This is the accessible text file for GAO report number GAO-12-100 
entitled 'U.S. Postal Service: Action Needed to Maximize Cost-Saving 
Potential of Alternatives to Post Offices' which was released on 
November 17, 2011. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

November 2011: 

U.S. Postal Service: 

Action Needed to Maximize Cost-Saving Potential of Alternatives to 
Post Offices: 

GAO-12-100: 

GAO Highlights: 

Highlights of GAO-12-100, a report to congressional requesters. 

Why GAO Did This Study: 

Declines in mail volume have brought the U.S. Postal Service (USPS) to 
the brink of financial insolvency. Action to ensure its financial 
viability is urgently needed. Visits to post offices have also 
declined, and in an effort to cut costs, USPS is considering closing 
nearly half of its 32,000 post offices by 2015. In their place, 
alternatives to post offices, such as the Internet, self-service 
kiosks, and partnerships with retailers, are increasingly important 
for providing access to postal services. Retail alternatives also hold 
potential to help improve financial performance by providing services 
at a lower cost than post offices. As requested, this report discusses 
how (1) USPS’s efforts to expand access through retail alternatives 
support its service and financial performance goals, (2) USPS 
communicates with the public about retail alternatives, and (3) USPS 
oversees its retail partners. To conduct this work, GAO analyzed USPS 
documents and data and interviewed USPS officials and stakeholders. 
GAO also interviewed operators of postal retail partnerships. 

What GAO Found: 

USPS has expanded access to its services through alternatives to post 
offices in support of its goals to improve service and financial 
performance. Retail alternatives offer service in more locations and 
for longer hours, enhancing convenience for many customers, but 
certain characteristics of these alternatives could be problematic for 
others. For example, services obtained from some alternatives cost 
more because of additional fees, which could deter use by price-
sensitive customers. Furthermore, although about $5 billion of its $18 
billion in fiscal year 2010 retail revenue came from alternatives, 
USPS officials said it is too early to realize related cost savings. 
USPS also lacks the performance measures and data needed to show how 
alternatives have affected its financial performance. A data-driven 
plan to guide its retail network restructuring could provide a clear 
path for achieving goals. Without such a plan, USPS may miss 
opportunities to achieve cost savings and identify which alternatives 
hold the most promise. 

Figure: USPS Retail Network: Examples of Services Offered at Post 
Offices and Alternatives: 

[Refer to PDF for image: illustration] 

Retailer 1: 
Purchase stamps. 

ups.com: 
Purchase stamps; 
Mail letters; 
Mail packages. 

Post Office: 
Purchase stamps; 
Mail letters; 
Mail packages; Obtain Passport. 

Retailer 2: 
Purchase stamps; 
Mail letters; 
Mail packages. 

Source: GAO. 

[End of figure] 

USPS has sought to raise customers’ awareness by developing media 
campaigns, enhancing its online tools for locating postal access 
points, and creating standard symbols for post offices and retail 
alternatives to show which products and services they offer. However, 
USPS has not assessed whether its message is reaching its customers, 
such as by using one of its existing customer surveys, and therefore 
does not know to what extent customers are aware of and willing to use 
its various retail alternatives. Although the public increasingly uses 
postal retail alternatives, more widespread adoption will be needed if 
USPS is to close thousands of post offices as planned in the next few 
years. USPS has projected that by 2020 alternatives to post offices 
will account for 60 percent of its retail revenue. 

USPS’s oversight of its retail partners, which includes entering into 
written agreements with them and providing training and guidance, 
could be improved if USPS modified its approach to monitoring 
compliance with its procedures. Local USPS officials are supposed to 
conduct quarterly reviews of retail partners to make sure they are 
following mailing procedures, but according to retail partners and 
USPS officials in field and local offices, these reviews do not always 
occur as often as intended because of resource constraints. A risk-
based monitoring approach would allow targeting limited USPS oversight 
resources to areas of concern and thus address issues that could 
otherwise discourage customers from adopting retail alternatives, such 
as inadequate service. 

What GAO Recommends: 

USPS should develop a plan to guide its retail network restructuring 
that is supported by relevant performance measures and data and 
includes a method to assess the effectiveness of its public 
communication strategy. USPS should also implement a risk-based 
approach to monitoring retail partners. USPS reviewed a draft of this 
report and stated it is developing a plan to guide its retail network 
restructuring and agreed to review how it monitors retail partners. 

View [hyperlink, http://www.gao.gov/products/GAO-12-100] or key 
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

A Retail Network Plan Could Help USPS Enhance Service and Financial 
Performance: 

Effective Public Communication Is Key to Successful Network 
Restructuring with Retail Alternatives: 

USPS Takes Steps to Help Ensure Retail Partners Follow Procedures, but 
Could Improve Oversight: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Redesign of usps.com: 

Appendix III: Comments from the United States Postal Service: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Stakeholders Interviewed: 

Table 2: Redesign Plans for usps.com as Compared to Industry Best 
Practices for Web Retail: 

Figures: 

Figure 1: Retail Web Pages of usps.com: 

Figure 2: Typical Self-Service Kiosk in Post Office Lobby: 

Figure 3: Example of CPU Interior with Post Office Boxes: 

Figure 4: Comparison of USPS Services Offered at Post Offices and 
Retail Alternatives: 

Figure 5: Typical Retail Alternatives in Urban, Suburban, and Rural 
Areas: 

Figure 6: USPS Retail Revenue from Post Offices and Retail 
Alternatives, Fiscal Years 2006-2010: 

Figure 7: USPS Icons Demonstrating Product and Service Availability: 

Abbreviations: 

ABnote: ABnote North America: 

CPU: contract postal unit: 

GPRA: Government Performance and Results Act of 1993: 

USPS: United States Postal Service: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548" 

November 17, 2011: 

The Honorable Darrell E. Issa: 
Chairman: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Stephen F. Lynch: 
Ranking Member: 
Subcommittee on Federal Workforce, U.S. Postal Service and Labor 
Policy: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Edolphus Towns: 
Ranking Member: 
Subcommittee on Government Organization, Efficiency and Financial 
Management: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The U.S. Postal Service (USPS) is on the brink of financial insolvency 
as it faces a continuing decline in the overall demand for its 
products and services. USPS has reported that about 80 percent of its 
postal retail facilities do not generate sufficient revenue to cover 
their costs, yet this network of about 32,000 post offices has 
remained largely unchanged.[Footnote 1] As customers increasingly turn 
to digital communications and payment methods, mail volume has 
decreased precipitously, dropping almost 20 percent from its 2006 peak 
of 213 billion pieces to about 170 billion pieces in fiscal year 2010. 
USPS projects a total decrease of 37 percent from the 2006 peak by 
2020. This decline in mail volume is reflected in USPS's worsening 
financial condition: In fiscal year 2010, USPS recorded a loss of $8.5 
billion. At the end of fiscal year 2011, USPS expected to reach its 
statutory borrowing limit of $15 billion.[Footnote 2] In addition, the 
Postmaster General has testified that USPS would not be able to pay 
its statutorily mandated retiree health benefits payments that were 
due on September 30, 2011, and Congress delayed the payment due date 
until November 18, 2011.[Footnote 3] 

Action to modernize USPS's retail network is urgently needed to help 
bring USPS's costs in line with its revenue, and in 2011 USPS 
announced plans to review thousands of post offices for potential 
closure in the next few years.[Footnote 4] Alternatives to obtaining 
services at post office windows, including self-service options and 
partnerships with retailers, could help USPS contain facility and 
labor costs while still providing access for customers. In its March 
2010 Action Plan, USPS included expanding access through retail 
alternatives as part of its overall strategy to return USPS to 
financial solvency. USPS stated that its effort to expand access 
through retail alternatives supports two of its agencywide strategic 
goals: (1) to improve service by offering its products and services in 
more convenient places where customers already work, live, and shop; 
and (2) to improve financial performance by growing revenue and 
offering services through alternatives at a lower cost than at post 
offices.[Footnote 5] 

Because of its dire financial condition, USPS is on our list of high- 
risk agencies and programs,[Footnote 6] and we continue to examine 
USPS's management, operations, and business model to identify actions 
needed to make USPS a sustainable enterprise.[Footnote 7] Citing 
concerns about its future financial viability, you asked us to review 
how USPS is expanding retail options for customers. This report 
discusses (1) how USPS's efforts to expand access through retail 
alternatives support its strategic goals of improving service and 
financial performance, (2) how USPS communicates with customers about 
the availability of its products and services at retail alternatives, 
and (3) what actions USPS has taken to oversee third parties that 
provide postal products and services. 

To address these objectives, we reviewed USPS guidance, performance 
reports, and other documents and interviewed USPS officials 
responsible for managing and overseeing retail alternatives. In 
addition, we visited USPS district offices, post offices, and retail 
partnership operations in four USPS districts.[Footnote 8] We selected 
districts whose revenue from retail alternatives, growth in 
alternative revenue, and percentage of retail revenue from 
alternatives were higher than average for fiscal years 2009 and 
2010.[Footnote 9] We interviewed stakeholders representing postal 
employees and managers, consumers, and retail partners, and analyzed 
USPS data on retail revenue for 2006 through 2010. We assessed the 
reliability of USPS's revenue data and determined that they were 
sufficiently reliable for presenting rounded figures of USPS revenue. 
We also reviewed laws, regulations, internal control standards, and 
prior GAO reports. See appendix I for a more detailed description of 
our scope and methodology. 

We conducted this performance audit from December 2010 to November 
2011 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

USPS is required by law to provide prompt, reliable, and efficient 
services to patrons in all areas,[Footnote 10] a standard known as 
universal service. In meeting this standard, USPS is required to 
operate as a self-sufficient, independent establishment of the 
executive branch.[Footnote 11] USPS receives no annual appropriations 
for purposes other than revenue forgone on free and reduced rate mail. 
USPS generates revenue through the sale of postage and postal-related 
products and services. 

