BREAST CANCER

RESEARCH STAMP

Millions Raised for

Research, but Better

Cost Recovery

Criteria Needed

United States General Accounting Office

GAO Report to Congressional

Subcommittees

April 2000

GAO/GGD-00-80

United States General Accounting Office General Government Division

Washington, D.C. 20548

Page 1 GAO/GGD-00-80 Breast Cancer Research Stamp

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April 28, 2000

The Honorable Thad Cochran

Chairman

The Honorable Daniel Akaka

Ranking Minority Member

Subcommittee on International Security,

Proliferation and Federal Services

Committee on Governmental Affairs

United States Senate

The Honorable John M. McHugh

Chairman

The Honorable Chaka Fattah

Ranking Minority Member

Subcommittee on the Postal Service,

Committee on Government Reform

House of Representatives

This report discusses the Postal Service’s Breast Cancer Research Stamp.

It responds to Section 2 (b) of the Stamp Out Breast Cancer Act, Public

Law 105-41, August 13, 1997, which directs the Comptroller General to

submit a report to Congress that

• describes the monetary and other resources required of the Postal Service

in developing and selling the Breast Cancer Research Semipostal (BCRS),1

• evaluates the effectiveness of using the BCRS as a means of fund-raising,

and

• evaluates the appropriateness of using the BCRS as a means of fundraising.

In doing this work, we focused most heavily on how the Service went

about identifying and allocating the costs it incurred in developing and

marketing the BCRS and the issues associated with effectiveness.

Additionally, we discuss the statutory authorities and constraints

associated with the Postal Service’s issuance of semipostals, in general, as

 

1

 A semipostal is a stamp sold at a surcharge over postal value. The additional charge is for a special

purpose.
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a means of fund-raising. We also provide information that Congress may

want to consider as it deliberates proposals for additional semipostals.

As part of our evaluations of the effectiveness and appropriateness of

using the BCRS as a means of fund-raising, we discuss the opinions of key

stakeholders involved with breast cancer research/funding and philately.

We also provide information on 12 semipostals issued by foreign postal

administrations. The information on the 12 semipostals was collected from

8 of 10 foreign postal administrations that responded to our questionnaire.

We also discuss the results of a statistically generalizable survey of adults

(18 years of age or older) in the continental United States that we

commissioned to determine the public’s opinion of the BCRS. Additionally,

we provide information on BCRS sales and the resulting proceeds

transferred to the National Institutes of Health (NIH) and the Department

of Defense (DOD) for breast cancer research.

The Stamp Out Breast Cancer Act directed the Postal Service to establish a

special stamp—known as a semipostal—to raise money for breast cancer

research. This stamp, the BCRS, is the first stamp ever issued by the Postal

Service to raise money for nonpostal purposes. The BCRS is a

“blockbuster” commemorative stamp,2

 costs 40 cents, and is valid for the

33-cent First-Class postage rate, leaving 7 cents as surcharge revenue. The

act provides that the Service is to deduct from the surcharge revenue the

reasonable costs it incurs in carrying out the act, including those

attributable to the printing, sale, and distribution of the BCRS, as

determined under regulations it shall prescribe. The Service is to remit the

remaining net proceeds from the surcharge revenue to NIH and DOD for

breast cancer research. Seventy percent of the net proceeds go to NIH,

with the remaining 30 percent going to DOD’s medical research program.

It is not clear precisely how much it cost to develop and sell the BCRS

because there were costs that the Service did not track. Postal officials

said the costs not tracked were inconsequential or immaterial, and it

would have been too expensive to track these costs. On March 16, 2000,

the Service reported that the bulk of its costs to develop and sell the BCRS

through December 31, 1999, was $5.9 million. According to the Service,

almost all of these costs would have been incurred with any blockbuster

commemorative stamp issue and have been recovered through the 33

 

2

 A commemorative stamp is a postage stamp that depicts the cultural and historical heritage of the

United States; e.g., important people, events, places, or special subjects of national appeal or

significance. A “blockbuster” commemorative is a commemorative stamp that has mass appeal; garners

Postal Service support on a national level; and, in most cases, will be highly retained by postal patrons

and not used for postage.

