Inspectors General: A Comparison of Certain Activities of the Postal IG
and Other IGs (Letter Report, 09/20/96, GAO/AIMD-96-150).

This report compares certain activities of the Postal Inspector General
(IG) with the activities of IGs in other federal agencies. It is
important to note that the Postal IG differs from other IGs by serving
in a dual capacity: It performs audits and other reviews as well as
serves at the Chief Postal Inspector responsible for the enforcement of
postal laws throughout the United States. GAO compares the Postal IG
with four other IGs--Justice, Treasury, Agriculture, and Labor--with
respect to audit activities over their agencies' law enforcement
operations and the results of peer reviews over their audit operations.
GAO also compares the Postal IG's policies and procedures to Office of
Management and Budget guidance on the resolution of audit
recommendations.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-96-150
     TITLE:  Inspectors General: A Comparison of Certain Activities of 
             the Postal IG and Other IGs
      DATE:  09/20/96
   SUBJECT:  Law enforcement
             Internal audits
             Internal controls
             Auditing standards
             Postal law
             Auditing procedures
             Inspectors general

             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on the Postal Service, Committee
on Government Reform and Oversight, House of Representatives

September 1996

INSPECTORS GENERAL - A COMPARISON
OF CERTAIN ACTIVITIES OF THE
POSTAL IG AND OTHER IGS

GAO/AIMD-96-150

Postal Inspector General

(911725)


Abbreviations
=============================================================== ABBREV

  IG - Inspector General
  OMB - Office of Management and Budget

Letter
=============================================================== LETTER


B-274027

September 20, 1996

The Honorable John M.  McHugh
Chairman, Subcommittee on the Postal Service
Committee on Government Reform
 and Oversight
House of Representatives

Dear Mr.  Chairman: 

This letter responds to your March 27, 1996, request that we compare
certain activities of the Postal Inspector General (IG) with the
activities of IGs in other federal agencies.  In making such
comparisons, it is important to note that the Postal IG differs from
other IGs by serving in a dual capacity.  In accordance with
authorizing legislation, the Postal IG's responsibilities include
performing audits and other reviews in accordance with the IG Act
Amendments of 1988, as well as serving as the Chief Postal Inspector
responsible for the enforcement of postal laws throughout the United
States.  As agreed with your office, we specifically compared the
Postal IG with four other IGs with respect to audit activities over
their agencies' law enforcement operations and the results of peer
reviews over their audit operations.  In addition, as agreed, we
compared the Postal IG's policies and procedures to Office of
Management and Budget (OMB) guidance on the resolution of audit
recommendations. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :1

We compared the selected activities of the Postal IG with the
activities of IGs at the Departments of Justice, Treasury,
Agriculture, and Labor.  These four departments accounted for almost
85 percent of total federal law enforcement personnel as of March 31,
1995.  To determine the extent of audit activity by the Postal IG's
office over its law enforcement operations, we reviewed the IG's
September 30, 1995, and March 31, 1996, semiannual reports and
interviewed IG officials.  To identify audits of law enforcement
operations conducted by the other IGs in the four federal
departments, we obtained their semiannual reports for the same
periods and interviewed IG officials.  We selected a judgmental
sample of the audit reports identified to ascertain whether the IGs'
asserted that they performed them following generally accepted
government auditing standards.  We did not assess whether the Postal
IG or the other IGs provided adequate oversight of their law
enforcement operations through audits and other reviews. 

To compare the results of peer reviews of the IGs' audit operations,
we obtained the last two peer reviews for each of the IGs.  We
compared the results of the peer reviews to determine if the Postal
IG had any unique weaknesses or issues not found in the peer review
results of the other IGs.  Also, we reviewed the audit resolution
policies and procedures of the Postal IG and the Postal Service to
determine if they were consistent with guidance in OMB Circular A-50,
"Audit Followup", which applies to executive agencies and IGs.  In
addition, we reviewed the Postal IG's audit tracking and reporting
system, obtained listings of unresolved recommendations in the IG's
semiannual reports, and interviewed key audit resolution officials in
the Postal Service.  We did not audit compliance with the OMB
guidance nor review the effectiveness of audit resolution at the
Postal Service.  We conducted our work from April through mid-August
1996 in accordance with generally accepted government auditing
standards. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The Inspector General Act of 1978, as amended (IG Act), requires that
IGs conduct audits in accordance with generally accepted government
auditing standards.  These standards require IGs to be
organizationally independent of the operations they audit.  Because
the Postal IG is the Chief Postal Inspector and therefore not
organizationally independent of law enforcement operations, the
Postal IG can not audit these operations in accordance with the
required standards.  Although the Postal Service's law enforcement
operations have not been audited by the Postal IG, the IG does
perform internal quality reviews of these activities.  These reviews
include assessments of their compliance with laws, regulations, and
policies.  In contrast, IGs in other departments are organizationally
independent of their departments' major law enforcement operations
and audit these operations according to generally accepted government
auditing standards.  As with all federal IGs, the Postal IG is
subject to audit by GAO and other organizations as contracted. 

