oversight

Need To Increase Rates To Recover the Cost of Providing Service to Commercial Firms Renting Multiple Post-Office Boxes

Published by the Government Accountability Office on 1971-07-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

REPORT           TO THE CONGRESS
                         vT f,c- 2;;g
                       7

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                                     LM095562




Need To Increase Rates To Recover
The Cost Of Providing Service
To Commercial Firms
Renting M u ltiple Post-Office Boxes
                                                B-114874



United States Postal Service




BY THE COMPTROLLER    GENERAL
OF THE UNITED  STATES
                        cOMFTROLLER          GENERAL   OF   THE      UNITED        STATES
                                         WASHINGTON.    D.C.      205.48




     B-l   14874




     To the President   of the Senate    and the
&\   Speaker  of the House   of Representatives
 /
            This is our report          on the need to increase                       rates     to recover     the
     cost of providing  service          to commercial    firms                     renting      multiple    post-
     office boxes.

            Our review     was made            pursuant   to the              Budget  and Accounting      Act,
     1921 (31 U.S.C.   53), and the           act of September                 2, 1960 (39 U.S.C.    2206).

             Copies   of this report    are being   sent to the Director,      Office   of
      Management     and Budget;     to the Postmaster     General;    and to each mem-
      ber of the Postal      Rate Commission      and the Board     of Governors      of the
      U.S. Postal   Service.




                                                                  Comptroller               General
                                                                  of the United             States




                                      50TH     ANNIVERSARY                 1921-     1971
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          COMPTROiLER
                    GENERAL'S                       NEED TO INCREASE RATES TO RECOVER
    I     REPORT
               TO THECOlJGRESS                      THE COST OF PROVIDING SERVICE TO
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                                                    COMMERCIALFIRMS RENTING MULTIPLE
    I                                               POST OFFICE BOXES
    !                                           /   United States Postal Service  B-114874 z'&
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          DIGEST
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    I     WHYTHEREVIEWWASMADE
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                    Many commercial firms receiving large volumes of mail have been
    I               renting numerous post-office    boxes (multiple   boxes) for the pur-
    I
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                    pose of having Post Office Department employees sort their mail.
    I               Each box is designated by a firm as the address to which its
    I               customers and other correspondents are to send particular       types of
    I
    I               business correspondence.     In many instances there is no actual
    I               lockbox, but mail addressed to a box number is sorted and placed
    I
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                    in a mailbag for pickup by the addressee.       Boxes rented under these
    I               circumstances are referred to by the Postal Service as phantom
    I
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                    boxes.    (See p- 3.)
     I
.   I               The Department has been aware for some time that the cost of pro-
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     I              viding service to corranercial firms renting multiple    and phantom
     I              boxes exceeds the revenues derived from the rental of such boxes.
    I
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                    The Department, however$ has not taken affirmative      action to ad-
    I               just the rates to recover the cost.       Therefore, the General Ac-
    I               counting Office (GAO) has reviewed the Post Office Department's
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                    policy of establishing   rental rates formulWie‘a%d       phantom
                    boxes rented to comercial     firms.    (See p. 5.7
    i                   ._-_ ~. .-
    I
    I               The Postal Reorganization Act (84 Stat. 719), approved August 12,
    I               1970, provides for abolishing     the Post Office Department and
    i               creating the U.S. Postal Service and the Postal Rate Conrnission
    I               as independent establishments     of the executive branch of the Gov-
    I
    I               ernment.
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                   The Commission is responsible for reviewing and making reconnnended
    I              decisions on changes in postal rates and fees as proposed by the
    I              Postal Service.    Upon receipt of the Commission's decision,  the
    I              Board of Governors of the Postal Service may approve, allow under
    I              protest,  reject,  or modify the decision. The act also requires that
    I
    I              all classes of mail and all types of mail services recover their
    I              related costs.    (See pa 3.)
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         Tear   Sheet
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                                                                       JUtY19,1971
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FINDINGSANDCONCLUSIONS                                                           I
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     GAO estimates that the cost of providing mail service to commercial         I
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     firms renting multiple   and phantom boxes at 80 selected large post        I
     offices exceeds revenues by about $3.1 million     annually.  The excess     I
     cost primari1.v consists of the increased clerical    cost of sorting a         I
                                                                                     I
     large'volume Of mail sent to one recipient   who has numerous post:             I
     office boxes.   (See pp. 5 and 6.)                                              I
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RECOMMENDATIONS
            OR SUGGESTIOIVS                                                          I

