December 20, 2009, marks the third anniversary of the enactment of the Postal Act of 2006. Over the past three years, the Postal Service has worked to successfully implement the Act’s requirements to date. Highlights are detailed below.
The Postal Service was required by the Postal Act to establish service standards for all market dominant products, and then to measure and report on its service performance against those standards. At the start of 2009, the Postal Service began using a combination of internal and external systems to measure the service performance of all market dominant products, including First-Class Mail, Periodicals, Standard Mail, Package Services, and Special Services. Service performance results are posted at usps.com/serviceperformance, and results are updated on a quarterly basis. These systems are being refined to provide more robust measurement data in the future. Maintaining a high level of service performance is important to the Postal Service and its customers, and these measurement data support continuous improvement efforts.
The Postal Regulatory Commission (PRC) was required by the Postal Act to submit a report to the President and Congress on universal postal service and the postal monopoly. While not explicitly defined, the Postal Service’s universal service obligation is broadly outlined in statute and includes multiple dimensions such as geographic scope, range of products, access to services and facilities, delivery frequency, affordable and uniform pricing, service quality, and security of the mail. The Postal Service is obligated to provide all the various aspects of universal service at affordable rates.
To inform the discussion, the Postal Service issued its report on universal postal service and the postal monopoly on October 15, 2008. It is available at usps.com/postallaw/. In its report, the Postal Service recommended flexibility to allow it to be responsive as circumstances change over time, and recommended the postal monopoly be preserved since it is the current funding mechanism to help ensure the American public receives affordable, universal service. On December 19, 2008, the PRC issued its report to the President and Congress, recommending no changes at this time to either the universal service obligation or the monopoly.
In December 2008, the Postal Service filed its Annual Compliance Report (ACR) with the PRC. The Postal Act requires the report to include information on costs, revenues, rates, and quality of service associated with postal products. In addition, it requires the ACR to show that market dominant products do not subsidize competitive products and that each competitive product covers its costs. On March 30, 2009, the PRC issued its Annual Compliance Determination, a formal review of the ACR, which found the Postal Service to be in general compliance.
As follow-up to its June 2008 Network Plan to Congress, the Postal Service issued its first annual update to Congress in December 2008 regarding progress on the plan to rationalize its network of facilities and to achieve service standards.
The Postal Service was directed by the Postal Act to develop a process for imposing civil penalties for shipping hazardous materials. New regulations and Post Office notice signage have been issued regarding fines imposed for shipping hazardous substances.
Taking advantage of pricing flexibilities offered by the Postal Act, the Postal Service implemented the Standard Mail Volume Incentive Pricing program, or “Summer Sale,” effective July 1 through September 30, 2009. Eligible mailers who increased Standard Mail volumes above their past mailing history earned rebates of 30 percent on the additional volume. Mailers expressed overwhelming enthusiasm during the PRC’s review of the Summer Sale. The Postal Service also received approval to conduct a similar incentive pricing program for First-Class Mail.
The Postal Act requires the Postal Service to come into compliance with Section 404 of the Sarbanes-Oxley Act (SOX). Section 404 pertains to establishing internal controls for financial reporting, and evaluating and monitoring their effectiveness. The Postal Service has been operating under the following implementation timeline: plan and scope in 2007, document and remediate in 2008, test and remediate in 2009, and report and monitor in 2010 and beyond.
The Postal Service has begun testing the effectiveness of financial controls at facilities across the country and is on track to meet the requirement to have its 2010 Annual Report be SOX compliant. The testing phase of SOX implementation determines how consistently the Postal Service executes its internal controls. The tests also can help prevent or detect a significant misstatement on financial reports on such day-to-day activities as payroll, procurement, and revenue. Testing is an integral part of monitoring the effectiveness of financial controls. They help the Postal Service achieve a level of assurance that controls are in place and are helping prevent or detect a material misstatement on financial statements.
