WASHINGTON—The U.S. Postal Service (USPS) today filed its 2009 fiscal year-end financial results, showing a net loss of $3.8 billion for the year — despite cost-cutting efforts resulting in $6 billion in cost savings and a $4 billion reduction in required payments for retiree health benefits. Cost savings reflect a reduction of 40,000 career USPS employees as well as reductions in overtime hours, transportation and other costs. The $4 billion reduction in required retiree health benefit payments was passed into law for fiscal 2009 to allow USPS to maintain fiscal solvency while continuing to provide universal, affordable service to the nation.

Details of 2009 results include:

* Operating revenue of $68.1 billion, compared to $74.9 billion in 2008;
* Operating expenses of $71.8 billion, compared to $77.7 billion in 2008;
* Net loss of $ 3.8 billion, compared to $2.8 billion in 2008; and
* Total mail volume of 177.1 billion pieces, compared to 202.7 billion pieces in 2008, a decline of more than 25 billion pieces, or 12.7 percent.

“Our 2009 fiscal year proved to be one of the most challenging in the history of the Postal Service,” said Chief Financial Officer Joseph Corbett. “The deep economic recession, and to a lesser extent the ongoing migration of mail to electronic alternatives, significantly affected all mail products, creating a large imbalance between revenues and costs.”

Corbett said that USPS responded aggressively to unprecedented mail volume declines and the ongoing recession. “We undertook comprehensive cost-cutting measures across all areas of the organization,” he said. “Most notably, we reduced work hours by 115 million, or the equivalent of 65,000 full-time employees — a larger number than the entire workforce at more than 80 percent of Fortune 500 companies today.”

Several significant accruals in the year increased the 2009 net loss by $1.7 billion but did not affect current year cash flow:

* An increase in estimated Workers Compensation liability of $718 million, primarily to reflect lower interest rates;
* An increase in estimated deferred revenue recognition on prepaid postage of $756 million, primarily based on newly-available data on customer purchases and use of stamps; and
* Accrued retirement incentives of $197 million for 13,400 employees who applied for the incentive prior to Sept. 30, 2009.

In its report on the financial statements contained in the Postal Service’s 2009 report, independent auditor Ernst & Young issued an unqualified audit opinion, but emphasized that questions remain about the ability of the Postal Service to generate sufficient liquidity to make all of its payments, including the $5.5 billion retiree health benefits payment due on the last day of 2010. “There is significant uncertainty as to whether the United States Postal Service will have sufficient liquidity to make this payment on Sept. 30, 2010,” the opinion stated.

The Postal Service will file its 2010 Integrated Financial Plan later this week, outlining plans and goals for the coming year. While further revenue losses and mail volume declines are expected, Potter said USPS will continue to move aggressively to meet the challenges posed by the current economic downturn.

“We realize our customers are facing the same economic challenges,” said Potter. “That’s why we are not raising prices on First-Class Mail, Standard Mail and our other market-dominant products in 2010,” he said.

The 2010 plan, which estimates a revenue decline of $2.2 billion, a net loss of $7.8 billion, cost reductions of more than $3.5 billion and a reduction in mail volume of 11 billion pieces for the year, is based on the assumption that there will be no change in the number of delivery days per week, and no change in the current retiree health benefits payment schedule.

“We’re grateful to Congress and the Administration for the necessary 2009 adjustment to our retiree health payment,” said Postmaster General John Potter. “This was a welcome and much-needed change to assure that the Postal Service was able to meet all of its obligations at the end of the fiscal year and over the course of 2010.” Potter stated, however, that the Postal Service faces “a sobering reality” of the same problem in 2010 and every year in the near future. “As volume contracts and we struggle to match the costs of an expanding delivery network with revenues received, it’s clear that long-term success requires fundamental, legislative change,” he said.

Potter said that legislation must address “the impossible demands” of prefunding future retiree health benefits at current levels of more than $5 billion annually; the barriers to matching delivery frequency with declining mail volumes; and the ability to leverage the Postal Service’s logistics, distribution and retail networks to create new revenue streams.

