June 24, 2024
The U.S. Postal Service is not living up to its projected cost savings from its plan to overhaul the agency, according to a new audit, which found the 10-year initiative is no longer offering insight for measuring the success of the reforms.
USPS is bringing in more revenue than it anticipated when it first laid out its Delivering for America plan in 2021, though its costs have also accelerated in a way it did not project. That has led to overall losses of $950 million in fiscal 2022 and $6.5 billion in fiscal 2023, despite postal management predicting it would have broken even by now.
Postmaster General Louis DeJoy initially suggested his plan generate $160 billion through revenue improvements and cost savings that included new business, cost increases, changes to the delivery network and legislative overhauls. In a new report, the USPS inspector general faulted DeJoy’s team for failing to specify the cost savings associated with each initiative or providing updates on its efforts that detail how costs would be cut. The auditors encouraged postal management to provide updates on progress to Congress, mailers, its unions and the public, which it said could give those parties more confidence in DeJoy’s vision at a time when enthusiasm for his plan is waning.
“The DFA plan and its projections no longer provide a reasonable basis for comparisons to future years’ results, and we could not link current progress on initiatives back to the DFA plan projections,” the IG said.
Overall revenue is up $13 billion in fiscal years 2022 and 2023 compared to the Postal Service’s initial projections as the agency has continued its aggressive approach ot raising prices. USPS saw its regular mail volumes exceed its estimates by 12% in that time, which management and the IG attributed to the COVID-19 pandemic—and the subsequent economic recovery—driving out less mail than anticipated.
Despite that positive development, the mailing agency’s expenses increased by nearly $18 billion over the same period. Transportation costs were 28% and 21% more than USPS expected in the original DFA plan for fiscal years 2022 and 2023, respectively. Compensation and benefits cost USPS 5% and 11% more than it expected in those years, and payments for future retirement liabilities significantly outpaced what the agency anticipated. Inflation drove many of those cost increases, including labor contract-mandated cost-of-living adjustments.
In addition, mail volumes are now falling closer to management’s initial projections. Overall volume was down 9% in fiscal 2023 from the previous year.
USPS had predicted it would slash work hours by similar rates as volumes continued their decades-long slide, but the IG noted that has failed to take place. Hours were cut by only 2% in fiscal 2023, which the auditors said signaled a “reduction in work hours productivity.” While DeJoy has pledged to find efficiencies that reduce work hours and overtime costs, he has also promised to continue hiring across the agency and converting part-time staff to full-time, career employees.
“It is imperative that the Postal Service reduce its work hours in sync with volume declines, to save labor costs and ensure it is operating efficiently,” the IG said.
While USPS is in the midst of overhauling its delivery network, the auditors said the agency has failed to track the progress on cost savings for each initiative. The Postal Service noted it did so in aggregate on an annual basis and the DFA was a “living plan” that is constantly being updated. It is therefore measuring real-time impacts, not comparing them to its initial estimates.
Luke Grossman, the Postal Service’s senior vice president for financial and strategy matters, said in response to the report the agency has met and exceeded its goals to provide updates to stakeholders. Still, the IG encouraged the sharing of more information.
“Transparency allows stakeholders to better understand and plan for upcoming Postal Service network and pricing changes,” the watchdog said.
The Postal Service will provide an update on its reforms in September, which the IG said marked an opportunity for the agency to provide clearer financial projections and the cost impacts of each of its initiatives.
Grossman defended the DFA plan overall and pledged to, in the future, “articulate a plan as to how we track, measure and communicate progress on our initiatives.”
“We remain firm in our position that the status quo is not an option if we want a financially self-sufficient Postal Service that provides the high-quality service expected of us far into the future,” Grossman said. “In the end, we will not only produce the operating and financial successes to which we aspire, but we will also advance the institutional culture of the organization, enabling us to engage in our future in a much more logical, organized, confident and successful manner.”
June 24, 2024
https://www.govexec.com/management/2024/06/usps-failing-meet-financial-returns-promised-dejoys-10-year-plan/397596/