We found that the peer review results of the Postal IG's audit
activities were similar to those of other IGs.  These peer reviews
all concluded that the IGs were in general compliance with
established policies, procedures, and applicable audit standards in
their audit work but recommended improvements in specific audit
areas.  Regarding the Postal IG's policies and procedures on audit
resolution, we found them consistent with guidance in OMB Circular
A-50, which applies to executive branch IGs. 


   BACKGROUND
------------------------------------------------------------ Letter :3

The Postal IG, established by the IG Act Amendments of 1988 (Public
Law 100-504), is responsible for audits and other reviews of Postal
Service activities.  These audits include (1) performance audits that
address improvements to the economy and efficiency of postal
operations, (2) developmental audits that evaluate new or redesigned
Postal Service systems under development, (3) financial audits of
Postal Service systems and operations, (4) capital investment audits
to assist postal management in making investment decisions, and (5)
contract audits of Postal Service procurements.  In addition, to
better safeguard Postal Service assets, the IG staff perform audit
and investigative activities under the revenue asset protection
program.  Also, the Postal IG conducts internal quality reviews of
the operations of its division and headquarters offices responsible
for law enforcement activities.  These reviews include an assessment
of the offices' compliance with laws, regulations, and policies. 

The IG Act Amendments require that the Chief Postal Inspector also
hold the position of Inspector General of the Postal Service.  The
Chief Postal Inspector traditionally has been the head of the Postal
Inspection Service, which traces its origins back to the activities
of Benjamin Franklin in 1737.  The Postal Inspection Service is
responsible for enforcing more than 200 federal statutes involving
mail fraud, mail bombs, child pornography, illegal drugs, mail theft,
and other postal crimes. 

In 1994, we reported that the combination of missions carried out by
the Postal IG involve responsibilities beyond those held by other
IGs.\1 These include providing for the security of postal personnel
and buildings, investigating physical crimes, such as threats and
assaults by and against postal employees, and conducting
investigations intended to eliminate the use, sale, and possession of
illegal drugs by postal employees. 

The Postal IG's and Chief Postal Inspector's combined operating
expenses for fiscal year 1996 were $410.2 million.  The IG's 4,582
staff as of July 29, 1996, were located among the Washington, D.C. 
headquarters, 29 division offices, and 5 crime laboratories.  Of the
4,582 employees, 2,246 were postal inspectors, 1,441 were postal
police, and 895 were support staff.  Of the postal inspectors, 258
were allocated for audit activities and another 261 performed both
audit and investigative activities under the revenue asset protection
program. 


--------------------
\1 Letter to William L.  Clay, Chairman, Committee on Post Office and
Civil Service, House of Representatives (GAO/AIMD-94-103R, April 14,
1994). 


   IG AUDITS OF LAW ENFORCEMENT
   OPERATIONS
------------------------------------------------------------ Letter :4

The IG Act requires that audits conducted by IGs follow generally
accepted government auditing standards.  These standards require that
in all matters relating to the audit work, the audit organization and
the individual auditors be free from personal and external
impairments to independence, be organizationally independent, and
maintain an independent attitude and appearance.\2 Because of dual
responsibilities, the Postal IG is not organizationally independent
of law enforcement operations and can not perform audits of these
operations in accordance with the required standards. 

Although the Postal IG cannot conduct audits of its law enforcement
operations in accordance with required standards, the Postal IG, as
with other federal IGs, is subject to audit by GAO and other audit
organizations as contracted.  In addition, the IG conducts
assessments of law enforcement operations through internal quality
reviews of its division and headquarters offices.  These reviews
assess eight core values throughout all the activities of these
offices.  The core values are (1) empowerment of staff, (2)
implementation of corporate goals, (3) resource management, (4)
training, (5) communications, (6) teamwork, (7) customer focus, and
(8) compliance with laws, regulations, and policies.  The Postal IG
completed reviews in 14 of these division offices from May 1995
through April 1996.  These reviews are performed in three stages: 
(1) an annual review of staff under the direction of division office
management to ensure that teams are complying with instructions,
safeguarding equipment and funds, and operating efficiently and
effectively, (2) an annual self-assessment by each division office,
and (3) reviews that are to occur every 3 years by Postal IG
headquarters staff and members chosen from a pool of experienced
reviewers.  The final quality review reports resulting from the
triennial reviews, which are sent to the Chief Postal Inspector and
the Deputy Chief Inspectors, have resulted in recommendations
intended to strengthen the eight core values within the Inspection
Service. 

