Postal Service's Method for Billing Federal Agencies for Penalty Mail

GAO discussed the Postal Service's method for billing Federal agencies for penalty mail. Penalty mail consists of all official U.S. Government mail, other than franked mail, which can be transmitted without prepayment of postage. It bears the words "Official Business," and "Penalty for Private Use, $300," and includes the name of the agency. Agencies are required to reimburse the Postal Service for penalty mail at the same rates as nongovernmental organizations. At the beginning of the fiscal year, agencies provide estimated mailing costs to the Service for the coming year. These estimates are used as the basis for periodic payments made by the agencies. At the end of the year, adjustments are made based on actual mail counts or sampling conducted by the agencies. If an agency does its own sampling, it may randomly select 2 weeks out of the year to make a complete count of all outgoing mail at its headquarters and all field locations. This count is then projected to other weeks and is used as the basis for computing mailing costs. Some agencies modify the sampling plan on a case-by-case basis. Other agencies choose not to perform their own sample and rely on the Revenue, Pieces, and Weights (RPW) method for determining mailing costs. RPW requires a continuous statistical sampling at selected post offices for identifying revenue costs associated with each class of mail type. A comparison of methods shows that there is no agreement between the results of the agency sample and the RPW amounts. GAO does not know if Federal agencies, particularly those using RPW, are paying too little or too much for postal services. Despite repeated attempts by the Postal Service to promote better mail management, some agencies are still: (1) understating their mail costs for budgetary reasons; (2) not having the funds to pay the bill; (3) not submitting the required documentation for their samples on a timely basis; (4) not doing their samples; and (5) submitting inaccurate data. Disagreements over certain items on bills routinely occur and are ironed out between the parties. Occasionally, an agency owes a significant amount and refuses to pay its bill. Cost effectiveness, agency accountability problems, legislative changes, and redesigning the present sample system are factors that must be considered regardless of the suggested solutions.