Evening star. [volume] (Washington, D.C.) 1854-1972, 1898-01-07
Extensive Frauds in Money Orders
Have Been Discovered.
AUDITOR CASFLE'S new SYSTEM
It Brought to Light the Defects Of
Former Practice.
THE LOSS NOT KNOW

Office Department involving extensive
forgerfes in money orders, and the loss of
hundreds of thousands of dollars to the
government.
The discovery was made in a peculiar
way, and was only possible after a change
had been effected in the system of auditing
money orders. There is no means of ar
irving even at an approximate estimate of
the losses the government has sustained,
but Auditor Castle thinks perhaps it will
reach into the hundreds of thousands Of
dollars.
Checking by Coupon.
Under the so-called Dockery system,
which reorganized the departmental service
three years ago, the system Of checking
money orders In the office of the auditor
of the Post Office Department was materi-
ally changed. This was an incident to the
bill, although required only by implication.
Mr.. Dockery disclaims any intention Of
forcing this change, but 1t was neverthe-
less made, and for more than three years
the money order accounts of the issuing
postmasterS have been audited by the stubs
or coupons, and not by the money orders
themselves. as had previously been done.
In other words, the postmaster who issued
the money order sent in with his daily,
weekly or monthly report of money orders
sold what purported to be the coupon cut
from each order, which coupon was sup
posed to represent, by the process of cut
ting the exact amount of the order from
which it had been detached. If the post
masters account cOrresponded in each item
with this coupon, his account was assumed
to be correct, was audited and then closed.
The money order itself was never checked
by the issuing pOstmaster's returns, but
was only used as a voucher for the paying
postmas ter.
The object of using the coupon instead of
the money order to check by was to ex-
pedite the settlement of pOstmasterS' ac-
counts. The coupon C:me in with the re-
port, could be Immediately checked up and
verified. If correct the report was APP
proved; If incorrect the correction could be
made without any delay; whereas. if the
account must remain open until the money
order could he compared with it, much
time must necessarily elapse, as the money
orders go to- all parts of the country, and
weeks or months elapse before they can be
gathered in by the auditors office, checked
up with the paying postmaster's account
hen assorted to the issuing postmaster,
and compared with his report.
Possible Ways to Dcfraud.
Fresh from his duties as postmaster at
ST. Paul, Capt Henry A Castle assumed
contrcl Of the office of auditor last June.
One of the first things he did was to ac-
quaint himself with the system of auditing
post Office accounts. Being familiar with
the workings Of a large post Office and un-
derstanding the system of issuing money
orders, he found upon examining the meth
eds of auditing what he believed to be
glaring defects. defects which made it pos
sible for dishonest postmasters to rob the
government out of thousands of dollars.
Shortly after the appointment of Deputy
Auditor Lawshc, who, by the way, had al
SO served a term as postmaster in Indiana.
Auditor Castle charged him with the spe-
cial duty of investigating the methods in
n tn RI JiQf oil hoir n
In conjunction with MIR. Bishop, chief of
the inspecting division, now chief clerk of
the auditors office, Mr.. LaWshe discovered
and pointed out nine possible ways in
winch the government could be defrauded
under the prevailing system. In some of
these cases collusion between two post
masters was necessary. In others collusion
between postmasters and clerks In the au-
ditors office was necessary, but still others
could be worked by postmasters alone or
by Office clerks alone. 1t WAS agreed that
n system so radically defective could not
he longer tolerated, and in November Au-
oltor castle arranged to commence the new
year by new system Of auditing which,
IN his opinion, would cover all defects.
one OF the most important reforms de-
cided upon was the abolishment of the
coupon entirely and check both sides of
every postmasters account by the money
order itself. This involved much additional
labor and considerable delay. but is be-
lieved to be the only absolutely safe and
correct method.
Errors Discovered.
There was nothing said Of the proposed
reforms. The postmasters throughout the
country were not notified. If frauds ex-
listed the new system would develop them.
Last Monday the new system was put into
operation, and the first days experience
fully demonstrated its necessity Several
cases were detected in which orders had
been issued for large amounts such as
$sO or slOO each, which had been reported
by the issuing postmaster at one or two
dollars each. When the reports came in
three months ago, they were accompanied
by coupons cut to represent the amount
reported. The reports had been checked
up by the coupons; everything appeared
regular the accounts had been found cor
rect ard closed. In some cases discovered
the postmasters had gone out Of the sery-
Ice and had made their final settlements
with the government. Under the system
which prevailed down to December 81 last
these errors ware not and could not have
been discovered. With the Inauguration of
the new system numerous errors or frauds
have already been discovered, showing
conclusively that some dishonest postmas-
tiers had either learned of the defective
auditing and practice here and took ad-
vantage of it or simply took a chance, and,
finding 1t operated. continued their pecula-
1ions' How many Of these frauds have
been perpetrated during the three years
in which the coupon system Of auditing
was in vogue can only be guessed at Each
day since Monday has brought to light
new developments. If these continue In
anything like the present ratio Auditor
Castle will probably find 1t necessary to
go back over the entire three years. check
nearly one hundred million separate money
orders by the issuing postmaster reports,
reopen the accounts of several thousand
ex-postmasters and have q finally correct
audit.
Big Work Possible.
The department officials hope this will
not be necessary, as it involves an immense
amount of labor. The means, however, are
at hand for doing the work. provided
enough force can be secured, and Auditor
Castle. at rough estimate, says he be-
lieves 100 men can do the work in a year.
There are 5OO,O00.G0O post office orders at
hand. covering period of seven years.
but the investigation would not go into ali
Of them, but be limited to the past three
years, when the coupon system was in
aCgurated. There ara issued each day
$1,000 post Office orders, OF a total Of 2G,-
100000 orders a year. These, after they
are audited, are put in the basement Of
the Post Office Department, where they