has financial implications for the 

Postal Service. It eliminates the escrow 

previously required under PL 108-18 

and reduces payments into the CSRS. 

However, it requires the Postal Service to 

place between $5.4 billion and $5.8 billion into the newly created Postal Service 

Retiree Health Benefits Fund each year 

for the next 10 years to substantially fund 

its share of retiree health benefits. Also, 

the Postal Service expects to incur significant costs as a result of the requirement 

to comply with Section 404 of the Sarbanes-Oxley Act beginning in FY 2010. 

Field Financial Audits. As part of the overall 

audit of the Postal Service’s financial 

statements, using a stratified sampling 

plan, we audited and issued reports on 

102 post offices and BMEUs. We also 

issued 18 reports in addition to those in 

the sampling plan and four summary capping reports. The reports concluded that 

financial transactions were reasonably 

and fairly presented in the accounting 

records and, generally, internal controls 

were in place and effective. However, the 

reports identified various internal control 

and compliance issues that could be 

improved. In addition, we issued four 

We audited and issued reports on 102 post offices and 

Business Mail Entry Units.
19 | Semiannual Report to Congress

audits at Postal Service headquarters and 

the Information Technology and 

Accounting Service Centers, which 

concluded that management’s financial 

accounting policies and procedures 

conformed to accounting principles 

generally accepted in the United States 

and provided for an adequate internal 

control structure. We did not identify any 

instances of noncompliance with laws 

and regulations that have a direct and 

material effect on the financial statements.

We issued 10 reports and one summary 

capping report for Cost and Revenue 

Analysis test observations. We concluded 

that the Postal Service generally conducted the statistical tests in accordance 

with established policies and procedures. 

However, we noted some areas where 

the Postal Service could make improvements to maintain the integrity of the 

statistical data. 

Security and Controls in Technology 

Investments. We perform information 

systems general controls reviews to support the annual financial statement audit 

and to assess the adequacy of controls 

over information systems security and 

software.

FY 2006 Information Systems General 

Controls. General controls are the policies and procedures that apply to all or 

a large segment of an organization’s 

information systems and help ensure the 

systems’ proper operation. Examples 

of general controls include those that 

safeguard data, protect computer application programs, protect system software 

from unauthorized access, and ensure 

continued computer operations in case 

of unexpected interruptions. Moreover, 

the effectiveness of general controls is a 

significant factor in determining the effectiveness of application controls. Without 

effective general controls, application 

controls may be rendered ineffective 

by circumvention or modification. For 

example, edits designed to prevent users 

from entering unreasonably large dollar 

amounts in a payment processing system 

can be an effective application control. 

However, this control cannot be relied on 

if the general controls permit unauthorized program modifications that might 

allow some payments to be exempt from 

the edit. Both general and application 

Postal Service Efforts 

to Protect Sensitive 

Information 

The Postal Service adopted an initiative in 

October 2005 to strengthen controls over 

sensitive information that mirrors many 

of the concerns included in the Office of 

Management and Budget’s Memorandum 

M-06-16 security directive. After issuance 

of Memorandum M-06-16, the Postal 

Service appointed a team to manage the 

protection of sensitive data, develop goals 

and action items to safeguard personally 

identifiable information, and update policies 

on transporting and storing sensitive 

information off-site. The Postal Service will 

also deploy encryption tools for employee 

use and replace existing laptops with 

encryption-capable laptops over the next 

2 years. We made recommendations to 

amend policy and implement procedures 

to recertify sensitive and businesscontrolled sensitive applications every 

3 years, update the information security 

assurance documentation for systems that 

are reclassified as sensitive or businesscontrolled sensitive, and establish milestones 

for completing the sensitive data action plan. 

When fully implemented, these initiatives 

safeguard sensitive business, customer, and 

employee data and are expected to assist 

in preserving the value and integrity of the 

Postal Service brand. 

The OIG publication, “Discover the OIG,” is distributed 

internally to postal employees and to our external 

stakeholders.
October 1, 2006 — March 31, 2007 | 20

Preserving Integrity: 

Audit 

Activities

controls must be effective to help ensure 

the reliability, confidentiality, and availability of critical automated information.

During the reporting period, we supported the annual financial statements 

audit with an audit of information systems 

general controls. For FY 2006, we found 

that general controls for selected applications, data, and computer infrastructure 

at selected Postal Service information 

technology (IT) data centers provided 

reasonable assurance that computerprocessed data were complete, validated 

for accuracy, and secure; data integrity 

controls were in place; and business 

practices complied with Postal Service 

policies, procedures, and standards. In 

addition, controls over software, data, 

personnel, and physical security that 

affect computer systems were adequate. 

However, we identified some IT audit 

control issues that neither alone nor collectively represent a significant risk to 

reliance on general computer controls. 

These issues were in the areas of access 

to UNIX servers, Oracle password settings, mainframe disaster recovery 

equipment testing, physical security over 

information assets, security clearance 

retention and database reconciliation policies and procedures, and security and 

administration of routers and switches.

Security Vulnerability Assessments 

A vulnerability assessment is a process that defines, identifies, and classifies the security weaknesses in 

a computer, network, or communications infrastructure. We perform security vulnerability assessments on 

critical Postal Service Information Technology resources — networks, servers, and databases — to ensure 

that these resources and the sensitive customer information they handle are secure. The assessment 

results provide management with technical information to assist in locating potential weaknesses, 

establishing priorities for corrective action, and implementing repairs, as necessary. 

We perform security vulnerability assessments on critical Postal Service Information Technology 

resources — networks, servers, and databases.
21 | Semiannual Report to Congress

Mainframe Service Continuity and Physical 

Security. To ensure continued computer 

operations in case of unexpected interruptions, management made major 

improvements in service continuity 

affecting the mainframe processors at 

two of its IT data centers. For example, 

management developed policies requiring 

essential business functions located in 

major IT facilities to develop workgroup 

recovery plans, track the development 

and testing of application disaster recovery plans on a monthly basis and identify 

those that are incomplete or are past 

due for testing, and began an effort to 

acquire and implement new technology 

that allows the near real-time replication 

of production mainframe files on storage 

devices located in Eagan, Minnesota, and 

San Mateo, California.

As part of the FY 2006 information systems general controls audit, we evaluated 

whether service continuity controls were 

in place to ensure that critical operations 

would continue without interruption or 

could be resumed within a reasonable 

amount of time when unexpected events 

occur. We determined that while management established and updated continuity 

plans and procedures relating to essential 

business functions at the IT data centers 

and used new technology for backing up 

critical data files and sending them offsite, management needed to complete 

testing of mainframe disaster recovery 

equipment at the San Mateo and Eagan 

IT facilities. Management was responsive 

to the finding and began tests to validate 

that the new disaster recovery environment functioned properly. Further tests 

designed to validate that applications 

functioned properly in the new environment began in February 2007. 

To determine whether management has 

adequately protected critical IT physical 

resources from accidental or intentional 

Suspicious 

Expenditures Task Force 

During this reporting period, we 

established a cross-component task force 

to coordinate purchase card audit and 

investigative work. Our Office of Chief 

Information Officer developed a Computer 

Assisted Assessment Techniques (CAATs) 

Continuous Monitoring System (CCMS) 

where purchase card transactions are 

analyzed and flagged based on certain 

anomalies or indicators. The CCMS 

allows users to analyze purchase card 

transactions using pre-defined queries. 

Our Offices of Investigations and Audit 

use the CCMS data and other data mining 

tools to identify and review transactions 

that appear to be non-compliant with 

Postal Service policies and procedures. 

We then ask the cardholder and approving 

official of the flagged transactions to 

provide explanations and supporting 

documentation for the transactions. The 

results of these inquiries are evaluated 

and may result in the initiation of an 

investigation or issuance of an audit 

report. We also track trends in suspicious 

transactions and their resolution and 

will report on them periodically to 

management.

In addition, the task force has a number 

of planned and ongoing audits, such as 

audits of purchase card transactions at 

Postal Service districts and statistically 

selected field units as part of the annual 

financial statement audits. Further, at the 

request of management, we will audit 

Postal Service executives’ use of purchase 

cards, complementing ongoing Postal 

Service efforts to strengthen controls. 

We are also auditing the effectiveness of 

internal controls on Voyager transaction 

cards that Postal Service employees 

and highway contract route suppliers 

use to purchase commercial fuel for 

postal-owned and leased vehicles, and 

supplier vehicles transporting mail for 

the Postal Service. Beginning in 2002, 

we published a series of audit reports 

that noted unauthorized transactions and 

serious internal control weaknesses in 

the Voyager card program. Our current 

audits will assess the effectiveness of the 

internal controls that were implemented 

as a result of our recommendations, 

and the internal controls applied to the 

recently created highway contract route 

Voyager card program.

The work of this task force exemplifies 

the effectiveness that coordinated efforts 

between OIG components can have. 

For example, auditors and investigators 

working together led to a significant case 

in North Carolina, which identified an 

alleged embezzlement possibly exceeding 

$100,000 and led to the resignation of 

one Postal Service employee and the 

retirement of another employee.
October 1, 2006 — March 31, 2007 | 22

loss or damage, we performed an audit 

of physical security controls at the Eagan, 

San Mateo, and St. Louis, Missouri, 

Information Technology and Accounting Service Centers (IT/ASC). While we 

found management had implemented 

beneficial physical security controls at the 

IT/ASCs, we noted they could improve 

physical security over information system 

assets by performing regular testing of 

the badge access system in St. Louis 

and by storing the badge system backups in a secure, off site location. In San 

Mateo, managers could improve controls over physical security by regularly 

reviewing the monitoring system of the 

restricted areas to verify it is functioning 

properly and to take immediate action to 

correct any deficiencies that they identify 

as a result.

Inspection Service. We conducted two 

qualitative assessment reviews of 

investigative and related administrative 

processes at the Inspection Service’s 

Miami and Washington Divisions. Overall, 

inspectors generally complied with basic 

investigative standards while conducting investigations; however, we found 

improvements could be made to overall 

case documentation and supervisory 

reviews to further maximize program 

efficiency and the quality of investigations. 

We recommended that management 

make changes to investigative policies 

and procedures, improve management 

controls, and train inspectors to address 

the issues identified during our reviews.

We also assessed emergency preparedness efforts at each division by 

examining their Integrated Emergency 

Management Plans (IEMP). Both divisions’ IEMPs generally provided a 

consistent framework for an integrated 

plan as required by Homeland Security 

Presidential Directive 5; however, 

emergency preparedness at both 

divisions could be enhanced. For 

example, we recommended that management update stand-alone emergency 

management plans, conduct required 

risk assessments, and incorporate 

lessons learned from emergency preparedness exercises to identify systemic 

weaknesses and strengthen emergency 

management plans to respond effectively to emergencies.

In March 2007, the Postal Service began 

consolidating its homeland security 

responsibilities under the Inspection 

Service. Emergency Preparedness and 

Aviation Mail Security are being realigned 

to form the National Preparedness Group 

(NPG). NPG will focus on policy and guidance, continuity of operations planning, 

exercise coordination and evaluation, aviation mail security, hazardous 

materials and substances, emergency 

management, facility security reviews, 

and homeland security performance 

measures aligned to potential risks and 

vulnerabilities. 

Security Review. We audited Postal Service security controls and processes for 

the Capital Metro Area and concluded 

that the Postal Service and the Inspection 

Service have opportunities to improve 

security controls and processes to more 

effectively and efficiently protect employees, customers, the mail, and critical 

assets. For example, responsible security 

personnel did not always conduct facility 

security surveys accurately or annually as 

required, and did not always sufficiently 

address and resolve deficiencies identified during security assessments. Key 

recommendations included requiring 

personnel to implement internal controls 

to ensure that responsible security personnel complete these surveys accurately 

and in a timely manner, developing 

performance measures to assess the 

achievement of security goals, and providing appropriate guidance and training.

Preserving Integrity: 

Audit 

Activities
23 | Semiannual Report to Congress

Explosive Ordnance. We reviewed the 

handling of a potentially explosive ordnance found at the Dallas Bulk Mail 

Center (BMC) and found that employees 

mishandled the ordnance. Additionally, 

Dallas BMC management had not established a site-specific IEMP to ensure they 

could effectively respond to bombs and 

suspicious mail. Management agreed 

to provide training and practice drills 

to ensure that employees understand 

the procedures for handling suspicious 

and dangerous mail. Management also 

agreed to complete a site-specific IEMP 

with procedures for handling suspicious 

and dangerous mail and to implement 

plan requirements.

We reviewed the handling of a potentially explosive ordnance found in the 

mailstream at the Dallas Bulk Mail Center and found that employees mishandled the 

ordnance. Depicted here is the ordnance (a World War II, American 3-inch training 

round) that came out of a package and the special package holding unit where the 

ordnance was held. 
October 1, 2006 — March 31, 2007 | 24

Investigative Activities

Special Agents — federal law enforcement officers — play a key role in 

maintaining America’s trust in the postal 

system. Their charge is to investigate 

internal crimes and fraud against the 

Postal Service and to help detect and 

prevent postal crimes.

The vast majority of postal personnel are 

dedicated, hardworking public servants 

whose daily efforts instill trust in America’s 

postal system. However, it takes only one 

incident of theft, fraud, or misconduct to 

potentially diminish that trust. 

To identify trends and develop effective 

countermeasures to prevent or minimize 

future violations, we created a Countermeasures team. This team uses trend 

surveys to capture information on investigations, develop justifications, and work 

with other OIG components to ensure 

proper implementation and monitoring of 

approved countermeasures. For example, 

employee mail theft at a plant may be 

prevented or minimized with an enforced 

policy prohibiting employees from carrying personal items like a backpack 

or gym bag on the workroom floor and 

allowing only clear plastic bags for personal items. The Countermeasures team 

works closely with important mailers such 

as the Department of Veteran Affairs (VA). 

