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.
City Carrier Work Years and Workhours, by Employee Type FY 2009
The Postal Regulatory Commision requested that USPS provide the following:
For each of the city carrier employee types indicated in Attachment 1 of USPS-T-7, please provide the distribution of total city carrier work years, indicated in the third column of the first table, by day of the week, for FY 2009.
Here are the charts:
USPS RESPONSE:
Time and Attendance Collection System (TACS) data for FY 2009 were obtained for the city carrier employee types listed below to determine the percentage of workhours by day of week, as shown in Table 1 on the next sheet. These percentages are applied to the “Work Year” and “Total FY Workhours” data
below (which is from my testimony, USPS-T-7, Attachment 1, page 2) and are reported in Tables 2 and Table 3 respectively.
PRC Affirms USPS Overpaid $50 Billion to Retirement Fund
OPM Must Reconsider Calculations
The Postal Regulatory Commission (PRC) released an independent actuarial report [PDF] on June 30 which confirms that the Postal Service was overcharged $50-$55 billion for payments to the Civil Service Retirement System (CSRS) between 1972 and 2009. The report recommended an “adjustment” of $50-$55 billion in favor of the Postal Service.
The PRC has submitted the report to Congress and the Office of Personnel Management (OPM), which administers the fund. By law, OPM must reconsider its calculation of the Postal Service’s pension assets in light of the report; make any appropriate adjustments, and submit the results of its reconsideration to the Commission, the Postal Service, and Congress.
“There seems to be agreement that an updated recognition and disposition of any surplus, if it is to take place promptly, will require Congressional action,” the report noted.
The Postal Service is facing severe budget deficits due to a requirement of the 2006 Postal Accountability and Enhancement Act (PAEA) that the USPS must “pre-fund” future retiree healthcare benefits at a cost of more than $5 billion a year for 10 years. To help restore the Postal Service to financial health, postal unions and other “stakeholders” have been urging Congress to relieve the USPS of the pre-funding obligation – a burden that no other government agency or private business bears.
“The APWU has opposed the elimination of Saturday mail delivery and other cutbacks,” said APWU President William Burrus. “This finding denies the Postal Service any excuse for refusing to provide the American people the service they have received for more than 200 years.”
The PRC study, Civil Service Retirement System Cost and Benefit Allocation Principles, [PDF] was commissioned by the PRC in response to a request by the USPS. It followed a Jan. 20, 2010, report by the USPS Inspector General [PDF] which concluded that the Postal Service had overpaid CSRS obligations by $75 billion.
Sen. Carper Welcomes News of PRC Discovering $50 Billion USPS Overpayment
The office of Sen. Thomas Carper, D-Del., issued the following news release:
WASHINGTON,DC- Sen. Tom Carper (D-Del.), chairman of the Senate’s Federal Financial Management Subcommittee with jurisdiction over the U.S. Postal Service, issued the following statement reacting to a report submitted to Congress by the Postal Regulatory Commission earlier today:
“Every once and a while in life we find money in places that we aren’t expecting, sort of like when you find a ten dollar bill you forgot in the pocket of your jeans that you haven’t worn in a while. This is a very good day indeed because rarely in life do you discover an extra $50 billion lying around. This discovery couldn’t have come at a better time, as the Postal Service is facing a serious financial crisis. In fact, the overpayment the Postal Regulatory Commission has identified represents less than 25 percent of the Postal Service’s projected long-term budget deficit. That said, this certainly is a helpful development that will give Congress some assistance as we work to provide the Postal Service with much-needed relief from the overly-aggressive retiree health funding schedule that was placed on in 2006. It is my hope that it can also provide some momentum to efforts to remove the roadblocks that often prevent the Postal Service from streamlining its operations. Both of these things – financial relief and more aggressive cost cutting – must take place in the very near future if we want a Postal Service capable of continuing to deliver the goods and services millions of Americans depend on.”
Earlier today, the Postal Regulatory Commission submitted to Congress, the Office of Personnel Management (OPM) and the United States Postal Service, an independent actuarial report on the allocation of the Civil Service Retirement System (CSRS) benefits paid to former Post Office Department employees. The Commission report found that an adjustment of $50-$55 billion in favor of the Postal Service would be equitable.
