oversight

The Results Act: Observations on the Postal Service's June 1997 Draft Strategic Plan

Published by the Government Accountability Office on 1997-07-31.

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

                     United States
GAO                  General Accounting Office
                     Washington, D.C. 20548

                     General Government Division

                     B-277565

                     July 31, 1997

                     The Honorable Richard K. Armey
                     Majority Leader
                     House of Representatives

                     The Honorable John Kasich
                     Chairman, Committee on the Budget
                     House of Representatives

                     The Honorable Bob Livingston
                     Chairman, Committee on Appropriations
                     House of Representatives

                     The Honorable Dan Burton
                     Chairman, Committee on Government Reform
                       and Oversight
                     House of Representatives

                     The Honorable John M. McHugh
                     Chairman, Subcommittee on the Postal Service
                     Committee on Government Reform and Oversight
                     House of Representatives

                     Subject: The Results Act: Observations on the Postal Service’s June 1997
                     Draft Strategic Plan

                     On June 12, 1997, we were asked by the Majority Leader and Chairmen
                     Kasich, Livingston, and Burton to review draft strategic plans submitted by
                     the cabinet departments and selected major agencies for consultation with
                     Congress as required by the Government Performance and Results Act of
                     1993 (the Results Act). Chairman McHugh also asked that we include the
                     U.S. Postal Service’s draft strategic plan in our review. This letter is our
                     response to the request concerning the U.S. Postal Service.


                     Our overall objective was to review and evaluate the latest available
Objectives, Scope,   version of the Postal Service’s draft strategic plan. As you requested, we
and Methodology      specifically (1) assessed the draft plan’s compliance with the Results Act’s
                     requirements and its overall quality, (2) determined whether the Service’s
                     major statutory responsibilities are reflected in the plan, (3) determined
                     whether the plan addressed major management problems, (4) reviewed
                     the Service’s capacity to provide reliable information for measuring



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             results, and (5) determined whether the plan evidences input from
             consultations and interagency coordination for any cross-cutting
             functions.

             We reviewed the Postal Service’s June 16, 1997, draft strategic plan.
             Specifically, to determine whether the Service’s draft strategic plan
             complied with the requirements of the Results Act, we compared the plan
             with the Act’s requirements using our May 1997 guidance for congressional
             review1 as a tool. Our overall assessment of the Service’s draft strategic
             plan was generally based on our knowledge of the Postal Service’s
             operations and programs, and on our numerous reviews of the Service. We
             also reviewed the most recent reports on the Service’s financial statements
             by the independent, certified public accounting firm of Ernst and Young,
             LLP.2 See Related GAO Products at the end of this letter for a list of our
             recent major products related to the Postal Service.


             The Postal Reorganization Act of 1970 (P.L. 91-375) reorganized the former
Background   U.S. Post Office Department into the U.S. Postal Service, an independent
             establishment of the executive branch. It has a public service obligation to
             provide postal services to all communities, and it must largely finance its
             operations from its own revenue sources.3 As we recently reported, mail
             service is a long-standing part of American culture and business.4 The
             Constitution empowers only Congress to establish post offices,5 and it is a
             federal criminal offense for anyone other than the government to deliver
             most letters. The letter mail monopoly was created by Congress to ensure
             that the Service has sufficient revenues to carry out its public service
             mandates, including providing regular mail delivery service (typically 6

