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Audit Report – MS-AR-15-003 – 04/08/2015
Background
The U.S. Postal Service offers its commercial customers special arrangements called plant load agreements. These agreements stipulate that the Postal Service will verify and pick up mail at a customer’s plant and transport it directly to a Postal Service destination facility. In return, the customer agrees to provide sufficient mail volume and revenue to offset transportation costs and yield a net cost savings for the Postal Service.
Plant loading bypasses handling at a Postal Service facility, which reduces processing time, staffing, and dock space requirements. Plant load agreements should be financially and operationally beneficial to the Postal Service and are a productive way to foster positive relationships with customers.
District staff and postmasters help initiate, coordinate, and monitor plant load agreements. They should also monitor performance under these agreements since conditions – such as mail volume and transportation routes – can change.
Our objective was to assess how effectively plant load agreements in the Central Pennsylvania District protectPostal Service revenue and control costs. We selected this district because it presented an opportunity for cost savings based on revenue. The district had 40 plant load agreements as of October 2014. In fiscal year (FY) 2014, these 40 agreements were associated with revenue of over $1.7 billion.
What The OIG Found
The Central Pennsylvania District was not sufficiently approving and monitoring plant load agreements. Thirty-eight of 40 agreement documents were missing information such as signatures, expiration dates, and cost analysis; and some contained errors. Additionally, twenty-two of the 25 plant loads observed did not meet the minimum requirements for volume or weight. District management was also not aware that some plant loads had reduced activity. This occurred because management did not have an adequate system in place to monitor compliance with plant load agreement requirements.
As a result, there is an increased risk of unnecessary transportation-related costs. We estimated transportation costs of $1.14 million in FY 2014 as disbursements at risk.
What The OIG Recommended
We recommended the district manager, Central Pennsylvania District, improve current procedures to ensure compliance with plant load agreements, particularly provisions related to approving and monitoring these agreements.