USPS has acknowledged that its operating costs must be cut, including 
by reducing the number of postal-operated retail facilities. Visits to 
post offices have decreased, with USPS reporting about 59 million 
fewer visits to post offices in 2010 than in 2009 and an overall 
decline in post office visits of about 21 percent over the last 
decade. However, it has been difficult for USPS to close post offices 
because of statutory restrictions on closing small post offices solely 
for operating at a deficit[Footnote 12] and resistance from employees, 
affected communities, and Members of Congress concerned about possible 
effects on service, employees, and communities.[Footnote 13] USPS 
officials have also said that the amount of time it takes to complete 
the statutory process for closing its facilities has hindered USPS 
from timely realignment of its retail network.[Footnote 14] 

Expanding retail alternatives is part of USPS's overall strategy to 
return to financial solvency while continuing to meet its universal 
service requirements. These alternatives have the potential to provide 
postal services at a lower cost to USPS than post offices, since USPS 
does not staff or maintain retail partners' facilities, and self- 
service options reduce the need for labor and facilities. In 2010, 
USPS reported that providing access through certain types of retail 
alternatives costs less in proportion to the revenue these 
alternatives generate, an estimate USPS officials referred to as cost 
per revenue dollar. The following retail alternatives are the focus of 
USPS's efforts to expand access.[Footnote 15] 

* USPS Web site (usps.com). The Click-N-Ship section of USPS's Web 
site allows a customer to print domestic and international shipping 
labels using a computer, and the site's Postal Store offers stamps and 
collectible memorabilia (see figure 1). Customers may also use the 
site to complete other tasks, such as informing USPS of a changed 
address or tracking their shipments. 

Figure 1: Retail Web Pages of usps.com: 

[Refer to PDF for image: illustration] 

Click-N-Ship;
Postal Store. 

Source: Click-N-Ship Web site page and the Postal Store Web site page 
©2011 United States Postal Service®. 

[End of figure] 

* USPS self-service kiosks. USPS owns and operates about 2,500 kiosks, 
also known as automated postal centers, that allow customers to buy 
stamps and mail letters and packages in a self-service environment. 
Each kiosk consists of a touch-screen computer with a scale and is 
generally located in a post office lobby, with many allowing for 24- 
hour customer access (see figure 2).[Footnote 16] Customers can make 
purchases at kiosks using debit or credit cards. 

Figure 2: Typical Self-Service Kiosk in Post Office Lobby: 

[Refer to PDF for image: photograph] 

Source: GAO. The Eagle logo and the trade dress of USPS® Packaging and 
Automated Postal Center are among many trademarks of the U.S. Postal 
Service®. 

[End of figure] 

* Contract postal units (CPU). CPUs are the retail alternative most 
comparable to post offices. They generally provide a broad range of 
retail products and services to customers at USPS prices. Like post 
offices, CPUs do not offer competitors' shipping products and 
services. CPUs are operated and managed by independent retailers that 
USPS contracts with, providing them with signage and the rights to use 
the USPS logo. A CPU may be a stand-alone business or occupy space 
within a larger business, such as a counter within a store (e.g., 
pharmacy or grocery store) that also sells other products and services 
(see figure 3). According to USPS, there were about 3,600 CPUs as of 
fiscal year 2010. 

Figure 3: Example of CPU Interior with Post Office Boxes: 

[Refer to PDF for image: photograph] 

Source: GAO. The Eagle logo and the trade dress of USPS® Packaging and 
Signage are among many trademarks of the U.S. Postal Service®. 

[End of figure] 

* Approved Shippers. Approved Shippers are retailers that may offer 
shipping services from a range of providers, including USPS. For 
example, Approved Shippers we met with offered shipping services from 
companies such as FedEx and UPS, as well as local delivery companies. 
USPS provides no compensation to the retailers, but provides its 
services at discounted commercial rates and puts no restrictions on 
additional fees that retailers can charge for USPS products and 
services. Vendors that participate in the Approved Shipper program are 
provided USPS branding rights and signage. According to USPS, as of 
fiscal year 2010, there were about 4,200 Approved Shippers. 

* Stamp retailers. USPS's Stamps on Consignment program, managed by 
ABnote North America (ABnote), a company specializing in secure 
distribution and order fulfillment, makes stamps available at 
retailers such as grocery stores and pharmacies and at banks' 
automated teller machines. USPS generally provides no compensation for 
stamp retailers, and retailers cannot sell stamps above face value; 
however, banks that sell stamps through automated teller machines may 
charge customers a fee for this service, and other stores that are not 
Stamps on Consignment program participants may also resell stamps and 
charge additional fees. According to USPS, as of fiscal year 2010, 
there were more than 56,000 Stamps on Consignment locations selling 
stamps.[Footnote 17] 

The types of USPS products and services available at post offices 
compared with those available at retail alternatives are shown in 
figure 4. 

Figure 4: Comparison of USPS Services Offered at Post Offices and 
Retail Alternatives: 

[Refer to PDF for image: illustrated table] 

Post offices: 
Stamps: Product/service is available; 
Domestic mailing and shipping: Product/service is available; 
International mailing and shipping: Product/service is available; 
Money orders: Product/service is available; 
Passports: Product/service may be available at some locations, but not 
others. 

usps.com: 
Stamps: Product/service is available; 
Domestic mailing and shipping: Product/service is available; 
International mailing and shipping: Product/service is available; 
Money orders: Product/service is not available; 
Passports: Product/service is not available. 

Self-service kiosks: 
Stamps: Product/service is available; 
Domestic mailing and shipping: Product/service is available; 
International mailing and shipping: Product/service is available; 
Money orders: Product/service is not available; 
Passports: Product/service is not available. 

CPUs: 
Stamps: Product/service is available; 
Domestic mailing and shipping: Product/service is available; 
International mailing and shipping: Product/service may be available 
at some locations, but not others; 
Money orders: Product/service may be available at some locations, but 
not others; 
Passports: Product/service is not available. 

Approved shippers: 
Stamps: Product/service may be available at some locations, but not 
others; 
Domestic mailing and shipping: Product/service is available; 
International mailing and shipping: Product/service may be available 
at some locations, but not others; 
Money orders: Product/service is not available; 
Passports: Product/service is not available. 

Stamp retailers: 
Stamps: Product/service is available; 
Domestic mailing and shipping: Product/service is not available; 
International mailing and shipping: Product/service is not available; 
Money orders: Product/service is not available; 
Passports: Product/service is not available. 

Source: GAO analysis. 

[End of figure] 

Retail alternatives are available in urban, suburban, and rural areas, 
supplementing USPS's traditional retail network of post offices, as 
illustrated in figure 5. 

Figure 5: Typical Retail Alternatives in Urban, Suburban, and Rural 
Areas: 

[Refer to PDF for image: illustration] 

Urban: 
Post office; 
Approved shipper; 
Approved shipper; stamp retailer; 
Stamp retailer; 
usps.com. 

Suburban: 
CPU; 
usps.com; 
Stamp retailer; 
Post Office. 

Rural: 
CPU; 
usps.com. 

Source: GAO. 

[End of figure] 

USPS employees in headquarters and field offices have roles in 
implementing retail alternatives. Headquarters officials are 
responsible for designing and overseeing the retail alternatives 
programs, including setting goals, developing marketing campaigns, 
managing usps.com, and developing policies for local officials that 
oversee kiosks and retail partners. They also maintain databases on 
retail revenue and facilities. Officials in administrative field 
offices, particularly district offices, and post offices supervise 
postmasters and other managers who oversee and support local 
implementation of retail alternatives, in addition to their duties 
supporting the mail delivery network. These oversight duties include 
monitoring and servicing kiosks and training and monitoring retail 
partners. 

The Government Performance and Results Act of 1993 (GPRA) requires 
USPS to establish outcome-related performance goals for its major 
functions. GPRA also requires USPS, as it does other federal agencies, 
to develop performance indicators for measuring the relevant outcomes 
of each program activity to demonstrate how well it is achieving its 
goals.[Footnote 18] We have previously reported that performance data 
should be complete, accurate, valid, timely, and easily accessible to 
be useful. Furthermore, we have reported on the importance of reliable 
cost data, noting that it can help provide accurate comparisons of 
costs and benefits; inform budgets and proposals for reorganization; 
identify potential savings, efficiencies, and waste; benchmark 
programs and activities; and measure program and managers' 
performance.[Footnote 19] 

A Retail Network Plan Could Help USPS Enhance Service and Financial 
Performance: 

USPS's efforts to expand access through retail alternatives are 
intended to support its strategic goals of improving service and 
financial performance. According to USPS's 2010 Comprehensive 
Statement on Postal Operations, retail alternatives improve service by 
making postal products and services available at times and places 
consistent with customer preferences, and they improve financial 
performance by increasing revenue and providing services at a lower 
cost than traditional outlets.[Footnote 20] 

USPS Has Expanded Access through Retail Alternatives, but Service 
Differences May Present Barriers for Some Customers: 

USPS intends for both types of retail alternatives--self-service and 
partnership programs--to make postal products and services more 
convenient by expanding the locations and times at which they are 
available. For instance, USPS has expanded the number of access points 
in the following ways: 

* Providing customers the option to obtain postal services through its 
Web site, usps.com. According to USPS, use of the site has increased 
from about 312 million visits in 2006 to more than 413 million visits 
in 2010, showing that customers are increasingly accessing postal 
services online. 

* Deploying 2,500 self-service kiosks in 2004 to selected post 
offices, to provide an alternative to post office windows that enables 
customers to conduct most types of common postal transactions. 

* Partnering with retailers to sell stamps in over 56,000 locations, 
such as pharmacies or grocery stores. 

* Expanding its Approved Shipper program in 2010 to about 4,200 
participants, including by offering postal services in about 1,000 
Office Depot stores. According to USPS officials, the number of stores 
increased to about 1,100 stores in 2011. 

* Placing CPUs in rural areas that need service but would not generate 
enough revenue to justify the cost of operating post offices in those 
locations. 

According to USPS, retail alternatives improve service by providing 
access to customers not only in more places but also for longer hours. 
For example, usps.com is available 24 hours a day, and self-service 
kiosks are accessible when post office windows are closed.[Footnote 
21] Additionally, USPS states that service at busy post offices can 
also be improved when kiosks in post office lobbies or CPUs in nearby 
areas are available to accommodate customers who could otherwise have 
long waits in post office lines.[Footnote 22] To further improve 
service through usps.com, USPS is currently redesigning its Web site 
with the intention of making it more useful for customers (see our 
assessment of USPS's Web site redesign in appendix II).[Footnote 23] 

Although retail alternatives expand service locations and hours, 
certain characteristics of these alternatives could be problematic for 
some postal customers. For example, USPS says that usps.com provides 
postal products and services "when and where" customers want them, but 
this option is only available to postal customers with access to the 
Internet. We identified the following characteristics that may affect 
customers' ability to access postal service at retail alternatives: 

Cost. Postal services available through retail alternatives may be 
more costly for customers than at post offices because of added fees 
or limited options. For some customers, the convenience certain 
options offer may outweigh the added cost, but to more price-sensitive 
customers, higher costs could deter the use of some alternatives. 
Instances in which alternatives may be more costly include the 
following:[Footnote 24] 

* USPS charges a $1.00 service fee for stamps purchased from usps.com 
or over the phone, and banks that sell stamps through automated teller 
machines are allowed under their service agreements to charge 
customers a service fee. 

