USPS says it’s too early to determine cost savings from Retail Alternatives to Post Offices
Filed under: GAO, politics, post office closings, postal, postal news, usps
GAO Report: Action Needed to Maximize Cost-Saving Potential of Alternatives to Post Offices
Highlights:
USPS has expanded access to its services through alternatives to post offices in support of its goals to improve service and financial performance. Retail alternatives offer service in more locations and for longer hours, enhancing convenience for many customers, but certain characteristics of these alternatives could be problematic for others. For example, services obtained from some alternatives cost more because of additional fees, which could deter use by price-sensitive customers. Furthermore, although about $5 billion of its $18 billion in fiscal year 2010 retail revenue came from alternatives, USPS officials said it is too early to realize related cost savings. USPS also lacks the performance measures and data needed to show how alternatives have affected its financial performance. A data-driven plan to guide its retail network restructuring could provide a clear path for achieving goals. Without such a plan, USPS may miss opportunities to achieve cost savings and identify which alternatives hold the most promise. USPS has sought to raise customers’ awareness by developing media campaigns, enhancing its online tools for locating postal access points, and creating standard symbols for post offices and retail alternatives to show which products and services they offer. However, USPS has not assessed whether its message is reaching its customers, such as by using one of its existing customer surveys, and therefore does not know to what extent customers are aware of and willing to use its various retail alternatives. Read more
GAO: Restructuring USPS Business Model Could Eliminate Prefunding for Retirees Health Benefits
In a report release yesterday GAO wrote:
Restructuring USPS’s business model to adapt to decreased mail use could follow one of three primary models: a government-subsidized federal agency, the current structure with additional flexibility, or a private-sector business. See table 2 for key actions and decisions associated with each model.
Financial obligations
government-subsidized federal agency: Allow USPS to fund its obligations like other federal agencies and eliminate prefunding for retiree health benefit obligations.
the current structure with additional flexibility: Restructure funding for retiree health benefit obligations in a fiscally responsible manner.
private-sector business: Establish new pension, retiree health, and workers’ compensation programs and determine obligations, in accordance with applicable laws and regulation.
Labor-related requirements
Revise requirements to reflect those used by federal agencies
Require binding arbitration for labor contracts to consider USPS’s financial condition
Revise requirements to reflect those applicable to private firms
U.S. POSTAL SERVICE: Mail Trends Highlight Need to Fundamentally Change Business Model
Summary
By the end of fiscal year 2011, with a projected net loss of about $10 billion, the U.S. Postal Service (USPS) was expected to become insolvent. To mitigate this, Congress temporarily deferred USPS’s required $5.5 billion retiree health benefit payment. Over the previous 4 years, USPS experienced a cumulative net loss of just over $20 billion. USPS expects its revenue to decline further as First-Class Mail is projected to decline nearly 7 percent annually through 2020. Consequently, decisions need to be made to determine how USPS should be restructured to put it on a path to financial viability. GAO was asked to summarize (1) long-term trends related to the demand for and use of mail, and (2) options for restructuring USPS’s business model to adjust to changing mail trends. This summary is based on GAO’s past work, including GAO-11-278 (High-Risk Series: An Update) and GAO-10-455 (USPS: Strategies and Options to Facilitate Progress toward Financial Viability), both of which found that USPS urgently needs to restructure its networks and workforce to achieve and sustain financial viability. In addition, GAO also used data and related studies from USPS. GAO performed this work from September 2011 to October 2011 in accordance with generally accepted government auditing standards. GAO provided a draft of this report to USPS for comment and incorporated technical comments provided by USPS as appropriate.
Long-term trends–highlighted in the data below–strongly suggest that the use of mail will continue to diminish as online communication and e-commerce expand. By 2020, USPS projects mail volume will decline to levels not seen since the 1980s: Total mail volume is projected to decrease by 25 percent, First-Class Mail is expected to decrease by 50 percent, and Standard Mail volume is projected to remain flat. While dire, USPS’s projections could prove optimistic if communication continues to move to digital technologies as quickly as in the recent past. For the first time, in 2010, fewer than 50 percent of all bills were paid by mail. Almost 60 percent of mail received by households in 2010 was advertising, while bills and financial statements comprised 22 percent. These trends underscore the need for USPS’s business model to undergo fundamental changes to reduce personnel and network-related costs. Restructuring USPS’s business model to adapt to decreased mail use could follow one of three primary models: a government-subsidized federal agency, the current structure with additional flexibility, or a private-sector business.
