Background
The U.S. Postal Service plans to invest roughly $40 billion over the next 10 years to modernize its retail and processing networks and upgrade facilities. Thus, it is crucial for the Postal Service to establish and maintain internal controls over its capital assets to safeguard against theft, support operations, and uphold accurate financial reporting. As part of its inventory controls, the Postal Service conducts the annual capital property review, as required by the Sarbanes-Oxley Act. The review occurs annually in March, with a sampling of Postal Service capital assets to allow for every capital asset to be physically located and inventoried over a four-year cycle.
What We Did
Our objective was to evaluate the effectiveness of internal controls over the Postal Service’s annual capital property review at network distribution centers and processing and distribution centers. We judgmentally selected four network distribution centers and processing and distribution centers to conduct site visits.
What We Found
While the Postal Service has some internal controls in place governing the annual capital property review, we found they were not always effective to ensure capital assets were accurately identified and certified. In addition, although there are documented policies and procedures to address risks associated with the management of capital assets, we found that some practices were not being followed.
These issues occurred because existing controls are not designed to detect reporting inaccuracies, the Postal Service measures the success of the annual capital property review based on timely completion rather than accuracy, and management did not provide sufficient oversight as it relates to material accountability officers (MAO). Ineffective internal controls over the annual capital property review leaves the Postal Service vulnerable to operational and financial risks. Specifically, this can result in theft, not having assets like key processing equipment available to support operations, or inaccurately reporting the value of assets in the Postal Service’s financial statements.
Recommendations
We recommended management (1) evaluate the internal controls for the annual capital property review to identify process improvements, add controls, and create a goal to enhance accuracy; and (2) reinforce the importance for facility management to issue timely, written MAO delegation letters, and for newly assigned MAOs to conduct a physical inventory of capital assets.