Pursuant to a congressional request, GAO examined the U.S. Postal

Service's oversight of the National Change of Address (NCOA) program,

focusing on: (1) how the Postal Service collects, disseminates, and uses

NCOA data; and (2) whether the Postal Service adequately oversees the

release of NCOA data in accordance with privacy laws.

GAO found that: (1) the Postal Service uses 24 licensees to collect and

disseminate address-correction information; (2) the licensees provide

address services to other private firms and organizations in accordance

with standard licensing agreements; (3) the Postal Service has been

unable to prevent, detect, or correct potential breaches in the

licensing agreement; (4) the Postal Service audits the software that

licensees use to match their mailing lists with NCOA files, reviews NCOA

advertisements that licensees propose to use, and investigates

complaints concerning the NCOA program; (5) Postal Service officials

believe that the NCOA licensing agreement helps to ensure that federal

privacy guarantees are not compromised through the operation of the NCOA

program; (6) the Postal Service has not expressed a clear and consistent

position regarding the use of NCOA data to create new-movers lists; (7)

the Postal Service failed to terminate the license of any licensee that

failed successive process audits in 1992; (8) the NCOA program office is

not terminating licensees that fail to maintain address-matching

software or enforcing the performance standards prescribed in the

license agreements; and (9) the Postal Service needs to enforce these

limitations to ensure that the use of NCOA-derived data is limited to

the purpose for which it was intended.

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

REPORTNUM: GGD-96-119

TITLE: U.S. Postal Service: Improved Oversight Needed to Protect

Privacy of Address Changes

DATE: 08/13/96

SUBJECT: Postal service

Postal law

Privacy law

Proprietary data

Mailing lists

Information disclosure

Data collection operations

Government sponsored enterprises

Mail delivery problems

IDENTIFIER: USPS National Change of Address Program

USPS Computerized Forwarding System

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Cover

================================================================ COVER

Report to Congressional Requesters

August 1996

U.S. POSTAL SERVICE - IMPROVED

OVERSIGHT NEEDED TO PROTECT

PRIVACY OF ADDRESS CHANGES

GAO/GGD-96-119

U.S. Postal Service's NCOA Program

(240157)

Abbreviations

=============================================================== ABBREV

GAO - General Accounting Office

NCOA - National Change of Address

Letter

=============================================================== LETTER

B-258950

August 13, 1996

The Honorable John M. McHugh

Chairman, Subcommittee on the Postal Service

Committee on Government Reform and Oversight

House of Representatives

The Honorable Gary A. Condit

House of Representatives

This report responds to your request that we examine the U.S. Postal

Service's oversight of the National Change of Address (NCOA) program.

The Postal Service's ability to quickly and accurately correct

customers' addresses is key to effective mail delivery; however, it

has also raised concerns about potential misuse of NCOA data. Our

report objectives were to determine (1) how the Postal Service

collects, disseminates, and uses NCOA data and (2) whether the Postal

Service adequately oversees the release of NCOA data in accordance

with privacy provisions of relevant federal laws.

RESULTS IN BRIEF

------------------------------------------------------------ Letter :1

Through the NCOA program, the Postal Service collects and widely

disseminates change-of-address information reported by postal

customers. To do this, the Postal Service uses 24 licensees,

primarily mail advertising and credit information firms, to provide

the address-correction service. The licensees pay the Postal Service

to receive and use the electronic master NCOA file and Postal

Service-approved computer software that is used for updating mailing

lists. The licensees are to use NCOA data and provide address

services to other private firms and organizations in accordance with

the standards and procedures specified in the licensing agreement.

The Postal Service's oversight of NCOA program licensees and controls

over the release of NCOA data have not been adequate to prevent,

detect, and correct potential breaches of the licensing agreement and

potential violations of federal privacy law in a timely manner.