* The usps.com Click-N-Ship site offers Express Mail, which provides 
overnight or second-day delivery, and Priority Mail, which provides 1- 
to 3-day delivery, but not the less-expensive First-Class, Parcel 
Plus, and Media Mail shipping options.[Footnote 25] 

* USPS puts no restrictions on added fees Approved Shippers may charge 
for the same services available at post offices. Furthermore, many 
retailers that resell USPS stamps, including some Approved Shippers, 
may charge customers other than face value for them.[Footnote 26] For 
example, during a site visit, we observed an Approved Shipper charging 
$11.00 for a book of 20 stamps valued at $8.80. 

Access requirements. Self-service options give customers the 
flexibility of accessing postal services directly. However, these 
options have additional requirements for a customer to be able to use 
them: 

* Both usps.com and self-service kiosks require an electronic form of 
payment, such as a credit card. This creates a barrier for customers 
who do not have access to credit cards, which could disproportionately 
affect low-income customers.[Footnote 27] 

* Internet access is required to use usps.com, putting customers who 
lack access to or do not use the Internet at a disadvantage, 
particularly those in remote areas.[Footnote 28] 

Closure and termination procedures. Retail partners, unlike postal- 
operated facilities, can close without public notice or an opportunity 
for public input, creating the potential for unanticipated gaps in 
service: 

* CPU contracts are generally valid for an indefinite period, but 
either the CPU operator or USPS can terminate a contract at any time, 
with or without notice, depending on the circumstances.[Footnote 29] 
According to USPS, the number of CPUs has declined in recent years, 
from about 5,800 in 2006 to about 3,600 in 2010.[Footnote 30] USPS 
officials and representatives of a national association of CPUs said 
that the main reason for the decline in CPUs has been the recent 
downturn in the U.S. economy. Furthermore, USPS officials told us they 
have faced challenges with expanding the number of CPUs, including 
resistance from postal labor and higher costs than implementing other 
types of retail alternatives. In order to minimize the potential for 
closures, 

USPS officials told us they assess potential CPU operators to 
determine whether their existing business is viable.[Footnote 31] 

* USPS or Approved Shippers can terminate an Approved Shipper 
agreement with 10 days' notice to the other party. 

* ABnote's agreement with stamp retailers states that either ABnote or 
the retailer may terminate the agreement with 30 days written notice 
to the other party and that ABnote may terminate it immediately. 

USPS is required to provide universal service to customers throughout 
the United States, which includes providing access to its retail 
services. The Postal Reorganization Act of 1970 mandates that USPS 
provide "prompt, reliable, and efficient services to patrons in all 
areas and shall render postal service to all communities" as well as "…
a maximum degree of effective and regular postal services to rural 
areas, communities, and small towns where post offices are not self- 
sustaining.[Footnote 32]" According to USPS, there are a number of 
dimensions to providing universal service, encompassing issues such as 
uniform prices and affordability, quality of service, access to 
services and facilities, and geographic scope--many of which are 
particularly applicable to providing retail services. However, USPS 
has not adopted a specific standard for universal service and has 
declined to create on[Footnote 33]e. This makes it difficult to 
determine to what extent the differences in cost, access requirements, 
and closure procedures previously discussed could affect USPS's 
ability to meet its universal service mandate as it modernizes its 
retail network to rely more on retail alternatives and less on post 
offices. Such ambiguity will add to the challenge of defining an 
appropriate level of access under a modernized network, such as 
determining the optimal mix of retail alternatives and post offices 
USPS needs to effectively serve customers from varying socioeconomic 
and population demographics. 

Other countries that have modernized their postal retail networks to 
include more partner-owned and -operated facilities developed criteria 
for providing a minimum level of service to guide their restructuring 
efforts. Such standards can include different requirements for serving 
areas of higher and lower population density. For example, in our 
recent report on foreign posts' efforts to restructure their networks, 
we noted that Australia's universal service standards require that at 
least 90 percent of residences in metropolitan areas be located within 
2.5 km (1.56 miles) of a postal retail outlet and, in nonmetropolitan 
areas, at least 85 percent of residences be located within 7.5 km 
(4.66 miles) of a retail outlet.[Footnote 34] Canada and Germany also 
set standards for determining appropriate geographic coverage of 
retail access points. Having criteria for assessing whether changes to 
its retail network conform with its requirements to provide universal 
service could help USPS determine the most cost-effective placement of 
retail access points--whether through post offices or alternatives. 
Such criteria could change over time to adapt to changing customer 
needs. They could also help USPS more clearly articulate how it 
intends to achieve its goals and better demonstrate its progress 
toward them. Without such measures, it is unclear how well USPS's 
efforts to expand access with retail alternatives are supporting its 
goal to improve service as intended. 

USPS Has Increased Revenue from Retail Alternatives, but Has Not 
Demonstrated Cost Savings: 

USPS has stated that retail alternatives support its goal to improve 
financial performance by generating revenue while offering products 
and services through outlets that are less costly than post offices. 
USPS officials told us that the increasing proportion of retail 
revenue from alternatives is a marker of improved financial 
performance, even though retail revenue from all sources--which 
constitutes about one-fourth of USPS's overall revenue--decreased from 
$19.2 billion in fiscal year 2006 to $17.5 billion in fiscal year 
2010.[Footnote 35] USPS data show that the share of retail revenue 
from alternatives grew from about 22 percent in fiscal year 2006 to 
about 31 percent in fiscal year 2010, representing an increase from 
about $4.3 billion to $5.4 billion during this period, while at the 
same time, revenue from post office windows decreased from $14.9 
billion to $12.1 billion (see figure 6). According to USPS, revenue 
from retail alternatives in fiscal year 2011 represented 35 percent of 
overall retail revenue. USPS has projected that by 2020 alternatives 
to post offices will likely account for 60 percent of its retail 
revenue. 

Figure 6: USPS Retail Revenue from Post Offices and Retail 
Alternatives, Fiscal Years 2006-2010: 

[Refer to PDF for image: stacked line graph] 

Fiscal year: 2006; 
Retail alternatives: $4.3 billion; 
Post offices: $14.9 billion. 

Fiscal year: 2007; 
Retail alternatives: $4.6 billion; 
Post offices: $14.7 billion. 

Fiscal year: 2008; 
Retail alternatives: $5.1 billion; 
Post offices: $14.0 billion. 

Fiscal year: 2009; 
Retail alternatives: $5.1 billion; 
Post offices: $12.7 billion. 

Fiscal year: 2010; 
Retail alternatives: $5.4 billion; 
Post offices: $12.1 billion. 

Source: GAO analysis of USPS retail revenue data. 

[End of figure] 

Although overall postal revenue from alternative sources has grown in 
recent years, trends in revenue vary among the types of retail 
alternatives.[Footnote 36] From fiscal years 2006 through 2010, 
revenue from some types of retail alternatives has increased: 

* According to USPS, revenue from usps.com has grown from about $370 
million in fiscal year 2006 to about $640 million in fiscal year 2010. 

* Revenue from self-service kiosks has also grown, increasing from 
about $410 million in fiscal year 2006 to about $580 million in fiscal 
year 2010. 

* Revenue from Approved Shippers, a comparatively small program, grew 
from about $12 million in fiscal year 2006 to about $29 million in 
fiscal year 2010, according to USPS. 

However, revenue from other types of retail partners has decreased: 

* Revenue from CPUs declined from about $730 million in fiscal year 
2007 to about $625 million in fiscal year 2010.[Footnote 37] 

* Revenue from stamp retailers declined in fiscal year 2010 to about 
$1.1 billion, after having grown from about $1.0 billion in fiscal 
year 2006 to about $1.2 billion in fiscal year 2009. 

According to USPS officials, retail alternatives also contribute to 
USPS's financial performance by providing access to its products and 
services at a lower cost than through post offices. In its March 2010 
action plan, USPS presented estimates showing that, for each dollar in 
sales generated, costs were higher for post offices than for retail 
alternatives. Specifically, using fiscal year 2008 data, USPS 
contractors estimated that USPS incurred $0.23 to $0.39 in cost for 
each dollar in sales at post offices, while for retail alternatives, 
USPS estimated its costs per dollar of revenue ranged from $0.02 to 
$0.13.[Footnote 38] In assessing the success of retail alternatives in 
providing cost savings, USPS officials repeatedly pointed to the cost 
per revenue dollar estimates; however, these estimates do not 
represent actual cost savings, and we identified several limitations 
with these estimates as a measure of financial performance: 

* The 2008 cost-per-revenue-dollar estimates are a snapshot of costs 
and not a model that projects future costs as inputs or external 
conditions change. For example, in estimating the costs of local 
oversight of retail partners, USPS assumed that the existing retail 
and delivery network would remain intact and did not account for 
potential closures or staffing changes in post offices. 

* The estimates do not take into account how additional retail 
alternatives could increase or decrease the per-unit cost of retail 
alternatives. For example, as USPS adds more retail alternatives, such 
as CPUs or Approved Shipper locations, the cost of providing 
additional oversight may be comparatively less, since USPS has already 
invested resources necessary for training postmasters or managers to 
oversee the initial units. Moreover, the declining demand for postal 
products and services could also significantly change the cost per 
revenue dollar estimates. If revenue declines, as has been the case 
for some retail alternatives, absent reductions in costs, the cost per 
revenue dollar would increase. 

* More recent expenses, such as for redesigning USPS's Web site or 
reviewing the performance of Approved Shippers, were not factored into 
the 2008 cost estimates and could conceivably change the estimates. 

Consequently, the 2008 cost-per-revenue-dollar estimates do not 
provide a complete picture of cost savings realized or expected from 
implementing retail alternatives. According to USPS, the estimates are 
being updated with fiscal year 2009 and 2010 data using a similar 
methodology and include changes intended to improve their accuracy. As 
of October 2011, USPS had not completed this update. 

USPS officials said they were unable to provide any details about 
actual cost savings resulting from their efforts to expand retail 
alternatives because wider adoption of retail alternatives is needed 
before USPS can realize cost savings by reducing staff at specific 
post offices. Officials responsible for oversight of retail 
partnerships told us that although they track the cost of their 
programs, they have not determined metrics for identifying cost 
savings, and need better cost data analysis to make effective program 
decisions. Furthermore, USPS officials told us their cost data systems 
were designed more for providing information in determining pricing of 
postal products than for analyzing costs of specific program areas. 
USPS did, however, estimate in 2003 that implementing self-service 
kiosks would save an average of $110 million annually in labor costs 
from fiscal year 2005 through fiscal year 2009, but USPS has not 
assessed whether such cost savings were achieved.[Footnote 39] USPS 
officials in headquarters and field offices told us that they can 
track changes in staffing at post offices that can result in cost 
savings, but cannot determine whether such changes are the result of 
customer shifts to retail alternatives or declines in demand for other 
reasons. 

