USPS OIG Audit Report – Flats Sequencing System: Program Status and Projected Cash Flow
This report discusses the Flats Sequencing System (FSS) program status and its projected financial impact and addresses both operational and financial risks (Project Number 09YG052DA000). The objective of this audit was to assess procedures for reporting of FSS performance and program savings shortfalls. See Appendix A for additional information about this audit.
In December 2006, the U.S. Postal Service approved a (redacted) project to develop,purchase, and deploy 100 FSS machines, which are designed to sort flat mail in the precise order in which it is delivered. The first two contract requirements tests of FSS machines (designed to ensure functionality, quality, and compliance with specifications) have shown shortfalls in expected performance. Typically, when there is a First Article Test (FAT) failure, Postal Service acquisition guidelines call for retests before beginning deployment. However, in this case, the Postal Service has decided to deploy FSS machines despite major performance shortfalls in order to capture savings earlier; however, deploying FSS machines that do not meet contract requirements could reduce
expected savings. Although the Postal Service has adjusted its savings expectations and project assumptions have changed, it has remained optimistic when communicating expected financial outlooks.
Conclusion
The Postal Service’s revised performance projections in Quarter 1 (Q1) of fiscal year (FY) 2010’s Investment Highlights report do not use current actual machine performance and its projection of a gain of at least $872 million from FSS appear optimistic. In addition,there have been significant changes in assumptions for FSS machines and measurement criteria since the 2006 approval of the original investment. For example, flats volumes have decreased significantly, expected throughput rates have not been met, planned FSS sites have increased, the program schedule has changed by a year, and additional savings for transitional employees (TE) have been introduced to the investment return.These changes make it challenging for the Postal Service to measure project success as initially defined.
Particularly, we believe adding TE savings to the evaluation of FSS program success is questionable for several reasons. First, these savings were never considered as part of the original investment decision. Second, 44 percent of TEs are not in districts that will eventually host FSS machines. Lastly, management claimed these savings prior to FSS deployment and has the option of reducing TE complements for volume declines irrespective of the FSS program’s success. Thus, much of the savings from these employees will likely not be associated with FSS deployment.The Postal Service’s Q1, FY 2010 Investment Highlights report shows a projected gain for the FSS program of at least $872 million and a return of at least 27 percent. Using current actual performance data for the highest performing machine and operational target metrics, we calculated four financial scenarios for measuring program status and progress
against program goals. These scenarios were at least $431 million lower than the scenarios the Postal Service presented. Such a large difference exists because the Postal Service used more optimistic performance assumptions rather than actual machine performance or operational target results.
Our analysis shows that using current FSS performance data to calculate projected savings results in a net present value (NPV) of $215 million (a rate of return of 14.49 percent). If we remove the questionable TE savings, the NPV decreases to a negative $311 million (a rate of return of 5.18 percent). Assuming the FSS machines reach the operational target metrics, we calculate gains from FSS to be $441 million (rate of return of 19.26 percent). If we remove the questionable TE savings, there is a projected NPV of a negative $85 million (a rate of return of 8.54 percent).
The Postal Service’s Handbook F-661 requires accurate analysis and reporting of program impact. One purpose of the Investment Highlights report is to show the progress of large-scale programs within the Postal Service. Reporting program performance based on actual and operational target data is critical so that key decision-makers (such as the Board of Governors) have sufficient information to monitor program progress on projects of significant duration. See Appendix B for our detailed analysis of this topic.
We recommend the vice president, Engineering:
1. Use actual machine performance and operational target data to more accurately report the progress of the Flats Sequencing System program’s financial outcomes in compliance reports such as the Investment Highlights report.
1 General Investment Policies and Procedures (November 2005, updated with Postal Bulletin revisions through October 11, 2007) provides a single source overview of investment projects.
Management’s Comments
While management agreed with the recommendation to use actual machine performance data for compliance reports, they took exception to certain findings and our recommendation to use operational target data. Specifically, the Postal Service will include an additional FSS financial scenario when reporting outcomes in Investment Highlights reports. Management will take this action in time for the Q3, FY 2010 Investment Highlights report. The reported scenario will represent the Postal Service’s most current assessment of actual machine performance. In reference to using operational target data,the Postal Service does not believe they are representative of long-term expectations and elected not to present them in future Investment Highlights reports.