Specifically, we identified weaknesses in the Postal Service's

licensee oversight activities for (1) "seeding"\1 NCOA files to

detect unauthorized uses of addresses, (2) auditing the performance

of software that licensees use to match their mailing lists with NCOA

files, (3) reviewing NCOA advertisements that licensees propose to

use, and (4) investigating complaints about the NCOA program.

Postal Service officials said they believe that neither the Privacy

Act nor the Postal Reorganization Act of 1970 limit licensees' use of

address data that have been properly updated or corrected through the

NCOA service. In our view, use of NCOA-linked data by a licensee to

create a new-movers list would not be consistent with the limitations

imposed by the Privacy Act. The Postal Service had not explained in

the acknowledgment form--to be signed by customers of licensees--that

NCOA data are not to be used to create or maintain new-movers lists.

Unless the Postal Service implements and attempts to enforce these

limitations, it cannot be assured that the use of NCOA-derived data

is limited to the purpose for which it was gathered.

--------------------

\1 Seeding is a commonly used practice in the mailing industry to

control proprietary information. A "seed" record planted in a file

can be used to detect the inappropriate release of a record or file.

BACKGROUND

------------------------------------------------------------ Letter :2

Automating mail sorting with state-of-the-art technology is at the

core of Postal Service initiatives to provide efficient, economically

priced mail service. Mail addressed accurately and in the Postal

Service's standardized format is more compatible with these automated

processes. However, the Manager of Address Management at Postal

Service headquarters said that the single greatest barrier to the

Postal Service's effort to automate mail processing is "the poor

quality of the address on the mail piece."

Mail addressed incorrectly or inadequately cannot be processed and

delivered as quickly and efficiently as properly addressed mail.

When mail is misaddressed, the Postal Service incurs added costs for

sorting, transporting, delivering, and, in some cases, disposing of

that mail. Of the 177 billion pieces of mail the Postal Service

handled in 1994, nearly 5 billion pieces were addressed incorrectly.

The Postal Service estimated that it incurred a cost of about $1.5

billion a year in compensating for poor address quality. However,

the Postal Service had no information on the portion of this cost

associated with a change of address.

Because accurate addressing is essential for efficient mail service,

the Postal Service and its predecessor, the Post Office Department,

have provided address-correction services since 1924. These

services, among other things, assist mailers in obtaining and using

accurate, properly formatted addresses that are automation

compatible.

NATIONAL CUSTOMER SUPPORT

CENTER ADMINISTERS NCOA

PROGRAM

---------------------------------------------------------- Letter :2.1

In 1986, the Postal Service implemented the NCOA program, which

extends the Postal Service's use of mail forwarding information to

update business mailers' address lists.\2 The NCOA program is

administered by the NCOA program office within the National Customer

Support Center, which is located in Memphis, TN. The Center's

Director reports to the Manager, Address Management, under the Vice

President for Operations Support. Before introducing this program,

the Postal Service notified business mailers of changed addresses

after their mail had been sent out and forwarded, returned, or

discarded. The NCOA program, however, confronts this problem before

the mail piece enters the mail stream by using contractors licensed

by the Postal Service to provide business mailers updated

change-of-address information.

--------------------

\2 The NCOA program is one of several address-correction services

offered by the Postal Service to help ensure that accurate addresses

are available to and used by mailers.

PRIVACY LAWS RESTRICT POSTAL

SERVICE USE OF NAME AND

ADDRESS DATA

---------------------------------------------------------- Letter :2.2

The Postal Service's authority to disclose address information about

its customers is limited by certain privacy guarantees in two federal

laws. Section 412 of the Postal Reorganization Act of 1970 (39

U.S.C. 412) restricts the Service's release of certain names or

addresses as follows:

"Except as specifically provided by law, no officer or employee

of the Postal Service shall make available to the public by any

means or for any purpose any mailing or other list of names or

addresses (past or present) of postal patrons or other persons."

Subsequently, in 1974, Congress passed the Privacy Act (5 U.S.C.