By law, OPM, which is responsible for calculating the Postal Service’s CSRS pension liability, must now reconsider its calculation of the Postal Service’s pension assets in light of this report, and submit the results of its reconsideration to the Commission, the Postal Service, and Congress.
The Commission report suggests that Congress may wish to alter the schedule established in the Postal Accountability and Enhancement Act (PAEA) for potential transfers from the Postal Service Retirement Fund to its Retiree Health Benefit Fund. Currently, such transfers may not take place before September 30, 2015.
The full report, Civil Service Retirement System Cost and Benefit Allocation Principles, is available on the Commission website, www.prc.gov.
PRC Report Finds $50 Billion Discrepancy In USPS Payment Of Retirement Benefits
Washington, DC – The Postal Regulatory Commission today submitted to Congress, the Office of Personnel Management (OPM) and the United States Postal Service, an independent actuarial report on the allocation of the Civil Service Retirement System (CSRS) benefits paid to former Post Office Department employees.
The Postal Service asked for an independent review of current allocations. The Commission report finds that an adjustment of $50-$55 billion in favor of the Postal Service would be equitable.
“The Commission is pleased to provide this expert and timely perspective to assist Congress and OPM as they work to resolve an issue that has far-reaching consequences for the financial health and viability of the Nation’s universal mail system,” said Chairman Ruth Y. Goldway.
By law, OPM, which is responsible for calculating the Postal Service’s CSRS pension liability, must now reconsider its calculation of the Postal Service’s pension assets in light of this report, and submit the results of its reconsideration to the Commission, the Postal Service, and Congress.
The Commission finds that the report, prepared by The Segal Company, provides a persuasive statement of how generally accepted accounting principles should be used to develop the current postal pension assets.
The Commission suggests that Congress may wish to alter the schedule established in the Postal Accountability and Enhancement Act (PAEA) for potential transfers from the Postal Service Retirement Fund to its Retiree Health Benefit Fund. Currently, such transfers may not take place before September 30, 2015.
The full report, Civil Service Retirement System Cost and Benefit Allocation Principles, is available on the Commission web site, http://prc.gov/.
USPS Reports $642 Million Loss for Month Of May
The US Postal Service filed its May 2010 (unaudited) preliminary financial report on Friday, June 24, 2010 with the Postal Regulatory Commission. USPS reported a net income/ loss of $642 million. The total Fiscal Year to year loss is $2.9 billion ($382 lost for April; $381 lost for month of March; $611 lost in February; $592 million lost for the month of January, $179 Million gain the month of December; $255 million lost for November; $221 Million lost the month of October) see full report at the Postal Regulatory Commission
Total Mail Services Volume was down 0.9%
Total Shipping was up 4.6%
Total Mail voume was down 0.8% but revenue up by 0.1%
First class volume down 6.3%
Stand Mail up by 5.6%
Total Workhours was down 3.8% (City Carriers 3.0%, Mail Processing, 9.0%, Cusotmer Services 8.5%, Rural Delivery up by 2.4%, Other 0.8%)
Total Career Employees 590,596
Total Non-Career Employees 89,135
Vehicle Maintenance Service was up 33.6% (see OIG report on Vehicle Maintenance)
Postal Worker’s Letter to PRC: Don’t End Saturday Delivery – Save Money Elsewhere
A Texas Postal Worker in a letter to the Postal Regulatory Commission regarding the elimination of Saturday mail delivery he wrote:
Greetings Everyone!
My name is Bill Hall and I have been a mail processing clerk in the Amarillo, Tx facility for the past 18 years. What I see on a daily basis is the extreme waste that is being put forth in our facility. Money is being wasted on salaries for supervisory positions. We have too many of them. I feel the 204B program should be eliminated. We have more of need for these people as clerks than supervisor trainees. All of our trainees and supervisors work where needed and when needed. In other words, they supervise half the shift and work manually the remaining shift. There have been times when the MDO’s (shift supervisors) have done the job of supervising a particular area if that person is on vacation or even off a day or two. Why can’t the supervisors and MDO’s develop a plan to have rotating days off? I think this alone would curb the use of trainees and their salary. We need them as clerks. There have been occasions where there is no supervisor at the facility on weekends, only 1 trainee. This is
unacceptable.
