Postal Service Product Costing Methodologies
BACKGROUND:
The U.S. Postal Service is an independent agency, expected to cover its costs through revenue generation. Current Postal Service accounting systems, however, do not provide sufficient information to assign costs to specific mail products and services. Therefore, various manual sampling, statistical systems, and special studies have been used to estimate and assign costs. These costs are presented in the annual Cost and Revenue Analysis report. In 2010, the total budget for the Revenue Reporting and Cost Analysis group was $102 million, which includes manual data collection, statistical sampling, production of the Cost and Revenue Analysis report, and other functions.
The Postal Service’s business environment has changed drastically over the past several decades with the rapid growth of digital technologies, such as electronic communication platforms and Intelligent Mail barcodes. The methods for Postal Service costing have evolved over the last 40 years to address new products and services and to meet changing guidelines.
This report is the first of two reviews requested by the Postal Service chief financial officer and executive vice president. The objective of our review was to describe the background and history of the Postal Service’s current costing methodologies and identify concerns with those methodologies. The second review will address alternatives to the current costing methodologies and systems.
WHAT THE OIG FOUND:
Postal Service stakeholders continue to discuss whether the Postal Service’s current costing methodologies are viable in today’s environment, given the changes in law, trends toward digital technology, and high costs of manual sampling required with current costing methodologies. The following areas appear to need improvement: (1) cost of collecting data from manual sampling, statistical systems, and special studies; (2) availability of timely cost reporting data; and (3) high costs that cannot be directly attributable to a product. In response to these concerns, Postal Service officials recognize the need to explore other options and requested a second report in this series to benchmark costing methodologies of foreign posts.
WHAT THE OIG RECOMMENDED:
We did not make any recommendations in this report.