Volume, Performance, and Financial Changes since the Onset of the COVID-19 Pandemic (GAO-21-261)
Summary
A GAO report to congressional committees, GAO-21-261, dated April 2021, on the U.S. Postal Service (USPS). It reports that in 2020 USPS experienced a 9 percent drop in total mail volume compared to 2019, primarily due to a 4 percent dip in First-Class Mail and a 14 percent decline in Marketing Mail. Package volume rose by 32 percent in 2020, and a surge of election-related mail caused a temporary spike in total volume in September and October 2020. GAO notes that USPS's financial viability is not on a sustainable path and has been on GAO's High Risk List since 2009.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
United States Government Accountability Office
Report to Congressional Committees
U.S. POSTAL
April 2021
SERVICE
Volume, Performance,
and Financial
Changes since the
Onset of the COVID-
19 Pandemic
GAO-21-261
April 2021
U.S. POSTAL SERVICE
Volume, Performance, and Financial Changes since
the Onset of the COVID-19 Pandemic
Highlights of GAO-21-261, a report to
congressional committees
Why GAO Did This Study What GAO Found
USPS plays a critical role in the In 2020, the majority of which was affected by the COVID-19 pandemic, the U.S.
nation’s communications and Postal Service (USPS) experienced a 9 percent drop in total mail volume when
commerce. However, USPS’s financial compared to 2019. The overall drop was primarily due to a 4 percent dip in First-
viability is not on a sustainable path Class Mail and a 14 percent decline in Marketing Mail (such as advertisements).
and has been on GAO’s High Risk List Despite a drop in total volume, 2020 package volume rose by 32 percent. A
since 2009. The COVID-19 pandemic surge of election-related mail caused a temporary spike in total mail volume in
has highlighted the role of USPS in the September and October 2020, before falling again by year end.
nation’s economy as well as USPS’s
financial difficulties. Responding to Overall, USPS’s nationwide on-time performance fell in 2020. Average monthly
these concerns, the CARES Act, as on-time performance for First-Class Mail decreased from 92 percent in 2019 to
amended in late 2020, provided USPS 87 percent in 2020. However, decreases were more significant in certain USPS
up to $10 billion in additional funding. districts at different times, and nationally in December 2020. On-time
The CARES Act included a provision performance was 48 percent in New York in April and 61 percent in Baltimore in
for GAO to report on its monitoring and September—both of which were nearly 90 percent prior to the pandemic (see
oversight efforts related to the COVID- figure). Further, national on-time performance dipped to 69 percent in December.
19 pandemic. This report examines In February 2021, the Postmaster General stated that on-time performance was
changes in USPS’s (1) mail volume, affected by employees’ decreased availability in COVID-19 hot spots and a surge
(2) on-time performance, and (3) in holiday package volume.
revenue and expenses from January
through December 2020. 2020 Average Monthly On-Time Performance for First-Class Mail in Baltimore, Detroit, and
New York Postal Districts
GAO analyzed USPS mail volume, on-
time performance, revenue, and
expense data by month for 2020, and
compared these data to similar data for
2019. GAO also reviewed its prior
work, including its May 2020 report.
That report had three matters for
congressional consideration on: (1)
determining the level of postal
services, (2) the extent to which those
services should be financially self-
sustaining, and (3) the appropriate
institutional structure of USPS. GAO
also reviewed reports by USPS and
the USPS Inspector General. Finally,
GAO interviewed USPS officials, two
package delivery companies that USPS’s revenue increased in 2020 but not enough to avoid a net loss of $8.1
compete with USPS, and billion. Rapid growth and price increases for packages, resulted in a net revenue
representatives from four mailing increase of $4.3 billion. However, USPS’s expenses grew by $4.4 billion,
associations whose members send the including COVID-19 related expenses, such as personal protective equipment.
types of mail with the highest volumes USPS took some cost-reduction actions in 2020 and released a new strategic
in 2020. plan in March 2021 that also has cost-reduction actions. In May 2020, GAO
concluded that absent congressional action to transform USPS, USPS’s financial
problems would worsen, putting its mission and financial solvency in greater
peril. The further deterioration of USPS’s financial position since the start of the
View GAO-21-261. For more information, pandemic makes the need for congressional action even more urgent.
contact Jill Naamane, 202-512-2834 or
naamanej@gao.gov.
United States Government Accountability Office
Contents
Letter 1
Background 3
Total Mail Volume Decreased in 2020, Mostly Due to a Sharp
Decline Early in the Year 6
National On-Time Performance Declined through November and
Significantly Declined in December, with Some Districts
Experiencing Significant Declines throughout 2020 11
USPS’s Revenue Increased but Did Not Offset Increased
Expenses, Highlighting the Need for Transformation of USPS’s
Business Model 15
Agency Comments 21
Appendix I Comments from the United States Postal Service 24
Appendix II GAO Contact and Staff Acknowledgments 26
Tables
Table 1: USPS’s Revenue, Expenses, and Net Loss, 2020
Compared to 2019 18
Table 2: Selected and Total USPS Expenses for 2020 and 2019 18
Figures
Figure 1: Total 2020 Monthly USPS Mail Volume, as Compared to
Same Month in 2019 7
Figure 2: 2020 Monthly Market-Dominant Mail Volume as
Compared to the Same Month in 2019 8
Figure 3: USPS 2020 Monthly Competitive Product Volume
Compared to the Same Month in 2019 10
Figure 4: 2020 Average Monthly On-Time Performance for First-
Class Mail in Baltimore, Detroit, and New York Postal
Districts 13
Figure 5: Total Market-Dominant Products’ Revenue by Month,
2019 and 2020 16
Figure 6: USPS’s Total Revenue from Competitive Products by
Month, 2019 and 2020 17
Page i GAO-21-261 USPS Changes since COVID-19
Abbreviations
CARES Coronavirus Aid, Relief, and Economic Security Act
COVID-19 Coronavirus Disease 2019
FFCRA Families First Coronavirus Response Act
OIG U.S. Postal Service’s Office of the Inspector General
PRA Postal Reorganization Act
UPS United Parcel Service
USPS U.S. Postal Service
This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.