Currently, we are working with the VA’s 

Consolidated Mail Outpatient Pharmacy 

on proactive initiatives to identify nonreceipt of life-saving prescriptions and 

possible points of loss within the postal 

network.

With more than 500 Special Agents stationed in more than 90 offices nationwide, 

the OIG carries out that mission by investigating internal postal crimes involving:

Theft, delay, or destruction of mail by 

employees and contractors

Injury compensation fraud

Embezzlements and financial crimes

Contract fraud

Computer crimes

Internal affairs and executive investigations

Whistleblower reprisals

Employee misconduct and general 

crimes

Narcotics.

Investigative Analysts examine data and 

analyze trends to augment investigators’ 

work in the field. Analysts and Special 

Agents partner to help detect and prevent 

fraud, provide investigative analysis and 

research, review investigative trends, and 

facilitate strategic initiatives.

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Preserving Integrity: Investigative 

Activities 

OIG Special Agents prepare to arrest a Charlotte postal employee at her residence.
25 | Semiannual Report to Congress

Theft, Delay, or Destruction of Mail by 

Employees and Contractors. Americans 

expect their letters and parcels to arrive 

on time and 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 travels across the 

country daily — whether it is a First-Class 

Mail letter; a Priority Mail piece; Express 

Mail overnight service; a magazine; or a 

family heirloom sent by Registered Mail. 

Last year, the Chairman of the Board of 

Governors and the Postmaster General 

announced their decision to complete 

the investigative realignment between 

the OIG and the Inspection Service. This 

realignment transferred all investigations 

of employee misconduct, including theft 

of mail, to the OIG. The announcement 

established a timeline for completing this 

transfer and set September 1, 2006, as 

the starting date for our assumption of 

employee mail theft investigations. As 

of January 1, 2007, we are exclusively 

responsible for all employee misconduct 

and mail theft investigations. 

To handle the new investigative responsibilities, our Office of Investigations has 

hired more than 260 new investigators 

since April 1, 2006, and has identified an 

internal mail theft subject matter expert 

within each field office. These specialists offer experience and guidance to 

their respective field offices. Special 

Agents assigned mail theft duties have 

completed a rigorous training program 

in preparation 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, Blockbuster, and QVC) 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. 

Many of the new investigators who joined 

the OIG last year were Postal Inspectors 

specializing in internal crime investigations. These investigators, along with the 

existing complement of Special Agents, 

had an immediate impact. Following is a 

These video cassettes and CDs were seized from the home of a Florida 

Letter Carrier. The employee resigned form the Postal Service and the 

Florida State Attorney is still considering state prosecution at this time.

OIG Special Agents from the Los Angeles Field Office arrest a postal employee for mail theft. 
October 1, 2006 — March 31, 2007 | 26

mail theft investigation that occurred in 

this reporting period.

$50,000 in Stolen Credit Card Charges 

by Letter Carrier Uncovered. A manager 

of a self-service storage facility in Fort 

Worth, Texas, contacted us after one 

of his units, rented by a Letter Carrier 

overdue on payments, was opened 

and found to contain thousands of 

pieces of mail.

Special Agents recovered deliverable 

mail dating back to 2002, along with 

numerous rifled First-Class Mail letters 

containing credit cards. The investigation revealed that the Letter Carrier 

had stolen the contents of numerous 

First-Class Mail letters containing credit 

cards, and had incurred fraudulent 

charges of approximately $50,000. It 

was also determined the Letter Carrier 

stole hundreds of free samples, prescription medicine sent via the Postal 

Service, magazines, and other types 

of mail. 

The Letter Carrier resigned from the 

Postal Service and was indicted by a 

federal grand jury in February 2007. 

Delay or destruction of mail entrusted 

to postal employees is a serious federal 

crime punishable by up to 5 years in 

prison. Regardless of the class of mail, 

all mail has value and postage has been 

paid by the mailer who expects that the 

mail will be delivered in a timely manner. 

The OIG takes all allegations of delay, 

destruction, or “dumping” of any class of 

mail as a serious matter.

During the reporting period, we found 

instances of employees “dumping” 

various classes of mail in Michigan, 

Texas, and Virginia. After our investigations, management took administrative 

action ranging from letters of warning to 

proposed removals of employees. The 

■

following describes a specific investigation in Arizona.

Arizona Postal Employee Indicted for 

Dumping Mail. An Arizona Manager 

reported that a Rural Carrier Associate 

had discarded mail at a post office. 

Our investigation revealed that the 

Rural Carrier Associate put mail in a 

trash bag and threw it in a Dumpster. 

Discarded mail included 257 pieces of 

First-Class Mail, 423 pieces of Standard Mail, and 10 pieces of Nonprofit 

Standard Mail. The dumping occurred 

regularly when he could not fit the 

mail into his delivery vehicle or if the 

addressees’ mailboxes were full.

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Preserving Integrity: Investigative 

Activities 

Title 18, United States Code, § 1703. Delay or destruction of mail or newspapers

(a) Whoever, being a Postal Service officer or employee, unlawfully secretes, 

destroys, detains, delays, or opens any letter, postal card, package, bag, or mail 

entrusted to him or which shall come into his possession, and which was intended to 

be conveyed by mail, or carried or delivered by any Letter Carrier or other employee 

of the Postal Service, or forwarded through or delivered from any post office or 

station thereof established by authority of the Postmaster General or the Postal 

Service, shall be fined under this title or imprisoned not more than five years, or both. 

(b) Whoever, being a Postal Service officer or employee, improperly detains, delays, 

or destroys any newspaper, or permits any other person to detain, delay, or destroy 

the same, or opens, or permits any other person to open, any mail or package of 

newspapers not directed to the office where he is employed; or 

Whoever, without authority, opens, or destroys any mail or package of newspapers 

not directed to him, shall be fined under this title or imprisoned not more than one 

year, or both. 

The OIG takes all allegations of delay, destruction, or 

“dumping” of any class of mail as a serious matter.
27 | Semiannual Report to Congress

injury compensation 

fraud Investigative 

Results

October 1, 2006 — March 31, 

2007

1,143 fraud investigations 

resolved

$79 million in compensation 

payments avoided

13 arrests

12 indictments/informations

6 convictions*

261 personnel actions taken 

by postal management

* Convictions do not 

necessarily reflect the results of 

investigations from this reporting 

period.

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In December 2006, the Rural Carrier 

Associate was indicted for Delay or 

Destruction of Mail and was issued a 

Notice of Removal. 

Injury Compensation Fraud. The Postal 

Service funds workers’ compensation 

benefits for employees who sustain 

job-related injuries. The monetary and 

medical benefits the Postal Service paid 

to workers’ compensation claimants 

totaled $1.2 billion in 2006. At the end of 

2006, the Postal Service’s estimated total 

liability for future workers’ compensation 

costs was more than $7.8 billion. This 

was an increase of $342 million over the 

previous year. Administered by the DOL, 

the OWCP provides direct compensation 

to providers, claimants, and beneficiaries. The Postal Service later reimburses 

OWCP in a process known as “chargeback billing.” 

Most employees receive workers’ compensation benefits because of legitimate 

job-related injuries. However, a small percentage of postal employees and health 

care 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 

it is suspected that individuals or health 

care providers are defrauding the DOL’s 

Federal Employees’ Compensation Act 

benefits fund. Criminal prosecutions are 

an effective deterrent to fraud and may 

permanently prevent the 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.

■ During this reporting period, injury compensation fraud investigations resulted 

in more than $79 million in cost savings/

avoidances. Investigations by Special 

Agents led to arrests of 13 suspects and 

261 administrative personnel actions, 

including removals, letters of warning, 

and claim terminations. Following are 

examples of injury compensation fraud 

cases investigated during this reporting 

period.

Bogus Injury Claim Uncovered, Yielding 

$1.3 Million Cost Avoidance. A Louisiana 

Flat Sorter Machine Clerk (FSM Clerk) 

submitted an OWCP form claiming she 

had a medical condition of “plantar 

wart and ganglion cyst,” and therefore 

could not perform her required duties 

to stand on concrete floors 8 hours per 

day lifting and pushing heavy equipment. Thereafter, the OWCP placed 

her on the long-term Periodic Roll for 

total disability.

Our investigators videotaped the FSM 

Clerk engaging in various activities 

exceeding her stated limitations and 

indicating the Clerk’s ability to perform 

postal work. After our Special Agent 

showed the video to the Clerk’s physician, he issued a revised OWCP form 

documenting restrictions to allow the 

Clerk to return to work in a limited-duty 

capacity.

The Postal Service thereafter extended 

a job offer to the FSM Clerk matching 

the physician’s imposed limitations. 

The FSM Clerk did not respond to the 

job offer or to numerous requests to 

complete OWCP documentation. 

On February 7, 2007, the DOL terminated the FSM Clerk from the 

Periodic Roll for failing to respond to 

a valid job offer from the Postal Service, saving the Postal Service more 

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October 1, 2006 — March 31, 2007 | 28

than $1.3 million in future payments. 

The Postal Service is in the process 

of removing the FSM Clerk from the 

employment rolls for failing to accept 

a valid job offer. 

Civil War Collector Ordered to Pay 

$260,000 in Restitution. A former Virginia 

City Letter Carrier allegedly injured his 

back and hip. After the employee’s 

physician wrote that the City Letter 

Carrier could not drive a vehicle more 

than 1 hour per day, nor stand, walk, 

kneel, or bend more than 2 hours per 

day, he was given a sedentary limitedduty job at his post office in 1998.

The City Letter Carrier’s stated physical 

limitations were directly contradicted 

after our Special Agents followed him 

as he drove 525 miles from his home 

in Virginia to his parent’s house in 

Georgia over a 10-hour period. Special Agents also showed he had no 

difficulty bending and kneeling after 

obtaining two full days of videotape 

showing the allegedly disabled City 

Letter Carrier using a metal detector to 

collect Civil War artifacts from Northern 

Virginia battlefields. 

As a result of the investigation the City 

Letter Carrier was removed from the 

Postal Service. In October 2006, he 

pleaded guilty to committing fraud to 

obtain workers’ compensation benefits 

in the Western District of Virginia. In 

January 2007, the City Letter Carrier 

was sentenced to 1 year of home 

confinement and 3 years’ probation, 

and was ordered to pay $260,765 in 

restitution.

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Craft Business Scam Ends, Saving 

$900,000 in Long-Term Expenses. In January 2007, a former Mail Handler and 

former Postmaster were sentenced 

in New York for committing fraud to 

obtain federal workers’ compensation 

benefits. Each defendant was fined 

$1,500. Each was also ordered to pay 

$15,240 in restitution.

The joint investigation by Special 

Agents and Postal Inspectors revealed 

that the former Mail Handler failed to 

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Preserving Integrity: Investigative 

Activities 

During this reporting period, injury compensation fraud investigations resulted in more than 

$79 million in cost savings/avoidances.
29 | Semiannual Report to Congress

report income from her craft business 

while receiving workers’ compensation benefits. The former Postmaster, 

who lived with the claimant, was an 

accomplice in her fraudulent workers’ 

compensation scheme, as he had 

assisted her in the craft business. He 

was demoted from his Postmaster 

position to that of a Letter Carrier.

Following the conviction, the claimant’s 

workers’ compensation benefits were 

terminated, thereby saving the Postal 

Service $902,545 in future workers’ 

compensation payments.

Embezzlements and Financial Crimes. 

Employee embezzlements include those 

in which postal employees steal money 

from cash drawers, manipulate postal 

money orders or money order funds, or 

falsify financial retail records. When post 

offices experience unusual or significant 

shortages, our investigators employ various investigative techniques to uncover 

embezzlements and report improper or 

lax procedures to management for corrective action. When employees are 

found responsible for missing postal 

funds, we report this to management 

for appropriate administrative action. In 

cases that warrant criminal prosecution, offenders not only face the loss of 

their jobs, but also may face jail time and 

court-ordered restitution. 

The Postal Service uses the International 

Merchant Purchase Authorization Card 

(IMPAC), Voyager Fleet, and Employee 

Travel Cards to manage common recurring expenditures. The IMPAC program 

processed approximately $267 million 

in transactions during this reporting 

period, and earned the Postal Service 

approximately $1 million in refunds. 

The Voyager Fleet Card Program pays 

for fuel, oil, repair, maintenance, and 

washing of more than 214,996 postal 

vehicles. This program processed more 

than $186 million in transactions during 

this reporting period, with documented 

savings and cost avoidance to the Postal 

Service of almost $15 million. Following 

are examples of financial fraud cases we 

investigated during this reporting period:

New York Special Agents recover mail pursuant to a search warrant on an employee’s home.
October 1, 2006 — March 31, 2007 | 30

$200,000 in Restitution Ordered in Postal 

Vehicle Repair Scam. After our 2006 

investigation, the Owner, General 

Manager, and Administrative Officer 

of a California auto body shop signed 

plea agreements and agreed to pay 

more than $134,000 in restitution 

for making false claims against the 

Postal Service. The auto body shop 

employees submitted inflated accident 

repair claims and estimates to a Postal 

Service California Accident Investigator. The Accident Investigator received 

free repair services on his vehicles 

and received a percentage of checks 

made out to Postal Service claimants. 

The former Accident Investigator also 

signed a plea agreement and agreed 

to pay approximately $114,000 in restitution.

