on Jul 25th, 2011
in Finances: Cost & Revenue
| 43 comments
The past few years have been tumultuous for the U.S. Postal Service. Mail volume has dropped 20 percent to 171 billion pieces from its peak in 2006, and over the last four years experienced unprecedented financial losses totaling $20 billion. In 2010 alone, the Postal Service experienced its largest 1-year net loss of $8.5 billion. Our Risk Analysis Research Center has published The Cost Structure of the Postal Service: Facts, Trends, and Policy Implications, which reviews the major components of the Postal Service’s 2010 cost structure and presents insights to the ongoing policy debate about the future of the Postal Service. Below are some of the paper’s key findings: 1.The mail business is labor intensive, and labor makes up 80 percent of Postal Service expenses. This means that in order to achieve real cost savings, the Postal Service has to cut labor costs. While ideally labor costs could be cut to match declines in volume, this is challenging because the Postal Service’s delivery network has significant fixed costs. 2.Since 1972, the total cost of benefits to the Postal Service has risen an astounding 448 percent above inflation, while the real amount spent on wages has declined by nearly 3 percent. This extraordinary increase in benefit costs is due to three factors: a general trend of higher benefit costs that has affected most U.S. companies, the gradual transfer of postal retiree benefit costs from the federal government to the Postal Service, and repeated overcharges for these retiree benefit costs. 3.Since 2000, cumulative unit costs for three of the four market dominant mail classes (Periodicals, Standard Mail, and Package Services) have far outpaced increases in the Consumer Price Index (CPI-U). 4.A continuing freeze in capital investment, while saving the Postal Service in the short term, may paradoxically lead to higher costs in the future. In particular, investing in rightsizing the physical network to meet decreasing demand is vital to the future viability of the Postal Service. We invite you to review the white paper and share your thoughts on reducing costs and the impact those cost reductions might have on the Postal Service here on our blog. This blog is hosted by the OIG’s Risk Analysis Research Center.
on Jul 18th, 2011
| 9 comments
Contract fraud is a big problem for the federal government and quite possibly for the U.S. Postal Service, which currently manages over 20,000 contracts worth $29 billion. Conservative business estimates project up to 5 percent of contracted dollars are lost to fraud, meaning $1.45 billion of Postal Service funds are potentially at risk. Detecting, stopping, and preventing fraud is a core mission of the Office of Inspector General (OIG) and we need your help. We’ll be using this blog to introduce some common fraud schemes and their warning signs. You don’t need special skills or a badge to fight contract fraud — just know the warning signs and alert the OIG when you see them. Scheme of the Week: False Claims or False Statements With false claims or false statements, a contractor knowingly submits a fraudulent invoice for payment or approval. This includes over-billing, certifying that a product or service meets specifications when it does not, and providing fraudulent documentation, as well as situations where a Postal Service employee knows a claim is false but processes or authorizes it anyway. In one case, an OIG investigation uncovered a phantom cleaning business used in a scheme to fraudulently bill the Postal Service for cleaning services never rendered. In another, a Highway Contract Route contractor submitted more than 337 false or fraudulent fuel use certifications, trying to get paid for unused fuel. The Postal Service recovered $970,000 through a settlement with the contractor and refused to pay an additional $284,000 in improper claims. What to watch for:
- Documents supporting supplier invoices are inadequate or obviously altered
- Invoiced quantities and prices differ from contract terms
- Delivered goods and services do not match invoices
- Quality of goods or services is poor
- Test or inspection documentation isn’t provided or is determined not to exist when requested
- Discrepancies exist between test results and inspection results
- Supplier repeatedly acknowledges errors when questioned about discrepancies in contract documentation
- Supplier provides a product or service that doesn’t conform to contract specifications with no variance or requested/approved change
on Jul 11th, 2011
in Strategy & Public Policy
| 17 comments
The American marketplace is experiencing constant changes in the ways that companies conduct business and communicate with customers. Like other businesses, the Postal Service must also innovate to stay relevant. The Office of Inspector General plans to examine innovation processes currently used by major U.S. corporations to learn about best practices/processes. The essence of innovation is to identify a problem and develop solutions. For example, Google and Facebook are successful because their websites meet needs of people to manage and organize vast amounts of information and social relationships available on the Internet. The Postal Service has enjoyed some success with innovative products. Its Priority Mail Flat Rate products have become popular, shipping 350 million boxes over the last 6 years, with revenue of $1.2 billion in fiscal year 2010. This product met the need to simplify the shipping process and was relevant to both consumers and business. What should the Postal Service do to identify business opportunities and customer needs in order to create solutions that lead to financial success and customer satisfaction? Also, what experience(s) have you had with Postal Service innovation? This topic is hosted by the OIG’s Planning and Strategic Studies Directorate.
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