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Closing USPS offices could save $894m, states audit

Monday, September 27th, 2010

USPS could save $894m over 10 years by closing four area and 32 district offices, according to the Office of the Inspector General.

The conclusions from an audit on USPS field structure were released last week as the USPS posted its August 2010 unaudited figures showing a $1.6bn net loss for the month, adding up to a $7.7bn loss over the previous year.

In its report, the OIG laid out three possible options for changes to the current configuration of eight area and 74 district offices across the country.

The first option would close 14 district offices, the second option would close four area and 32 district offices, while a third option would move all area offices to USPS headquarters in Washington DC.

The OIG’s deputy assistant inspector general for financial accountability, John E Chiota, said in the report: “The Postal Service has significant opportunities to reduce costs by consolidating its field structure.”

None of the recommendations for office closures have the backing of USPS management, which wants to put together a full comprehensive strategy on area and district structure before making any changes.

Such a strategy is likely to take until the end of September 2011 to complete.

Nevertheless, Chiota said: “We continue to believe the Postal Service needs to consider in the comprehensive strategic plan the ideal location for area offices, as long-term costs savings and other non-financial benefits may be available.”

The USPS financial report for August 2010 revealed that mail volumes were up 1.8% compared to the same month last year. However, the year to date has volumes down 3.9% compared to the same period in 2009.

The Postal Service already completed a consolidation program in January this year, eliminating its NY Metro Area Office and six district offices, moving operations into other offices.

But with the operation of its current field structure costing $1.5bn a year, the OIG – an independent watchdog that reports to the USPS Board of Governors – urged further consolidation.

It said cutting 14 district offices that are within 50 miles of other district offices would save $33.6m a year, $298m over 10 years.

Cutting four area offices and 32 district offices identified as having below-average mail volumes would save $104m a year or $894m over 10 years, the OIG said.

The auditors were unable to come up with a figure for the kind of savings that would be achieved by transferring all area offices to USPS headquarters, although Chiota said the OIG believed there would be overall cost savings from such a move.

The USPS management insisted that consolidating area offices would actually cost money, rather than saving it – in the region of $61m.

Following the audit, USPS management will develop its comprehensive strategic plan by September 30, 2011, when it will also provide recommendations for future area and field structures.

A regular review of USPS field structure is to be put in place by March 2012.

Source: Post&Parcel

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