Background

As part of its $40 billion investment under the Delivering for America (DFA) plan, the U.S. Postal Service is transforming its infrastructure, including consolidating local delivery and sorting operations into centrally located sorting and delivery centers (S&DC). To determine if relocating operations to S&DCs is feasible and financially sound, the Postal Service conducts financial assessments. As such, it is crucial for the Postal Service to use reliable and accurate investment planning information to execute its network modernization strategies and support long-term financial stability.

What We Did

Our objective was to determine if the Postal Service assessed route consolidation accurately and monitored associated costs at the S&DCs. For this audit, we reviewed route and investment data at 90 of the 101 S&DCs active during our evaluation.

What We Found

We found that the Postal Service’s assessment of route consolidations and monitoring of associated costs at the S&DCs could be improved. Specifically, 62 S&DCs (69 percent) underwent route adjustments, resulting in 450 total changes — about 5 percent of the estimated 8,992 consolidated routes. These included a net increase of 290 routes that were not accounted for in the original investment calculations. This occurred because management did not account for a growth factor in its estimates nor perform route inspections as part of its annual review prior to financial assessment and consolidation. In addition, the Postal Service did not always capture, reconcile, and report expenditures throughout the S&DC project lifecycle, nor update investment calculations when there were deviations from initial project plans. This occurred because it did not require sufficient oversight of route delivery operations’ financial performance. Unreliable estimates increase the risk of mismanagement and hinder oversight, decreasing the ability to evaluate the effectiveness of the Postal Service’s major investments in the DFA plan. As a result of adding 290 delivery routes, we estimated that the Postal Service incurred an additional $18,971,046 in delivery labor expenses. Incorporating the practices identified will be critical as the Postal Service anticipates activating an additional 251 S&DCs by calendar year 2030.

Recommendations and Management’s Comments

We made three recommendations to address the issues identified, and Postal Service management disagreed with all. We will pursue the disagreed recommendations through the audit resolution process. Postal Service management’s comments and our evaluation are at the end of each finding and recommendation.