Page ii GAO-21-261 USPS Changes since COVID-19
Letter
441 G St. N.W.
Washington, DC 20548
April 29, 2021
Congressional Committees
The U.S. Postal Service (USPS) plays a critical role in the nation’s
communication and commerce—collecting, transporting, and delivering
billions of letters, bills, ballots, magazines, newspapers, packages, and
other types of mail to about 161 million addresses nationwide.
Coronavirus Disease 2019 (COVID-19) has had a profound effect on the
economy and on USPS, which has continued to provide postal services
nationwide since the pandemic was declared a national emergency in
March 2020. Mailers have changed how they use USPS due to COVID-
19’s spread, affecting USPS’s mail volume, revenues, and expenses. In
response, the CARES Act, as amended in late 2020, provided USPS up
to $10 billion in additional funding. 1 USPS has requested additional
federal financial assistance, which would require further congressional
action.
We and members of Congress continue to be concerned with USPS’s
financial condition. In 2009, we placed USPS on our High-Risk List and
found that its financial condition needed attention by Congress and the
executive branch to achieve broad-based restructuring. 2 Since then,
USPS’s finances have worsened and USPS’s financial viability has
remained on our 2021 update to our High Risk list. 3 In May 2020, we
found that USPS’s business model was unsustainable, due in part to
1The Consolidated Appropriations Act, 2021 amended CARES Act authority to borrow this
amount by providing that USPS shall not be required to repay such amounts borrowed
(Pub. L. No. 116-260, div, N, tit. VIII, § 801, 134 Stat. 1182, 2119 (2020)). As of March
2021, USPS accessed about $8.6 billion of this CARES Act funding. Funds available
under the CARES Act (Pub. L. No. 116-136, div. A, tit. VI, § 6001, 134 Stat. 281, 504-05
(2020)), as amended, are in addition to USPS’s borrowing authority under the Postal
Reorganization Act (PRA) (Pub. L. No. 91-375, § 2, 84 Stat. 719, 740 (1970)) (codified as
amended at 39 U.S.C. § 2005(a)). The PRA authorizes USPS to borrow up to $3 billion in
any one fiscal year and not more than $15 billion in total. As of the end of fiscal year 2020,
USPS had borrowed $14 billion of this $15 billion total.
2GAO, High Risk Series: Restructuring the U.S. Postal Service to Achieve Sustainable
Financial Viability, GAO-09-937SP (Washington, D.C.: July 2009).
3GAO, High Risk Series: Dedicated Leadership Needed to Address Limited Progress in
Most High-Risk Areas, GAO-21-119SP (Washington, D.C.: Mar. 2, 2021).
Page 1 GAO-21-261 USPS Changes since COVID-19
declining mail volume and to expenses rising faster than revenue. 4
Congressional committees held hearings in August 2020 and February
2021 on USPS, and several bills have been introduced that are designed
to affect USPS’s financial viability. 5
We conducted this engagement under the authority of the CARES Act,
which includes a provision for us to conduct monitoring and oversight of
the federal government’s efforts to prepare for, respond to, and recover
from the COVID-19 pandemic. 6 This report describes how USPS’s (1)
mail volume, (2) on-time service performance for mail delivery, and (3)
revenues and expenses have changed since the COVID-19 pandemic.
This report covers January 1, 2020, through December 31, 2020. We
used January 1, 2020 as the start date of our analysis because this date
marks the beginning of the fiscal quarter in which the pandemic was
declared. We used December 31, 2020, as the end date of our analysis
as it is the most recent month for which data were available and because
it allows us to include the 2020 general election and holiday periods
where USPS experienced high mail volumes. Because nearly all of
USPS’s 2020 mail volume and revenue (about 99 percent and 97
percent, respectively) consists of domestic mail products such as
domestic First-Class Mail, Marketing Mail and packages, we excluded
USPS’s international mail from our analysis.
To determine how USPS’s mail volume changed during 2020, we
reviewed USPS data on mail volumes by mail type and by month for 2020
and compared these 2020 data to 2019 data. 7 To describe how USPS’s
on-time service performance changed, we analyzed USPS national on-
4GAO, U.S. Postal Service: Congressional Action Is Essential to Enable a Sustainable
Business Model, GAO-20-385 (Washington, D.C.: May 7, 2020).
5E.g., H.R. 695, 117th Cong. (2021); S. 145, 117th Cong. (2021).
6We regularly issue government-wide reports on the federal response to COVID-19. For
the latest report, see GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic
Enters Its Second Year, GAO-21-387 (Washington, D.C.: Mar. 31, 2021). Our next
government-wide report will be issued in July 2021 and will be available on GAO’s website
at https://www.gao.gov/coronavirus.
7Specifically, we used publicly-available postal volume data from USPS Preliminary
Financial Information, Unaudited reports that USPS submitted to the Postal Regulatory
Commission. USPS officials told us that there is usually a relatively small but noticeable
difference between the data in the monthly unaudited reports and their quarterly reports
which include volume data that have been reconciled.
Page 2 GAO-21-261 USPS Changes since COVID-19
time performance data by month for 2020 and compared them to 2019.
We also analyzed monthly on-time performance during 2020 for the
Baltimore, Detroit, and New York postal districts. 8 We selected these
districts because postal associations and package delivery companies we
interviewed noted that these districts had experienced significant COVID-
19 related service delays during the initial months of the pandemic. We
also reviewed USPS’s and USPS Office of the Inspector General’s (OIG)
reports regarding USPS’s service performance for 2020. To determine
how USPS’s revenues and expenses changed and how USPS responded
to these changes, we reviewed USPS data on revenues and expenses by
month for 2019 and 2020.
For all of our objectives, we interviewed USPS officials, two major
package delivery companies that directly compete with USPS in the
products they offer, and four associations that represent companies that
send the highest-volume categories of mail: First-Class Mail, Marketing
Mail, and packages. We also interviewed relevant USPS officials about
volume, on-time performance, and financial data that they either provided
us directly or that we obtained from publicly available reports. They
described where the data came from, how they were collected, and
controls in place to provide assurance the data were complete and
accurate. Based on these interviews and relevant USPS documents we
reviewed, we determined all data used were sufficiently reliable for the
purposes of reporting on USPS mail volumes, on-time performance
levels, revenues, and expenses.