             1
              See Agencies’ Strategic Plans Under GPRA: Key Questions to Facilitate Congressional Review
             (GAO/GGD-10.1.16, May 1997).
             2
              The Postal Service is required to obtain an annual certification of the accuracy of its financial
             statements from an independent, certified public accounting firm. The Postal Service is unlike many
             federal agencies in that it is not subject to the Chief Financial Officers Act or the Federal Managers
             Financial Integrity Act.
             3
              The Postal Service does not depend on appropriations for its basic operations but receives some
             funds for, among other things, free and reduced rate mail, such as mail for the blind. In fiscal year
             1996, the Service reported $56.4 billion in operating revenues, of which $93.1 million was appropriated
             for free and reduced rate mail.
             4
              Postal Service Reform: Issues Relevant to Changing Restrictions on Private Letter Delivery
             (GAO/GGD-96-129A/B, Sept. 12, 1996).
             5
              As we recently reported, local post offices have long been a part of American culture and business,
             and the Postal Reorganization Act of 1970 provides that no small post office can be closed for
             economic reasons alone. See U.S. Postal Service: Information on Post Office Closures, Appeals, and
             Affected Communities (GAO/GGD-97-38BR, Mar. 11, 1997).



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days a week) to all communities, providing uniform rates for at least one
class of letter mail, and maintaining a national network of post offices.

Since 1970, the Postal Service has gained greater commercial freedom, the
scope of its monopoly has been narrowed, and competition has increased
from private delivery companies and electronic communications
alternatives. The mission of the Postal Service and its predecessor has
long been and continues to be debated, including the balance between
fulfilling its public service responsibilities and remaining a viable
self-financing entity. The House Subcommittee on the Postal Service is
currently considering comprehensive postal reform legislation (the Postal
Reform Act of 1997, H.R. 22) intended to grant the Service more flexibility
in setting postal rates and introducing new products and services, while
ensuring that a viable universal mail delivery system at reasonable rates
remains the primary mission of the Postal Service.

To carry out its mission, the Service has a presence in every community
across the country. The Postal Service is the nation’s largest civilian
employer with more than 860,000 employees as of the end of fiscal year
1996. In 1996, the Service maintained over 35,000 postal facilities and
delivered more than 180 billion pieces of mail to nearly 130 million
households and businesses. In fiscal year 1996, the Service raised more in
revenues than those of all but eight U.S. companies. In many respects, the
Postal Service operates much like a business in that it provides products
and services in an increasingly dynamic competitive environment.

The Results Act calls for the Service to submit a strategic plan to the
President and the Congress by September 30, 1997.6 The Service has
engaged in strategic planning for several years using its current
management system called “CustomerPerfect!”—which is based on
criteria from the Malcolm Baldrige National Quality Award—to make
improvements.7 This system includes four major phases: (1) establishing
goals, (2) deploying resources toward achievement of those goals,
(3) implementing improvement actions, and (4) reviewing performance
and adjusting actions. We recognize that the strategic planning process is
ongoing and iterative in nature. Therefore, our comments on the June 1997

6
 Unlike federal executive branch agencies, the Postal Service is not required to submit its strategic
plan to the Office of Management and Budget (OMB) and is not subject to the provisions of OMB’s
Circular No. A-11, part 2.
7
 The Malcolm Baldrige National Quality Award is made annually to recognize U.S. companies for
business excellence. Award recipients need to demonstrate results and results improvement in a wide
range of indicators: customer-related, operational, and financial. Results reported need to address all
stakeholders, including customers, employees, owners, suppliers, and the public.



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                   draft plan reflect a snapshot of the current status of the plan. The Postal
                   Service is continuing work to revise the draft with input from Congress
                   and other stakeholders.


                   The Postal Service’s draft strategic plan generally includes the six
Results in Brief   components required by the Results Act and provides useful information
                   on the Service’s vision of its future and how the Service plans to achieve
                   its desired results. However, the plan’s discussion of some components
                   could be strengthened to better meet the purposes of the Act. For
                   example, the mission component of the plan could be more
                   comprehensive, and the goals and objectives could more completely cover
                   the Service’s major functions and operations. The plan generally reflects
                   the Service’s major statutory responsibilities, but it could be more detailed
                   in discussing how major management problems could affect the
                   achievement of goals, how the plan reflects input from consultations, and
                   interagency coordination. The plan also recognizes that the Service is
                   working to improve its information capacity so that the Service can
                   measure progress toward all of its goals.

