OIG: USPS lacks strategy to protect revenue

From a recent report by the USPS Office of Inspector General:

uspsoigThe Postal Service does not have a comprehensive, strategic approach to revenue protection. Revenue protection is provided by various groups whose missions and focuses are limited. For example, the Financial Testing and Compliance group tests internal controls to ensure the accuracy of financial statements, the Field Remediation group identifies and mitigates Sarbanes-Oxley weaknesses, and the Postal Inspection Service Revenue, Product, and Global Security group identifies systemic risk from weak revenue protection controls.

The Postal Service lacks a permanent group dedicated to coordinating and overseeing revenue protection activities. The existing Revenue Assurance group consists of employees on temporary assignment who have other responsibilities in addition to revenue assurance, and the group’s future is uncertain. Industry best practices suggest that agency-wide coordination is critical in reducing unnecessary overlap of key revenue protection activities. Identifying a permanent group to oversee revenue protection activities would mitigate gaps in and duplication of revenue protection activities, leverage Postal Service resources and increase the effectiveness of revenue protection efforts.

The Postal Service also lacks critical information on the amount and sources of shortpaid postage. Prior U.S. Postal Service Office of Inspector General audit reports identified Postal Service internal controls were inadequate to identify shortpaid and unpaid postage. The Postal Service continues to address revenue protection through technological initiatives; however, revenue leakage will continue to occur until automated verification procedures replace current manual processes.

Postal Service officials explained that the process for identifying shortpaid is difficult and cost-prohibitive and that no single group is responsible for this effort.

The first step in mitigating revenue leakage, including shortpaid postage, is to identify its source and magnitude. Currently, the Postal Service uses data provided by Statistical Programs from Origin Destination Information System-Revenue, Pieces and Weight tests to project shortpaid postage of $432 million in fiscal year (FY) 2013. However, the data are not considered statistically valid for shortpaid estimates and are only used to gauge potential revenue leakage. Further, this estimate does not include commercial mail.

This lack of data impedes the Postal Service from developing effective revenue protection rules and measuring program effectiveness. Applying the Universal Postal Union’s 5 percent estimate to business and retail mail that was not verified for sufficient postage through automation in FY 2013, we estimate that $1.2 billion of revenue was at risk of revenue leakage.

What The OIG Recommended

We recommended the Postal Service develop a strategy to coordinate revenue protection efforts and explore cost effective methods for estimating shortpaid revenue for business mail.

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