USPS has stated that it will realize cost savings as it closes 
redundant and underutilized post offices in response to decreased 
demand and customers shifting to retail alternatives. USPS announced 
in September 2011, that it will review as many as 15,000 post offices 
for possible closure, which it stated could produce annual savings of 
$1.5 billion as part of an effort to eliminate $20 billion in annual 
costs by 2015. As part of USPS's review begun in July 2011, USPS said 
that post offices that could potentially close are those that have 
insufficient demand and available alternative access. Also, in July 
2011, USPS launched a new retail partnership initiative, the Village 
Post Office, which directly ties retail alternatives to USPS's ability 
to cut costs. USPS described the Village Post Office as a replacement 
option for some communities where underutilized yet costly post 
offices may close. With Village Post Office, USPS intends to partner 
with existing small businesses to provide a limited array of postal 
products and services to the local community, including mail 
collection boxes, post office boxes, stamps, and flat-rate shipping 
and mailing products. USPS launched its first Village Post Office in 
the town of Malone, Washington, in the summer of 2011, and USPS 
officials said they expect to open several thousand similar outlets by 
the summer of 2012. Our past work has shown that replacing postal-
owned and -operated facilities with privately owned and operated 
facilities is a strategy some foreign posts, such as those in 
Australia, Germany, Finland, and Sweden, have used to restructure 
their retail networks in order to contain facility and labor 
costs.[Footnote 40] USPS officials we spoke with recognized, however, 
that until post office closures actually occur, efforts to expand 
retail alternatives will yield no cost savings and in fact could 
increase costs, since, although the alternatives are generally less 
costly, USPS still incurs start-up, administration, and oversight 
costs. 

Retail Network Plan Needed to Maximize the Potential of Retail 
Alternatives: 

Given USPS's financial challenges, a clear plan guiding investments in 
its retail network is essential, including how it intends to increase 
access through retail alternatives while considering cuts to its 
network of post offices. USPS has not yet produced a plan outlining 
how retail alternatives, as part of USPS's overall retail network, 
will improve service and financial performance. USPS released a plan 
to Congress in June 2008 outlining changes to its processing, 
transportation, and retail networks that included descriptions of 
alternatives it was pursuing, but did not include specific goals for 
expanding access through alternatives or specific related actions it 
would take to achieve cost savings.[Footnote 41] We reported in 
February 2011 that USPS officials said they were developing a retail 
strategy that would be made public in early 2011.[Footnote 42] 
However, as of October 2011, USPS officials told us they had not 
prepared a documented strategy for retail. According to an official 
responsible for USPS retail programs, such a plan has not been 
completed because the needs of postal customers continue to evolve. 
Members of Congress have introduced legislation calling for USPS to 
develop a plan that addresses customer access, the closure and 
consolidation of post offices, and estimated cost savings attributable 
to such closures and consolidations[Footnote 43]. Furthermore, GPRA 
identifies how such a plan should look, what it should include, and 
how it would help USPS measure progress toward its goal[Footnote 44]s.: 

Effective Public Communication Is Key to Successful Network 
Restructuring with Retail Alternatives: 

As USPS continues to make changes to its retail network, an ongoing 
focus on public communication will be important to foster customers' 
acceptance of retail alternatives. USPS's Corporate Communications 
officials told us that building awareness of retail alternatives among 
the public has been a particular challenge. We have previously 
reported that agencies need to ensure they adequately communicate with 
external stakeholders, such as consumers, whose actions have a 
significant impact on an agency achieving its goals.[Footnote 45] To 
accomplish this, agencies develop communication strategies, which can 
include actions for building awareness and support for a program. 
Determining whether such communication is adequate can include 
assessing whether the agency's message is reaching the intended 
audience, which is particularly important when the agency is trying to 
reach specific populations, such as those in rural areas or with low 
incomes. Without feedback from such groups, the agency cannot know 
whether its communication strategies are building the awareness and 
support needed to achieve its goals. 

USPS Has Taken Steps to Increase Public Awareness of Retail 
Alternatives: 

USPS has included actions to inform the public about retail 
alternatives in its retail communications strategies and has recently 
launched communications efforts aimed specifically at increasing 
awareness of retail alternatives. In developing its public 
communications, USPS conducted focus groups to identify messages that 
would resonate with customers. USPS's actions under these strategies 
include the following: 

* As previously discussed, in July 2011, USPS launched the Village 
Post Office initiative to partner with small businesses to offer a 
limited array of postal products and services in areas where USPS may 
close underutilized post offices. 

* In May 2011, USPS launched a communications campaign to promote the 
availability of its services at post offices and retail alternatives. 
This campaign uses the slogan "we're everywhere so you can be 
anywhere" to communicate the availability of USPS products and 
services at locations other than post offices. 

* Also in May 2011, USPS released an initial version of a new online 
tool customers can use to find post offices and retail partners, 
including Approved Shippers, which have generally received less 
promotion from USPS than other alternatives. USPS planned to release 
additional improvements to its online locator as part of the usps.com 
redesign. 

* In 2010, to improve the public's awareness of USPS services at 
multiple retail points, USPS created a set of icons that post offices 
and retail partners can display to show specific products and services 
available at a particular location (see figure 7). A full-service post 
office would have most or all of these products and services, while 
retail partners like CPUs and Approved Shippers, would have fewer, 
such as only stamps, mailing, and shipping options. 

Figure 7: USPS Icons Demonstrating Product and Service Availability: 

[Refer to PDF for image: illustrations] 

Icons depicted: 

Mailing; 
Stamps; 
Shipping; 
Supplies; 
Greeting Cards; 
Passport; 
Self Service; 
P.O. Box. 

Source: USPS. The Eagle logo and the trade dress of USPS® Iconography 
are among many trademarks of the U.S. Postal Service®. 

[End of figure] 

In May 2011, USPS developed its plan for communicating the redesign of 
usps.com. This plan focuses on the benefits customers may expect from 
the new features that will be deployed with each of the project's 
phases.[Footnote 46] The plan called for USPS to use multiple methods 
to communicate with external stakeholders, including the public, such 
as press releases, e-mail to its business partners, and external 
publications. Key goals of the plan were to ensure that the Web site's 
current customers were aware of the launch of the new site and to help 
them understand the benefits of the transition and work to build 
interest among other customers for the new site. 

Measures of Effectiveness Could Help Strengthen USPS's Communications 
Strategy: 

As previously discussed, some customers may be more likely to obtain 
postal services at post offices than through retail alternatives, 
because of certain characteristics that may make alternatives 
problematic for them. We have previously reported that USPS needs to 
clearly communicate to the public how its plans to optimize its retail 
network will affect customers, particularly those in rural areas. 
[Footnote 47] We continue to believe this is important, especially in 
light of the changes that USPS is undertaking to close post offices 
and replace some of them with retail partners, a process that includes 
consideration of whether sufficient retail alternatives are available. 
[Footnote 48] According to a senior USPS official responsible for 
advertising, USPS used to measure changes in public awareness by 
conducting surveys before and after major advertising campaigns, but 
is no longer doing so. Although financial constraints may preclude 
USPS from introducing new customer feedback tools, it could 
potentially use existing tools to gauge public awareness of retail 
alternatives. USPS currently surveys residential and business 
customers about their experiences with USPS products and services, 
including their views on the convenience and customer service of post 
offices. The household diary study USPS conducts annually to assess 
customers' use of the mail is another such tool. Either of these 
options could serve as a platform for obtaining feedback on how aware 
customers are of retail alternatives and whether they are meeting 
customers' needs. 

Feedback about customers' awareness and use of retail alternatives can 
help USPS be sure its message is reaching its intended audience. For 
USPS, as for the foreign posts we reviewed recently, having an 
effective communications strategy is an important way to mitigate 
resistance to modernizing a postal retail network.[Footnote 49] For 
example, Sweden's postal service, Posten AB, developed a comprehensive 
public communications campaign to inform its stakeholders of how it 
was transforming its retail network, an effort begun in 2001. This 
campaign was intended to help change the perception of "the post as a 
place" to "the post as a service." Posten AB officials told us they 
made efforts to show customers and other stakeholders that although 
retail facilities owned and operated by the post were closing, the new 
retail partnerships offered more access points and made postal 
products and services more convenient to obtain. Swedish postal 
officials told us that the public was initially resistant to the 
sweeping changes to the nation's postal infrastructure, but ultimately 
accepted them. As of 2009, Sweden has transformed its retail network 
to be 88 percent owned and operated by retail partners. According to 
the officials, their public communications campaign was central to the 
post's successful transformation of its retail network. Similarly, 
three of the five other foreign posts we examined maintained a retail 
network with a majority of partner-owned and -operated facilities 
rather than their own traditional post offices. That about a third of 
USPS's retail revenue now comes from alternatives to post offices 
shows the public has started to accept and use retail alternatives. As 
previously discussed, USPS announced this year it is studying several 
thousand post offices for potential closure and intends to close up to 
15,000 post offices by 2015. If USPS closes these post offices as 
planned, it will be increasingly important for it to effectively 
encourage widespread adoption of retail alternatives. 

USPS Takes Steps to Help Ensure Retail Partners Follow Procedures, but 
Could Improve Oversight: 

As USPS has expanded its use of retail partners, it has taken steps to 
help ensure that such third-party retailers offer products and 
services in accordance with its procedures. Specifically, USPS has 
established procedures for entering into written agreements with 
retail partners, training them, and monitoring their performance. 

Contracts and Agreements: 

USPS contracts and agreements with retail partners establish terms of 
service and requirements for providing service: 

* The standard CPU contract we examined specifies that a CPU must 
offer stamps, domestic and international shipping services, and other 
special services, such as insurance and confirmation of an item's 
delivery, and that the CPU may not offer competitors' shipping 
products and services. 

* Approved Shippers sign licensing agreements stating they will comply 
with USPS requirements for offering postal products and services and 
follow guidelines on displaying USPS-branded signage and promotional 
materials. 

* Stamp retailers sign agreements with USPS's contractor, ABnote, 
stating they agree to offer stamps at a price no higher than face 
value and advertise the availability of stamps. 