                   Overall, the draft plan is conceptually consistent with the Results Act’s
                   concept of a systematic management process that uses results-oriented
                   goals and strategies as well as performance indicators to measure progress
                   toward these goals. However, the plan would benefit from a more
                   complete mission statement that conveys the requirement that the Service
                   is to fulfill its mandate to bind the nation together while being largely a
                   self-supporting entity. Also, the general goals and objectives and strategies
                   to achieve the goals and objectives do not cover some of the Service’s
                   major functions and operations, specifically those related to providing
                   universal access to mail services. Further, while the plan contains a useful
                   chart that helps relate performance measures to general goals/objectives,
                   the Service acknowledges that it is still in the process of identifying
                   tangible performance indicators and target levels to measure progress
                   toward all of its goals.

                   The draft plan generally reflects the Service’s major statutory
                   responsibilities and identifies the 1970 Postal Reorganization Act as the
                   basis for its public service mission. However, the plan could better discuss
                   how its overall goals, strategies, and performance measures may be
                   affected by key management problems that have been identified over the
                   years, such as the need to (1) improve labor-management relations,
                   (2) strengthen internal controls to protect revenues, and (3) ensure the



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                         integrity of acquisitions. Finally, the draft plan does not indicate how the
                         views of stakeholders or others were considered as a result of
                         consultations or offer evidence of interagency coordination with executive
                         branch agencies in some areas where coordination might be appropriate,
                         such as with the U.S. Justice Department, which helps enforce laws
                         related to postal matters.


                         The Postal Service’s draft strategic plan is a work in process that provides
Draft Plan Is            much useful information on its future vision. The draft plan shares the
Consistent With the      Act’s focus on a single overriding goal: results. The draft plan is
Act’s Focus on Results   conceptually consistent with the Act’s concept of a systematic
                         management process that uses results-oriented goals and strategies as well
but Could Be             as quantitative performance indicators to measure progress toward these
Strengthened             goals.8 Moreover, the draft plan contains an informative discussion of key
                         external factors, including competitive forces, the general economy, and
                         proposed postal reform legislation, that could affect the Service’s ability to
                         achieve its goals. The plan also describes the Service’s “continuous
                         improvement” efforts, which include systematic reviews to track progress
                         against goals and identify additional steps needed to ensure achievement
                         of goals.

                         Recognizing that the draft plan has many strengths, we believe it could be
                         strengthened further to better meet the purposes of the Results Act.
                         Although the draft plan discusses all six components required by the Act,
                         in some areas, it could be more comprehensive, clear, and consistent.


Mission Statement        The Results Act requires the strategic plan to contain a comprehensive
                         mission statement covering the major functions and operations of the
                         Service. The mission component of the Postal Service draft plan contains a
                         mission statement and supplemental explanatory discussion. However,
                         this component could be more complete and more clearly conveyed.

                         First, the mission statement could be made more complete by better
                         conveying the requirement that the Service is to fulfill its mandated
                         mission to bind the nation together while being a self-supporting entity.
                         Although the plan recognizes that the Service must depend on its own
                         revenues to be a viable entity, the mission statement does not specifically
                         state that the Service fulfills its basic mission while being largely

                         8
                          Executive Guide: Effectively Implementing the Government Performance and Results Act
                         (GAO/GGD-96-118, June 1996).



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                       self-supporting. Much of the current debate about the Service’s mission
                       centers on what products and services it should be allowed to provide in
                       order to remain a self-supporting entity.

                       Second, the explanatory discussion in the mission component of the plan
                       could more clearly convey the meaning of the basic mission of the Service
                       to “bind the Nation together” by “render[ing] postal services to all
                       communities.” Specifically, the explanatory discussion could better
                       communicate that fulfilling this mission involves providing all
                       communities with regular mail delivery and ready access to postal retail
                       services. It would also be useful if the discussion in the mission
                       component better defined the nature of the Service’s mission to bind the
                       nation together. The Postal Service has long provided nationwide mail
                       delivery and postal retail services to fulfill its mission of providing
                       universal postal service, and Congress has affirmed the importance of
                       these functions and operations.