552a) to more broadly protect individuals from the unauthorized use

of records that federal agencies maintain about them and to give them

right of access to those records. Subsection (n) of this act also

applies to address correction but, in contrast to related provisions

of the 1970 Act, restricts certain uses of a name and address as

follows: "An individual's name and address may not be sold or rented

by an agency unless such action is specifically authorized by law."

In 1991 and again in 1992, Congress held hearings addressing the

privacy implications of the Postal Service's address-correction

services.\3 These hearings focused on public concerns about the

increasing volume of mail generated through the use of mailing lists,

and raised questions about (1) the legality of certain Postal Service

address-correction processes and (2) the adequacy of Postal Service

oversight of the NCOA program to ensure compliance with the privacy

provisions in federal law. A bill (H.R. 434) introduced in January

1995 would, among other provisions, allow any person notifying the

Postal Service of a change of address to deny it permission to

disclose such information.

--------------------

\3 Hearings before the Subcommittee on Postal Operations and

Services, House Committee on Post Office and Civil Service (October

10, 1991), and before the Subcommittee on Government Information,

Justice, and Agriculture, House Committee on Government Operations

(May 14, 1992).

OBJECTIVES, SCOPE, AND

METHODOLOGY

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

The objectives of our review were to determine (1) how the Postal

Service collects, disseminates, and uses NCOA program data to provide

mailers with accurate change-of-address information and (2) whether

the Postal Service adequately oversees the release of NCOA data in

accordance with privacy provisions of relevant federal laws. Because

we were asked to review only the NCOA program, we did not review

other Postal Service address-correction programs.

To meet our first objective, we interviewed Postal Service

headquarters officials in the Office of Address Management Systems,

Operations Support Division, and officials and technical support

staff at the National Customer Support Center and the NCOA program

office in Memphis, TN. We also reviewed relevant records provided by

these officials on the NCOA data gathering and dissemination process,

including some correspondence from licensees on how they used NCOA

data.

To meet our second objective, we obtained and reviewed federal laws,

legislative histories, congressional hearings, and other pertinent

literature on privacy issues to better understand Congress' concerns

about U.S. citizens' privacy rights and their relation to the name

and address records the Postal Service uses to provide

address-correction services. As we did in responding to objective

one, we met with Postal Service representatives in Memphis to discuss

and document how NCOA program oversight is maintained and what

controls the Postal Service uses to ensure that the release of NCOA

address information complies with applicable statutory constraints.

Additionally, we reviewed files and other records of Postal Service

NCOA program oversight activities; however, finding them to be

incomplete, we relied more on information obtained from our

interviews of Postal Service officials. Finally, we obtained written

explanations from the Postal Service's Chief Counsel for Ethics and

Information Law regarding privacy issues pertinent to our second

objective.

To meet both objectives, we met with representatives of TRW Target

Marketing Services, located in Allen, TX--which in 1994 was one of

the NCOA program's largest licensees in terms of volume of client

address records processed. In this meeting, we obtained information

and company views on how the NCOA program works, as well as on the

Postal Service's oversight of the program.

On May 30, 1996, the Postmaster General provided written comments on

a draft of this report, which are discussed beginning at page 20 and

reprinted as appendix II. Our review was conducted from August 1994

through October 1995 in accordance with generally accepted government

auditing standards.

HOW THE NCOA PROGRAM IS USED TO

COLLECT AND DISSEMINATE NEW

ADDRESS DATA

------------------------------------------------------------ Letter :4

Since its implementation, the NCOA program has effectively reduced

the volume of misaddressed mail processed through the Postal

Service's Computerized Forwarding System,\4 according to the program

manager. Before 1986, the volume of such mail was increasing

annually, along with the overall volume of all mail. However, during

the period in which the NCOA program has been operational, the volume

of mail processed through the forwarding system has remained

relatively constant, averaging about 2.4 billion pieces annually,

while the total mail volume has continued to increase--by about 27

percent from late 1985 to 1995.

