Fiscal Year 2021 Selected Financial Activities and Accounting Records
The Postal Reorganization Act of 1970 requires annual audits of the U.S. Postal Service’s financial statements. In addition, the Postal Accountability and Enhancement Act of 2006 requires the Postal Service to comply with Section 404 of the Sarbanes-Oxley Act. This section requires the Postal Service to report the scope and adequacy of its internal control structure and procedures and assess their effectiveness.
The U.S. Postal Service Board of Governors contracted with an independent public accounting (IPA) firm to express audit opinions on the Postal Service’s fiscal year 2021 financial statements and internal controls over financial reporting (an integrated audit). The IPA firm maintained overall responsibility for testing and reviewing significant Postal Service accounts, processes, and internal controls. We coordinated audit efforts with the IPA firm to ensure adequate coverage.
Our audit objectives were to determine whether the Postal Service:
- Fairly stated accounting transactions in the general ledger and whether selected key controls surrounding those transactions were designed and operating effectively.
- Properly tested, documented, and reported its examination of selected key financial reporting controls related to Postal Service Headquarters (HQ) and the Accounting Service Centers.
We tested 31 key financial reporting controls, traced selected accounting transactions, and reviewed supporting documentation for 15 accounting processes and determined the Postal Service fairly stated accounting transactions in the general ledger, and selected key controls over those transactions were operating effectively.
In addition, the Postal Service properly tested, documented, and reported its examination of selected key financial reporting controls related to HQ and the Accounting Service Centers.
We did not propose any adjustments or identify any issues or control deficiencies that were material to the financial statements or that would affect the overall adequacy of internal controls. However, we identified issues related to the approval of journal vouchers (JV). We reviewed 267 JVs that were manually recorded into the general ledger and found seven instances where information on the JV entry form differed from the supporting documentation. Specifically:
- Five JV entry forms had general ledger account numbers that differed from supporting documentation.
- Two JV entry forms had dollar amounts that differed from supporting documentation.
The seven JV entry forms were signed by the transaction’s approver, signifying they were reviewed for completeness and accuracy. When approvers do not adequately review manually recorded JVs to ensure supporting documentation is complete and accurate, there is an increased risk of misstated financial statements.
We recommended management strengthen internal controls over the preparation and approval of manually recorded journal vouchers, specifically with respect to employee transition periods