OIG Report On USPS Health and Safety Program
OIG found in some locations that safety was not always a priority to management
Highlights of the USPS OIG audit:
Previously, the Postal Service, as a federal agency, was exempt from private sector provisions of the OSH Act. When PESEA became effective, the Postal Service became fully subject to the OSH Act. This gave OSHA jurisdiction over the Postal Service in matters relating to employee safety and health and required the Postal Service to comply with OSHA standards and regulations. If violations occur, OSHA may cite or fine the Postal Service or, in extreme cases, refer the agency for criminal prosecution. Read more
OIG Finds Over $400k In Questionable USPS Purchases On Beer, Sports,Gift Cards
USPS OIG Audit Report – Purchasing Compliance and Imprudent Purchases Follow-Up Audit;
The Postal Service has an increased risk of loss when purchases are made without proper authorization or justification
This report presents the results of a follow-up audit to determine whether purchases complied with U.S. Postal Service policy and whether imprudent purchases were still occurring related to the SmartPay® Purchase Card and select Accounts Payable Excellence (APEX) system transactions since our last audit. Read more
OIG Audit: Conflicts of Interest – USPS Facility Leases and Contract Delivery Services
USPS Audit Report “Conflicts of Interest: Facility Leases and Contract Delivery Services (Report Number DA-AR-11-008)
Federal regulations and Postal Service policies seek to minimize conflicts of interest to ensure that every citizen can have confidence in the integrity of the federal government. Postal Service policies encourage employees to avoid creating the appearance that they are violating the law or ethical standards.
At the end of fiscal year 2010, the Postal Service leased over 24,000 properties that represent about $1 billion2Appendix A in annual rent. During the same period, the Postal Service also maintained 7,797 mail delivery service contracts with individuals at an annual value of $318,658,027.
Our audit determined the Postal Service entered into leases that resulted in financial conflicts.One-hundred seventy of the active properties were leased from current employees with an annual rent value of $490,375. Some pose risks of violations while others give the appearance of impropriety. We identified 1,202 of 24,582 total leased properties that were obtained from current or former Postal Service employees with an annual rent value of $8.2 million. Of these properties, 982 were active leases with an annual rent value of $5.4 million.
Similarly, the Postal Service entered into 78 of the 7,797 total CDS contracts (valued at $3,005,818 annually) with current or former employees that, in some cases, resulted in apparent violations of federal regulations and Postal Service policies. Others also give the appearance of impropriety.
Real Estate Leases – Conflicts of Interest
We randomly sampled 59 of the 1,202 leases that we associated with employees or their relatives. As presented in Table 1, we identified 11 (or 19 percent) with financial conflicts because they were owned by employees who have the authority to exert significant influence in the lease process. These employees consisted of postmasters and their reliefs. For eight of these 11 leases, we confirmed that employees did, in fact, exert significant influence during negotiations in their roles as postmasters.
For example, in one instance the Postal Service decided to move operations from the postmaster’s property due to the poor condition of the facility. The postmaster subsequently solicited community support to discourage the move but once unsuccessful, she was able to lease land for the new post office location. This instance, among others, are apparent violations of Title18 U.S.C. §208 because employees participated personally and substantially in the Postal Service’s decision to lease property they own and represent illegal actions that, in the absence of an approved waiver, are subject to criminal prosecution. We were unable to confirm apparent Section 208 violations for the remaining three leases because there was insufficient evidence in lease files to assess employee participation
In addition, we identified 27 (46 percent) leases that were not conflicts of interest per Postal Service or federal guidelines. However, they give the appearance of impropriety. These lease renewals include former employees who have insider knowledge into the Postal Service’s leasing practices, current employees not assigned to the leased location, and instances where the lessor was a permitted relative of a Postal Service employee. The remaining 21 leases were no longer conflicts of interest due to termination or ownership transfer to individuals other than Postal Service employees.
Apparent violations of Section 208 and federal ethics standards exist because Postal Service policy allows employees or their relatives to lease smaller properties to the Postal Service, self-disclosure of potential conflicts is ineffective, and the Postal Service does not match lessor information to payroll records. For example, in four of the 11 financial conflicts, the lessors did not disclose their relationships with the Postal Service as required.
