on Jul 12th, 2010
in Finances: Cost & Revenue
| 5 comments
The Sarbanes-Oxley (SOX) Act of 2002 grew out of large corporate financial scandals. SOX aims to improve corporate governance and enhance the accuracy of financial reporting. While compliance is required by the Postal Act of 2006, the Postal Service believes it is a great way to make its business stronger. SOX helps target areas of improvement and strengthen financial accounting, making the Postal Service a better business. As a result, the Postal Service designed and implemented new business mail acceptance procedures and requirements in an effort to comply with SOX. The initiative includes new check-in, verification, recording, placarding, and induction procedures for processing business mail; daily certifications of SOX compliance by business mail entry units; an updated mail acceptance handbook; and enhanced customer use of the PostalOne! system. Although the Postal Service hopes to strengthen its financial integrity and reporting accountability and reinforce the public’s trust in the Postal Service, there is widespread confusion at postal facilities about SOX compliance and how it changes (or does not change) mail acceptance and verification policies. Mailers and service providers often argue that postal facilities are misinterpreting SOX compliance policies, describing problems such held-up mailings, inconsistent acceptance processes, insufficient education and training, and inconsistent approvals from postal personnel. What do you think about the Postal Service’s new business mail acceptance procedures? We’d like to hear from you. We are also currently conducting an audit evaluating whether the Postal Service is effectively implementing the requirements of SOX. Click here for more information or to provide comments on the audit. This topic is hosted by the Office of Audit Field Financial – Central 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 Jul 5th, 2010
| 37 comments
One area identified in the Postal Service’s action for the future is to increase workforce flexibility. A larger, part-time work force would give postal management the flexibility to increase or decrease employees depending on mail volume. Although this change is not as drastic as closing postal facilities or switching to 5-day delivery, it raises questions about what a part-time postal workforce would look like. The Postal Service has fewer part-time employees than any other international postal operation. Currently only 13 percent of its workforce is part-time. Meanwhile, Deutsche Post employs a 40 percent part-time staff, while the United Kingdom’s Royal Mail employs 22 percent. Local competitors also have a higher percentage of part-time employees. For example, UPS employs a 53 percent part-time workforce and FedEx remains around 40 percent. Generally speaking, the Postal Service is behind the average American private sector firm, which employs a 30 percent part-time labor workforce.
Is there a downside to employing a larger part-time workforce? Critics argue that part-time employees are less loyal to their employers, and as a result, they increase ”quasi-fixed” costs associated with recruiting, training, and oversight. However, recent findings call these assertions into question. A study in the Annual Review of Sociology found that part-time employees are just as likely as full-time employees to view their jobs as a “central life activity” and to be “equally committed to their organizations.” Moreover, the study also mentioned that employees’ demand for part-time jobs has increased since the 1980s, as the American workforce has increasingly desired job flexibility. Increasing the number of part-time postal employees would make the Postal Service more flexible in the face of declining mail volumes, seasonal fluctuations, and market volatility. For more information visit Newsweek story on part time workers. UPS info blog. A look at FedEx labor unrest. What do you think about the Postal Service’s idea to increase its part-time workforce? This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).