In the four other federal departments, the IGs are organizationally
independent from the offices and bureaus responsible for their
departments' major law enforcement operations and do audit them
according to generally accepted government auditing standards.  For
example, the Justice Department IG audits (1) the Federal Bureau of
Investigation, which is the principal investigative arm responsible
for investigating violations of federal law, (2) the Immigration and
Naturalization Service, which enforces immigration laws, and (3) the
Drug Enforcement Administration, which enforces laws and regulations
over narcotics and controlled substances.  Likewise, the Department
of the Treasury IG audits the Department's operating bureaus
responsible for the prevention of counterfeit U.S.  currency, the
enforcement of customs laws, and the control of firearms, alcohol,
and tobacco. 


--------------------
\2 Government Auditing Standards, 1994 Revision, June 1994, section
3.11, page 22. 


   PEER REVIEWS
------------------------------------------------------------ Letter :5

Generally accepted government auditing standards also require that
audit organizations have external quality control reviews completed
at least once every 3 years.\3

Known as peer reviews, they are conducted by another audit
organization that is comparable to but not affiliated with the audit
organization under review.  The objectives of a peer review are to
determine whether the organization's internal quality control system
is adequate and operating effectively to provide reasonable assurance
that established policies, procedures, and applicable auditing
standards are being followed in the audit work.  The Postal IG's two
most recent peer reviews were performed by the Federal Deposit
Insurance Corporation IG in 1992 and the Tennessee Valley Authority
IG in 1995. 

The results of the peer reviews of the Postal IG and the IGs in the
four other federal departments were similar, concluding that the IGs
were in general compliance with established policies, procedures, and
applicable auditing standards in their audit work.  As was also the
case with one or more of the other IGs, the two peer reviews for the
Postal IG recommended improvements in certain areas, including
supervisory reviews of audit working papers, internal quality control
reviews, statistical sampling documentation, and continuing
professional education. 


--------------------
\3 Government Auditing Standards, 1994 Revision, June 1994, section
3.33, page 29. 


   AUDIT RESOLUTION GUIDANCE
------------------------------------------------------------ Letter :6

The Postal Service and the Postal IG have policies and procedures
that are consistent with the guidance in OMB Circular A-50 regarding
the resolution of audit recommendations.  This guidance requires that
federal managers establish procedures to ensure that prompt and
proper corrective action is taken on audit recommendations.  The
ultimate resolution and implementation of IG recommendations is the
responsibility of agency management. 

The OMB guidance requires, among other provisions, the appointment of
a top-level audit resolution official and a system for tracking the
status of audit recommendations as a means to ensure timely
resolution.  In response to these requirements, the Postal Service
has designated the Deputy Postmaster General to be responsible for
audit resolution activities.  In addition, the Postal IG maintains a
tracking system containing detailed information about the status of
audit recommendations.  IG policies and procedures call for
information on the status of audit recommendations in the tracking
system to be sent every 6 months to the senior management officials
responsible for ensuring the implementation of all recommendations. 
These management officials are to request, and program units are
required to send, information regarding the extent to which audit
recommendations have been addressed.  This information on the status
of audit recommendations is also provided to the Postal IG office,
which then updates the information in the tracking system.  In
addition, as required by the OMB guidance, the Postal IG provides the
status of audit recommendations in semiannual reports to the
Postmaster General and periodically evaluates the Postal Service's
audit resolution process. 


---------------------------------------------------------- Letter :6.1

At the end of our fieldwork, we provided a draft of this report to
the Postal IG for his comments.  The IG agreed with our results and
his views have been incorporated where appropriate. 

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 7 days
from the date of this letter.  At that time, we will send copies to
the Postal IG, the Postmaster General, and the Director of the Office
of Management and Budget.  If you would like to discuss these issues,
please contact me at (202) 512-9489 or Jackson Hufnagle, Assistant
Director, at (202) 512-9470. 

Sincerely yours,

David L.  Clark
Director, Audit Oversight and Liaison

*** End of document. ***