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Office of Inspector General Semiannual Report to Congress April 1 — September 30, 2010 MISSION STATEMENT the Mission of the U.S

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Office of Inspector General Semiannual Report to Congress April 1 — September 30, 2010 MISSION STATEMENT the Mission of the U.S Office of Inspector General Semiannual Report to Congress April 1 — September 30, 2010 MISSION STATEMENT The mission of the U.S. Postal Service Office of Inspector General (OIG) is to conduct and supervise objective and independent audits, reviews, and investigations relating to Postal Service programs and operations to: Prevent and detect fraud, theft, and misconduct. Promote economy, efficiency, and effectiveness. Promote program integrity. Keep the Governors, Congress, and Postal Service management informed of problems, deficiencies, and corresponding corrective actions. A MESSAGE FROM THE INSPECTOR GENERAL This report, submitted pursuant to the Inspector General Act, outlines our work and activities for the 6-month period ending September 30, 2010. In the first section of this issue, we highlight audits and reviews that address risks in the strategic, financial, and operational areas of the U.S. Postal Service. The second section highlights investigations conducted during this reporting period that contributed to safeguarding the Postal Service’s revenue and assets and helped deter postal crimes. Postal Service executives often work closely with their OIG counterparts to identify problems and collaborate on solutions. These efforts have resulted in significant savings opportunities. During this period, we issued 165 audit reports and management advisories, and the Postal Service accepted 94 percent (141 of 149) of the OIG’s significant recommendations. In addition, we conducted 1,991 investigations that led to 453 arrests and more than $672 million in fines, restitutions, and recoveries, of which more than $27 million went to the Postal Service. The Postal Service has reached a critical point in its history. It faces tremendous challenges to remain financially sound and meet its mission. While the Postal Service is finding its role in the digital age, there are near-term actions needed for sustainability and to increase its readiness to enter a period of change. These include optimizing the network of plants and Post Offices; assessing the cost-effectiveness of contracts; improving internal controls in financial systems, resolving the benefit program inequities; offering new postal product and services In September, we issued a report that summarizes the results of four OIG reports identifying overfunding issues in employees’ and retirees’ benefit funds. If our proposals to recover the overfunded amounts were placed in effect, the Postal Service could potentially recover $142.4 billion. In addition, the Postal Service would no longer need to make the required payments to the Postal Service Retiree Health Benefits Fund (retiree health fund) — an average of $5.6 billion per year. The Postal Service can use these reports to come up with a legislative strategy when working with Congress, the Office of Personnel Management (OPM), and the Office of Management and Budget (OMB) to develop a fiscally responsible legislative proposal granting relief from the Postal Accountability and Enhancement Act (Postal Act of 2006) requirements to prefund retiree health benefits. The OIG — with the support of the Governors, Congress, and Postal Service management — will continue to play a key role in helping to maintain the integrity and accountability of America’s postal service, its revenue and assets, and its employees through its audit and investigative body of work. David C. Williams Inspector General SUMMARY OF PERFORMANCE April 1 — September 30, 2010 AUDITS Reports issued 165 Significant recommendations issued 149 Total reports with financial impact 43 Funds put to better use $11,502,017,298 Questioned costs1 $ 57,179,926,121 Revenue Impact $1,956,617,687 TOTAL FINANCIAL IMPACT2 $ 70,638,561,106 INVESTIGATIONS3 Investigations completed 1,991 Arrests 453 Indictments/informations 466 Convictions/pretrial diversions4 507 Administrative actions 1,096 Cost avoidance $126,185,995 Fines, restitutions, and recoveries5 $ 672,064,407 Amount to Postal Service $27,117,893 OIG HOTLINE CONTACTS Telephone calls 45,332 E-mail 13,524 Virtual Front Office calls 9,156 Standard Mail 1,071 Voice mail messages 513 Facsimile – FAX 385 National Law Enforcement Communications Center 282 TOTAL CONTACTS 70,263 1 Includes unsupported costs of $5,919,236,174. 2 The Postal Service agreed to recommendations or proposed alternative corrective actions that, if implemented, could result in more than $70 billion in savings. 3 Statistics include joint investigations with other law enforcement agencies. 4 Convictions reported in this time frame may be related to arrests made in prior reporting periods. 5 Amount under fines, restitution, and recoveries. TABLE OF CONTENTS OFFICE OF AUDIT ..............................................................................................................2 Audit Work by Risk Category ......................................................................................................................................... 3 Strategic Risk .............................................................................................................................................................. 3 Financial Risk .............................................................................................................................................................. 8 Operational Risk ......................................................................................................................................................... 11 OFFICE OF INVESTIGATIONS ...........................................................................................18 Financial Crimes ........................................................................................................................................................ 19 Workers’ Compensation Fraud .................................................................................................................................... 21 Delay, Destruction, and Theft of Mail by Employees ...................................................................................................... 22 Contract Fraud ........................................................................................................................................................... 23 Official Misconduct .................................................................................................................................................... 24 Executive Investigations and Internal Affairs ................................................................................................................. 25 SPECIAL FEATURES ..........................................................................................................3 Pension / Retirement / Health Benefits / CSRS Overpayment .......................................................................................... 3 Financial Implications of Declining Mail Volumes ............................................................................................................ 9 An Assessment of Worksharing ................................................................................................................................... 13 A Framework to Optimize the Retail Network................................................................................................................ 15 Data Mining Successes .............................................................................................................................................. 17 Financial Fraud Awareness Posters Distributed to All Postal Facilities ............................................................................ 20 APPENDICES ..................................................................................................................26 APPENDIX A — Reports Issued to Postal Service Management ..................................................................................... 27 Reports with Quantifiable Potential Monetary Benefits ......................................................................... 28 Report Listing .................................................................................................................................... 31 APPENDIX B — Findings of Questioned Costs ............................................................................................................. 34 APPENDIX C — Recommendations That Funds Be Put to Better Use ............................................................................. 35 APPENDIX D — Reported Non-monetary Benefits ........................................................................................................ 36 APPENDIX E — Reports with Significant Recommendations Pending Corrective Actions ................................................. 38 APPENDIX F — Significant Management Decisions in Audit Resolution ......................................................................... 54 APPENDIX G — Status of Peer Review Recommendations............................................................................................ 55 APPENDIX H — Investigative Statistics ........................................................................................................................ 56 APPENDIX I — Summary of U.S. Postal Inspection Service Investigative Activities Under Title 39 USC 3005 & 3007 ....... 57 APPENDIX J — Closed Congressional and Board of Governors’ Inquiries ....................................................................... 58 SUPPLEMENTAL
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