Procedures for Calculating Workshare Discounts for Letters
Background
The U.S. Postal Service offers reduced postage rates (i.e., worksharing rates) to mailers for handling, pre-applying barcodes, pre-sorting, and transporting mail. Worksharing rates are also referred to as workshare discounts because postage rates are reduced based on costs the Postal Service is estimated to avoid from worksharing activities the mailing industry performs, which enables the Postal Service to increase its operational efficiency. In fiscal year (FY) 2022, 87 percent of domestic market dominant mail was workshared. Ninety-seven percent of domestic market dominant workshared mail consisted of either First-Class Mail or Marketing Mail. Domestic market dominant workshared First-Class Mail and Marketing Mail consisted primarily of letters. The Postal Service increased the percentage of workshare discounts that align with avoided costs from 41 percent in FY 2018 to 91 percent in FY 2022. Worksharing is dependent on the Postal Service, Postal Regulatory Commission, and mailing industry performing several key activities; and the procedures for the workshare discount calculation process being current and sufficiently detailed for effective implementation by responsible personnel.
What We Did
We performed this audit as part of our mandate under the Postal Accountability and Enhancement Act to regularly audit Postal Service data collection systems and procedures used to collect information to prepare reports. Our objective was to assess the Postal Service’s workshare discount calculation process for select mail products to ensure that the discounts align with avoided costs. Specifically, we focused on the Postal Service’s internal controls and data inputs related to the workshare discount calculation process for letters.
What We Found
Opportunities exist for the Postal Service to establish detailed procedures documenting its responsibilities for calculating letters’ avoided costs and setting workshare discounts. In addition, the Postal Service can periodically review non-recurring data inputs for letter cost models to help ensure all inputs reflect current operations.
Recommendations
We recommended management develop and implement (1) detailed procedures for calculating avoided costs and setting workshare discounts of First-Class Mail and Marketing Mail letters; and (2) a process to regularly review non-recurring data inputs for First-Class Mail and Marketing Mail letter cost models to formally document whether they need to be updated.