We determined that the integrity and objectivity of the Mystery Shopper Program was compromised, because information regarding the program is posted on the contractor’s website where it is accessible to the general public. Specifically, we found that information regarding mystery shop sites, as well as the dates and scenarios of scheduled evaluations, was available to anyone who accessed the contractor’s website.

Mystery Shopper Program was Compromised

We found that in January 2011, a Postal Service employee was able to enroll as a
mystery shopper on the contractor’s website. Although the employee did not complete a Post Office evaluation, the employee was allowed access to information regarding the locations, dates, and scenarios for scheduled mystery shop evaluations. Upon accessing the information, the employee distributed it to 44 Postal Service unit and retail managers via e-mail. This occurred because the information is available to the general public on the contractor’s website.1 As a result, advance notice of upcoming mystery shop evaluations was accessible, which compromised the objectivity of the program. We also found that three other employees enrolled as mystery shoppers on the contractor’s website between November and December of 2010;2 however, none completed a Post Office evaluation.

USPS Management accepted the findings, but said it would not seek a refund of fees paid to the Mystery Shop contractor, Synovate.

USPS OIG: Mystery Shopper Program was compromised

Mr. Chairman and members of the subcommittee, thank you for the opportunity to discuss workers’ compensation issues and reform. The Federal Employees Compensation Act (FECA) requires federal agencies to participate in the Department of Labor’s (DOL) FECA program. DOL bills each agency annually for compensation paid and non-appropriated agencies also must pay DOL an annual administrative fee.

Eligible disabled employees receive 66 2/3 percent (or 75 percent with dependents) of their basic salary, tax-free plus, medical-related expenses. Also, FECA places no age limit on receiving benefits. This is substantially more than other employees receive when they retire. Though unintended, FECA has become a lucrative retirement plan.

The Postal Service is the largest FECA participant, paying more than $1 billion in benefits and $60 million in administrative fees annually, creating a long-term liability of $12.6 billion. As of February 2011, the Postal Service had about 15,800 disabled employees. Over 8,700 were at least age 55, about 3,100 were at least age 65, and about 900 were between age 80 and 98.

Certain aspects of the program make it susceptible to fraud:

• The claimant’s ability to change their story until their claim qualifies;

• The claimant’s ability to hire a physician rather than use a plan physician to assess their injuries and condition;
• The program incentivizes DOL to collect larger fees if they approve more claims and lose budget dollars if they deny them;
• The lack of effective DOL case management; and
• Employers not being allowed to present or respond to evidence at hearings.

DOL has some fraud detection responsibility, but it’s unclear to what extent. They advise agencies to actively manage their own programs, while still charging administrative fees. There is not a clear delineation of responsibility between (1) agency program managers and (2) their OIGs and (3) DOL and (4) its OIG in detecting fraud. Accordingly, there is significant risk that program oversight will be duplicative or not done.

Since October 2008, we have removed 476 claimants based on disability fraud, recovered $83.5 million in medical and disability judgments, and halted significant future losses. In one investigation, a fraudulent claimant received $142,000 in benefits while she was working as a real estate agent, and we had pictures of her hiking and bungee jumping. She even bought a boat named “Free Ride.” Other investigations have found fraudulent claimants working as martial arts instructors, landscapers, hairdressers and mechanics.

Working with DOL is difficult. They control needed documents, but are often not responsive when we investigate cases. Additionally, they do not take timely action when told that a claimant no longer qualifies for benefits. Even when a claimant is convicted, DOL is slow to terminate benefits.

• We gave DOL an investigative report in 2006 which found a claimant was exceeding his limitations. Even though the employee was willing to return to work, DOL did not reduce his benefits until 2011.

• Fourteen months ago we gave DOL an investigative report containing evidence of fraud by a disability claimant and a subsequent medical exam confirmed the claimant was able to return to work with no restrictions. Despite requests, DOL has taken no action and continues to pay benefits.
• Over a 5-year period one claimant submitted $190,000 in unsupported mileage reimbursements that DOL paid without question.

Stress claims in particular are at high risk for fraud. If a doctor sees a correlation between stress and a claimant’s work, the claim is often approved. In one instance, a claimant’s emotional reaction to a change in work schedule was enough for DOL approval.

The OIG also investigates medical providers involved in criminal matters, including disability fraud and we have recovered $78.5 million since FY 2009. Unfortunately, DOL provides no standardized billing guidelines for doctors, making it difficult to hold them accountable for fraudulent billings. If DOL instituted a system similar to Medicare’s, prosecutors would be more inclined to take these cases. From our reviews, the Postal Service would benefit from having its own workers’ compensation program. Savings would be in the areas of reduced administrative fees, accurate assessment of claims by plan physicians, buyout options, mandatory retirements, immediate access to records, and improved accountability over case management.