                       The remainder of the plan also could be more clear and consistent in
                       defining universal service. For example, while the draft plan states that
                       First-Class mail is a product that “remains the only public universal
                       service,”9 it also states that the Service continues to provide “universal
                       service” to a periodicals industry10 “that has historically been critical to the
                       democracy and continues to be so today.” Further, the draft plan indicates
                       that the Service could deliver electronic commerce and communications
                       in the 21st century through “a combined electronic/paper universal service
                       infrastructure.” Greater clarity and more detailed support in this area of
                       the draft plan would help stakeholders by demonstrating the Service’s
                       continued commitment to its mission of binding the nation together as
                       well as indicating whether the Service foresees fundamental changes in
                       this area.


Goals and Objectives   The Results Act requires that the plan contain general goals and
                       objectives, including outcome-related goals and objectives, for the major
                       functions and operations of the Service. This draft of the plan moves in the
                       right direction by laying out a number of specific goals and objectives that
                       relate to growing the Service’s key businesses. In particular, the plan sets
                       out three major goals that are intended to improve (1) customer
                       satisfaction, (2) employee and organizational effectiveness, and

                       9
                        The draft plan contains a footnote that explains that “In an age of telecommunications reform, this
                       distinction could become more important.”
                       10
                           There is a separate class of mail for delivery of periodicals.



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                              (3) financial performance. These goals are consistent with the spirit of the
                              Results Act.

                              One of the key ways in which the draft plan could be more complete is in
                              the setting of targets for carrying out the Service’s major functions as a
                              provider of universal postal service. The plan did not contain goals and
                              objectives for carrying out the universal service functions that the Service
                              performs. While the plan contains goals for timely delivery of mail, it does
                              not set goals for two main universal service functions—providing mail
                              delivery service to all communities and providing ready access to postal
                              retail services. Developing explicit goals or subgoals for carrying out these
                              functions could help demonstrate that the Service is continuing to meet its
                              public service obligations, as well as help build support for a shared vision
                              of how the Service will fulfill its universal service mandate in the future.


Strategies to Achieve Goals   The Results Act requires the strategic plan to contain a description of how
and Objectives                the goals and objectives are to be achieved, including a description of the
                              operational processes, skills and technology, and the human, capital,
                              information, and other resources required to meet these goals and
                              objectives. The plan contains a section entitled “How Will We Get There?”
                              that addresses this requirement. The plan also describes the Service’s
                              operational processes used by management to plan, implement, and
                              review performance against desired goals and objectives. The plan
                              summarizes the processes the Service uses to define goals and objectives
                              as well as the resources in the Postal Service network that will be
                              employed to meet these goals and objectives. In addition, the plan
                              contains an informative section on the Service’s process for making capital
                              investments necessary to meet its goals, along with information on
                              specific amounts allocated for various capital needs.

                              Providing multiple goals is a strength of the draft plan because achieving
                              success on multiple dimensions is necessary for organizational success.
                              However, setting multiple goals creates the challenge of managing to
                              achieve these goals simultaneously. As we noted in our recent testimony,11
                               while the Postal Service reported improving overnight delivery of local
                              residential mail to 91 percent during 1996, during the same period, the rate
                              for on-time delivery of 2-day and 3-day mail—at 80 and 83 percent
                              respectively—was not as high as that for overnight delivery. Such
                              performance raised concern that the Postal Service’s emphasis on

                              11
                                 U.S. Postal Service: Continued Challenges to Maintaining Improved Performance (GAO/T-GGD-97-88,
                              Apr. 24, 1997).



