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Jul
11
2016
Report Number:
CP-AR-16-007
Report Type:
Audit Reports
Category: Cost & Pricing

Market Dominant Billing Determinants: Standard Mail

Background

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

Mailers use Standard Mail to send small parcels and printed matter such as flyers, circulars, advertisements, newsletters, bulletins, and catalogs. The Postal Service obtains data for Standard Mail billing determinant spreadsheets from data sources that include revenue, pieces, weight, and shape.

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 (FYs) 2014 and 2015 Standard Mail billing determinant spreadsheets and the completeness and accuracy of the data.

What the OIG Found

Opportunities exist to improve the accuracy and completeness of Standard Mail billing determinants. Specifically, FYs 2014 and 2015 spreadsheets contained incorrect calculations of Intelligent Mail barcode incentives, handling fees, and detached address labels. In FY 2014, Picture Permit mail was incorrectly omitted from the billing determinant spreadsheets.

Although these errors did not impact compliance with price cap requirements, future billing determinant calculation errors might.

The errors existed because the Postal Service used manual processes to create the spreadsheets and controls over the Standard Mail billing determinant practices were inadequate. The manual preparation and complexity of the Standard Mail billing determinant spreadsheets create a risk of data entry errors.

The Postal Service refiled FY 2015 Standard Mail billing determinants to correct an error in Move Update fee calculations. The Postal Service also 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 higher level internal review process.

What the OIG Recommended

We recommended management consult with the Postal Regulatory Commission to determine whether the FY 2014 Standard Mail billing determinant spreadsheets should be refiled due to the identified errors. Also, we recommended management explore the cost-benefit of fully automating the process or further leveraging Microsoft Excel tools to prepare billing determinant spreadsheets. Lastly, we recommended management complete ongoing efforts to validate that all Standard Mail billing determinant spreadsheets are produced using documented and repeatable processes to minimize errors and include a higher level internal review.

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