Results in Brief
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cents that constitutes the First-Class postage portion of the BCRS.

However, the remaining costs which are unique to the BCRS program are

to be recouped from its surcharge revenue. Since BCRS sales are not

scheduled to end until July 28, 2000, some additional costs may be

incurred.

In a report dated March 31, 2000, the Postal Service Office of Inspector

General (OIG) identified $836,000 in costs that it believed were attributable

to the BCRS program and not previously identified by the Service. Earlier

in March, after reviewing a draft of OIG’s report, the Service agreed that

$488,000 of these costs were incurred exclusively on behalf of the BCRS

program, and included them in its reported $5.9 million in BCRS costs. The

Service and OIG had not, as of March 31, 2000, resolved their differences

over the remaining $348,000 in costs identified by OIG. To the extent that

the remaining costs are attributable to the BCRS program, we believe they

should be added to the total BCRS costs and reported by the Service.

We are concerned that the Service has yet to prescribe, as required by the

act, regulations setting forth its criteria for determining the reasonable

costs to be recouped from the surcharge revenue generated by the BCRS.

The act required that the Service prescribe such regulations, but it did not

establish a date by which this was to occur. Through much of the BCRS’

sales period, the Service has used an evolving set of informal criteria to

decide what costs it would recoup from the surcharge revenue. The

Service initially planned not to recoup any costs from the surcharge

revenue; however, using its latest informal criteria, the Service has decided

that it will recoup $482,000. According to the Service, all other BCRS costs

have been recovered through the 33-cent First-Class postage rate, but the

Service provided no data or analysis showing that these costs have been

recovered.

Because the Service has not yet developed formal, written criteria for

determining the costs to be recouped from the BCRS surcharge revenue,

as the act requires, and has revised its informal criteria several times since

the BCRS went on sale, it is difficult for Congress, us, and others to

evaluate how well the Service is implementing its legislative mandate to

recoup reasonable costs. The absence of formal written criteria also makes

it difficult for Congress to determine the appropriateness of the Service’s

criteria.

The act did not provide quantitative measures for evaluating the

effectiveness of the BCRS as a fund-raiser. However, the act provided that

the BCRS would be voluntary and convenient, and it would raise funds for
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breast cancer research. To these ends, the BCRS has been successful. The

BCRS is voluntary because postal patrons may choose to purchase it for

First-Class postage at 40 cents or purchase any of the Service’s other, nonsemipostal First-Class stamps at 33 cents. It is convenient, as attested to by

68 percent of adults responding to the public opinion survey we

commissioned; and it had raised about $10 million for breast cancer

research by the end of 1999. Additionally, the BCRS is expected to raise

more money for breast cancer research by the time sales are scheduled to

conclude on July 28, 2000.

The key breast cancer research/funding stakeholders we spoke with that

expressed an opinion on the BCRS’ effectiveness as a fund-raiser believed

that it had been effective. The most serious concern expressed was that

money raised by the BCRS could be used to supplant appropriated dollars

for breast cancer research—even though the act states that it is the sense

of Congress that the act should neither directly nor indirectly cause a net

decrease in total funds received by NIH or DOD. In addition, the public’s

view of the BCRS was generally positive; and a majority of the adults

responding to our public opinion survey expressed a desire to see more

semipostals in the future for other special, nonpostal purposes.

The BCRS’ performance, compared to foreign semipostals, was mixed. The

BCRS generated more money for its designated beneficiaries, in an average

month, than was reported to have been generated by 7 of the 12 foreign

semipostals. On the other hand, on a per capita basis, 8 of the 12 foreign

semipostals were reported to have generated more money for their

beneficiaries than did the BCRS. On the basis of the collective results of all

the measures we used to evaluate effectiveness, we believe the BCRS has

been an effective fund-raiser.

