Federal Reports

The U.S. Postal Service maintains an unrivaled presence in American life, utilizing more than 33,000 retail locations and a workforce of over 640,000 employees to reach every home and business six days a week. While USPS’s primary mission is mail and package delivery, it also manages a portfolio of nonpostal government services that generated $387 million in revenue during fiscal year (FY) 2025. However, this revenue stream is heavily dependent on passport services — with passport processing accounting for approximately 80 percent of total earnings — and all active partnerships remain exclusively at the federal level.

The landscape for providing government services shifted significantly with the Postal Service Reform Act of 2022, which gave USPS the authority to partner with state, local, and tribal governments for non-commercial public services. Despite this legal green light and the Postal Service’s Delivering for America plan’s goal of becoming a national “government storefront,” the organization has not yet established a formal strategy or initiated outreach to explore these new non-federal opportunities.

USPS OIG discussions with state and federal officials highlight the untapped potential of new government partnerships, particularly in rural and underserved areas where the post office often serves as a primary civic hub. Potential growth is evident in providing in-person identity verification for social benefit programs like SNAP or Medicaid, and in streamlining high-assurance biometric services, such as fingerprinting for state professional licensing. Facilities could also transform into digital access points by hosting DMV or IRS kiosks in “service deserts” where residents currently travel long distances for simple renewals or tax assistance. Additionally, USPS could lease rooftop space for 5G and broadband infrastructure to help bridge the digital divide in the thousands of underserved counties it already serves.

Future possibilities also include equipping the delivery fleet with sensors for passive data collection on air quality and road conditions, and leveraging the last-mile network to report infrastructure failures during national disasters. To turn these concepts into reality, the Postal Service could look toward international peers in Australia, France, and Italy, which have built successful government service portfolios through proactive sales teams and centralized management units. These operators thrive by standardizing their offerings to lower technical costs and using market intelligence to target areas where private competition is absent.

Currently, the Postal Service’s approach to government partnerships remains largely reactive and fragmented across multiple departments. To capitalize on its vast infrastructure and the interest expressed by state agencies, the OIG recommends postal leadership develop a unified strategic roadmap. This plan would outline the steps necessary to identify, evaluate, and prioritize expansion opportunities across all levels of government, finally moving the organization beyond case-by-case federal agreements toward its vision of a modern, multi-level government storefront.

Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020. The CARES Act, “Federal Contract Authority,” Section 3610, clarifies that reimbursement requests must be reduced by any credits received from other COVID-19 relief programs, including Paycheck Protection Program (PPP) loans. There were 149 subcontractors that collectively received forgiveness for more than $196 million of PPP loans at the Portsmouth Paducah Project Office (PPPO) sites. In addition, the Department of Energy paid subcontractors about $13 million in Section 3610 safety pay from 2020 through 2022.

Given the risk, we initiated this audit to determine if the Department paid PPPO subcontractors for the same costs that were covered by forgiven PPP loans.

We identified approximately $5.2 million in duplicate payments, unsupported costs, and unallowable profit paid to the Department’s subcontractors at the PPPO that received CARES Act funds. Specifically, we identified 19 subcontractors that received approximately $2.6 million in either duplicate payments and/or unallowable profit under Section 3610. Additionally, we identified seven subcontractors that certified the need for PPP loan forgiveness after already billing and receiving $2.6 million in payments from the PPPO for work performed. These subcontractors also received loan forgiveness paid by the Small Business Administration for costs the Department already paid.

These issues were caused by incomplete policy guidance, inadequate oversight, and inappropriate behavior by subcontractors. For example, the PPPO did not enforce internal controls and labor monitoring during COVID-19 to prevent duplicate payments and erroneous reimbursements. In addition, the PPPO subcontractors did not always uphold ethical standards and comply with contract requirements.

To address the issues identified in this report, we have made seven recommendations that, if fully implemented, should help ensure that the Department’s safeguards reduce future risks associated with similar programs and protect taxpayer funds.