Management also said the financial outcomes presented in the report do not recognize:
- Throughput improvements demonstrated during tests in November 2009 and April 2010.
- Performance improvements over the 10-year program life and performance levels already achieved by the first article machine.
- Over 17 hours of daily runtime for unconstrained machines.
- The relevance of TEs, their strategic use, and the resulting savings attributable to the FSS program.
- Scheduling adjustments that address lower mail volumes.
- Additional savings related to delivery unit space reductions and vehicle capital investment and maintenance avoidance.
Thus their lower bound outcomes represent the likely worst case scenario. We have included management’s comments, in their entirety, in Appendix D.
full report from the USPS Office Of Inspector General
OIG Audit: USPS Summer Sale For Mailers May Have Lost Money In FY 2009
This report presents the results of our audit of the fiscal year (FY) 2009 Standard Mail® Volume Incentive Program (Project Number 10BO008FF000). The report responds to a request from the Postal Regulatory Commission (PRC). Our objectives were to evaluate the Standard Mail Volume Incentive Program (Summer Sale) to determine whether the Postal Service achieved its objective of increasing volume and revenue and whether the process used to establish customers’ mailing history was valid and accurate. This audit addresses financial risk. See Appendix A for additional information about this audit.
The U.S. Postal Service intended its Summer Sale to increase volume during a typically light mail volume period and increase revenue. The program ran from July 1 through September 30, 2009. At the end of this period, the Summer Sale provided a 30 percent credit to customers for additional volume mailed over a specified threshold.
Conclusion
The Postal Service reported both volume and revenue increases resulting from the FY 2009 Summer Sale.1 However, the processes used to calculate the reported
increases may result in misleading reported revenue and volume impacts. While the Postal Service used actual, verifiable mailing data in many cases, the additional data
essential to calculations supporting the reported increases is less precise. These data included various assumptions related to mail thresholds,2 negotiated mail volumes
based on customer input, and incomplete or unconsidered employee cost data. Postal Service outsiders — including the PRC’s public representatives3 — have also
questioned the Postal Service’s methods for calculating reported revenue and volume increases. The public representatives found that using methods more closely aligned
with those initially considered by the PRC in approving the Summer Sale suggests the Postal Service may actually have lost money on the FY 2009 program.
A Postal Service official stated that the benefits gained from conducting incentive programs like the Summer Sale outweigh their potential financial uncertainties. The
official said the Summer Sale program should be viewed as an investment in the future of the Postal Service, creating long-term customer satisfaction and building its
reputation. While these goals are commendable, a stated objective of the FY 2009 Summer Sale was to increase revenue and volume. It is uncertain whether the Postal
Service achieved that objective. We believe the Postal Service needs solid data and complete cost information in order to make well-informed decisions on the programs it initiates or conducts, particularly considering the critical financial predicament it is currently facing.
Revenue and Volume Increases Reported for Summer Sale May be Misleading
Overall, the Postal Service did not always have independent, reliable, and complete data upon which to calculate the $24.1 million in net revenue contribution and increased volume resulting from the FY 2009 Summer Sale. This occurred because the Postal Service relied on certain customer-provided data to determine customer thresholds and this data was a key component in evaluating revenue and volume increases. In addition, the method the Postal Service used to determine customer mail volume without a Summer Sale — commonly referred to as “loyalty growth” — differs from the PRCapproved method. The Postal Service’s calculation of “loyalty growth” considered trends in volume, whereas the PRC’s public representatives applied a measure of price sensitivity to volumes actually mailed during the Summer Sale to calculate “loyalty growth.” As a result, the Postal Service provided $67.8 million in rebates to customers who exceeded the established threshold volumes that may have been inaccurate. We consider the $67.8 million to be assets at risk.
A key component in calculating net revenue and volume increases was determining customers’ mail volume thresholds. To determine thresholds, the Postal Service provided mailing data that established a threshold for all its customers who were eligible to participate in the Summer Sale. While 324 customers agreed with this threshold figure, 129 others did not. Customers who disagreed with the threshold met with a Postal Service analyst from the Business Customer Intelligence (BCI) Department to discuss and negotiate the changes. Postal Service officials stated that BCI analysts researched the requested changes; however, they were not able to provide documentation to support the changes made or the validation process.
