The reduction in mail volume has not been accompanied by a comparable decline in expenses, an IG audit has said, saying that “the Postal Service’s strategic initiatives to reduce costs and optimize the processing network have not achieved planned cost savings.”

For example, it said, the Postal Service had planned on savings of $1.9 billion over fiscal 2014-2018 from its “Ready Now/Future” initiative, but achieved savings of only $339.1 million; it reported no savings in 2018 from facilities consolidations carried out earlier; and auditors were able to verify only $90.7 million in savings over 2016-2017 from the Operational Window Change” initiative that lowered first-class mail service standards, which had been projected to save $1.6 billion in that time.

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Over the 2014-2018period, it said, mail volume decreased by 31 billion pieces, or 9 percent, while mail processing costs increased by $301.3 million, or 4 percent (although when adjusted for inflation, they decreased by 2 percent).

Prominent among the costs is labor, which makes up 80 percent of total operating expenses, it said. “Mail processing workhours have not decreased since FY 2014, while overtime and penalty overtime workhours have increased significantly,” it said. For example, it said that a decrease in processing costs in 2017 of $6.9 million was followed by an increase the following year of $37.4 million, largely due to additional overtime and penalty overtime costs—the former up by a quarter and the latter more than doubling.

Productivity as measured by pieces processed divided by workhours spent on that task has been declining during the period, it added, down by 20 percent for manual processing, 18 percent for flats processing and 5 percent for letter processing.