$14,000 Money Order Scam Results in 

Postmaster’s Removal. A Michigan 

Postmaster was removed, in October 

2006, for misusing postal funds. Our 

investigation determined the Postmaster deviated from policy by accepting 

checks as payment for money order 

purchases. The Postmaster issued 

more than $14,000 in postal money 

orders to her ex-husband and 

accepted non sufficient fund (NSF) 

checks as payment. The Postmaster was aware of the policies that 

restricted money order sales to cash 

and debit card tender. Further, she 

continued to accept NSF checks from 

her ex-husband after district management advised her that his checks were 

being returned.

Self-Service Postal Center Technician Indicted on Misappropriation of 

Postal Funds. We received information regarding a Self-Service Postal 

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Center Technician (Technician), who 

serviced about 10 vending machines 

in the New York area. According to a 

Postal Service audit, the Technician 

had a reported shortage of more than 

$4,400. Records for every periodic 

audit conducted from 2003-2006 had 

indicated shortages. 

A Special Agent conducted “test buys” 

on one of the vending machines the 

Technician serviced. Of 12 marked 

$20 bills, only seven were accounted 

for in the deposit monies. Analysis of 

the vending machine data attributed 

to the Technician revealed that losses 

incurred from October 2003 through 

June 2006 totaled more than $65,000.

While under investigation, the Technician retired from the Postal Service. 

In January 2007, the Technician was 

indicted in federal court on one count 

of Misappropriation of Postal Funds.

Contract Fraud. The Postal Service presently manages more than $42.4 billion 

in postal contracts. These contracts 

range from multimillion dollar national 

contracts for services such as transportation networks and IT infrastructures to 

local contracts for supplies and services 

at individual postal facilities. The sheer 

volume of contracts (48,457) and their 

huge dollar value provide opportunities for 

contractors and employees to defraud the 

Postal Service. We aid the Postal Service 

by assessing its management of acquisitions and contracts and investigating 

allegations of contract improprieties. 

Contract fraud is defined as any willful 

or conscious wrongdoing relating to a 

contract that adversely affects the Postal 

Service’s interests. Following are 

Contract fraud 

can occur at 

various stages 

during the life of 

the contract:

Pre-Solicitation Phase

Attempted/actual bribes 

and kickbacks. 

Solicitation Phase

Falsification of 

certifications such as 

Woman/Minority Owned 

Business, bid submissions 

by nonexistent companies, 

kickbacks, bribery, 

conflicts of interest, and/or 

bid-rigging. 

Proposal Phase

Bid-rigging among 

contractors, including bid 

rotation, sporadic bidding, 

token bids, market 

allocation, and/or changeorder schemes.

Negotiation and 

Award Phase

Bid-rigging among 

contractors, including bid 

rotation, sporadic bidding, 

token bids, market 

allocation, and/or changeorder schemes.

Contract Performance 

Phase 

Cost mischarging including 

material and labor 

mischarging, defective 

pricing, false invoices, 

over billing, duplicate 

billing, fraudulently 

charging “extra costs” 

for work not performed, 

and/or product/service 

substitution.

Preserving Integrity: Investigative 

Activities 
31 | Semiannual Report to Congress

examples of contract fraud that we look 

to uncover.

Overbilling, billing for services not rendered, and/or fraudulently charging for 

“extra costs”

Making false statements and/or false 

claims

Misrepresenting material facts

Bribes/gratuities

Falsifying records

Arranging for secret profits, kickbacks, 

or commissions

Conflict of interest.

We joined the National Procurement 

Fraud Task Force, which was formed in 

October 2006 by the Criminal Division 

of the U.S. Department of Justice. The 

national task force promotes the “early 

detection, prevention, and prosecution of procurement fraud associated 

with increased contracting activity for 

national security and other government 

programs.” In conjunction with this initiative, various OIG field offices joined 

regional working groups, formed by U.S. 

Attorney’s Offices, to coordinate and 

organize procurement fraud investigations 

and implement the strategies and mission 

of the national task force. These regional 

working groups will also facilitate the 

exchange of information among agencies 

at the regional level. 

During this reporting period, Special 

Agents conducted 137 contract fraud 

investigations, resulting in more than 

$7.2 million in funds returned to the 

Postal Service. Following are examples 

of contract fraud investigated during this 

reporting period.

Defective Pricing Investigation Nets Postal 

Service $1.5 Million. A postal contractor, who submitted defective pricing 

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information for a $41.4 million postal 

contract, agreed to pay the Postal 

Service $1.5 million in January 2007. 

The Postal Service let a contract in 

which the vendor was to supply 200 

machines that could verify information 

provided by bulk mailers. Previously, 

the Postal Service had no means to 

verify that mail was properly sorted 

and weighed. 

During contract negotiations in 2000, 

the vendor’s representatives knew the 

company’s standard cost for materials 

was steadily decreasing, but did not 

inform the Postal Service about the 

lower cost. By September 8, 2000, 

the standard cost for material was 

$35,900 per machine, compared to 

the proposal price of $41,000. Since 

the vendor knew of the lower cost and 

did not disclose it to the Postal Service 

before the end of contract negotiations, a defective pricing issue existed. 

Because of our investigation, the U.S. 

Attorney’s Office issued a demand 

letter to the contractor for $3,356,614 

in damages (including the loss, plus 

treble damages and penalties) on 

November 14, 2005. The $1.5 million 

agreed-upon settlement resulted.

The Houston Field Office presented Certificates of Appreciation 

to the East Memphis Purchasing Service Center group for their 

assistance with an investigation that netted a $384,000 check 

to the Houston District and eliminated a possible $3.5 million 

overcharge over the potential 10-year life of the contract.
October 1, 2006 — March 31, 2007 | 32

$384,000 Overcharge by Postal Contractor Uncovered. A Forensic Examiner’s 

proactive initiative determined a postal 

contractor was underpaying the Postal 

Service for the waste paper and cardboard it picks up, and charging the 

Postal Service to haul away the recyclables when payment for this service 

was already included in the contract.

Our investigators confirmed that the 

contractor was using the wrong rate 

and charging separate hauling fees. 

■ Special Agents met with Postal Service 

contracting officials, who agreed with 

the findings. The contracting officials 

then issued a letter of demand to the 

contractor for $384,394. If the incorrect billing had continued, the Postal 

Service would have been overcharged 

by more than $3.5 million over the 

potential 10-year life of the contract. 

On December 21, 2006, the contractor 

agreed with our findings and issued a 

check to the Postal Service for the full 

amount. 

Preserving Integrity: Investigative 

Activities 

U.S. Department of Justice announces a $10 million settlement agreement as a result of OIG investigative work. 
33 | Semiannual Report to Congress

Computer Crimes. As the Postal Service 

information infrastructure expands and 

the number of products and services 

available over the Internet increases, 

the agency faces increased exposure 

to online risks. Unauthorized access to 

Postal Service networks and improper 

usage of computers by employees 

are just two types of computer crimes 

to which the Postal Service may fall 

victim. Training staff to investigate 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 our investigations. During this 

reporting period, the Unit proactively 

generated 35 investigations — 12 of 

which pertained to felony allegations. The 

Unit also responded to more than 450 

requests for investigative support. Following are examples of computer crime 

investigations.

Special Agents Uncover nearly $450,000 

in Uncollected Postage. During a 

6-month period, an Alaska postal 

employee failed to collect the appropriate postage due on business accounts 

and then took the postage statements 

home to dispose of. Special Agents 

arrested the postal employee and 

searched his residence pursuant to 

federal warrants. 

A Special Agent from the Computer 

Crimes Unit analyzed data from 

the employee’s personal computer 

seized during his arrest. The analysis 

revealed a spreadsheet identifying 503 

bypassed mailings valued at nearly 

$450,000. Of that amount, the Postal 

Service recovered approximately 

$80,000 either before or during the 

investigation when business mailers 

and other postal employees discovered account discrepancies. The 

employee failed to collect the postage 

because he felt he was unfairly passed 

over for promotions. Upon conclusion 

of the investigation, the Postal Service 

began collecting the remainder of 

the unpaid postage the investigation 

identified. The postal employee was 

sentenced to 30 months in jail and 

3 years of probation. 

Postal Employee Gets 6 1⁄2 Years in Jail 

for Child Pornography Surfing. During a 

web-log review and hard drive imaging 

of a post office computer, our Computer Crimes Unit discovered the child 

pornography surfing activity of a postal 

employee. The Kentucky employee 

was using the workroom floor computer almost 1 hour per day to visit 

websites containing child pornography. 

In December 2006, a Western District 

of Kentucky judge sentenced the 

former postal employee to a felony violation. The employee was sentenced to 

78 months of federal detention, with 

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Whistleblower Activity

In the Postal Service, a whistleblower is an employee or an applicant for 

employment 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 are just a few examples. In order 

to be eligible for whistleblower protection, the employee must reasonably 

believe his or her employer has committed a violation of some law, rule, 

or regulation.

Whistleblower Activities for this Reporting Period: 

Retaliation allegations received 

(including congressional inquiries): 47

OIG investigations initiated: 18

Investigations closed with no finding of retaliation: 5

Open investigations: 13

OIG found reprisal: —

Number of allegations reviewed 

but closed without further action: 35
October 1, 2006 — March 31, 2007 | 34

7 years of supervised release upon 

completion of the term, and a $100 fine.

Internal Affairs and Executive Investigations.

We conduct criminal and administrative 

investigations of Postal Service executives, Inspection Service personnel, and 

alleged whistleblower reprisal. Among 

the investigative activity for the reporting 

period was the following case.

Whistleblower Reprisal Investigated. 

Our Hotline received a complaint of 

possible whistleblower reprisal. The 

complainant alleged that her Postmaster removed her from her position as 

an acting Supervisor, and reassigned 

her as a Letter Carrier, in reprisal for 

reporting that her Supervisor changed 

color codes (indicating urgency) on 

the mail. The complainant also alleged 

that the Postmaster denied her entry 

into the Associate Supervisor Program 

■

as an additional act of reprisal for her 

disclosure.

The investigation disclosed insufficient 

evidence to support the claim that the 

Postmaster denied the complainant 

entry into the Associate Supervisor 

Program in reprisal for her protected 

communications. However, the investigation found prima facie evidence that 

the complainant’s protected disclosure 

contributed to the Postmaster’s decision to reassign her to a Letter Carrier 

position.

We forwarded the findings to the 

Postal Service. In March 2007, the 

Postal Service offered the complainant back pay and corrected her leave 

record.

Preserving Integrity: Investigative 

Activities 

Some of the merchandise recovered during a search warrant executed at a San Francisco Supervisor’s residence. The Supervisor 

allegedly stole approximately $40,000 in merchandise from the mail in late 2006. 
35 | Semiannual Report to Congress

Employee Misconduct and General Crimes. 

Misconduct on the part of Postal Service 

employees may include the following 

offenses committed in the course of their 

official duties: misuse of Postal Service 

computers; destruction or theft of Postal 

Service property; falsification of official 

documents/forgery; theft of funds; 

abuse of authority; sabotage of operations; narcotics usage or sale of drugs 

while on duty; and alcohol abuse. To 

focus on these areas, we created a new 

program area called Employee Misconduct and General Crimes. Following are 

examples of work performed under this 

program area.

Publisher’s Mailing Rate Fraud Results 

in Letter of Demand for $94,000. We 

received a referral about a Florida 

magazine publishing company’s mailing account. A follow-up review by a 

Miami Business Mail Entry Unit Clerk 

revealed the publisher appeared to be 

inflating the number of subscribers to 

qualify for periodical mailing rates. For 

example, the publisher paid $1,760 to 

mail 4,172 magazines at the periodical rate. Without that rate, the mailing 

would have cost the publisher $3,496. 

Individuals associated with the publisher’s circulation department told our 

Special Agents they knowingly lied by 

representing that the magazine had 50 

percent more paid subscriptions than it 

actually had. This resulted in more than 

$100,000 in unwarranted discounts. 

■

Periodically, results of OIG investigations are picked up and reported by local and national media.
October 1, 2006 — March 31, 2007 | 36

The Department of Justice agreed to 

negotiate a settlement between the 

publisher and the Postal Service. On 

October 19, 2006, the U.S. Attorney’s 

Office issued to the magazine publisher a Letter of Demand for $94,175.

Fraudulent $10 Million Tort Claim 

Uncovered. We received a referral from 

the Inspection Service that an individual submitted a $10 million tort claim 

for a motorcycle accident involving a 

Postal Service vehicle in March 2004. 

Our investigation revealed the individual fraudulently obtained motorcycle 

insurance through his girlfriend, and 

neither the individual nor the girlfriend 

had a valid permit or license to operate 

a motorcycle. In addition, the individual’s California driver’s license was 

suspended. Numerous surveillances 

confirmed the individual was exceeding his claimed limitations.

The case was settled and judgment 

rendered for the government, denying payment claims to the individual. 

In February 2007, we received a 

letter from the U.S. Attorney’s Office 

stating that the government attained 

a $10 million cost avoidance for the 

Postal Service.

Colorado Carrier Technician Finds 

Gambling Does Not Pay. An investigation by Special Agents, the Colorado 

District Attorney’s Office, and local 

law enforcement resulted in the 

indictment of a postal employee and 

others on charges relating to illegal 

gambling. The investigation revealed 

approximately $80,000 in bets were 

placed weekly through the enterprise. 

While on duty, the Carrier Technician 

collected bets and paid winnings on 

sporting events from his postal vehicle. 

■

■

Four additional postal employees were 

involved in placing bets, collecting 

winnings, or otherwise facilitating the 

illegal operation. A Jefferson County 

grand jury indicted all the postal 

employees. The Carrier Technician 

was placed on indefinite suspension, 

pending the outcome of the legal 

proceedings. On March 15, 2007, the 

four postal conspirators pled guilty to 

misdemeanor professional gambling 

charges and were fined. Administrative 

action against the postal employees is 

pending.

