GAO Report: Postal Service in Peril

The Government Accountability Office on Tuesday added the Postal Service to its list of high-risk federal agencies in need of change.

The post office has been struggling with a sharp decline in mail volume as people and businesses switch to e-mail both for personal contact and bill paying. The agency is facing a potential nearly $7 billion loss this fiscal year despite a 2-cent increase in the price of stamps in May, and cuts in staff.

"There are serious and significant structural financial challenges currently facing the Postal Service," the GAO said.

"New technology is profoundly affecting services in both the private and public sectors, including traditional mail delivery. Compounded by the current recession, the volume of mail being sent is dropping substantially," Gene L. Dodaro, acting comptroller general, said in a statement.

The report called on the Postal Service to work with Congress and other organizations to develop and implement a restructuring plan.

Congress is considering a bill to change the way the post office funds its retiree health benefits over the next two years that could save it $2 billion annually.

The post office also filed a petition with the independent Postal Regulatory Commission indicating that managers are looking at closing many post offices to save money.

In addition, Postmaster General John Potter has asked Congress for permission to reduce mail deliveries from six days-a-week to five.

Last year, mail volume fell by 9.5 billion pieces to a total of 203 billion pieces. It is expected to fall by 28 billion pieces this year to a total of 175 billion pieces.

The GAO report said the key short-term goal is to cut expenses quickly enough to offset mail volume and revenue declines to avoid running out of cash to pay its expenses. Postal officials have said the agency could run out of cash in September.

The post office issued a statement saying: "The GAO High Risk List announcement accurately reflects our current financial reality. Securing the fiscal stability of the Postal Service will require continued review of retiree health benefit prefunding, as well as gaining flexibility within the law to move toward five-day delivery, to adjust our network as needed, to develop new products the market requires and to work with our unions, mailers, stakeholders and Congress to meet the challenges ahead."