Financial Management

The Postal Service is required to reimburse the government for some cost-of-living adjustments (COLA) and health benefits that Postal Service retirees received during fiscal years 1972-90. GAO estimated a total of $1,728.5 million in interest on the amount that the Postal Service is required to pay--$782.5 million higher than the amount in the President's 1994 budget proposal. The estimates differed because of the choice of interest rates and the principal balances used in the calculations. For the period covered by the calculations, GAO's interest rates averaged about nine percent annually for COLAs and about eight percent annually for health benefits, whereas the President's proposal used a five percent figure to calculate amounts. GAO applied its calculated interest rates to the $2.1 billion in the 1990 Omnibus Reconciliation Act, while the amount in the budget relied on the $3 billion figure that the administration had calculated.

GAO found that: (1) the estimated total interest was $1.728 billion, which exceeds the amounts contained in the President's 1994 budget proposal by $782.5 million; (2) the estimates differed because of the interest rates and principal balances used in the calculations; (3) interest rates averaged 9 percent annually for cost-of-living adjustments and 8 percent annually for health benefits; and (4) the principal amounts used in calculating the President's budget proposal were higher.