FECA is in need of significant reform. Such reform could reduce the substantial risk for fraud and improve program efficiency and effectiveness, while protecting reasonable benefits for legitimate claimants.

Postal service management disagreed with the recommendation, pointing out that it was not possible under current collective bargaining agreements. The USPS did say that it is

currently working with NALC to examine how city delivery routes might be structured in the future. The parties are working on a test that will attempt to separate the casing and delivery functions to the extent possible while operating within the current work rules…

Management also indicated in a separate discussion that the Postal Service will pursue additional flexibility in the workforce and provided a target date of May 2012 for their ongoing test to separate the casing and delivery functions.

USPS OIG Management Advisory – Benchmarking Mail Distribution to Carriers

Senator Susan M. Collins requested that we conduct this review to evaluate commercial mailer concerns with Postal Service compliance rules on business mailers. Specifically, we will focus on recent and planned changes to compliance rules related to Intelligent Mail, Mail Evaluation Readability Lookup Instrument, Move Update, and Plant Verified Drop Shipments.

While that’s a perfectly understandable area of inquiry, the OIG seems to be taking a rather casual approach to gathering the data- they’ve posted a web based poll that anyone can take- as often as they like. The survey does ask for comments, which may provide the OIG with valuable insights, but it’s difficult to see how the results of an open web based survey would provide any statistically valid data. The OIG could certainly have obtained a listing of commercial mailers and surveyed all or a random sampling of them, for little if any additional expense- it seems they’ve taken the easy way to get some quick numbers rather than doing actual research.

Poll: Effects of Postal Service Compliance Rules on Mailers

The Office of the Inspector General carried out unannounced checks on 96 of the Postal Service’s Business Mail Entry Units (BMEUs) from October 2009 to September 2010, finding there was a “unacceptably high degree of noncompliance” with key financial controls.

The audited sites represented $2.5 billion in annual revenues for the USPS, which last year reported an $8.5 billion loss.

Gaps in the USPS mail acceptance and verification process at its BMEUs, where mailers take presorted mail and pay the USPS for delivery, meant that business mailings may not be accurately accounted or billed, the OIG said.

Full story: Auditors raise concerns over USPS bookkeeping | Post & Parcel.

APWU Web News Article 142-2010, Dec. 1, 2010

The USPS Office of Inspector General (OIG) concluded in a recent report that the Postal Service prefunds its pension and retiree healthcare benefits at levels that are substantially higher than other government agencies, the military, and private-sector businesses. Reducing the required funding levels would result in projected USPS savings of more than $60 billion, the OIG found, and would allow the USPS to meet its obligation while conserving cash and improving its financial position.

In the report issued on Nov. 23, the OIG recommended that the Postal Service pursue legislative changes that would permit the agency to pre-fund employee pensions at 80 percent, and retiree healthcare benefits at 30 percent. Currently, the USPS is required to pay 100 percent of these costs.

The OIG’s summary supports the union’s claim that were it not for the massive pre-funding mandate of the Postal Accountability and Enhancement Act (PAEA) of 2006 — which requires the Postal Service to pay more than $5 billion annually for future retiree healthcare benefits — the USPS would have experienced a surplus of $3.7 billion in fiscal years 2007-2009.

Reduced Payments, Billions in Savings

The OIG found that reducing the Postal Service’s pension prefunding requirement to 80 percent and its retiree healthcare prefunding requirement to 30 percent “represents a reasonable level in addressing retirees’ needs, yet also provides the Postal Service with a means of halting its current financial slide.”

According to the report, the Postal Service has overfunded its pension plans and its retiree healthcare fund by a total of $60.6 billion. If corrected, reduced prefunding would provide the Postal Service with “significant financial relief.”

The report stated that the federal government and many private companies do not prefund retiree healthcare at all; among the private companies that do, the average prefunding level is 28 percent. The military prefunds retiree healthcare at 29 percent, and state governments prefund at an average 30 percent, the report noted.

“Under these circumstances, we can make a strong case for the Postal Service to prefund at reduced levels, such as those found in the private and public sectors,” the OIG stated.

A Call for Congressional Action

Despite the OIG’s finding, the Postal Service does not have the power to change its prefunding requirements without corrective legislation.

In response to the OIG’s findings, postal management said, “The recommendation requires a significant change in public policy that must ultimately be decided by Congress and the Administration.”

