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.
USPS May Be Undercharging House Of Representatives For Official Mail
USPS Office Of Inspector General Audit Report – Revenue for Official Mail from the House of Representatives Mailroom
Title 39, U.S.C Chapter 32, establishes the franked mail privilege for the vice president and members of Congress. The Postal Service accepts, processes, and delivers
franked mail sent under an authorized individual’s signature, or facsimile signature, without prepayment of postage. The Southern Maryland BMEU accepts and processes
mail from the House of Representatives, and the Eagan Accounting Service Center (ASC) bills the House Finance Office monthly for all House mailings processed
Conclusion
The Postal Service’s process for verifying and accepting franked mail at the Southern Maryland BMEU did not fully comply with Postal Service mail acceptance policy.
Further, the Eagan ASC could improve the controls over transferring bulk mailing transactions between computer systems to ensure invoices provided to the House are
complete and accurate.
The Southern Maryland BMEU did not count and report individually franked mailpieces presented by the House mailroom operator as required by Postal Service policy.2
Instead, the Postal Service relied solely on reports from the House Finance Office to prepare monthly invoices. BMEU management questioned whether all postage for
House mail was collected and why they did not have an opportunity to verify the piece counts. However, they continued to accept the mail with little or no verification because they did not have alternative verification processes, such as those available under an alternate mailing system agreement, approved for use. As a result, the Postal Service billed the House $3.2 million for mail from January 3, 2009, through January 2, 2010, without verifying the charges were accurate.
The House of Representatives makes payment for franked mail by appropriation to cover the postage and fees. The Postal Service records charges in FMRS based on actual usage. Unlike some commercial mailers who prepay their postage, House members do not prepay postage. The ASC prepares reports by individual House member each month, based on postage statements and the self-reported data provided by the House Finance Office. They send consolidated invoices to the House Finance Office. The House Finance Office reviews and reconciles invoices and then transmits payment to the Postal Service. Once the Postal Service finalizes a billing period, representatives can view their individual bills in FMRS.
BMEU Acceptance and Verification
The House mailroom usually presents three types of mailings to the Southern Maryland BMEU: automation and presorted letters; single-piece letters; and flats and parcels.
Postage statements accompany each of the letter mailings. There is no documentation presented with the flats and parcels mail. All of the mailings consist of nonidentical weight pieces. As a result, the BMEU cannot weight-verify the mail. Further, there are no SPPS agreements establishing alternative verification procedures. Because the unit cannot verify the number of pieces in the mail, they cannot verify postage.
USPS to Deploy Retail Discontinuance Model in FY 2011
The nationwide effort to consolidate stations and branches is NOT over.
156 Stations and Branches Remain Under Review For Possible Consolidation Under the Stations and Branches Optimization and Consolidation Initiative as of March 2010. 144 Stations and Branches were reported by USPS in February 2010.
PostalReporter note:
Top five states with facilities on possible consolidation list:
Ohio – 25
California -19
Florida- 14
Pennsylvania – 11
New York – 11
“Both federal law and postal policies prescribe a Post Office discontinuance process. In contrast, the Postal Service uses an expedited process to close stations and branches, which is not specifically covered by statute. Absent future legislative changes, the two discontinuance processes are warranted to promote a flexible, agile Postal Service to adapt to changing mailing preferences and to increase the opportunity to consolidate redundant retail facilities.”
“While the Postal Service developed an expedited process for closing stations and branches, it is primarily subjective and qualitative in nature. Management stated they are developing a decision tree-based retail discontinuance model to mitigate the inconsistency and subjectivity identified in our review. The project is currently in the design phase. Management plans to complete and deploy this model in FY 2011.”
OIG Audit Report – Stations and Branches Optimization and Consolidation Initiative (excerpts)
This report presents the results of our review of the U.S. Postal Service’s efforts to optimize the retail network (Project Number 10XG021EN000). Our objective was to
assess the Stations and Branches Optimization and Consolidation (SBOC) Initiative for discontinuance of classified stations and branches.1 This self-initiated audit addresses strategic, financial, and operational risks. This is the first in a series of retail optimization reviews. See Appendix A for additional information about this audit.