Almost all of our supervisors have had no previous experience in leadership . Our maintenance is deplorable. The Postal Service is paying good money to a group of people who do nothing but play dominoes and take breaks. This is another area where jobs need to be eliminated. Either do your job or get out. The supervisor needs to get his group together or leave. If an employee can’t find a clean restroom on a daily basis, the supervisor and his crew are getting paid to do nothing.
Another area that needs to be addressed is the unbelievable amout of overtime that is being paid. Several of us go in 2 hours before shift to clean up empty equipment. Most of this is due to the negligence of supervision from the previous shift. They let their employees go home early to save hours but they won’t make them clean up after themselves. I hate to say it, but I will take advantage of the overtime for this stupidity.
I think the Postal Service is eliminating positions that they should leave alone. The mailhandler positions are a thing of the past in Amarillo. The processing clerks are presently doing all duties of the mailhandler with exception of actually unloading the trucks. I think in due time we will be unloading trucks.
Another area that needs to be addressed is the unnecessary paperwork that supervisors have to
complete. With all that there is to do, they don’t have time to supervise. We had a former supervisor that spent 8 of the 9 hours that he was there on the computer doing paperwork. If paperwork could be eliminated, then there would be jobs to be eliminated at all district offices. Big money can be saved in this area. The jobs being held in district offices needs to be scruitinized. To make this situation work that the Postal Service is in, you are going to have to eliminate jobs. But, those jobs should be at the top.
I don’t think we should give discounts to mailers. They should have to pay what everybody else pays per letter. Seems to me we have lost millions over the years because of this. This is an area where the Domestic Mail Manual needs to be rewritten. We could possibly make money just by changing and simplifying the legalese for customers and employees alike. Too many regulations with discounts.
The Postal Service is a SERVICE company. We have not been giving good service in my opinion. I
don’t think we should eliminate one day of the week of service to save money. On weekends we have plenty of mail to work and we get it out on time. It’s ridiculous to cut service to save money when the real problem of saving money is at the top.
Thank You!
Bill Hall
PRC: Witness List For Hearings In Dallas and Memphis To Consider USPS 5-Day Mail Delivery
Witness List for the Postal Regulatory Commission Field Hearings On U.S. Postal Service Six-Day to Five-Day Mail Delivery Proposal
Monday, May 17, 1:00 p.m.Dallas City Hall
L1 Auditorium
1500 Marilla Street
Dallas, TX
Panel 1
Phil Major
Editor
Wise County Messengerr
Decatur, Texas
Roy Robinson
Publisher, VP, Graham Newspapers
Graham, Texas
The Honorable Bruce R. Sherbet
Election Administrator, Dallas County
Dallas, Texas
Suzanne Henderson
County Clerk, Tarrant County
Forth Worth, Texas
Panel 2
Ellis Burgoyne
Southwest Area Vice President
U.S. Postal Service
Shelley Hyde
CEO, NDSI Direct Solutions
Dallas, Texas
Carol Kliewer
Director, Distribution & Logistics, Order Fulfillment
Harland Clarke
Dallas, Texas
Carol Bald
Postal Operations Manager
Strategic Fulfillment Group
Big Sandy, Texas
Wednesday, May 19, 1:00 p.m.
Memphis City Hall
Council Chambers
125 North Main Street
Memphis, TN
Panel 1
Linda WelchSoutheast Area Vice President, U.S. Postal Service
Cheryl Chapman
Envelope Paper Products Manager
International Paper Co.
Memphis, TN
Joseph AdamsPublisher, The Lebanon Democrat
Lebanon, TN
Bill Graham
W.E. Graham Inc. (Star Route Contractor)
Memphis, TN
Panel 2
Shri GreenPostal Supervisor/National Assoc. of Postmasters Area V.P. for Cotton Belt Area
Memphis, TN
Mike Morris
Assistant Clerk Director, American Postal Workers Union
Birmingham, AL
Earlice Taylor
Member, Glenview Development Corporation
Memphis, TN
Hazel Burks
Member, Bluebird Estates Neighborhood Association
Memphis, TN
Lynn Strickland
Member, Colonial Acres Neighborhood Association
Memphis, TN
Monday, June 21, 1:00 p.m.
Chicago City Hall
Council Chambers, Room 201A
121 LaSalle Street
Chicago, IL
Other Upcoming Hearings
Wednesday, June 23, 9:00 a.m.