The address-correction process begins when a postal customer submits

a signed Change of Address Order (Postal Service Form 3575) to a

local post office to have mail forwarded. (See app. I for a copy of

the July 1995 form). Post office employees are to verify that the

form is complete and then pass it on to one of 212 Computerized

Forwarding System units located in the United States and Puerto Rico.

These units are to convert the data to electronic form for use in the

mail forwarding process and in the NCOA program. Using the completed

change-of-address form, the Postal Service follows a policy of

forwarding first-class mail to new addresses for 1 year. Although

filing a change-of-address order is voluntary, customers who want

their mail forwarded after moving must submit the form and must

accept that the Postal Service will further disseminate the new

addresses to commercial mailing list holders through the NCOA

program.

Each workday, the National Customer Support Center collects

change-of-address data from the forwarding units. These data are

then to be standardized into the Postal Service's "preferred address

with ZIP\5 + 4 code" format and used to update a centralized database

of change of address records--i.e., the master NCOA file. This file

contains more than 110 million permanent change-of-address records.

It covers the most recent 36-month period based on the move dates

that customers report. Newly reported moves are to be added and

those dated over 36 months are to be deleted biweekly. The computer

programs used to maintain the master NCOA file and all data released

from it are to be controlled by the National Customer Support Center.

--------------------

\4 This system is used to forward mail that cannot be delivered as

addressed.

\5 Zoning Improvement Plan.

LICENSEES ARE TO RECEIVE NEW

ADDRESS DATA BIWEEKLY

---------------------------------------------------------- Letter :4.1

The Postal Service has licensed, for a fee paid by the licensees, the

master NCOA file to a limited number of companies, which in turn use

the file to correct addresses on their mailing lists and sell

address-correction services to other businesses. As of December

1995, 24 companies were licensed, including some of the nation's

largest firms in the direct marketing and credit reporting

industries, such as Donnelly Marketing, Inc., a leading direct mail

marketing company; TRW Target Marketing Services, which operates

primarily in the direct marketing industry; and Metromail

Corporation, which primarily provides address services for direct

marketing purposes.\6 In 1995, 22 companies each paid $80,000, and

the remaining 2 each paid $120,000, to the Postal Service under the

licensing agreements.

Each licensee is responsible for maintaining a complete and current

NCOA file. Every 2 weeks, the NCOA program office within the

National Customer Support Center is to provide licensees with a copy

of the NCOA file update tapes, which on average contain about 1.1 to

1.5 million change-of-address records. Licensees are to use these

tapes, which include address deletions, additions, and changes, to

update the NCOA files they maintain. Licensees then use the NCOA

files and address-matching logic designed into their computer

software to update addresses on their customers' mailing lists as

well as their own mailing lists.

Since all records in the NCOA file are to be in the Postal Service's

standardized address format, licensees must convert customers'

mailing lists, to the extent possible, into the same standardized

address format before any matching occurs. This initial step may

also identify and correct incomplete or inaccurate addresses on the

licensee's list. The resulting standardized lists are to be matched

with the NCOA file by the licensees using address-matching computer

software tested and approved by the NCOA program office, as required

by the Postal Service. Each licensee's software must meet the

performance standards specified in the licensing agreement, and only

approved software may be used to provide NCOA services.

Under these procedures and conditions, each licensee is to update an

address on a mailing list only when a name and address on that list

matches a name and old address in the NCOA file. Licensees are to

provide their customers the original address as it was presented on

each customer's list; the standardized address, including the correct

ZIP + 4 code; and a new address where a match was found. When a

match is found and a new address is disclosed, licensees may also

disclose other information, such as whether the address is for a

family, individual, or business and when the move became effective.

