USPS reported a deficit of $1.68 billion for fiscal year 2001 and has  budgeted a deficit of $1.35 billion for fiscal year 2002. Currently, USPS’s  liabilities exceed its assets. Currently, cash flow from USPS operations is  insufficient to fully fund its operational and capital investment needs and  repay its debts. Transformation Required to Make USPS Financially Viable

A comprehensive transformation of the Postal Service is needed to ensure  its financial viability and fulfill its mission in the 21st century in the dynamic  communications and delivery sectors. Furthermore, USPS faces legal and practical constraints related to  restructuring its infrastructure, including closing or consolidating postal  facilities and realigning its workforce as its operations change. USPS’s basic business  model, which assumes that rising mail volume will help cover rising costs  and mitigate rate increases, is increasingly problematic as mail volume  either stagnates or further declines while costs continue to rise. Limited Progress Made to Increase Productivity

USPS has had long-standing difficulty in its efforts to increase postal  productivity. Comments from the U.S.
What GAO Found

The U.S. Postal Service (USPS) continues to experience deficits, severe cash-flow problems, rising debt, and liabilities that exceed its assets. USPS also lacks enough income to fund needed investments in safety, maintenance, expansion, and modernization and to cover its liabilities. USPS reported a $1.68 billion deficit in fiscal year 2001, up from $199 million a year earlier. The pressure to increase rates will mount as USPS contends with growing long-term obligations, including employee retirement and health benefits. Although USPS assumes that rising mail volume will cover rising costs and mitigate rate increases, this business model is increasingly problematic because of the potential for declining or stagnating mail volume. USPS has had little success in sustaining productivity increases. USPS' financial viability is also hindered by structural, legal, and practical constraints that make it difficult to close or consolidate postal facilities or realign the postal workforce. USPS must undertake a comprehensive transformation to address its financial, operational, and human capital challenges. USPS also needs to produce more timely and accessible financial information.