Postage Meters

In 1993 the Postmaster General disclosed publicly that meter fraud had caused significant revenue losses. GAO concludes that sustained management attention to controls over metered mail is needed to reduce the potential for substantial revenue losses to the Postal Service. Metered mail represents about 46 cents of every dollar the Postal Service collects in postage. Meters are used to print postage, which is a marketable, liquid asset. Much of the control over meter activities, however, resides with meter manufacturers. The Postal Service recognizes that it needs to gain greater control over meters and is trying to do so through several initiatives, including improving aspects of the meter program, such as meter technology, meter licensing, and the identification of lost and stolen meters. These efforts appear to have the potential for improving the meter program in the long run. However, the effectiveness of the meter program depends on management's sustained attention to substantially reducing the risk of meter fraud. This includes maintaining accountability for meter program operations, ensuring that the technology and security used in meters are effective, and working to establish and maintain an adequate system of controls for deterring and detecting meter fraud.

GAO found that: (1) since 1985, the Postal Inspection Service has resolved over 130 meter fraud cases with documented losses totalling about $25 million; (2) as of 1993, the Service had investigated 11 cases with potential losses amounting to nearly $11 million; (3) although the Postal Service estimates that potential annual losses from meter fraud could total $171 million, it does not have the data necessary to accurately estimate total losses; (4) postal revenue losses arise from criminal meter tampering, meter indicia counterfeiting, and criminal use of lost or stolen meters; (5) the Postal Service estimates that of the 1.4 million postage meters in use, 636,000 are vulnerable to tampering; (6) meter fraud revenue losses are high because of weaknesses in meter design and ineffective program controls; (7) the Postal Service has not timely responded to reported meter fraud because its investigation and corrections offices have not been adequately staffed and postal management have historically underestimated the losses attributable to meter fraud; (8) postal meters have remained vulnerable to tampering and abuse because the Postal Service has traditionally emphasized durability over meter security; and (9) although the Postal Service has attempted to address postal meter fraud problems by establishing a high-level management team to strengthen the meter program, it needs to implement substantive changes to reduce the risk of losing revenue to meter fraud.