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     GAO recoaunends that the Postmaster    General propose to the Postal             I
L,   Rate Conmission that:   Bb                                                          I
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        --Two classes of post-office-box    delivery    service be estab-                I
           lished--one class for the individual      or the businessman who              I
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           rents one box to receive mail normally delivered to his home                  I
           or business and one class for the commercial firm which rents                 I
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           more than one box.                                                            I
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        --Box rental rates for each class of box delivery service be ad-                  I
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           justed so that they will be sufficient    to recover the cost                     I
            incurred in providing such service.   ISee pa 13.)                               I
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AGENCY
     ACTIO&SAND UNRESOLVED
                        ISSUES                                                               I
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     The Postmaster General advised GAO that the box rental policy                           I
     would be revised and that an announcement of the new service and                        I
     fees would be made soon. (See p. 12.)                                                    I
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      On February 9, 1971, however, the Executive Assistant   to the                          I
      Deputy Postmaster General informed GAO that, because the Postal                         I
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      Rate Commission must review proposed fee changes, the Postal                             I
      Service could not say with assurance when new fees or services                           I
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      it might propose would become effective.   (See p. 13.)                                     I
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MATTERS
      FORCOiWI'DE~TIOIvBY THECONGRESS                                                             I
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     This report informs the Congress that the Postal Service has                                 I
     acknowledged the need for modifying the rental policy for mul-                                   I
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     tiple and phantom boxes to recover the costs of providing ser-
     vice to such boxes.                                                                              f
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                            Contents
                                                                Page

DIGEST                                                            1

CHAPTER

       1   INI'RODUCTION                                          3

       2   NEED TO INCREASE RATES TO RECOVERCOST OF
           PROVIDING SERVICE TO COMMERCIALFIRMS
           RENTING MULTIPLE POST-OFFICE BOXES                     5
              Use of multiple    and phantom post-office
                 boxes by commercial firms                        5
              Additional    cost incurred    in providing
                 mail service to firms renting multi-
                  ple and phantom boxes                           6
               Department proposals to increase rental
                  rates for multiple    boxes                     9
               Increase in rental    rates of all post-
                  office  boxes                                  11

           AGENCYCOMMENTSAND GAO EVALUATION AND REC-
           OMMENDATIONS                                          12
              Recommendations to the Postmaster Gen-
                eral                                             13

           SCOPEOF REVIEW                                        15

APPENDIX

       I   letter   dated   December 16, 1970, from the
               Postmaster   General to the General Account-
               ing Office                                        19

  II       Principal     management officials    of the Post
              Office Department responsible       for the ad-
              ministration    of activities   discussed in
              this report                                        21
COMPTiiOLLER
          GENERAL'S                NEEDTO INCREASE RATES TO RECOVER
REPORT
     TO THE CONGRESS               THE COST OF PROVIDING SERVICE TO
                                   COMMERCIALFIRMS RENTING MULTIPLE
                                   POST OFFICE BOXES
                                   United States Postal Service  B-114874


DIGEST
_-----

WHYTHEREVIEWWASMADE
    Many commercial firms receiving large volumes of mail have been
    renting numerous post-office    boxes (multiple   boxes) for the pur-
    pose of having Post Office Department employees sort their mail.
    Each box is designated by a firm as the address to which its
    customers and other correspondents are to send particular      types of
    business correspondence.     In many instances there is no actual
    lockbox, but mail addressed to a box number is sorted and placed
    in a mailbag for pickup by the addressee.       Boxes rented under these
    circumstances are referred to by the Postal Service as phantom
    boxes. (See p. 3.)
    The Department has been aware for some time that the cost of pro-
    viding service to commercial firms renting multiple   and phantom
    boxes exceeds the revenues derived from the rental of such boxes.
    The Department, however,. has not taken affirmative  action to ad-
    just the rates to recover the cost.    Therefore, the General Ac-
    counting Office (GAO) has reviewed the Post Office Department's
    policy of establishing  rental rates for multi le and phantom
    boxes rented to commercial firms.    (See p. 5.7

    The Postal Reorganization Act (84 Stat. 719), approved August 12,
    1970, provides for abolishing  the Post Office Department and
    creating the U.S. Postal Service and'the Postal Rate CorrYnission
    as independent establishments  of the executive branch of the Gov-
    ernment.

