on Sep 19th, 2011
in Finances: Cost & Revenue
| 12 comments
Let’s take a simplistic view of the Postal Service by dividing it into two groups: Operations and Finance. Operations’ main concern is to make sure mail is delivered and other services are rendered to satisfy customers’ needs. On the other hand, Finance’s responsibility is to ensure that all the information stemming from the Operations side is captured for billing/payment and financial statement reporting purposes. After all, the Postal Service needs to be paid for their good work, doesn’t it? Based on audits of prior years’ financial statements, it seems Operations personnel were not always aware what financial impact their action or inaction had on the Postal Service when it came to the big picture. For example, Operations personnel might process the mail and deliver it to the customers’ satisfaction. However, internal supporting documentation and data might not have been updated in a timely manner. When personnel do not process documentation for services rendered according to Postal Service policy, the Postal Service risks losing money. Over the years, management has taken steps to provide Operations and Finance personnel with the bigger picture. They have advised the Operations side of their impact on the Postal Service’s financials and the repercussions of not completing processes correctly. The question is do you believe this endeavor has been successful? Let us know what you think in the comments section below. This blog is hosted by the OIG's Financial Reporting Directorate.
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 Feb 14th, 2011
in Finances: Cost & Revenue
| 12 comments
[dropcap style="font-size: 60px; color: #9b9b9b;"] T [/dropcap]he Postal Accountability and Enhancement Act of 2006 requires the Postal Service to comply with specific sections of the Sarbanes Oxley Act of 2002 (SOX). Among other financial reporting requirements, SOX mandates internal control compliance – making sure that financial transactions are reasonably and fairly presented in the accounting records - and places the responsibility on postal management. A recent district-wide audit of 13 postal retail units found 80 internal control compliance issues related to stamp accountabilities, disbursements, and financial accounting and reporting. The cause for most of these issues was attributed to a lack of adequate training, the insufficient financial background of some unit managers, why they were placed in the position without receiving the necessary financial training, and an absence of oversight by the managers and supervisors responsible for implementing financial internal controls. Why do these managers lack the proper training and background to adequately supervise financial operations? One possibility is the amount of management turnover at retail units. The management turnover rate was high at some retail sites visited during the audit. For example, one retail unit had three different acting station managers in the last 18 months. Often, new or acting managers and supervisors come from different segments of the Postal Service and are placed in positions which require them to supervise financial operations. Is there a benefit for bringing in someone from a different segment to oversee the operations of a retail unit? How should they be trained? Please give your comments. The topic is hosted by the Office of Audit Field Financial – West team.
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