Furthermore, Postal Service outsiders have questioned the validity of the calculation of the “loyalty growth.” The PRC’s public representatives8 found that using the PRC’s method for “loyalty growth,” the Summer Sale lost $39.6 million of revenue. This is in contrast to the Postal Service’s reported $24.1 million net revenue growth. These varying calculations illustrate the difficulty in determining the results and effect of the Summer Sale.
see full report from the Office Of Inspector General:
note: another postal website really likes stealing my headlines.
OIG Criticizes USPS Oversight Of Grievance Settlements And Questions Payments to Union Officials
Recent audit report from the USPS Office of Inspector General :
Most Postal Service bargaining unit employees are represented by one of the four major unions. The national agreements signed by senior-level management and the four union presidents include grievance-arbitration procedures that Postal Service management, bargaining unit employees (also referred to as craft employees), and union representatives must follow. These procedures provide guidance for resolving workplace disputes, differences, disagreements, and complaints. The Postal Service pays millions of dollars in grievance settlements; in fiscal year (FY) 2008 and FY 2009 they paid $250 million and $179 million respectively. As a result, it is important to ensure the Postal Service has appropriate internal controls in place.
Conclusion
Management controls over grievance settlements and disbursements need to be strengthened. We found that grievance payments were often not supported by adequate documentation and, as a result, we identified at least $27.8 million in unsupported questioned costs. We also found that oversight of the grievance settlement process was not consistent among the districts and that union representatives received grievance payments to which they may not have been entitled. The weakness in the control environment makes it difficult to determine the propriety of settlement amounts, and
payments to employees and union officials who represent bargaining unit employees.Documentation to Support Grievance Settlements and Payments
We reviewed 600 randomly selected grievances2 and found that 234 (or 39 percent) were not adequately supported by required documentation. The missing documentation included signed Grievance Arbitration Tracking System (GATS) decision letters that document the reason for the settlement; the Grievance Form, which explains the original grievance; and documentation that explains how management determined the amount of the payment. As a result, there is no assurance that at least $27.8 million in grievance settlement payments were justified or warranted.
Human resources managers and labor relations officials at six of the 10 districts in our sample stated that supervisors are not required to copy and maintain supporting documentation used to settle informal grievances because they can settle them verbally. Management at the remaining four districts stated the documentation was missing due to poor recordkeeping by supervisors and individuals who prepared the grievance payments.
The Postal Service requires management to maintain documentation supporting grievance files and appeals for 7 years. In addition, the Government Accountability Office (GAO) developed standards for internal controls. These standards require agencies to assess the level of risk associated with specific activities and develop nternal controls to mitigate these risks. One internal control activity includes documenting all transactions and other significant events and making the documentation readily available.
Payments to Union Representatives
We also found that union representatives received excessive payments from grievance settlements. Union representatives in four districts (Colorado/Wyoming, Alabama, Mid- America, and Capital) were involved with the allocation of class-action grievance settlements for six grievances that resulted in union representatives receiving payments that were significantly more than other members of the class. Specifically, union representatives received $33,447 (or 24 percent) of $141,639 in settlements for these six grievances. One union representative in the Mid-America District received as much as 35 percent of a grievance settlement, while other payees received less than 1 percent.
This occurred because the Postal Service has not established procedures for reviewing the allocation of settlements to ensure that payees whom the union identifies are part of a class action. Once the Postal Service negotiates a settlement, they often have no involvement with its allocation. As a result, union representatives may be receiving payments to which they are not entitled.
Inconsistent Oversight of Grievance Settlements
We identified inconsistencies in the oversight of grievance settlements among the districts we reviewed. Specifically:
- Six of the 10 districts did not encourage or expect management representatives to seek higher-level consultation during the grievance process.
- Four of the 10 districts had not established dollar thresholds indicating when consultation or approval was required. Thresholds varied among the six districts that did have established thresholds.
There was no requirement or nationwide methodology for monitoring grievances through GATS. District officials stated they each used one or more GATS reports, and seven of the 10 stated they used one or more alerts in GATS to monitor settlement amounts or prevalent issues.
We found that these inconsistencies existed, because supervisors are authorized to settle grievances at any amount; and although some Postal Service managers had implemented a consultation process, others believe oversight of grievances before settlement and documentation of any consultation would violate union contracts.Without consistent procedures and appropriate oversight, management has no assurance that grievance settlements and disbursements are appropriate. According to GAO, internal controls provide reasonable assurance that funds are safeguarded and laws and regulations are complied with and support effective and efficient operations.