With respect to appropriateness, about 71 percent of adults responding to

the public opinion survey we commissioned, and most of the key

stakeholders we spoke with, believed that it is appropriate to use

semipostals issued by the Service to raise funds for nonpostal purposes.

The Service, although supportive of the BCRS, is generally opposed to

semipostals because it believes that congressional mandates to issue

semipostals expand the Service’s mission beyond what was defined by the

Postal Reorganization Act of 1970 and that the BCRS’ success may not

mean success for other semipostals. Likewise, the American Philatelic

Society opposes the use of semipostals because it views them as a tax on

the Society’s members that falls disproportionately and unfairly on their

hobby. However, the president of the American Philatelic Society stated

that if a fair process could be designed to choose no more than two
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semipostals per year, he believed stamp hobbyists could live with that

process.

The eight foreign postal administrations that responded to the

questionnaire we sent them were evenly split on the question of the

appropriateness of their countries using semipostals to raise funds for

nonpostal purposes. The postal administrations of Germany, The

Netherlands, Belgium, and New Zealand believed semipostals are an

appropriate way to raise money. The postal administrations of Austria,

Canada, the United Kingdom, and Sweden believed semipostals are

inappropriate—and the United Kingdom and Sweden have permanently

discontinued semipostal sales. Canada does not currently have any

semipostals for sale, although it has not ruled out selling them at some

future date. Although the Austrian postal administration believes

semipostals are inappropriate, it continues to issue them annually at the

direction of its legislature.

We do not believe that the Service has the authority to issue semipostals

on its own volition without specific legislation authorizing it to do so.

Although the act gave the Service the specific authority to issue the BCRS,

it was silent with regard to the appropriateness of the Service issuing

additional semipostals for other causes. Postal officials, however, have

stated that in the absence of statutory authority to issue semipostals, it is

unclear whether selling such stamps would be consistent with the

underlying statutory and regulatory authorities governing the Service. We

do not interpret the Service’s underlying statutory authority as authorizing

it to establish postage rates and fees for a particular stamp at a level that

exceeds its postage value for purposes of generating revenue for

contributions to a charitable cause.

We are offering two matters for Congress to consider should it decide that

the Postal Service is not recouping all of the costs from the BCRS that

Congress intended. We are also making recommendations to the

Postmaster General to address the problems we identified regarding costs

to be recouped from the BCRS surcharge revenue.

Congress passed the Stamp Out Breast Cancer Act on August 13, 1997. The

act required the Postal Service to establish, within 1 year, a First-Class

stamp with an added surcharge that would allow the public to make a

contribution to breast cancer research each time it purchased one or more

of these special stamps. The act stipulated that the Postal Service’s Board

of Governors was to determine the surcharge amount that would be added

to the First–Class postage rate. The surcharge was not to exceed 25

Background
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percent of the First-Class postage rate, which, at the time, was 32 cents.

The Board of Governors set the price of the stamp at 40 cents—32 cents

for First-Class postage plus the maximum 25-percent surcharge of 8 cents.3

The act further stipulated that the BCRS was to be offered to the public as

an alternative to regular First-Class postage, thereby allowing postal

patrons purchasing the BCRS to make a voluntary contribution equal to

the surcharge amount. The act directed the Postal Service to make the

BCRS convenient for postal patrons to purchase. It stipulated that the

Service transfer 70 percent of the net proceeds from the surcharge to NIH

for breast cancer research and 30 percent to DOD for the same purpose.

Net proceeds are the revenue generated from the surcharge, less

reasonable costs incurred by the Service in carrying out the statutory

mandate, as determined by the Service under regulations it shall prescribe.

The act directed that the Service’s authority to issue the BCRS would

terminate 2 years from the date on which the BCRS first became available

to the public.4

The BCRS was dedicated at a White House ceremony on July 29, 1998—the

date of issuance. As mandated by the act, the BCRS is to be available for

sale through July 28, 2000—2 years from the date it was issued.

According to the Service, the BCRS was the idea of Dr. B.I. Bodai, the

Director of Breast Surgical Services for Kaiser Permanente, Sacramento,

CA. Literature on the BCRS states that Dr. Bodai, with the support of Ms.