    The Commission is responsible for reviewing and making recolrtmended
    decisions on changes in postal rates and fees as proposed by the
    Postal Service.    Upon receipt of the Commission's decision, the
    Board of Governors of the Postal Service may approve, allow under
    protest,  reject,  or modify the decision. The act also requires that
    all classes of mail and all types of mail services recover their
    related costs.    (See p= 3.)




                                     1
FINDINGSAND CONCLUSIONS
    GAO estimates that the cost of providing mail service to commercial
    firms renting multiple  and phantom boxes at 80 selected large post
    offices exceeds revenues by about $3.1 million    annually.  The excess
    cost primarily consists of the increased clerical    cost of sorting a
    large volume of mail sent to one recipient   who has numerous post-
    office boxes.   (See pp. 5 and 6.)


RECOiWENDATIONS
             OR SUGGESTIONS
    GAO recommends that the Postmaster General propose to the Postal
    Rate Cotmrission that:

      --Two classes of post-office-box    delivery   service be estab-
         lished--one class for the individual     or the businessman who
         rents one box to receive mail normally delivered to his home
         or business and one class for the commercial firm which rents
         more than one box.

      --Box rental rates for each class of box delivery service be ad-
         justed so that they wi77 be sufficient   to recover the cost
          incurred in providing such service.   (See pm 13.)

AGENCY
     ACTIONSAND UNRESOLVED
                        ISSUES
    The Postmaster General advised GAO that the box rental policy
    would be revised and tha$ an announcement of the new service and
    fees would be made soon. (See p. 12.)

    On February 9, 1971, however, the Executive Assistant   to the
    Deputy Postmaster Genera7 informed GAO that, because the Postal
    Rate Commission must review proposed fee changes, the Postal
    Service could not say with assurance when new fees or services
    it might propose would become effective.   (See p. 13.)

MATTERS
      FORCONSIDERATION
                    BY TAECONGRESS
   This report informs the Congress that the Postal Service has
   acknowledged the need for modifying the rental policy for mul-
   tiple and phantom boxes to recover the costs of providing ser-
   vice to such boxes.




                                     2
                              CHAPTER1

                           INTRODUCTION

      The Postal Service rents post-office        boxes for the con-
venience and privacy of the public in accepting delivery           of
their mail.     In recent years    many  commercial  firms receiving
large volumes of mail have been renting numerous post-office
boxes (multiple    boxes) for the purpose of having Postal Ser-
vice employees sort their mail.         Each box is designated    by
a firm as the address to which its customers and other cor-
respondents   are to send particular      types of business corre-
spondence,    A department store,     for example, may rent one
box to receive remittances      from customers and another box
to receive merchandise orders.

      In many instances,    when post-office   boxes are not avail-
able in post offices     or when the volume of mail received by
a patron exceeds the capacity      of the largest post-office
box, businesses renting multiple      boxes do not have lockboxes
assigned to them, but their mail is sorted and placed in a
mailbag or other container     and held for pickup by the ad-
dressee,   Boxes rented under these circumstances       are referred
to by the Postal Service as phantom boxes.

       Before the Postal Reorganization      Act became effective,
the Postmaster General prescribed      policies    and rates for the
rental   of post-office  boxes (including     phantom boxes) pursu-
ant to general authority    contained    in the United States Code
(5 U.S.C. 301 and 39 U.S.C. 501).

       The Postal Reorganization         Act provides for abolishing
the Post Office Department and creating             the U.S. Postal
Service and the Postal Rate Commission as independent estab-
lishments   of the executive        branch of the Government of the
United States.     Effective       January 20, 1971, the Commission
is responsible    for reviewing        and making recommended deci-
sions on changes in postal rates and fees as proposed by the
Postal Service.      Upon receipt       of the Commission's decision,
the Board of Governors of the Postal Service may approve,
allow under protest,       reject,     or modify the decision.      In ac-
cordance with a resolution          of the Board (36 F.R. 7851, all
provisions   of the act are to be in effect            as of July 1, 1971.


