Objective

The Postal Accountability and Enhancement Act of 2006 requires that each class of mail or type of mail service covers their direct and indirect costs. Over the past 10 years, several U.S. Postal Service market dominant products continuously failed to cover their attributable costs. Currently there are six market dominant products that are not covering their direct and indirect costs (underwater products). In fiscal year (FY) 2019, total loss from these underwater products was about $1.6 billion.

Further, some market dominant mail products have had notable declines in cost coverage over the last 10 years. Unlike competitive products, market dominant product price increases are restricted to the Consumer Price Index, with a price cap applied to each mail class.

Our objective was to evaluate opportunities to reduce mail product costs. This audit was initiated to review cost reduction initiatives specific to underwater products; however, the issues we identified impacted more than just underwater products.

Our audit was in the fieldwork stage when the President of the United States issued the national emergency declaration concerning the novel coronavirus disease outbreak (COVID19) on March 13, 2020. The results of this audit do not reflect any process and/or operational changes that may have occurred as a result of the pandemic. We understand COVID-19 may have caused further decline in cost coverage for some mail products; however, it is too early to determine the full impact of this situation.

Findings

Opportunities exist for the Postal Service to reduce costs for mail products. Specifically, the Postal Service needs to address several mail preparation issues and enhance reporting and tracking of mail irregularities.

We identified several mail preparation issues related to bundle strapping, the use of sacks, shrink-wrap, and paper quality that increased mail product costs. These issues caused increased bundle breakage which resulted in manual mail processing and increased costs for mail products. We estimated that for FY 2018 – FY 2019, the Postal Service incurred about $48 million annually in additional costs to process broken bundles.

We found that personnel did not regularly record or communicate mail preparation and quality issues to mailers and within the Postal Service to ensure they were corrected, charged back to the mailer or addressed with updated mail preparation guidelines. Scans of mail irregularities were not always captured and complete. Further, scanners were not readily accessible to record commonly identified irregularities and report them for corrective action.

We observed clerks not reporting mail deemed non-machinable into the mail irregularity reporting system because the mail was technically prepared in accordance with current Postal Service guidance. Had the information been reported, management could have reviewed these irregularities and updated mail preparation requirements as necessary.

Finally, we saw loose bundle straps being replaced to avoid having to manually process broken bundles. However, Postal Service personnel did not report the re-strapped bundles as a mail irregularity because current policy does not require reporting of re-strapped bundles.

There are several Postal Service groups that develop, implement, and monitor holistic cost reduction strategies and communicate with mailers. However, there is no centralized group focused on developing product-specific cost reduction initiatives or communicating issues related to mail preparation irregularities. Cost coverage for some mail products will likely continue to decline if there is no dedicated group focused on addressing product-specific costs. Minimally, a centralized group specifically focused on reducing costs for underwater market dominant products is essential for improving cost coverage.

Recommendations

We recommended management:

  • Create a dedicated group to establish metrics, analyze cost trends, and track mail irregularity reports to implement cost reduction initiatives; recommend updates to mail preparation guidelines; and communicate mail irregularities to mailers, as appropriate, particularly for those products significantly struggling to cover their costs.
  • Update mail preparation guidelines to set appropriate mail preparation standards that align with automation to reduce costs associated with bundle breakage and manual processing of machinable mail.
  • Develop processes to ensure mail irregularities are recorded in the facilities, scanners are placed at key locations where mail irregularities are identified, and mail irregularity reports are distributed to Postal Service personnel and mailers, as appropriate.

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Comments (18)

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  • anon

    The problems with the PO predate this president and this PMG. I have been watching it rot from within for at least the last 10 of my 20 years as a carrier. Our first responsibility is suppose to be to the integrity of the mail and the service of our customers, unfortunately it has been reduced to a hyper focus on target numbers that keep postmasters and plant managers in the good graces of their handlers. Numbers often made of fudge at the insistence of managers not wishing to be yelled at. Hard to be proud to be a Postal carrier these days. I suggest that a PMG from outside the PO may not be so horrible. Fresh eyes and business acumen may be able to fix a lot of what is currently broken. Our Logistics have been a hot mess for a while now, I've read that is one of DeJoys specialties.

    Sep 06, 2020
  • anon

    Residential and commercial mail delivery should be cut to 3 days a week; anyone can pay more to have extra delivery 6 days a week, or rent a USPS P.O. box For example, A homeowner will have mail delivery either Mon, Wed, Fri, or Tues, Thurs, Sat. The net effect should be a reduction in delivery hous and delivery personnel of 50 %, without a noticeable degradation of service for almost all locations. Any business, such as a law office, requiring daily service either continue using private couriers as they currently do, or pay directly and fully for higher levels of convience.

    Aug 25, 2020
  • anon

    I have been voicing my opinion for years on this subject; reduce residential mail delivery to 3 days/wk. Enormous labor savings could be achieved, even allowing for labor reductions through attrition rather than layoffs. Retained postal carriers could handle two routes each, one on MWF, the other route on TTS. We are subsidizing the USPS to deliver enormous amounts of "junk" mail at very low postage rates. An increase would seem appropriate for this class of mail. Finally, free supplies have got to be a huge expense on the USPS. Mailing containers and envelopes are available for the public to take as many items as they want. I know for a fact that many containers are mis-used for other purposes.