The Postal Service’s current retail network of approximately 32,000 facilities reflects a time when practically all retail revenue was generated through window transactions at
“brick and mortar” Postal Service facilities, mail volume was robust, and there was less alternate access to postal services. Congress recognized in the Postal Accountability
and Enhancement Act of 20062 that the Postal Service has more facilities than it needs and strongly encouraged streamlining the network. These factors, combined with its
current financial challenges, have made it incumbent upon the Postal Service to review the number and location of stations and branches to determine whether or not there is
excess capacity in the network.
While a station or branch is similar in many ways to a PO, there are some meaningful differences, particularly from the Postal Service’s perspective and administrative
standpoint. POs are established and maintained at locations to ensure that complete postal services are available to all customers within specified boundaries of named
geographic places. Stations and branches are subordinate units within the service area of POs. Operations at stations and branches are directed by each facility’s supervising
PO.
The SBOC Initiative is a viable option for the Postal Service to reduce costs in the retail network, but opportunities exist to improve the process. The Postal Service could have
enhanced the planning and management of the initiative by improving communication and coordination with stakeholders3 and developing accurate and reliable data on its
facilities. In addition, the Postal Service needs to raise stakeholders’ confidence that it will make decisions in a transparent, equitable, and fact-based manner by integrating a
strategic approach (top-down) and establishing clear criteria for evaluating discontinuance decisions.
The Postal Service has not posted a status update on the SBOC Initiative on its external website (usps.com) since February 2010. Postal Service Headquarters (HQ) did provide
an updated list (dated March 2010) showing that 156 facilities remained under consideration for discontinuance. Based on our fieldwork, we determined that district
offices forwarded 144 proposals6 recommending discontinuance of operations to HQ. However, management has made no decisions regarding which, if any, of these
facilities it will close through the time of our report. Management stated other initiatives, including 5-day delivery,7 have taken priority over the SBOC Initiative. As a result, the Postal Service spends about $425,000 per month to maintain operations at 28 of the 144 facilities we randomly selected for review. The Postal Service could realize cost
savings of over $1.7 million in fiscal year (FY) 2010 if they approve discontinuance of operations for the 28 facilities after HQ Retail Operations has completed its predecisional
review of the proposals.
Postal Service Actions – Management stated they are developing a decision tree-based retail discontinuance model to mitigate the inconsistency and subjectivity identified in
our review. The project is currently in the design phase. Management plans to complete and deploy this model in FY 2011.
Management added that they have initiated, in coordination with the Continuous Improvement Office, a Lean Six Sigma8 (LSS) study of the discontinuance process for
POs and other retail facilities. The project scope, milestones, and completion date had not been established at the time of our report.
Station and Branch Discontinuance Process Issues
While the station and branch discontinuance process was developed to provide the Postal Service with greater flexibility to aid in decision-making, postal policies do not
contain detailed procedures to ensure the process is fairly and consistently applied. This is partially because the SBOC Initiative was a unique project the Postal Service
implemented quickly. Management used PowerPoint presentations to document, communicate, and train its employees on the SBOC Initiative discontinuance process. Appendix F provides a timeline showing the SBOC Initiative from concept development to current status. Appendix G provides a flowchart of the SBOC Initiative discontinuance
process.
While presentations provide a swift means to communicate changes and updates to the existing process, we believe they should not be a substitute for formal policies and
procedures. On April 6, 2010, during an interview with the OIG, the former program manager for the Post Office Discontinuance Program acknowledged that Handbook PO-
101 should have step-by-step instructions. During other interviews, field managers expressed a need for detailed discontinuance instructions.
Resistance to Retail Network Changes
The Postal Service faces strong resistance to closing and consolidating retail facilities from local communities, employees, and lawmakers. While alternate access channels
are more widely available, some customers resist changing long-standing habits. Management needs to improve communication strategies and work with stakeholders to
overcome resistance. These strategies should include adding an alternate retail access channel expansion plan and educating stakeholders on the availability of these
convenient services. The Postal Service must explain its plans and decisions to stakeholders in an open, transparent, and timely manner
The Post Office Discontinuance Tracking System (PODTS) tracked PO and other retail unit discontinuance. However, management stated in the September 30, 2009 Official Transcript of Proceeding Before the PRC that the data in the system was inaccurate. Based on PODTS data, management reported to the PRC that they closed a total of 96 stations and branches between FYs 2005 and 2008. Management later found a number of data entry errors in PODTS, including misidentification of facilities. Subsequently, management filed a
correction and revised the number of closures from 96 to 21 for the same period.