Narcotics. Narcotics (illegal drugs and 

prescription drug abuse) in the workplace 

can negatively impact employee productivity and safety. Illegal drugs affect 

employee judgment and can increase 

stress levels, leading to acts of violence 

or hostility. Use and sale of illegal drugs 

by employees on duty can also contribute 

to other crimes such as theft, embezzlement, and workers’ compensation fraud 

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 illegal 

drugs are normally 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 illegal drug use is the 

desired outcome. Following is a typical 

illegal drug investigation involving a postal 

employee.

Preserving Integrity: Investigative 

Activities 
37 | Semiannual Report to Congress

Illinois Letter Carrier Arrested and 

Removed for Selling Marijuana from 

Postal Vehicle. Working jointly with the 

Illinois Police Department, Special 

Agents arrested a Letter Carrier for 

state narcotics violations after he was 

observed selling marijuana from his 

postal vehicle while on duty. Subsequent to his arrest, a search warrant 

was served at the Letter Carrier’s 

residence. Special Agents seized drug 

paraphernalia and several bundles of 

Bulk Business Mail, which the Letter 

Carrier had not delivered to customers 

on his route. The Postal Service issued 

the Letter Carrier a Letter of Removal, 

effective February 16, 2007.

■ Carrier Observation Program. Misconduct 

by postal employees who are on duty 

and in uniform casts the Postal Service 

in a negative light. This improper conduct 

includes, but is not limited to, Letter Carriers purchasing or consuming alcohol in 

public places, selling illegal narcotics from 

their postal vehicles, driving with suspended state drivers’ licenses, deviating 

from their routes to conduct non-postal 

business — all while on duty and in 

uniform. Letter Carriers who drive postal 

trucks while intoxicated or under the influence of a narcotic also present a threat 

to others, themselves, and Postal Service 

property while placing the security of the 

mail at risk. 

On September 1, 2005, our Office of 

Investigations initiated the Carrier Observation Program based on allegations of 

Letter Carrier misconduct. We received 

information from various sources nationwide, including: 

Hotline allegations

Surveillance of postal vehicles parked 

outside bars or similar establishments 

for prolonged periods 

Contact with Postal Service Supervisors, Managers, Postmasters, and 

District Managers.

In addition, Special Agents reviewed 

Overtime Usage Reports and Managed 

Service Points Exception Reports to identify excessive early, late, or missing scans 

re-occurring for the same Letter Carriers 

and to compare workload and resource 

utilization. 

As a result of investigative activity by 

Special Agents, postal management took 

corrective action against 293 employees, 

as of March 31, 2007. Actions ranged 

from reprimands and suspensions to 

removal.

■

■

■

Special agents found evidence of a marijuana “grow operation” when searching the 

house of a Letter Carrier suspected of using and selling narcotics. 
October 1, 2006 — March 31, 2007 | 38

“Master Imposter” 

Sentenced to 303 

Years for Forgery

A check forger who fashioned 

himself after Frank Abagnale, the 

impersonator whose life story was 

captured in the movie, “Catch 

Me If You Can,” was sentenced 

February 2007 in Denver District 

Court to 303 years in prison. The 

forger was also ordered to pay 

$129,171 in restitution to the 

Postal Service. 

Office of Inspector General Special 

Agents and Postal Inspectors 

jointly investigated numerous 

forged check transactions at 

multiple post offices in California, 

Colorado, Arizona, Minnesota, 

Iowa, and Utah for the purchase 

of postage stamps (First-Class, 

Priority, and Express Mail). The 

forger used counterfeit computergenerated fictitious checks at 

these Post Offices to obtain 

the stamps and then resold the 

stamps to businesses across the 

country at a discounted rate. Over 

a 10-month period, the forger 

passed more than 558 counterfeit 

checks, resulting in $327,124 

in revenue loss for the Postal 

Service. 

In imposing the sentence 

— believed to be the longest 

white-collar sentence ever handed 

down in Denver — Judge Herbert 

Stern said this about the forger, 

“You are a serial counterfeiter. You 

are a serial forger. You are beyond 

rehabilitation. You are a menace 

to society. These crimes are grave 

and serious.”

Preserving Integrity: Investigative 

Activities 
39 | Semiannual Report to Congress

Pacific

Southwest

Great Lakes

Western

The OIG currently has more than 1,100 employees located in more than 100 offices 

nationwide in each of the Postal Service’s nine areas.

U.s. postal service Office Of Inspector General Office Locations
October 1, 2006 — March 31, 2007 | 40

Eastern Northeast

New York Metro

Capital Metro

Southeast

October 1, 2006 — March 31, 2007 | 40

Capital Metro

Arlington, VA (HQ)

Baltimore, MD

Charleston, WV

Charlotte, NC

Columbia, SC

Greensboro, NC

Norfolk, VA

Richmond, VA

Washington, DC

Eastern

Charleston, WV

Clarksburg, WV 

Cleveland, OH 

Columbus, OH

Covington, KY

Harrisburg, PA

Louisville, KY

Philadelphia, PA

Pittsburgh, PA

Wilmington, DE

Great Lakes

Carol Stream, IL

Chicago, IL*

Detroit, MI

Fox Valley, IL

Gary, IN 

Grand Rapids, MI

Indianapolis, IN

Milwaukee, WI

Omaha, NE

St. Louis, MO*

New York Metro

Hoboken, NJ

Jersey City, NJ

Long Island, NY

New York, NY

San Juan, PR

Trenton, NJ

Northeast

Albany, NY

Boston, MA*

Buffalo, NY

New Haven, CT

Portland, ME

Providence, RI 

Springfield, MA

Syracuse, NY

Pacific

City of Industry, CA

Honolulu, HI

Long Beach, CA

Los Angeles, CA

Richmond, CA

Riverside, CA

Sacramento, CA

San Diego, CA

San Francisco, CA

San Jose, CA

San Mateo, CA

Santa Clarita, CA

Southeast

Atlanta, GA

Birmingham, AL

Jackson, MS

Jacksonville, FL

Knoxville, TN

Memphis, TN

Miami, FL

Nashville, TN 

North Metro, GA 

Orlando, FL

Raleigh, NC

Tallahassee, FL

Tampa, FL

Southwest

Albuquerque, NM

Baton Rouge, LA

Bedford, TX

Coppell, TX

Dallas, TX

El Paso, TX

Houston, TX*

Little Rock, AR

New Orleans, LA

Oklahoma City, OK

San Antonio, TX

Shreveport, LA

Western

Anchorage, AK

Billings, MT

Denver, CO* 

Des Moines, IA

Eagan, MN

Independence, MO

Kansas City, KS

Las Vegas, NV

Omaha, NE

Phoenix, AZ

Portland, OR

Salt Lake City, UT

Seattle, WA

Sioux Falls, SD

Spokane, WA

St. Paul, MN

*Multiple OIG Offices
41 | Semiannual Report to Congress

REPORTS ISSUED TO POSTAL SERVICE MANAGEMENT

For the period October 1, 2006 — March 31, 2007

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. 

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

Costs that are unnecessary, 

unreasonable, unsupported, 

or an alleged violation of law, 

regulation, contract, and so 

forth.

Unsupported Costs

Costs that are 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 Goals

Number of 

Reports

Funds Put to 

Better Use

Questioned 

Costs

Unsupported 

Costs

Revenue 

Impact

Reduce Costs 23 $122,689,783 $302,253,373 $24,002,855 $922,478

Generate Revenue 2 — 310,608 7,869 140,497

Achieve Results with 

a Customer-Focused 

Performance-Based Culture 2 — — — —

Improve Service 13 10,191,676 570,000 — —

Preserving Integrity 161 56,659 1,951,071 181,667 2,135,451

Total 201 $132,938,118 $305,085,052 $24,192,391 $3,198,426
October 1, 2006 — March 31, 2007 | 42

appendix 

Reports With Quantifiable Potential Monetary Benefits

A

Report Title

Funds Put to

Better Use

Questioned

Costs

Unsupported

Costs

Revenue 

Impact

REDUCE COSTS

ENGINEERING

Automated Package Processing System Status and Administration; 

DA-AR-07-001; 1/26/2007 — $1,980,150 $1,980,150 —

Management of the Flats Recognition Improvement Program; DA-AR-07-002; 1/26/2007 — $21,367,952 $21,367,952 —

FINANCIAL REPORTING

Rail Management Information System Service Claim Payments — 

Capital Metro Distribution Networks Office; FT-AR-07-008; 3/5/2007 — $654,753 $654,753 —

San Francisco International Service Center — Inbound International Mail; 

FT-AR-07-012; 3/30/2007 — — — $922,478 

INFORMATION SYSTEMS

Cellular Services; IS-AR-07-010; 3/29/2007 $5,141,194 $1,679,991 — —

SUPPLY MANAGEMENT

Automated Package Processing System Phase II Submitted by Lockheed Martin Systems 

Integration — Owego, Distribution Technologies; CA-CAR-07-004; 12/4/2006 — $1,889,476 — —

Firm Fixed Price Proposal for 200 Envelope Reflective Meter (ERM) lll Kits and Other 

Related Items Submitted by Bowe Bell and Howell Postal Systems Company;

CA-CAR-07-008; 3/5/2007 — $100,648 — —

Firm Fixed Price Proposal for the Biohazard Detection System (BDS) — Flats Production 

and Deployment, and Additional Options Submitted by Northrop Grumman Electronic 

Systems Company ($87,502,887); CA-CAR-07-010; 3/26/2007 — $522,396 — —

Flats Sequencing System Production Proposal Submitted by Northrop Grumman 

Corporation, Electronic Systems Company; CA-CAR-07-003; 12/4/2006 — $175,670,235 — —

Flats Sequencing System Production Revised Proposal Submitted by Northrop Grumman 

Corporation, Electronic Systems Company; CA-CAR-07-005; 12/29/2006 — $91,710,395 — —

Participation on an Integrated Process Team for the Multiline Replacement Program — 

Delivery Bar Code Sorter 6 Proposal, Submitted by Siemens Energy and Automation, 

Incorporated, Postal Automation Division; CA-CAR-07-001; 10/2/2006 — $1,650,550 — —

Price Adjustment Claim Submitted by Government Telecommunications, Incorporated; 

CA-CAR-07-007; 2/2/2007 — $5,026,827 — —

TRANSPORTATION

Air Networks - Airport Mail Center Operations — Atlanta; NL-AR-07-001; 12/22/2006 $107,873,000 — — —

Postal Vehicle Service Transportation Routes — Memphis Processing and Distribution 

Center; NL-AR-07-003; 3/30/2007 $7,344,820 — — —

Surface Transportation — Processing and Distribution Center Transportation Routes 

— Eastern Area; NL-AR-07-002; 3/23/2007 $2,330,769 — — —

GENERATE REVENUE

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDITS

Annual Mailing Fee Sharing — Package Services; FF-AR-07-118; 3/16/2007 — — — $73,160 

SALES & SERVICE

Stamps on Consignment Program; DR-AR-07-003; 3/31/2007 — $310,608 $7,869 $67,337 

IMPROVE SERVICE

DELIVERY

Address Management System Information — Northeast Area; 

DR-AR-07-001; 3/15/2007 $4,590,875 — — —

Address Management System Information — Southeast Area; 

DR-AR-07-002; 3/30/2007 $862,134 — — —

NETWORK PROCESSING

Jacksonville Processing and Distribution Center Flat Processing Operations; 

NO-AR-07-002; 3/20/2007 $3,112,457 — — —

SALES & SERVICE

Postal Service Contact Center Phase 1: Customer Service MS-AR-07-001; 12/11/2006 $1,626,210 $570,000 — —
43 | Semiannual Report to Congress

Reports With Quantifiable Potential Monetary Benefits

Report Title

Funds Put to

Better Use

Questioned

Costs

Unsupported

Costs

Revenue 

Impact

PRESERVING INTEGRITY

FINANCIAL REPORTING

Employee Accounts Receivable — Follow-up;

FT-AR-07-009; 3/20/2007 — $1,292,399 — —

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDITS

Alamo Main Post Office — Alamo, California; FF-AR-07-003; 10/3/2006 — $914 $914 $112 

Attleboro Post Office — Attleboro, Massachusetts; FF-AR-07-02; 11/7/2006 — — — $617

Bronx General Post Office Business Mail Entry Unit — Bronx, New York;

FF-AR-07-011; 10/25/2006 — — — $29,750 

Coronado Station — El Paso, Texas; FF-AR-07-024; 11/27/2006 — $7,120 — $10,956 

Corpus Christi Southside Station — Corpus Christi, Texas; FF-AR-07-007; 10/23/2006 — — — $1,851 

Denver General Mail Facility — Denver, Colorado; FF-AR-07-001; 10/2/2006 — $903 — $15,990 

Duluth Main Post Office — Duluth, Minnesota; FF-AR-07-002; 10/2/2006 — $498 $395 $963 

Englewood Main Post Office — Englewood, Colorado; 

FF-AR-07-020; 11/7/2006 — $830 $830 $10,617 

Industry Processing and Distribution Center Window Unit — City of Industry, California;

FF-AR-07-016; 10/31/2006 — $688 — $26,563 

New York Main Post Office — New York, New York; 

FF-AR-07-010; 10/23/2006 — $1,692 — —

Newark Main Post Office — Newark, Delaware; FF-AR-07-013; 10/27/2006 — — — $13,133 

Norfolk Business Mail Entry Unit — Norfolk, Virginia; FF-AR-07-019; 11/3/2006 — — — $33,809 

Pittsburgh Business Mail Entry Unit — Pittsburgh, Pennsylvania;

