• on Jan 10th, 2011 in Finances: Cost & Revenue | 6 comments
    Postage Meters are printing machines or systems for home or office that print postage directly onto mailpieces, or onto an approved label, for mailing. Customers can request refunds on meter mail for a variety of reasons. For example, customers can request refunds when meter mail postage is printed for the wrong denomination, mail is damaged before it is delivered to the Postal Service, or postage is printed but not mailed. For customers to receive a refund, they must take their unused meter mail postage along with the Postal Service Form 3533, (Application for Refund of Fees, Products and Withdrawal of Customer Accounts),to their local post office to request the refund. Once postal employees receive a refund request, they process the request manually by counting each piece of metered postage in question to verify the refund amount. The Postal Service charges a 10 percent fee (up to $350) for each refund processed. If the 10 percent fee is greater than $350, the Postal Service charges the customer a flat fee of $35 an hour to process the refund. Once the local postal employee verifies the refund amount, the post office either issues a no-fee money order (if the refund is less than $500) or forwards the supporting documentation to a disbursement center for refund payment. In Fiscal Year 2010, the Postal Service refunded customers more than $21 million for spoiled and unused meter mail postage. If all associated mailpieces were metered at the First-ClassTM 44-cent stamp rate that would mean postal employees manually counted 47.7 million mailpieces to verify meter mail refunds. The topic is hosted by the Office of Audit Field Financial – West team.
  • on Jul 7th, 2010 in Pricing & Rates | 13 comments
    The Postal Accountability and Enhancement Act of 2006 (PAEA) ushered in a new regulatory structure for the U.S. Postal Service. One key element was a price cap on market dominant products. (Most of the Postal Service's products are market dominant.) This means that price increases for market dominant products are capped by the rate of inflation as measured by the Consumer Price Index (CPI). PAEA, however, does allow the Postal Service to increase its prices beyond the CPI cap under “extraordinary and exceptional circumstances.” The Postal Service makes the exception by filing an ‘exigent’ rate case to the Postal Regulatory Commission (PRC). Before the Postal Service can increase prices, the PRC must agree with the ‘exigent’ request and find it to be reasonable, equitable, and necessary.

    This week the Postal Service proposed an exigent rate increase, an average of 5.6 percent across all classes of mail, effective January 2011. The direct mail industry has challenged the increase, threatening legal action and warning that the Postal Service will suffer large drops in mail volume. Much of the industry’s objection has centered on whether the Postal Service’s current circumstances are really “extraordinary and exceptional.” The Postal Service has based its case on the significant decline in mail volume and revenue, caused by the economic recession. In addition, because inflation has been low, the Postal Service has a small margin under the cap to raise prices. Some might argue that a price cap based on consumer items such as food, apparel, and electronics might not be the best metric for the Postal Service, because its costs are based on fuel, salaries, and health benefits. What do you think of the exigent price increase? Is it important to the continued viability of the Postal Service or should other revenue and cost reduction opportunities be explored first? This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).

  • on Jun 28th, 2010 in Products & Services | 50 comments
    For decades, the Postal Service offered vending machine service to supplement its retail operations. Vending machines meet the needs of customers who want to purchase stamps without waiting in line. While the lack of stamp vending machines has resulted in customer frustration and a surprising number of newspaper articles, the problems are particularly acute in economically depressed and more urban areas. Although Automated Postal Centers (APCs) provide many services including the sale of stamps and directly applied postage for First-Class letters, APCs require credit cards, which people in economically depressed areas often do not have. In addition, some customers find APCs to be intimidating to use. Finally, APCs sell only booklets of stamps or individual stamps in denominations of $1 or more, yet many disadvantaged customers may want to buy just one First-Class Mail stamp.

    So with an apparent need for simple vending machines, what should the Postal Service do? In the past, the Postal Service had problems with the legacy machines it owned. They were costly and difficult to maintain and operate. The answer may be to contract this activity out. Commercial vending machines, like those selling soda and chips, are generally not owned and operated by the organizations on whose property they are located. While Postal Service unions and management associations may have concerns, private operators might be very interested in acquiring stamp vending machine contracts for a percentage of gross sales (or similar) while taking sole responsibility for vending machine maintenance and support. In addition to the convenience vending machines would offer, they might also help window clerks operate more efficiently. Diverting low-value stamp sales from windows would increase revenue per labor hour and allow the Postal Service window clerks to focus on more important functions. With shorter lines and happier customers, the work environment of a window clerk would likely improve. This idea could be a win-win for all concerned. This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).

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