GAO adds Postal Service to list of high-risk federal programs

It's official: delivering the mail is a risky business. The General Accounting Office Wednesday added the Postal Service's long-term outlook and its efforts to make significant organizational changes to its "high-risk" list, which identifies government agencies and programs vulnerable to fraud, waste, abuse and mismanagement. "We believe that the service's deteriorating financial situation calls for prompt, aggressive action, particularly in the areas of cutting costs and improving productivity," GAO Comptroller General David Walker told the House Government Reform Committee, adding, "it is not clear how the service will address its mounting financial difficulties and other challenges." Postmaster General William Henderson, who is leaving the agency after 30 years in May, agreed with GAO's decision. He said the agency, faced with declining revenues and increasing costs, could lose between $2 billion and $3 billion this fiscal year. That number could go higher if the economy continues to weaken. To stave off the projected shortfall, the Postal Service is expected this summer to file another rate increase with the Postal Rate Commission. The hike could be as much as 15 percent across-the-board. Rates were raised 4.6 percent in January. The agency also embarked on a series of cost-cutting moves, hoping to save $2.5 billion by 2003. It halted all capital projects for the remainder of the year, saving about $1 billion. That means no new construction, new leasing or expansion projects. More than 800 projects are affected. The agency also plans to reduce total working hours through improved productivity, reduce administrative costs by 25 percent and cut transportation costs by 10 percent over the next five years. But Walker pointed out that the agency has not laid out a plan for achieving those savings. The agency historically has difficulty meeting its projections. In another highly publicized move, the Postal Service is studying what it might save by canceling Saturday mail delivery, and is looking at whether some "poorly performing" post offices should be closed. Henderson, questioned on the subject repeatedly by committee members, said no decision has been made to cut Saturday delivery. Even so, Congress typically includes a provision in the Treasury appropriations bill requiring Saturday delivery. The agency is prohibited by law from closing rural post offices. GAO staff accused the Postal Service of picking at low-hanging fruit rather than taking a serious look at systemic changes to drive down costs. Committee staff and other agency observers wondered if Postal Service officials are playing a dangerous political game: Cut costs in high profile areas to get Congress' attention and thus gain momentum for legislative reform. Henderson said the agency needs more flexibility in how it sets prices, in its ability to rapidly introduce new products and in labor negotiations. Rep. John McHugh, R-N.Y., spent nearly six years trying to get Congress to enact postal reform. His legislation never made it to the full House Government Reform Committee. Postal Service officials never fully supported the legislation. In fact, it wasn't until last December that the Postal Service's board of governors even endorsed the notion of legislative reform. "Well John, it looks like you are the one guy in this room who has the right to say, 'I told you so,'" Committee Chairman Dan Burton, R-Ind., told his colleague. Burton urged all stakeholders to work together to submit a package of legislative reform ideas to the committee. He and ranking member Henry Waxman, D-Calif., pledged to develop a bipartisan reform bill.