The automation of mail sorting and distribution activities with state-of-the- art technology is a core component of the Service’s strategy to achieve its goals for efficiency, effectiveness, and financial performance. According to the Service, the success of this strategy relies, in considerable part, on the Service’s ability to provide address management services that help mailers accurately address their mail and adopt automation-compatible address standards. The NCOA program is one of several Service address management programs under the direction of the Manager, Address Management, located at the National Customer Support Center in Memphis, TN. The Manager reports to the Vice President, Operations Planning, at Service headquarters. The NCOA program began in 1986 and extended the use of change-of- address information submitted by postal customers to the Service by providing that information to business mailers for updating their mailing lists. This is important to the Service because sorting, transporting, delivering, and, in some cases, disposing of improperly addressed mail costs the Service money—estimated by the Service in 1996 at about $1.5 billion a year. The Service estimated that of the 191 billion pieces of mail it processed in 1997, incomplete or inaccurate address elements adversely affected the delivery of about one-third, or over 63 billion pieces. NCOA change-of-address data are widely disseminated to business mailers through a network of 21 private businesses licensed, for a fee, by the Service. Licensees are responsible for maintaining a complete and current NCOA master file. Every week, the NCOA program office is to provide licensees a copy of the latest NCOA file update via computer tape. Licensees are to use these tapes to update the NCOA files they maintain. These tapes include address deletions, additions, and changes. Licensees are to use their updated NCOA master files and the address- matching logic designed into their computer software to update addresses on their and their customers’ mailing lists. Each licensee’s address matching software is to be tested and approved by the NCOA program office. The Service requires the software to meet strict performance standards as specified in the licensing agreement, and licensees are to use only the approved software to provide the NCOA service. In providing this service, licensees are to update an address on a mailing list only when a name and address on that list match a name and old address in the NCOA file. Service authority to disclose address information about its customers is limited by certain privacy guarantees in two federal laws. One of them, Section 412 of the Postal Reorganization Act of 1970, as amended (39 U.S.C. 412), provides that no officer or employee of the Postal Service shall make available to the public by any means or for any purpose any mailing or other list of names or addresses of postal patrons or other persons, except for census purposes or as otherwise specifically provided by law. The Privacy Act of 1974 (5 U.S.C. 552a) provides individuals broader protection from the unauthorized use of records that federal agencies maintain about them and gives them right of access to those records. Subsection (n) of the act specifically restricts certain uses of a name and address as follows: “An individual’s name and address may not be sold or rented by an agency unless such action is specifically authorized by law.” More generally, under the Privacy Act, agency records may be disclosed provided such disclosures are compatible with the purpose for which the records were collected. Under subsection (m)(1) of the act, NCOA licensees operate on behalf of the Service and are subject to the provisions of the act to the same extent that employees of the Service would be. To determine the actions the Service has taken in response to our recommendations that it prepare and implement formal written procedures to strengthen its oversight of the NCOA program, we interviewed the Manager, Address Management and National Customer Support Center; technical managers who oversee certain Service- administered address management processes and programs, including the NCOA program; and the NCOA program manager. We obtained and reviewed the two procedures manuals the Service prepared in response to our earlier recommendations. The “NCOA Procedure Guide” was undated but, according to the program manager, became effective beginning in about September 1996. It prescribes oversight procedures and processes for (1) reviewing and documenting reviews of licensees’ proposed NCOA-related advertisements and sales methods; (2) receiving, responding to, and documenting Service responses to postal customer NCOA-related inquiries and complaints; and (3) scheduling, conducting, and managing the results of Service audits of NCOA program licensees. The second manual, the “NCOA Integrity Procedures Manual,” dated October 1998, describes seed records, their purposes, and the procedures and organizational responsibilities for carrying out the seeding process. To verify that written procedures were being followed and assess whether they responded to our recommendations, we (1) discussed the procedures with the NCOA program manager and other managers and staff responsible for program operations and oversight; and (2) reviewed records and files documenting the oversight processes of seeding, responding to and resolving postal customer inquiries and complaints, reviewing licensee’s proposed advertisement, and auditing licensees. Specifically, we discussed the seeding process with the program office’s project leader, who had primary responsibility for carrying out the process. We reviewed reports and documentation related to the seeding process, including tests of the process for alerting NCOA program officials to the possible release of seed record addresses, during the January 1996 through March 1999 period. We had discussions with the program manager responsible for handling customer inquiries and complaints and reviewed program files and records. We had no way to determine whether all inquiries and complaints received at the program office were logged and responded to. However, we randomly selected 18 of the 32 file drawers where inquiry and complaint records were stored, and we reviewed the entire contents of each. We discussed selected examples with the program office technical staff responsible for researching and responding to customer concerns. We examined documentation of licensees’ NCOA-related advertisements that had been submitted to and reviewed and approved/disapproved by the Service as required by the licensing agreement and specified in the NCOA Procedure Guide. We reviewed all available documentation in the program office’s official licensee files, and we discussed selected examples of advertisements with the program office staff responsible for the review and approval process. For the licensee audit process, we reviewed the results of all audits conducted from September 1995 through March 1999 that were documented in the program office’s audit files. We discussed the audits with the program manager and reviewed examples of audit results with responsible program office staff. To assess the Service’s response to our recommendation that the Privacy Act-related restriction on the use of NCOA-linked data to create new- movers lists be communicated explicitly to licensees’ customers, we discussed the issue with the Service’s Chief Counsel, Consumer Protection Law; a Service Senior Attorney in Washington, D.C.; and the Manager, Address Management, in Memphis. We conducted our review between September 1998 and May 1999 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Service and received written comments from the Postmaster General, which we have included in appendix I. His comments are discussed near the end of this report. The Service has taken steps to strengthen its oversight of the NCOA program and help ensure that the program operates in compliance with the privacy provisions of federal laws. The Service has developed and implemented written procedures formalizing its oversight processes and responsibilities for (1) seeding NCOA address change updates released to licensees, (2) addressing customer NCOA-related inquiries and complaints, and (3) reviewing and approving licensees’ proposed advertisements promoting NCOA-related services. However, our review revealed that the procedures the Service developed to ensure that mail sent to seed record addresses is appropriately identified, and the program office alerted to a possible release of a seed record address by a licensee, were not working as intended. As a result, the Service has no assurance that the seeding process provided an effective oversight mechanism. In 1996, we found several weaknesses in the Service’s practice of using seed records as an oversight measure to detect the improper release of NCOA data by licensees. We recommended that the Service develop and implement formal, written procedures that addressed the responsibilities and timetables for using the seeding process as an oversight mechanism. Our more recent work at the NCOA program office showed that, in response to our recommendations, the Service prepared formal written procedures that delineate program office responsibilities for carrying out the seeding process. Further, our work showed that the written procedures were generally being followed. However, we found another problem—the program’s process for alerting program officials that mail was sent to a seed record address (and therefore a licensee had possibly released a seed record address) was not working as intended. As a result, the Service had no assurance that the seeding process was providing the program oversight intended. According to NCOA program officials, the process of seeding NCOA files provides program oversight by helping to detect and deter the improper release of NCOA data by licensees. They said that NCOA file updates have been seeded since the program began in 1986. Seed records are fictitious name and address data that the program office periodically places in NCOA file updates provided to licensees. These names and addresses are designed uniquely and do not identify postal customers who have moved and submitted mail-forwarding forms to the Service, or any other postal customer. Therefore, licensees should not be able to match the seed record names and addresses with names and addresses on their mailing lists or their customer’s mailing lists when using the Service-approved name and address-matching computer software.