As a result, we estimate that 119 of the 982 active leases (or 12 percent) are at risk for conflict and 103 of them (or 10 percent) are possible in violation of Section 208. Section 208 does provide exceptions that require obtaining a waiver from the Postal Service’s Designated Agency Ethics Official (DAEO). None of the lease files we reviewed that were subject to Section 208 violations contained a waiver. See Appendix B for our detailed analysis of this topic.
CDS – Conflicts of Interest
Of the 78 delivery contracts with potential conflicts, we confirmed that the Postal Service awarded 15 of 78 contracts (19 percent) valued at $591,210 to current employees.
In one instance a rural carrier associate was awarded a delivery service contract in July 2006 and remained an employee. The employee contractor did not disclose the Postal Service relationship as required. This instance, among others, are not violations of Section 208 because employees did not participate personally and substantially in the contracting decision from which they or their relative received a financial benefit. Rather, these contract awards are apparent violations of Title 18 U.S.C. §440 that prohibits Postal Service employees from entering into contracts for mail delivery and Postal Service policy that does not allow CDS contracting with current employees. Section 440 violations are also illegal actions subject to criminal prosecution.
In addition, we determined that 27 of 78 (35 percent) contracts were awarded to employees within days of separation from the Postal Service. Per discussion with Postal Service contracting personnel, employees were advised to resign before receipt of contract awards. Another 25 contracts (32 percent) were awarded to employees after 30 days of separation from the Postal Service. Although contracts with former employees are not violations of Postal Service or federal conflicts of interest guidelines, they do give the appearance of impropriety and may create the appearance that former employees violated Title 5 CFR.2635.703 by using their insider knowledge of the Postal Service to secure contract awards. This is particularly applicable to the 27 contracts negotiated during the employees’ tenures and awarded shortly after separation. The remaining 11 contracts were not financial conflicts due to contract termination or changes in contractors.
OIG: USPS Must Embrace Culture Of Innovation To Overcome Current Financial Challenges
USPS OIG Audit Report on “Postal Service’s Innovation Process for Competitive and Market-Dominant Products”
To overcome its current financial challenges, the Postal Service must recognize innovation not as the byproduct of an effort to improve operational efficiency only, but as a distinct strategic goal and activity. It must embrace a culture of innovation that begins with the most senior levels of management, understand the process that turns ideas into innovation, and commit to an organizational structure that allows innovation teams to work free from the constraints of day-to-day operations
The Postal Service faces regulatory and market constraints to innovation that private companies do not. For example, it must prove to the Postal Regulatory Commission (PRC) that new products and services will not violate statutory restrictions, will cover their attributable costs,3 and will not create an unfair competitive advantage.4 The Postal Service may not offer loss leaders, defined as goods or services advertised and sold at or below cost,whereas private sector businesses are free to use this business strategy. Despite these external barriers, the Postal Service has introduced some innovations including Priority Mail® Flat Rate Boxes, Intelligent Mail barcode (IMb), Critical Mail, Simplified Addressing, and the Flats Sequencing System (FSS).
While foreign posts have turned to alternate businesses–including banking, investment, and insurance–to address their economic challenges, the Postal Act prohibits the Postal Service from offering non-postal products and services, except for a limited number that were offered before January 1, 2006. In addition, the Postal Service faces challenges to innovation that private sector businesses are not subject to. For example, the Postal Service must prove to the PRC that new products and services will not violate statutory restrictions and will not create an unfair competitive advantage. The Postal Service may not offer loss leaders, whereas private sector businesses are free to use this business strategy. The Postal Service is also required to attribute costs in such a way that new products bear the full cost of research and development, advertising and promotion, and implementation.7
In the private sector, many of these costs are considered overhead. Further, each product the Postal Service offers must bear transaction costs as an individual unit, even though items sold at retail facilities are often add-ons to other transactions with lower incremental costs.
