The U.S. Postal Service paid contractors more than a quarter-billion dollars over two years without proof the work was actually performed, and its own inspector general says the agency's oversight gaps leave it exposed to the kind of invoice fraud that has already cost it millions. A USPS Office of Inspector General audit released September 24, 2026 found that Postal Service contract managers routinely skipped the documentation and approval steps required before contractors get paid, producing $271.9 million in questioned costs across a contracting operation that now tops $15 billion a year.
The audit, "Postal Service Contract Practices and Oversight," is a self-initiated review of how USPS manages contracts from the moment they are awarded through the moment invoices get paid. USPS spent more than $15 billion on contracts in FY2025, up roughly $3.3 billion since FY2016. The Supply Management organization alone oversees $5 billion spread across 4,839 active contracts — a portfolio the OIG concluded is not getting the scrutiny its size demands.
How $271.9 Million Went Unverified
The largest share of the finding came from a sample of 203 time-and-materials invoices, the kind of contract where the Postal Service pays for hours worked and materials used rather than a fixed price for a finished product. Auditors found that 151 of those 203 invoices — 74 percent — lacked the documentation required to show what tasks the contractor actually performed or what services were delivered. Extrapolated across FY2024 and FY2025 invoices, that gap produced at least $271,121,756 in unsupported questioned costs.
A second, smaller gap came from Unauthorized Contractual Commitment files, the paperwork required when someone commits the Postal Service to a purchase without proper contracting authority and the arrangement has to be ratified after the fact. Reviewing every UCC file from FY2024 and FY2025, the OIG found that 42 of 70 — 60 percent — lacked critical required information such as invoices, receipts, legal review assessments or pricing determinations, including five files with no evidence of evaluation or approval at all. Across that UCC review, the OIG put the unsupported cost at $794,709. Combined with the invoice sample, the two gaps total $271,916,465 in monetary impact.
The report frames the missing paperwork as more than a filing problem. "By not holding contractors to account and requiring evidence of tasks performed, management cannot effectively verify that the Postal Service received the service or product provided, at the agreed-upon cost, risking payment of overstated bills or contractors defrauding the Postal Service through false claims," the OIG wrote.
The $792 Million Noncompetitive Purchase Gap
Auditors also examined how USPS handles noncompetitive purchases — contracts awarded without a competitive bidding process, which by design require extra layers of review to justify sole-sourcing the work. Of 124 noncompetitive purchases sampled, 21 — 18 percent, representing $792 million in spending — were approved without the Postal Service demonstrating that all required reviews and approvals had been completed in its contract system. "For 21 of 124 (18 percent) noncompetitive purchases sampled, we found the Postal Service approved $792 million noncompetitive purchases without demonstrating all required reviews and approvals were completed in the contract system," the report states.
A separate 58 percent of the sample — 72 of 124 purchases — were not publicized after award as required, a step meant to give the public and potential competitors visibility into sole-source spending. And 54 of the 124 purchases, worth roughly $2.8 billion, had their required purchase-plan documentation waived outright, either by the Vice President of Supply Management or a senior portfolio director. The OIG did not conclude that waived documentation or missing publication notices themselves constitute wasted money, but it flagged the pattern as evidence that internal controls are being bypassed at a scale far larger than the questioned-cost figure alone suggests.
Two Recent Fraud Cases Show the Stakes
The OIG's report is not describing a theoretical risk. It cites two recent Department of Justice False Claims Act settlements involving Postal Service contractors as evidence of what weak invoice controls can lead to. One contractor was ordered to repay $2.4 million after submitting false and altered invoices that inflated labor and material costs. A repair contractor, A-Plus Management, paid $1 million after overstating labor hours, mischarging travel expenses, and altering invoices submitted to the Postal Service. Both cases turned on exactly the kind of invoice detail — hours worked, tasks completed, costs incurred — that the OIG's sample found missing from the majority of files it reviewed.
USPS occupies an unusual position among federal agencies: as an independent establishment, it is exempt from the Federal Acquisition Regulation that governs contracting at most agencies, and instead runs its contracting program under its own internal rulebook, the "Supplying Principles and Practices." That gives the Postal Service more flexibility than FAR-bound agencies, but the OIG's findings suggest the internal rules are not being consistently followed even where they exist.
The OIG issued nine recommendations aimed at tightening documentation requirements, invoice review and UCC oversight. Postal Service management agreed or partially agreed with all nine, but disagreed with the OIG's monetary-impact calculation for the invoice findings and pushed back on other portions of the report covering UCCs and noncompetitive purchases, leaving four of the nine recommendations unresolved as the two sides work through the standard audit-resolution process.
What It Means for Contractors
For companies doing business with the Postal Service, the audit is a signal that invoice-level documentation is about to get more scrutiny, not less. Time-and-materials contractors in particular should expect USPS contracting officers to start asking for more granular proof of hours and tasks before invoices get approved, given that three-quarters of the sampled invoices in this category failed that test. Firms holding noncompetitive awards should also expect closer questions about whether required reviews were documented at the time of award, rather than assumed after the fact. And with two recent False Claims Act settlements already on the books, contractors that have treated loose invoice documentation as a low-risk shortcut now have fresh evidence that the Postal Service — and the Justice Department — are willing to claw the money back.
