• on Jan 31st, 2011 in Finances: Cost & Revenue | 75 comments
    In 1916, the Federal Employees’ Compensation Act (FECA) was enacted. FECA provides medical, compensation, death, and other benefits, such as vocational rehabilitation, and nursing services to federal employees who sustain injuries, including occupational diseases, as a result of their employment. All Postal Service employees are covered by FECA. The Department of Labor (DOL) administers FECA and makes all decisions regarding the eligibility of injured workers’ to receive workers’ compensation benefits. DOL provides direct compensation to medical providers, claimants, and beneficiaries. The Postal Service reimburses DOL for all workers’ compensation claims in addition to paying an administrative fee. In fiscal year 2009, the Postal Service workers’ compensation expense was approximately $2.2 billion, an 81 percent increase from $1.2 billion in FY 2008. These costs include $55 million in DOL administrative fees for FY 2009. About 72 percent ($718 million) was a non-cash charge related to changes in the estimated discount and inflation rates used to calculate the liability for future payments. At the end of FY 2009, the Postal Service estimated the total liability for future workers’ compensation cost was over $10 billion. One of the contributing factors to the high cost of workers’ compensation payments is that FECA does not mandate a cut-off age for workers’ compensation benefits. Thus, injured workers can continue to receive workers’ compensation benefits well past the legal retirement age of 65, and in some cases employees over the age of 90 are still receiving workers’ compensation benefits. Fraudulent workers’ compensation claims also result in higher overall costs. To combat workers’ compensation fraud the OIG launched its crime prevention and awareness campaign in September 2009 and a joint year-long initiative with the U.S. Postal Inspection Service in February 2010. The successful investigative efforts saved the Postal Service more than $400 million for fiscal years 2009 and 2010 combined. What can the Postal Service do to reduce workers’ compensation costs? This topic is hosted by the OIG’s Human Resources and Security Audit Team.
  • on Jan 24th, 2011 in Mail Processing & Transportation | 8 comments
    The Postal Service established International Service Centers (ISCs) in 1996 to become more competitive in the international mail market. ISCs distribute and dispatch both incoming and outgoing international mail. The ISC network has facilities located in five major cities: New York, Miami, Chicago, Los Angeles, and San Francisco. The Postal Service hoped that ISCs would improve service and provide the structure needed to support new products and increase revenue. However, International Mail volume has not increased as projected by the ISC marketing and sales plan. During the period FY 2007 to FY 2010, International mail volume declined by approximately 29 percent (from 858 million to 609 million mailpieces). Although the Postal Service reduced expenses by nearly $6 billion in fiscal year (FY) 2009 and by almost $789 million during the first three quarters of FY 2010, the reductions have not been sufficient to offset declines in mail volume revenue. Consequently, the Postal Service is reviewing its mail processing and retail networks to remove duplication and make them more efficient to reflect current mail volumes. In light of international mail volume declines and the Postal Service’s current financial condition, does the Postal Service still need a separate network to handle international mail? Are there other options the Postal Service could pursue to increase International mail volumes and revenue? Please share your comment(s) on how to make the ISC network more profitable, effective, efficient and economical. This topic is hosted by the OIG’s Network Processing Audit Team.
  • on Jan 3rd, 2011 in OIG | 15 comments
    It’s that time of year again. Those of us helping on the Office of Inspector General blog have come up with a list of the top 10 postal stories for 2010. Tell us about any stories we missed and add whatever comments you think appropriate. In particular, we would like to get your input on the top story, so take a minute and vote in the poll below. 10. OSHA Fines the Postal Service – At plants across the country, the Postal Service receives sizeable fines for electrical hazards. 9. e-Tipping Point – A flurry of activity in 2010 bolsters the notion that the Digital Revolution has trumped paper-based communications: Apple introduces its iPad tablet computer; all e-reader sales are up nearly 80 percent over last year; the Kindle becomes Amazon’s biggest seller and the company predicts e-books will surpass paper books within a year; Netflix announces that more customers watch streaming videos than DVDs. 8. Congress Takes Notice – Members from both houses of Congress – and both sides of the aisle – introduce legislation to fix the Postal Service’s overpayments to the federal government, which contributed significantly to the Postal Service’s massive net losses over the past few years. 7. America Wakes Up – Widespread mainstream media coverage on a number of postal issues, including 5-day delivery and the financial challenges plaguing the organization, spark a national interest in our postal system. 6. Reports Address Flawed Business Model – The Government Accountability Office confirms that the Postal Service’s business model is ”not viable.” The Postal Service issues its action plan to address declining mail volumes, changing communications habits and other systemic problems. 5. Stakeholders Debate 5-Day Delivery – The Postal Service’s plan to eliminate Saturday delivery generates heated debate, massive press coverage and congressional input. The Postal Regulatory Commission holds a series of public hearings on the topic. 4. PMG Potter Retires – After nearly 10 years as the postmaster general and 32 years with the Postal Service, Jack Potter called it a career and retired on Dec. 3. 3. Postal Service Suffers Largest Net Loss in History – The Postal Service ends FY 2010 with a net loss of $8.5 billion, the largest net loss in its history. Still, it manages to pay all of its bills and remain solvent at the start of FY 2011. 2. OIG Finds $75 Billion Overpayment – A report by the Office of Inspector General finds that the Postal Service has overpaid its Civil Service Retirement System obligations by a staggering $75 billion. Mailing industry unites in its support of a congressional fix. 1. PRC Denies Exigent Rate Request – The Postal Service invokes the exigency clause in the Postal Accountability and Enhancement Act and asks for a price increase above the inflation-based price cap. Mailers unite in their opposition to the request, which the Postal Regulatory Commission officially denies in September. The Postal Service appeals the decision to federal appeals court.

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