Traditionally, the Service’s local post offices deposited their daily remittances of coin, cash, and checks in accounts with local banks. Before 1997, according to the Service’s Assistant Treasurer for Banking, the thousands of individual retail postal units deposited their daily remittances in some 9,300 bank accounts with 5,500 banks across the country. In 1997, to help reduce banking costs and improve funds availability, the Postal Service implemented consolidated banking—a Service-wide process whereby the daily remittances from the Service’s retail postal facilities are consolidated and transferred by armed bank couriers to a relatively few commercial banks for deposit. The Postal Inspection Service, one of the nation’s oldest law enforcement agencies, is the Postal Service’s law enforcement arm. With a force of about 1,400 uniformed Postal Police Officers (PPOs), over 1,900 postal inspectors, and five forensic crime laboratories, the Postal Inspection Service is responsible for ensuring the safety and security of postal employees, facilities, and assets. PPOs provide security at postal facilities where the Postal Inspection Service has determined that risk and vulnerability demonstrate a need for this level of security. Postal inspectors help enforce and investigate infractions of over 200 federal laws applicable to crimes that adversely affect or involve fraudulent use of the U.S. mail. Matters investigated include criminal incidents, such as mail theft, robberies, burglaries, and embezzlement; and the criminal use of the mail for money laundering, fraud, child exploitation, and the movement of illegal drugs. The Postal Inspection Service periodically performs reviews of remittance- processing procedures at selected individual postal facilities or at a cross section of facilities within a postal district. These reviews are security reviews focused primarily on compliance with the applicable policies and procedures to help prevent instances of mishandling and losses. Results of these reviews are reported to the appropriate postal district manager, and districtwide review results are reported to the appropriate postal area manager. According to the Postal Inspection Service, although its reports apprise postal officials of its findings and recommend corrective action(s), district and area managers are not required to implement these recommendations. To meet our objectives, we obtained and reviewed Service policies and procedures for controlling and securing remittances and for requiring background checks and training for employees who work with remittances. We used the Standards for Internal Control in the Federal Government, as well as the Internal Control Management and Evaluation Tool, to help assess the Service’s policies and procedures. We also obtained and reviewed applicable training manuals, orders, directives, and handbooks. Also, for each of our objectives, we discussed the applicable policies, procedures, and practices with appropriate Service officials, including headquarters officials in Postal Operations, Corporate Accounting, Corporate Treasury, Human Resources, Network Operations Management, and the Postal Inspection Service. Further, we had similar discussions with postal facility managers, supervisors, employees who process remittances, and Postal Inspection Service inspectors in the various field locations we visited. We did not review all aspects of the Service’s internal controls or its systems for accounting for remittances. For example, we did not evaluate the Service’s assessment of the risks that it faces from both internal and external sources or perform a comprehensive assessment of the Service’s security for its post offices or processing centers. To help determine how well the Service’s policies, procedures, and control activities are working, we obtained and reviewed Postal Inspection Service reports of investigations and other Postal Inspection Service reports dating back to fiscal year 1999. We judgmentally selected reports for review on the basis of our discussions with Postal Inspection Service officials about the remittance loss history of the various postal districts and to provide geographic dispersion. We also visited Service facilities at six locations—three in Arizona; one in Texas; one in Maryland; and one in Washington, D.C.—to observe Service policies and procedures in practice.The facilities in Arizona were chosen because they were at or near the location where a postal employee stole a substantial amount of remittances in June 2001. The other facilities were chosen to provide geographic dispersion for our observations. We performed our work between July 2001 and November 2002 in accordance with generally accepted government auditing standards. We obtained comments on a draft of this report from the Postal Service. The Service’s policies and procedures include a number of remittance control activities that, if properly implemented, would help prevent remittance losses. However, Service employees are not always following established policies and procedures, and Postal Service management does not appear to have taken effective actions to address this problem. The GAO-issued Standards for Internal Control in the Federal Government defines the minimum level of acceptable internal controls in government. Although the standards provide a general framework, the management of each agency is responsible for developing the detailed policies, procedures, and practices to fit its operations. For example, one of the standards for internal control states that internal control activities— the policies, procedures, techniques, and mechanisms that enforce