FF-AR-07-014; 10/27/2006 — — — $37,218 

FISCAL YEAR 2006 FINANCIAL STATEMENT AUDITS

San Mateo Information Technology and Accounting Service Center;

FT-AR-07-010; 3/26/2007 — $159,653 — —

St. Louis Information Technology and Accounting Service Center;

FT-AR-07-011; 3/28/2007 — — — $708,298 

FISCAL YEAR 2007 FINANCIAL INSTALLATION AUDITS

Addison Business Mail Entry Unit — Addison, Illinois; 

FF-AR-07-077; 1/25/2007 — — — $25,321 

Baltimore Business Mail Entry Unit — Baltimore, Maryland; 

FF-AR-07-087; 2/12/2007 — $173,437 — $356,307 

Bensenville Business Mail Entry Unit — Bensenville, Illinois; 

FF-AR-07-086; 2/8/2007 — — — $3,277 

Brunswick Main Post Office — Brunswick, Ohio; FF-AR-07-045; 12/21/2006 —- $2,448 — $28,666 

Canoga Park Business Mail Entry Unit — Canoga Park, California;

FF-AR-07-064; 1/18/2007 — $4,071 $4,071 —

Columbus Business Mail Entry Unit — Columbus, Mississippi; FF-AR-07-055; 1/8/2007 — — —- $1,428 

Concord Business Mail Entry Unit — Concord, New Hampshire; 

FF-AR-07-012; 3/9/2007 — — — $49,623 

Concord DMU Post Office — Concord, New Hampshire; FF-AR-07-124; 3/21/2007 — $6,322 — $13,689 

Corinth Business Mail Entry Unit — Corinth, Mississippi; FF-AR-07-046; 12/26/2006 — — — $31,626 

Emeryville Station — Emeryville, California; FF-AR-07-042; 12/21/2006 — $240 $240 $18,577 

Fountain Station — Grand Prairie, Texas; FF-AR-07-096; 2/16/2007 — $19,065 $2,418 $660 

Freehold Business Mail Entry Unit — Freehold, New Jersey; FF-AR-07-083; 2/2/2007 — — — $46,606 

Frontier Station — Round Rock, Texas; FF-AR-07-092; 2/13/2007 — $5,741 $5,741 $10,445 

George W. Young Finance Unit — Detroit, Michigan; FF-AR-07-076; 1/25/2007 — — — $130,591 

Great Barrington Business Mail Entry Unit — Great Barrington, Massachusetts;

FF-AR-07-132; 3/28/2007 — — — $1,974 

IMPAC-Dallas District — Coppell, Texas; FF-AR-07-122; 3/19/2007 — $163,898 $151,371 —
October 1, 2006 — March 31, 2007 | 44

appendix 

Reports With Quantifiable Potential Monetary Benefits

A

Report Title

Funds Put to

Better Use

Questioned

Costs

Unsupported

Costs

Revenue 

Impact

Jacksonville Post Office — Jacksonville, Arkansas; FF-AR-07-036; 12/14/2006 — $5,303 $5,303 $840 

Lafayette Main Post Office — Lafayette, California; FF-AR-07-131; 3/27/2007 — $739 $739 $707 

Livingston Business Mail Entry Unit — Livingston, New Jersey; 

FF-AR-07-105; 3/16/2007 — — — $4,523 

Londonderry Business Mail Entry Unit — Londonderry, New Hampshire; 

FF-AR-07-074; 1/23/2007 — — — $5,559 

Longmont Business Mail Entry Unit — Longmont, Colorado; FF-AR-07-050; 1/5/2007 — — — $2,678 

Margaret L. Sellers Business Mail Entry Unit — San Diego, California; 

FF-AR-07-125; 3/22/2007 — $36,433 — $14,148 

Mason Business Mail Entry Unit — Mason, Ohio; FF-AR-07-085; 2/5/2007 — — — $11,328 

McLean Main Post Office — McLean, Virginia; FF-AR-07-038; 12/14/2006 — $1,218 — $34,885 

Medina Business Mail Entry Unit — Medina, Ohio; FF-AR-07-095; 2/26/2007 — — — $72,286 

Moraine Valley Post Office — Bridgeview, Illinois; FF-AR-07-101; 2/16/2007 — $1,451 — —

Newark Business Mail Entry Unit — Newark, New Jersey; FF-AR-07-102; 2/26/2007 — $270 — $13,165 

Ontario Business Mail Entry Unit — Ontario, California; FF-AR-07-065; 1/18/2007 $56,659 — — $14,790 

Perryville Business Mail Entry Unit — Perryville, Missouri; FF-AR-07-054; 1/8/2007 — — — $895 

Phoenix Main Office Window — Phoenix, Arizona; FF-AR-07-133; 3/27/2007 — $6,665 — $32,366 

Preston Royal Finance Station — Dallas, Texas; FF-AR-07-134; 3/29/2007 — $5,115 — $31,095 

Sacramento Business Mail Entry Unit — West Sacramento, California;

FF-AR-07-097; 2/16/2007 — $10,512 — $87,009 

San Jose Business Mail Entry Unit — San Jose, California; FF-AR-07-098; 2/16/2007 — $659 $659 $684 

Scarborough Post Office — Scarborough, Maine; FF-AR-07-037; 12/21/2006 — — — $7,029 

Sidney Business Mail Entry Unit — Sidney, Ohio; FF-AR-07-129; 3/26/2007 — — — $7,120 

South Suburban Business Mail Entry Unit — Bedford Park, Illinois;

FF-AR-07-049; 12/28/2006 — — — $6,977 

Southaven Post Office — Southaven, Mississippi; FF-AR-07-033; 12/11/2006 — — — $2,084 

St. Louis Main Office Finance Unit — St. Louis, Missouri; FF-AR-07-107; 3/28/2007 — $18,934 — $107,737 

Swansea Business Mail Entry Unit — Swansea, Massachusetts; 

FF-AR-07-114; 3/23/2007 — — — $1,766 

Tulsa Downtown Station — Tulsa, Oklahoma; FF-AR-07-039; 12/18/2006 — $1,722 $1,722 $19,625 

Walnut Business Mail Entry Unit — Walnut, California; FF-AR-07-032; 12/13/2006 — — — $7,581 

West Lynn Post Office — Lynn, Massachusetts; FF-AR-07-111; 3/9/2007 — — — $3,640 

West Menlo Park Station — Menlo Park, California; FF-AR-07-056; 1/9/2007 — $7,264 $7,264 —

West Palm Beach Business Mail Entry Unit — West Palm Beach, Florida;

FF-AR-07-108; 3/2/2007 — — — $27,647 

Westlake Hills Station — Austin, Texas; FF-AR-07-121; 3/16/2007 — $14,867 — $7,306 

York Business Mail Entry Unit — York, Pennsylvania; FF-AR-07-115; 3/19/2007 — — — $1,314 

TOTAL $132,938,118 $305,085,052 $24,192,391 $3,198,426 
45 | Semiannual Report to Congress

Report Listing

For the period of October 1, 2006 — March 31, 2007.

Complete listing of all OIG Reports issued to Postal Service management

REDUCE COSTS

ENGINEERING

Automated Package Processing System Status 

and Administration; 

DA-AR-07-001; 1/26/2007

Management of the Flats Recognition 

Improvement Program; 

DA-AR-07-002; 1/26/2007

FINANCIAL REPORTING

Fiscal Year 2007 Peak Season Review — 

Christmas 2006; 

FT-WP-07-001; 3/12/2007

Rail Management Information System Service 

Claim Payments — Capital Metro Distribution 

Networks Office; 

FT-AR-07-008; 3/5/2007

San Francisco International Service Center — 

Inbound International Mail; 

FT-AR-07-012; 3/30/2007

INFORMATION SYSTEMS

Cellular Services; IS-AR-07-010; 3/29/2007

SALES & SERVICE

Transportation Cost System; 

MS-AR-07-002; 3/20/2007

SUPPLY MANAGEMENT

Automated Package Processing System Phase 

II Submitted by Lockheed Martin Systems 

Integration — Owego, Distribution Technologies; 

CA-CAR-07-004; 12/4/2006

eBuy Monthly Reconciliation Procedures; 

CA-AR-07-001; 2/16/2007

Estimated Fiscal Year 2006 Supply Chain 

Management Impact Associated with National 

Office Supply Contract; 

CA-OT-07-001; 3/9/2007

Estimated Supply Chain Management Impact 

Associated with the Custodial Rental Project; 

CA-MA-07-001; 11/27/2006

Firm Fixed Price Proposal for 200 Envelope 

Reflective Meter (ERM) lll Kits and Other Related 

Items Submitted by Bowe Bell and Howell Postal 

Systems Company; CA-CAR-07-008; 3/5/2007

Firm Fixed Price Proposal for the Biohazard 

Detection System (BDS) — Flats Production and 

Deployment, and Additional Options Submitted 

by Northrop Grumman Electronic Systems 

Company ($87,502,887); 

CA-CAR-07-010; 3/26/2007

Fiscal Year 2004 Incurred Costs of Mitretek 

Systems, Incorporated; 

CA-CAR-07-002; 11/6/2006

Flats Sequencing System Production Proposal 

Submitted by Northrop Grumman Corporation, 

Electronic Systems Company; 

CA-CAR-07-003; 12/04/2006

Flats Sequencing System Production Revised 

Proposal Submitted by Northrop Grumman 

Corporation, Electronic Systems Company; 

CA-CAR-07-005; 12/29/2006

Forward Pricing Rate Proposal Submitted by 

Siemens Energy and Automation Incorporated, 

Postal Automation; 

CA-CAR-07-006; 1/29/2007

Indefinite Delivery, Indefinite Quantity Proposal 

for Architect and Engineering Services in 

Response to Solicitation Number 519809-06-

A-001 Submitted by Burt Hill Incorporated; 

CA-CAR-07-009; 3/9/2007

Participation on an Integrated Process Team for 

the Multiline Replacement Program — Delivery 

Bar Code Sorter 6 Proposal, Submitted by 

Siemens Energy and Automation, Incorporated, 

Postal Automation Division; 

CA-CAR-07-001; 10/2/2006

Price Adjustment Claim Submitted by 

Government Telecommunications, Incorporated; 

CA-CAR-07-007; 2/2/2007

TRANSPORTATION

Air Networks — Airport Mail Center 

Operations — Atlanta;

NL-AR-07-001; 12/22/2006

Postal Vehicle Service Transportation 

Routes — Memphis Processing and Distribution 

Center; NL-AR-07-003; 3/30/2007

Surface Transportation — Processing and 

Distribution Center Transportation Routes — 

Eastern Area; NL-AR-07-002; 3/23/2007
October 1, 2006 — March 31, 2007 | 46

appendix 

GENERATE REVENUE

A

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDITS

Annual Mailing Fee Sharing — Package 

Services; FF-AR-07-118; 3/16/2007

SALES & SERVICE

Stamps on Consignment Program; 

DR-AR-07-003; 3/31/2007 

ACHIEVE RESULTS WITH A CUSTOMER-FOCUSED, PERFORMANCE-BASED CULTURE

HUMAN CAPITAL

Postal Service Schedule Awards in the New York 

Metro Area — Report II; 

HM-AR-07-001; 12/13/2006

INFORMATION SYSTEMS

Data Integrity Review of Address Management 

System Facility Data; 

IS-AR-07-005; 12/22/2006

IMPROVE SERVICE

DELIVERY

Address Management System Information — 

Northeast Area; 

DR-AR-07-001; 3/15/2007

Address Management System Information — 

Southeast Area; 

DR-AR-07-002; 3/30/2007

Delivery and Retail Standard Operating 

Procedures — Capital Metro Area; 

DR-MA-07-001; 10/16/2006

Delivery and Retail Standard Operating 

Procedures — National Capping Report; 

DR-MA-07-003; 2/22/2007

FISCAL YEAR 2006 FINANCIAL STATEMENT AUDITS

Service Level Agreements; 

FT-AR-07-001; 11/2/2006

NETWORK OPTIMIZATION

Service Implications of Area Mail Processing 

Consolidations; 

EN-AR-07-002; 12/05/2006

Sioux City, Iowa, Processing and Distribution 

Facility Consolidation;

EN-AR-07-001; 11/9/2006

NETWORK PROCESSING

Color-Coding of Standard Mail at the South 

Jersey Processing and Distribution Center;

NO-MA-07-001; 3/20/2007

Jacksonville Processing and Distribution Center 

Flat Processing Operations; 

NO-AR-07-002; 3/20/2007

Steubenville - Youngstown, Ohio, Outgoing Mail 

Consolidation; NO-AR-07-003; 3/30/2007

Timeliness of Mail Processing at the Los 

Angeles, California, Processing and Distribution 

Center; NO-AR-07-001; 2/9/2007

SALES & SERVICE

Delivery Confirmation for Inbound International 

Mail; DR-MA-07-002; 11/21/2007

Postal Service Contact Center Phase 1: 

Customer Service; MS-AR-07-001; 12/11/2006
47 | Semiannual Report to Congress

PRESERVING INTEGRITY

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

Cost and Revenue Analysis; 

FF-AR-07-093; 2/16/2007

Northern Illinois District; 

FF-AR-07-004; 10/11/2006

AUDITS OF STATISTICAL TESTS FOR FISCAL YEAR 2007 COST AND REVENUE ANALYSIS

Atlanta District; FF-AR-07-022; 11/8/2006

Bay-Valley District — Pacific Area; 

FF-AR-07-060; 1/17/2007

Bay-Valley District, Oakland International Service 

Center — Pacific Area; 

FF-AR-07-069; 1/18/2007

Dakotas District; FF-AR-07-103; 2/26/2007

Gateway District; FF-AR-07-062; 1/18/2007

Northern New Jersey District; 