READ FULL GAO REPORT (PDF)
USPS OIG Responds to GAO Report
Hmmm… it appears that some members of Congress have been sitting on this GAO report for at least a week. Of course, the report was sent out to GOP-leaning news media to get ahead of today’s spin on the USPS overpayment. The games some people play once they are in power.
USPS OIG sent the following letter to GAO:
We disagree with the major conclusions of the report. Your review focuses on the 1974 law (P.L. 93-349), which is not in dispute. All parties agree that the 1974 law made the Postal Sen/ice responsible for funding the additional CSRS liabilities resulting from pay increases after 1971.
The issue in question surrounds the CSRS Funding Reform Act of 2003 (PL. 108-18) as it pertains to the Office of Personnel Management’s (OPM) share of CSRS liability. Your report fails to recognize how the 2003 law changed the 1974 law. We do not understand your assertion that the “consequence of the 2003 Act was to leave the 1974 allocation unchanged, notwithstanding the removal of the explicit allocation provision.” If. as you state, the allocation provision was removed, it does not seem reasonable to assume the intent of Congress was that the allocation remain unchanged.
In fact, the 2003 law changed the directive to OPM. As the legislative history shows, it was intended to “repeal” the 1974 law (Senate Report No. 108-35, page 6). OPM was required to adopt modern dynamic methods. Dynamic methods dictate that OPM take into account the effect of future salary increases on the total liability. Using these methods, OPM was to capture the size of the postal liability and the respective responsibilities of the Postal Service and OPM to satisfy the liability. Instead, OPM applied dynamic assumptions solely to the Postal Sen/ice’s share of the liability — not to its own share. It appears that OPM failed to follow the 2003 law and now must agree to do so or be compelled by law for a second time.
The current OPM methodology is neither fair nor modern nor does it comply with the 2003 law. We agree with you that action from Congress is necessary to settle this issue once and for all. We believe Congress did just that in 2003. If OPM cannot be convinced of the need to change its methodology, the only alternative is for Congress to compel OPM to act by adding even more explicit reform language to the legislation currently being prepared. Read more
NALC President Rolando issues statement on the GAO report on the CSRS dispute
October 13, 2011 — The GAO is simply wrong in denying the overpayment, and in doing so it differs with the USPS, the Office of Inspector General (of the Postal Service), the Postal Regulatory Commission, two independent actuaries, and legislators from both parties and both chambers of Congress who’ve addressed the issue in current legislation.
It’s absurd to claim that the money owed the Postal Service would not solve its financial problems by asserting that they result from changes in consumer mail use and a business model weakness — given that over the past four fiscal years, despite the recession, mail delivery netted a $611 million operational profit. The crushing burden of pre-funding retiree health benefits that caused 100 percent of the USPS’s reported losses between 2007 and 2010 could be relieved by a fair allocation of CSRS benefits. Read more
GAO Report On USPS Overpayment
Here is the report from GAO on USPS Pension Funding
U.S. Postal Service: Allocation of Responsibility for Pension Benefits between the Postal Service and the Federal Government
The current methodology used by OPM for allocating responsibility for CSRS benefits between USPS and the federal government is consistent with applicable law. Congress created USPS in 1971 as an independent, self-sustaining entity, with a package of assets and obligations, as well as competitive advantages and disadvantages. In 1974, Congress explicitly allocated responsibility to USPS for CSRS benefits attributable to post-1971 USPS pay increases and, although it revised aspects of the CSRS funding process in 2003 and 2006, it did not alter the fundamental allocation of responsibility for CSRS benefits. Although the USPS OIG and PRC reports present alternative methodologies for determining the allocation of pension costs, this determination is ultimately a policy choice rather than a question of accounting or actuarial standards. Some have referred to “overpayments” that USPS has made to the CSRS fund, which can imply an error of some type–mathematical, actuarial, or accounting. We have not found evidence of error of these types. While the USPS OIG and PRC reports make judgments about fairness, the 1974 law also implicitly reflected fairness. Congress considered that USPS was to be self-sustaining and that the federal government, which had no control over USPS pay increases, should not be liable for pension benefits attributable to those increases. Also, the USPS OIG and PRC reports assess the fairness of the allocation in isolation, looking only at pension costs. In the private sector, the fairness of the allocation of pension obligations between two businesses depends on the total package of assets and obligations–both pension and nonpension. Finally, the cost of USPS’s CSRS pension allocation based on the 1974 law has already been reflected in postal rates for most of the past four decades. The key impacts of transferring assets out of the CSRS fund to USPS based on the current proposals would be to increase the federal government’s current and future unfunded pension liability by an estimated $56 billion to $85 billion. This liability would then be funded by the federal government using tax revenue, borrowing, or both. Also, CSRS beneficiaries would continue to receive their benefits under current law, even if the federal government’s unfunded CSRS liability increases, but this could indirectly create pressure to reduce pension benefits. Furthermore, legislation would be required for the CSRS funds transferred under the recommendations in the PRC and USPS OIG reports to be used by USPS for purposes other than funding the Postal Service Retiree Health Benefits Fund. Any change in the USPS’s share of responsibility for CSRS benefits would provide some temporary relief from the pressures USPS faces because of declining volume, revenue, and inflexible costs, but would not by itself address USPS’s long-term financial outlook. Such a transfer of CSRS funds would not be sufficient to repay all of USPS’s debt and address current and future operating deficits related to USPS’s inability to cut costs quickly enough to match declining mail volume and revenue. Last year, GAO issued a report (GAO-10-455) that outlined a number of options to address USPS’s financial viability that Congress could consider–such as realigning its operations, networks, and workforce–so that USPS could modernize to meet changing customer needs.
GAO Report On USPS Overpayment
GAO Reportedly Says Labor Costs Is Reason For USPS Current Financial Condition
Although the full report has not been released, is this really a surprise GAO Supports Issa-Ross Arguments on USPS Overpayment –
According to the Federal Eye
Washington Post – Transferring tens of billions of dollars in federal worker retirement accounts back to the U.S. Postal Service would not address its long-term debt problems and would force unfunded liabilities on to taxpayers, according to a new government report. The conclusions set for release Thursday by the Government Accountability Office run counter to the opinions of postal regulators, the postal inspector general and congressional Democrats, who say Congress should refund as much as $75 billion to the Postal Service for improperly overpaying federal retirement accounts since the 1970s. GAO concluded otherwise, writing in its report that “We have not found evidence of error of these types. Any attempt to refund money to USPS “would be a significant change from a policy” in place since the 1970s, it said. Returning money to the Postal Service for past and future retirement payments would cause as much as $85 billion in losses for taxpayers “which must then be paid by the federal government through tax revenue or borrowing,” GAO said. And any refund “would not be sufficient to repay all of USPS’s debt and address current and future operating deficits.”
In the Senate, Thomas Carper (D-Del.), a longtime proponent of postal reforms, appeared to agree with Issa, calling on lawmakers to table discussions of CSRS refunds and to focus instead on areas of agreement, including paying back the $6.9 billion from the FERS.
GAO Recommends Recruiting Mail Carriers, Postal Retirees As Temporary Takers For 2020 Census
GAO Report: Census Bureau and Postal Service Should Pursue Opportunities to Further Enhance Collaboration
Highlights
The Bureau and USPS are expanding collaborative efforts for the 2020 Census. The collaborative efforts include a new Bureau initiative to continuously update its master address list using USPS and local address information. This could allow the Bureau to limit the size of field operations needed to develop an accurate and complete address list for the 2020 Census.
The Bureau and USPS also plan to update their 1995 memorandum of understanding to, among other matters, help ensure that both agencies benefit from their collaborative efforts. The revised memorandum of understanding is expected to be approved later this year.
Additional opportunities exist for the Bureau to take advantage of the knowledge and experience of USPS mail carriers, including retirees…
Opportunities exist for the Bureau to take advantage of the knowledge and experience of USPS mail carriers, including retirees. Bureau and USPS officials agree that USPS city and rural mail carriers are familiar with the local living conditions in their communities and that this knowledge could help the Bureau conduct aspects of the 2020 Census more effectively. Mail carriers have experience and knowledge about the dwellings on their routes and could help find unconventional and hidden housing units (e.g., converted basements and attics) and identify single versus multi-unit homes. Residents of these households are often more difficult to find and count. Additionally, in some communities, mail carriers have information about hazardous locations along delivery routes (e.g., houses with an unchained dog or other dangers such as structurally unsafe porches), which could make census workers’ jobs safer and easier. Read more
GAO seeking public help in finding Employees abusing Federal Workers’ Comp Program
Filed under: GAO, Injured On Duty, owcp, postal, postal news, press releases
GAO issued the following press release:
Believe You’ve Seen Evidence of Workers’ Compensation Fraud? Contact GAO
Abuse of benefits by federal employees can be reported anonymously
WASHINGTON, DC (July 14, 2011) – The U.S. Government Accountability Office (GAO) is investigating fraud and abuse in the Federal Employees’ Compensation Act (FECA) program. Specifically, GAO is looking for information on cases in which federal employees are currently abusing workers compensation benefits.