Under legislation proposed in September 2010,the prohibition against offering non-postal products and services would be revised, allowing non-postal offerings that are in the public interest and making use of the existing postal network, thereby giving the Postal Service additional flexibility. The Postal Service would also be permitted to offer services to state and local governments. For example, post offices might provide voter registration and driver’s license renewal.
Need to Effectively Manage Ideas from External Stakeholders
The Postal Service has a system to track ideas for improvements that are generated by Postal Service employees. The eIDEAS program is a web-based application that allows Postal Service employees to submit ideas online or at kiosks located in processing plants. The Postal Service encourages employees to contribute constructive ideas to improve customer satisfaction, generate revenue, increase productivity, and improve competitiveness.13 However, management of that system has been troubled. A U.S. Postal Service Office of Inspector General (OIG) report published in August 2010
Some entrepreneurs seeking to partner with the Postal Service by introducing innovative products or services offered their views regarding obstacles they encountered. During interviews with the OIG, they described a Postal Service culture resistant to change and unresponsive to customers’ needs. We interviewed individuals who attempted to introduce or develop innovations at the Postal Service to obtain feedback regarding their experiences. One individual developing innovative software for the Postal Service noted that management delayed the project so much that it eventually failed. However, several years later, the Postal Service implemented a similar application. Another individual experienced significant delays in obtaining approval for a mailing product that met his customers’ needs and satisfied Postal Service regulations. These entrepreneurs cited further obstacles to innovation, including:
* Guidelines regarding whom to approach with new ideas or improvements to existing products and services are not transparent and easily identifiable.
* The Postal Service dictates conditions to customers rather than listening to customers’ suggestions.
* The Postal Service discourages innovation by requiring innovators to present ideas without providing assurance that either the idea will be safeguarded or the innovator compensated.
The Postal Service resists adopting innovations suggested by customers if those innovations do not fit seamlessly into current operations. Instead, it requires customers to modify their innovations to meet all current standards.
* A process has not been established for approving new products and services or improvements to existing ones.
* Feedback regarding approval of products and services is not presented timely.
* Innovators within the Postal Service tend to get pushed out.
* There is an “us versus them” attitude.
* The Postal Service does not reward risk takers.
* The Postal Service, in certain situations, prohibits vendors from meeting with engineers to determine why products fail tests.
While the Postal Service is making an effort to engage a culture of innovation, the lack of a comprehensive innovation strategy including systemic tracking and management of innovative ideas has the effect of both limiting strategic vision and creating an organization that responds slowly to a rapidly changing business and technological environment. To overcome the challenges it faces, the Postal Service must reach beyond its current vision and embrace a culture of innovation that begins with the most senior levels of management, understand the process that turns ideas into innovation, and commit to an organizational structure that allows innovation teams to work free from the constraints of day-to-day operations. Without such a comprehensive innovation strategy, the Postal Service jeopardizes its long-term viability through loss of business to electronic diversion and industry competitors. See Appendix B for our detailed analysis of this topic.
We recommend the vice president, Government Relations and Public Policy:
1. Continue to work toward legislative changes that will allow the Postal Service more flexibility to introduce new products and services.
We recommend the president and chief marketing/sales officer and the chief financial officer and executive vice president:
2. Consider a comprehensive innovation strategy, based on the best practices of companies considered leaders in the field that includes innovation teams that are both independent of operations and actively collaborate with outside organizations, or other generally accepted forms of innovation teams. The strategy should also contain a system to support tracking and management of innovative ideas that are generated.