Journey Museum
222 New York Street
Rapid City, SD
Monday, June 28, 1:00 p.m.
Buffalo City Hall, 13th floor
Common Council Chambers
Buffalo, NY
APWU Urges PRC To Reject Five-Day Delivery Proposal
APWU Urges Postal Commission To Save Saturday Service
APWU News
Testifying at a Las Vegas field hearing, APWU Western Region Coordinator Omar Gonzalez urged the Postal Regulatory Commission to reject the USPS proposal to end Saturday delivery. The plan will “hasten the call for elimination of the private express statutes and legal monopolies, which ensure quality postal services at affordable prices,” he said.
Addressing the commission on May 10, Gonzalez said that eliminating Saturday delivery would lead to an erosion in the public’s confidence in the Postal Service, and an even greater reduction in mail volume and declining revenue.
“We do not agree nor support the USPS Board of Governor’s action approving the Postmaster General’s plan to end six day delivery,” Gonzalez testified [PDF]. “The estimated savings of $3.1 billion per year will not offset the billions of dollars in revenues that will be diverted from postal coffers by millions of Americans seeking alternatives.”
Gonzalez said that the Postal Service’s projected loss of $238 billion over the next 10 years is spurious, and noted that while mail volume may never return to 2006 levels, the economy is showing signs of rebounding — including signs of growth in parcel delivery for the Postal Service.
Lawmakers should strongly consider ending the Postal Service’s obligation to pre-fund retiree healthcare liabilities, a requirement included in the 2006 Postal Accountability and Enhancement Act, he said. Modest but steady increases in mail volume, coupled with repeals of “unreasonable requirements to pre-fund retiree health benefits will go a long way to stabilizing the Postal Service,” Gonzalez said.
“At a time when the USPS should be exploring every available means to increase volume and revenue, including compliance with contracts, regulations and statutes, the seriously flawed effort to cut services will only undermine the viability of postal services in this country.”
The Las Vegas hearing was the first of seven scheduled field hearings, where the PRC hopes to receive public input on the USPS initiative to eliminate Saturday delivery. Other witnesses included Yul Melonson, the Las Vegas District Manager for the USPS; Rich Griffin, Vice President of the Nevada State Association of Letter Carriers; as well as representatives from Postal Solutions, Inc., Southwest Gas Corporation, and Medco Health Solutions.
“The commission has developed a disciplined schedule to ensure a timely, thorough review of the Postal Service’s proposal,” PRC Chairman Ruth Y. Goldway said in an April 28 press release. “Our process will provide multiple opportunities for the public to be heard and for all the facts to be considered before the Commission issues its Advisory Opinion.”
Additional field hearings will take place in Sacramento, Dallas, Memphis, Chicago, Rapid City (SD), and will conclude on June 28 in Buffalo, NY.
PRC: Measuring the Social Value of Postal Services to the Nation
Measuring the Social Value of Postal Services to the Nation
U.S. Postal Regulatory Commission
REQUEST FOR PROPOSAL (RFP)
Issued May 7, 2010
The Postal Regulatory Commission (PRC or Commission) is an independent establishment of the executive branch of the federal government with regulatory oversight over the United States Postal Service (USPS or Postal Service). It is composed of five Commissioners supported by staff from its four operating offices, one of which is the Office of Accountability and Compliance (OAC). OAC is responsible for technical analysis and formulation of policy recommendations for the Commission in both domestic and international matters.
The PRC is seeking research proposals to quantify the social value of postal services. Areas of interest include, but are not limited to, the impact (costs and/or benefits) of the community presence of the Postal Service (post offices, daily delivery to homes, its (competitive) products, etc.) on:
- Community security and public safety impacts of the presence of USPS personnel (i.e., carriers, post offices).
- The benefits in terms of real estate values, increased business, etc. of being located near a post office.
- The role of lower priced postal products, e.g. competitive parcels or expedited services, in keeping the price of these services, including those of competitors, affordable.
- The value of the national street address and ZIP code system to emergency workers, businesses, utilities, researchers, and government.
- Environmental impact of mail delivery.
- Economic impact of providing middle-class jobs in the community.
- Value of providing affordable advertising and fulfillment options to small businesses.
- Civic pride and federal government presence.
- Linking remote communities commercially and socially with the rest of the Nation Read more