    Aug 21, 2020
  • anon

    what does it cost for the US post office to print and mail "USA PHILATELIC" catalog?

    Aug 21, 2020
  • anon

    Do not cut back on services! Balance your budget by raising the bulk mail rate for catalogers and other direct marketers. Raise the rate charged Amazon for processing their packages.

    Aug 15, 2020
  • anon

    The news media is reporting that mail sorting machines and blue mailboxes are being removed prior to the election. I am sure there is a perfectly logical explanation for this and I would appreciate your getting it out to the public. This way against our President needs to stop.

    Aug 15, 2020
  • anon

    I understand the reason for the postal decline in being profitable and it is a result of the 2006 bill signed by George Bush to fund medical for employees for 75 years, thus this diminishes the profits. But, with the added cuts in services and products, this will cause a delay in mail delivery and cause low employee moral. I am a consumer of the Postal Service and I am adamant about receiving my mail in a timely manner and so far, there is no interruption, but once it starts, I will consider filing a lawsuit against the US Postal Service. When something is not broken, it doesn't need fixing.

    Aug 14, 2020
  • anon

    If the PMG is auditing the PO procedures and finding areas to improve on, wouldn't it be more cost worthy to allot the money to improve on any irregularities with a reasonable time limit to fix the problems rather than closing down PO operations and procedures, (slowing down the mail, leaving the mail behind, no overtime, and closing offices) and DEFUNDING THE POST OFFICE. Seems this is taking us Backwards. Despite what the President would like us to hear, the US Government is responsible to keep the PO operating. Not tear it down.

    Aug 14, 2020
  • anon

    Great recommendation, too bad the new Postmaster General isn’t following them with his “cost cutting measures.” In fact, he’s destroying our democracy.

    Aug 14, 2020
  • anon

    This memo in in regards to the slow down of mail as of lately. To start, to file a complaint it is very difficult to find the proper page on your website, therefore this is the most logical. As I understand it and have experienced it, the mail has slowed down. With this mandate from above, how is the general public supposed to deal with bills, medicine by mail, late charges, etc., because of a slow down and a bill has not arrived on time etc. I have used USPS all of my life and have never had to wait this long to receive mail. Also, if this is due to the upcoming election, shame on you! Please inform the public about what to expect and alternatives to the USPS which was always dependable and efficient prior to this debacle.

    Aug 05, 2020
  • anon

    reply I to disagree strongly with the new Inspector General's new rules / policies to reduce costs--especially as a result of political tactics to impact our November election. Our mail in Fort white FL is consistently running later and later in the day. It is 12:30 AM and we still haven't received our mail today. This is totally inappropriate and BAD politics-- and it is bad for USPS in general.

    Aug 05, 2020
  • anon

    do NOT cut back any portion of service. Now is not the time unless you ARE trying to cause problems with mail in voting. You aren't doing that are you?????? Now is the time to approve overtime and increase hours. Or, is the main stream media right - that DeJoy is a Trump lacky. How will history remember you? Do what you know is the fair and right thing to do.

    Aug 04, 2020
  • anon

    A couple of the issues I see especially in our district is that offices are usually short staffed and so corners are cut. This would be a big reason these items aren’t reported.

    Aug 04, 2020
  • anon

    Magazine bundle straps break frequently going down the LMS feed system for the APBS. A lot of the time it’s from operators overfilling the feed system so they can walk away and take a break but sometimes it’s just unavoidable. It’s the same with the shrink wrapping around them. We could use a dedicated feed system for bundles that is gentler on them.

    Aug 04, 2020
  • anon

    I’m a carrier, and far too often we receive letter mail to case that came “presorted first class” or “presorted standard”, that could not be properly machined, therefore we have to spend time (money) to case for delivery. There have been days this adds 20-40 minutes to office time. It also slows down street time because excessive manual letters are harder to deliver, especially when they’re postcard size mail pieces.

    Aug 04, 2020
  • anon

    Every single one of my packages has had over two week delay. Things i would normally get within a week or less... have just vanished into "Your package will arrive later than expected, but is still on its way. It is currently in transit to the next facility." I have a package from early July that just vanished and had to file a search claim. Nice job inspector general. The post office is NOT A BUSINESS! it is a service. I understand you want to ruin the mail in voting its extremely obvious...

    Aug 04, 2020
  • anon

    I disagree strongly with the new Inspector General's new rules / policies to reduce costs--especially as a result of political tactics to impact our November election. Our mail in Louisville, KY is consistently running later and later in the day. It is 6:30 PM and we still haven't received our mail today. This is totally inappropriate and BAD politics-- and it is bad for USPS in general.

    Aug 03, 2020
  • anon

    You all really are trying to kill the Post Office and hurt everyone. In business with high fixed costs sometimes you only need to cover variable costs. Didn't you bozos learn this in business school like I did? I can only imagine your managerial accounting and how you put costs on what product especially the indirect expenses. Right now I am seeing the postal service die. We need competition and we need the Internet business model, but if you kill the USPS you raise prices for all because only USPS has kept the other two from raising prices even further. Yes there need to be changes but a Demings approach would be best. The examples you mentioned are idiotical. America needs a Post Office subsidized by the government for the benefit of all. Republican Ideology is BS, getting the job means more. DON'T MESS WITH MY POST OFFICE, IT HELPS PAY MY BILLS WITH MY EBAY BUSINESS!

    Aug 03, 2020