Betsy Mullen, the founder of the Women’s Information Network Against

Breast Cancer, lobbied Congress to pass legislation creating the Nation’s

first-ever semipostal.

The BCRS is a self-adhesive, nondenominational First-Class

commemorative stamp. According to the Service, the BCRS was designed

by Ethel Kessler of Bethesda, MD, a breast cancer survivor. Postal

literature states that the BCRS was illustrated by Whitney Sherman of

Baltimore, MD, and features “a black line drawing of a female figure,

suggesting a ‘goddess of the hunt or fight’.” The words “BREAST CANCER”

and “FUND THE FIGHT. FIND A CURE.” accompany the illustration. (See

fig. 1.)

 

3

 When the price of First-Class postage increased to 33 cents on January 10, 1999, the Board of

Governors decided that the price of the BCRS would remain at 40 cents.

4

 H.R. 4069 and S. 2386 were introduced in Congress on March 23, 2000, and April 11, 2000, respectively,

to extend the sales period for the BCRS for 2 years.
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Source: U.S. Postal Service.

The Postal Service has never before issued any semipostals, but foreign

postal administrations have used them for many years—with some

semipostals dating as far back as the 1800s. According to the president of

the American Philatelic Society, approximately 50 countries issued

semipostals at some time during the 1990s. Of those countries, 17 issued

semipostals on a routine basis. Those countries were Argentina, Aruba,

Austria, Belgium, Denmark, Finland, France, Germany, Greenland,

Hungary, Indonesia, Luxembourg, The Netherlands, Netherlands Antilles,

New Zealand, Switzerland, and Turkey. The semipostal surcharge revenues

raised by those countries went to such beneficiaries as The Red Cross, the

Olympics, social and cultural programs, child welfare, and the promotion

of philately.

NIH and DOD officials reported that they will, as required by the act, use

the money generated by the BCRS to fund breast cancer research. NIH

officials stated that money received from the BCRS will be used to fund

peer-reviewed research awards, such as “Insight Awards” to stamp out

breast cancer. Officials described Insight Awards as a new initiative

Figure 1: Reproduction of the 1998

Breast Cancer Research Semipostal
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designed to support innovative pilot studies that will generate a new

understanding of breast cancer.

DOD officials said that money received from the BCRS will be used to

supply additional financial support for the extramural breast cancer

research program managed by the U.S. Army Medical Research and

Materiel Command. Officials said the money would be spent through peerreviewed award mechanisms such as “Idea Awards” that are intended to

encourage innovative approaches to breast cancer research.

On September 30, 1998, OIG reported on its review of postal management’s

early actions to implement the act. OIG identified several issues it believed

warranted postal management’s attention. The key issue focused on

needed improvements in the BCRS program to better define program

costs.

In describing the monetary and other resources required by the Postal

Service in developing and selling the BCRS, and in evaluating the

effectiveness and appropriateness of using the BCRS as a means of fundraising, we interviewed postal officials responsible for the BCRS program

and gathered and analyzed pertinent information on costs, revenue, and

resources used to develop and sell the BCRS. During the course of our

work, OIG concluded a follow-up audit of the BCRS program. We reviewed

OIG’s draft report and incorporated its findings where appropriate. We

also gathered information on 12 semipostals issued by 8 foreign postal

administrations that had experience with semipostals.

We interviewed key stakeholders involved with breast cancer

research/fund-raising and philately to obtain their opinions on the BCRS.

We interviewed representatives of (1) the American Cancer Society, who

stated that the Society is the Nation’s largest nongovernmental funder of

cancer research; (2) the National Breast Cancer Coalition (NBCC), an

alliance of over 500 member organizations and 60,000 individuals

dedicated to lobbying Congress and the states for improved public policies

for eradicating breast cancer; and (3) the Susan G. Komen Breast Cancer

Foundation, a leader in the field of breast cancer research, education,

screening and treatment. We also interviewed (1) Dr. B.I. Bodai, the

individual credited with conceiving the idea for the BCRS and

spearheading the lobbying effort that resulted in Congress passing the

Stamp Out Breast Cancer Act; (2) the president of the American Philatelic

Society, which represents over 55,000 stamp collectors; and (3) the

Curator of the Smithsonian Institution’s National Philatelic Collection.