We conducted this performance audit from July 2020 to April 2021 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
USPS’s mission is to provide prompt, reliable, and efficient universal
Background service to the public, while covering its expenses primarily through
8USPS divides the country into seven postal areas and 67 postal districts. A postal area is
the administrative level directly below national headquarters. A postal district is the
administrative level directly below a postal area.
Page 3 GAO-21-261 USPS Changes since COVID-19
revenues generated from the sale of its products and services. 9 USPS’s
two main types of mail products—market-dominant and competitive—vary
in terms of volume, profitability, and pricing.
• Market-dominant products—which include products such as First-
Class Mail, Marketing Mail, and Periodicals—account for over 90
percent of USPS’s total mail volume and over half of USPS’s
revenue. 10 We found in May 2020 that First-Class Mail, Marketing
Mail, and total mail volumes have experienced significant declines
since their peaks in 2006. USPS is limited in its ability to set prices for
market-dominant products. 11
• Competitive products, which consist of mostly packages but also of
other products such as express letters, are those for which USPS
competes with other package delivery companies, such as United
Parcel Service (UPS) and FedEx, on pricing and service. 12 USPS
9USPS’s universal service obligation is governed by several statutory provisions, including
the requirement to provide a maximum degree of effective and regular postal services to
rural areas, communities, and small towns where post offices are not self-sustaining. See
39 U.S.C. §§ 101, 403(a), 3691. For more information, see GAO, U.S. Postal Service:
Strategies and Options to Facilitate Progress toward Financial Viability, GAO-10-455
(Washington, D.C.: Apr. 12, 2010) and Postal Regulatory Commission, Report on
Universal Postal Service and Postal Monopoly (Washington, D.C.: Dec. 19, 2008).
10USPS’s market-dominant products are those for which it has a statutory monopoly or
provides a large share of the product with limited competition. Such market dominance in
an unregulated market would likely enable a firm to exercise market power through the
setting of price above costs without the risk of losing a significant level of business to other
firms offering similar products.
11Price increases for market-dominant products are generally subject to a price cap based
on the Consumer Price Index for All Urban Consumers (“CPI-U”). USPS’s Governors
establish the prices for market-dominant services, subject to a review process by the
Postal Regulatory Commission (PRC) for compliance with requirements such as the price
cap. PRC issued an order adopting final rules in November 2020; the order, among other
things, modifies USPS’s price cap for market-dominant products, thereby providing USPS
with additional rate adjustment authority. Postal Regulatory Commission, Order No. 5763
(Nov. 20, 2020). PRC is an independent establishment of the executive branch that has
exercised regulatory oversight over USPS since PRC’s creation (as the Postal Rate
Commission) by the Postal Reorganization Act of 1970 (Pub. L. No. 91-375, § 2, 84 Stat.
719, 759 (1970)), with expanded responsibilities (and a re-designation as PRC) under the
Postal Accountability and Enhancement Act of 2006 (Pub. L. No. 109-435, 120 Stat. 3198
(2006)).
12Competitive products—which include Priority Mail, Priority Mail Express, First-Class
Package Service, Parcel Select and Parcel Return Service, and some types of
international mail—have greater pricing flexibility than market-dominant products and are
not limited by a price cap.
Page 4 GAO-21-261 USPS Changes since COVID-19
must price these products to at least cover their attributable costs. 13
As we found in May 2020, competitive products have become more
important to USPS, as its competitive product volumes more than
tripled between fiscal year 2007 and fiscal year 2019. 14 However,
according to USPS officials, competitive products have lower profit
margins than some market-dominant products, although profit
margins for competitive products have increased in recent years.
USPS establishes public delivery service standards for most of its market-
dominant mail products, which define the number of days USPS is to take
to deliver the mail in a timely manner. 15 USPS measures its delivery
performance as the percentage of mail pieces delivered within its service
standards. To determine whether a piece of mail is delivered on time,
USPS compares the mail’s transit time—that is, the number of days it
takes USPS to deliver the mail once it enters USPS’s system—with its
delivery service standards. 16 For the purposes of this report, we refer to
this performance measurement as “on-time performance”.
13Prices for competitive products are set by the USPS Board of Governors and reviewed
by PRC for compliance with applicable requirements. By statute, prices for each
competitive product must at least cover “attributable costs” (meaning USPS’s direct and
indirect costs attributable to the products through reliably identified causal relationships),
and competitive products collectively must contribute an appropriate share to USPS’s
institutional costs, 9.1 percent for fiscal year 2021, as determined by PRC.
14GAO-20-385.
15The Postal Accountability and Enhancement Act of 2006 requires USPS to create
service standards for market-dominant products. Pub. L. No. 109-435, § 301, 120 Stat.
3198, 3218 (2006)) (codified at 39 U.S.C. § 3691). These standards include measuring
and reporting on delivery performance. USPS does not publicly report on the extent
service performance meets the standards for its competitive products, as USPS considers
this information proprietary.
16USPS’s service standards for its market-dominant mail products define the number of
days USPS is to take to deliver the mail in a timely manner. Its service standards are set
forth in federal regulations (see 39 C.F.R. §§ 121.1 - 121.4) and differ depending on the
type of mail, the time of day and location at which USPS receives the mail, and the mail’s
final destination. For example, USPS standards for delivery of 2-day single-piece First-
Class Mail require the mail to be received by a specified cutoff time on the day it is
accepted, which varies depending on geographic location and where the mail is deposited
(e.g., in a collection box, at a post office, or at a mail-processing facility). This mail must
then be delivered on the second regular delivery day (Monday to Saturday) to be
considered “on time.” USPS measures delivery performance against its delivery service
standards to determine its on-time performance. In fiscal year 2020, the USPS annual
target for on-time performance for single-piece, two-day First-Class Mail was 96.5 percent.