OIG Audit Report on USPS Innovation
USPS OIG Unable To Determine Why Postal Supervisors Deleted Employees Timeclock Rings
The USPS Office Of Inspector General issued an Audit Report over “Allegations of Inaccurate Time and Attendance Records”
Here is why the report was conducted and some excerpts of what the OIG found:
This report presents the results of our audit of allegations of inaccurate time and attendance records (Project Number 10YG017HR000). Our objective was to assess whether the U.S. Postal Service has adequate controls to ensure the accuracy of employees’ workhours. We are conducting this audit as a result of a congressional request and other inquiries we received regarding postal locations in Salem, OR; Dover, NH; Kansas City, MO; Gahanna, OH; and Gastonia, NC. This audit addresses financial and operational risks. See Appendix A for additional information about this audit. Read more
OIG Audit: USPS Failed To Cancel Credit Cards For 2,491 Former And Deceased Employees
and Employees Misused Travel Credit Cards
The USPS Office Of Inspector General released the following report:
Postal Service employees did not comply with prescribed travel policies resulting in over $600,000 in excessive travel costs for lodging and airfare in FYs 2009 and 2010. We estimate the Postal Service could realize an additional $600,000 in savings over the next 2 years, or $300,000 annually, if it takes action to curtail employee noncompliance with travel policies. Further, the Postal Service did not cancel 2,491 credit cards issued to former employees, including 53 employees listed as deceased in employee records. At the time of our audit, there was more than $37 million in open credit associated with cards of former employees.
Employees Exceeded Government Lodging Rates
Postal Service employees continued to exceed the prevailing government lodging rates. The U.S. Postal Service Office of Inspector General (OIG) also reported this
issue in FY 2009. Of the 155,104 lodging transactions we reviewed, 21,691 exceeded the government lodging rate. Postal Service policy requires travelers to obtain the
government rate for official lodging. While the Postal Service is in the process of clarifying this requirement in their policy, our audit found that employees were frequently
unaware of the established government rate when they obtained lodging and did not verify whether the rate they secured exceeded the government rate. In addition, the current Electronic Travel Voucher System (eTravel) does not flag lodging that exceeds the prevailing government rate and does not require employees to separate lodging amounts from taxes, resulting in lodging rates that are not transparent to reviewing officials. Overall, we noted that from October 2008 through September 2010, the Postal Service could have saved more than $600,000 if employees adhered to prescribed government lodging rates and could save an additional $600,000 over the
next 2 years if action is taken.
We reviewed travel card usage for 2747 employees with high-risk transactions and found that 173 misused their government travel card by purchasing personal items and
taking cash advances unrelated to official travel. While travel coordinators reviewed cardholder statements when delinquencies were identified, they did not routinely review for misuse if there was no associated delinquency. As a result, we identified more than $349,317 in inappropriate purchases and cash advances from October 2008 through September 2010. We referred this employee misconduct to the OIG Office of Investigations, and Postal Service and cognizant officials have taken a variety of personnel actions including employee removal.
When employees misuse their government travel cards, there is an increased risk of delinquency and write-offs, which could negatively impact the Postal Service’s
contractual relationship with Citibank® (goodwill). Further, the amount of money rebated to the Postal Service is reduced when Citibank forgives delinquent accounts.
Based on our audit work, Postal Service officials are mitigating risk by lowering employee credit limits from the current level of $15,000. In addition, the Postal Service
will require employees with government travel cards to sign cardholder agreements to verify employees are aware travel cards are for official travel only.
Travel Cards Were Not Cancelled for Separated Employees
The Postal Service did not cancel 2,491 credit cards issued to former employees, including 53 employees listed as deceased in employee records. We identified two former employees who were using their travel cards after they separated from the Postal Service. Postal Service policy requires an employee’s supervisor to collect an employee’s travel card upon termination. However, no processes exist to verify that credit card accounts for separated employees have been cancelled. At the time of our audit, there was more than $37 million in open credit associated with these cards. When we brought this issue to management’s attention, they took immediate action to begin closing the accounts of the separated employees we identified.
Miscellaneous Travel Policy Noncompliance
Employees violated various other travel policies including paying for other employees’ lodging, using their personal credit card for travel rather than their government travel
card, submitting duplicate claims for travel reimbursement, and other noncompliance described in Appendix B. The eTravel system does not flag or otherwise identify the
noncompliances we identified. As a result, the Postal Service has an increased risk of unnecessary travel expenses.
