Thursday, August 26, 2010

USPS July Preliminary Financials: Oh the Questions They Raise

The Postal Service filed their July 2010 preliminary financials with the Postal Regulatory Commission and the results raise more questions about its financial viability and its ability to develop realistic financial plans.
  • What should the financial target be to ensure financial self sufficiency? 
  • If accounting break-even is not sufficient, then what operating margin is required?
  • Why is the workers compensation expense greater than plan for two years in a row?  It required a $718 adjustment in 2009 and is $1,593 million greater than plan this year.  
  • Is the problem with the Postal Service's forecasting approach or is it because properly forecasting workers compensation would require presenting non-GAAP financials prior to the official calculation of its actual liability?
  • How is the shift in the mix of mail affecting the demand for resources under the current operating model?
  • How does the mix of mail differ from what either the Boston Consulting Group forecast projected or what the Postal Service projected in the exigent rate case?
  • Does the decline in the average revenue per piece for both Standard Mail and Mailing Services overall reflect a faster or slower decline than what the Postal Service previously anticipated?
  • Does the Postal Service need a more radical or more rapid operating overhaul to bring costs in line with potential revenue than it has proposed to date?  
  • Is this rapid or radical operating overhaul required regardless of what happens with the exigent rate case?
  • Is this rapid or radical operating overhaul required regardless of what happens in the disputes over the Postal Service's retiree liabilities and expenses?
  • Does the Postal Service have the capital necessary to complete the operating overall at a pace required to make it self sufficient by 2015 or 2020?
  • How long will it take for Congress and the administration take to realize that fixing the Postal Service's financial problems cannot be solved without major adjustments in its retiree obligations?
  • What price will stakeholders have to pay to have the retiree expense problems fixed?
  • Can the retiree expense problems be fixed without a major restructuring of the Postal Service's business model, operating model, and regulatory framework?
  • Will this restructuring look anything like what the Postal Service proposed in its action plan?
  • How will the 2010 election and more conservative Congress affect the political process for fixing the Postal Service as well as potential outcomes?


Anonymous said...

The answer to the question of why has the USPS Workman's Comp increased so drastically increased: Because USPS developed a "new program" in which most injured employees were put out on the street because managment said they had no work for them, even when the duties these people were performing were valid and necessary jobs. The employees were then forced to apply for Workmen's Comp even though they were ready, willing, and able to work. The program is called the "National Reassesment Program". The USPS has been challenged each time they did this to someone and have lost every time, yet they continue to do it. I respectfully ask that there is some investigation into this so Congress and the public know the truth.

uncommon sense said...

The workers compensation expenses exceeding plan are an accounting phenomenon and not necessarily all that important. The "expense" going up doesn't necessarily cost the USPS any more in cash payments. It is almost entirely caused by the "discount rate" used to calculate this liability declining more than planned. If interest rates continue the rise they started yesterday then this "expense" will decline dramatically in coming months.