We issued a series of reports between September 2016 and June 2017 on Postal Service stamp, money order, and cash inventory accountability at 10 post offices. Also, in April 2018, we performed a nationwide audit of the design and effectiveness of internal controls over stamp stock accountabilities. As a result of these audits, management implemented three controls: monthly meetings between the Controller and area personnel, facility reviews of financial controls, and an online certification process requiring field offices to be certified in managing controls over stamp stock accountabilities and shipments.
Each Postal Service retail unit must maintain an inventory for items such as stamps, money orders, and cash. Sales and service associates do not have an individually assigned stamp stock inventory and instead work from a shared retail floor stock. A count of the retail floor stock must be conducted at least once each quarter. If the count results in a variance greater than $100, the unit must notify our office.
Because of the volume of small value items, a perfect count of stamp stock inventory is unlikely, and significant numbers or trends of perfect counts or near perfect counts can indicate weak controls over stamp stock. A perfect count is when a unit does not identify a shortage or overage in retail floor stock, and a near perfect count is when a unit reports a variance within $5 of the expected count. The objective of this audit was to determine whether perfect and near perfect counts of retail floor stock decreased from fiscal year (FY) 2018 to FY 2019.
Our fieldwork was nearly completed before the President of the United States issued the national emergency declaration concerning the novel coronavirus disease outbreak (COVID19) on March 13, 2020. The results of this audit do not reflect operational changes and/or service impacts that may have occurred as a result of the pandemic.
Nationwide, the number of perfect counts and the number of units that reported perfect counts decreased by 14 and 12 percent, respectively, from FY 2018, quarter (Q) 1, to FY 2019, Q4. The number of near perfect counts and the number of units that reported near perfect counts increased slightly, both by about 2 percent. A reduction in the perfect counts indicates the risk of inaccurate financial reporting or ineffective internal controls over the stock count process has declined.
We also found that perfect counts were no more than 5 percent of the total, and near perfect counts were 23 percent or less of the total counts performed by all units in any one quarter. In addition, we reviewed the units from the previous audits and identified none of the 10 units reported perfect counts, but four units reported five near perfect counts during the scope period.
When analyzing the data by area and district, we found regions where the units with perfect or near perfect counts increased significantly more than others. For example, between FY 2018, Q1, and FY 2019, Q4:
- In the Eastern and Great Lakes areas, units reporting perfect counts decreased by more than 25 percent.
- In the Pacific Area, units reporting perfect counts increased by 8 percent.
- In the Northeast Area, units reporting near perfect counts increased 14 percent.
- Ten districts in four areas notably exceeded the average percentage of units reporting perfect and near perfect counts. We made referrals to our Office of Investigations as appropriate.
District, area, and headquarters management do not analyze perfect or near perfect count results of retail floor stock to identify financial or internal control risks. However, they do use perfect counts as an indicator for other activity, such as identifying sites for retail unit reviews. Additionally, headquarters officials are developing a new report (estimated for July 2020) that would identify stock counts with high dollar variances and units with a high frequency of counts.
Based on the audit results, we did not make any recommendations. However, we plan to continue analyzing this activity and may perform additional work in the future.