“In 2010 we will engage our customer and business partner stakeholders, the Administration and Congress, and the American people in a dialogue to determine a more financially sustainable future,” said Potter. “The Postal Service remains a vital driver of the American economy and an integral part of every American community.”

Copies of the 2009 financial results are available on the Annual Reports page of the Postal Service website, usps.com, at: http://www.usps.com/financials/ar/welcome.htm#10k.

WASHINGTON, D.C. – On Thursday, November 5, 2009 at 10:00am in room 2154 of the Rayburn House Office Building, the Subcommittee on Federal Workforce, Postal Service, and the District of Columbia will hold a hearing entitled, “More than Stamps: Adapting the Postal Service to a Changing World.”

The purpose of the hearing is to examine revenue-generation initiatives recently undertaken by the Postal Service in order to further address the agency’s ongoing financial challenges. In addition, the hearing is also expected to discuss existing barriers to the Postal Service’s ability to innovate its operations through the introduction of new products and services.

As one means of addressing its unprecedented fiscal challenges, the Postal Service has undertaken a series of revenue-generation activities and begun to consider additional innovative services and product offerings. Notably, since June of 2008, the Postal Service has begun to focus its attention on the diversification of its Mailing and Shipping Services, including the pursuit of an integrated business model based on private sector best practices. In addition, the Postal Service recently developed and implemented a Standard Mail Volume Incentive Program, providing eligible mailers with a 30% rebate on certain Standard Mail letters and flats volume during the summer of 2009. Furthermore, the Postal Service has begun to explore the viability of pursuing several new sources of revenue, ranging from the sale of flat rate priority shipping boxes to the implementation of banking, telecommunications, and insurance services in postal retail facilities.

“While the Postal Service, a self-funded government entity, has already implemented a series of cost-cutting efforts in response to its deteriorating financial condition, the current situation also mandates that the agency take significant and innovative steps designed to enhance its products and services and generate revenue,” said Chairman Stephen F. Lynch. “Meaningful oversight of these activities will serve to better ensure that the Postal Service is able to address its financial shortfalls by growing the value of the mail and by generating greater revenue. These actions will in turn minimize the impact of cost-cutting measures on our hardworking postal employees, mailers, postal operations, and the agency’s future viability.”

Witnesses’ testimonies, the Chairman’s opening statement, and a 10:00 a.m. live broadcast of the hearing can be found on the Subcommittee’s website, www.federalworkforce.oversight.house.gov

October 15, 2009

The Honorable Paul Hodes
U.S. House of Representatives
Washington, DC 20515

Attention: Sarah Levin

Dear Mr. Hodes:

We received your May 21 letter on behalf of the New Hampshire branch of the National Association of Letter Carriers (NALC). They alleged manipulation of the Time and Attendance Collection System (TACS) by management at the Milford Post Office, Manchester South Station, and Manchester West Station. Specifically, they alleged postal management altered electronic timecards to avoid paying NALC carriers overtime and to falsify the reporting of work hour usage at these facilities.

As background, TACS is the timekeeping system used by the Postal Service to record employees’ work time and to ensure proper payment. TACS also manages budgeted work hours for each facility. Employees are assigned an individual identification card, bearing a magnetic stripe encoded with their personal information. Employees use their cards at an Electronic Badge Reader (EBR). The employees enter the type of clock ring and operation number, if applicable, and then slide their cards through the EBR. This produces a record of the date, time, type of clock ring, and the operation number to TACS.

Every week, postal managers reconcile and download TACS data to the Accounting Service Center (ASC) in Minnesota, which collates this information and uses it to generate employee paychecks. Managers have manual access to the TACS in order to approve overtime and correct timekeeping errors before the information is downloaded to the ASC. Manual access to TACS is individually password protected. When a postal manager makes a manual change, TACS records the nature of the change, the date, time, and the Employee Identification Number of the person making the change.

We conducted an investigation, which included interviews and a review of records and documents. We concluded that management at the Milford Post Office made manual entries to change employees’ clock rings for the period of December 14, 2002, through December 19, 2008. These changes resulted in the removal of straight time, overtime, night differential, and penalty overtime causing, employees to be underpaid. Additionally, we found an apparent flaw in the way that TACS handles hours worked by clerks who also perform carrier work for part of their day. This flaw causes an unintentional loss of pay to employees. We forwarded our findings to postal management for action they deem appropriate.

