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Audit Reports

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Aug
05
2016
Report Number:
CP-AR-16-009
Report Type:
Audit Reports
Category: Cost & Pricing

Market Dominant Billing Determinants: Package Services

Background

The U.S. Postal Service prepares billing determinant spreadsheets to report revenue, volume, and weight for the five market dominant classes of mail: Package Services, Standard Mail, First-Class Mail, Periodicals, and Special Services.

One type of billing determinant — Package Services — is composed of four products: Alaska Bypass Service, Bound Printed Matter Flats, Bound Printed Matter Parcels, and Media and Library Mail. The Postal Service obtains data for Package Services billing determinants primarily from data sources that include prices, revenue, pieces, mail weights, and mail shapes.

The Postal Accountability and Enhancement Act of 2006 requires the Postal Service to produce an Annual Compliance Report (ACR) within 90 days of the end of each fiscal year. The report analyzes cost, revenue, pricing, and quality of service for all products.

The Postal Service files billing determinant spreadsheets to support the ACR. Management also uses billing determinant spreadsheets to help make decisions regarding price adjustments and to ensure these adjustments do not exceed price caps for each market dominant class of mail.

Our objective was to assess the procedures used to prepare fiscal years (FY) 2014 and 2015 Package Services billing determinant spreadsheets and the accuracy and completeness of the data.

What the OIG Found

Opportunities exist to improve the accuracy of Package Services billing determinant data calculations; however, we found no issues with the completeness of the data.

FYs 2014 and 2015 Bound Printed Matter Parcels spreadsheets contained incorrect revenue totals, because the data was not correctly imported.

These errors existed because the Postal Service used manual processes to create the spreadsheets, and controls over the Package Services billing determinant practices were inadequate.

FYs 2014 and 2015 Alaska Bypass billing determinant spreadsheets were submitted to the Postal Regulatory Commission using FYs 2012 and 2013 revenue, pieces, and weight data. This data was used because the Postal Service could not obtain more current data in time to prepare the spreadsheets.

The manual preparation and complexity of the Package Services billing determinant spreadsheets create a risk of data entry errors. Although these errors did not impact compliance with price cap requirements, future billing determinant errors might. Additionally, without accurate billing determinant spreadsheets, Postal Service management could make business decisions based on inaccurate information.

The Postal Service began enhancing internal controls over billing determinant spreadsheets by establishing an informal review and documenting the process for preparing them. The process document was in draft form at the time of our audit; however, the document could be improved by including a standard template, version control, and a higher level internal review process.

What the OIG Recommended

We recommended management consult with the Postal Regulatory Commission to determine if the FYs 2014 and 2015 Package Services billing determinants should be refiled due to the identified errors. Also, we recommended management explore the cost-benefit of fully automating the process or using Microsoft Excel tools to prepare billing determinant spreadsheets. Lastly, we recommended management finish validating that all Package Services billing determinant spreadsheets are produced using documented and repeatable processes to minimize errors and include a higher level internal review.