FF-AR-07-078; 1/24/2007

Northern Virginia District; 

FF-AR-07-029; 11/30/2006

Pittsburgh District; 

FF-AR-07-116; 3/16/2007

Santa Ana District; 

FF-AR-07-048; 12/27/2006

FINANCIAL REPORTING

Employee Accounts Receivable — Follow-up; 

FT-AR-07-009; 3/20/2007

FISCAL YEAR 2006 FINANCIAL INSTALLATION AUDITS

Alamo Main Post Office — Alamo, California; 

FF-AR-07-003; 10/3/2006

Annandale Automated Postal Center — 

Annandale, Virginia; 

FF-AR-07-017; 11/3/2006

Attleboro Post Office — 

Attleboro, Massachusetts; 

FF-AR-07-021; 11/7/2006

Automated Postal Centers; 

FF-AR-07-073; 1/25/2007

Bronx General Post Office Business Mail Entry 

Unit — Bronx, New York; 

FF-AR-07-011; 10/25/2006

Brookshire Post Office — Brookshire, Texas; 

FF-AR-07-005; 10/23/2006

Business Mail Entry Units; 

FF-AR-07-090; 2/15/2007

Contract Postal Units; 

FF-AR-07-075; 1/25/2007

Coronado Station — El Paso, Texas; 

FF-AR-07-024; 11/27/2006

Corpus Christi Southside Station — 

Corpus Christi, Texas; 

FF-AR-07-007; 10/23/2006

Denver General Mail Facility — 

Denver, Colorado; 

FF-AR-07-001; 10/2/2006

Desoto Main Post Office Automated Postal 

Center —- Desoto, Texas; 

FF-AR-07-028; 11/28/2006

Duluth Main Post Office — 

Duluth, Minnesota; 

FF-AR-07-002; 10/2/2006

Englewood Main Post Office — 

Englewood, Colorado; 

FF-AR-07-020; 11/7/2006

Hamilton Station Automated Postal Center — 

Palo Alto, California; 

FF-AR-07-012; 10/25/2006

Industry Processing and Distribution Center 

Window Unit — City of Industry, California; 

FF-AR-07-016; 10/31/2006

Irving Valley Ranch Station Automated Postal 

Center — Irving, Texas; 

FF-AR-07-025; 11/24/2006

Lakeville Post Office — Lakeville, Minnesota; 

FF-AR-07-008; 10/23/2006

New York Main Post Office — 

New York, New York; 

FF-AR-07-010; 10/23/2006

Newark Main Post Office — Newark, Delaware; 

FF-AR-07-013; 10/27/2006

Norfolk Business Mail Entry Unit — 

Norfolk, Virginia; 

FF-AR-07-019; 11/3/2006

Oakman Post Office — Oakman, Alabama; 

FF-AR-07-023; 11/14/2006

Pittsburgh Business Mail Entry Unit — 

Pittsburgh, Pennsylvania; 

FF-AR-07-014; 10/27/2006

Post Offices, Stations, and Branches; 

FF-AR-07-094; 2/20/2007

Providence Post Office Automated Postal 

Center — Providence, Rhode Island; 

FF-AR-07-006; 10/23/2006

Spivak Contract Postal Unit — Denver, Colorado; 

FF-AR-07-018; 11/3/2006

Sunnyvale Main Post Office Automated Postal 

Center — Sunnyvale, California;

FF-AR-07-015; 10/31/2006

Vicksburg Post Office — Vicksburg, Michigan; 

FF-AR-07-009; 10/23/2006

FISCAL YEAR 2006 FINANCIAL STATEMENT AUDITS

Board of Governors’ Travel and Miscellaneous 

Expenses for Fiscal Year 2006; 

FT-AR-07-003; 12/1/2006

Eagan Information Technology and Accounting 

Service Center; 

FT-AR-07-007; 12/29/2006

Internal Controls Over Receipt and Disbursing 

Activities; 

FT-AR-07-006; 12/21/2006

Opinion on the Postal Service’s Special-Purpose 

Financial Statements; 

FT-AR-07-002; 11/17/2006

Postal Service Officers’ Travel and 

Representation Expenses for Fiscal Year 2006; 

FT-AR-07-005; 12/7/2006

San Mateo Information Technology and 

Accounting Service Center; 

FT-AR-07-010; 3/26/2007

St. Louis Information Technology and Accounting 

Service Center; FT-AR-07-011; 3/28/2007

Washington, D.C., Headquarters; 

FT-AR-07-004; 12/7/2006
October 1, 2006 — March 31, 2007 | 48

appendix 

A

Addison Business Mail Entry Unit — 

Addison, Illinois; 

FF-AR-07-077; 1/25/2007

Avella Post Office — Avella, Pennsylvania; 

FF-AR-07-026; 11/28/2006

Baltimore Business Mail Entry Unit — 

Baltimore, Maryland; 

FF-AR-07-087; 2/12/2007

Bedford Business Mail Entry Unit — 

Bedford, Massachusetts; 

FF-AR-07-030; 12/1/2006

Belcamp Business Mail Entry Unit — 

Belcamp, Maryland; 

FF-AR-07-044; 12/21/2006

Bensenville Business Mail Entry Unit 

— Bensenville, Illinois; 

FF-AR-07-086; 2/8/2007

Brunswick Main Post Office — Brunswick, Ohio; 

FF-AR-07-045; 12/21/2006

Bryan Business Mail Entry Unit — Bryan, Texas; 

FF-AR-07-088; 2/13/2007

Buckingham Post Office — 

Buckingham, Pennsylvania; 

FF-AR-07-123; 3/19/2007

Canoga Park Business Mail Entry Unit — 

Canoga Park, California; 

FF-AR-07-064; 1/18/2007

Casa Grande Business Mail Entry Unit — 

Casa Grande, Arizona; 

FF-AR-07-082; 1/30/2007

Chapel Lakes Branch — Hollywood, Florida; 

FF-AR-07-040; 12/19/2006

Clarksville Post Office — Clarksville, Texas; 

FF-AR-07-031; 12/1/2006

Columbus Business Mail Entry Unit — 

Columbus, Mississippi; 

FF-AR-07-055; 1/8/2007

Concord Business Mail Entry Unit — 

Concord, New Hampshire; 

FF-AR-07-012; 3/9/2007

Concord DMU Post Office — 

Concord, New Hampshire; 

FF-AR-07-124; 3/21/2007

Corinth Business Mail Entry Unit — 

Corinth, Mississippi; 

FF-AR-07-046; 12/26/2006

Dallas Stamp Distribution Office — 

Grand Prairie, Texas; 

FF-AR-07-113; 3/13/2007

Dulles Stamp Services Center — Dulles, Virginia; 

FF-AR-07-081; 1/30/2007

Eastlake Business Mail Entry Unit — 

Eastlake, Colorado; 

FF-AR-07-066; 1/18/2007

El Paso Business Mail Entry Unit — 

El Paso, Texas; 

FF-AR-07-100; 2/20/2006

Emeryville Station — Emeryville, California; 

FF-AR-07-042; 12/21/2006

Fountain Station — Grand Prairie, Texas; 

FF-AR-07-096; 2/16/2007

Freehold Business Mail Entry Unit — 

Freehold, New Jersey; 

FF-AR-07-083; 2/2/2007

Frontier Station — Round Rock, Texas; 

FF-AR-07-092; 2/13/2007 

George W. Young Finance Unit — 

Detroit, Michigan; 

FF-AR-07-076; 1/25/2007

Great Barrington Business Mail Entry 

Unit — Great Barrington, Massachusetts; 

FF-AR-07-132; 3/28/2007

Heber Springs Permit — 

Heber Springs, Arkansas; 

FF-AR-07-099; 2/20/2007

Holliston Business Mail Entry Unit — 

Holliston, Massachusetts; 

FF-AR-07-067; 1/19/2007

Houston Post Office — Houston, Missouri; 

FF-AR-07-034; 12/11/2006 

IMPAC-Dallas District — Coppell, Texas; 

FF-AR-07-122; 3/19/2007

Irving Business Mail Entry Unit — Irving, Texas; 

FF-AR-07-057; 1/11/2007

Jackson Business Mail Entry Unit; 

FF-AR-07-119; 3/16/2007

Jackson-LeFleur Station — 

Jackson, Mississippi; 

FF-AR-07-130; 3/23/2007

Jacksonville Post Office — 

Jacksonville, Arkansas; 

FF-AR-07-036; 12/14/2006

Kentlands Station — Gaithersburg, Maryland; 

FF-AR-07-110; 3/5/2007

Kingman Business Mail Entry Unit — 

Kingman, Arizona; 

FF-AR-07-052; 1/5/2007

Lafayette Main Post Office — 

Lafayette, California; 

FF-AR-07-131; 3/27/2007

Lakeland Downtown Station — 

Lakeland, Florida; 

FF-AR-07-041; 12/18/2006

Linn Business Mail Entry Unit — Linn, Missouri; 

FF-AR-07-063; 1/17/2007

Livingston Business Mail Entry Unit — 

Livingston, New Jersey; 

FF-AR-07-105; 3/16/2007

Londonderry Business Mail Entry Unit — 

Londonderry, New Hampshire; 

FF-AR-07-074; 1/23/2007

Longmont Business Mail Entry Unit — 

Longmont, Colorado; 

FF-AR-07-050; 1/5/2007

Luray Post Office — Luray, Virginia; 

FF-AR-07-104; 2/27/2007

Manasota Business Mail Entry Unit — 

Sarasota, Florida; 

FF-AR-07-080; 1/29/2007

Margaret L. Sellers Business Mail Entry 

Unit — San Diego, California; 

FF-AR-07-125; 3/22/2007

Mason Business Mail Entry Unit — Mason, Ohio; 

FF-AR-07-085; 2/5/2007

McLean Main Post Office — McLean, Virginia; 

FF-AR-07-038; 12/14/2006

Medina Business Mail Entry Unit — 

Medina, Ohio; 

FF-AR-07-095; 2/26/2007

Miami Business Mail Entry Unit — 

Miami, Florida; 

FF-AR-07-109; 3/2/2007

Moraine Valley Post Office — Bridgeview, Illinois; 

FF-AR-07-101; 2/16/2007

Morley Post Office — Morley, Michigan; 

FF-AR-07-043; 12/20/2006

Newark Business Mail Entry Unit — 

Newark, New Jersey; 

FF-AR-07-102; 2/26/2007

Newark Business Mail Entry Unit — 

Newark, Ohio; 

FF-AR-07-059; 1/17/2007

Newport Post Office — Newport, New York; 

FF-AR-07-068; 1/18/2007

Northern New Jersey Stamp Distribution 

Office — Newark, New Jersey; 

FF-AR-07-061; 1/17/2007

Ontario Business Mail Entry Unit — 

Ontario, California; 

FF-AR-07-065; 1/18/2007

Orlando Stamp Distribution Office — 

Orlando, Florida; 

FF-AR-07-120; 3/15/2007

Osceola Mills Post Office — 

Osceola Mills, Pennsylvania; 

FF-AR-07-027; 11/27/2006

Oswego Business Mail Entry Unit — 

Oswego, New York; 

FF-AR-07-071; 1/22/2007

Palestine Permit — Palestine, Texas; 

FF-AR-07-128; 3/23/2007

FISCAL YEAR 2007 FINANCIAL INSTALLATION AUDITS
49 | Semiannual Report to Congress

FISCAL YEAR 2007 FINANCIAL INSTALLATION AUDITS

Parkersburg Business Mail Entry Unit — 

Parkersburg, West Virginia; 

FF-AR-07-051; 1/5/2007

Perryville Business Mail Entry Unit — 

Perryville, Missouri; 

FF-AR-07-054; 1/8/2007

Phoenix Main Office Window — 

Phoenix, Arizona; 

FF-AR-07-133; 3/27/2007

Poinciana Branch — Kissimmee, Florida; 

FF-AR-07-126; 3/26/2007

Preston Royal Finance Station — Dallas, Texas; 

FF-AR-07-134; 3/29/2007

Redding Ridge Post Office — 

Redding Ridge, Connecticut; 

FF-AR-07-053; 1/8/2007

Sacramento Business Mail Entry Unit — 

West Sacramento, California; 

FF-AR-07-097; 2/16/2007

Saltsburg Post Office — 

Saltsburg, Pennsylvania; 

FF-AR-07-089; 2/12/2007

San Francisco Stamp Distribution Office — 

San Francisco, California; 

FF-AR-07-058; 1/11/2007

San Jose Business Mail Entry Unit — 

San Jose, California; 

FF-AR-07-098; 2/16/2007

Santa Ana Stamp Distribution Office — Santa 

Ana, California; FF-AR-07-070; 1/22/2007

Scarborough Post Office — Scarborough, 

Maine; FF-AR-07-037; 12/21/2006

Shawnee Mission Business Mail Entry Unit 

— Shawnee Mission, Kansas; 

FF-AR-07-117; 3/21/2007

Sidney Business Mail Entry Unit — Sidney, Ohio; 

FF-AR-07-129; 3/26/2007

South Suburban Business Mail Entry 

Unit — Bedford Park, Illinois; 

FF-AR-07-049; 12/28/2006

Southaven Post Office - Southaven, Mississippi; 

FF-AR-07-033; 12/11/2006

St. Inigoes Post Office — St. Inigoes, Maryland; 

FF-AR-07-091; 2/12/2007

St. Louis Main Office Finance Unit — 

St. Louis, Missouri; 

FF-AR-07-107; 3/28/2007

St. Petersburg Business Mail Entry Unit — 

St. Petersburg, Florida; 

FF-AR-07-079; 1/26/2007

Swansea Business Mail Entry Unit — 

Swansea, Massachusetts; 