--------------------

\6 Direct marketing refers to the use of mail services to target

advertising materials to specific segments of the American

population. Since the mid-1980s, direct marketing has flourished

primarily because of the ability to use large-scale, integrated,

automated files to combine various demographic characteristics of the

consuming public--such as age, income, neighborhood, etc., for

increasing the return on advertising and marketing investments.

THE POSTAL SERVICE RESTRICTS

LICENSEES' USE OF NAME AND

ADDRESS DATA

---------------------------------------------------------- Letter :4.2

Postal Service officials said they believe that the design and

implementation of the NCOA program fully complies with applicable

federal privacy laws. Postal Service officials said that they

analyzed federal privacy laws and that releasing the NCOA file to

licensees to provide address-correction services and licensees'

subsequent release of new addresses of postal customers--whose names

and old addresses are already on a licensee's or its customer's

lists--are lawful when done in accordance with the provisions and

conditions of the licensing agreement. In a July 12, 1995, letter to

us, the Postal Service's Chief Counsel for Ethics and Information Law

said that disclosure of the NCOA file to the licensee is supported by

subsection (m)(1) of the Privacy Act.\7 He said that because

licensees act as representatives of the Postal Service when

performing the list correction function, disclosure to the licensees

does not constitute disclosure to the "public" within the meaning of

section 412 of the Postal Reorganization Act of 1970. Furthermore,

the Chief Counsel said that release of the information by a licensee

to its customer for the limited purpose of list correction is

permissible routine use.

Postal Service officials emphasized that the Postal Service does not

provide names to be included on any lists, whether held by its

licensees or by their customers. Postal Service officials said that

the information provided to licensees, and by licensees to their

customers, under the NCOA program is limited to the new addresses of

persons whose names and addresses are already on the licensee's or

the customer's list. Thus, Postal Service officials said they

believe that the NCOA program does not violate the prohibition in the

Privacy Act against the unauthorized disclosure of an individual's

"name and address."

--------------------

\7 Under 5 U.S.C. 552a(m)(1), contractors and their employees are

treated as agency employees for the purpose of assessing criminal

penalties for unauthorized disclosures as set forth in that section.

PRIVACY PROVISIONS OF THE

LICENSING AGREEMENT

---------------------------------------------------------- Letter :4.3

Postal Service officials said they believe that the NCOA licensing

agreement, with its conditions and performance provisions, helps to

ensure that federal privacy guarantees are not compromised through

the operation of the NCOA program. The licensing agreement requires

licensees to provide mailing-list correction services according to

standards set by the Postal Service, and specifies licensees'

obligations under the Privacy Act.

Postal Service officials said they believe that the prescribed

standards for licensee performance provide the Postal Service a basis

for monitoring performance to ensure the quality of the service

provided and compliance with the privacy restrictions of federal law.

For example, the agreement sets minimum standards for the performance

of the computer software that licensees use to provide the NCOA

service. It also establishes requirements for maintaining a current

NCOA file, for timeliness of the service, and for safeguarding the

NCOA file and the lists that customers submit for the

address-correction service.

The licensing agreement specifies the Privacy Act restrictions that

Postal Service officials said they believe apply to the release and

use of NCOA address information. The agreement states that the NCOA

file is a system of records, as defined in subsection (a)(5) of the

Privacy Act, and is subject to its provisions. It states that if, at

any time during the term of the agreement, the licensee fails to

comply with or fulfill any of the terms or conditions of the

agreement, the Postal Service may, at its discretion, terminate the

agreement.

The agreement prohibits licensees from disclosing or using the

information in the NCOA file for any purpose other than correcting

addresses on preexisting lists. Licensees are required to institute

procedural and physical safeguards to ensure the security of the

information in the NCOA file, as well as to maintain an accurate

accounting of all disclosures of information in the file in

accordance with subsection (c) of the Privacy Act. The agreement

points out that the Postal Service may conduct impromptu audits to

evaluate the potential for unauthorized access, disclosure, or misuse

of the NCOA file, as well as to ensure that all performance

requirements are met. The agreement also points out that the

licensee and its employees are subject to the criminal penalties set

out in subsection (i)(1) of the Privacy Act for any willful

disclosure prohibited by the act.