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                            overnight delivery came at the expense of 2-day and 3-day mail delivery.
                            The Postal Service faces an even more difficult challenge in successfully
                            implementing the full set of goals and subgoals in its draft strategic plan.
                            The draft plan recognizes the challenge of meeting multiple goals, but it
                            could better explain how postal executives will manage progress toward
                            multiple priorities.


Relating Annual             The Results Act requires the strategic plan to contain a description of how
Performance                 the performance goals included in the annual performance plan are to be
Goals/Measures to General   related to the general goals and objectives in the strategic plan. The
                            Service’s draft plan meets this requirement, and includes a useful chart
Goals and Objectives        that summarizes the major goals, specific subgoals, performance
                            indicators, and targets. We consider the chart to be one of the strengths of
                            the current plan, but we also recognize that the Service has not developed
                            all of the indicators and targets that it will need.

                            The draft strategic plan recognizes that the Service will be developing and
                            submitting annual performance reports to compare results with goals and
                            objectives. However, as the Service also recognizes in the draft plan, it
                            currently does not have a complete set of performance indicators to
                            measure improvement. For example, the Service has developed specific
                            targets for on-time delivery of First-Class mail, but it has yet to determine
                            the indicator(s) and targets for meeting its goal of enhancing the
                            workplace environment to improve relationships with employees.


Key External Factors        The Act requires an identification of those key factors external to the
                            Postal Service, and beyond its control, that could significantly affect the
                            achievement of its general goals and objectives. The Service’s plan
                            identifies many external factors, such as the impacts of growing
                            competition, electronic messaging capabilities, and changing customer
                            demands. The plan also has an informative discussion of anticipated
                            economic growth and of how economic and demographic trends could
                            affect the Service. The plan explicitly addresses external factors by setting
                            forth a growth strategy designed “to meet the expanding requirements and
                            specialization demanded by customers today.”

                            The plan also notes the importance of pending postal reform legislation
                            that could make changes to the statutory framework governing the Postal
                            Service. The plan points out that the proposed legislation contains a
                            significant overhaul of the pricing mechanisms used to set postal rates and



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                     explains how such a change could help the Service achieve its goals: “By
                     allowing reasonable pricing changes to occur without extensive regulatory
                     hearings, the Postal Service would be able to react more quickly to
                     changing market conditions and focus more directly on the needs of its
                     customers.” However, the plan could also recognize that many other
                     aspects of the proposed comprehensive postal reform legislation—such as
                     provisions establishing a presidential postal employee-management
                     commission, ending Treasury Department control of Postal Service
                     banking, limiting the postal monopoly, and establishing a demonstration
                     project to test relaxing the mailbox restriction—could have implications
                     for its key functions and operations.


Program Evaluation   The Act requires a description of the program evaluations used in
                     establishing or revising general goals and objectives, with a schedule for
                     future program evaluations. Under the Act, program evaluation is defined
                     as an assessment, through objective measurement and systematic analysis,
                     of the manner and extent to which Postal Service programs achieve
                     intended objectives. The Service’s plan explains that the Service differs in
                     fundamental ways from other federal agencies so that classic
                     governmental program evaluation is less appropriate than other forms of
                     review used by the Service. The plan describes the Service’s review
                     processes for evaluating progress towards its goals, but in some areas, the
                     plan does not indicate how the results of review activities relate to specific
                     goals and objectives.

                     The plan describes the Service’s process for systematic review, including
                     its overall process management review cycle and three specialized review
                     processes: capital investment review and approval, new product
                     development, and reviews of new and ongoing activities by the Postal
                     Service Inspector General and Inspection Service. The plan also states that
                     the Service plans to conduct another assessment of the Postal Service
                     based on criteria drawn from the Malcolm Baldrige National Quality
                     Award assessment process.

