• on Mar 17th, 2014 in OIG | 2 comments

    “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

    So said former Supreme Court Justice Louis Brandeis, who could be considered a forefather of Sunshine Week. No, not some Spring Break in Florida for government workers, but an annual initiative held the week of James Madison’s birthday to promote open and transparent government. The term “operating in the sunshine” means conducting business in a for-all-to-see way that enlightens and empowers people to play an active role in their government – one of the key elements of a democracy. Sunshine also serves to curb misdeeds or abuse.

    The sunshine concept took many years to evolve. It gained momentum in the 1960s and 1970s, when news reports of federal abuses and “enemies lists” prompted Congress to pass legislation to open up government to greater public view. The Freedom of Information Act (FOIA), Government in the Sunshine Act, and the Privacy Act were some of the products of a push for good government.

    Another sunshine initiative was the 1978 Inspector General Act, which created IGs in 12 of the largest federal agencies to detect and prevent fraud and misconduct in agency programs and to examine the efficiency and effectiveness of agency operations. The law has been amended over the years to increase the number of agencies with IGs to 73, including the Office of Inspector General for the Postal Service in 1996. Right off the bat, we took the concepts of openness and transparency to heart. Shortly after setting up the agency, we launched a website and started publishing reports online. In fact, we’ve posted so many reports on our website that you would have to comb through 143 pages of summaries just to find them all. (Fortunately, we have a search function that makes it easy to find what you want.)

    We created a webpage to notify stakeholders of audit projects before they start so we can gain your insights on those projects. We launched this very blog 5+ years ago to open a dialogue with you on issues affecting the Postal Service. Finally, we have fielded lots of FOIA requests, – formal, written requests for records maintained by the OIG. We handled 36 in FY 1998. Last year, that number topped 600 formal FOIA and Privacy Act requests; more than 4,500 total in our 18-year history.

    At a time when the future direction of the Postal Service is at stake, how government does business is of heightened public interest. (The Postal Service is considered part of the government.) And that is arguably at the root of the sunshine concept. It’s your government; you are entitled to know how it is carrying out its mission.

  • on Mar 10th, 2014 in Finances: Cost & Revenue | 4 comments

    Benjamins, dough, cabbage, coin, greenbacks. Most of us could rattle off a dozen or more slang words that mean money. But we might be unsure what certain financial terms -- operating income, liquidity -- mean. When you follow the U.S. Postal Service, this might put you at a disadvantage, especially when it’s quarterly financial statement time.

    Operating income measures earnings (revenues minus expenses) before interest and taxes. Liquidity is the amount of financial resources (cash, equity, assets, credit) that an organization can easily convert to cash for spending and investments. Postal officials often mention the Postal Service’s lack of liquidity. Chief Financial Officer Joe Corbett said in January that the Postal Service’s liquidity, at its highest point in the year, is only about $3 billion. This isn’t much cushion for a $65 billion entity. And the cushion shrinks at certain points in the year, such as in October, when the Postal Service makes its workers’ compensation payment to the Labor Department.

    UPS and FedEx, companies with revenues about $20 billion less than the Postal Service, have liquidity of about $12 billion and $14 billion respectively, he noted. But what does this mean exactly? Well, companies with strong liquidity positions, such as UPS and FedEx, have much greater access to capital than the Postal Service. They have more opportunity to invest, whether in capital projects or new businesses. The Postal Service’s weak cash position means it cannot invest in the infrastructure or innovation. It also has no margin for error. What happens if a catastrophe strikes in October right after the Postal Service has made its workers compensation payment?

    Finally, the Postal Service has no available cash to pay down its debt. It reached its statutory borrowing limit of $15 billion in FY 2012 and it has been unable to borrow from the Treasury Department for more than a year.

    The Postal Service says employees will get paid – this is not an issue. And it has enough cash on hand to pay suppliers. But it has had to forego needed investment in its infrastructure, such as facility maintenance and vehicle replacement. And as the Postal Service considers a new business model for the digital age, it has no available cash to invest in new opportunities. It has not had the funds to make its required prefunding payment to the retiree healthcare fund for the past few years. The postage price increase in late January should help its cash position, but it will not build the bigger cushion it needs.

    Share your thoughts on the Postal Service’s cash position. What is hurt most by the Postal Service’s lack of liquidity? Is it missing opportunities because of its cash shortage? If its liquidity position were to improve, what should be the Postal Service’s priorities (infrastructure investment, paying down debt, lowering postal rates, etc.)? 

  • on Mar 3rd, 2014 in Ideas Worth Exploring | 4 comments

    Canada Post shares a number of similarities with the U.S. Postal Service, including its founding by Benjamin Franklin in 1753 when both Canada and the 13 colonies were under British rule. Both posts are self-supporting, meaning they pay for their operations through the sale of postage and services. And Canada Post, like the Postal Service, has suffered volume losses the past few years.

    Here’s where things get different, though. Canada Post has adopted a radical plan to restore its financial health, featuring bold initiatives that might seem too politically difficult in the United States. Canada Post’s five-point plan is intended to streamline operations, cut costs, and return the corporation to fiscal self-sufficiency by 2019.

    The plan features:

    1. Ending to-the-door residential delivery over 5 years. Two-thirds of Canadian residents already are without to-the-door delivery, so, while it is a major change, perhaps it is not as disruptive as it would be in other countries.
    2. Upping the price of postage. Bought in bulk, stamps that now cost 63 cents (CAD) will be 83 cents. Bought singly, the same stamps will cost $1. The increase still needs approval from the regulator.
    3. Streamlining via franchise post offices. Franchise post offices are more convenient for customers and less costly to operate. There’s a moratorium, however, on closing existing rural post offices given their popularity among customers.
    4. Increasing efficiency. Consolidation and technology improvements, including faster sorting equipment and more fuel-efficient vehicles, should improve operations. No resulting changes are expected in the corporation’s fairly relaxed 2- to 4-day delivery standard for letter service, yet parcel delivery is expected to improve.
    5. Reducing labor costs. Along with the service cuts, Canada Post said it would eliminate 8,000 jobs, mostly through attrition.

    Canada’s plan has met with criticism from opposition political leaders, labor unions, and some citizens. But Canada Post defends the plan saying without major operational changes it will lose $1 billion a year starting in 2020. It also faces a $6.5 billion pension fund shortfall.

    What could the United States learn from the Canada Post plan? Are some of these initiatives worth trying in the United States? Or are they not the right approach for the U.S.? What cost-cutting and revenue-generating ideas should the Postal Service focus on? 

Pages