Our Annual Report on Form 10-K as filed with the Postal Regulatory Commission, supplemented by online filings, details the financial performance of the Postal Service. Our fundamental goal is to generate income sufficient to fully fund operations and invest in improvements for the future. The Postal Reorganization Act of 1970 created the Postal Service as an independent entity of the federal government, with the responsibility to become self-sufficient. At the time, about 20 percent of the postal budget was provided through appropriations. USPS succeeded in eliminating public subsidies by 1983. We since have operated as a break-even organization, with postage rates increasing at about the rate of inflation in the general economy. The Postal Accountability and Enhancement Act of 2006 allowed the Postal Service to generate profits, but at the same time imposed additional costs, including the requirement to pre-fund retiree healthcare benefits.
This requirement caused financial distortions that made total revenue less useful as an indicator of postal financial performance and obscured actual operating results. This was described in the March 2, 2010, Ensuring A Viable Postal Service for America: An Action Plan for the Future. Total revenue was replaced by operating income for FY2011.
In FY2011, a new indicator — deliveries per work hour — was established to focus on our largest operating cost. This measure gets to the root of one of the Postal Service’s core challenges — the growing number of delivery points, which increase between .5 and 1.5 million each year, depending on the economy, while mail volume continues to decline.
The total number of deliveries is the number of delivery points multiplied by the number of delivery days. It includes all types of delivery. This is divided by the total number of work hours used in all employee categories, including managers and executives. The result is the number of annual deliveries completed per work hour used.
This measure replaced total factor productivity (TFP), which is an aggregate measure useful for measuring long-term organization-wide trends, but is less relevant as a functional and unit indicator and, as a technical measure, is less easily explained. The Postal Service will continue to measure and use TFP where it is appropriate.
USPS employs a disciplined process that conforms to rigorous requirements of financial reporting and is required by the Postal Accountability and Enhancement Act of 2006 to follow certain rules and regulations of the Securities and Exchange Commission in filing Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K. Accounting systems and financial reports are independently audited, and are subject to review by the Office of the Inspector General and the Government Accountability Office. Financial procedures are protected against abuse by investigations conducted by the Postal Inspection Service.
