Uncompensated and Undercompensated Services
Objective
Our objective was to determine whether the Postal Service is appropriately compensated for selected government and business services.
The mission of the Postal Service is to provide the American public with trusted, affordable, and universal mail service. Through legislative enactments that codify service levels, the Postal Service must provide mail service to every U.S. address six days a week. The Postal Service also provides accessible retail locations throughout the U.S. and offers a variety of services and products to its customers. The Postal Service relies on the sale of postage, products, and services to fund its operations. However, these operations come at a high cost; over the last 20 years, the Postal Service has only had a positive net income four times.
While its financial situation has been described as unsustainable, the services the Postal Service provides are of tremendous value to the public and businesses. We identified 9 critical services the Postal Service provides beyond general mail processing and delivery for which it is either uncompensated or undercompensated. These services generally benefit two groups: the government or business customers.
Findings
Opportunities exist to address uncompensated or undercompensated services provided by the Postal Service. The services we studied resulted in losses of about $743.3 million annually.
Government Services
The Postal Service coordinates with multiple agencies and Congress to obtain funding for services outside of regular mail delivery, with limited success. Specifically, the Postal Service provides uncompensated or undercompensated services to include: mail delivery to the Freely Associated States, the Alaska Bypass program, government mailings, repayment under the Revenue Forgone Reform Act of 1993, and its obligation for providing universal service. In some of these instances, the Postal Service does not have control over pricing or compensation, and – in some cases – must work through a secondary agency who is not the beneficiary of the service to receive funding. In other instances, the Postal Service either provided services without a formal payment agreement or decided to not request compensation. Under payment associated with government services resulted in an annual revenue loss of $636.4 million.
Business Services
The Postal Service provides multiple services to business customers for which it is not fully compensated. These services include the specialized and customized packaging programs, the provision of mail transport equipment to mailers, expedited processing of political Marketing Mail, and Sunday delivery. We found under compensation associated with business service resulted in an annual revenue loss of $106.9 million in unsupported questioned costs.
Other Matters
The Postal Service provides a number of products that have their costs covered by the sale price, including free standard packaging supplies and insurance on packages. The Postal Service has not conducted studies on the value of these offerings to customers or their impact on market share or product sales. The Postal Service may be able to reduce cost, reduce its number of offerings to better align with customer expectations, or make additional profit on these offerings.
Recommendations
We recommended management:
- Explore strategies for receiving amounts owed or appropriated for government services and providing the Postal Service reimbursement for these services going forward.
- Evaluate opportunities to adjust provisions involving business customers to ensure only services paid for are provided.