Scope and

Methodology
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To obtain the public’s views on the BCRS, we contracted with

International Communications Research (ICR) to conduct a statistically

representative survey of adults 18 years of age and older in the continental

United States. We researched and analyzed applicable sections of the U.S.

Code and Postal Service regulations. We also met with NIH and DOD

officials to review the arrangements they had with the Postal Service to

receive the surcharge revenue from the BCRS and to discuss how they

planned to use that money. Appendix I provides further details about our

objectives, scope, and methodology.

We conducted our review at Postal Service Headquarters in Washington,

D.C., between June 1999 and March 2000 in accordance with generally

accepted government auditing standards. To verify the accuracy of

financial data provided by the Postal Service, we discussed financial

accountability for the BCRS with officials of the Postal Inspection Service.

We also reviewed a random selection of Inspection Service audit reports

that covered, among other things, internal controls over accountable

paper—such as postage stamps which included the BCRS.

We requested comments on a draft of this report from the Postmaster

General. The Service’s comments are discussed at the end of this letter and

are reprinted in appendix III.

It is not clear precisely how much it cost the Postal Service to develop and

sell the BCRS. There were costs the Service did not track because it

believed that these costs would be inconsequential or immaterial. The

Service reported that the bulk of its costs through December 31, 1999 were

$5,921,000. These costs include $488,000 in BCRS costs identified by OIG

that the Service had not identified. Additional costs may be incurred

before BCRS sales are scheduled to end on July 28, 2000. According to the

Service, almost all of these costs would have been incurred with any

blockbuster commemorative stamp issue and have been recovered

through the 33 cents that constitutes the First-Class postage portion of the

BCRS. However, the remaining costs which are unique to the BCRS

program are to be recouped from its surcharge revenue.

The Stamp Out Breast Cancer Act required that the Service prescribe

regulations setting forth the criteria it will use to determine the reasonable

costs to be recouped from the surcharge revenue generated by the BCRS.

However, the act did not establish a deadline to prescribe such regulations.

As of March 2000, the Service had not prescribed regulations containing

formal, written criteria for determining the reasonable costs to be

Monetary and Other

Resources Used to

Develop and Sell the

BCRS
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recouped from the BCRS’ surcharge revenue. Through much of the BCRS’

sales period, the Service has used an evolving set of informal criteria to

decide what costs it would recoup from the surcharge revenue. The

Service initially planned not to recoup any costs from the surcharge

revenue; however, using its latest informal criteria, the Service has decided

that it will recoup $482,000 in BCRS costs from the surcharge revenue. The

Service considers these costs to be unique to the BCRS. According to the

Service, all other BCRS costs have been recovered through the 33-cent

First-Class postage rate, but the Service provided no data or analysis

showing that these costs have been recovered. Postal officials said there

may be some additional costs to be recouped before BCRS sales are

scheduled to end on July 28, 2000.

We are concerned that the Service has not clearly articulated the criteria to

be applied in deciding what costs it would recoup from the surcharge

revenue. As of March 2000, the Service had not prescribed formal, written

criteria for determining which of the costs that it is tracking are to be

recouped from the surcharge revenue as contemplated by the act. Until the

Service does this, it will be difficult to evaluate the appropriateness of the

Service’s criteria or to determine if the Service is consistently applying its

criteria. Establishing formal written criteria is particularly important given

that BCRS sales are scheduled to end shortly and that eight bills for

additional semipostals have been introduced in Congress. Each of those

bills contains the same language about recouping reasonable costs as the

Stamp Out Breast Cancer Act does.