APPENDIX C: MONETARY IMPACT
The OIG identified $2,773,043 in funds put to better use17 related to untimely discontinuance decisions and missed opportunity to reduce lease costs. The Postal
Service spends about $425,000 per month to maintain operations at 28 facilities we randomly selected for review. District management forwarded proposals recommending
discontinuance of operations for these 28 facilities to HQ. Although HQ Retail Operations completed pre-decisional reviews of the 28 proposals in February 2010, no
final agency decisions have been made through the time of our report due to other priorities. We estimated the Postal Service could realize cost savings of over $1.7
million from March 1 to September 30, 2010, if they approved discontinuance of operations for the 28 facilities after completing pre-decisional reviews18 (see Table 5).
In addition, the amount the Postal Service could save should it terminate leases at the Atlanta Civic Center, Tower Grove, and Southwest Stations is $1,055,320.19 District
management removed these stations from discontinuance consideration and cited “no termination clause” as the only non-feasible justification. However, the OIG review
found that lease agreements for these stations contain termination clauses that provide the Postal Service the option to terminate the leases with proper written notice. We
estimated the present value using October 1, 2010, as the start date to begin the termination notice period for each facility (see Table 6).
Read full report from the Office Of USPS Inspector General
OIG Says USPS Overfunded Its FERS Retirement Obligations By $6.8 Billion
A new audit report from the Office Of Inspector General says that the USPS over-funded its FERS retirement obligations by $6.8 billion. The OIG reported several months ago that USPS overfunded its CSRS retirement obligations by $75 billion.
Excerpts:
Consistent with other retiree benefit obligations, the Postal Service is being unfairly burdened for its share of the FERS pension obligation. The OPM projected a $6.8 billion surplus in the Postal Service’s FERS obligation at the end of FY 2009. The OPM acknowledged that the federal government’s FERS obligation, excluding the Postal Service, was unfunded by $7.4 billion at the end of FY 2008.The funding status for the Postal Service, as well as the federal government, is calculated by subtracting the pension assets from the actuarial accrued liability. A higher liability results in an unfunded status, while a lower liability results in a surplus. According to the OPM, the liability is a projection for current and future benefit obligations and considers contributions paid into and disbursements from FERS. Overall, the liability is based on estimated demographics for the entire federal government, including the Postal Service.
However, the Postal Service’s benefits paid represent actual demographic behavior, such as early career turnover, and not the aggregate, resulting in a surplus status for the Postal Service and an unfunded status for the federal government.
Based on this data, the Postal Service’s overfunding issue is even larger than we previously reported. Similar to what we have noted in other OIG retiree benefit reports, Postal Service Based on this data, the Postal Service’s overfunding issue is even larger than we previously reported. Similar to what we have noted in other OIG retiree benefit reports, Postal Service ratepayers continue to pay more than their fair share of retiree benefits. It is important that the trend of overpayments does not continue. The Postal Service faces a challenging future and its responsibilities and the true cost of funding postal operations needs to be absolutely clear. To address that challenge, the Postal Service is making operational changes to bring costs in line with revenue projections. Additionally, it is pursuing legislative changes to address concerns raised about pension and retiree health benefit payments. We believe management should also consider the FERS overfunding issue as the Postal Service pursues legislative changes.
Having retirement expenses commingled with the federal government’s budget, while being expected to operate as an efficient business, puts the Postal Service in a precarious position. The surplus in the CSRDF effectively subsidizes appropriated tax dollars when it could be used to offset the Postal Service’s current and future business expenses.
Conclusion:
The Postal Service has opportunities to use at least $5.5 billion of the $6.8 billion in FERS surplus funds to address its current and future financial condition. We found the Postal Service continues to overfund its retirement obligations and there is no present legislation to resolve surpluses. Further, it is vital that the Postal Service’s responsibilities be clearly delineated and separated from those of the rest of the federal government. The overcharges associated with CSRS obligations, coupled with the FERS surplus discussed in this report, have adversely affected the Postal Service’s financial position, hindered its ability to operate efficiently in a business-like matter, and hindered its transformation under the Postal Accountability and Enhancement Act (PAEA). Action is needed to prevent a repeat of historical trends in the overfunding of Postal Service retiree benefits.