                     However, the plan varies in the way it explains the linkage between
                     different review processes and the goals and objectives. For example, in
                     the area of capital investments, the plan has a clear summary of the
                     four-step process that is used to develop and monitor projects from start
                     to finish as well as to determine whether the projects achieve intended
                     goals. In contrast, the plan contains little discussion of how the results of
                     other systematic reviews, such as performance audits by the Postal



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                        Service Inspector General, the Postal Inspection Service,12 or the Baldrige
                        Award assessment process, relate to specific goals, objectives, and other
                        components of the plan. We believe these sections of the plan could be
                        made more useful to stakeholders through additional explanation of how
                        these review processes are linked to the Service’s goals and objectives.


                        To further review the strategic plan’s consistency with the intent of the
Key Statutory           Results Act, we were asked to determine whether the draft plan reflects
Authorities Generally   the Service’s major statutory responsibilities, and whether those
Reflected in the        responsibilities are reflected in the plan’s goals. The draft plan generally
                        reflects the Service’s major statutory responsibilities, although it could be
Service’s Strategic     more detailed. For example, as previously discussed, the mission
Plan                    component of the plan is focused on the major statutory authority that
                        serves as the basis for its mission: the 1970 Postal Reorganization Act.
                        However, the plan does not have specific goals for carrying out the
                        universal service functions that the Service performs, including providing
                        national delivery of mail and ready access to postal retail services. In
                        addition, the plan could place greater emphasis on the statutory
                        requirement that the Service deliver certain mail at a uniform rate, a
                        requirement that has long been associated with providing universal
                        service.


                        The Act requires the plan to describe how goals and objectives are to be
The Draft Plan Could    achieved, and therefore it is helpful for the plan to address management
Address Major           problems that could affect the achievement of goals. The draft plan does
Management              address a number of major management challenges, including the need for
                        the Service to improve customer service, increase productivity, control
Problems More           costs, and increase revenues. However, the plan does not appear to fully
Effectively             discuss some other problems that face the Service, such as how
                        labor-management relations may affect the Service’s ability to achieve
                        major goals related to improving employee and organizational
                        effectiveness and to control costs by achieving productivity gains. In
                        addition, the plan could better address other significant problem areas,
                        such as weaknesses that we have identified in internal controls that may
                        reduce revenues and compromise the integrity of certain acquisitions.




                        12
                          The Postal Inspection Service, which is part of the Postal Service, is responsible for enforcing postal
                        laws.



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As we have reported, improving labor-management relations is one of the
major management problems facing the Service.13 The plan describes the
Service’s initiatives to improve labor-management relations, but the plan
could more explicitly discuss how labor-management relations could
affect achievement of goals and the strategies to address these potential
impacts. One of the Service’s core strategies is to manage its operating
costs by improving labor productivity and reducing cost per work hour.
However, the Service’s ability to meet its goal of reducing cost per work
hour may be affected by its statutory requirements related to collective
bargaining for wages and other terms and conditions of employment. If
collective bargaining impasses develop, which have occurred as far back
as 1978, binding arbitration by a third party is required. Labor contracts set
wages for bargaining employees. Employee costs comprise most of the
Service’s operating costs, and therefore its ability to control labor costs
largely determines whether the Service meets its cost reduction goals. The
plan could be more useful if it more directly addressed labor-management
issues and their potential effect on the Service’s goals and strategies.

In addition, the draft plan contains little discussion of the need to improve
internal controls, which is an area that we have previously identified as an
important management weakness. We recently testified that improving
internal controls to protect revenue remains a concern.14 We reported in
June 1996 that weaknesses in the Postal Service’s control for accepting
bulk business mail prevented it from having reasonable assurance that all
significant amounts of postage revenue due were received when mailers
claimed presort/barcode discounts.15 The Service plans to improve the
processes used in the verification of bulk mail, which accounts for nearly
half its revenues. However, the draft plan does not mention revenue
protection initiatives for bulk mail.16 Other areas of recent concern have
been the overall integrity of Postal Service acquisitions17 and