Page 5 GAO-21-261 USPS Changes since COVID-19
Total Mail Volume
Decreased in 2020,
Mostly Due to a
Sharp Decline Early
in the Year
Total Mail Volume During 2020, total USPS mail volume decreased by 8.6 percent (11.9
Decreased in Early 2020, billion pieces) when compared to 2019. 17 Market-dominant mail made up
Spiked Prior to the 2020 94 percent of total mail volume, and competitive mail made up the
remaining 6 percent of total mail volume in 2020. While total mail monthly
General Election and Fell volume at the beginning of 2020 was similar to the total mail monthly
Back Below 2019 Levels volume during 2019, it dropped to significantly lower levels with the onset
by the End of 2020 of the COVID-19 pandemic in March (see fig. 1). However, during
September and October, total mail volumes briefly spiked. According to
USPS officials, this increase was due in part to election mail sent prior to
the 2020 general election. After the election in early November,
November and December total mail volume again decreased to below
2019 levels.
17These figures do not include international mail.
Page 6 GAO-21-261 USPS Changes since COVID-19
Figure 1: Total 2020 Monthly USPS Mail Volume, as Compared to Same Month in
2019
Note: Total mail volume consists of market-dominant (such as First-Class Mail and Marketing Mail)
and competitive (mainly packages) mail volumes, which comprised 94 percent and 6 percent of total
mail volume, respectively. International mail, which comprised approximately 0.5 percent of annual
mail volume in 2020, is excluded from this figure.
Market-Dominant Mail When compared to the 2019 levels, the drop, brief spike, and subsequent
Volume Drove Changes in decline in total mail volume during 2020 was primarily due to changes in
market-dominant mail volume. USPS’s total mail volume has dropped
Total Mail Volume
every year but one since 2007. These year-over-year declines have been
driven by declines in market-dominant products. We found in May 2020
that as online communication and payments have expanded, USPS
continued to face decreases in mail volume. For example, we found that
First-Class Mail volume declined 44 percent since fiscal year 2006 and
that Marketing Mail declined 27 percent from fiscal year 2007 to fiscal
year 2019. 18 The two types of market-dominant mail that account for the
greatest share of USPS’s mail volume—First-Class Mail and Marketing
Mail— declined 4 percent and 14 percent, respectively, over the course of
18GAO-20-385.
Page 7 GAO-21-261 USPS Changes since COVID-19
2020 compared to 2019. However, both products experienced significant
volume fluctuations during 2020.
As shown in figure 2, monthly market-dominant mail volume at the
beginning of 2020 was similar to the same period in 2019. However,
monthly market-dominant mail volume decreased significantly at the
onset of the pandemic—by almost 30 percent in April 2020—and
remained below prior-year levels through August 2020. For example, in
April 2020, First-Class Mail declined by about 9 percent and Marketing
Mail declined by about 45 percent compared to April 2019, and in August
volumes were still 10 percent and 25 percent below 2019 levels,
respectively. However, September and October volumes increased to or
above previous-year levels. In September, both First-Class Mail and
Marketing Mail were within less than 1 percent of prior year levels, and in
October 2020 volumes exceeded 2019 volumes by 2 percent and 12
percent, respectively. According to USPS, this increase in volume was in
part because of a surge of election-related mail.
Figure 2: 2020 Monthly Market-Dominant Mail Volume as Compared to the Same
Month in 2019
Note: Market-dominant mail includes products such as First-Class Mail, Marketing Mail, Periodicals,
Package Services and Special Services.
Page 8 GAO-21-261 USPS Changes since COVID-19
USPS and a postal stakeholder identified key factors underlying these
changes in volume during 2020. For example, USPS told us that the
decline in First-Class Mail volume during 2020 would have been even
greater if not for volume increases associated with the 2020 decennial
U.S. Census and mailed recovery rebates (commonly referred to as
stimulus checks). 19 Further, USPS and a mailing association told us that
Marketing Mail declined after the start of the COVID-19 pandemic
because businesses that use Marketing Mail—such as local businesses
for instance—needed to preserve cash during the shutdown. Officials at
the mailing association told us that some of this mail volume returned as
some businesses began to re-open.
In November 2020, USPS projected that market-dominant mail volume
would decrease in fiscal year 2021 due to several factors, including:
• the continuing long-term trend of migration from First-Class Mail to
electronic media,
• the ongoing effects of the COVID-19 pandemic, and
• the lack of the bolstering effects that the 2020 Census and recovery
rebates had on First-Class Mail volume in 2020 but that will not
continue in 2021. 20
Competitive Product Competitive product volume was 32 percent greater in 2020 than 2019,
Volume Grew Rapidly with nearly all of the volume increase occurring in packages after the
pandemic began in March 2020 (see fig. 3). 21 Competitive volumes in
during 2020 but Remained
2020 remained over 20 percent higher than 2019 volumes from April
a Small Percentage of through December, with June 2020 volume peaking at over 71 percent
Total Mail Volume higher than June 2019 volume. Additionally, USPS recorded its highest
19The CARES Act included a credit for tax year 2020 of up to $1,200 per eligible individual
or $2,400 for individuals filing a joint tax return, plus up to $500 per qualifying child (as
defined in section 24(c) of the Internal Revenue Code). The act also provided for an
advance refund of the credit. Pub. L. No. 116-136, div. A, tit. II, § 2201(a), 134 Stat. 281
335–40 (2020). The CARES Act refers to the credit and the advance payments as
Recovery Rebates.
20USPS, Fiscal Year 2021 Integrated Financial Plan, (Washington, D.C.) Nov. 24, 2020.
After the publication of this plan, a second round of recovery rebates was authorized by
the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260, div. N, tit. II, § 272, 134
Stat. 1182, 1965 (2020)) and scheduled to be sent in 2021. A third round of recovery
rebates was authorized by the American Rescue Plan Act of 2021, (Pub. L. No. 117-7, tit.
IX, sub. tit. G, Part 1, § 9601, 135 Stat. 4, 138 (2021)) to be provided prior to December
31, 2021.
21We did not compare competitive product volumes to USPS projections, because USPS
considers its projected competitive volumes to be business proprietary information.
