- The Washington Times - Wednesday, January 9, 2002

The Postal Service incurred a whopping $1.68 billion deficit in fiscal 2001, despite additional revenue of $3 billion from two recent rate increases. That's an 800 percent increase from the prior year's loss of $199 million.

For their part in this financial fiasco, postal managers rewarded themselves with $164 million in bonuses. Postal executives maintain these so called Economic Value Added (EVA) payments are not really bonuses, but rather pay-for-performance. In truth, there is no relationship between financial performance and the bonuses paid to Postal Service executives. The entire Pay-for-Performance Program is nothing more than an elaborate scheme to line the pockets of these government employees without any accountability for good service, operating efficiency or prudent management decisions.

The Postal Service hijacked the Economic Value Added (EVA) name for this program from the financial performance metric that is widely used in the private sector to reflect shareholder value by discounting an organization's earnings by the cost of capital required to generate the earnings. The Postal Service started to apply EVA principals during Marvin Runyon's tenure as postmaster general. Since that time, the EVA formula has been manipulated to assure managers receive bonuses by "indexing" EVA calculations for inflation, effectively rewarding managers for poor financial performance.

Recently, the agency's inspector general concluded use of an indexed EVA was inappropriate for calculating bonuses and "program participants earned incentive awards totaling $805 million during a period of steeply declining profits."

In 2001 however, economic mismanagement exceeded the Postal Service's ability to corrupt the EVA formula, thus it eliminated its use in calculating bonuses. Instead, the agency's 2001 Annual Performance Plan replaced the EVA measure with something called Area and Performance Cluster Productivity Improvement Indicators.

Why the change? According to Postal Chief Financial Officer Richard Strasser, "productivity was substituted for net income for fiscal year 2001 because there was no chance of finishing in the black."

In other words, the Postal Service recognized it is so poorly run, that the use of financial performance in calculating bonuses would have to be abandoned if managers were to receive any bonuses.

Real world economic measurements have been replaced with a convoluted and easily manipulated myriad of Productivity Improvement Indicators purported to measure improvement in certain targeted areas.

One way managers ensure their bonuses under the new scheme is by downwardly revising on-time-delivery goals that prove difficult to meet. This past summer, the Postal Service "realigned" its "out-of-town mail delivery standards" for many western cities, a move that drew widespread media attention. Many articles reported mail delivery was getting slower, but in reality, mail was not actually slowing down; the Postal Service was merely reverse-engineering its goals to meet its poor delivery performance in order to ensure that managers would receive bonuses.

The volume of mail handled by postal processing facilities also weighs heavily in bonus calculations. Gary Joseph, a former postal employee at the Sharonville, Ohio, bulk mail processing facility, told investigative reporters that managers regularly fabricated counts of the mail handled by the facility "with the stroke of a pen." The Government Accounting Office (GAO) is currently investigating Mr. Joseph's claims.

Postal managers are certainly daring, paying themselves hundreds of millions in so-called productivity bonuses while raising rates and seeking a huge handout from Congress in order to cover billions in waste, fraud and mismanagement. They are allowing, if not outright coordinating, a massive deceit against the American people.

And why shouldn't they? There is no real accountability. The Postal Rate Commission is by definition very limited in its authority, and must rely on the Postal Service's own self-reported data and statistics when making decisions. As a self-described "quasi-government agency," the Postal Service gets to dodge the usual regulatory and legislative oversight.

While our leaders are pleading with Americans to stimulate our ailing economy by overcoming their fears and returning to a normal life, the Postal Service has come up with its own economic anti-stimulus package a massive $5 billion government bailout followed by a $6 billion rate increase.

The Postal Service does not need a rate increase or bailout; it needs increased accountability. And it needs to start supporting the American people instead of defrauding them.

Rick Merritt is the executive director of PostalWatch Inc., a nonpartisan, nonprofit advocacy organization committed to a fair, efficient and accountable U.S. Postal Service.

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