Travelers Submitted International Airfare Costs Before Travel
We noted in isolated instances that employees submitted travel vouchers for international airfare that was booked for future dates. Postal Service policy explicitiy
prohibits payment in advance of travel. Postal Service officials advised that the employees would not have had sufficient credit on their travel cards if the airfare was
not paid in advance, and such flights were routinely booked far in advance, thus requiring prompt payment before travel. As a result, the Postal Service is at increased
risk for overpayment, as it did with one employee who received a reimbursement of $10,114 in October 2009 for a flight that was never taken. The employee currently has a
credit on his government travel card account and has yet to repay the Postal Service. The Postal Service increases its risk of not collecting the overpayment the longer it
resides in the employee’s account.
Employees Exceeded Government Lodging Rates
Postal Service employees continued to pay for lodging that exceeded the prevailing government lodging rates, as previously reported by the OIG in FY 2009.Postal Service policy requires travelers to obtain the government rate for official lodging. Of the 155,104 lodging transactions made from October 1, 2008, through August 13, 2010, we reviewed, 21,691 exceeded the government lodging rate. While the Postal Service will clarify this requirement in a revised Handbook F-15, our audit found employees were frequently unaware of what the established government rate was when they obtained lodging and did not verify whether the rate they secured exceeded the government rate. Some of the occurrences we noted included:
• One employee claimed 326 lodging nights for reimbursement over a 20-month period that, in total, exceeded the prescribed government lodging rates by $17,877.
• Postal Service employees claimed lodging charges for reimbursement for the 2009 and 2010 National Postal Forums that exceeded the prescribed government lodging rates by $88,983.
• Two employees on an extended detail assignment for the majority of FY 2009 charged a total of $11,000 over the prescribed government lodging rates.
Employees Misused Travel Credit Cards
We reviewed travel card usage for 27415 employees with high-risk transactions and found that 173 misused their government travel cards by purchasing items for personal
use and taking cash advances unrelated to official travel, including the following:
- Three employees purchased airfare tickets, including tickets to Spain and Italy, for family and friends.
- One employee purchased an Apple computer and paid his mortgage.
- One employee used his government issued travel card more than 50 times at adult entertainment establishments.
OIG: USPS Northern Virginia District Used More Workhours Than Necessary To Deliver Mail
Filed under: letter carriers, oig, postal, postal news, usps
Highlights from the USPS OIG Audit Report – City Delivery Efficiency Review – Northern Virginia District
Background
Delivery operations are the Postal Service’s largest operational function, accounting for approximately 45 percent of salary expenses and workhours. Despite an annual increase of approximately 1 million delivery points, delivery operations used 36.5 million fewer workhours in fiscal year (FY) 2009, because of effective growth management, increased use of automation, standardization of best practices, and improved productivity. Although delivery operations used fewer workhours, workhour reduction has not kept pace with declining mail volume. Nationally, city delivery mail volume declined by 3.9 percent in FY 2010. During this same period, mail volume declined in the Capital Metro Area by 2.4 percent, while workhours declined by 2.8 percent. The Northern Virginia District mail volume declined by 2.7 percent in FY 2010, while workhours declined by 3.2 percent
Audit
The U.S. Postal Service is delivering fewer pieces of mail to a growing number of addresses as new households and businesses are added to the delivery network each year. The Postal Service must achieve unprecedented levels of efficiency to accommodate this new growth while facing financial losses from declining mail volumes and rising costs.
The Northern Virginia District was not operating at peak efficiency and could reduce city delivery operating costs. Our benchmarking comparison determined the Northern Virginia District used approximately 16 minutes more per day than the national average for each carrier route, compared to the standard for that route. This equated to more than 103,000 workhours annually. The measurement for this factor, called percent to standard,2 was 123.24 – about 17 percentage points above the national average of 105.95 percent.
Although numerous factors were involved, our review of 20 randomly selected delivery units confirmed these inefficiencies and determined Northern Virginia District management did not always (1) provide sufficient review and oversight of unit offices’ operating efficiencies and (2) coordinate with the mail processing facility to ensure mail was timely received and in a condition that promoted operating efficiency. Eliminating time-wasting practices and increasing focus on efficiency could allow management to reduce workhours.
Some examples include ensuring that:
• Management provides sufficient oversight of morning and afternoon office operations.