Page 9 GAO-21-261 USPS Changes since COVID-19
competitive package volume ever in December 2020 with over 811 million
packages processed, about 147 million more packages than in December
2019.
Figure 3: USPS 2020 Monthly Competitive Product Volume Compared to the Same
Month in 2019
Note: Competitive products consist of mostly packages, but also of other products such as express
letters. We excluded international mail from our analysis.
Despite USPS experiencing record volume growth in competitive
products, these products continue to be a small albeit growing contributor
to total mail volume. We found in May 2020 that the volume of
competitive products (most of which are packages) more than tripled from
fiscal year 2007 through fiscal year 2019. 22 While competitive products
significantly increased over 2019 levels in 2020, they constituted only 6
percent of USPS’s total mail volume for 2020.
USPS officials, two major package delivery companies, and an
association representing mailers told us that the growth in 2020 was due
22GAO-20-385.
Page 10 GAO-21-261 USPS Changes since COVID-19
in part to increased business-to-consumer shipping, as household
purchasing moved online during the pandemic, including during the 2020
holiday season. In addition, USPS officials told us that other package
delivery companies were also experiencing volume increases, which
resulted in their sending additional package volume to USPS for “last
mile” delivery. 23 For instance, one package delivery company told us that
it had experienced volumes typical of its November-December holiday
season since the pandemic began in March 2020 and that the volume
growth it had anticipated over the next 3 to 5 years had manifested itself
over just a few months. Another package delivery company told us it had
increased its use of USPS’ last-mile delivery service to manage its
volume increases. In November 2020, USPS reported that it expects
future package volume to decline from 2020’s elevated levels. 24
During 2020, USPS nationwide on-time performance for market-dominant
National On-Time mail fell when compared to 2019. 25 USPS stated that the average monthly
Performance on-time performance for First-Class Mail decreased from 92.0 percent in
2019 to 86.7 percent in 2020. Likewise, USPS stated that the average
Declined through monthly on-time performance for Marketing Mail decreased from 90.1
November and percent in 2019 to 87.5 percent in 2020. While the average on-time
performance declined by 5 percentage points over the course of 2020 for
Significantly Declined First-Class Mail, it declined more so in December 2020. Specifically,
in December, with monthly on-time performance levels for First-Class Mail ranged from 84
percent to 93 percent from January through November 2020, and in
Some Districts December 2020 dipped to 69 percent. In February 2021, the Postmaster
Experiencing General testified that this significant decline in on-time performance
during the 2020 holiday season was due to, among other things, COVID-
Significant Declines related issues affecting employee availability, increased package volume,
throughout 2020 and access to transportation. In March 2021, the Postmaster General
joined with union leadership and management associations to form a joint
task force on service performance to improve service in certain facilities
around the country.
23Package delivery companies, such as UPS, pay USPS to deliver packages that they
enter into USPS’s system at local post offices where carriers pick up their mail for “last
mile” delivery.
24USPS, Fiscal Year 2021 Integrated Financial Plan.
25USPS reports on-time performance for its First-Class Mail, Marketing Mail, Periodicals,
Packages and Special Services. USPS does not report its on-time performance for its
competitive products, as USPS regards that information as proprietary.
Page 11 GAO-21-261 USPS Changes since COVID-19
Representatives we spoke with from mailers associations and package
delivery companies in September and October 2020 stated that while the
effect of COVID-19 on national on-time performance has been relatively
small, certain postal districts—such as New York, Detroit, and
Baltimore—have experienced periods of significant declines during the
pandemic. USPS data show that on-time performance for First-Class Mail
in these districts were all nearly 90 percent and in close proximity to the
national average prior to the COVID-19 pandemic but significantly
declined for various periods after the pandemic was declared (see fig. 4).
For example, USPS’s New York district had an on-time performance
rating of about 48 percent in April, and Baltimore’s on-time performance
dipped to about 61 percent in September. USPS officials stated that they
took several actions to respond to these on-time performance declines,
such as shifting mail volume within their mail-processing network,
expediting the hiring of new employees, and adjusting delivery schedules.
While each of these districts may have experienced differing trends at
different times, on-time performance for these districts in December 2020
was similar to national on-time performance in that they all experienced
significant declines. Specifically, the December 2020 First-Class Mail on-
time performance for the New York, Detroit, and Baltimore districts dipped
to 64 percent, 51 percent, and 42 percent, respectively. In January 2021,
officials from one mailing association told us that the poor on-time
performance in December has renewed some of its members’ efforts
toward digital alternatives to mail, which could result in even greater
reductions in First-Class Mail volumes over the next 12 to 18 months.
Page 12 GAO-21-261 USPS Changes since COVID-19
Figure 4: 2020 Average Monthly On-Time Performance for First-Class Mail in
Baltimore, Detroit, and New York Postal Districts
USPS and the USPS OIG identified several COVID-19-related factors
related to the decline in on-time performance. Specifically, USPS officials
attributed decreases in on-time performance to a combination of COVID-
19-related factors, such as reduced employee and transportation
availability, increased package volume, and the overall economic
impacts. 26 The USPS OIG also reported that several factors associated
with COVID-19 affected USPS’s on-time performance, such as decreased
employee availability and package volume increases. 27
26USPS officials also stated that it is not possible to precisely quantify the direct effects of
COVID-19 on on-time performance it is influenced by several other factors such as
transportation availability, operational changes and USPS’s focus on election mail in 2020.
27OIG, USPS, Operational Changes to Mail Delivery, Report Number 20-292-R21
(Arlington, VA: Oct. 19, 2020).
Page 13 GAO-21-261 USPS Changes since COVID-19
In addition to the factors associated with COVID-19, USPS took actions
that may have also reduced its on-time performance. For example, in
June 2020, the USPS OIG found that USPS spent $550 million in fiscal
year 2019 for such things as overtime and charter air flights to mitigate
delays in its mail transportation network. 28 In an August 2020 testimony,
the Postmaster General stated that USPS attempted to cut this cost by
reducing late and extra mail transportation trips between USPS’s mail-
processing plants and its post offices for final delivery among other
actions that he said were designed to cut costs. 29 However, the
Postmaster General also stated that to avoid the appearance of any
potential effect on election mail, he suspended several of these actions
until after the general election on November 3, 2020. There has also been
a number of lawsuits in federal court challenging the implementation of
this and other actions. 30 Many of these lawsuits resulted in preliminary
28OIG, USPS, Transportation Network Optimization and Service Performance, Report
Number 20-144-R20 (Arlington, VA: June 5, 2020).
