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.
USPS OIG: Former Postal Marketing Exec Robert Bernstock misused staff, contractors
From the Federal Times
The U.S. Postal Service’s former top marketing executive repeatedly used government staff — and at least two business associates he hired with sole-source contracts — to manage his personal finances and outside business interests, according to a new report. Robert Bernstock, who resigned June 4, admitted to Office of Inspector General investigators that he had used postal resources and staff to handle his personal business while on the agency’s time. The report, released today, said his use of Postal Service employees and property to conduct personal business was improper. The report also raises questions about Postal Service general counsel Mary Anne Gibbons’ apparent failure to report Bernstock’s improper use of postal staff. download the entire report by clicking here.
USPS President Under Fire For Directing Postal Contracts To Former Associates Resigns
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).
Acting Postmaster Charged With Obstructing The Passage Of Mail
The Office of the United States Attorney for the District of Vermont stated that Frank J. Strzelec, former Officer in Charge of the Center Rutland, Vermont Post Office, was arraigned today on the misdemeanor charge of knowingly and willfully obstructing and retarding the passage of mail of a Post Officer customer. Strzelec was released pending trial by United States Magistrate Judge John M. Conroy, on the condition that he have no contact with that postal customer.
The information charging Strzelec with obstructing mail is an accusation only; he is presumed innocent unless and until proven guilty. If convicted, Strzelec faces a maximum possible penalty of 6 months in prison, and up to $5,000 in fines. The actual sentence, in the event of conviction, will be determined by the Court with reference to the advisory Federal Sentencing Guidelines.
The investigation was led by the Office of the Inspector General for the United States Postal Service in Springfield, Massachusetts.
Assistant United States Attorney Christina Nolan is handling the prosecution. Strzelec is represented by Alison Arms of the Federal Public Defenders Office in Burlington, Vermont.
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 Says Workshare Audit Will Include Union’s Views
The USPS Office of Inspector General (OIG) has assured the APWU that the union’s views on “workshare discounts” will be considered in an upcoming examination of the controversial practice. Inspector General David C. Williams offered the commitment after President William Burrus criticized the OIG for excluding postal unions from providing input for the report.
“We do hope to interview you as we did earlier on the same subject for one of our research papers,” Williams wrote on June 2 [PDF]. “You concluded that we did not plan to interview you from looking at the web page. I can see how you came to that conclusion,” he continued. “Thanks for being available to us and I am sorry that you concluded, as I would have, that we were not going to seek your views.”
In a May 21 letter [PDF] to the Inspector General, Burrus pointed out that the audit announcement said the OIG planned to interview a range of “stakeholders,” including mailers’ representatives, but made no mention of interviewing the APWU or other postal unions. The mailers are the beneficiaries of the discounts, Burrus observed, while the APWU has been an outspoken opponent of excessive discounts.
“The American Postal Workers Union has a long history of denouncing excessive discounts and pointing out that they fail to comply with federal law,” Burrus wrote. “Therefore, I was extremely disappointed that your announcement of the audit” excluded postal unions from the consultative process.
The Postal Accountability and Enhancement Act (PAEA) stipulates that postage discounts may not exceed “postal costs avoided,” but a March 29, 2010, report by the Postal Regulatory Commission [PDF] found that 30 types of postal discounts exceed the legal standard.
Despite his criticism of the OIG’s methods, Burrus praised the office for undertaking the study. “Given the loss of billions of dollars annually, this subject should have been reviewed long ago,” he wrote.
The audit for Fiscal Year 2009 will “determine whether Postal Service workshare discounts in excess of avoided costs were reasonable.”
Congressman To USPS OIG: New Documents Show Wage Theft In New Hampshire Post Offices Continues
Washington, D.C. – Today, Paul Hodes and Congresswoman Carol Shea-Porter are demanding an investigation into a new round of allegations that letter carriers at even more post offices have been shortchanged on their paychecks. In documents obtained by Hodes, post offices in Dover and Salem, New Hampshire are shown to have manipulated letter carriers’ time sheets to remove overtime pay and earned wages.