                                     3
       The act requires       the Postal Service to become self-
sustaining.        Postal rates and fees are required        to be set
so that all postal revenues (including           appropriations    that
the Congress may make to cover the loss of revenues on con-
gressionally       declared free and reduced-rate      mail) equal ex-
penses as nearly as practicable.            The act provides criteria
for establishing        postal rates and fees and includes a re-
quirement      that all classes of mail and all types of mail
services     recover their related      costs.

       In fiscal   years 1969 and 1970, box rentals       received
from all 32,000 post offices      totaled  about $42 million       and
$44 million,     respectively.   At the time of our review, box
rental   rates ranged from $1.40 to $48 a box annually,           de-
pending on the size of the box and the salary level of the
postmaster     or superintendent  in charge of the local facility.
The Department did not have data readily        available     showing
the total number of post-office       boxes rented.




                                    4
                             CHAPTER2

               WED TO INCREASE RATES TO RECOVER

        COST OF PROVIDING SERVICE TO COMMERCIALFIRMS

              RENTING MULTIPLE POST-OFFICE BOXES

       The cost of providing    post-office-box     mail service to
commercial firms renting multiple         and phantom boxes substan-
tially   exceeds related   revenues, because rental        rates are
not sufficient   to recover the cost associated         with sorting
the large volume of mail addressed to these boxes,

      On the basis of a Department study, we estimate that
the cost of providing   mail service to commercial firms rent-
ing multiple  and phantom boxes at 80 selected large post of-
fices exceeds revenues by about $3.1 million   annually.

       Although the Department has recognized for some time
that the rental     rates for post-office      boxes are not adequate
to recover the cost of providing        service to commercial firms
renting multiple      and phantom post-office     boxes, the Depart-
ment has not taken affirmative       action to adjust post-office-
box rental    rates to recover such cost.

USE OF MULTIPLE AND PHANTOMPOST-OFFICE BOXES
BY COMMERCIALFIRMS

      A Department official   advised us that, within       the last
15 years, the use of multiple     and phantom post-office       boxes
by commercial firms had become widespread.          For example, in
April 1968 a bank in Detroit,     Michigan,   in commenting on a
Department proposal to curtail     the renting    of multiple    and
phantom boxes, advised the Department that it was renting
225 post-office   boxes to segregate its mail.         The bank
stated that during a typical    month about 190,000 pieces of
mail were handled through its multiple       post-office    boxes.

      On May 2, 1968, a Department official,         in reply to an
organization     that had commented on the Department's       proposal
to curtail    the renting      of multiple and phantom boxes, gave
the following      description    of the evolution  and use of multi-
ple and phantom boxes,

                                   5
      "The practice     of renting     multiple and nonexis-
      tent [phantom] boxes has developed because of the
      advantages to firms,       banks, and mailer agents, in
      having post office       employees perform an intra-
      firm separation      of their mail by individual     de-
      partments,    client    accounts,    etc. As many as 600
      boxes or box numbers for nonexistent         boxes have
      been rented to one firm Which acts as a represen-
      tative   for many clients.        As many as 14,700 non-
      existent    boxes are rented at a single post office.
      These practices      are proving burdensome and costly."

       Department officials        advised us that the use of multi-
ple and phantom boxes went far beyond the scope of the orig-
inal intent     of post-office-box       service,      They stated that
post-office-box     service originally        was intended to provide
convenience and privacy to private             individuals   in the deliv-
ery of mail and that it was not intended that Department em-
ployees would sort large volumes of mail addressed to cjne
firm into various boxes.

ADDITIONAL COST INCURRED IN PROVIDING
MAIL SERVICE TO FIRMS RENTING
MULTIPLE AND PHANTOMBOXES

        In many instances   the cost to the Department of provid-
ing service to firms renting multiple       and phantom boxes
greatly    exceeds the rental    fees. The additional   cost pri-
marily consists     of the increased clerical    cost of sorting  a
large volume of mail being sent to one recipient        who has
numerous post-office      boxes,

      A 1957 Department study showed that at the Minneapolis
Post Office the additional   clerical cost to the Department
to segregate mail of holders of commercial multiple   and
phantom boxes was about $38,000 a year and that revenues of
about $4,200 a year were received from the three firms which
accounted for most of such mail.