• Vehicle inspection process is efficient.
• Carriers are timely and correctly clocking into afternoon (p.m.) office time.
• Units receive the proper mix from the processing facility per the integrated operating plan (IOP).3
• Carriers spend less time waiting for mail.
• Clerks and carriers do not unnecessarily re-handle unshelved mail transport containers to identify and retrieve delivery point sequence4 (DPS) mail.
Consequently, the Northern Virginia District used more workhours than necessary to deliver the mail. Adjusting its operations would increase the Northern Virginia District’s overall efficiency by reducing 103,160 workhours, resulting in savings of more than $3.2 million annually or about $32 million over 10 years. See Appendix C for additional information about this issue.
We recommend the district manager, Northern Virginia District:
1. Reduce the Northern Virginia District’s workhours by 103,160 to achieve an associated economic impact of about $32 million over 10 years.
2. Require processing facility managers and delivery managers to coordinate, review, and update all integrated operating plans to ensure mail arrives timely and in the condition necessary to promote office efficiency.
Management’s Comments
Management agreed with the findings, recommendations, and opportunities to capture monetary impact.
In response to recommendation one, management agreed to reduce city carrier office hours. Management’s action plan includes reducing carrier inefficiencies in the office by implementing and monitoring standard operating procedures (SOPs); increasing operational audits for compliance with established best practices; providing additional training for supervisors on managing office time; flexing carrier start times for tours; and improving on-time mail arrival profiles. Management plans to implement action by February 2011.
Managing Morning and Afternoon Office Operations
Supervisors did not provide sufficient oversight of morning operations. Specifically, the vehicle inspection process was not always efficient. Our observations disclosed that delivery units lost several minutes per day because of carriers searching for vehicles before inspection. Five of the 20 delivery units lost time because parking spaces were unassigned.
In four other delivery units, carriers waited in line to get vehicle keys. Postal Service policy states employees should park vehicles near the dock in assigned spaces identified by individual route numbers. In addition, policy states employees should conduct vehicle inspections promptly after clocking in for the morning. The policy also requires vehicle keys to be located adjacent to time-recording equipment (see Illustration 1).
In addition, supervisors did not always effectively manage afternoon office time at 11 of the 20 delivery units observed. Some carriers spent 10 minutes or more in the office after returning from their routes. Postal Service policy allows a standard 5 minutes for carriers to perform afternoon office duties. We also observed some carriers not clocking directly to “office time” upon returning to the unit in the afternoon, resulting in much of this additional office time” being included in street operations time.
Adjusting its operations would increase the Northern Virginia District’s overall efficiency by reducing approximately 103,160 workhours, resulting in savings of more than $3.2 million annually or about $32 million over 10 years.
USPS OIG Audit Report – City Delivery Efficiency Review – Northern Virginia District
USPS Office Of Inspector General’s Audit Plan For 2011
The USPS Office Of Inspector General’s 2011 Audit Plan
A few highlights:
The Financial Risk category pertains to the critical financial risk the Postal Service faces as it, like other companies, deals with the economic slowdown affecting the nation. Factors
exacerbating financial risk include the crisis in the financial industry, increases in energy costs, significant declines in mail volumes, and mandated annual payments to pre-fund retiree health benefits. The anticipation of further declines in volume means the Postal Service still faces major challenges to cut costs and increase revenues.
Examples in the Financial Risk category include issues with a clear financial impact, such as:
- Labor costs and volume reductions.
- Financial statement audits.
- Sarbanes-Oxley Act implementation.
- Pricing.
Examples of Planned Work Under Financial Risk in FY 2011
In FY 2011, we plan to conduct work that addresses:
- Department of Labor and the US Postal Service—Workers’ Compensation Program: We plan to review the requirements for the Postal Service to participate in the Federal Employee Workers’ Compensation Program, problems existing in the program, and the impacts to the Postal Service of the current arrangement. We also plan to benchmark with other companies to determine how their costs compare with the Postal Service and to identify best practices for reducing workers’ compensation cost.