The Postal Service reported its costs associated with developing and

selling the BCRS, through December 31, 1999, to be $5,921,000. The Service

believed that these costs accounted for the bulk of BCRS costs. The

$5,921,000, however, does not include direct costs for items the Service

determined to be inconsequential—e.g., minor accounting functions

related to the BCRS, such as posting sales receipts to cashbooks in

nonautomated offices. Additionally, the $5,921,000 does not include

indirect costs (overhead) which, according to postal officials, are also

inconsequential. According to these officials, it was not cost-effective to

spend the resources that would have been required to quantify and recoup

inconsequential costs associated with the BCRS. As a result, it is not clear

precisely how much it cost the Postal Service to develop and sell the

BCRS.

Furthermore, the officials said there were no staff dedicated full-time to

work on the BCRS, and no additional staff were hired because of the

BCRS. According to these officials, all work associated with the BCRS was

Cost of Developing and

Selling the BCRS Is Unclear
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absorbed by existing staff and staff budget—i.e., the Service incurred no

additional staffing-related expenses because of the BCRS. They also told

us the Service has not tracked staff hours devoted to the BCRS. The

Service may also incur additional costs associated with the BCRS before

its sales are scheduled to end on July 28, 2000.

The $5,921,000 in BCRS costs includes $488,000 in costs identified by OIG

that had not previously been identified by the Service.5 In total, OIG had

identified an additional $836,000 in costs it believed were attributable to

the BCRS.6

 The Service agreed that $488,000 of those costs were incurred

exclusively on behalf of the BCRS program and included them in its

reported costs. However, the Service disagreed that the remaining

$348,000 was attributable to the BCRS. As of March 31, 2000, the Service

and OIG had not resolved their differences over the remaining costs. The

$348,000 in costs that the Service disagreed with consisted of about

$221,000 in advertising and promotion costs and about $127,000 in labor

costs. According to the Service, the approximately $221,000 in disputed

advertising and promotion costs were rental charges for a billboard in

Times Square (New York, NY) that was used to promote commemorative

stamps in general—not just the BCRS. OIG agrees that the billboard was

rented to promote commemorative stamps but maintains that

approximately $221,000 was the BCRS’ pro rata share of the total rental

charges. The Service also disagrees with OIG that labor costs should be

charged to the BCRS program because all work associated with the BCRS

was absorbed by existing staff and staff budget. OIG maintains that labor

costs are a part of the “other resources” identified in the act and should be

included in BCRS costs.

We did not review the cost differences between the Service and OIG

because we did not receive OIG’s final report until early April 2000.

However, to the extent that the remaining costs are attributable to the

BCRS program, we believe they should be added to the total BCRS costs

and reported by the Service.

According to postal officials, if the Service were to have tracked all

monetary and other resources used in developing and selling the BCRS, it

would have had to either (1) make substantive modifications to its existing

 

5

 These costs consisted of (1) some advertising and promotion costs, (2) stamp design costs, and (3)

packaging costs.

6

 Details of additional costs are included in OIG’s report (RG-AR-00-002) on the BCRS program, dated

March 31, 2000. BCRS costs reported by OIG were about $65,000 more than what we reported. This is

due to differences in the cost items included and opinions regarding which costs to include in each

cost item.
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accounting systems or (2) establish a separate accounting system devoted

exclusively to the BCRS. The Service believed, given that there may be no

additional semipostals issued in the future, that it should not spend either

the time or the money that these options would have required.

Consequently, in lieu of pursuing either of these options, the Service

decided it would identify; track; or, as appropriate, estimate the costs in

connection with 17 items that it believed would account for the bulk of the

BCRS’ cost. The initial list of 17 was subsequently expanded to 18 with the

inclusion of legal fees associated with the BCRS. The 18 items and their

reported costs, through December 31, 1999, are shown in table 1.