We concluded that manual entries to change employees’ clock rings were made by management to TACS at the Manchester South Station for the period of December 22, 2007, through June 26, 2009, and at the Manchester West Station for the period of December 23, 2006, through June 26, 2009. These changes resulted in the removal of night differential and overtime causing employees to be underpaid. We forwarded our findings to postal management for action they deem appropriate.

After we began our investigation, we widened our scope to include two other nearby locations, specifically the Somersworth Post Office and the Salem Post Office. Our investigation concluded that at the Somersworth Post Office for the period of the December 22, 2007, through June 12, 2009, and at the Salem Post Office for the period December 22, 2007, through July 1, 2009, manual entries were made to TACS. Management changed employees Move clock rings from one operation number to another, which caused work hours to be posted to operations employees apparently did not perform. These changes resulted in misstatements of budgeted work hour activity at the facilities. These findings were also forwarded to postal management for action.

If you or your staff have any questions related to your inquiry, please contact Betsy Cuthbertson in our Congressional Response unit at (703) 248-2270.

Sincerely,

Lance Carrington
Deputy Assistant Inspector General for Investigations

In a letter posted on the web site of the National Association of Postal Supervisors, USPS Human Resources VP Anthony Vegliante has admitted that the USPS Pay for Performance program will not accurately reflect the contributions of supervisors, postmasters and managers for the fiscal year just ended.

Citing the economic downturn, Vegliante warns that the USPS may end the year with “a corporate NPA score for which the adjective rating would be non-contributor. Employees who worked diligently and contributed to the organizations performance may receive an end of year rating of 3 or less and a personal adjective rating of non-contributor.”

The only solution offered for the program’s failure is the option for evaluators to change the adjective rating of employees receiving a PFP score of 1, 2, or 3 to “contributor”. The score would not change, and the employee would not receive an increase in salary. “This is each evaluator’s decision based solely on the overall performance of the employee throughout the year.”

Unaudited financial statements files with the Postal regulatory Commission report that the Postal Service lost an additional $865 million in July. That’s better than the $1.3 billion loss reported in June, but brings the total fiscal year to date net loss to $5.6 billion, with two months left left to report in the fiscal year, which ends September 30.

First class mail volume was down 10.9% from July 2008, Standard mail was down by %16.8%, and package services by 18.8%.

On the expense side, total expenses were up by 0.9%, or about $55 million. Personnel expenses, mainly salaries and benefits, were up by 3.8% from the prior year, or $167 million. City and rural carrier compensation expenses were up less than a percentage point from July 2008, while customer service and mail processing compensation (i.e. employees who work inside post offices and processing plants) was down by about 7%, or $104 million. The biggest contributors to the increase in compensation were “other” employees, i.e. administrative, maintenance, postmasters, etc., where compensation was up by 33% or $245 million, and workers compensation payments, up by 17.3% or $18 million.

Reports filed with the Postal regulatory Commission show that as of July 17, the US Postal Service has reduced its field staff by 5.7%, or 37,454 employees from the same period last year. (All numbers cited refer to actual employees on the rolls, not authorized positions).

The largest reductions among bargaining unit employees, as in the past, have come in the clerk craft, which lost 16,023 employees, or 8.1%. City carriers were down by 5.2%, or 11,135 employees. The smaller mail handler craft lost 2,829, or 5% of its members. Career rural carriers, who are compensated on an evaluation basis, and generally earn significantly less than their city counterparts, lost just 974 employees, or 1.4%.

Supervisors, managers and administrative staffing in the field was reduced by 3,468 employees, or 8.4%. Headquarters lost 88 staff, or 3.1%.

The bad news for the USPS is that the complement reductions so far have not translated to any significant cost reductions. Thanks to salary and benefit increases, the USPS has paid out almost exactly the same amount in base salaries and benefits this year as it did in 2008. The $1 billion the agency has managed to save in compensation costs this year has come entirely from reductions in overtime. Sustaining that level of savings solely from overtime in the future will be difficult if not impossible.

