Strengthening Postal Governance
Over time, the United States has developed sophisticated institutions, laws and rules to ensure postal workers do their jobs ethically and efficiently. But these rules require regular changes and updates if they are to keep pace with those who seek to use the mail system for illicit means. The U.S. Constitution charges Congress to govern America’s postal service. At the dawn of a new decade, an important question for this generation of legislators is how to improve oversight of the USPS.
The postal service pays for oversight of its operations with transfers from the agency’s revenues. It is managed by a board of governors who are responsible for the agency’s day-to-day corporate governance. As scholars at the Lexington Institute have pointed out, these individuals are offered compensation well below those of peers in the private sector despite having responsibilities similar to those of a corporate board. Increasing pay for these individuals would constitute a modest step toward ensuring these specialized, challenging-to-hire employees have a reason to choose public service over analogous roles in corporate America.
Beyond these five to nine individuals, the USPS employs three oversight and enforcement entities to investigate postal crimes, audit USPS internal processes and make sure its policy decisions comply with postal law. Respectively, these tasks are primarily done by the U.S. Postal Inspection Service (USPIS), the USPS Inspector General’s office (USPS OIG) and the Postal Regulatory Commission (PRC). Each role is important to the efficient operation of the USPS—they help avoid the fraud, waste and abuse that would undermine its status as the nation’s favorite government agency and overall most trusted brand. However, just because things are working it doesn’t mean they can’t be improved, and in an era when postal dollars are more scarce than ever, it’s important that legislators continue working toward improved oversight.
The simplest solutions involve improving USPS regulatory capacity by increasing the budgets of the USPS’ regulatory bodies. Last year, the Postal Service and the Postal Regulatory Commission suffered an embarrassing defeat in court after the agency’s annual stamp rate increase was deemed inadequately reviewed by the PRC. While they’ve gone back and corrected the analysis such that current stamp rates are compliant, the ruling exposed a lack of capacity at the PRC to conduct the reviews and analysis necessary to ensure the postal service sets stamp rates in compliance with postal law as designed by Congress.
Ensuring compliance takes time and money. The PRC has an annual budget of just $15-16 million, a figure only modestly increased since the agency’s creation more than a decade ago. Administering current obligations takes about 75 full-time staff, and about 80 percent of the PRC budget goes to pay for compensation of these employees. Increasing the PRC’s budget to add 10 staff to the Accountability and Compliance program would cost approximately $2.5 million; adding three “Public Access and Participation” staff as well as two “Integration and Support” staff to support them and some money for office space would bring the PRC budget to about $20 million. In doing so, the PRC would see its regulatory capacity increase by a quarter. This would still be a modest sum for an agency tasked with reviewing the financial reporting and regulatory approvals for a government body that handles more than $70 billion in sales per year, but it will equip postal regulators with the capacity to oversee the rate and rule changes that will be required for the USPS to adapt to a changing postal environment.
The USPS OIG’s operations, which include the postal inspection budget, cost $245 million per year in transfers of postal funds. The OIG had 1,034 staff in FY 2019, with about two-thirds working on investigations, and one-third working in the audit division. Investigations work to recover losses from fraud, theft and other abuses of the postal system, most often by postal employees. Audits help ensure postal rules and regulations are being followed internally, and provide recommendations for improving postal policy. This last function includes the OIG’s public policy research work, a service no other postal regulator has been given the mandate and budget to undertake. Together, the divisions identified more than $1.7 billion in realized and potential savings in FY 2018.
With a substantial return on the amount it spends, the USPS OIG could benefit from an expanded oversight budget. The postal service currently faces many new challenges, including curbing the amount of opioids shipped through the mail and expanded opportunities for theft brought on by the increasing number of parcels in the mail stream. To combat these threats, Congress could mandate that the USPS send an extra $30 million to the OIG for their investigation and audit operations. This would provide for 100 to 150 more employees, increasing the agency’s capacity by 10 percent and ensuring more leads can be followed and more fundamental postal research can be undertaken.
Similarly, the U.S. Postal Inspection Service plays a vital role in investigating theft, fraud and shipping of illicit goods through the mail stream. The USPIS is an integral part of USPS operations, employing more than 1,150 postal inspectors and another 1,200 or so support staff. The number of postal inspectors has fallen by almost half in the last 25 years, coinciding with a decline in letter volume and both the creation of the OIG in 1996 and expansion of PRC oversight authority in 2006. Despite this, USPIS remains the largest postal oversight body by number of staff, although the postal service does not disclose the agency’s budget. Staff of the PRC cost $200,000 per full-time equivalent employee, while staff of the USPS OIG require between 10 and 15 percent more. Using these numbers as a baseline, the USPIS budget is estimated to be approximately $500 million. This puts the implied total postal governance budget in FY 2019 at about $765 million, or just over one percent of postal revenues.
With a steady decline over many years and new political entities with their own oversight power, it is likely that the USPIS does not need more regulatory capacity. But the newer oversight bodies, the PRC and the OIG, have not seen regulatory capacity rise despite a changing postal market that creates new incentives for waste and fraud while creating new fiscal issues that the USPS must adapt to moving forward. Paying postal board members more would cost a trivial amount, while the proposed increases to the PRC and OIG budgets would amount to around $50 million, less than 6 percent of current postal oversight budgets. Considering the challenges the USPS will face in coming years, this investment may seem too modest before long.
Image credit: David Tran Photo
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