29USPS, Statement of Postmaster General and Chief Executive Officer Louis DeJoy
before the House Committee on Oversight and Reform, Protecting the Timely Delivery of
Mail, Medicine, and Mail-in Ballots. Aug. 24, 2020.
30The plaintiffs consisted of both state governments and private parties, and their
challenges included alleged procedural violations because USPS did not seek a statutorily
required (39 U.S.C. § 3661) advisory opinion from the PRC prior to making changes that
will affect service on a nationwide or substantially nationwide basis, and alleged
constitutional violations because the changes affected people’s ability to vote by mail.
See, for example, Washington v. Trump, No. 20-cv-03127, 2020 WL 5568557 (E.D. Wash.
2020) (challenging the reduction of late and extra delivery trips, the reduction of overtime,
the decommission of sorting machines, the removal of mailboxes, the reduction in
operating hours, and the change in election-mail classification); see also New York v.
Trump, No. 20-cv-2340, 2020 WL 5763775 (D. D.C. 2020) (challenging the reduction of
late and extra delivery trips, the prohibition of mail carriers in certain cities spending time
in the morning sorting mail, the removal of sorting machines, and the decision to no longer
treat Election Mail on an expedited First-Class basis); see also Vote Forward v. DeJoy,
No. 20-cv-2405, 2020 WL 5763869 (D. D.C. 2020) (challenging the reduction of late and
extra trips and the alleged delay of election mail); see also Bullock v. USPS, No. 20-cv-
00079 (D. Mont. 2020) (challenging the reduction of overtime, removal of mailboxes,
decommission of sorting machines, and changes in the classification of Election Mail).
Page 14 GAO-21-261 USPS Changes since COVID-19
injunctions, temporarily prohibiting USPS from continuing to implement
these actions, and full resolution in some of the cases is still pending. 31
USPS’s Revenue
Increased but Did Not
Offset Increased
Expenses,
Highlighting the Need
for Transformation of
USPS’s Business
Model
USPS Total 2020 Revenue Decreasing revenue from market-dominant products was more than offset
Increased Due to Growth by increasing revenue from competitive products in 2020, resulting in a
net revenue increase of 6.1 percent (about $4.3 billion). 32 Revenue from
in Competitive Products’
market-dominant products decreased overall by $3.8 billion from 2019 to
Volume and Prices 2020, with some significant monthly changes (see fig. 5). To some extent,
this overall decline in market-dominant revenue reflects the long-term
downward trend starting in fiscal year 2007. At the same time, USPS
reported that the decline in market-dominant revenue during 2020 was a
result of significantly lower mail volume for these products. 33
31While preliminary injunctions often apply until the respective court reaches a final
judgment, some of these injunctions appear to have been specifically limited to the
November election. See, for example, Jones v. USPS, No. 20-cv-6516, 2020 WL
5627002, at *28 (S.D.N.Y. 2020) (referencing a November end-date for the injunctive
order that USPS approve overtime). USPS settled one of the cases by agreeing to
postpone operational changes until after the November election. Joint Stipulation to Stay
Case in Light of Settlement Agreement, at *4, Bullock v. USPS, No. 20-cv-00079 (D. Mont.
2020) (referencing USPS Guidance “making clear that the operational changes . . . have
been and will be resolved until after the 2020 November Election”). Plaintiffs voluntarily
dismissed some of the other cases, such as Washington v. Trump, after the elections.
32As stated above, we did not include USPS’s international mail products in our analysis.
However, USPS’s net loss figure includes revenue from international mail products and
interest income. Revenue from international mail products and interest income accounted
for about $2.4 billion and $60 million, respectively, in 2020.
33USPS, 2020 Report on Form 10-K (Washington, D.C.: Nov. 13, 2020).
Page 15 GAO-21-261 USPS Changes since COVID-19
Figure 5: Total Market-Dominant Products’ Revenue by Month, 2019 and 2020
Note: Market-dominant mail includes products such as First-Class Mail, Marketing Mail, Periodicals,
Package Services and Special Services.
USPS’s competitive product revenue increased by about $8.4 billion in
2020 compared to 2019 (see fig. 6). Even though competitive products
are a much smaller percentage of USPS’s total mail volume than its
market-dominant products, this increase in revenue more than offset the
decrease in revenue of its market-dominant products. USPS reported that
higher competitive product revenue reflected more e-commerce packages
sent during the pandemic, as well as USPS price increases implemented
in January 2020 and a temporary price increase from October 18 to
December 27, 2020 for certain competitive products. While competitive
product revenue increased, as noted earlier, USPS also reported that
costs to provide these products (e.g., packages) are greater as they are
more labor-intensive. Therefore, according to USPS, competitive products
are not as profitable as some market-dominant products (e.g., letters). 34
34USPS, 2020 Report on Form 10-K.
Page 16 GAO-21-261 USPS Changes since COVID-19
Figure 6: USPS’s Total Revenue from Competitive Products by Month, 2019 and
2020
Note: Competitive products consist of mostly packages, but also of other products such as express
letters. We excluded international mail from our analysis.
USPS reported that in the long term, it does not expect that the growth in
revenues associated with increases in competitive products’ volume will
continue to offset revenue losses in other mail services. 35 As discussed
above, USPS has projected that market-dominant volume, which
accounted for about 55 percent of USPS’s total revenue in 2020, will
continue to decline. USPS based its projection on the continuing
migration from mail to electronic communication. This trend has been
magnified by the effects of COVID-19 on mailer and consumer demand.
USPS’s 2020 Expenses As we found in May 2020, USPS’s poor financial condition is due to
Increased More than expenses increasing faster than revenue. Since fiscal year 2007, USPS
has reported 14 straight fiscal years of net losses. 36 USPS’s $4.3 billion
Revenue
35USPS, 2020 Report on Form 10-K.
