Market Dominant Billing Determinants: Periodicals
Background
Billing determinants are spreadsheets that U.S. Postal Service employees manually produce to report volume and revenue for every price in the five market dominant classes of mail: First-Class Mail, Periodicals, Standard Mail, Package Services, and Special Services. Periodicals primarily consist of flat-shaped mail that contains educational, cultural, or scientific information, such as magazines and newspapers. The Postal Service obtains data for Periodicals billing determinants from the following sources: its published price list, the Shape Indicia Report, and the Revenue, Pieces, and Weight Report. This is the second in a series of audits on billing determinants. The first audit looked at First-Class Mail.
The Postal Accountability and Enhancement Act requires the Postal Service to produce an Annual Compliance Report within 90 days of the end of each fiscal year. The report analyzes costs, revenue, pricing, and quality of service for all products. Billing determinants are filed in support of this report and used to ensure that price adjustments do not exceed price caps for each market dominant class of mail. The manual preparation and complexity of the spreadsheets create a risk of data entry errors.
Our objective was to assess the accuracy and completeness of data used to prepare fiscal year (FY) 2013 and FY 2014 Periodicals billing determinants.
What the OIG Found
We did not find issues with completeness of data; however we did identify data inaccuracies that could be prevented by improving the procedures used to prepare Periodicals billing determinants. Specifically, there were errors in the FY 2013 and FY 2014 determinants because employees used outdated and mislabeled source data and made incorrect calculations. Further, the Postal Service did not establish adequate controls over the Periodicals billing determinant process. As a result of our First-Class Mail billing determinants audit, the Postal Service began to document repeatable processes for preparing billing determinant spreadsheets. Although these procedures are being developed, there were no internal reviews conducted of Periodical billing determinants prior to FY 2015. As a result, the Postal Service incorrectly calculated an absolute value of $7.6 million in revenue for FYs 2013 and 2014. Although these errors did not impact compliance with 2015 price cap requirements, future errors may do so.
What the OIG Recommended
We recommended the vice president, Pricing, file corrected Periodicals billing determinants for FYs 2013 and 2014 with the Postal Regulatory Commission no later than December 2015; ensure source data is labeled correctly and labeling errors are not repeated; increase transparency by disclosing the methodology for calculating editorial discounts; and complete ongoing internal efforts to ensure all Periodicals billing determinants are produced using documented and repeatable processes that include an in-depth internal review process.