Training and Guidance: 

USPS has procedures for providing initial and ongoing training and 
guidance to its retail partners. According to USPS guidance and 
officials, USPS provides new CPU operators with initial classroom and 
on-the-job training, which covers topics such as customer service, 
product knowledge, and equipment use. USPS may provide additional 
training to CPUs to cover changes in its products and services. 
Approved Shippers do not generally receive in-person training from 
USPS, but do receive training materials such as a guide to postal 
products, and Office Depot employees receive employer-provided 
training on USPS services. USPS provides additional updates to retail 
partners through its field offices, and retail partners can call local 
USPS offices if they have questions. Most CPU operators we met with 
during our site visits raised no concerns about their training; 
however, operators at two CPUs told us they would like refresher 
training. Additionally, one CPU operator in Northern Virginia told us 
it would be useful to have more communication from USPS about the 
CPU's performance. Furthermore, according to a national association of 
CPUs, some CPUs have had trouble identifying an appropriate point of 
contact at USPS because of staffing changes. 

Monitoring: 

USPS's guidance for overseeing CPUs states that local USPS officials 
are required to monitor the performance of CPUs on a quarterly basis 
through on-site reviews of their operations and compliance with 
policies.[Footnote 50] According to USPS officials, similar reviews 
have also been required of Approved Shippers since fiscal year 2009; 
however, we do not know what these reviews cover since USPS did not 
provide us guidance for these reviews that we requested. 

As we observed during our site visits, reviews of retail partner sites 
do not always occur quarterly as USPS intends.[Footnote 51] CPU 
operators in two of the four districts we visited told us that such 
reviews were happening either less frequently than required or not at 
all. Furthermore, none of the Approved Shippers we visited told us 
they had been visited by USPS staff conducting a quarterly review. 
[Footnote 52] Cuts in USPS's management-level staffing may contribute 
to lapses in oversight of retail partners. According to USPS 
headquarters officials, no staff in field offices or post offices are 
solely responsible for oversight of retail alternatives and personnel 
with such responsibility must balance their oversight duties with 
other responsibilities. Reductions in USPS staffing have led to the 
elimination or consolidation of management roles that provide 
oversight of retail partners, such as field managers who oversee USPS 
retail operations in several districts. USPS officials in one district 
told us that, although they were required to conduct such visits with 
Approved Shippers, they were not doing so. According to these 
officials, the quality of monitoring of retail partners had suffered 
because recent USPS staffing cuts had consolidated administrative 
duties for responsible post office employees. 

We have previously reported that a risk-based approach to oversight 
can help agencies effectively target constrained resources to better 
address potential problem areas.[Footnote 53] Such an approach could 
help USPS identify which retail partners should be monitored more 
closely and would give managers flexibility to conduct reviews more or 
less frequently as warranted by available resources and assessments of 
risks. USPS already collects data on retailers' revenue, complaints 
from customers, and results of monitoring reviews, which could be 
suitable for determining a retailer's relative level of risk and an 
appropriate method and frequency of monitoring. USPS could then make 
better use of its management resources, particularly during a time 
when such resources are being cut back. Effective monitoring of retail 
partners is important because it can identify bad operators whose 
actions could potentially undermine USPS's efforts to encourage the 
adoption of retail alternatives. Stakeholder organizations 
representing USPS postmasters, a major postal union, and consumers 
expressed concerns about the potential for retail partners to be 
inadequately trained in how they provide postal services, which could 
harm USPS's image, increase the potential for fraud, and frustrate 
customers. If retailers offering USPS products and services provide 
inadequate service, customers may be unwilling to adopt retail 
alternatives for their postal needs, hampering USPS's efforts to 
increase their use. For example, during our site visit to USPS's 
Houston district, officials told us about a CPU that was poorly 
managed, leading to customer complaints and decreased revenue. 
Eventually the CPU improved after its management was replaced. 

Conclusions: 

USPS has acknowledged that to improve its financial condition, it 
needs to make changes to its operations, including modernizing its 
retail network to more cost-effectively serve customers through the 
use of retail alternatives. USPS now offers mailing and shipping 
products through thousands of retailers and stamps through tens of 
thousands of locations. Further network restructuring must occur 
quickly if USPS is to address its financial difficulties, and USPS has 
announced plans to study 15,000 post offices for potential closure by 
2015. Expanding access through retail alternatives needs to be an 
integral part of this effort, but USPS has still not developed a plan 
to clearly outline its vision for what a modern retail network will 
look like, including how retail alternatives will help maximize cost 
savings and preserve customer access to a degree sufficient for 
meeting USPS's universal service mandate. A plan could facilitate 
realizing the cost savings USPS expects to achieve by expanding retail 
alternatives, but its costs could increase if it expands access 
without concurrently making cost-saving cuts in its expensive network 
of 32,000 post offices. Furthermore, effective progress measures and 
the data to support such measures would help USPS and key stakeholders 
determine whether efforts to expand access are improving its service 
and financial performance as intended. 

No amount of planning or oversight will ensure the success of 
providing postal services through retail alternatives if the public 
does not use them. Clear communication about USPS's plans for 
providing access to postal services, even if it creates short-term 
resistance, will more likely create long-term acceptance if the public 
knows why, where, and how it may access postal services through 
alternatives, particularly as post offices close. Although USPS has 
strategies for communicating with the public about retail 
alternatives, it lacks methods of assessing whether its message is 
both reaching its intended audience and having the intended effect. 
USPS expects that, by 2020, retail alternatives will replace post 
offices as the principal means of access for its retail products and 
services--an outcome dependent on the public's growing awareness, 
acceptance, and use of the alternatives. 

Since USPS expects to continue expanding its use of third-party 
retailers to provide postal services, it will need to have the 
resources necessary for effective monitoring of those third parties to 
help ensure they follow USPS procedures and provide quality service. 
On the basis of our site visits, we found that quarterly reviews of 
such retail partners are not occurring as required. And because the 
risk associated with any particular retailer may vary, a risk-based 
oversight approach could help USPS direct its resources toward those 
retailers that require more oversight. Factors that inform risk could 
include volume of sales, incidence of customer complaints, or prior 
performance history. As USPS continues to cut its administrative 
staffing to address funding shortfalls, efficient use of its 
streamlined management resources will be increasingly important. 

Recommendations for Executive Action: 

We are making the following two recommendations to the Postmaster 
General: 

* To better ensure that USPS's efforts to expand access through retail 
alternatives support its strategic goals to improve its service and 
financial performance, the Postmaster General should develop and 
implement a plan with a timeline to guide efforts to modernize USPS's 
retail network that addresses both traditional post offices and retail 
alternatives. This plan should also include: 

- criteria for ensuring the retail network continues to provide 
adequate access for customers as it is restructured; 

- procedures for obtaining reliable retail revenue and cost data to 
measure progress and inform future decision making; and: 

- a method to assess whether USPS's communications strategy is 
effectively reaching customers, particularly those customers in areas 
where post offices may close. 

* To help ensure CPUs and Approved Shippers provide postal products 
and services in accordance with USPS policies, while making efficient 
use of its constrained resources, the Postmaster General should 
establish procedures to focus monitoring of retail partners on those 
determined to be at a greater risk of not complying with its 
requirements and procedures. 

Agency Comments: 

We provided a draft of this report to USPS for review and comment. In 
response to our recommendation to develop a plan to guide its retail 
network modernization, USPS stated that it is developing a 
comprehensive strategic plan to identify efforts and activities across 
the organization that align with optimizing the retail network. In 
response to our recommendation to establish risk-based procedures for 
monitoring retail partners, USPS agreed to review its current 
monitoring policies and stated that its review will be incorporated 
within its strategic planning efforts. USPS's full comments are 
reprinted in appendix III. 

We are sending copies of this report to the appropriate congressional 
committees, the Postmaster General, and other interested parties. In 
addition, the report will be available at no charge on GAO's Web site 
at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions on this report, please 
contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Contact information and key contributors 
to the report are listed in appendix IV. 

Signed by: 

Phillip Herr: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report discusses (1) how the U.S. Postal Service's (USPS) efforts 
to expand access through retail alternatives support its strategic 
goals of improving service and financial performance, (2) how USPS 
communicates with customers about the availability of its products and 
services at retail alternatives, and (3) what actions USPS has taken 
to oversee third parties that provide postal products and services. 

To obtain information for all of our objectives, we reviewed USPS 
documents and interviewed USPS officials responsible for implementing 
efforts to expand retail alternatives. We reviewed internal control 
standards and our prior reports to identify appropriate criteria for 
assessing aspects of how USPS manages its efforts to provide access 
through retail alternatives. We also visited four USPS districts to 
see how retail alternatives are being implemented at the local level. 
Specifically, we visited USPS district offices, post offices, contract 
postal units (CPU), and Approved Shippers in Detroit Lakes and 
Richwood, Minnesota, and Fargo, North Dakota (Dakotas District); 
Conroe and Katy, Texas (Houston District); Arlington and Winchester, 
Virginia (Northern Virginia District); and Miami and Stuart, Florida 
(South Florida District). We selected the Dakotas, Houston, and South 
Florida districts because for fiscal years 2009 and 2010 their revenue 
from retail alternatives, growth in alternative revenue, and 
percentage of retail revenue from alternatives were higher than 
average.[Footnote 54] We chose the specific locations we visited to 
include a more urban and a moral rural location in each district based 
on 2000 census data; locations where there were generally CPUs, 
Approved Shippers, and self-service kiosks present; and locations with 
higher than average revenue. We also interviewed USPS partners, 
contractors, and representatives of key groups of affected by USPS 
retail efforts to obtain their views on USPS's efforts to provide 
access through retail alternatives (see table 1). We identified these 
stakeholders through reviews of USPS regulatory proceedings and prior 
GAO and USPS Inspector General reports and recommendations from other 
stakeholders and experts. 

Table 1: Stakeholders Interviewed: 

Type of stakeholder: USPS corporate contractor or partner; 
Stakeholder organization or individual interviewed: 
* ABnote North America; 
* Costco; 
* Office Depot; 
* Walgreens. 

Type of stakeholder: Postal employee organization; 
Stakeholder organization or individual interviewed: 
* American Postal Workers Union; 
* National League of Postmasters. 

Type of stakeholder: Consultant; 
Stakeholder organization or individual interviewed: 
* Anthony Yezer, The George Washington University; 
* Jay Donahue, Global Office Link. 

Type of stakeholder: Postal supplier; 
Stakeholder organization or individual interviewed: 
* Pitney-Bowes. 

Type of stakeholder: Postal consumer organization; 
Stakeholder organization or individual interviewed: 
* Consumer Postal Council; 
* Postal Regulatory Commission, consumer representative[A]. 

Type of stakeholder: Retail partner organization; 
Stakeholder organization or individual interviewed: 
* Contract Postal Unit Association of America. 

Source: GAO interviews. 

[A] We did not meet with the Postal Regulatory Commission consumer 
representative in person, but instead received written responses to 
our questions. 