LICENSING AGREEMENT MODIFIED

TO STRENGTHEN CONTROL AND

OVERSIGHT

---------------------------------------------------------- Letter :4.4

After the congressional hearings held in 1991 and 1992, mentioned

previously, the Postal Service modified, in May 1994, certain

provisions of the licensing agreement.\8 The Service took steps to

clarify the licensing agreement restrictions on the use of NCOA data,

strengthen its oversight of licensee performance, and provided for

suspending any licensee who fails to comply with the terms and

conditions of the agreement.

--------------------

\8 The Postal Service and its licensees refer to this change to the

agreement as "Modification 75."

PROHIBITION ON USE OF

NCOA SERVICES

-------------------------------------------------------- Letter :4.4.1

As modified, the agreement specifies certain practices that are

prohibited, such as the creation of new-movers lists. The use of

new-movers lists is reportedly an important and common practice in

the mail marketing industry. New-movers lists can be created by

updating an existing list of names and addresses using NCOA data or

other sources of current-address data. Individuals on the existing

list whose addresses have changed are considered to have "moved," and

the names and new addresses of these individuals can be used to

create or supplement a new-movers list. These lists can be used by

list holders for their marketing purposes--e.g., to offer products or

services to anyone who moves into a new home, or they can be sold to

others.

The use of NCOA services to create or maintain new-movers lists has

been controversial and, as explained hereafter, the Postal Service

has not expressed a clear and consistent position regarding

prohibitions on using NCOA data to create such lists. During

congressional hearings in May 1992 on the NCOA program and privacy

issues, evidence was presented that some licensees were producing and

selling new-movers lists using NCOA-linked data. At that time, the

Postal Service Director, Office of Address Management Systems,\9

testified that the protections afforded individuals by federal

privacy law do not extend to proprietary lists that have been

appropriately updated by the NCOA service and that the Postal Service

was not responsible for how such lists are used. The Director said,

in part, that

"Licensees, as well as their customers, hold mailing lists which

are their intellectual property. We believe that by availing

themselves of the NCOA and other services, those lists are

legally and properly updated and that our management of these

services fully comports with all of the laws which you have

listed, as well as any others which may exist.

"The simple fact of the matter is that once a list holder has

acquired a corrected address through address correction service,

we do not believe it is the intent of the law, nor do we believe

it is the role of the Postal Service to attempt to police how

the private sector uses their own intellectual property for

their business reasons."

This position, however, is contrary to the conclusion reached by the

Committee on Government Operations in its November 24, 1992, report

(House Report 102-1067) following the 1992 congressional hearings.

The Committee found that the NCOA program contravenes section 412 of

the Postal Reorganization Act and subsection (n) of the Privacy Act.

Among its other reasons for this conclusion, the Committee focused on

the creation and sale of NCOA-linked new-mover lists by licensees as

violating the restrictions imposed by the Privacy Act.

The Postal Service later added a prohibition in the licensing

agreement on the creation of new-movers lists. Specifically, the

licensing agreement was modified in May 1994 to read, in part, as

follows:

"The sole purpose of this license and of the standardized name

and address matching services is to provide a mailing list

correction service for lists that will be used for the

preparation of mailings. Information obtained or derived from

the NCOA file or service shall NOT be used by the Licensee,

either on its own behalf or knowingly for its customers, for the

purpose of creating or maintaining "new-movers" lists.

"As with the NCOA file itself, no proprietary Licensee list,

which contains both old and corresponding new address records,

if it is updated by use of the NCOA file, shall be rented or

sold or otherwise provided, in whole or in part, to Licensee

customers or anyone else."