Currently, two bills are pending in the House and Senate that would require the Office of Personnel Management (OPM) to recalculate the Postal Service’s CSRS liability, and would allow the USPS to use the overfunded amount to fund the annual retiree healthcare pre-payments: H.R. 5746 and S. 3831. It is unclear whether these bills will be voted on before Congress ends its “lame duck” session later this month.

via OIG Calls for Reduced Prefunding Requirements; Says Current Payments Result in Massive Overfunding.

The U.S. Postal Service is delivering fewer pieces of mail to a growing number of addresses as new households and businesses are added to the delivery network each year. During the past 3 years, the Postal Service reduced its city letter carrier workforce and workload; however, financial losses continue to occur while salary and benefits will continue to increase. The Postal Service must achieve unprecedented levels of efficiency to accommodate this new growth while facing financial loss from declining mail volume.

Conclusion

The Postal Service’s workforce planning process for city letter carriers did not always optimize available resources. In fiscal year (FY) 2009, the Postal Service could have avoided paying almost 7 million of the 28 million overtime hours for full-time city letter carriers by maximizing available, lower cost carrier resources to deliver the mail.

City Delivery Workforce Planning

Delivery management often used full-time city delivery carriers in overtime status to deliver the mail when using lower cost part-time and transitional carriers would have been more economical. Based on workload trends, vacancies, absences, and mail volume, supervisors decide either to use overtime with full-time carriers or staff routes with part-time or transitional city letter carriers to ensure mail is delivered on routes.

Postal Service Headquarters and area officials have implemented initiatives aimed at improving delivery operation performance including reducing managers’ daily administrative burdens,1 implementing new staffing tools, and improving daily communication of office operations. Moreover, area officials have primarily focused on increasing route efficiency and reducing overall workhours. However, management has not fully developed an overall city delivery operations strategy that optimizes resources and focuses on the type of workhours used and the associated staff costs to deliver the mail on city routes. See Appendix B for our detailed analysis of this topic.

By not optimizing all city carrier staffing resources, the Postal Service unnecessarily incurred excess costs of over $153 million in FY 2008 and approximately $122 million in FY 2009. Additionally, operating costs of more than $275 million could be reduced over a 2 year period (FYs 2010 and 2011). See Appendix C for our monetary impact calculations.

We recommend the vice president, Delivery and Post Office Operations:

1. Collaborate with area management to develop and implement an overall city delivery operations strategy that optimizes the most cost-effective combination of full-time, part-time, and transitional city carrier resources to reduce overtime workhours and costs.

Download the full report in .pdf format.

Former letter carrier Johnnie Harden Jr., 46, of Houston, has pleaded guilty to mail theft, United States Attorney José Angel Moreno announced today. Harden was convicted today of mail theft by United States District Judge Nancy F. Atlas after pleading guilty to having stolen gift cards and cash contained in pieces of U.S. Mail entrusted to him for delivery.

Harden, who began his employment with the U.S. Postal Service as a city carrier on Nov. 17, 1990, was assigned to work at the Oak Forest Station on Judiway Street in Houston. An indictment charging Harden with two counts of mail theft returned in April 2010 arose from an investigation triggered by a complaint concerning of a mail piece mailed from Mesquite, Texas, containing a greeting card and Target gift card valued at $50 that did not reach its intended recipient in Houston along a route serviced by the Oak Forest Postal Station.

The United States Postal Service – Office of Inspector General (USPS-OIG) investigation following the complaint ultimately identified Harden as the person responsible for servicing the route. He was also identified from a still photo generated from Target surveillance video redeeming the Target gift card. OIG agents later observed Harden opening another mail piece and removing the contents (two $50 bills). When apprehended, agents recovered from Harden’s personal vehicle additional mail pieces including gift cards, magazines and a small parcel.

Immediately after pleading guilty, Judge Atlas sentenced Harden to one-year probation and ordered him to pay $50 restitution. He is permanently barred from future employment with the USPS.

The Southern Maryland BMEU did not count and report individually franked mailpieces presented by the House mailroom operator as required by Postal Service policy.

Instead, the Postal Service relied solely on reports from the House Finance Office to prepare monthly invoices. BMEU management questioned whether all postage for House mail was collected and why they did not have an opportunity to verify the piece counts. However, they continued to accept the mail with little or no verification because they did not have alternative verification processes, such as those available under an alternate mailing system agreement, approved for use. As a result, the Postal Service billed the House $3.2 million for mail from January 3, 2009, through January 2, 2010, without verifying the charges were accurate.

Read the full report