13
 U.S. Postal Service: Labor-Management Problems Persist on the Workroom Floor
(GAO/GGD-94-201A/B, Sept. 29, 1994).
14
  GAO/T-GGD-97-88.
15
 U.S. Postal Service: Stronger Mail Acceptance Controls Could Help Prevent Revenue Losses
(GAO/GGD-96-126, June 25, 1996).
16
 The draft plan summarized the Service’s “aggressive ’ease of use’ program” designed to reduce
variations in interpretation and application of rules and regulations as well as to reduce the number
and complexity of these regulations, when possible.
17
 Postal Service: Conditions Leading to Problems in Some Major Purchases (GAO/GGD-96-59, Jan. 18,
1996).



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                        strengthening program oversight.18 The Service has taken steps to deal
                        with these concerns. However, in our view, because internal controls over
                        revenue protection, the integrity of acquisitions, and oversight of postal
                        programs will continue to be important concerns, the draft plan could be
                        enhanced by placing greater emphasis on these areas.


                        The Service acknowledges in its draft plan that it currently does not have a
The Service Continues   sufficient amount of data and information to completely measure results.
to Develop              The Service also indicates that it plans to continue developing
Performance             (1) performance indicators to allow measures of improvement for all goals
                        in the plan, and (2) measures called “internal process drivers” that
Indicators and          managers can use to evaluate and improve performance to reach the goals
Information Systems     in the plan. Although we have not reviewed the Service’s information or
                        internal assessment systems, the Service has emphasized that it is
                        developing a management system that will allow management to track
                        progress and take additional steps to ensure the achievement of targets.

                        Another important issue related to performance measurement is the
                        accuracy and reliability of the data used to measure results. This issue has
                        been raised in congressional hearings related to the quality of Service data
                        used for ratemaking. At the request of the Chairman of the House
                        Subcommittee on the Postal Service, a review of the quality of the data
                        used in ratemaking is being conducted by a contractor, whose progress
                        will be monitored by the Postal Service, the Postal Rate Commission, and
                        us. This study will examine some of the specific issues that have been
                        raised about the completeness and accuracy of data used for ratemaking.

                        Some data, such as financial data that may be used to measure
                        performance, have been audited by outside parties. For example, the
                        Service’s financial statements, which relate to the Service’s financial
                        performance measures, are audited and some aspects of its internal
                        control structure reviewed annually by its outside auditor, Ernst & Young
                        LLP. In the Service’s 1996 annual report, Ernst & Young LLP said that the
                        financial statements presented fairly, in all material respects, the Service’s
                        financial position at September 30, 1996 and 1995, as well as the results of
                        its operations and cash flows for each of the 3 years for the period ending
                        September 30, 1996, in conformity with generally accepted accounting
                        principles. The Service plans to use financial data, such as net income, as a



                        18
                         U.S. Postal Service: Improved Oversight Needed to Protect Privacy of Address Changes
                        (GAO/GGD-96-119, Aug. 13, 1996).



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                     key performance indicator to measure progress toward its financial
                     performance goal.

                     Another key data source discussed in the Service’s plan is its major
                     information systems. In its strategic plan, the Postal Service included a
                     plan to enhance information technology capabilities throughout its
                     network, such as by developing (1) a new integrated, managed network
                     service, (2) an improved computer system to support retail and delivery
                     activities, and (3) a delivery confirmation system. The plan does not
                     discuss how the Service will address two high-risk areas that we have
                     identified as governmentwide problems: computer security and the need
                     for computer systems to be changed to accommodate dates beyond
                     1999—the so-called “year 2000 problem.” Additionally, many of the
                     Service’s current information systems directly support key mission
                     functions, such as retail operations, mail processing, delivery, internal
                     communications, and law enforcement. Although we have not evaluated
                     the Service’s information systems, they do handle information that needs
                     to be protected against unauthorized access and disclosure and that may
                     be vulnerable to problems associated with the year 2000. These issues
                     have a significant potential impact on all federal agencies’ ability to
                     effectively conduct operations. Accordingly, we believe a discussion in the
                     plan of both these issues and the steps the Service has taken, has under
                     way, or plans to take to address them would be useful to its stakeholders.