Without sufficient internal controls, the risk of fraud, waste, and abuse is high.
USPS OIG: Fixing CSRS Overpayment and pre-funding requirements would fully fund pension and retiree health benefits
The economic downturn and the continued electronic diversion of mail, coupled with an aggressive retiree health pre-payment schedule have combined to put the Postal Service in financial crisis. A recent analysis of the future of the mail conducted on behalf of the Postal Service showed that mail volume may not recover along with the economy – further deteriorating the Postal Service’s financial condition in the years to come. Moreover, in its April 12 report entitled, “U.S. Postal Service: Strategies and Options to Facilitate Progress Toward Financial Viability,” the Government Accountability Office (GAO) found This report presents the results of our review of the Civil Service Retirement System (CSRS) Overpayment by the U.S. Postal Service (Project Number 10YO036CI000).This report discusses the $75 billion CSRS overpayment by the Postal Service in fiscal years (FY) 1972 through 2009. The objective of this review was to assess the facts concerning this overpayment and identify any possible solution(s) to correct the overpayment to the benefit of the Postal Service. This review addresses financial risk.See Appendix A for additional information about this review.
On May 5, 2010, the U.S. Postal Service Office of Inspector General (OIG) entered, for the record, the attached Congressional testimony with the U.S. Congress in addition to the oral testimony previously given by the Postal Service’s Inspector General (IG) before Congress on April 15 and 22, 2010. 1 The attached testimony (See Appendix B) explains, in detail, the Postal Service’s $75 billion overpayment to the CSRS and three possible solutions to correct the overpayment contained in the IG’s written testimony of May 5, 2010. (See Appendix B pages 13 – 16)
Conclusion
The Postal Service pension fund is not made up of tax dollars. The two funding streams are the employees’ own money and money collected from postage sales, with inflated prices as a result of the $75 billion overpayment. See Appendix C for OIG’s detailed monetary impact calculation. The return of the overpayment or a combination of actions to realize the benefit of the $75 billion overpayment to the Postal Service would fully fund the pension and health retiree plans. The Postal Service’s more than $7 billion annual payments for retiree health care prefunding and retiree health care premiums would no 1 The April 15, 2010, Hearing before the Committee on Oversight and Government reform and the Subcommittee on the Federal Workforce, Postal Service, and the District of Columbia House of Representatives and the April 22, 2010, Hearing before the Senate Homeland Security and Governmental Affairs Committee’s Subcommittee on the Federal Financial Management, Government Information, Federal Services, and International Security.
How the $75 Billion overcharge started:
In July 1971, when the Post Office Department became the Postal Service, employees that belonged to the federal pension fund began contributing to the Postal Service’s portion of the pension fund. These retirement costs were divided according to the number of years employees had belonged to each fund. However, the federal pension fund paid for retirements was based on 1971 salaries, not final salaries as administered by the Office of Personnel Management (OPM).
OPM has explained that these mischarges were in response to what they believed to be the will of Congress expressed in 1974 legislation. However, the 1974 language was repealed by Congress in 2003. Congress directed OPM to use its authority to oversee the reforms using accepted “dynamic assumptions” that include pay increases and inflation. OPM switched to dynamic funding for the Postal Service portion, but did not for their share. The Postal Service paid the $75 billion difference.
In 2004, the Postal Service appealed the OPM’s methodology for pension fund allocation and the appeal was denied by the OPM. The denial relied on 1974 legislation that made the Postal Service responsible for the pension costs related to salary increases. However, the 1974 language was repealed by Congress.
In addition, the OPM directed the Postal Service to use 100 percent pre-funding for both pension and health care retirement funds. In contrast the OPM has pension funding levels of 41 percent for federal employees and 24 percent for the military. The OPM’s own retiree health care prefunding for federal employees is 0 percent. The Standard & Poor’s 500 companies’ pension funding is 80 percent.
Correcting either the $75 billion overcharge or reducing the 100 percent target prefunding level to 80 percent would result in the ability of the Postal Service to pay off the Treasury debt associated with paying the $75 billion overcharge.