- Financial Fraud Vulnerability – Internal and External: We have several audits planned in this area—we plan to look at no-fee money orders, imprudent purchases,
bad check prevention and collection, click-n-ship postage, Automated Postal Center Postage and stamp accountability.
- Substantial Savings Available by Prefunding Pension & Retiree Health Care at Benchmarked Levels: We will benchmark Postal Service prefunding pension and retiree health care fund requirements against other large companies and the federal government.
Examples of Planned Work Under Operational Risk in FY 2011
Work we plan to do in FY 2011 includes:
- Plant Production Efficiency: We plan to assess the overall efficiency of the processing and distribution network for FY 2010.
- First-Class Mail on Air Transportation: We plan to determine whether opportunities exist to improve density of First Class mail on air transportation and reduce overall
transportation costs.
- City Delivery Efficiency – National Capping: We will summarize the results of our audits that assessed overall efficiency of city delivery operations and identified
opportunities to reduce operating costs.
- OSHA Compliance: We plan to assess the Postal Service’s processes to ensure compliance with Occupational Safety and Health Administration regulations.
- Benchmarking with Other Delivery Companies: We plan to identify opportunities for improving mail distribution to carriers by benchmarking with the commercial mailing
industry.
- Nationwide Facility Excess: We will identify nationwide opportunities for the Postal Service to optimize excess space.
MANAGEMENT CHALLENGES FACING THE POSTAL SERVICE
We address the following management challenges facing the Postal Service:
- Strategic Direction and Infrastructure Challenges – The Postal Service must address its critical financial challenge while 1) increasing its effectiveness and efficiency; 2) ensuring that products and services are self-sustaining; and 3) balancing legal considerations and stakeholder views.
- Labor and Management – The Postal Service must ensure its compensation and benefit costs are effectively aligned in anticipation of further reductions in revenue. The
Postal Service must analyze labor dispute settlements to assess whether there are recurring scenarios that could be avoided.
- Cost Control and Reduction of Energy Consumption – The Postal Service must control costs and reduce energy use to maintain universal service. The Postal Service
must compare contract analysis assumptions with actual performance to determine whether it should continue to outsource products and services or perform them
internally.
- Revenue, Brand Protection, and Growth – The Postal Service must manage its pricing of products and services to ensure maximum revenue and provide greater value to its customers.
- Customer Service – The Postal Service must balance its public service obligation with the need to remain commercially viable.
- Preserving Integrity and Security – The Postal Service must provide a secure infrastructure for the nation’s mail system – despite threats of terrorism or natural disaster – to safeguard its resources (employees, facilities, and applications) and protect and maintain the integrity of its proprietary and customer data.
- Technology Improvements and Information Transparency – The Postal Service must optimize its use of technology and provide information that better meets the needs of its managers and stakeholders.
- Public Outreach – The Postal Service must educate stakeholders and the public about the financial challenges it faces and the fact that it is funded by ratepayers not tax
dollars.
- Regulatory Challenges – The Postal Service must comply with legal and regulatory mandates.
OIG: USPS Noncompliant, Insufficiently Supported Contracts Totaled $218,940,344
Excerpts from a report issued by the USPS Office of Inspector General:
We also found that 24 of the 68 (or 35 percent) of the noncompetitive contracts we reviewed were not sufficiently supported per Postal Service policy. Policies contain
minimum requirements for noncompetitive justifications, market research, and endorsement and approval requirements. Compliance with these requirements is
essential to ensuring fair treatment of suppliers, adequate competition, and the best value to the Postal Service.
Our review included seven contractual actions identified in a recent investigation of a former Postal Service executive who exerted undue influence on the contracting
process in their negotiation and award, and four professional services contracts with description codes similar to the contracts identified during the investigation. None of
these 11 contracts met the minimum requirements for noncompetitive justification. Finally, we also evaluated contracts awarded noncompetitively to former Postal Service
employees. By matching Postal Service vendor file information to employee file information, we identified 2,788 contracts in the Contract Authoring Management
System with current and former Postal Service employees with separation dates dating back to August 31, 1991, and 359 of those were awarded to employees with separation
dates in the last 3 years (October 1, 2006, to September 30, 2009).
