Financial Measurement Details

Operating Income measures the net of total operating revenue minus operating expenses. Operating expenses excludes the prefunding of future retiree health benefits and non-cash changes to the Workers’ Compensation liability that results from changes to interest rates or actuarial assumptions. The addition of Operating Income as a corporate indicator will focus attention on the importance of profitability and cash flow that is within management’s control.

To measure income and all other aspects of financial performance, the Postal Service employs a disciplined process conforming to the rigorous requirements of SOX. Accounting systems and financial reports are independently audited. Financial and accounting programs are also subject to audit by the Office of Inspector General and the Government Accountability Office, and financial procedures are protected against abuse by the Postal Inspection Service.

The Postal Service’s fundamental financial objective is to generate income sufficient to fully fund operations and expand the delivery network, while continuing to invest in improvements for the future. Since creation of the modern Postal Service in 1970, postage prices have increased at about the rate of inflation, despite large increases in costs such as fuel and health care. Postal Service prices are lower than most foreign posts, often dramatically so, even though the United States is larger and more geographically diverse than most.

Deliveries per Work Hour is an efficiency measure that compares the number of deliveries of all types (city, rural, highway contract route, Post Office Box, and Caller Service) with the total number of work hours used in all employee categories, including all field and headquarters managers, executives, and officers — even the postmaster general. This measure gets to the root of the challenges to the postal business model — the growing number of delivery points with declining mail volume.

This replaces TFP, which is solely an aggregate measure and not as useful for managing and motivating performance, which is a primary function of the Annual Performance Plan. Compared with TFP, Deliveries per Work Hour is a more basic measure of productivity while being a more versatile tool for managing productivity performance at functional and unit levels. TFP is a very technical measure that cannot easily be understood by non-specialists, and can also vary widely on an annual basis. It is best used for measuring trends over several years. The Postal Service will continue to measure and use TFP where it is appropriate.

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We welcome your questions and comments at:

Office of Strategic Planning

United States Postal Service

475 L’Enfant Plaza, SW

Washington, DC 20260-5126

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