Though the U.S. Postal Service lost a record nearly $16 billion last year, one bright spot has been its continued growth in the package business and the popular "If it fits, it ships" Flat Rate Box ad campaign.
But a recent audit into Postal Service advertising expenditures for fiscal 2011 has uncovered millions of dollars in questionable costs as postal officials pushed hard to publicize shipping products in the face of sharply declining first-class mail volume.
Overall, the Postal Service spent nearly $150 million in advertising, with the bulk of it -- $108 million -- going to promote Priority Mail, which includes the Flat Rate Box campaign.
One ad contractor received $126 million, according to the audit, which redacted the name of the contractor.
The audit found that postal officials didn't understand the roles and responsibilities for "core team members" of its major ad contractors, which resulted in about $4 million in questionable payments to contractor staff members.
What's more, the Postal Service paid more than $600,000 in questionable bonuses to two ad contractors in fiscal 2011 and 2012, according to the review.
"The issues we have identified are significant enough to warrant immediate action to prevent questionable expenditures," auditors wrote in their report.
The review also uncovered $2.3 million in invoices that had not been certified and another $4 million in invoices missing from contract files.
When the U.S. Postal Service's office of inspector general sent a draft of its report to the Postal Service, the watchdog office later learned that its findings had been leaked to officials outside of the Postal Service with ties to a major advertising contractor.
The draft report contained language warning postal officials not to share the document. The leak was referred to the inspector general's Office of Investigations, according to the report.
In a written response to the report, postal officials defended their ad campaigns but acknowledged "oversight and internal controls needed improvement in some areas."
Nagisa Manabe, the Postal Service's chief marketing officer, wrote in a Dec. 21 letter to the inspector general that the primary advertising contract wouldn't be extended and multiple ad agencies would be used in the future.
In addition, she wrote, the Postal Service's marketing and sale organization was redesigned in December.
Ms. Manabe's predecessor as chief marketing officer, Bob Bernstock, resigned in 2010 before an inspector general's report found he awarded no-bid contracts to former associates and failed to report required information on a financial disclosure form.
The report was issued after The Washington Times reported that Mr. Bernstock was taking home more than $200,000 per year in outside income by serving on the corporate boards of weight-loss giant NutriSystem Inc. and Pantry Inc., which runs the Kangaroo Express convenience store chain.
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