Post office penalty pay

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Objectives

Our objective was to assess Postal Service controls over managing overtime.

Overtime pay is a premium that eligible employees receive when they perform work in excess of eight paid hours in a day, or 40 paid hours in a week. Per union contracts, regular overtime is paid at one and one-half times an employee’s hourly rate to non-exempt employees, while penalty overtime is paid at double an employee’s hourly rate under specific conditions.

Employees must be paid for all overtime work they perform, even if that time was not authorized. Unauthorized overtime occurs when an employee’s clock time exceeds eight hours in a day or 40 hours in a week without prior authorization from a manager.

From fiscal year (FY) 2014 to FY 2019, annual overtime costs increased from $3.7 to $5 billion (or 35 percent), while overtime hours increased from 98.9 to 129.7 million hours (or 31 percent). As a result, during this time period, the Postal Service paid $25.8 billion in total overtime costs, including $23.5 billion for regular overtime and $2.3 billion for penalty overtime. The highest costs over these six fiscal years were in FY 2019 for both overtime and penalty overtime, with $4.4 billion and $574 million, respectively. In addition, regular and penalty overtime were 13 to 16 percent of total dollars spent and over 9 percent of total hours worked for labor costs in each of these six years.

Our fieldwork began before the president of the United States issued the national emergency declaration concerning the novel coronavirus disease (COVID-19) outbreak on March 13, 2020. The results of this audit do not reflect any operational changes that may have occurred as a result of the pandemic or more recent changes made to reduce inefficiencies in the network. Any future operational changes to manage overtime expenses should be coordinated and clearly communicated across the Postal Service to ensure service to customers is maintained and performance is not adversely impacted.

Findings

The Postal Service needs to strengthen controls over managing overtime to successfully contain these costs. From FY 2014 to FY 2019, overtime costs and hours have trended upward and consistently exceeded their planned overtime budgets. Although package volume grew, these costs increased despite declining mail volume and increased employee levels. Specifically, we found:

• Between FY 2014 and FY 2019, the number of employees who earned more in total overtime pay than their pay for regular straight time hours increased from 758 to 4,008 (an increase of 3,250 employees, or 429 percent).

• Management’s actual regular overtime costs and hours exceeded their planned overtime for each of the past six fiscal years, which ranged from $73.2 million to $801.7 million, and 2.0 million to 21.7 million hours, respectively. In addition, while management successfully managed their penalty overtime use compared to their planned hours during three of the six fiscal years, they exceeded their planned penalty overtime costs and hours during the remaining three years (FYs 2016, 2018, and 2019), which ranged from $69.2 million to $228.5 million, and 1.4 million to 4.4 million hours, respectively.

• Management did not always effectively manage unauthorized overtime. In FY 2019, 263,694 of the Postal Service’s 633,108 career and non-career employees (42 percent) had unauthorized overtime. Five of the seven Postal Service areas had an increase in unauthorized overtime between FY 2018 and FY 2019. The Northeast Area had the highest increase of 37 percent, from 4.8 million hours to 6.6 million hours.

• Management did not have complete, accurate, and reliable payroll workhours data for FY 2019. Specifically, about $1.2 billion, representing 44.3 million employee workhours, was not recorded for Pay Period (PP) 18 of FY 2019. This inaccuracy, which should have been corrected by management, remained undetected for about one month until the OIG’s data request and analysis identified the error.

These conditions occurred because:

• Management did not always maintain adequate staffing levels:

- Delivery units operated below their authorized complement by up to nine employees and had up to 18 vacancies during FY 2018. On average, delivery units had a complement of about 28 employees during this timeframe.

- Management inaccurately used the Function 1 employee scheduler to calculate employee complement levels using a base week that was not representative of mail processing operations and underestimated the number of employees needed. This contributed to a decrease in overall mail processing complement by about 5,000 career positions during FY 2018. Management later addressed the decrease at the end of the year.

• The Postal Service’s current framework for measuring key performance indicators lacks a direct deterrent that would prevent management from exceeding their overtime budget.

• Headquarters management did not require supervisors and managers in the field to collect information on their reasons for overtime use. This would have provided analytical data to support the causes for exceeding their planned overtime and determine if they need to adjust their employee and operational schedules.

• Management did not provide adequate supervisory oversight to ensure:

- Proper completion and maintenance of required Postal Service forms

- Adequate access and control of employee timecards.

- Timely review of Time and Attendance Collection System reports.

• A contract employee unintentionally omitted PP 18 FY 2019 when manually updating the code used to obtain the employee payroll workhours data. While testing and validation of this information was conducted when the code was first created, there was no formal process to ensure new workhours data information was correctly entered and complete when the data file parameters were updated.

During FY 2019, the Postal Service exceeded its planned overtime and penalty overtime hours by more than 9.5 and 4.4 million hours, respectively. As a result, we estimated the Postal Service incurred about $521.6 million in questioned costs.

Recommendations

We recommended management:

• Address staffing issues at facilities operating below their authorized complement or with excessive vacancies and identify opportunities for savings at locations with high overtime users by determining the optimal point at which hiring new staff becomes more cost efficient than using overtime.

• Modify current policies and procedures to include performance measures or other oversight controls to hold appropriate management accountable for not reducing overtime use.

• Implement a process to collect and monitor data that identifies the reasons for overtime use to better manage and control overtime costs.

• Develop an action plan, with milestones, to monitor and reduce unauthorized overtime.

• Establish and implement automated processes to update the data file parameters and validate the file for accuracy and completeness.