Accordingly, the annual costs and premiums for the health care liability could be financed out of the interest earnings and surplus. Another option for the Postal Service could be to use the $75 billion overcharge to pledge to the retiree health fund instead of making annual payments. This could be done with the agreement of the OPM and the U.S. Treasury.
The details concerning each of the three possible solutions can be found in the appendix of the attached Congressional testimony.
See Full Report: Management Advisory Report – Civil Service Retirement System
Overpayment by the Postal Service (Report Number CI-MA-10-001).
OIG Audit: USPS could save $342 million By Replacing Some Vehicles Instead of Repairing Them
In a recent OIG audit report on USPS delivery vehciles:
The Postal Service has approximately 189,000 delivery vehicles made up of minivans, sport utility vehicles (SUVs), flex fuel, and long-life vehicles (LLVs). The majority of the
Postal Service’s delivery fleet are nearing the end of their 24-year life expectancy. Because of limited capital resources, the Postal Service has delayed its planned purchase of delivery vehicles until fiscal year (FY) 2018. The Postal Service faces the same capital challenges after 2018, as forecasts show continuing shortfalls
The Postal Service has successfully maintained its LLV delivery vehicle fleet in safe, working condition for over 20 years. They attribute this success to a robust preventive maintenance program, as well as a “fix as fails” strategy that we found to be operationally viable and generally cost effective. However, analysis of delivery vehicle costs shows that this strategy would not be cost-effective for fleet vehicles the Postal Service will have to replace soon. These vehicles consist of 19,257 LLVs, with an average annual maintenance cost in excess of $5,600 for FYs 2008 and 2009. Incurring maintenance costs at this rate, the “fix as fails” strategy costs $342 million1 more than it would cost to purchase new vehicles.
This opportunity exists because the strategy as implemented often circumvents the service life and maintenance reinvestment guidelines.2 These guidelines require that before initiating any extensive vehicle repair, Vehicle Maintenance Facilities (VMFs) must assess maintenance reinvestment by providing complete documentation of expected maintenance costs, the condition of all major components, and a cost analysis justifying the decision to repair. This information is to be documented on Postal Service (PS) Forms 4587, “Request to Repair, Replace, or Dispose of Postal Service-Owned Vehicles”, and it is to be submitted for district management approval before the repair is made. We found that this control was circumvented and costly repairs were made because the assessments were not complete and lacked district management approval. In addition, the Handbook PO-701 does not require that cumulative maintenance reinvestments are monitored beyond district levels. Without this control, maintenance intensive vehicles are not apparent to area and headquarters managers.
We recommend the vice president, Engineering:
1. Replace maintenance intensive vehicles beginning in fiscal year 2011.
2. Reemphasize to vehicle maintenance and district managers the reinvestment threshold, the importance of completing PS Forms 4587 to include cumulative costs, and the need to obtain required approvals as detailed in Handbook PO-701.
3. Monitor maintenance intensive delivery vehicles at the area level.
OIG Report: Postal Service’s Progress In Reducing Workhours
This report presents the results of the Postal Service’s progress in reducing workhours based on recommendations in a prior report.1 Our objective was also to assess the
overall efficiency of the processing and distribution network for fiscal year (FY) 2009 (Project Number 10XG017NO000). This is a cooperative effort with the Postal Service
and addresses operational risk. See Appendix A for additional information about this review.
Last year, we reported on efficiency levels and mail volume in processing and distribution centers (P&DCs) and facilities (P&DFs), and recommended the Postal Service reduce almost 23 million workhours by FY 2011. The goal of the previous effort was to report out on Postal Service’s efforts to “raise the bar” on productivity levels for those plants that were the least productive in the network nationwide. We took a similar approach in this report and plan to conduct this type of analysis annually.
Conclusion
The Postal Service made substantial progress by reducing workhours in the network from the previous year. Plants that were the least productive in FY 2008 reduced over
18 million workhours (achieving 82 percent of the recommended workhour savings) and improved productivity by over 6 percent. Moreover, from Quarter 1 (Q1), FY 2009 to Q1,
FY 2010, the Postal Service maintained or improved service. See Appendix B for more information.
However, we found the Postal Service had not yet fully adjusted workhours in response to declining mail volume as a result of poor economic conditions, nor achieved all
possible efficiencies in mail processing operations.