Read the full USPS OIG report.
OIG: USPS Takes Average Of 2.2 Yrs. To Process Employees Ideas Instead of 7 Days
The following are excerpts from a USPS Office Of Inspector General review of the eIDEAS program. According to the USPS OIG, “When an idea is approved, management can award noncash and cash awards up to $10,000. The complainant and surveyed employees expressed concern about management’s commitment to the eIDEAS program.”
This management advisory presents the results of our review of the eIDEAS program
(Project Number 10YG023DA000). Our objective was to identify opportunities for the
U.S. Postal Service to enhance the timeliness of the eIDEAS process and transparency
of the resulting management actions. We conducted this self-initiated review based on a
hotline complaint. See Appendix A for additional information about this review.
The eIDEAS program is a web-based application that allows Postal Service employees
to submit ideas online or at one of the 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.
Given the current financial condition of the Postal Service, it is appropriate to evaluate
the timeliness and transparency of the eIDEAS program to help management identify
those ideas with tangible benefits.
Conclusion
We found the eIDEAS program was not timely and management’s resulting actions
were not transparent. Specifically, while the eIDEAS program guide stipulates
evaluators assess ideas within 7 days of submission, we found level 1 evaluators took
an average of 2.2 years to process employee ideas, while level 2 and level 3
evaluators1 took an average of 1.1 years and .57 years, respectively, to process ideas.
Additionally, we noted that while the number of ideas submitted has grown by 26
percent from fiscal years (FY) 2004 to 2009, the number and value of awards has
declined by more than 88 percent. Although, we did not assess the quality of employee
suggestions received, this trend suggests further evaluation is warranted by
management to measure program success.
1 Level 1 idea evaluation is typically performed by the supervisor, postmaster, or manager to whom the submitter
reports. Level 2 evaluation is performed by the submitting organization’s executive (or designee). Level 3 evaluation
is performed by a representative of the headquarters functional area to which the idea most closely relates.
Our survey of employees who submitted ideas revealed that untimely evaluations,
insufficient management commitment and communication, and insufficient program
transparency were perceived as inhibitors to the program’s success. Program
management indicated that system limitations such as electronic reminders and
employee separations contributed to the backlog in open statuses. These challenges
prevent the full realization of the eIDEAS program’s purpose, which is to improve
customer satisfaction, generate revenue, increase productivity, and enhance
competitiveness.
In our benchmarking analysis, we found that federal and private entities have similar
idea programs. The National Aeronautics and Space Agency (NASA), the Department
of Defense (DOD), and the state of Washington evaluate and/or reward ideas within 20
to 45 days of submission. The DOD considers a benefit-to-award ratio when
implementing its ideas program. NASA, the DOD, and the state of Washington also use
a committee to evaluate ideas.
In regard to the hotline compliant, Postal Service Engineering developed a solution to
the Delivery Barcode Sorter (DBCS) problem with damaged stacker gates that was field
tested and repair kits were procured. Additionally, the Postal Service Maintenance
Technical Support Center (MTSC) is currently working on a maintenance bulletin to
inform field sites of the fix. The OIG hotline office will communicate with the complainant
as appropriate. See Appendix B for our detailed analysis of this topic.
We recommend the executive vice president, chief Human Resources officer, in
coordination with participating vice presidents:
1. Re-evaluate the Postal Service’s level of commitment to the eIDEAS program and
implement program modifications as appropriate.
2. Take action to improve the timeliness of the evaluation process and the
transparency of resulting management actions.
Archive: Postal Employee Idea Not Returned To Sender
USPS OIG Audit Report – Flats Sequencing System: Program Status and Projected Cash Flow
This report discusses the Flats Sequencing System (FSS) program status and its projected financial impact and addresses both operational and financial risks (Project Number 09YG052DA000). The objective of this audit was to assess procedures for reporting of FSS performance and program savings shortfalls. See Appendix A for additional information about this audit.