For example, fraud schemes might include a beneficiary working a second job, overstating their workers’ compensation claim, or collecting benefits for a deceased individual. Anyone with information regarding fraud or abuse of the FECA program by federal employees is encouraged to contact us at workerscompfraud@gao.gov. All information about individuals who contact us will be kept confidential.
For media inquiries about this announcement, contact Chuck Young, Managing Director of Public Affairs, at 202-512-4800.
PMG Comments On GAO Report on Five-Day Mail Delivery Readiness
Filed under: delivery, GAO, postal, postal news, press releases, usps
The Government Accountability Office (GAO) has produced a thorough and comprehensive review of the Postal Service proposal to move to a five day per week delivery schedule. We are pleased to see they agree that the Postal Service is likely to achieve significant cost savings if this change were to be effected and that much of its success depends on how efficiently it is implemented. We agree and believe that having completed a lengthy planning process; we are prepared to make that happen.
We are aware of the concerns certain stakeholders have expressed to GAO. We consulted extensively with our customers as we developed our operating plans. They can be assured that any decision to go to a five-day schedule will carefully balance our universal service responsibility and our statutory duty to operate in an efficient manner in light of prevailing volume, cost and revenue trends. Consideration of such matters will help ensure the financial stability of the Postal Service well into the future.
source: USPS
GAO: Ending Saturday Delivery Would Reduce Costs, but Comprehensive Restructuring Is Also Needed
The United States Government Accountability Office issued the following report today:
USPS’s proposal to move to 5-day delivery by ending Saturday delivery would likely result in substantial savings; however, the extent to which it would achieve these savings depends on how effectively this proposal is implemented. USPS’s $3.1 billion net cost-savings estimate is primarily based on eliminating city- and rural-carrier work hours and costs through attrition, involuntary separations, or other strategies. USPS also estimated that 5-day delivery would result in minimal mail volume decline. However, stakeholders have raised a variety of concerns about USPS’s estimates, including,
First, USPS’s cost-savings estimate assumed that most of the Saturday workload transferred to weekdays would be absorbed through more efficient delivery operations. If certain city-carrier workload would not be absorbed, USPS estimated that up to $500 million in annual savings would not be realized.
Second, USPS may have understated the size of the potential mail volume loss due to questions about the methodology USPS used to develop its estimates of how 5-day delivery may affect mail volumes.
The extent to which USPS can achieve cost savings and mitigate volume and revenue loss depends on how well and how quickly it can realign its operations, workforce, and networks; maintain service quality; and communicate with stakeholders. USPS has spent considerable time and resources developing plans to facilitate this transition. Nevertheless, risks and uncertainties remain, such as how quickly it can realign its workforce through attrition; how effectively it can modify certain finance systems that cannot be changed until congressional approval for 5-day delivery is granted; and how mailers will respond to this change in service. Further, uncertainties remain as factors other than delivery frequency—e.g., price increases—can also affect mail volumes and revenues.
USPS’s proposal involves several factors that need to be considered. It would improve USPS’s financial condition by reducing costs, increasing efficiency, and better aligning its delivery operations with reduced mail volumes. However, it would also reduce service; put mail volumes and revenues at risk; eliminate jobs; and, by itself, be insufficient to solve USPS’s financial challenges. USPS’s role in providing universal postal services can affect all American households and businesses, so fundamental changes involve key public policy decisions for Congress. If Congress decides 5-day delivery is necessary, then Congress and USPS could factor the savings into deliberations about what package of actions should be taken to restore USPS’s financial viability. Conversely, if Congress maintains the mandate for 6-day delivery, Congress and USPS would need to find other ways to achieve equivalent financial savings, so that the package is sufficient to restore USPS’s financial viability. This would likely entail difficult decisions with broad implications for USPS’s infrastructure, workforce, and service. As GAO has reported, a package of actions by Congress and USPS is urgently needed to modernize USPS’s operations, networks, and workforce.
GAO: Ending Saturday Delivery Would Reduce Costs