We identified five major areas where the Postal Service could realize workhour savings:
- Overtime Hours
- Mail Handling
- Automated and Mechanized Equipment
- Allied Operations
- Manual Operations
The Postal Service could improve operational efficiency by reducing over 16.2 million workhours by the end of FY 2012. This would allow the Postal Service to achieve at
least median productivity levels in the network and avoid costs of almost $744 million based on workhour savings for 1 year.2 See Appendix C for a detailed explanation of
this cost avoidance.
USPS OIG Auditing Early Distribution of Employee Paychecks
The objective of the audit is to evaluate the process for issuing salary checks early and determine the impact for cashing the salary checks prior to the pay date.
The Postal Service opened a payroll clearing account for employees that do not receive direct deposit. This account became effective for the February 5, 2010 pay date. An analysis of the Point of Service (POS) tender data for February 2010 revealed the payroll checks are being distributed early on the Wednesday and Thursday prior to payday and are being cashed at POS offices. Again, a similar pattern occured on the Wednesday and Thursday prior to the February 19, 2010 pay date. To conduct our audit, we will: Review the POS tender data for February 2010. Review employee schedules to determine the purpose of the employee receiving their salary check in advance. Hold discussions with Postal Service management to determine when the payroll account is funded. Conduct site visits at a minimum of # sites in the Northeast area to conduct interviews with Postal Service management to determine why they are distributing salary checks in advance and why they are allowing the checks to be cashed early. (Note: Of the 6 districts cashing over 100 checks, the largest violation occurred in 5 districts in the Northeast Area. Review USPS regulations, manuals, and policies and procedures as criteria to evaluate internal controls over disbursing checks early and cashing them prior to the pay date at POS offices.
source: USPS Office of Inspector General
USPS OIG: Federal Express – Transportation Agreement – Northeast Areas
This report presents the results of our self-initiated audit of the Federal Express (FedEx) transportation agreement. The objectives of our audit were to determine whether selected transportation operations were effective and economical (Project Number 09XG027NL000). See Appendix A for additional information about this audit.
On August 2, 2006, the U.S. Postal Service signed a new 7-year agreement with FedEx. FedEx transports time sensitive mail for the Postal Service, including Express Mail®, Priority Mail®, and First-Class Mail® (FCM). FedEx transportation is usually more expensive than commercial air carrier or surface transportation, and Postal Service policy requires transportation managers to balance service and cost in determining the best transportation mode. In addition, the Postal Service uses Terminal Handling Services (THS) contractors to prepare and load mail into containers for transport on FedEx planes. The containers include both bypass and mixed containers.
Bypass containers hold mail bound for the same destination airport and move through or “bypass” the sorting operations at the FedEx Memphis hub at no additional cost to the Postal Service. Mixed containers hold mail bound for various destination airports and must be sorted at the Memphis hub onto departing planes. The Postal Service is required to pay FedEx for sorting mail at the Memphis hub.
Conclusion
It was more effective and economical in some cases for the Capital Metro, Eastern,Great Lakes, and Northeast Areas to use ground transportation and domestic air carriers as well as to sort mail at Postal Service plants than to use FedEx to perform these functions.1 Because the areas used FedEx, the Postal Service incurred about $35.3 million in unnecessary costs. If these areas implement our recommended changes, we estimate the Postal Service could save $170.6 million over a 10-year period.
Transporting Surface Mail on FedEx
We concluded that in some cases using ground transportation was more advantageous than using FedEx. By flying surface mail on FedEx instead of using cheaper ground transportation, the Postal Service spent about $32.1 million more than necessary during fiscal years (FYs) 2007 and 2008. This occurred because plant employees did not properly segregate surface mail classes from FCM and Priority Mail. By using ground transportation, the Postal Service could lower overall FedEx lift requirements and save about $138.3 million over 10 years. See Appendix B for our detailed analysis of this topic.
Mixed Versus Bypass Air Containers
Finally, it was more advantageous in some cases for the Postal Service to sort mail than use FedEx to do it. During the period May 1, 2008, through April 30, 2009, the Capital Metro, Eastern, Great Lakes, and Northeast Areas unnecessarily spent about $1.5 million to pay FedEx to sort mail because processing plants did not separate and distribute it in available bypass containers.3 If these areas properly sort and distribute this mail, the Postal Service could avoid about $14.9 million in unnecessary costs over 10 years. See Appendix B for our detailed analysis of this topic.
