Government Operations:

Need for Comprehensive Postal Reform

GAO-04-455R: Published: Feb 6, 2004. Publicly Released: Feb 25, 2004.

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This letter responds to a request by the Chairman, Senate Committee on Governmental Affairs, for GAO's views on the need for postal reform and is based upon prior testimonies related to this issue. Since the Postal Service's transformation efforts and financial outlook had been placed on GAO's High-Risk List in April 2001, the Comptroller General has testified on several occasions about the governance, financial, operational, and human capital challenges that threaten the Service's ability to carry out its mission. If not effectively addressed in a timely manner, these challenges serve to threaten the Service's ability to remain self-supporting while providing affordable, high-quality, and universal postal services to all Americans.

The following key trends serve to reinforce GAO's view that enactment of postal reform legislation is needed: (1) declining mail volume; (2) changes in the mail mix; (2) increased competition from private delivery companies; (4) subpar revenue growth; (5) declining capital investment; (6) renewed difficulties in substantially improving postal productivity; (7) significant financial liabilities and obligations; (8) uncertain funding for emergency preparedness; and (9) challenges to achieve sufficient cost cutting. GAO does not believe that incremental steps toward postal transformation can resolve the fundamental and systemic issues associated with the Service's current business model. To avoid the risk of a significant taxpayer bailout or dramatic postal rate increases, Congress should enact comprehensive postal reform legislation that includes the Service's overall statutory framework, resolution of issues regarding the Service's pension and retiree health benefits obligations, and whether there is a continued need for an escrow account. The key areas of the Service's statutory framework that need to be addressed include: (1) clarifying the Service's mission and role; (2) enhancing governance, transparency, and accountability; (3) improving flexibilities and oversight; and (4) making needed human capital reforms.

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