Postal Service officials said that the above prohibition was not new

but, rather, that the above language clarified restrictions that were

already stated in broader terms in the original licensing agreement.

However, the statement that the prohibition was not new appears to be

contrary to the testimony quoted previously from the May 1992

congressional hearings.

Further, in the May 1994 modification, the Postal Service imposed new

requirements to limit the use of NCOA-linked data by the customers of

licensees. However, in contrast to the modification provision

applicable to licensees, this new requirement does not state

explicitly that the prohibition on the use of NCOA-linked data to

create new-movers list applies to the licensees' customers.

Specifically, the Postal Service added a requirement to the licensing

agreement that, at least once each year, licensees are to have

customers sign an "NCOA Processing Acknowledgement Form." By signing

the form, customers acknowledge their understanding that "the sole

purpose of the NCOA service is to provide a mailing list correction

service for lists that will be used for the preparation of mailings."

However, the form is not clear as to any specific prohibitions on the

use of NCOA services by licensees' customers because the form does

not explicitly state that NCOA data are not to be used to create or

maintain new-movers lists.

Postal Service officials said they continue to believe that neither

the Privacy Act nor the Postal Reorganization Act of 1970 limit in

any way licensees' and customers' use of address data that have been

properly updated or corrected through the NCOA service. The Manager,

Address Management said that the change to the licensing agreement

cited above was made as a "good business practice" to address

concerns raised by Congress and the public in the 1992 congressional

hearings.

We do not question the Postal Service's view that the disclosure of

NCOA data to licensees for the specific and limited purpose of

address list correction is permitted under the Privacy Act and the

1970 Act. However, we do not agree that the Privacy Act allows

licensees to use NCOA-linked data to create new-movers lists, which

may then be sold to their customers. As the Postal Service

acknowledges, under the Privacy Act

(5 U.S.C. 552a (m)(1)), the NCOA licensees operate on behalf of the

Postal Service. As such, they are subject to provisions of the

Privacy Act that allow an agency record to be disclosed provided that

it is used for a purpose compatible with the purpose for which it was

collected. Like the Postal Service, licensees may use the

information disclosed only for the limited purpose of address-list

correction, which is the routine use and purpose for which the Postal

Service collected such information. Thus, in our view, use of

NCOA-linked data by a licensee for the purpose of creating a

new-movers list would not be consistent with the limitations imposed

by the Privacy Act.

--------------------

\9 At the time of our review this position was entitled Manager,

Address Management.

OTHER PROVISIONS ADDED ON

AUDIT AND SUSPENSION OF

LICENSEES

---------------------------------------------------------- Letter :4.5

In addition to the above changes, the May 1994 modification called

for increasing the frequency of Postal Service audits that licensees

must pass, from one to at least three each contract year. The

modification further added the alternative of suspending a licensee

for failure to comply with the terms and conditions of the agreement

pending verification that the deficiencies have been corrected.

Previously, the agreement provided only for the outright

termination--at the Service's discretion--of a licensee who failed to

comply with provisions of the agreement.

THE POSTAL SERVICE HAS NOT

REASONABLY ENSURED LICENSEES'

COMPLIANCE WITH LICENSING

AGREEMENT PRIVACY PROVISIONS

------------------------------------------------------------ Letter :5

The Postal Service's oversight fell short of ensuring that licensees

have met the provisions and conditions of the licensing agreement

and, thus, did not ensure that the NCOA program was operating in

compliance with federal privacy laws. The Postal Service's oversight

procedures and processes have been weak with regard to (1) "seeding"

the NCOA files with fictitious records to discourage unauthorized

name and address disclosure by licensees; (2) auditing the

performance of licensees' NCOA software and conducting impromptu site

visits to monitor whether licensees are complying with various

licensing agreement requirements; (3) reviewing licensees' proposed

advertisements for NCOA services they sell; and (4) investigating

NCOA program-related complaints.

WEAKNESSES IN THE SEEDING

PROCESS