Report questions financial success of 2009 Postal Service 'Summer Sale'
The US Postal Service may have lost money on its 2009 “Summer Sale” initiative, according to a report from the organization's own Office of Inspector General (OIG). The USPS is currently conducting its 2010 version of the Standard Mail Volume Incentive Program.
The USPS has said it increased volume and revenue during the 2009 initiative, however its Inspector General's office said inaccurate data may have led the Postal Service to misjudge the Summer Sale's effect.
“The Postal Service reported both volume and revenue increases resulting from the FY 2009 Summer Sale. However, the processes used to calculate the reported increases may result in misleading reported revenue and volume impacts,” the Inspector General's office said in its report conclusion. “Postal Service outsiders — including the Postal Regulatory Commission's public representatives — have also questioned the Postal Service's methods for calculating reported revenue and volume increases. The public representatives found that using methods more closely aligned with those initially considered by the PRC in approving the Summer Sale suggests the Postal Service may actually have lost money on the FY 2009 program.”
USPS, though, stands by its original numbers.
Tom Foti, manager of marketing mail at the USPS, told DMNews that the Postal Service believes its measurements were accurate and that the 2009 Summer Sale was “a success for a number of reasons.”
“There are other people, such as the PRC's public representative, who looked at other methodologies,” he said. “We believe ours was the most appropriate for a short-term sale.”
The Postal Service's goal in instituting the Summer Sale was to increase companies' mail volumes during one of the slowest mailing periods of the year. The USPS reported a net loss of $3.8 billion in its 2009 fiscal year. In response to losses and declining mail volumes, it has also asked the PRC's approval for rate increases and for moving to a five-day home delivery schedule.
“The Postal Service's calculation of ‘loyalty growth' considered trends in volume, whereas the PRC's public representatives applied a measure of price sensitivity to volumes actually mailed during the Summer Sale to calculate ‘loyalty growth,'” the OIG said in the report. “As a result, the Postal Service provided $67.8 million in rebates to customers who exceeded the established threshold volumes that may have been inaccurate. We consider the $67.8 million to be assets at risk.”
The OIG contended that the US Postal Service may have also spent more than it reported on personnel costs to create the initiative. “The Postal Service attributed $530,000 to the cost of having six full-time and 10 part-time employees working on the project for four months,” said the report. “However, the actual amount of time these employees spent on the project far exceeded those estimates.”
“It is difficult in these scenarios when you have normal employees working on a number of projects and trying to access what portion of the project they are working on versus another initiative,” countered Foti, who added that the USPS has made some improvements to measuring this year's program.
The 2010 Summer Sale was scheduled for July 1 through September 30. The USPS has said it expects to generate between 3.3 million and 1.1 billion new mail pieces through the initiative. It has credited last year's initiative with a net revenue contribution of $24 million.
The Postal Regulatory Commission approved the 2010 Summer Sale in April, saying at the time that “offering new discounts under these circumstances represents a risk.” It added that even if the initiative were to result in a financial loss, it would be “unlikely to seriously worsen the financial situation of the Postal Service.”