       Moreover, a study of post-office    boxes performed by the
Department in 1968 showed that,      on the basis of the average
clerical   salary applicable   at that time, the annual cost of
providing   mail service to multiple    and phantom boxes in 80
large post offices    was about $3.3 million,    whereas the rev+.
nues received from rental    of the boxes were about $1 million.

                                   6
      Because the Department's    1968 study had been conducted
before our review was undertaken and because supporting         doc-
uments were not available     for our inspection,    we were un-
able to verify   the Department's   data,   We visited   two of
the 80 post offices   included in the Department's      1968 study
and one other post office     to observe the handling of multi-
ple and phantom box mail and to discuss such mail with
postal employees.

       Cur observations     and discussions     confirmed that addi-
tional    labor costs were associated       with sorting     mail to mul-
tiple    and phantom boxes.     For example, at the Washingtoh,
D.C., Post Office,      a bank rents 33 post-office         boxes to have
its mail sorted by depositors        having large volumesbof trans-
actions.      When mail arrives    at the post-office-box        section
of the Washington, D.C., Post Office,           postal employees sort
the bank's mail from all other mail.            Post office     employees
must then sort the bank's mail to the 33 individual               box num-
bers.     This letter   sorting  would not be required        if multiple
boxes were not involved.

       A post-office   employee in the box section estimated
that mail for this bank and another bank which rented 26
post-office     boxes accounted for about 10 to 15 percent of
the total volume of mail handled in the box section.           He ad-
vised us that sorting     mail for the two banks was cumbersome
and time-consuming     and estimated   that about 34 postal-clerk-
hours a week were required      to sort mail to the banks' multi-
ple boxes.

       On the basis of this estimate         and the Department's   na-
tional   productive   hourly pay rate      for postal clerks of
$5.61, the clerk time required      to     sort mail to the two banks'
multiple    boxes costs about $9,900       annually,   The annual rev-
enue received from the two banks         for box rentals    is about
$2,800, leaving an excess of cost          over revenue of about
$7,100 annually.

      In several letters      written    during April and May 1968
to organizations      and individuals      who had commented on the
Department's     proposal to curtail       the renting  of multiple
and phantom boxes,      Department    officials    gave the  following
explanation    of the additional      cost associated    with multiple
and phantom boxes.

                                    7
      "Distribution          costs to the Department constitute
      the basic problem involved in this service,
    / Never    less than two, generally            three, and some-
      times four additional            handlings are required        to
      effect     delivery      under the present practices.           Ad-
      ditional     equipment and space are necessary,                The
      post office         is providing    personnel to perform
      clerical     mail distribution         duties which should be
      performed by the personnel employed by those rent-
      ing multiple          and nonexistent     boxes.     This detailed
      separation        of mail before delivery         for a single
      recipient       is not an inherent        service of the post
      office.       It is a separation        which naturally       should
      be made according to the recipients'                 internal   or-
      ganization,        by the recipients'       own employees, af-
      ter the mail is delivered."

         In a letter  dated August 15, 1968, another Department
official,     in commenting on an organization's    recommendations
for improving the mail service,        stated that space limita-
tions at many post offices      precluded the installation        of
additional      box equipment and that firms renting     multiple
boxes deprived other patrons of the use of the post-office-
box service.




                                      8
DEPARTMENTPROPOSALSTO INCREASE
RENTAL RATES FOR MULTIPLE SOXES

       In June 1962 a Department study of multiple         and phantom
boxes recommended that the Department curtail          the multiple
and phantom box service,        The Department did not propose
changes in post-office-box       service until    1968. The Depart-
ment deferred action on the 1962 proposal,          because it be-
lieved that action at that time would adversely           affect  the
cooperation    of large-volume    mailers   in the Department@s Na-
tionwide    Improved Mail Service program.        This program, which
was initiated     in July 1961, was a cooperative      program under
which the Department encouraged large-volume          mailers to pre-
sort and schedule their mailings         so that mail could be han-
dled more efficiently      by the Department,

      In March 1968 the Department proposed in the Federal
Register that,   effective    July 1, 1970, multiple  and phantom
boxes be eliminated      and postal patrons be allowed to rent
only one box at each post office.

