September 23, 2013

The U.S. Postal Service uses several best practices in determining the costs of its products, but it needs to reduce its investment in the system and improve the usefulness of the resulting data. The Postal Service’s product-costing system, which was implemented after the passage of the Postal Reorganization Act of 1970, is designed to meet the statutory reporting requirements that each class of mail or mail product bears its own costs. The system also informs management decisions. The Postal Service spends about $100 million annually to develop the costing data reported to the Postal Regulatory Commission.

At the request of Postal Service executives, we reviewed policies and procedures relating to the Postal Service’s costing environment. We also studied the cost accounting procedures of foreign postal organizations to identify potential alternatives or enhancements to the existing costing approach that could be used to better inform business decisions and competitive pricing.

To enhance its current product-costing system, we suggested the Postal Service move from expensive manual data collection systems, generate more granular and timely costing information, and ensure better coordination among groups regarding data usage. Based on recommendations we provided in prior audit reports,1, 2, 3, 4 the Postal Service has taken some steps to explore additional ways to obtain and use automated data; however, additional opportunities exist for the Postal Service to use automated data generated by its systems and processing equipment, especially with the increased use of intelligent mail barcoding.

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In-Office Cost System Inputs into the Cost and Revenue Analysis Report (CRR-AR-12-004)

Revenue, Pieces, and Weight Inputs into the Cost and Revenue Analysis Report (CRR-AR-12-003)

3Transportation Cost System Inputs into the Cost and Revenue Analysis Report (CRR-AR-11-004)

4Cost and Revenue Analysis Reporting Model (CRR-AR-10-003)