                     The Results Act requires that in developing its plan, the Service consider
Discussion of        the views and suggestions of those entities potentially affected by or
Comments Obtained    interested in such a plan. The plan describes how the Service solicited
From Consultations   input from stakeholders, but it does not explain what input was received
                     or how it was addressed. Although the Service interacts with a number of
and Interagency      agencies in carrying out its operations, such as the enforcing of laws
Coordination Could   related to postal matters and the printing of stamps, the plan does not
                     offer evidence of interagency coordination with executive branch
Be More Complete     agencies. Further development of this section would help Congress and
                     other stakeholders to be more informed about the substance of the
                     consultations that took place.

                     The Service’s draft plan does not discuss the substance of the comments
                     that it received from stakeholders or how the comments were addressed
                     in the plan. In addition, some concerns were raised that the timing of the
                     development of the plan did not allow for sufficient stakeholder review
                     and input on the actual draft. Now that the plan is drafted, the Service has



                     Page 13                    GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
                  B-277565




                  an opportunity to continue consultations with Congress and other key
                  stakeholders to obtain meaningful input on the mission, goals, and
                  measures in the plan. Such consultations could also help build support for
                  the plan.

                  Although the Postal Service plays a largely unique role in the federal
                  government, it does interact with a number of federal agencies. However,
                  the draft strategic plan does not evidence interagency coordination with
                  executive branch agencies, such as with (1) the U.S. Justice Department,
                  which helps enforce laws relating to postal matters; (2) the Bureau of
                  Engraving and Printing, which prints many stamps; and (3) the Census
                  Bureau, which works with the Postal Service to develop the address list
                  for the decennial census. To the extent that the Service’s relationships
                  with other agencies could affect achievement of the Service’s goals, a
                  discussion of interagency coordination would be helpful.


                  On July 29, 1997, we met with, and obtained oral comments on a draft of
Agency Comments   this letter from, Postal Service officials, including the Vice President,
                  Controller; and the Vice President, Strategic Planning. They stated that
                  they found our observations to be helpful and said they would address our
                  suggested improvements in the August 1997 draft of their plan and in their
                  planning for fiscal year 1999 along with suggestions they have received
                  from others. In addition, they said that they would include additional
                  specificity on goals and performance measures in the annual performance
                  plans. They also noted, and we agree, that the Postal Service’s
                  “CustomerPerfect!” management system provided a good foundation for
                  the Service to address Results Act requirements.


                  We will send copies of this report to the Minority Leader of the House of
                  Representatives; Ranking Minority Members of your Committees and
                  Subcommittees; the Chairman and Ranking Minority Member of the
                  Subcommittee on International Security, Proliferation and Federal
                  Services, Senate Committee on Governmental Affairs; the Postmaster
                  General; and other interested parties. Copies will also be made available to
                  others upon request.




                  Page 14                   GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
B-277565




Major contributors to this letter are listed in the enclosure. If you have any
questions, please call me on (202) 512-4232.




Bernard L. Ungar
Director, Government Business
  Operations Issues

Enclosure




Page 15                    GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
Enclosure

Major Contributors to This Report


                        Teresa Anderson, Assistant Director
General Government      Kenneth E. John, Senior Social Science Analyst
Division, Washington,
D.C.
                        Nancy W. Kong, Auditor
Accounting and
Information
Management Division
                        Alan N. Belkin, Assistant General Counsel
Office of the General   Jill P. Sayre, Senior Attorney
Counsel




                        Page 16                  GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
Page 17   GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
Page 18   GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
Page 19   GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
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(240257)      Page 20                   GAO/GGD-97-163R The Postal Service’s Draft Strategic Plan
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