       On April 15, 1968,'the       Department initiated     its study
of post-office-box       service at 80 selected large post offices
throughout     the country.      The purpose of the study was to de-
termine the number of multiple          and phantom boxes being
rented, the rental       revenues received from those boxes, and
the additional     clerical     cost incurred   in providing    mail ser-
vice to such boxes.         Reports on the study, issued in May
1968, showed that the 80 post offices           were renting    over
40,000 multiple     and phantom boxes, that the annual rental
revenues were about $1 million,          and that the annual cost of
providing    mail service to the multiple         and phantom boxes was
about $3.3 million.

       On the basis of the results     of the 1968 study, Depart-
ment officials     on August 27, 1968, proposed to the Executive
Assistant    to the Postmaster General that the rental      rates
for multiple    and phantom boxes be increased to three times
the then-existing     rental rates,   which ranged from $1.40 to
$48 a box annually depending on the size of the box and the
salary level of postmaster      or superintendent   in charge of
the local facility.       A Department official   advised us that




                                    9
the proposed rate increase was intended to recover most, if
not all,   of the additional   cost incurred by the Department
in providing    service to holders of these boxes.

       On September 20, 1968, the Department       pub!ished   a no-
tice   in the Federal Register,  which

       --proposed   that the rental rates on all multiple    and
          phantom boxes in excess of an initial   box be in-
          creased to three times the regular rate;

       --rescinded   the March 1, 1968, proposal to restrict
          postal patrons to one box at each post office;     and

       --announced that the Department would undertake a full-
          scale study of post-office-box  service, including the
          cost problems that prompted issuance of the March 1,
          1968, proposal.

The decision to rescind the March 1, 1968, proposal was
based on the complaints      of many commercial firms that they
relied   heavily   on the convenience of renting    multiple boxes.
A Department official      advised us that about 20 percent of
the firms commenting to the Department on the proposal had
volunteered     to pay increased rates to maintain the service,
even though the Department had not requested interested
parties   to comment on the acceptability     of increased rental
rates.

      On January 17, 1969, the Postmaster General announced
that the proposal to triple     the rental rates for multiple
and phantom boxes was being withdrawn,     pending the comple-
tion of a more detailed    study which was expected to be com-
pleted in the spring of 1969. He stated,        however, that an
adjustment   in the rental  rates for post-office    boxes could
be expected.

      The Department initiated     the study in February 1969
and obtained data from 288 post offices         in different    parts
of the United States during the period February through
March 1969.     A study report was not prepared,        however, nor
were any conclusions      or recommendations   finalized,     A De-
partment official     informed us that the study was not com-
pleted because of other high-priority        assignments.


                                  10
        The data obtained by the Department from the 288 post
offices    included the number of all post-office       boxes by
size, the number of patrons renting        these boxes, and the
volume of letter      mail processed in the box sections      of the
post offices     during a 4-week period.      The Department,    how-
ever, did not obtain data on the cost incurred          in distribut-
ing mail to multiple        and phantom boxes, and a responsible
Department official       informed us that he did not know why
such cost data was not obtained.

       In view of the lack of such cost data, we believe that
the data obtained in 1969 from the 288 post offices     will
not afford a sound basis for establishing    rates for the
rental   of multiple and phantom boxes.

INCREASE IN RENTAL RATES
OF ALL POST-OFFICE BOXES

        Due to increased labor cost, the Department,       in Decem-
ber 1970, increased rental       rates for all post-office    boxes
an average 20 percent.        Applying the increased rental    rates
and labor cost to the data obtained in the Department's           1968
study of post-office     boxes, we estimated that the annual
rental    rates from multiple    and phantom boxes at the 80 post
offices    would be about $1.2 million,     whereas the cost of
providing     services to these boxes would be about $4.3 mil-
lion.




                                  11
                             CHAPTER 3

                        AGENCY COMMENTSAND

             GAO EVALUATION AND RECOMMENDATIONS

        On September 29, 1970, we brought our findings     to the
attention     of the Postmaster General and suggested that
rental    rates for multiple   and phantom boxes be increased to
recover the cost incurred      by the Department in providing
mail service to such boxes.

