Background
Accurate billing determinant calculations are critical to ensure the U.S. Postal Service’s products cover their costs. Parcel Select was second to Priority Mail in revenue and was the top product by volume from fiscal year (FY) 2018 to FY 2022. The Postal Accountability and Enhancement Act of 2006 (PAEA) requires the Postal Service to produce an Annual Compliance Report (ACR) and provide the report to the Postal Regulatory Commission (PRC) within 90 days of the end of each fiscal year. The ACR analyzes cost, revenue, pricing, and quality of service for all products.
In support of the ACR, Postal Service management manually prepares billing determinant spreadsheets quarterly and at the end of each fiscal year. The Postal Service uses a contractor to provide quarterly and year-end volume data supporting the billing determinants.
What We Did
Our objective was to assess the competitive Parcel Select billing determinant process for FYs 2021 and 2022. We recalculated the Parcel Select billing determinants for FY 2021 through FY 2022 using the Postal Service price list, Special Weights Reports, and the Domestic Negotiated Service Agreements Revenue, Pieces, and Weights Report.
What We Found
The Parcel Select billing determinant calculations and process were generally accurate and complete. However, we identified a calculation error and an opportunity to improve the Parcel Select billing determinant standard operating procedures (SOPs). Specifically, the Postal Service miscalculated nonmachinable parcel volume and underreported Parcel Select revenue in Quarter 1 of FY 2022. Also, while management had SOPs in place, the procedures did not include key internal controls. Preparers stated they completed procedures to verify the accuracy of contractor data; however, we found management did not document these procedures to ensure they were applied consistently. In addition, management did not include PRC refiling criteria in the SOPs.
Recommendation
We recommended management update the Parcel Select billing determinant SOPs on a regular basis to ensure billing determinants are produced using documented, complete, and repeatable processes to validate contractor volume and revenue data and document criteria for when to refile billing determinants.