USPS OIG Recommends Better Oversight Of Postal Employees Unscheduled Absenteeism
USPS Could Have Save $4 Million
Excerpts from the USPS OIG report:
This report presents the results of our audit of Postal Service Absenteeism (Project Number 09YG016HM000). Our overall audit objective was to determine if the Postal
Service’s absenteeism rate is comparable with the rate of the private and federal sectors and, if not, to determine the potential causes. We were also asked to determine if sick leave usage by Postal Service employees in the Civil Service Retirement System (CSRS) was less than that of employees in the Federal Employees Retirement System (FERS) who are 3 to 4 years from retirement. This report responds to a request from the Deputy Postmaster General and Chief Operating Officer to review Postal Service absenteeism. This audit addresses financial risk
Conclusion
The Postal Service’s total absenteeism rate for major benefits is comparable to the total absenteeism rate of the federal sector, but higher than that of the civilian sector.1 We identified two potential causes for the difference between the Postal Service and the civilian sector absenteeism rates — the Postal Service offers more leave benefits than the civilian sector and they offer fewer incentives for employees to accumulate leave. In addition, we determined some supervisors were not complying with attendance control procedures related to unscheduled absences. We also determined that CSRS and FERS retirees use comparable amounts of sick leave in the last years before they retire
Comparison to Federal and Civilian Sectors
The Postal Service’s total absenteeism rate for major benefits2 is comparable to the Office of Personnel Management (OPM) rate for federal employees. However, it was
almost double the Bureau of Labor Statistics’ (BLS) rate for private industry and approximately 4 percent higher than the state and local government rate.3 The higher
absenteeism rates of the Postal Service and the federal sector may be due to the fact that, comparatively, they offer more leave benefits (more hours) and fewer incentives to employees to bank leave. We are not making any recommendations regarding these findings.
Controls Over Unscheduled Absences
We estimated supervisors did not comply with Postal Service policies and procedures regarding unscheduled absences for at least 11,468 employees nationwide. We
identified several causes, including lack of training, supervisors not using the Enterprise Resource Management System (eRMS) as the system of record for controlling
unscheduled absences, and insufficient oversight. In addition, Labor Relations indicated they did not have adequate resources to monitor attendance control. As a
result, overtime was used to cover 17.4 percent of the unscheduled sick leave4 and the Postal Service could have saved $4.0 million in overtime costs by following proper attendance control procedures during the 12-month audit period.5 Postal Service officials are responsible for administering the leave program and controlling
unscheduled absences, while its employees are responsible for avoiding these types of absences.6 Labor Relations professionals stated they provided supervisors with training on attendance control and advice on proper corrective actions; however, opportunities exist to improve oversight and reduce unscheduled absences.
We recommend the area vice presidents require district managers to:
1. Provide refresher training to supervisors to ensure they are aware of unscheduled leave policies and procedures and the importance of following them.
2. Establish and implement internal controls to evaluate and ensure supervisors’ compliance with unscheduled leave policies and procedures (for example,
performance and accountability measures or periodic management reviews).
3. Require supervisors and labor relations specialists to use the Enterprise Resource Management System to record employees’ inability to meet position requirements,
corrective actions taken, and grievance data.
Management’s Comments
Management generally agreed with the findings and recommendations. Specifically, seven of the eight areas agreed with all three recommendations. Great Lakes area
management agreed with recommendations one and two, but disagreed with recommendation three. They stated based on current Memorandums of Understanding
(MOUs) with various unions, supervisors, and labor relations specialists should not document corrective actions and grievance data in an open system, because this could
be viewed as a violation. Additionally, Eastern and Southeast area management commented on the accuracy of our monetary impact. Management’s comments, in their
entirety, are included in Appendix E. Some area vice presidents also provided extensive documentation that supports their corrective actions. Although we have not
included this information in this report, it is available upon request.
