The financial viability of the U.S. Postal Service is at risk because its business model is outdated and not sustainable, according to the Government Accountability Office.
As part of its High-Risk Series, GAO said USPS faces major financial, operational, governance and human capital challenges as it looks to remain viable in an increasingly competitive environment.
“Key trends that demonstrate the need for reform include declining mail volume, particularly for First-Class Mail; changes in the mail mix from high-margin to lower-margin products; changing demographics of the aging postal workforce; growing competition from private delivery companies; and projected revenue declines while expenses increase. The Service continues to face challenges in addressing its large financial liabilities and obligations (e.g., retiree health obligations), as well as in restructuring its infrastructure and workforce to become more efficient and performance based,” GAO’s report stated.
GAO designated USPS’ transformation efforts and long-term outlook as a high-risk area in 2001 mainly due to the increasing risk that the agency would not be able to continue providing universal postal service at reasonable rates while remaining self-supporting through postal revenues. The inclusion of USPS on GAO’s high-risk list “was intended to focus needed attention on the dilemmas facing the Service before the situation escalates into a crisis, where the options for action may be more limited and costly.”
The Postal Service has made some progress, GAO stated, such as cutting costs and improving productivity. However, it remains unclear how USPS will realign its outdated infrastructure and modernize its workforce policies to achieve additional long-term productivity gains.
Furthermore, GAO said USPS’ contention that it is using an evolutionary approach to transform its infrastructure and workforce has not been explained or communicated. As a result, many questions remain as to whether such an incremental approach will be sufficiently comprehensive, integrated, and responsive to the increasing pace of change in technology and competition affecting the Service’s core business.
“Without bold action and better communication, the Service risks falling short of achieving the major productivity gains needed to offset rising costs and maintain quality service and affordable rates. Further, the Congress has not yet enacted comprehensive postal reform legislation that addresses the Service’s key structural and systemic deficiencies, including its unfunded obligation for retiree health benefits and the escrow requirement. Without such action, the accessibility and affordability of postal services to the American people is at risk, which could result in dramatic increases in postal rates or a costly taxpayer bailout,” the report concluded.
GAO urged USPS to take bold action and better communicate how it plans to realign its infrastructure and workforce so that it can preserve its mission and financial viability while meeting its key challenges. GAO also said it continues to believe that comprehensive postal reform legislation is needed to clarify the Service’s mission and role, enhance governance, transparency, and accountability; improve regulation of postal rates and oversight; address long-term financial obligations; and make human capital reforms.