Questionable Bookkeeping at Postal Service?

ByABC News
January 28, 2002, 9:02 AM

W A S H I N G T O N, March 15 -- Enron's troubles are not the same as the United States Postal Service's difficulties not by a long shot. But newly released federal audits show the Postal Service also used questionable bookkeeping analysis to change the perception of its performance.

Despite the efforts of more than 800,000 employees, the Postal Service is losing money. Yet audits by Inspector General Karla Corcoran show 80,000 postal managers received $805 million in bonuses while the service was losing $2 billion between 1998 and 2000.

It's called pay for performance, a way to make employees accountable. It worked fine in earlier years while the Postal Service was making a profit. But when it lost $2 billion between 1998 and 2000, officials found it hard to justify bonuses.

So postal executives decided to find a way. The method they chose was to artificially adjust the books for inflation, turning a billion-dollar loss into a $1.7 billion gain. They used a term pioneered in private business called "economic value added."

Why Are You Paying Out Bonuses?

The change was not reported on the books but was used to trigger the bonuses under the banner of pay for performance.

This raised a question by Inspector General Corcoran: "If you have no net income, why are you paying out bonuses?" She called the pay-out unreasonable.

"It's not reasonable because they're using an inflation adjustment factor and the CPI [consumer price index] to adjust what their revenue would be. There's really no justification for [this adjustment]."

The Postal Service says it actually saved money this way because it no longer has to pay big cost of living raises or automatic pay raises, mechanisms relinquished some years ago in exchange for the bonus plan. Some managers complain that they are short-changed by the bonus plan.

Was Extra Pay Justified?

Was it justified in awarding the extra pay? Supporters point out that amounted to about $2,500 or less for each of the 80,000 supervisory or managerial personnel.