Evaluation of Management’s Comments
Overall, the OIG considers management’s comments responsive to the recommendations, and the corrective actions should resolve the issues identified in the
report. Regarding the Great Lakes area management’s disagreement to recommendation 3, we reviewed the MOUs in question and determined they do not
preclude management from implementing this recommendation. Additionally, the Privacy Act restricts disclosure of personally identifiable information by agencies and
prescribes penalties for improper disclosure. 7 Our recommendations are consistent with the routine uses contained in Postal Service policy, as all Postal Service
employees are responsible for protecting such information, and its use would not excuse improper dissemination that could arise from access and use.8
The OIG considers all three recommendations significant, and therefore requires OIG concurrence before closure. Consequently, the OIG requests written confirmation when corrective actions are completed. These recommendations should not be closed in the Postal Service follow-up tracking system until the OIG provides written confirmation that the recommendations can be closed.
see full report: USPS OIG Audit Report – Postal Service Absenteeism
OIG: Status Report on USPS Network Rationalization Initiatives
This report presents the results of our audit of Network Rationalization Initiatives (Project Number 09XR001EN000). This review is part of a series to evaluate the U. S. Postal Service’s Network Rationalization1 initiatives. Our objectives were to evaluate the Postal Service’s progress in streamlining the network since fiscal year (FY) 2005;and identify the key challenges in the planning, development, and implementation process. This self-initiated audit addresses operational and strategic risks. See Appendix A for additional information about this audit.
Conclusion
Between FYs 2005 and 2009, the Postal Service made progress in its effort to streamline its mail processing and transportation infrastructure; however, management has been unable to adjust resources to fully offset mail volume declines, resulting in a deteriorating financial condition. Mail volume decreased by approximately 35 billion pieces during this period. See Appendix B for our detailed analysis of this topic. In response, management has:
? Reduced approximately 205.2 million workhours — the equivalent of 117,273 employees — with the majority in mail processing and customer service functions.
? Reduced 37 million highway contract route (HCR) miles (but overall transportation expenses increased by $1.5 billion).
? Closed 68 airport mail centers (AMCs) and 12 remote encoding centers (RECs).
? Realigned bulk mail center (BMC) operations with no BMC closures.
1 The Postal Service has referred to its network redesign as Evolutionary Network Development (END), Network Integration and Alignment, and Network Rationalization. We use Network Rationalization throughout this report for consistency.
? Consolidated originating mail operations at 13 processing and distribution centers (P&DCs) and closed two P&DCs.
While management has taken unprecedented action to reduce costs, additional opportunities remain to reduce excess capacity in the plant network.
Streamlining the network presents the Postal Service with many challenges in planning,developing, and implementing rationalization initiatives. The most immediate challenge is to dramatically reduce costs and eliminate inefficiencies fast enough to enable the Postal Service to meet its financial obligations, while complying with its Universal Service Obligation.2 The economic downturn and resulting mail volume declines continue to complicate this difficult financial situation. Additional challenges include opposition to infrastructure changes, resistance to First-Class Mail® (FCM) service downgrades, facilities with long-term leases, workforce inflexibilities, facility data consistency and reliability, and lack of a comprehensive network plan.
To remain financially viable, the Postal Service must effectively streamline the mail processing and transportation network and optimize the workforce. 3 The Postal Service has embarked on a journey of transformational changes. Management, congress, unions, and stakeholders must work together during this period of rapid change to ensure network rationalization initiatives have the energy needed to be successful in spite of challenges.
Area Mail Processing (AMP) Consolidations
The Postal Service has made limited progress in implementing AMP consolidations4 in the P&DC network. There are 268 P&DCs nationwide and, since FY 2005, the Postal Service has implemented 13 AMP consolidations. Only two consolidations have resulted in full facility closures.5 Stakeholder opposition and resistance to consolidations with FCM service downgrades were the primary factors that delayed or resulted in the disapproval of AMPs. Another contributing factor is the lack of specific criteria for identifying consolidation opportunities the Postal Service can consistently apply nationwide. Additionally, the Postal Service has cancelled some AMPs without providing their rationale. If management does not consistently apply established criteria to identify consolidation opportunities, stakeholders may question the credibility of the process. Development of objective criteria and implementation of a top-down approach would provide a more consistent and defensible approach to AMP consolidations that may reduce stakeholder resistance, accelerate the AMP consolidation process, and reduce excess capacity in the P&DC network. See Appendix B for a detailed analysis of this topic.
We recommend the vice president, Network Operations:
1. Develop and document specific criteria to identify consolidation opportunities in the plant network.
2. Develop a periodic (annual) review process using a top-down methodology to ensure consistency in identifying consolidation opportunities.
3. Aggressively pursue processing and distribution center and other plant facility closures to eliminate excess plant capacity.