In December 2006, the U.S. Postal Service approved a (redacted) project to develop,purchase, and deploy 100 FSS machines, which are designed to sort flat mail in the precise order in which it is delivered. The first two contract requirements tests of FSS machines (designed to ensure functionality, quality, and compliance with specifications) have shown shortfalls in expected performance. Typically, when there is a First Article Test (FAT) failure, Postal Service acquisition guidelines call for retests before beginning deployment. However, in this case, the Postal Service has decided to deploy FSS machines despite major performance shortfalls in order to capture savings earlier; however, deploying FSS machines that do not meet contract requirements could reduce
expected savings. Although the Postal Service has adjusted its savings expectations and project assumptions have changed, it has remained optimistic when communicating expected financial outlooks.
Conclusion
The Postal Service’s revised performance projections in Quarter 1 (Q1) of fiscal year (FY) 2010’s Investment Highlights report do not use current actual machine performance and its projection of a gain of at least $872 million from FSS appear optimistic. In addition,there have been significant changes in assumptions for FSS machines and measurement criteria since the 2006 approval of the original investment. For example, flats volumes have decreased significantly, expected throughput rates have not been met, planned FSS sites have increased, the program schedule has changed by a year, and additional savings for transitional employees (TE) have been introduced to the investment return.These changes make it challenging for the Postal Service to measure project success as initially defined.
Particularly, we believe adding TE savings to the evaluation of FSS program success is questionable for several reasons. First, these savings were never considered as part of the original investment decision. Second, 44 percent of TEs are not in districts that will eventually host FSS machines. Lastly, management claimed these savings prior to FSS deployment and has the option of reducing TE complements for volume declines irrespective of the FSS program’s success. Thus, much of the savings from these employees will likely not be associated with FSS deployment.The Postal Service’s Q1, FY 2010 Investment Highlights report shows a projected gain for the FSS program of at least $872 million and a return of at least 27 percent. Using current actual performance data for the highest performing machine and operational target metrics, we calculated four financial scenarios for measuring program status and progress
against program goals. These scenarios were at least $431 million lower than the scenarios the Postal Service presented. Such a large difference exists because the Postal Service used more optimistic performance assumptions rather than actual machine performance or operational target results.
Our analysis shows that using current FSS performance data to calculate projected savings results in a net present value (NPV) of $215 million (a rate of return of 14.49 percent). If we remove the questionable TE savings, the NPV decreases to a negative $311 million (a rate of return of 5.18 percent). Assuming the FSS machines reach the operational target metrics, we calculate gains from FSS to be $441 million (rate of return of 19.26 percent). If we remove the questionable TE savings, there is a projected NPV of a negative $85 million (a rate of return of 8.54 percent).
The Postal Service’s Handbook F-661 requires accurate analysis and reporting of program impact. One purpose of the Investment Highlights report is to show the progress of large-scale programs within the Postal Service. Reporting program performance based on actual and operational target data is critical so that key decision-makers (such as the Board of Governors) have sufficient information to monitor program progress on projects of significant duration. See Appendix B for our detailed analysis of this topic.
We recommend the vice president, Engineering:
1. Use actual machine performance and operational target data to more accurately report the progress of the Flats Sequencing System program’s financial outcomes in compliance reports such as the Investment Highlights report.
1 General Investment Policies and Procedures (November 2005, updated with Postal Bulletin revisions through October 11, 2007) provides a single source overview of investment projects.
Management’s Comments
While management agreed with the recommendation to use actual machine performance data for compliance reports, they took exception to certain findings and our recommendation to use operational target data. Specifically, the Postal Service will include an additional FSS financial scenario when reporting outcomes in Investment Highlights reports. Management will take this action in time for the Q3, FY 2010 Investment Highlights report. The reported scenario will represent the Postal Service’s most current assessment of actual machine performance. In reference to using operational target data,the Postal Service does not believe they are representative of long-term expectations and elected not to present them in future Investment Highlights reports.
Management also said the financial outcomes presented in the report do not recognize:
- Throughput improvements demonstrated during tests in November 2009 and April 2010.
- Performance improvements over the 10-year program life and performance levels already achieved by the first article machine.
- Over 17 hours of daily runtime for unconstrained machines.
- The relevance of TEs, their strategic use, and the resulting savings attributable to the FSS program.
- Scheduling adjustments that address lower mail volumes.
- Additional savings related to delivery unit space reductions and vehicle capital investment and maintenance avoidance.