[End of table] 

To determine how USPS's efforts to expand retail access support its 
strategic goals of improving service and financial performance, we 
reviewed USPS's strategic planning documents to identify how efforts 
to expand retail alternatives are linked to its strategic goals and 
what the related performance measures are. We also reviewed USPS's 
requirements under the Government Performance and Results Act of 1993 
and prior GAO reports on strategic planning to achieve agency goals. 
We identified differences in services provided through retail 
alternatives and post offices using information obtained from USPS 
officials, site visits, and our examination of usps.com. To assess 
USPS's plans to redesign its retail Web site, we reviewed literature 
on best practices for retail Web site design. 

We analyzed available USPS data on revenue from retail alternatives 
for fiscal years 2006 through 2010 to identify trends and permit 
comparisons with revenue from post offices. USPS data on revenue from 
retail alternatives comes from various USPS sources that maintain the 
data in different ways and are therefore not comparable. Specifically, 
the data we provide about overall retail revenue, as well as revenue 
from post offices and retail alternatives in general, come from USPS's 
audited accounting database, which contains revenue data that have 
been adjusted to account for factors such as customer returns, lost 
inventory, and how USPS counts revenue for stamps sold but not yet 
used.[Footnote 55] Because of these adjustments, USPS officials said 
this data source is more accurate for reporting overall retail 
revenue. In contrast, data on revenue from specific alternatives comes 
from a variety of USPS data sources, including databases of gross 
sales data that have not been reconciled in the same manner as the 
accounting database. Neither source could provide revenue data both 
overall and for specific retail alternatives, since the accounting 
database does not break out revenue for all of the types of 
alternatives we examined, and the sales database does not include 
revenue from post offices and CPUs that do not report revenue through 
an electronic point-of-sale transaction system. Furthermore, there is 
some overlap in the revenue data from specific retail alternatives. 
This occurs because some retail partners obtain the stamps they sell 
from USPS's Stamps on Consignment program, which is counted as revenue 
under that program, and then the partners report all postal sales, 
including stamp sales, to USPS, thus creating the potential to double-
count some revenue when using the gross sales data. 

Further affecting our ability to complete planned analyses were 
substantial delays in receiving responses to our requests for data 
from USPS. For example, delays of several months precluded planned 
analyses of trends in the number of specific types of alternative 
retail outlets in different geographic areas, differences in the types 
of products and services sold through different retail outlets, and 
trends in revenue for the specific locations and districts we visited. 
According to USPS officials, major staff restructuring that occurred 
while we were conducting our audit made it difficult for USPS to 
respond in a timely manner. Consequently, we scaled back our data 
analysis to focus on trends in revenue and the number of locations for 
retail outlets overall and for the specific types of retail 
alternatives that were the focus of our review. 

We assessed the reliability of each of the data sources we used by 
interviewing USPS officials responsible for them or sending USPS 
questionnaires to obtain written answers about its procedures for 
maintaining the data and verifying their accuracy. After reviewing 
this information, we determined that the revenue data for post 
offices, usps.com, self-service kiosks, CPUs, Approved Shippers, stamp 
retailers, retail alternatives in general, and retail services overall 
were sufficiently reliable for presenting rounded figures of USPS 
revenue. 

Additionally, we obtained data from USPS officials about the number of 
outlets for each type of retail alternative. Although we did not 
verify the accuracy of these data, we believe they are sufficiently 
reliable to provide context for the relative number of alternative 
outlets offering access to USPS products and services. We reviewed 
USPS's estimates of the cost per revenue dollar earned from retail 
alternatives and discussed the methodology used for the estimates with 
USPS officials. We compared those estimates to estimates of post 
office costs prepared by USPS contractors, although we did not review 
the post office estimates in depth because it was beyond the scope of 
this review. 

To determine how USPS communicates with customers about the 
availability of its products and services at retail alternatives, we 
reviewed USPS documents such as communications strategies and 
presentations and interviewed USPS officials responsible for 
developing and implementing public communications and advertising 
strategies for retail alternatives. We also reviewed USPS public 
communications, such as press releases, reports, and other information 
on the USPS Web site. We reviewed our prior reports on effective 
public communication by government agencies. 

To determine what actions USPS has taken to oversee third parties that 
provide access to postal products and services, in addition to the 
site visits previously discussed, we reviewed USPS documents and 
interviewed USPS officials in headquarters and at the local level to 
determine how USPS recruits, contracts with, trains, and monitors 
retail partners. 

In examining USPS's efforts to expand access through retail 
alternatives, we focused on specific aspects of management related to 
program goals and measures, use of data for decision making, guidance 
and training, risk assessment and monitoring, and public 
communication. We did not assess other aspects of management, such as 
project planning or management of financial systems. 

We conducted this performance audit from December 2010 to November 
2011 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Redesign of usps.com: 

Created in 1994 as an information site, usps.com was later expanded to 
include retail components that today offer access to online shipping 
services and postal products, including stamps. Beginning in 2009, 
USPS began an overhaul of its Web site to improve its infrastructure 
and customer interface with an overall goal of improving customers' 
experience with the site. The first phase of the redesigned site was 
released in July 2011, and according to USPS planning documents, other 
new functions are expected to be released through early 2012. Because 
the redesign was still ongoing during our audit work, we were unable 
to evaluate the new Web site, but examined whether the intended 
functionality of the site is consistent with industry best practices 
for retail Web sites.[Footnote 56] 

Planned improvements to usps.com generally align with industry best 
practices for better serving customers, as shown in literature on 
retail Web site design. Table 2 outlines how USPS's plans for the Web 
site redesign correspond to industry best practices. 

Table 2: Redesign Plans for usps.com as Compared to Industry Best 
Practices for Web Retail: 

Best practice: Create a connection between digital and brick-and-
mortar offerings, using various methods to make them both accessible; 
Plans for usps.com redesign: USPS officials told us the redesigned 
site will emphasize creating a connection between the home and brick-
and-mortar post offices and provide access to services that involve 
the local post office, such as arranging for redelivery of packages. 

Best practice: Focus on providing an improved, personalized customer 
experience that caters to a customer's needs; 
Plans for usps.com redesign: The new site will allow customers to 
login at a single point and conduct all transactions, an improvement 
over the current "siloed" structure, which, for example, requires 
separate financial transactions to buy stamps and print shipping 
labels. 

Best practice: Focus on developing customer loyalty; 
Plans for usps.com redesign: Although USPS officials said they were 
interested in having a customer loyalty program, there are no plans at 
present to develop one because USPS does not have the necessary 
resources or expertise. Furthermore, the officials told us they would 
like to be able to better track how customers use the site and analyze 
this information so they can segment customers for marketing purposes. 
However, the officials said they have not determined when they will 
implement such functions.[A] 

Best practice: Provide multiple means of communication with customers 
and promptly respond to inquiries; 
Plans for usps.com redesign: Customers can already communicate with 
USPS representatives via e-mail and telephone. USPS is adding a text-
based chat feature to its Web site. Additionally, the USPS call center 
is being updated to provide more information to agents for helping 
customers. USPS is not developing a Web-based video chat option. 

Best practice: Ensure that the site is easy to use and up-to-date with 
functioning links and updated content; 
Plans for usps.com redesign: Improving ease of use is a key goal of 
the Web redesign. The team that manages usps.com has a process for 
regularly reviewing and updating content. 

Best practice: Safeguard shoppers' security and privacy to create 
trust so that shoppers will want to purchase from the site; 
Plans for usps.com redesign: USPS has taken steps to provide for 
secure transactions. The redesign will take additional steps to make 
the site fully compliant with industry best practices for credit card 
security. 

Best practice: Provide sufficient information about products and 
services to enable customers to make a purchase decision; 
Plans for usps.com redesign: The site already provides a significant 
amount of information about postal products and services, and the 
redesign is meant to create easier access to them rather than 
providing more information. 

Best practice: Provide multiple payment options, not just credit cards; 
Plans for usps.com redesign: USPS is adding other electronic payment 
options to usps.com, which already accepts credit cards. 

Source: GAO analysis of USPS plans and literature on industry best 
practices. 

[A] USPS cited privacy concerns as a main reason it is reluctant to 
pursue such data gathering for marketing purposes. 

[End of table] 

[End of section] 

Appendix III: Comments from the United States Postal Service: 

Kelly Sigmon: 
Vice President, Channel Access: 
United States Postal Service: 
475 L'Enfant Plaza, SW: 
Washington, DC 20250: 
202-268-2252: 
Fax: 202-268-6269: 

November 8, 2011: 

Phillip R. Herr: 
Director, Physical Infrastructure: 
United States Government Accountability Office: 
Washington, DC 20548-0001: 

Dear Mr. Herr: 

Thank you for providing the U.S. Postal Service with the opportunity 
to review and comment on the draft report titled Action Needed to 
Maximize Cost-Saving Potential of Alternatives to Post Offices. 

I wanted to provide you with an update on the current efforts of 
formalizing an implementation plan that will help guide expanded 
access through retail alternatives while improving service and the 
financial performance of the organization. 

The Postal Service is in the process of completing a comprehensive 
strategic plan to outline an optimized retail access plan for the 
entire country and to identify efforts and activities occurring across 
the organization that align with optimizing the retail network. We 
have recently finalized an Access Optimization Charter that
has an overall objective of providing customers with efficient, 
convenient and easy access to products and services in order to better 
meet their evolving needs. It has three basic tenets: provide greater 
convenience, lower cost of service, and improve the customer 
experience, We have identified a number of key work streams. A near-
term deliverable within the Strategy and Optimization work stream is a 
detailed and comprehensive strategic plan that will update our overall 
strategy, the metrics for evaluating its progress, and the desired end-
state. 

The USPS is in agreement with reviewing our current monitoring 
policies and procedures for Approved Shippers and Contract Postal 
Units to determine if a more appropriate frequency should be assigned. 
This will be incorporated Into the strategy and optimization work 
stream. 

Over the last five years, our current retail strategy has resulted in 
an increase in alternate access revenue from 24% to 35% of our total 
retail revenue. This is one of the contributing factors that enabled 
operations to reduce window work hours by 23.7% during the same period 
of time. 

If you or your staff wishes to discuss any of these comments further, 
I am available at your convenience. 

Sincerely, 

Signed by: 

Kelly M. Sigmon: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Phillip Herr, (202) 512-2834 or herrp@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Heather Halliwell, 
Assistant Director; Jameal Addison; Leia Dickerson; Patrick Dudley; 
Bess Eisenstadt; Andrew Huddleston; Sara Ann Moessbauer; Josh Ormond; 
Friendly Vang-Johnson; and Crystal Wesco made key contributions to 
this report. 