“Cheating workers out of their pay is a very serious offense and threatens the livelihood of these hardworking New Hampshire families,” said Hodes. “These troubling allegations must be investigated thoroughly, and any stolen pay should be immediately reimbursed to these workers.”
“The Office of Inspector General (OIG) has already found time sheet tampering of letter carriers throughout the State and these actions cannot continue,” said Congresswoman Carol Shea-Porter. “After taking a close look at these new documents, I believe it is appropriate for the OIG to investigate these new incidents.”
Never before seen evidence of manipulated timesheets has been sent to the chief investigator for fraud at the US Postal Service. Hodes and Shea-Porter have demanded an investigation into these documents and the alleged wage theft against New Hampshire workers.
Last year, Hodes spurred similar investigations at several New Hampshire post offices which led to thousand of dollars in repaid wages for workers. The investigations concluded that managers at five New Hampshire postal stations were found to be cheating workers out of rightfully earned wages. In total, previous investigations have uncovered 103 employees who were shortchanged, and the Hodes investigation has already led to $37,600 in wages being returned.
The full text of the investigation request is below:
Dear Inspector General Williams:
We have received reports of time adjustment tampering at two additional United States Post Offices in New Hampshire—Dover and Salem. We urge an Office of Inspector General investigation into the alleged theft of letter carriers’ hours in these post offices.
These new reports of time tampering are troubling, since it has already been determined that New Hampshire letter carriers were cheated out of their wages in an investigation that the Office of Inspector General completed in October, 2009. Your office found improper and inappropriate time adjustments in four post offices in New Hampshire: Milford, Manchester South Station, Somersworth and Salem.
We enclosed for your consideration copies of adjusted time schedules in Dover and Salem that we received from the New Hampshire branch of the National Association of Letter Carriers. The documents include allegations of improper moving of codes, deleted times from carriers, and deleting “no lunch.” In Salem, we urge an expansion of your previous investigation to examine the enclosed data that may include inappropriate reductions in carriers’ overtime.
We encourage a swift review of and report on the allegations of wage theft. If the allegations prove true, we must stop the pattern of unethical and inappropriate underpayments of hard working letter carriers in New Hampshire’s post offices.
USPS OIG Request Public Help In Catching Postal Employees Faking On the Job Injuries?
This is a press release from the U.S. Attorney’s office for the Northern District of Ohio. The story is about an Ohio Postal Clerk’s conviction but check out the last paragraph.
Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, today announced that on Friday, April 30, 2010, Tonia M. Anderson, 54, of Akron, Ohio, was convicted by a federal jury of four counts of mail fraud, eight counts of worker’s compensation fraud, and two counts of making false statements to federal officers. The jury returned a not guilty verdict as to one count of making false statements to federal officers. The guilty verdict was returned after a five day trial before U.S. District Judge Patricia A. Gaughan. The charge arose out of Anderson’s employment as a postal distribution clerk with the U.S. Postal Service and worker’s compensation payments Anderson received between August, 2005 and February, 2006.
The case was tried by Assistant U.S. Attorneys Teresa L. Dirksen and Phillip J. Tripi. The investigation preceding the indictment was jointly conducted by the U.S. Postal Service Office of Inspector General and the Department of Labor Office of Inspector General.
Eastern Area Special Agent in Charge Elizabeth A. Farcht, U.S. Postal Service Office of Inspector General, stated: “The majority of U.S. Postal Service employees who collect federal workers’ compensation benefits have legitimate claims due to on the job injuries and are truly unable to perform any work. A small percentage, however, abuse the system and cost the Postal Service millions of dollars in fraudulent claims. This conviction should put those who choose to defraud the system on notice that our Special Agents with the USPS Office of Inspector General will aggressively investigate these cases, and present them to the U.S. Attorney’s Office for criminal prosecution when appropriate. You can also help by contacting the USPS Office of Inspector General at www.uspsoig.gov or 888-644-8398 if you know a postal employee who is faking an injury or defrauding the Postal Service.”
Sentencing for the defendant is scheduled for August 10, 2010, at 11:30 a.m.