The US Postal Service processed 2.8 billion fewer pieces of mail in the month of May than it did in the same time period a year ago. The steepest decline was in advertising mail, down 24%. First class mail was down 16%. The 19.9% decline in overall volume yielded a 15.3% decrease in revenue. Combined with a decrease in expenses of just 6.7%, the end result was a net loss of $677 million. That brings the fiscal year to date loss to $3.4 billion, putting the USPS on track lose around $6 billion by the time the fiscal year ends on September 30.

The loss comes despite unprecedented reductions in employee workhours. City carriers’ hours were down 10% from May 2008, while hours for “inside” staff at post offices and processing centers were down 16%.

It should be noted that the postal service is required by Congress to set aside $5.4 billion this fiscal year to “pre-fund” future retiree health benefits. No other business or agency is required to do this. That $5.4 billion is included in the expected $6 billion deficit. All of which means that despite the sharp decline in mail volume, the USPS would otherwise be seeing only a modest net loss this year, or even a profit if it weren’t for the “pre-funding” requirement. We’ve covered this congressional shell game in the past, and the Inspector General’s office has found that even if the pre-funding requirement is considered legitimate, the USPS is being overcharged by $3.3 billion a year- read their report here.

Read the full financial summary here.

The US Postal Service lost an additional $385 million in April according to preliminary financial reports filed yesterday with the Postal Regulatory Commission. That brings the year to date deficit to $2.7 billion. At this point last fiscal year, the service’s net loss was just $22 million.

Mail volume was down across all classes, with first class down over a billion pieces from 2008, a drop of 12.3%. Advertising volumes were down by almost a billion and a half pieces, or 17.8%. Similar declines were seen in package shipping services. Periodical volumes were off by 6.8% from the prior year. The drop in total mail volume was 14.8%, which resulted in a revenue decline of 11.9% for the month.

The postal service reduced non-personnel expenses by 11.3% from April a year ago, but salaries and benefits, which account for the bulk of the agency’s costs, were down by just 4.3%. For the fiscal year to date, total expenses are down by just 3% from 2008, while total operating revenue is down 8.8%.

(Press release from the Universal Postal Union)

High-level conference reveals risks and opportunities for the sector and the world economy

The results of a recent Universal Postal Union (UPU) survey indicate that postal networks are increasingly trusted to further the growth of e-commerce and provide financial services. This trust is keeping this postal sector’s head above water as the financial crisis wreaks havoc on the global economy.

While operators are feeling the pinch, especially in the letter-post and express business segments, financial services and some areas of parcel post are showing signs of growth.

This is what the UPU reported today during a high-level conference on the impact of the financial and economic crisis on the postal sector, held at its Berne headquarters. More than 200 participants from 100 countries, including about 40 of the world’s postal CEOs and leading sector stakeholders operating in e-commerce, direct marketing, consulting and equipment and technology manufacturing, attended the special debate. Read the rest of this entry »

The US Postal Service losing streak continued in February, with the agency reporting a loss of $658 million, bringing the year to date loss for the fiscal year to $1.8 billion. The agency continued to aggressively cut employee work hours, which were down 12% from the prior year. That translated to a 7.3% decrease in wages and benefits. (The savings are inflated by 3-4% because 2008 was a leap year, so there was an extra weekday compared with 2009.) Revenue, meanwhile was down 12.8%. The slide in revenue accelerated from January’s 11.8% decline, but that number is also slightly inflated by the extra day in SPLY.

The sharpest drop was in standard mail, down 22% from February 2008. The decrease meant that there was actually less standard mail than first class in the system for the month, reversing recent trends. First class mail volume was down 12.7% compared with last year. Year to date, the USPS has processed about 11 billion fewer pieces of mail than it had at this point a year ago.

Non-personnel expenses were down 12.2% or $167 million, led by a 15% drop in transportation costs and a 14% decline in supplies and services. Information technology expenses increased by 26%, or about $7 million.

(Monthly financial results are unaudited and subject to change. Volume numbers are derived from permit data and statistical sampling. The sampling portion of the RPW system is designed to be statistically valid on a quarterly and annual basis.)