[End of section] 

Related GAO Products: 

U.S. Postal Service: Mail Trends Highlight Need to Fundamentally 
Change Business Model. [hyperlink, 
http://www.gao.gov/products/GAO-12-159SP]. Washington, D.C.: October 
14, 2011. 

U.S. Postal Service: Actions Needed to Stave off Financial Insolvency. 
[hyperlink, http://www.gao.gov/products/GAO-11-926T]. Washington, 
D.C.: September 6, 2011. 

U.S. Postal Service: Dire Financial Outlook and Changing Mail Use 
Require Network Restructuring. [hyperlink, 
http://www.gao.gov/products/GAO-11-759T]. Washington, D.C.: June 15, 
2011. 

U.S. Postal Service: Foreign Posts' Strategies Could Inform U.S. 
Postal Service's Efforts to Modernize. [hyperlink, 
http://www.gao.gov/products/GAO-11-282]. Washington, D.C.: February 
16, 2011. 

U.S. Postal Service: Strategies and Options to Facilitate Progress 
toward Financial Viability. [hyperlink, 
http://www.gao.gov/products/GAO-10-455]. Washington, D.C.: April 12, 
2010. 

U.S. Postal Service: Financial Crisis Demands Aggressive Action. 
[hyperlink, http://www.gao.gov/products/GAO-10-538T]. Washington, 
D.C.: March 18, 2010. 

U.S. Postal Service: Financial Challenges Continue, with Relatively 
Limited Results from Recent Revenue-Generation Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-10-191T]. Washington, D.C.: November 
5, 2009. 

U.S. Postal Service: Restructuring Urgently Needed to Achieve 
Financial Viability. [hyperlink, 
http://www.gao.gov/products/GAO-09-958T]. Washington, D.C.: August 6, 
2009. 

U.S. Postal Service: Broad Restructuring Needed to Address 
Deteriorating Finances. [hyperlink, 
http://www.gao.gov/products/GAO-09-790T]. Washington, D.C.: July 30, 
2009. 

High-Risk Series: Restructuring the U.S. Postal Service to Achieve 
Sustainable Financial Viability. [hyperlink, 
http://www.gao.gov/products/GAO-09-937SP]. Washington, D.C.: July 28, 
2009. 

U.S. Postal Service: Network Rightsizing Needed to Help Keep USPS 
Financially Viable. [hyperlink, 
http://www.gao.gov/products/GAO-09-674T]. Washington, D.C.: May 20, 
2009. 

U.S. Postal Service: Escalating Financial Problems Require Major Cost 
Reductions to Limit Losses. [hyperlink, 
http://www.gao.gov/products/GAO-09-475T]. Washington, D.C.: March 25, 
2009. 

U.S. Postal Service: Deteriorating Postal Finances Require Aggressive 
Actions to Reduce Costs. [hyperlink, 
http://www.gao.gov/products/GAO-09-332T]. Washington, D.C.: January 
28, 2009. 

U.S. Postal Service: USPS Has Taken Steps to Strengthen Network 
Realignment Planning and Accountability and Improve Communication. 
[hyperlink, http://www.gao.gov/products/GAO-08-1022T]. Washington, 
D.C.: July 24, 2008. 

U.S. Postal Service: USPS Needs to Clearly Communicate How Postal 
Services May Be Affected by Its Retail Optimization Plans. [hyperlink, 
http://www.gao.gov/products/GAO-04-803]. Washington, D.C.: July 13, 
2004. 

[End of section] 

Footnotes: 

[1] Post offices, stations, and branches have different classification 
meanings to USPS, but they are all brick-and-mortar retail locations 
operated by USPS where customers can access postal products and 
services by conducting transactions with a USPS window clerk. In this 
report, we refer to these traditional places of access to USPS retail 
products and service simply as post offices. USPS also operates 
facilities known as carrier annexes that have delivery but not retail 
operations. 

[2] USPS borrows money from the U.S. Treasury via the Federal 
Financing Bank and has relied increasingly on this debt to fund its 
operations. Over the last 5 years, its net borrowing has increased by 
nearly $12 billion, and federal statute limits USPS's total borrowing 
to $15 billion. 39 U.S.C. § 2005(a). 

[3] Pub. L. No. 112-36, § 124, 125 Stat. 386, 389 (Oct. 5, 2011). The 
2006 Postal Accountability and Enhancement Act required USPS to 
prefund its retiree health benefit obligations with annual payments 
through 2016 to the Postal Service Retiree Health Benefits Fund. Pub. 
L. No. 109-435 (Dec. 20, 2006). Deferring some prefunding of these 
benefits would serve as short-term fiscal relief. However, deferrals 
also increase the risk that USPS will not be able to make future 
payments as its core business declines. See GAO, U.S. Postal Service: 
Allocation of Responsibility for Pension Benefits between the Postal 
Service and the Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO-12-146] (Washington, D.C.: Oct. 13, 
2011). 

[4] In July 2011, USPS announced plans to study about 3,700 post 
offices for potential closure and in September 2011, said that it is 
examining about 15,000 post offices for possible closure by 2015. 

[5] USPS, Ensuring a Viable Postal Service for America: An Action Plan 
for the Future (Washington, D.C.: March 2010). 

[6] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[7] For a list of our most recent products on USPS, see related GAO 
products after the appendixes in this report. 

[8] For administrative purposes, USPS divides the country into areas, 
which are further subdivided into districts. For our site visits, we 
visited locations in Florida, Minnesota, North Dakota, Texas, and 
Virginia. We visited locations that had higher than average revenue, 
represented a mix of types of retail alternatives, and were located in 
both urban and rural areas. 

[9] The locations we visited in Virginia did not meet these revenue 
criteria. We visited them during the planning stage of our work to 
gain a better understanding of how retail alternatives operate. 

[10] 39 U.S.C. § 101(a). 

[11] 39 U.S.C. § 201. In prior reports, we have recommended that USPS 
realign its postal operations, networks, and workforce with changes in 
mail usage and customer behavior. As part of this work, we proposed 
options for action by Congress and USPS to reduce costs and improve 
efficiency. 

[12] 39 U.S.C. § 101(b). Recently, USPS implemented regulatory changes 
to the process for discontinuing USPS-operated facilities to implement 
uniform procedures for closing or consolidating post offices. 76 Fed. 
Reg. 41413 (July 14, 2011). 

[13] For example, in 2009, USPS engaged in a proceeding to analyze 
over 4,000 postal stations and branches for possible closure, which 
resulted in the closure of about 145 of those facilities. 

[14] See GAO, U.S. Postal Service: Dire Financial Outlook and Changing 
Mail Use Require Network Restructuring, [hyperlink, 
http://www.gao.gov/products/GAO-11-759T] (Washington, D.C.: June 15, 
2011). 

[15] USPS also provides alternative retail access through mobile 
retail vans, Post Office Express units (USPS-operated outlets in 
privately owned facilities), stamps by mail, stamps by phone, and 
third-party online vendors. We focused our review on retail portions 
of usps.com, USPS's self-service kiosks, and retail partnerships 
(specifically contract postal units, Approved Shippers, and stamp 
retailers), since USPS documents indicate these types of alternatives 
are the strategic focus of USPS's expanded access efforts. 

[16] USPS has eight self-service kiosks at locations other than post 
offices. According to USPS officials, these kiosks generally do not 
make as much revenue as those in post offices. 

[17] USPS has publicly reported higher figures for the number of stamp 
retailers. According to USPS officials, those figures include multiple 
access points at the same address (such as banks that have multiple 
automated teller machines that provide stamps) and locations not 
accessible to the general public, such as military bases and prisons. 

[18] Pub. L. No. 103-62, § 7 (Aug. 3, 1993), codified at 39 U.S.C. § § 
2801-2804. 

[19] GAO, Meeting the Fiscal and Performance Challenges Facing 
Government, [hyperlink, http://www.gao.gov/products/GAO-11-754CG] 
(Washington, D.C.: June 15, 2011); and Government Performance: GPRA 
Modernization Act Provides Opportunities to Help Address Fiscal, 
Performance, and Management Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-11-466T] (Washington, D.C.: Mar. 16, 
2011). 

[20] Additionally, USPS's comprehensive statement outlines a third 
strategic goal unrelated to retail alternatives, which is to improve 
employee engagement. U.S. Postal Service, 2010 Comprehensive Statement 
on Postal Operations (Washington, D.C.: 2010). 

[21] USPS officials told us that self-service kiosks were designed to 
allow customers to conduct up to 85 percent of the transactions 
available at a post office window; however, they also acknowledged 
that the actual percentage of transactions that can be done at a kiosk 
is smaller, since customers with multiple needs would use a window if 
at least one of those needs could not be fulfilled at a kiosk. 
According to USPS, most kiosks are available for use at any time, 
since many are located in an outer lobby of a post office that is 
accessible outside of regular business hours. 

[22] When considering placement of a new CPU, USPS assesses the needs 
of an area in order to determine the demand for and viability of a 
potential CPU. Some factors that USPS uses in this assessment include 
projected growth in an area and feedback from customers suggesting 
that access to services should be expanded. 

[23] Since the redesign of usps.com is ongoing, we were unable to 
assess the outcomes of this effort. We examined how USPS's plans to 
redesign the site to make it more useful for customers correspond to 
industry best practices for retail Web sites, as discussed in appendix 
II. According to USPS planning documents, the redesign is scheduled to 
be completed in early 2012. 

[24] In some cases, postal services may also be less costly. For 
example, USPS offers a discount on the shipping options it makes 
available on-line through Click-N-Ship, making those shipping options 
less expensive than at post offices, and at least one national 
retailer that sells stamps has offered a discount off their standard 
price. 

[25] USPS's Web site provides links to third-party Web sites that 
provide additional online shipping options. 

[26] Approved Shippers receive no direct compensation from USPS, but 
can make money by charging more for products and services than they 
pay USPS to obtain them. As previously discussed, some retailers-- 
specifically CPUs and Stamps on Consignment participants--have 
specific agreements with USPS to sell stamps at face value or no more 
than face value. Other third-party retailers that sell stamps, 
including Approved Shippers, have no such agreements with USPS about 
pricing. 

[27] Self-service kiosks require a credit or debit card for payment, 
and usps.com requires either a credit card or an online billing 
service that allows users to pay directly from checking or savings 
accounts. 