Thus their lower bound outcomes represent the likely worst case scenario. We have included management’s comments, in their entirety, in Appendix D.
full report from the USPS Office Of Inspector General
OIG Criticizes USPS Oversight Of Grievance Settlements And Questions Payments to Union Officials
Recent audit report from the USPS Office of Inspector General :
Most Postal Service bargaining unit employees are represented by one of the four major unions. The national agreements signed by senior-level management and the four union presidents include grievance-arbitration procedures that Postal Service management, bargaining unit employees (also referred to as craft employees), and union representatives must follow. These procedures provide guidance for resolving workplace disputes, differences, disagreements, and complaints. The Postal Service pays millions of dollars in grievance settlements; in fiscal year (FY) 2008 and FY 2009 they paid $250 million and $179 million respectively. As a result, it is important to ensure the Postal Service has appropriate internal controls in place.
Conclusion
Management controls over grievance settlements and disbursements need to be strengthened. We found that grievance payments were often not supported by adequate documentation and, as a result, we identified at least $27.8 million in unsupported questioned costs. We also found that oversight of the grievance settlement process was not consistent among the districts and that union representatives received grievance payments to which they may not have been entitled. The weakness in the control environment makes it difficult to determine the propriety of settlement amounts, and
payments to employees and union officials who represent bargaining unit employees.Documentation to Support Grievance Settlements and Payments
We reviewed 600 randomly selected grievances2 and found that 234 (or 39 percent) were not adequately supported by required documentation. The missing documentation included signed Grievance Arbitration Tracking System (GATS) decision letters that document the reason for the settlement; the Grievance Form, which explains the original grievance; and documentation that explains how management determined the amount of the payment. As a result, there is no assurance that at least $27.8 million in grievance settlement payments were justified or warranted.
Human resources managers and labor relations officials at six of the 10 districts in our sample stated that supervisors are not required to copy and maintain supporting documentation used to settle informal grievances because they can settle them verbally. Management at the remaining four districts stated the documentation was missing due to poor recordkeeping by supervisors and individuals who prepared the grievance payments.
The Postal Service requires management to maintain documentation supporting grievance files and appeals for 7 years. In addition, the Government Accountability Office (GAO) developed standards for internal controls. These standards require agencies to assess the level of risk associated with specific activities and develop nternal controls to mitigate these risks. One internal control activity includes documenting all transactions and other significant events and making the documentation readily available.
Payments to Union Representatives
We also found that union representatives received excessive payments from grievance settlements. Union representatives in four districts (Colorado/Wyoming, Alabama, Mid- America, and Capital) were involved with the allocation of class-action grievance settlements for six grievances that resulted in union representatives receiving payments that were significantly more than other members of the class. Specifically, union representatives received $33,447 (or 24 percent) of $141,639 in settlements for these six grievances. One union representative in the Mid-America District received as much as 35 percent of a grievance settlement, while other payees received less than 1 percent.
This occurred because the Postal Service has not established procedures for reviewing the allocation of settlements to ensure that payees whom the union identifies are part of a class action. Once the Postal Service negotiates a settlement, they often have no involvement with its allocation. As a result, union representatives may be receiving payments to which they are not entitled.
Inconsistent Oversight of Grievance Settlements
We identified inconsistencies in the oversight of grievance settlements among the districts we reviewed. Specifically:
- Six of the 10 districts did not encourage or expect management representatives to seek higher-level consultation during the grievance process.
- Four of the 10 districts had not established dollar thresholds indicating when consultation or approval was required. Thresholds varied among the six districts that did have established thresholds.
There was no requirement or nationwide methodology for monitoring grievances through GATS. District officials stated they each used one or more GATS reports, and seven of the 10 stated they used one or more alerts in GATS to monitor settlement amounts or prevalent issues.
We found that these inconsistencies existed, because supervisors are authorized to settle grievances at any amount; and although some Postal Service managers had implemented a consultation process, others believe oversight of grievances before settlement and documentation of any consultation would violate union contracts.Without consistent procedures and appropriate oversight, management has no assurance that grievance settlements and disbursements are appropriate. According to GAO, internal controls provide reasonable assurance that funds are safeguarded and laws and regulations are complied with and support effective and efficient operations.
Without sufficient internal controls, the risk of fraud, waste, and abuse is high.