36GAO-20-385. USPS’s net loss for fiscal year in 2020 was $9.2 billion, bringing USPS’s
total net loss from fiscal year 2007 through fiscal year 2020 to $87 billion.
Page 17 GAO-21-261 USPS Changes since COVID-19
increase in revenue in 2020 was more than offset by its $4.4 billion
increase in expenses—resulting in an increase of $100 million in USPS’s
net loss for 2020 ($8.1 billion) over 2019’s net loss ($8 billion)(see table
1).
Table 1: USPS’s Revenue, Expenses, and Net Loss, 2020 Compared to 2019
2020 Difference Percentage
(dollars in between 2020 change, 2020
billions) 2019 and 2019 and 2019
Revenue 75.3 71.0 +4.3 +6.1
Expenses 83.4 79.0 +4.4 +5.7
Net Income (Loss) (8.1) (8.0) -0.1 +1.0
Source: GAO analysis of U.S. Postal Service (USPS) data. | GAO-21-261
Notes: Numbers may not equate due to rounding. These figures include international revenue and
interest revenue and expenses. USPS’s expenses include required payments for retiree health care
and pensions that USPS did not make.
According to USPS, the increase in total expenses in 2020 was driven by
a rise in certain operating expenses. For example, cost increases were
greater than in 2019 for USPS’s three largest expense categories:
personnel compensation and benefits; transportation (i.e., the costs of
contracts to move mail between USPS facilities); and supplies and
services (see table 2). 37 USPS officials noted that some expenses
decreased during 2020, such as for fuel and vehicle maintenance.
Table 2: Selected and Total USPS Expenses for 2020 and 2019
2020 Percentage Change,
Expense Category (dollars in billions) 2019 2020 to 2019
Personnel Compensation 64.1 60.6 +5.8
and Benefits
Transportation 9.0 8.2 +9.5
Supplies and Services 3.1 2.8 +10.6
All Other Expenses 7.2 7.3 -1.8
(including interest)
Total Expenses 83.4 79.0 +5.7
Source: GAO analysis of U.S. Postal Service (USPS) data. | GAO-21-261
37USPS’s total personnel compensation and benefits expenses represented about 77
percent, transportation about 10 percent, and supplies and services about 4 percent of
USPS’s total expenses in 2020. Personnel compensation and benefits consists of
expenses such as compensation, current employee and retiree health benefits, retirement
benefits, worker’s compensation and other items.
Page 18 GAO-21-261 USPS Changes since COVID-19
Note: Numbers may not equate due to rounding. USPS’s total personnel compensation and benefits
expenses include required payments for retiree health care and pensions that USPS did not make.
According to USPS, some of its increase in expenses were also due to
the COVID-19 pandemic. USPS stated that under the CARES Act as
amended, it has received about $7.2 billion for operating expenses
needed due to the COVID-19 emergency from March to December 2020.
These expenses included categories such as overtime, hiring and training
costs of new employees, absenteeism, and costs of sanitizing work
areas. For example, USPS reported an estimated $763 million in
expenses as a direct result of COVID-19 for certain expenses such as:
• COVID-19 Leave. By the end of December 2020, increased use of
leave and the additional paid leave provided by the Families First
Coronavirus Response Act (FFCRA) had cost USPS a total of about
$433 million. 38
• Supplies and Services. Supplies and services expenses increased by
about $257 million largely due to personal protective equipment and
cleaning supplies procured in response to the COVID-19 pandemic.
• Transportation. USPS officials stated that transportation costs had
increased by about $73 million due to increased costs of air and
highway mail transportation contract costs resulting from a reduction
in commercial air service during the pandemic and the increase in
package volume.
USPS Has Taken Some As discussed above, USPS has taken actions that were intended to
Steps to Address the Gap address the growing gap between revenues and expenses by reducing
costs. USPS released a new strategic plan in March 2021 that includes
between Revenues and
Expenses, but
Congressional Action
Remains Essential to
Transforming USPS
38The FFCRA was enacted in March 2020 (Pub. L. No. 116-127, 134 Stat. 178 (2020).
FFCRA authorized new paid sick leave that may be used by an employee in COVID-19
situations for themselves, or to care for others such as sick family members, as well as
Family and Medical Leave Act-protected unpaid and paid leave if a school/child care is
closed.
Page 19 GAO-21-261 USPS Changes since COVID-19
more cost-reduction measures as well. 39 To increase revenue, USPS also
imposed a time-limited price increase on some competitive products for
its traditionally busy holiday period from October 18 through December
27, 2020. 40
In addition to these changes, USPS continued to forego making certain
required payments for retiree health care and pensions 41 and reported
that it would continue to forego these payments, to ensure that it can
maintain its normal operations to provide postal service. 42 As a result,
despite USPS’s net loss of $8.1 billion in 2020, USPS’s cash balance
increased from about $9 billion at the end of March 2020 to about $15.2
billion at the end of December 2020, in large part due to not making these
required payments and by borrowing more from USPS’s existing debt
authority with the federal government.
Although USPS preserved enough cash and obtained increased loan
capacity to continue to provide daily postal service during a time of
significant change, the trends we previously identified in USPS’s mail
volume revenue and expenses that make USPS’s business model
unsustainable have continued. We found in May 2020 that the steps
USPS had taken to date were not sufficient to restore its financial
sustainability without congressional action. We concluded that without
congressional action, USPS’s financial problems would only worsen,
putting its mission at greater risk and potentially limiting Congress’s ability
39USPS, Delivering For America: Our Vision and Ten-Year Plan to Achieve Financial
Sustainability and Service Excellence (Washington, D.C.: Mar. 23, 2021). USPS also
continued to call for legislative and regulatory changes, such as eliminating the price cap
for market-dominant products and integrating USPS’s retiree health care benefits with
Medicare. We reported in August 2018 that increased postal retiree participation in
Medicare would decrease USPS’s costs but increase Medicare’s costs, according to
analyses by the Congressional Budget Office. GAO, Postal Retiree Health Benefits:
Unsustainable Finances Need to Be Addressed, GAO-18-602 (Washington, D.C.: Aug. 31,
2018).