[28] Access to broadband is particularly critical in rural areas, 
where advanced communications can serve to reduce the distances that 
isolate remote communities. We previously reported that millions of 
Americans either lack access to or do not use broadband Internet. A 
2009 Federal Communications Commission survey showed that 65 percent 
of American households had access to broadband Internet, but that 
there was less adoption for certain demographic groups such as those 
in rural areas, with incomes less than $20,000 per year, age 65 or 
older, and with no high school degree. GAO, Telecommunications: 
National Broadband Plan Reflects the Experiences of Leading Countries, 
but Implementation Will Be Challenging, GAO-10-825 (Washington, D.C.: 
Sept. 14, 2010). Furthermore, U.S. households are increasingly relying 
only on wireless phone service and therefore lack landlines necessary 
for dial-up Internet access. According to the Centers for Disease 
Control and Prevention's National Center for Health Statistics, more 
than one-fourth of U.S. households lacked landlines during the first 
half of 2010, and in states such as Arkansas, Mississippi, and Texas, 
about one-third of households lacked landlines. See S.J. Blumberg and 
J.V. Luke, Wireless Substitution: State-Level Estimates from the 
National Health Interview Survey, January 2007 - June 2010, a report 
for the Centers for Disease Control and Prevention, National Center 
for Health Statistics (Washington, D.C.: Apr. 20, 2011). 

[29] Most CPU contracts can be terminated by either USPS or the 
retailer with 120 days' notice; however, USPS can also terminate the 
contract with 1 day's written notice if it is deemed in the interest 
of USPS, which USPS officials said is generally because of fraud. 

[30] We requested information from USPS on the number of openings and 
closures that resulted in this net decrease, but USPS did not provide 
it. 

[31] According to USPS officials, they review a retailer's financial 
statements for the previous 3 years as part of the process for 
evaluating a potential CPU. We asked USPS officials to provide 
documentation of the requirements for these reviews, but they did not 
respond to our request. 

[32] Pub. L. No. 91-375, § 2, 84 Stat. 719 (Aug. 12, 1970), codified 
at 39 U.S.C. § 101(a), (b). 

[33] In a 2008 report on universal service, USPS said that having a 
more specific definition of universal service would unduly restrict 
USPS, resulting in harm to the American public and businesses it 
serves. USPS recommended that its universal service obligation be 
defined broadly so as not to prohibit or limit creating a more 
efficient network and replacing facilities with alternative access 
where appropriate, among other reasons. See USPS, Report on Universal 
Service and the Postal Monopoly (October 2008). 

[34] U.S. Postal Service: Foreign Posts' Strategies Could Inform U.S. 
Postal Service's Efforts to Modernize, GAO-11-282 (Washington, D.C.: 
Feb. 16, 2011). 

[35] Total USPS retail revenue for fiscal year 2010 was about $17.5 
billion, representing about one-fourth of USPS's total revenue of 
$67.1 billion for the year. All USPS revenue figures presented in this 
section have been adjusted to 2010 dollars to account for inflation. 

[36] We are presenting the figures on specific alternatives' retail 
revenue in rounded numbers in order to provide context for their 
relative contributions to USPS's overall revenue. USPS data on revenue 
from retail alternatives comes from various USPS sources that maintain 
the data in different ways and are therefore not comparable. For 
example, the data we provide about overall retail revenue come from 
USPS's audited accounting database, which contains reconciled revenue 
data, but data about specific types of alternatives come from 
unreconciled data that represent gross sales. Furthermore, there is 
some overlap in these data because some retail partners obtain the 
stamps they sell from USPS's Stamps on Consignment program, creating 
the potential to double-count some revenue when using the gross sales 
data. See appendix I for a more detailed explanation of our 
examination of USPS retail data. 

[37] As previously discussed, the number of CPUs also decreased during 
this period. 

[38] According to USPS's action plan, the average cost per revenue 
dollar of postage and package transactions at post offices was $0.23, 
while the average cost for all retail transactions at post offices 
ranged from $0.31 to $0.39. See USPS, Ensuring a Viable Postal Service 
for America: An Action Plan for the Future (Washington, D.C.: March 
2010). 

[39] USPS headquarters officials told us that the USPS Inspector 
General had studied cost savings from USPS self-service kiosks; 
however, according to USPS IG officials, they have not assessed 
whether USPS's kiosks achieved their intended cost-saving goal. 

[40] [hyperlink, http://www.gao.gov/products/GAO-11-282]. 

[41] U.S. Postal Service, Postal Accountability and Enhancement Act § 
302 Network Plan (June 2008). 

[42] [hyperlink, http://www.gao.gov/products/GAO-11-282]. 

[43] U.S. Postal Service Improvements Act of 2011. S. 353, 112th Cong. 
(2011); Postal Reform Act of 2011, H.R. 2309, 112th Cong. (2011); 
Postal Operations Sustainment and Transformation Act of 2011, S. 1010, 
112th Cong. (2011). 

[44] Pub. L. No. 103-62, codified at 39 U.S.C. § 2803. 

[45] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[46] The first phase, launched in July 2011, includes the redesigned 
tools for shipping and tracking packages, while the second phase, 
originally scheduled for the end of September 2011, adds redesigned 
tools and features, such as redesigned tools for locating postal 
retail outlets and requesting redelivery of a parcel. According to 
USPS officials, the release of some features planned for September was 
delayed until October 2011. In early 2012, USPS plans to complete the 
third phase, which includes the site's infrastructure redevelopment, a 
redesigned section for purchasing USPS products, and integration of 
the site's various components with other USPS systems. 

[47] GAO, U.S Postal Service: USPS Needs to Clearly Communicate How 
Postal Services May Be Affected by Its Retail Optimization Plans, 
[hyperlink, http://www.gao.gov/products/GAO-04-803] (Washington, D.C.: 
July 13, 2004). 

[48] In 2004, we recommended that USPS improve its transparency and 
communication about its retail optimization efforts. In responding to 
this recommendation, USPS provided Congress with a network plan in 
2008 that explained its strategy to make changes to its processing, 
transportation, and retail networks. That same year, USPS also 
redesigned its Web site to provide customers with better information 
about the location of post offices and retail alternatives. See GAO-04-
803. 

[49] Foreign post operators we studied modernized their brick-and- 
mortar retail networks by drastically reducing the proportion of 
facilities they operate relative to the proportion of those operated 
by others. According to all of the posts, retail modernization has 
either improved customer service or reduced operating and labor costs, 
or both. See GAO-11-282. 

[50] Additionally, those CPUs that are within the USPS financial 
accountability system--generally those on a fixed-fee contract--are 
subject to an annual audit to ensure that their stamp stock matches 
the amount allowed by their bond. CPUs on the newer, performance-based 
contract are responsible for purchasing their own stamps and are 
therefore not bonded or subject to this audit. 

[51] Since we obtained our evidence of USPS's lack of monitoring 
retail partners during site visits, we cannot determine the extent to 
which such reviews may or may not be occurring nationwide. 

[52] Although this discussion focuses on USPS's monitoring of 
partners' compliance with its policies and procedures, as noted, USPS 
is also responsible for conducting financial audits of CPUs within the 
postal accounting system. In 2009, the USPS Inspector General examined 
USPS's financial oversight of a judgmental sample of CPUs selected 
based on financial risk and found that USPS had not provided 
sufficient oversight. Specifically, the Inspector General found that 
USPS officials were not always timely in recording CPUs' financial 
information, did not collect outstanding cash and stamp shortages, and 
allowed CPUs to issue unauthorized and unsupported disbursements. The 
Inspector General recommended that USPS improve its oversight by 
developing an action to plan to recover the shortages and reinforce 
procedures for the review and input of CPUs' financial information. 
USPS agreed with the recommendations and said it was taking steps to 
address them. See USPS Inspector General, Management Advisory - High- 
Risk Contract Postal Units, FF-MA-09-003 (Mar. 31, 2009). 

[53] For example, we reported that risk-based monitoring of grantees 
would strengthen the Department of Health and Human Services' Healthy 
Marriage and Responsible Fatherhood initiative by helping the agency 
better identify recipients that were not meeting goals or complying 
with grant requirements. See GAO, Healthy Marriage and Responsible 
Fatherhood Initiative: Further Progress Is Needed in Developing a Risk-
Based Monitoring Approach to Help HHS Improve Program Oversight, 
[hyperlink, http://www.gao.gov/products/GAO-08-1002] (Washington, 
D.C.: Sept. 26, 2008). We also reported that a risk-based oversight 
approach could help land management agencies make better use of scarce 
resources in a manner that effectively addresses risk. See GAO, 
Federal Lands: Adopting a Formal, Risk-Based Approach Could Help Land 
Management Agencies Better Manage Their Law Enforcement Resources, 
[hyperlink, http://www.gao.gov/products/GAO-11-144] (Washington, D.C.: 
Dec. 17, 2010). 

[54] To minimize travel expenses, we selected the Northern Virginia 
district for our first site visit and, since it occurred early during 
our research before obtaining data from USPS, we consulted with USPS 
to identify suitable locations to visit. 

[55] For accounting purposes, USPS recognizes revenue from postage 
when a letter or package is mailed. Since customers may buy postage in 
advance, USPS adjusts postage sales for revenue reporting purposes to 
account for postage purchased but not yet used by customers. For 
example, for fiscal year 2010, USPS's balance sheets reflected a 
liability of $2.6 billion in deferred revenue from prepaid postage. 
See U.S. Postal Service, 2010 Annual Report (Washington, D.C.: 2010). 

[56] Although the redesign as planned in 2009 was due to be completed 
in September 2011, as of June 2011, USPS estimated that some 
components of the project would not be completed until January 2012, 
with some training extending until March 2012. The USPS Inspector 
General reviewed causes of the project's delays and cost overruns and 
recommended that USPS improve the planning phase of its project 
management process for implementing technology solutions. USPS agreed 
with this recommendation. USPS Inspector General, Project Phoenix 
Audit Report, IT-AR-11-009 (Sept. 14, 2011). 

[End of section] 

GAO’s Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the 
performance and accountability of the federal government for the 
American people. GAO examines the use of public funds; evaluates 
federal programs and policies; and provides analyses, recommendations, 
and other assistance to help Congress make informed oversight, policy, 
and funding decisions. GAO’s commitment to good government is 
reflected in its core values of accountability, integrity, and 
reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO’s website [hyperlink, http://www.gao.gov]. Each 
weekday afternoon, GAO posts on its website newly released reports, 
testimony, and correspondence. To have GAO e mail you a list of newly 
posted products, go to [hyperlink, http://www.gao.gov] and select “E-
mail Updates.” 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of 
production and distribution and depends on the number of pages in the 
publication and whether the publication is printed in color or black 
and white. Pricing and ordering information is posted on GAO’s 
website, [hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 
MasterCard, Visa, check, or money order. Call for additional 
information. 

Connect with GAO: 

Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at www.gao.gov. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]; 
E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, DC 20548. 

Public Affairs: 
Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, DC 20548.