FF-AR-07-114; 3/23/2007 

Tulsa Downtown Station — 

Tulsa, Oklahoma; 

FF-AR-07-039; 12/18/2006

Walnut Business Mail Entry Unit — 

Walnut, California; 

FF-AR-07-032; 12/13/2006

Waters Post Office — Waters, Michigan; 

FF-AR-07-035; 12/13/2006

Waverly Business Mail Entry Unit — 

Waverly, Iowa; 

FF-AR-07-047; 12/26/2006

West Lynn Post Office — Lynn, Massachusetts; 

FF-AR-07-111; 3/9/2007

West Menlo Park Station — 

Menlo Park, California; 

FF-AR-07-056; 1/9/2007

West Palm Beach Business Mail Entry Unit 

— West Palm Beach, Florida; 

FF-AR-07-108; 3/2/2007

Westlake Station — Austin, Texas; 

FF-AR-07-121; 3/16/2007

Wilkesboro Business Mail Entry Unit — 

Wilkesboro, North Carolina; 

FF-AR-07-127; 3/26/2007

Willmantic Business Mail Entry Unit — 

Willmantic, Connecticut; 

FF-AR-07-072; 1/23/2007

Wisconsin Business Mail Entry Unit — 

Wisconsin Rapids, Wisconsin; 

FF-AR-07-084; 2/2/2007

Worth Business Mail Entry Unit — Worth, Illinois; 

FF-AR-07-106; 3/1/2007

Yankton Business Mail Entry Unit — 

Yankton, South Dakota; 

FF-AR-07-135; 3/30/2007

York Business Mail Entry Unit — 

York, Pennsylvania; 

FF-AR-07-115; 3/19/2007

INFORMATION SYSTEMS

Enterprise Payment Switch Solution Phase II: 

Preparations for Security Testing; 

IS-AR-07-007; 2/23/2007

Fiscal Year 2006 Information Systems General 

Controls Capping Report; 

IS-AR-07-009; 2/26/2007

Human Capital Enterprise SAP Change 

Management Process; 

IS-AR-07-001; 10/18/2006

Information for the Federal Bridge Certification 

Authority; IS-WP-07-001; 10/2/2006

Mainframe Service Continuity Planning and 

Testing at the Eagan, Minnesota, and San 

Mateo, California, Information Technology and 

Accounting Service Centers; 

IS-AR-07-002 11/16/2006

National Customer Management System 

Encryption; IS-AR-07-006; 12/26/2006

Physical Security Controls at the Eagan 

Minnesota; San Mateo, California; and St. Louis, 

Missouri Information Technology and Accounting 

Service Centers; IS-AR-07-004; 12/19/2006

Security Assessment Audit of Telephone Lines 

and Modems (PhoneSweep) at the International 

Business Operations Center in Jamaica, New 

York; IS-CS-07-001; 10/30/2006

Security Vulnerability Assessment of Selected 

Servers and Databases that Support the Change 

of Address Program; 

IS-CS-07-002; 1/4/2007

Security Vulnerability Assessment of Legacy 

Applications at the Eagan Host Computing 

Services, Eagan, Minnesota; 

IS-AR-07-003; 12/7/2006

Postal Service’s Efforts to Protect Sensitive 

Information; IS-AR-07-008; 2/26/2007

INSPECTION SERVICE & FACILITIES

Follow-up Review of the Postal Service’s 

Enforcement of Export Controls;

SA-MA-07-001; 3/29/2007

Handling of a Potentially Explosive Ordnance at 

the Dallas Bulk Mail Center; 

SA-AR-07-001; 3/29/2007

Letter to Senator Grassley on Transition Savings; 

SA-OT-07-001; 12/15/2006

Postal Service Security Controls and Processes 

for the Capital Metro Area; 

SA-AR-07-002; 3/30/2007

Qualitative Assessment Review of the Postal 

Inspection Service’s Miami Division; 

QAR-QA-07-001; 12/6/2006

Qualitative Assessment Review of the Postal 

Inspection Service’s Washington Division; 

QAR-QA-07-002; 12/5/2006

Sale of the Philadelphia Main Post Office; 

CA-MA-07-002; 2/8/2007
October 1, 2006 — March 31, 2007 | 50

Appendix 

A — 

B

Appendix B

FINDINGS OF QUESTIONED COSTS

For the period October 1, 2006 — March 31, 2007

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

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 $71,519,830 $4,719,495

Reports requiring management decision that were issued during the reporting 

period 44 $305,085,052 $24,192,391

TOTAL 65 $376,604,882 $28,911,886 

Reports for which a management decision was made during the reporting 

period (i+ii) 39 $215,257,835 $26,058,050

(i) Dollar Value of disallowed cost $9,551,985 $1,399,031

(ii) Dollar value of cost not disallowed $205,705,850 $24,659,019

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

reporting period; Negotiations are ongoing 26 $161,347,047 $2,853,836

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

issuance (See Note 1 for a list of individual reports) 4 $9,544,179 —

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

issuance (See Note 2 for a list of individual reports) 10 $54,190,098 $2,702,465 

Note 1 - Reports for which no management decision was made within 6 months of issuance:

Subject Report/Case Number Report Date

Questioned 

Costs

Unsupported Costs Included 

in Questioned Costs

Report on Audit of Settlement Proposal Under Contract Number 

102591-03-Q-0454 Submitted by Hasler Incorporated CA-CAR-06-027 7/5/2006 $2,470,818 —

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 —

Postal Service’s Grievance-Arbitration Service Centers HM-AR-06-006 8/29/2006 $356,510 —

Vehicle Management — National Trailer Lease Requirements — 

Capital Metro Area NL-AR-06-013 9/29/2006 $402,478 —

TOTAL $9,544,179 —
51 | Semiannual Report to Congress

Appendix B

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

Subject

Report/Case 

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 —

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 —

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 $54,190,098 $2,702,465
October 1, 2006 — March 31, 2007 | 52

Appendix 

B — 

C

Appendix C

RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE

For the period October 1, 2006 — March 31, 2007

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.

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

Note 1 - Reports for which no management decision was made within 6 months of issuance:

Subject Report Number Report Date

Recommend Funds Put to 

Better Use

Postal Service’s Grievance-Arbitration Service Centers HM-AR-06-006 8/29/2006 $5,521,081

Vehicle Management — National Trailer Lease Requirements — Capital Metro 

Area NL-AR-06-013 9/29/2006 $1,514,170

TOTAL $7,035,251 

Note 2 - Reports for which no management decision was made within 1 year of issuance:

Subject Report Number Report Date

Recommend Funds Put to 

Better Use

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

Surface Transportation — Bulk Mail Center Highway Transportation Routes 

— Western Area NL-AR-06-001 2/14/2006 $2,235,812

TOTAL $51,030,405 

Description Number of Reports Dollar Value

Reports for which no management decision was made at the beginning of the reporting period 7 $65,365,806 

Reports issued during the reporting period 9 $132,938,118 

TOTALS 16 $198,303,924 

Reports for which a management decision was made during the report period 9 $139,376,134 

(i) Value of recommendations agreed to by management $130,403,185 

(ii) Value of recommendations that were not agreed to by management $8,972,949 

Reports for which no management decision was made by the end of the reporting period 7 $58,927,790 

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

(See Note 1 for a list of individual reports) 2 $7,035,251 

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

(See Note 2 for a list of individual reports) 4 $51,030,405 
53 | Semiannual Report to Congress

Appendix D

Many of our audit reports identify areas for improvement that result in non-monetary benefits to the Postal Service. These benefits include improvements 

to service, protection of assets, and improvements in the reliability of data. FY 2007 is the first year we are reporting these benefits to the Postal Service.

Type of Measure Value or Amount

IMPROVED SERVICE

Recommendations that address the Postal Service’s efforts to improve the quality and 

accessibility of its products and services Number of Recommendations 34 

Number of customer service audits conducted Number of Audits 6 

SAFEGUARDING ASSETS

Assets or Accountable Items at Risk:

Inadequate internal controls put the value of assets or accountable items (for example cash 

and stamps) at risk of loss Dollar Value $112,114,758 

Physical Safety and Security:

Inadequate physical protection or safety practices put the value of physical assets (plant, 

computer equipment, and vehicles) at risk of loss and increase potential lost employee work 

time Dollar Value $82,294 

Recommendations that address the safety and security of Postal Service employees and/or 

the work environment Number of Recommendations 16 

Number of employee/facility safety and security audits conducted Number of Audits 2 

Information Technology Security:

Inadequate controls/protection put the value of data, IT assets (software, networks), and 

employee work time at risk of loss Dollar Value $2,164,487 

Number of data security/IT security audits conducted Number of Audits 12 

GOODWILL / BRANDING

An “adverse impact” on goodwill is an actual event/problem that harms the Postal Service’s 

reputation or a potential problem that could negatively impact the Postal Service “brand 

name” Number of Issues Identified 7 

Reported Non-Monetary Benefits

For the period October 1, 2006 — March 31, 2007
October 1, 2006 — March 31, 2007 | 54

Appendix 

D — 

E

Office of Inspector General

Issue Date

Number of 

Recommendations Report Title Report Number

2/22/2002 1 Review of the Facilities Management System for Windows IS-AR-02-003

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

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

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

8/21/2003 1 Propriety of Postal Service Utility Payments FT-AR-03-011

9/30/2003 2

General Controls at the Engineering Research and Development Center, Merrifield, 

Virginia IS-AR-03-008

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

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

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

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

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

1/25/2005 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

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

4/21/2005 2 Vehicle Management - National Trailer Lease — Unresolved Audit Recommendations NL-MA-05-001

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

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

8/11/2005 1

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

the Sacramento District HM-AR-05-010

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

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

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

2/10/2006 1 Flat Remote Encoding System for Automated Flat Sorting Machine 100 DA-AR-06-003

2/10/2006 5 Security Vulnerability Assessment and Audit of Automated Postal Center Systems IS-AR-06-003

2/14/2006 3

Surface Transportation — Bulk Mail Center Highway Transportation Routes — Western 

Area NL-AR-06-001

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

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

3/28/2006 1

Mail Transport Equipment Service Center Network — Highway Transportation Routes 

— Memphis NL-AR-06-005

Appendix E

REPORTS WITH SIGNIFICANT RECOMMENDATIONS PENDING CORRECTIVE ACTIONS

For the period through March 31, 2007

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.
55 | Semiannual Report to Congress

Issue Date

Number of 

Recommendations Report Title Report Number

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

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

5/19/2006 2

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

in Selected Areas HM-AR-06-004

5/25/2006 2 Router and Switch Controls at Selected Postal Service Information Technology Centers IS-AR-06-011

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

8/9/2006 1 Overdrawn Express Mail Corporate Accounts DR-AR-06-007

8/18/2006 2

Mail Transport Equipment Service Center Network — Highway Transportation Routes 

— Atlanta NL-AR-06-009

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

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

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

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

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

9/27/2006 1

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

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

9/28/2006 2

Mail Transport Equipment Service Center Network — Highway Transportation Routes 

- Dallas NL-AR-06-012

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

9/29/2006 3 Postal Service’s Schedule Awards Program in the New York Metro Area — Report I HM-AR-06-007

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

9/29/2006 1 Mail Transport Equipment — Transportation of Over the Road Containers NL-AR-06-014

9/30/2006 1 Biohazard Detection System DA-AR-06-006

10/16/2006 4 Delivery and Retail Standard Operating Procedures — Capital Metro Area DR-MA-07-001

11/9/2006 4 Sioux City, Iowa, Processing and Distribution Facility Consolidation EN-AR-07-001

12/4/2006 1

Audit Report for Flats Sequencing System Production Proposal Submitted by Northrop 

Grumman Corporation, Electronic Systems Company CA-CAR-07-003

12/5/2006 4 Service Implications of Area Mail Processing Consolidations EN-AR-07-002

12/7/2006 1

Security Vulnerability Assessment of Legacy Applications at the Eagan Host Computing 

Services, Eagan, Minnesota IS-AR-07-003

12/11/2006 1 Postal Service Contact Center Phase 1: Customer Service MS-AR-07-001

12/22/2006 2 Audit Report — Air Networks — Airport Mail Center Operations - Atlanta NL-AR-07-001

12/26/2006 2 National Customer Management System Encryption IS-AR-07-006

1/26/2007 2 Management of the Flats Recognition Improvement Program DA-AR-07-002
October 1, 2006 — March 31, 2007 | 56

Appendix e

Issue Date

Number of 

Recommendations Report Title Report Number

2/9/2007 2

Timeliness of Mail Processing at the Los Angeles, California, Processing and 

Distribution Center NO-AR-07-001

2/23/2007 1 Enterprise Payment Switch Solution Phase II: Preparations for Security Testing IS-AR-07-007

3/15/2007 3 Address Management System Information — Northeast Area DR-AR-07-001

3/23/2007 2

Surface Transportation - Processing and Distribution Center Transportation Routes 

— Eastern Area NL-AR-07-002

3/26/2007 1

Fiscal Year 2006 Postal Service Financial Statements Audit — San Mateo Information 

Technology and Accounting Service Center FT-AR-07-010

3/29/2007 2 Audit of Cellular Services IS-AR-07-010

3/30/2007 4 Address Management System Information - Southeast Area DR-AR-07-002

3/30/2007 5 Postal Service Security Controls and Processes for the Capital Metro Area SA-AR-07-002

3/30/2007 1 Steubenville — Youngstown, Ohio, Outgoing Mail Consolidation NO-AR-07-003

3/30/2007 2

Postal Vehicle Service Transportation Routes — Memphis Processing and Distribution 

Center NL-AR-07-003

3/31/2007 8 Stamps on Consignment Program DR-AR-07-003
57 | Semiannual Report to Congress

Appendix G

INVESTIGATIVE STATISTICS1

For the period October 1, 2006 — March 31, 2007

Investigations Completed 3,820

Arrests/Information/Indictments 412

Convictions/Pretrial Diversions2 141

Administrative Actions Taken 1,776

Cost Avoidance $79,336,879

Fines, Restitution, and Recoveries $128,149,410

Amount to Postal Service3 $22,191,944

1

 Statistics include joint investigations with 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.