management directives—should be effective and efficient in accomplishing the agency’s control objectives. A key control activity includes establishing physical control to secure and safeguard vulnerable assets, including limiting access to such assets and ensuring that they are periodically counted and compared with control records. Thus, effective control activities at the Service would be expected to include such reasonable activities as are necessary to physically secure, safeguard, and account for its remittances. Service polices and procedures incorporate a number of activities for controlling and securing remittances that we believe, if effectively implemented, would help prevent loss of these assets. The Service’s control activities or procedures include, among others, the requirement that there is to be continuous individual accountability of remittances, including hand-to-hand exchanges at all transfers. In addition, employees are to document the progress of remittances moving through the system to banks and notify the Postal Inspection Service immediately when discrepancies or losses are noted. Finally, postal district accounting personnel are to reconcile the electronic record of each post office’s daily sales with the bank information showing remittance deposits received from each post office. Our observations and the findings of the Postal Inspection Service show that many of these policies, procedures, and activities for controlling and securing remittances are not always followed or practiced by employees at numerous postal facilities across the country. In addition, even though the Postal Inspection Service has brought this issue to the attention of Service management over a period of several years, it appears that the Service has not taken effective actions to address the problem. In July 2002, we visited three locations in the Service’s Arizona district. At each location, Postal Inspection Service officials accompanied us. The officials agreed with our observations that at each of these locations, Service employees carried out a number of practices that are inconsistent with Service policies and procedures for controlling and securing remittances. Each year, the Postal Inspection Service reviews control and security procedures at selected postal districts and facilities throughout the country to identify opportunities for security improvements and to measure and improve compliance with the Service’s policies and procedures. A primary goal of these reviews is to help protect remittances from mishandling, loss, and theft. The findings from these reviews are reported to Service management at the respective districts. We reviewed a number of Postal Inspection Service reports on the results of these reviews, which were completed in fiscal years 1999, 2000, 2001, and 2002. A May 1999 Postal Inspection Service report on performance audits performed at various postal facilities in the Service’s Northeast Area found that a number of policies and procedures for processing and securing remittances were not being followed. Specifically, the Postal Inspection Service found that individual accountability for remittances was not being maintained as required by Service policy and procedures. Also, in a February 1999 performance audit report, the Postal Inspection Service found that at a California postal district, postal personnel were handling remittances without signing for and accepting accountability for them. Postal Inspection Service reports of districtwide reviews conducted during May through July 2000 in six districts in the Service’s Western Area disclosed that local post offices in each of these districts often failed to take the appropriate actions required for ensuring that remittances could always be accounted for. For example, remittances were sometimes left unattended and unsecured. Also, certain restricted access areas were not locked, and unauthorized personnel were permitted entry. In August 2001, the Postal Inspection Service reviewed remittance- handling practices at 25 post offices in a district in the Service’s Southeast Area. Its report on these reviews stated that losses due to internal causes (employee theft and mishandling) in the district during fiscal year 2001 to date totaled about $150,000, an increase of 375 percent over the previous year’s total. The report said that these losses were attributable to practices in the district that failed to establish individual accountability for remittances and to properly secure them. During the period from early September through late December of 2001, the Postal Inspection Service reported visiting over 2,000 postal facilities nationwide and observed 252 lapses of remittance security. Its inspectors also found lapses in individual accountability of remittances and instances of unauthorized access into postal facilities through unsecured doors, including doors that were propped open and left unattended. An important internal control standard established in the Standards for Internal Control in the Federal Government pertains to the control environment. It states that management and employees should establish and maintain an environment throughout the organization that sets a positive and supportive attitude toward internal control and conscientious management. However, it appears that even though significant weaknesses in the Service’s controls over its remittances have been brought to the attention of Service management by the Postal Inspection Service numerous times over the last few years, Postal Service management has not taken effective action to address these weaknesses—leaving its remittances vulnerable to theft or loss.