USPS OIG: Fixing CSRS Overpayment and pre-funding requirements would fully fund pension and retiree health benefits
The economic downturn and the continued electronic diversion of mail, coupled with an aggressive retiree health pre-payment schedule have combined to put the Postal Service in financial crisis. A recent analysis of the future of the mail conducted on behalf of the Postal Service showed that mail volume may not recover along with the economy – further deteriorating the Postal Service’s financial condition in the years to come. Moreover, in its April 12 report entitled, “U.S. Postal Service: Strategies and Options to Facilitate Progress Toward Financial Viability,” the Government Accountability Office (GAO) found This report presents the results of our review of the Civil Service Retirement System (CSRS) Overpayment by the U.S. Postal Service (Project Number 10YO036CI000).This report discusses the $75 billion CSRS overpayment by the Postal Service in fiscal years (FY) 1972 through 2009. The objective of this review was to assess the facts concerning this overpayment and identify any possible solution(s) to correct the overpayment to the benefit of the Postal Service. This review addresses financial risk.See Appendix A for additional information about this review.
On May 5, 2010, the U.S. Postal Service Office of Inspector General (OIG) entered, for the record, the attached Congressional testimony with the U.S. Congress in addition to the oral testimony previously given by the Postal Service’s Inspector General (IG) before Congress on April 15 and 22, 2010. 1 The attached testimony (See Appendix B) explains, in detail, the Postal Service’s $75 billion overpayment to the CSRS and three possible solutions to correct the overpayment contained in the IG’s written testimony of May 5, 2010. (See Appendix B pages 13 – 16)
Conclusion
The Postal Service pension fund is not made up of tax dollars. The two funding streams are the employees’ own money and money collected from postage sales, with inflated prices as a result of the $75 billion overpayment. See Appendix C for OIG’s detailed monetary impact calculation. The return of the overpayment or a combination of actions to realize the benefit of the $75 billion overpayment to the Postal Service would fully fund the pension and health retiree plans. The Postal Service’s more than $7 billion annual payments for retiree health care prefunding and retiree health care premiums would no 1 The April 15, 2010, Hearing before the Committee on Oversight and Government reform and the Subcommittee on the Federal Workforce, Postal Service, and the District of Columbia House of Representatives and the April 22, 2010, Hearing before the Senate Homeland Security and Governmental Affairs Committee’s Subcommittee on the Federal Financial Management, Government Information, Federal Services, and International Security.
How the $75 Billion overcharge started:
In July 1971, when the Post Office Department became the Postal Service, employees that belonged to the federal pension fund began contributing to the Postal Service’s portion of the pension fund. These retirement costs were divided according to the number of years employees had belonged to each fund. However, the federal pension fund paid for retirements was based on 1971 salaries, not final salaries as administered by the Office of Personnel Management (OPM).
OPM has explained that these mischarges were in response to what they believed to be the will of Congress expressed in 1974 legislation. However, the 1974 language was repealed by Congress in 2003. Congress directed OPM to use its authority to oversee the reforms using accepted “dynamic assumptions” that include pay increases and inflation. OPM switched to dynamic funding for the Postal Service portion, but did not for their share. The Postal Service paid the $75 billion difference.
In 2004, the Postal Service appealed the OPM’s methodology for pension fund allocation and the appeal was denied by the OPM. The denial relied on 1974 legislation that made the Postal Service responsible for the pension costs related to salary increases. However, the 1974 language was repealed by Congress.
In addition, the OPM directed the Postal Service to use 100 percent pre-funding for both pension and health care retirement funds. In contrast the OPM has pension funding levels of 41 percent for federal employees and 24 percent for the military. The OPM’s own retiree health care prefunding for federal employees is 0 percent. The Standard & Poor’s 500 companies’ pension funding is 80 percent.
Correcting either the $75 billion overcharge or reducing the 100 percent target prefunding level to 80 percent would result in the ability of the Postal Service to pay off the Treasury debt associated with paying the $75 billion overcharge.
Accordingly, the annual costs and premiums for the health care liability could be financed out of the interest earnings and surplus. Another option for the Postal Service could be to use the $75 billion overcharge to pledge to the retiree health fund instead of making annual payments. This could be done with the agreement of the OPM and the U.S. Treasury.
The details concerning each of the three possible solutions can be found in the appendix of the attached Congressional testimony.
See Full Report: Management Advisory Report – Civil Service Retirement System
Overpayment by the Postal Service (Report Number CI-MA-10-001).
