Audit Reports

Background

Billing determinants are spreadsheets that U.S. Postal Service employees manually produce to report volume and revenue for each price in the five market dominant classes of mail, including First-Class Mail. The Postal Service primarily obtains this data from its published price list and the Revenue, Pieces, and Weight codes.

The Postal Accountability and Enhancement Act requires the Postal Service to produce an Annual Compliance Report within 90 days of the end of each fiscal year. The report analyzes costs, revenue, pricing, and quality of service for all products. The Postal Service uses billing determinants to ensure price adjustments do not exceed the price cap for each market dominant class of mail. Given the manual preparation and complexity of the spreadsheets, there is a risk of data entry errors. Our objective was to assess the completeness and accuracy of the data used in market dominant billing determinants for First-Class Mail.

What The OIG Found

We did not find any issues with the completeness of billing determinants but opportunities exist to improve the accuracy of the Postal Service’s billing determinant calculations. Specifically, there were errors in fiscal year (FY) 2013 and FY 2014 First-Class Mail® billing determinants resulting from inconsistent accounting of mail volume due to reclassifications and calculations we could not verify. As a result, the Postal Service incorrectly calculated a combined $156.8 million in revenue for FYs 2013 and 2014. Although these errors did not impact compliance with 2015 price cap requirements, there is a risk that future billing determinant calculation errors could.

Overall, these errors occurred because the Postal Service did not establish strong controls over the billing determinant calculation process. Specifically, the Postal Service did not have documented repeatable processes to guide in the preparation of billing determinant spreadsheets and did not conduct quality reviews of billing determinants prior to publication. Recently, the vice president, Pricing, stated that Finance employees have begun reviewing billing determinant calculations for accuracy.

What The OIG Recommended

We recommended the vice president, Pricing, file corrected FY 2013 and FY 2014 billing determinants with the Postal Regulatory Commission; develop procedures to ensure billing determinants are produced using documented, repeatable processes; and establish a quality review process. The current process, with the amount of judgement required and the tight timeframes, would be difficult to automate; however, as business processes change, opportunities for automation may increase and should be pursued.