40USPS stated that it earned $361.8 million from this limited price increase.
41USPS did not make about $7.8 billion in required payments for retiree health benefits
and pensions in fiscal year 2020. USPS has not made its required prefunding payments
for retiree health benefits since fiscal year 2012. USPS’s total unpaid required payments
for retiree health benefits and pensions for fiscal years 2012 through 2020 now total $63.3
billion. USPS, FY2020 Report on Form 10-K. The missed payments for fiscal years 2020
and 2019 are included in USPS’s expenses in tables 1 and 2 above.
42USPS, FY2020 Report on Form 10-K.
Page 20 GAO-21-261 USPS Changes since COVID-19
to make the most appropriate or sustainable policy decisions. As a result,
we urged Congress to consider determining:
• the level of universal postal service the nation requires;
• the extent to which USPS should be financially self-sustaining; and
• the most appropriate institutional structure for USPS.
The further deterioration of USPS’s financial position since the start of the
COVID-19 pandemic makes the need for congressional action to
transform USPS’s business model even more urgent.
We provided a draft of this report to USPS for comment. USPS provided
Agency Comments a written response, which is reproduced in appendix I. USPS found that
the report correctly reflected its current financial and operational situation.
USPS also provided technical comments, which we incorporated as
appropriate.
We are sending copies of this report to the appropriate congressional
committees, the Postmaster General, and other interested parties. In
addition, the report is available at no charge on the GAO website at
https://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-2834 or naamanej@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff making key contributions to this
report are listed in appendix II.
Jill Naamane, Acting Director
Physical Infrastructure Issues
Page 21 GAO-21-261 USPS Changes since COVID-19
List of Committees
The Honorable Patrick Leahy
Chairman
The Honorable Richard Shelby
Vice Chairman
Committee on Appropriations
United States Senate
The Honorable Ron Wyden
Chairman
The Honorable Mike Crapo
Ranking Member
Committee on Finance
United States Senate
The Honorable Patty Murray
Chair
The Honorable Richard Burr
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate
The Honorable Gary C. Peters
Chair
The Honorable Rob Portman
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Rosa L. DeLauro
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives
The Honorable Frank Pallone, Jr.
Chairman
The Honorable Cathy McMorris Rodgers
Republican Leader
Committee on Energy and Commerce
House of Representatives
Page 22 GAO-21-261 USPS Changes since COVID-19
The Honorable Bennie G. Thompson
Chairman
The Honorable John Katko
Ranking Member
Committee on Homeland Security
House of Representatives
The Honorable Carolyn B. Maloney
Chairwoman
The Honorable James Comer
Ranking Member
Committee on Oversight and Reform
House of Representatives
The Honorable Richard Neal
Chair
The Honorable Kevin Brady
Republican Leader
Committee on Ways and Means
House of Representatives
Page 23 GAO-21-261 USPS Changes since COVID-19
Appendix I: Comments from the United
Appendix I: Comments from the United States
Postal Service
States Postal Service
Page 24 GAO-21-261 USPS Changes since COVID-19
Appendix I: Comments from the United States
Postal Service
Page 25 GAO-21-261 USPS Changes since COVID-19
Appendix II: GAO Contact and Staff
Appendix II: GAO Contact and Staff
Acknowledgments
Acknowledgments
Jill Naamane, (202) 512-2834 or naamanej@gao.gov.
GAO Contact
In addition to the individual named above, Derrick Collins (Assistant
Staff Director); Greg Hanna (Analyst-in-Charge); Amy Abramowitz; Geoff
Acknowledgments Hamilton; Delwen Jones; Serena Lo; Steven Rabinowitz; Malika Rice;
Mike Soressi; and Laurel Voloder made key contributions to this report.
(104435)
Page 26 GAO-21-261 USPS Changes since COVID-19
The Government Accountability Office, the audit, evaluation, and investigative
GAO’s Mission arm of Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability of the
federal government for the American people. GAO examines the use of public
funds; evaluates federal programs and policies; and provides analyses,
recommendations, and other assistance to help Congress make informed
oversight, policy, and funding decisions. GAO’s commitment to good government
is reflected in its core values of accountability, integrity, and reliability.
The fastest and easiest way to obtain copies of GAO documents at no cost is
Obtaining Copies of through our website. Each weekday afternoon, GAO posts on its website newly
GAO Reports and released reports, testimony, and correspondence. You can also subscribe to
GAO’s email updates to receive notification of newly posted products.
Testimony
Order by Phone The price of each GAO publication reflects GAO’s actual cost of production and
distribution and depends on the number of pages in the publication and whether
the publication is printed in color or black and white. Pricing and ordering
information is posted on GAO’s website, https://www.gao.gov/ordering.htm.
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card, MasterCard,
Visa, check, or money order. Call for additional information.
Connect with GAO on Facebook, Flickr, Twitter, and YouTube.
Connect with GAO Subscribe to our RSS Feeds or Email Updates. Listen to our Podcasts.
Visit GAO on the web at https://www.gao.gov.
Contact FraudNet:
To Report Fraud,
Website: https://www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in
Automated answering system: (800) 424-5454 or (202) 512-7700
Federal Programs
Orice Williams Brown, Managing Director, WilliamsO@gao.gov, (202) 512-4400,
Congressional U.S. Government Accountability Office, 441 G Street NW, Room 7125,
Relations Washington, DC 20548
Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
Public Affairs U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, DC 20548
Stephen J. Sanford, Acting Managing Director, spel@gao.gov, (202) 512-4707
Strategic Planning and U.S. Government Accountability Office, 441 G Street NW, Room 7814,
External Liaison Washington, DC 20548
Please Print on Recycled Paper.
File and source
- File
- gao-21-261.pdf
- Size
- 3,073,371 bytes
- SHA-256
- 3f0b875992dcc909a82988e802b9e647cdafc1c0da9f46b6473851465d1fede8
- Our copy
- gao-21-261.pdf
- Original
- www.gao.gov