OIG Audit: USPS could save $342 million By Replacing Some Vehicles Instead of Repairing Them
In a recent OIG audit report on USPS delivery vehciles:
The Postal Service has approximately 189,000 delivery vehicles made up of minivans, sport utility vehicles (SUVs), flex fuel, and long-life vehicles (LLVs). The majority of the
Postal Service’s delivery fleet are nearing the end of their 24-year life expectancy. Because of limited capital resources, the Postal Service has delayed its planned purchase of delivery vehicles until fiscal year (FY) 2018. The Postal Service faces the same capital challenges after 2018, as forecasts show continuing shortfalls
The Postal Service has successfully maintained its LLV delivery vehicle fleet in safe, working condition for over 20 years. They attribute this success to a robust preventive maintenance program, as well as a “fix as fails” strategy that we found to be operationally viable and generally cost effective. However, analysis of delivery vehicle costs shows that this strategy would not be cost-effective for fleet vehicles the Postal Service will have to replace soon. These vehicles consist of 19,257 LLVs, with an average annual maintenance cost in excess of $5,600 for FYs 2008 and 2009. Incurring maintenance costs at this rate, the “fix as fails” strategy costs $342 million1 more than it would cost to purchase new vehicles.
This opportunity exists because the strategy as implemented often circumvents the service life and maintenance reinvestment guidelines.2 These guidelines require that before initiating any extensive vehicle repair, Vehicle Maintenance Facilities (VMFs) must assess maintenance reinvestment by providing complete documentation of expected maintenance costs, the condition of all major components, and a cost analysis justifying the decision to repair. This information is to be documented on Postal Service (PS) Forms 4587, “Request to Repair, Replace, or Dispose of Postal Service-Owned Vehicles”, and it is to be submitted for district management approval before the repair is made. We found that this control was circumvented and costly repairs were made because the assessments were not complete and lacked district management approval. In addition, the Handbook PO-701 does not require that cumulative maintenance reinvestments are monitored beyond district levels. Without this control, maintenance intensive vehicles are not apparent to area and headquarters managers.
We recommend the vice president, Engineering:
1. Replace maintenance intensive vehicles beginning in fiscal year 2011.
2. Reemphasize to vehicle maintenance and district managers the reinvestment threshold, the importance of completing PS Forms 4587 to include cumulative costs, and the need to obtain required approvals as detailed in Handbook PO-701.
3. Monitor maintenance intensive delivery vehicles at the area level.
OIG Report: Postal Service’s Progress In Reducing Workhours
This report presents the results of the Postal Service’s progress in reducing workhours based on recommendations in a prior report.1 Our objective was also to assess the
overall efficiency of the processing and distribution network for fiscal year (FY) 2009 (Project Number 10XG017NO000). This is a cooperative effort with the Postal Service
and addresses operational risk. See Appendix A for additional information about this review.
Last year, we reported on efficiency levels and mail volume in processing and distribution centers (P&DCs) and facilities (P&DFs), and recommended the Postal Service reduce almost 23 million workhours by FY 2011. The goal of the previous effort was to report out on Postal Service’s efforts to “raise the bar” on productivity levels for those plants that were the least productive in the network nationwide. We took a similar approach in this report and plan to conduct this type of analysis annually.
Conclusion
The Postal Service made substantial progress by reducing workhours in the network from the previous year. Plants that were the least productive in FY 2008 reduced over
18 million workhours (achieving 82 percent of the recommended workhour savings) and improved productivity by over 6 percent. Moreover, from Quarter 1 (Q1), FY 2009 to Q1,
FY 2010, the Postal Service maintained or improved service. See Appendix B for more information.
However, we found the Postal Service had not yet fully adjusted workhours in response to declining mail volume as a result of poor economic conditions, nor achieved all
possible efficiencies in mail processing operations.
We identified five major areas where the Postal Service could realize workhour savings:
- Overtime Hours
- Mail Handling
- Automated and Mechanized Equipment
- Allied Operations
- Manual Operations
The Postal Service could improve operational efficiency by reducing over 16.2 million workhours by the end of FY 2012. This would allow the Postal Service to achieve at
least median productivity levels in the network and avoid costs of almost $744 million based on workhour savings for 1 year.2 See Appendix C for a detailed explanation of
this cost avoidance.