      In responding to our proposal, the Postmaster General
informed us on December 16, 1970 (see app. I), that the De-
partment had reviewed its policy on the rental of multiple
and phantom boxes and had concluded,   in part, that:

     --The postal lockbox system served two distinct
        markets--the  individual or businessman who rented one
        or more boxes in the lobby of post offices   to receive
        mail normally delivered  to his home or place of busi-
        ness and the commercial firm which received large
        volumes of mail addressed to one or more post-office
        boxes but who, for reasons of volume, did not use
        lockboxes.

     --There should     be separate        schedules   of fees   for   the
        two different    services.

      A Department official      advised us that commercial firms
which rented multiple     post-office    boxes and which received
large volumes of mail should be included with those which
used phantom boxes.

      The Postmaster General also said that the Department's
box rental  policy would be revised in accordance with our
suggestion  that rental rates for multiple  and phantom boxes
be increased to recover the cost of providing   the service
and that an announcement of the new service and fees would
soon be made.

      The Postmaster General also stated that, on a national
basis, the $41 million  currently received in box rentals


                                      12
covered the cost of providing  the service, although at cer-
tain large post offices  the added cost of providing  commer-
cial box service exceeded the revenue derived therefrom,

     Department data shows that the box rentals      received
from all 32,000 post offices     in fiscal  year 1969 were about
$42 million  and costs allocated     to box rental service were
about $38 million.     In fiscal   year 1970 total box rentals
were about $44 million    and the cost was about $40 million.

       The cost allocated       by the Department to the box rental
service primarily      consists    of depreciation,      space, mainte-
nance, and clerks'      salaries     for collecting    rent from post-
office-box    patrons.    The cost of sorting        mail to multiple
and phantom boxes, however, is allocated             by the Department
to the class of mail being sorted, rather than to box rental
service.     Therefore   the Department's        cost data for all post
offices    does not include all the cost associated            with pro-
viding mail service to multiple          and phantom boxes.

      On February 9, 1971, the Executive Assistant    to the
Deputy Postmaster General informed us that, effective      Janu-
ary 20, 1971, because the Postal Rate Commission must review
and make recommended decisions    on proposed fee changes the
Department could not say with assurance when any new fees or
services it might propose would become effective,       He stated,
however, that the Department would inform us of its progress
in obtaining   approval of new fees,and   services for multiple
and phantom boxes.

       On June 2, 1971, a Department official       advised us that
the Department was developing      proposals  that would make the
renting   of multiple  post-office    boxes equitable.

RECOMMENDATIONS
              TO THE POSTMASTERGENERAL

       We recommend that the Postmaster General propose to the
Postal Rate Commission the establishment         of two distinct
classes of post-office-box     delivery   service--one   for the in-
dividual    or businessman who rents one box to receive mail
normally delivered     to his home or place of business and one
for the commercial firm which, for reasons of volume, rents
multiple    or phantom boxes.   We recommend also that the Post-
master General propose adjustments      in box rental    rates

                                     13
sufficient to recover the.cost incurred by the Postal Ser-
vice in providing mail service to each class of box delivery
service.




                              14
                             CBAPTER 4

                          SCOPE OF REVIEW

      We reviewed Department policies,         procedures,   and rec-
ords relating   to the renting     of post-office      boxes and inter-
viewed Department officials      responsible       for making cost
studies and administering      multiple   and phantom post-office-
box activities.    We  visited   postal   facilities     in Denver and
Boulder, Colorado,    and Washington, D.C., to observe the han-
dling of mail for multiple      and phantom boxes and discussed
the handling of such mail with postal employees.             Our work
was performed primarily      at Department headquarters,       Washing-
ton, D.C., during the period March 1970 through April 1971.




