U.S. Postal Service:

Update on E-Commerce Activities and Privacy Protections

GAO-02-79: Published: Dec 21, 2001. Publicly Released: Dec 21, 2001.

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Management of the U.S. Postal Service's (USPS) e-commerce program has been fragmented, and implementation of e-commerce initiatives has varied at different business units. Overall, USPS' performance in this area has fallen short of expectations. Last year, the Postmaster General announced a sweeping management restructuring that changed both the reporting structure and program managers. USPS also revised its procedures for approving and implementing new Internet initiatives, including e-commerce. However, concerns persist about whether USPS' e-commerce initiatives are being cross-subsidized by other postal products and services. USPS managers contend that e-commerce products and services must cover their incremental costs. GAO found that this goal has not been met and it is unclear when it might be achieved. Without accurate, complete, and consistent financial information, USPS cannot assess its progress toward its financial performance goals for e-commerce. USPS also lacks clear and comprehensive policies and procedures for reporting direct and indirect revenues and costs for e-commerce and other new products and services. As a result, reporting inconsistencies are likely to continue. In contrast, USPS has reportedly developed privacy policies and practices for its e-commerce customers that exceed those required by federal law.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: On December 20, 2006, Congress enacted postal reform legislation (H.R. 6407, now Pub.L. 109-435) that requires USPS to annually report to PRC (now renamed the Postal Regulatory Commission) on its new postal products and services. In addition, the act contains reporting requirements for existing nonpostal products and services that cover electronic commerce products and services that were the subject of our report, such as the USPS "Electronic Postmark" that can be added to electronic data. Any nonpostal service not determined to be continued by PRC shall terminate. More specifically, PRC shall designate how the service shall be regulated as a market dominant product, a competitive product, or an experimental product (i.e., a new product). The annual reporting requirements for market dominant products, competitive products, and experimental products will apply to these nonpostal services. Market dominant products: USPS must annually report data to PRC on costs, revenues, rates, and quality of service. This information is to be made public except where USPS designates otherwise, such as proprietary data. Competitive products: PRC is required to establish regulations to ensure that each competitive product covers its costs. PRC is given broad authority to obtain information on whether competitive products are in compliance with this requirement, including the subpoena power to obtain revenue and cost information from USPS. Experimental products (i.e., new products and services): USPS must annually report information on market tests of experimental postal products and services. USPS must provide data on the costs, revenues, and quality of service by market test, as well as any other data that PRC specifies is to be reported. This information will be made public unless USPS designates otherwise, such as proprietary data. Also, the USPS Office of Inspector General is required to regularly audit the information submitted and report on its audits to PRC.

    Matter: In view of congressional interest in USPS' new products and services and the difficulty USPS has had in providing reliable information on its Internet-related activities, if the steps taken by USPS do not prove effective, Congress may wish to consider (1) requiring USPS to report annually to the Postal Rate Commission (PRC) on the performance of its new products and services, including its e-commerce activities, and (2) having PRC evaluate the quality of the data and submit a report annually to Congress on the results of this review.

  2. Status: Closed - Implemented

    Comments: On December 20, 2006, Congress enacted postal reform legislation (H.R. 6407, now Pub.L. 109-435) that requires USPS to annually report to PRC (now renamed the Postal Regulatory Commission) on its new postal products and services. In addition, the act contains reporting requirements for existing nonpostal products and services that cover electronic commerce products and services that were the subject of our report, such as the USPS "Electronic Postmark" that can be added to electronic data. Any nonpostal service not determined to be continued by PRC shall terminate. More specifically, PRC shall designate how the service shall be regulated as a market dominant product, a competitive product, or an experimental product (i.e., a new product). The annual reporting requirements for market dominant products, competitive products, and experimental products will apply to these nonpostal services. Market dominant products: USPS must annually report data to PRC on costs, revenues, rates, and quality of service. This information is to be made public except where USPS designates otherwise, such as proprietary data. Competitive products: PRC is required to establish regulations to ensure that each competitive product covers its costs. PRC is given broad authority to obtain information on whether competitive products are in compliance with this requirement, including the subpoena power to obtain revenue and cost information from USPS. Experimental products (i.e., new products and services): USPS must annually report information on market tests of experimental postal products and services. USPS must provide data on the costs, revenues, and quality of service by market test, as well as any other data that PRC specifies is to be reported. This information will be made public unless USPS designates otherwise, such as proprietary data. Also, the USPS Office of Inspector General is required to regularly audit the information submitted and report on its audits to PRC.

    Matter: The information provided by USPS could correspond to that currently provided to PRC and Congress for the volumes, revenues, and costs of its international mail products and services.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On May 16, 2002, USPS provided a report to Congress and GAO containing Profit and Loss Statements for the five e-commerce products USPS offered in fiscal year 2001, but not on all of its new products and services as GAO had recommended. USPS agreed to provide Profit and Loss Statements on May 1 of each year and that in future years it planned to have the annual Profit and Loss Statements reviewed by its independent auditor as part of the annual audit of USPS's Cost and Revenue Analysis report.

    Recommendation: To ensure that the USPS develops reliable and consistent financial information for all of its new products and services, the Postmaster General should provide the audited report for fiscal year 2001 by May 1, 2002, and by May 1 for each subsequent year.

    Agency Affected: United States Postal Service

  2. Status: Closed - Not Implemented

    Comments: USPS provided Congress and GAO with copies of its reports on its new products and services for fiscal years 2001, 2002, and 2003. GAO has had longstanding concerns about the quality of these reports and is not confident that USPS has accurately reported all of its new products and services. In addition, the reports were not audited as recommended to ensure that they were in accordance with USPS's policies and procedures and with generally accepted accounting principles. Thus, GAO continues to have concerns regarding USPS's future new products and the limitations of its reporting in this area. No improvements are expected so this recommendation is being closed as not implemented.

    Recommendation: To ensure that the USPS develops reliable and consistent financial information for all of its new products and services, the Postmaster General should provide an annual report to the Senate Committee on Governmental Affairs, House Committee on Government Reform, and PRC showing its revenues and expenses for new products and services individually and in aggregate that has been audited by an independent entity for the purpose of determining that the report was prepared in accordance with the Service's policies and procedures and generally accepted accounting principles.

    Agency Affected: United States Postal Service

  3. Status: Closed - Not Implemented

    Comments: In its May 16, 2002, report, USPS provided a framework of policies to Congress, the Postal Rate Commission (PRC), and GAO concerning the capture, attribution, and reporting of revenues and expenses associated with its new products and services that it said were consistent with PRC's cost attribution policies. GAO has concerns that the framework is not sufficient because the policies may not be consistent with those of PRC, as noted in a letter by the PRC to the Service dated August 9, 2002. Furthermore, the framework did not include a set of procedures that would ensure implementation of the policies and consistency in reporting. No further action was taken in USPS's 2003 or 2004 reports and no further action is anticipated, so this is being closed as not implemented.

    Recommendation: To ensure that the USPS develops reliable and consistent financial information for all of its new products and services, the Postmaster General should develop a comprehensive set of policies and procedures for capturing, attributing, and reporting revenues and expenses associated with its new products and services and that are consistent with the PRC's cost attribution policies.

    Agency Affected: United States Postal Service

 

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