Appendix F

SIGNIFICANT MANAGEMENT DECISIONS IN AUDIT RESOLUTION

For the period October 1, 2006 — March 31, 2007

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.

The OIG has no significant management decisions in audit resolution as of March 31, 2007.
October 1, 2006 — March 31, 2007 | 58

Appendix H

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

For the period October 1, 2006 — March 31, 2007

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 OIG rather than to the 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 Inspection 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.

Type of Scheme Complaints Filed

Consent 

Agreements FROs

Cease & Desist 

Orders

Advance Fee 1 — 1 1

Contests/Sweepstakes 1 1 — 2

Coupon Fraud 7 2 — 2

False billings 6 3 3 8

Internet Auction 4 1 — 2

Lotteries (Foreign and Domestic) 2 — — —

Medical — — — 3

Merchandise:

 Failure to furnish 1 1 — 1

 Failure to pay 16 6 — 7

Misrepresentation 1 1 — 1

Miscellaneous 5 4 — 5

Telemarketing 2 1 — 1

Work at home 13 12 7 14

TOTAL 59 32 11 47

Other Administrative Actions

Administrative Action Requests 94

Temporary Restraining Orders Requested —

Temporary Restraining Orders issued —

Cases Using Direct Purchase Authority —

Civil Penalties (Section 3012) Imposed $40,000 

Test Purchases —

Withholding Mail Orders Issued 56

Voluntary Discontinuances 14

Financial Reporting on Inspection Service Investigative 

Activities FY 2007 (October 2006 — March 2007)

TYPE Semiannual Report

Personnel $145,568,136 

Nonpersonnel $50,913,111 

Total $196,481,247 

Capital Obligations $6,144,293 

Subpoenas

Case # Date Issued Scheme

07-001 12/21/2006 False Representation

07-002 3/21/2007 Lottery scheme

Appendix 

F — 

G — 

H
59 | Semiannual Report to Congress

Appendix I

Investigations

Requestor Allegation/Concern Our Major Findings Closure Date

Office of the Vice President Allegations of harassment and unsafe work 

conditions resulting in an on-the-job vehicle 

accident.

We reviewed, did not substantiate allegations. 

Individual was found to be at fault for the vehicle 

accident. 11/6/2006

Representative, North Carolina Whistleblower retaliation. We investigated, found employee made a protected 

communication and management had taken 

adverse action. However, the adverse action was 

not a result of the protected communication. 1/4/2007

Senator, Texas Postal Service and Inspection Service personnel 

covered up incidents of employee exposure to 

asbestos.

We were unable to proceed, due to lack of specific 

information that would allow us to evaluate and 

possibly investigate such incidents. 10/27/2006

Senator, Texas Allegations of discrimination, hostile work 

environment, and harassment.

We reviewed, found employee had a pending equal 

employment opportunity complaint. No additional 

work necessary. 12/8/2006

Representative, Texas Allegations of misconduct and possible 

whistleblower reprisal.

We verified employee filed a grievance with 

the American Postal Workers Union. As union is 

pursuing, the OIG deferred to the union. 10/16/2006

Representative, West Virginia Management directed First-Class Mail be discarded 

and caused an intentional delay in Standard A 

(formerly Third Class) Mail.

We investigated but did not substantiate allegations. 

Management took steps to prevent First-Class Mail 

from being inadvertently discarded. 1/25/2007

Representative, Minnesota Intentional delay of “red-tagged” political mail so it 

would not arrive in time to influence the September 

12 Minnesota primary election.

We investigated, found no evidence of intentional 

delay of mail.

10/31/2006

Senator, Virginia Mail fraud allegations, which Inspection Service 

failed to properly investigate.

We investigated, did not substantiate allegation. 

Inspection Service handled case appropriately. 1/19/2007

Representative, Illinois Letter Carrier intoxicated while on duty, causing 

mail delivery problems.

Our investigation revealed the Letter Carrier was 

intoxicated while on duty; referred to management. 1/30/2007

Representative, New York Status/response regarding OIG investigation and 

removal from duty pending outcome.

We confirmed our investigation, but could not 

comment on status or disciplinary action. 12/8/2006

Representative, California Dissatisfied with the way the Inspection Service 

handled allegations of mail theft.

We reviewed, did not discover any misconduct on 

the part of the Inspection Service. 1/4/2007

Representative, California Letter Carrier intentionally submitted a Change of 

Address Order (COA) without knowledge or consent 

of recipients.

We investigated, confirmed the COA had been 

corrected and mail thereafter was being properly 

delivered. We advised management of our findings. 3/7/2007

Representative, Arkansas Management falsified documentation, or impeded 

efforts to file an on-the-job injury claim (form CA-2), 

and created a hostile work environment.

We investigated, found no basis for misconduct 

allegation. However, we did identify a deficiency in 

formal injury compensation training for personnel 

serving in acting status as first line supervisors. We 

notified management and plan additional contact to 

ensure the matter is fully addressed. 2/23/2007

CLOSED CONGRESSIONAL AND BOARD OF GOVERNORS INQUIRIES

For the period October 1, 2006 — March 31, 2007

This appendix lists the 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.

Inspector General

Requestor Allegation/Concern Our Major Findings Closure Date

Representative, Virginia Impropriety in OIG internal investigation of 

employee misconduct.

We conducted quality assurance reviews and 

concluded managers acted in good faith; noted 

investigation concluded there was no evidence to 

support the misconduct allegations. 10/18/2006
October 1, 2006 — March 31, 2007 | 60

Appendix I

Audits

Requestor Allegation/Concern Our Findings Closure Date

Representative, Pennsylvania Review recent changes in mail processing 

operations in the Philadelphia Metropolitan 

Performance Cluster that have affected employees 

at the Southeastern P&DC.

We conducted fieldwork at the Southeastern and 

Lehigh Valley P&DCs, part of the Philadelphia 

Metropolitan Performance Cluster. We examined 

changes in mail processing and their impact on 

mail handling requirements, employees, and costs. 

We substantiated two concerns about processing 

and partially substantiated one. Management plans 

to take corrective action. 12/8/2006

2 Senators & 1 Representative, 

Iowa 

Requested OIG audit of the proposed Sioux City 

consolidation.

Issues were addressed in Audit Report. 

11/13/2006

Representative, California Delayed mail at the Los Angeles, California, P&DC. Issues were addressed in Audit Report. 3/1/2007

Senator, Montana Review of the feasibility study to evaluate the 

movement of a portion of mail processing work 

from Helena to Great Falls.

The Western Area reviewed the Helena study and 

determined the study should be discontinued due to 

impacts to service and minimal cost savings. Postal 

Service Headquarters reviewed that decision and 

has concurred. 1/22/2007

Representative, California Beverly Hills, California, Post Office has failed to 

provide reasonable and timely postal services 

to residents and businesses, partly due to an 

ineffective management style.

District-wide issues were addressed in recent 

audit report on delayed mail conditions in Southern 

California, and management has made some 

changes at the Beverly Hills Station. 3/16/2007

Representative, West Virginia Employee misconduct/intentional delay of mail. We investigated; found no basis for misconduct 

allegation. We determined that the root cause was a 

local government address change process, coupled 

with mailers’ use of outdated addresses. 3/22/2007

Senator, Nevada Postal vehicle was driven recklessly; driver made 

racial slur, verbal threat, and displayed prescription 

medication.

We investigated, found employee had already been 

terminated from Postal Service and conducted no 

further work. 1/19/2007

Representative, Texas Request for information on an active investigation 

of discarded or intentionally not delivered mail. 

Complainants questioned OIG conduct of the 

investigation.

Our investigation found more than 1500 pieces of 

undelivered mail and other delivery problems. We 

shared findings with Postal management, who put 

several Letter Carriers on Emergency Placement. 1/29/2007

Representative, Texas Employee misconduct/mail tampering involving 

notations on private organization ballot envelopes.

We reviewed employee misconduct allegation; did 

not find clear violation of postal or criminal laws or 

regulations. 2/21/2007

Representative, Georgia Intentional delay of First-Class Mail. We investigated, found no evidence to substantiate. 2/23/2007

Representative, Louisiana Letter Carrier cashed Social Security checks of mail 

recipient on his route.

We investigated, found employee did cash checks. 

We reported our findings to management for any 

appropriate action. 2/22/2007

Senator, New York Status/Response regarding OIG investigation and 

removal from duty pending outcome.

We investigated and provided our findings to 

management. 2/26/2007
61 | Semiannual Report to Congress

Referrals

Requestor Allegation/Concern Referred To Closure Date

Representative, Florida Some mail, including Standard Mail, is being 

diverted, stolen, or misappropriated.

Inspection Service 3/1/2007

Representative, Texas A private organization intends to conduct a raffle 

through the mail.

Inspection Service 2/22/2007

Senator, New Hampshire Improper denial of Equal Employment Opportunity 

complaint.

Equal Employment Opportunity Commission 3/5/2007

General Counsel

Requestor Allegation/Concern Our Findings Closure Date

Executive Office of the President Harassment and retaliation by management 

following complainant’s whistleblower 

communication about employment of convicted 

felons. 

OIG investigated, finding a prima facie case of 

reprisal following a protected communication 

(whistleblowing). 

11/17/2006

Senator, Texas Work-related illness due to exposure to dust and 

chemicals used on mail processing equipment in a 

Dallas facility.

We did not substantiate claim due to lack of 

information, but noted management efforts to 

address the issues. 2/23/2007

Governors Allegations of misconduct and possible 

whistleblower retaliation.

In the previous SARC period, we conducted two 

investigations, finding a prima facie case of 

whistleblower reprisal. 10/10/2006

Senator, Texas Management interference with employee’s selection 

for a new position. 

We conducted a review, but noted that the employee 

was actively pursuing the complaint through the 

equal employment opportunity process. 3/29/2007

Senator, Texas Allegations of managerial harassment and 

discrimination at a Texas P&DC.

Employee pursuing complaint through the equal 

employment opportunity process and the grievance 

arbitration process. 11/24/2006
October 1, 2006 — March 31, 2007 | 62

supplemental information

supplemental information

Freedom of Information Act

For the period of October 1, 2006 — March 31, 2007.

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 the 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

Requests Number of Requests

Carryover from prior period 12

Received during period 143

Total on hand during the period 155

OIG actions Number of Requests

Processed during the period 139

Requests released in full 11

Requests partially granted 46

Requests not granted 19

Requests referred to another agency 43

No records 18

Not proper FOIA requests —

Withdrawn 2

Balance Number of Requests

Balance at the end of the period (pending) 16

Processing Days Number of Days

Median processing days to respond to a FOIA request 12
63 | Semiannual Report to Congress

Workplace Environment

For the period October 1, 2006 – March 31, 2007

The OIG’s Workplace Environment team receives referrals involving workplace environment and operational issues from multiple 

sources, which include 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. Workplace Environment closely coordinates efforts with Postal Service management to ensure employees have a 

stress- and adversity-free work environment to the extent possible. The team continues to review internal complaints received from 

OIG employees. This process provides OIG employees another avenue to report their concerns, in addition to the equal employment 

opportunity avenues. 

Referrals Total

Carryover from prior period 36

Complaints received from OIG Hotline 321

Congressional/BOG/Postal Service management 6

Internal 12

Other 3

Total on hand during this period 378

Workplace Environment Actions Total

Complaints closed during the period 350

Referred to management 57

Referred to OIG Office of Investigations 21

Referred to OIG Office of Audit —

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

Conducted limited inquiry into allegations/issues 182

Referred to database for statistical analysis and possible systemic reviews 84

Referrals pending at the end of the period 28
October 1, 2006 — March 31, 2007 | 64

supplemental Information

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.

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.

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 other 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 health care needs through a wide selection 

of health plans across the country. 

First-Class Mail – A class of mail that includes all matter 

wholly or partly in writing or typewriting, all actual and 

personal correspondence, all bills and statements of 

account, and all matter sealed or otherwise closed against 

inspection. First-Class Mail comprises three subclasses: 

postcards, letters and sealed parcels, and Priority Mail. 

Any mailable matter may be sent as First-Class Mail. 

First-Class Mail is a Postal Service trademark.

Flat–size mail – A mailpiece that exceeds one of the 

dimensions for letter-size mail (11-1/2 inches long, 6-1/8 

inches high, 1/4 inch thick) but that does not exceed the 

maximum dimension for the mail processing category (15 

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.

Inspection Service – 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.

Logistical support network – Activities or programs 

that support the transportation of mail, such as fuel 

procurement, mail transport equipment procurement and 

management, and vehicle management and maintenance.

Lottery scheme – Advertisements seeking money or 

property by mail for participation in schemes to win prizes 

through chance.

Merchandise failure to pay scheme – Mail order 

merchandise acquired without providing payment.

Glossary
65 | Semiannual Report to Congress

supplemental Information

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.

PAEA – The Postal Accountability and Enhancement Act 

is the new postal law passed by Congress in December 

2006. 

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 Regulatory 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.

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 non 

personnel 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.

Verification – Process to check 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.

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 falsely purport to 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.
October 1, 2006 — March 31, 2007 | 66

office of inspector general

Report 

Fraud, Theft, 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
67 | Semiannual Report to Congress

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