Postal Service. My testimony will (1) focus on the performance of the Postal Service and the need for improving internal controls and protecting revenue in an organization that takes in and spends billions of dollars each year and (2) highlight some of the key reform and oversight issues that continue to challenge the Postal Service and Congress as they consider how U.S. mail service will be provided in the future. Last year, the Postal Service reported that it had achieved outstanding financial and operational performance. According to the Postal Service’s 1996 annual report, its fiscal year 1996 net income was $1.6 billion. Most recently, the Postmaster General announced that, during 1996, the Postal Service delivered 91 percent of overnight mail on time or better. Additionally, during fiscal year 1996, the Postal Service’s volume exceeded 182 billion pieces of mail and generated more than $56 billion in revenue. While these results are encouraging, other performance data suggest that some areas of concern warrant closer scrutiny. For example, last year’s delivery of 2-day and 3-day mail—at 80 and 83 percent respectively—did not score as high as overnight delivery. Such performance has raised a concern among some customers that the Postal Service’s emphasis on overnight delivery is at the expense of 2-day and 3-day mail. Additionally, although its mail volume continues to grow, the Postal Service is concerned that customers increasingly are turning to its competitors or alternative communications methods. In 1996, mail volume increased by about one-half of anticipated increase in volume. The Postal Service’s continued success in both operational and financial performance will depend heavily on its ability to control operating costs, strengthen internal controls, and ensure the integrity of its services. However, we found several weaknesses in the Postal Service’s internal controls that contributed to unnecessary increased costs. Another key reform issue is the future role of the Postal Service in the constantly changing and increasingly competitive communications market. We also identified several issues surrounding the Postal Service’s role in the international mail arena that remain unresolved. Oversight of the Postal Service Remains Important

despite the initiatives that have been established to address them. The Postal Service has made considerable progress in improving its financial and operational performance.
Why GAO Did This Study

GAO discussed the challenges that confront the Postal Service and Congress as they consider how to sustain the Postal Service's performance and maintain a competitive role in providing mail service to the American public in the future.

What GAO Found

GAO noted that: (1) the Postal Service reported that fiscal year (FY) 1996 represented the second year in a row that its financial performance was profitable and operational performance improved; (2) the Postal Service's 1996 net income was $1.6 billion and it delivered 91 percent of overnight mail on time; (3) additionally, for FY 1996, the Postal Service's volume exceeded 182 billion pieces of mail and generated more than $56 billion in revenue; (4) while these results are encouraging, other performance data suggest that some areas warrant closer scrutiny; (5) last year's delivery of 2-day and 3-day mail, at 80 and 83 percent respectively, did not score as high as overnight delivery; (6) the concern among customers is that the Postal Service's emphasis on overnight delivery is at the expense of 2-day and 3-day mail; (7) additionally, although its mail volume continues to grow, the Postal Service is concerned that customers increasingly are turning to its competitors or alternative communications methods; (8) in 1996, mail volume increased by about one-half of anticipated increase in volume; (9) containing costs is another key challenge that GAO has reported on previously; (10) GAO has also found several weaknesses in the Postal Service's internal controls that contributed to increased costs; (11) the Postal Service's continued success in both financial and operational performance will depend heavily on controlling operating costs, strengthening internal controls, and ensuring the integrity of its services; (12) the prospect that pending postal legislation may place the Postal Service in a more competitive arena with its private sector counterparts has prompted congressional consideration of some key reform issues; (13) these issues include how proposed changes to the Private Express Statutes may affect universal mail service, postal revenues, and rates; (14) another reform issue is the future role of the Postal Service in an increasingly competitive, constantly changing communications market; (15) congressional oversight remains a key tool for improving the organizational performance of the Postal Service; (16) one of the most important areas for oversight is labor-management relations; (17) despite the initiatives that have been established to address them, the long-standing labor-management relations problems GAO identified in 1994 remain unresolved; and (18) also, the Postal Service's automation efforts will continue to require the attention of both the Postal Service and Congress to ensure that increased productivity and an adequate return on investments are realized.