                                   15
      APPENDIXES




i6d   17
                                                              APPENDIXI




                                                  December 16, 1970


Dear Mr. Neuwirth:

On the basis of your letter of September 29, I have directed that a review
be made of our policy on the rental of multiple and phantom boxes,

This review has concluded that:

    (a) there is a demonstrated public need for the lockbox
         services we offer, including multiple and phantom
         boxes;

    (b) the postal lockbox system serves two distinct markets:
         the individual or businessman who rents one or more
         lobby boxes to receive mail which would normally be
         delivered to his home or place of business, and the
         commercial customer who receives large volumes of
         mail addressed to one or more P. 0. Box numbers,
         but who, for reasons of volume, does not use physical
         boxes ;

    (cl on a national basis, the $41 million currently received
         in box rentals covers the cost of providing the service,
         although at certain large offices the added cost of pro-
         viding commercial box service exceeds the revenue
         derived therefrom; and

    (4 there should be separate schedules of fees for the two
         different services.

As a result of these findings, we are adopting your suggestion that adjustments
be made. Before new rates can be announced, however, it will be necessary
to define the new service and to promulgate instructions to post offices, In
light of the reaction to earlier Post Office Department proposals, first to
restrict box services and then to modify the pricing schedule, we believe it
desirable to discuss our proposals with representatives of those industries
most directly affected, before announcing them publicly.


                               l6P   19
APPENDIX   I


I have directed that steps be taken promptly to modify our box rental policy
in accordance with your recommendations and the above findings, with a
target date for the announcement of the new fees and service in January, 1971.

                                      Sincerely,



                                      Winton M. Mount

Mr. Max A. Neuwirth
Associate Director, Civil Division
U. S. General Accounting Office
Washington, D. C. 20548




                                     20
        .                                                 APPENDIX II
.



                    PRINCIPAL MANAGEMENTOFFICIALS OF

                       THE POST OFFICE DEPARTMENT

            RESPONSIBLE FOR THE ADMINISTRATION OF ACTIVITIES

                        DISCUSSED IN THIS REPORT


                                              Tenure of office
                                              From             To

    POSTMASTERGENERAL:
       Winton M. Blount                    Jan.    1969    Present
       W. Marvin Watson                    Apr.    1968    Jan.    1969
       Lawrence F. O'Brien                 Nov.    1965    Apr.    1968
       John A. Gronouski                   Sept.   1963    Nov. 1965
        3. Edward Day                      Jan.    1961    Aug. 1963
       Arthur E. Summerfield               Jan.    1953    Jan.    1961

    DEPUTY POSTMASTERGENERAL:
       Vacant                              Jan.    1971    Present
       Elmer T. Klassen                    Feb.    1969    Jan.    1971
       Frederick  C. Belen                 Feb.    1964    Jan.    1969
        Sidney W. Bishop                   July    1963    Feb. 1964
       Vacant                              July    1962    July    1963
       H. W. Brawley                       Jan.    1961    July    1962
       John M. McKibbin                    Oct.    1959    Jan.    1961
       Edson 0. Sessions                   Sept.   1957    Oct.    1959
       Maurice H. Stans                    Oct.    1955    Sept. 1957

    ASSISTANT POSTMASTERGENERAL,
      BUREAU OF OPERATIONS:
        Frank J. Nunlist                   Apr.    1969    Present
        Vacant                             Dec.    1968    Apr.    1969
        William M. McMillan                Feb.    1964    Dec. 1968
        Frederick C. Belen                 Mar.    1961    Feb. 1964
        Bert B. Barnes                     Nov.    1959    Mar.    1961
        John M. McKibbin                   Feb.    1957    Oct.    1959




                                    21
       APPENDIX II                                                            .



                                                  Tenure     of office
                                                  From                   To
                                                                         -

       ASSISTANT POSTMASTERGENERAL,
         BUREAU OF FINANCE AND ADMINIS-
         TRATION:
           James W. Hargrove                   Feb.   1969      Present
           Ralph W. Nicholson                  Mar.   1961      Feb.    1969
           Vacant                              Jan.   1961      Mar.    1961
           Hyde Gillette                       Feb.   1957      Jan.    1961

       ASSISTANT POSTMASTERGENERAL,
         BUREAU OF PLANNING AND MARKET-
         ING (note a>:
           Ronald B. Lee                       June   1969      Present

       aOn June 5, 1969, the functions   of the Office    of Planning
        and Systems Analysis,  Bureau of Operations,    were transfer-
        red to the Bureau of Planning and Marketing     which was
        created as an independent establishment    reporting    to the
        Postmaster General through the Deputy Postmaster General.




U.S.   GAO.   Wash.,   D.C.
                                      22