We focused our testing in this audit on contracts with former executives because the Postal Service has very specific requirements regarding these awards. We found 17
contracts that were awarded noncompetitively in the last 3 years to former Postal Service executives. We analyzed three of those and found that they were awarded for
“knowledge transfer” and other duties related closely to their former Postal Service position. None of the three contracts met the minimum requirements for noncompetitive
justification. We will review more broadly the propriety of Postal Service contracts with former employees and the control environment surrounding them in fiscal year (FY)
2011.
The noncompliant, insufficiently supported contracts totaled $218,940,344. These costs are questioned because their noncompetitive justifications do not contain all the
required elements and/or approvals/endorsements prescribed by Postal Service policy. These amounts are not necessarily actual losses incurred by the Postal Service. Also, because data used to support management decisions is incomplete and/or inaccurate and the existence of unethical appearances could result in negative publicity to the Postal Service, we are also reporting non-monetary impact for data integrity10 and goodwill/branding.11 See Appendix B for our detailed analysis of these topics and Appendix C for a discussion of the monetary and non-monetary impacts reported.
OIG: USPS Should Consider Eliminating 32 or More District,Area Offices
One option is to “Eliminate duplicative staff positions and better position area management to work
strategically with headquarters by relocating all area offices to headquarters.”
A recent audit report issued by the USPS Office of Inspector General:
Since 1992, the Postal Service’s workforce has decreased by almost 106,992
employees (13 percent); the cumulative total factor productivity has increased
approximately 11 percent; and mail processing automation has improved. By FY 2010,
mail volume is projected to be at the level it was in FY 1992. Since 1992, the Postal
Service’s field structure has also changed. The number of area offices has decreased
from 10 to eight and the number of district offices has decreased from 85 to 74.
However, a 2003 study for the President’s Commission on the Postal Service (“the
Commission”)4 suggested that, while the management structure was appropriately lean,
there was a real opportunity to continue to rationalize the network with regard to the
number of districts, post offices, and processing plants and this effort could enable a
reduction in the number of areas. Further, in 2007, the OIG recommended the Postal
Service develop a comprehensive workforce plan to assist with making decisions about
structuring and deploying its workforce.5
Conclusion
The Postal Service has significant opportunities to reduce costs by consolidating its field
structure. We identified two options the Postal Service should consider that would
reduce the number of area and district offices. Further, we identified a third option the
Postal Service should consider that would relocate area offices to headquarters. The
Postal Service should develop a comprehensive strategic plan that would guide future
field structure decisions and explore the viability of relocating area offices to
headquarters. At a minimum, this strategic plan would provide the Postal Service with a
method to evaluate and define an economic, efficient, and effective field structure to
oversee its universal service mission. The strategic plan would also provide the needed
foundation to develop a more flexible area and district field structure and workforce that
is responsive to changing demand. During the development of a comprehensive
strategic plan, fundamental issues such as the functional need for area and/or district
offices, right-sized staffing, operational impact, geographic distribution, and the ideal
location for area offices should be addressed.
Although the Postal Service recently consolidated one area and six district offices, we
identified three other options, done separately or in combination, to consolidate its field
structure further:
- Eliminate 14 offices by consolidating districts that have offices within 50 miles of
another district office.
- Eliminate four area and 32 district offices by consolidating those offices whose
workhours and mail volume are both below the mean mail volume and workhours.
- Eliminate duplicative staff positions and better position area management to work
strategically with headquarters by relocating all area offices to headquarters.
Implementing option 1, the most conservative of the options, closing district offices that
are within 50 miles of one another, the Postal Service can save approximately
$33.6 million annually or $289 million over 10 years. See Appendix C for monetary
impact. Option 2, closing area and districts that have less than the mean mail volume
and workhours, the Postal Service can save approximately $104 million annually or
$894 million over 10 years. We did not estimate the cost savings that could be realized for option 3 due to the many factors associated with such a move. However, we believe this option provides both overall cost savings and other non-financial benefits.