Cost item Reported Cost

Stamp design $40,000

Shipping to stamp distribution offices/stamp

distribution networks

$0a

Printing and manufacturing $2,100,000

Training $612,000

Rural training $0b

Reprogramming window automation devices $352,000

Posting to cashbook (nonintegrated retail

terminal)

$0a

Inventory costs $0a

Destruction costs $0a

Market research $56,000

Flyer cost $231,000

Advertising and promotion $1,505,000

Postage to Post Offices $0a

Customer receipts $7,000

Packaging for self-service $989,000

Vending machine training costs $0b

Vending machine reconfiguration $7,000

Legal fees $22,000

Total $5,921,000

a

The Service considers these costs to be minimal and does not track them.

b

Rural training and vending machine training costs are included in the cost item labeled training.

Source: U.S. Postal Service.

The Stamp Out Breast Cancer Act requires that the Service prescribe

regulations establishing, among other things, the criteria it would use for

determining the reasonable costs to be recouped from the BCRS surcharge

revenue. Section 2 of the act specifies, in part, that the Service is to recoup

from the surcharge revenue “an amount sufficient to cover reasonable

costs incurred by the Postal Service in carrying out this section, including

those attributable to the printing, sale, and distribution of stamps under

this section, as determined by the Postal Service under regulations that it

shall prescribe.” It is the view of the Service, and we agree, that because

Table 1: Cost of Developing and Selling

the BCRS, Through December 31, 1999,

as Reported by the Postal Service

No Formal Criteria

Established as of March

2000
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the act modified the term “costs” with the term “reasonable” and

empowered the Service to determine the costs and prescribe regulations,

the Service has discretion to determine the reasonable costs attributable to

the BCRS to be recouped from its surcharge revenue.

The act requires the Service to prescribe regulations governing its

determination of reasonable costs to be recovered from the surcharge

revenue, but the act does not specify a date by which the regulations are to

be issued. In June 1998, shortly before the BCRS was issued, the Service

issued a revision to its Administrative Support Manual that provided for

the Service to track the bulk of its costs incurred in connection with the

BCRS.7

 The revision to the Administrative Support Manual further

provided that the Service would make a decision at a later date as to which

of these costs constituted the Service’s reasonable costs to be recouped

from the BCRS’ surcharge revenue.8

Since revising the manual in June 1998, the Service has acknowledged

several times that it has not yet prescribed the formal, written criteria it

will use to determine the reasonable costs that will be recouped from the

surcharge revenue. The Memorandums of Understanding the Service

signed with NIH and DOD allow the Service up to 120 days after BCRS

sales end on July 28, 2000, to make a final determination as to which costs

will be recouped from the surcharge revenue. Also, the Service has sent

letters to Members of Congress, as late as June 1999, stating that it had not

yet determined what costs it would recoup from the surcharge revenue.

As of March 2000, the Service had not yet prescribed the regulations

setting forth its definition of reasonable costs or articulated clearly the

criteria it will apply in determining the costs to be recouped from the

surcharge revenue.

 

7

 Under 39 CFR 211.2, the Service states that the regulations of the Postal Service include the

Administrative Support Manual.

8

 In a report on the BCRS dated Sept. 30, 1998, OIG suggested to postal management that it identify and

define what constitutes reasonable costs incurred in carrying out the act and develop a policy that

incorporates that definition.
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Although the Service had not prescribed formal, written criteria by the end

of March 2000, it has used informal criteria for reviewing costs associated

with the BCRS and making decisions as to what costs it will recoup from

the BCRS’ surcharge revenue. However, the Service’s informal criteria

have evolved over time, and our review of the Service’s application of

these criteria indicates that the Service has not consistently applied its

informal criteria to all of the costs items it is tracking.

During the early months of BCRS sales, postal officials told us that the

Service did not plan to recoup any of its costs from the surcharge revenue.

We discussed this approach with postal officials and were later told that

the Service had decided to recoup certain costs. We asked the officials

what criteria the Service planned to use to recoup costs. They told us the

Service planned to recoup costs unique to the BCRS that were above and

beyond the costs normally incurred with a regular commemorative stamp

for the 18 cost items listed in table 1. Using these cost items and the costs

normally incurred with a regular commemorative stamp as its informal

criteria, the Service, at our request, identified the costs that it was tracking

that it considered to be unique to the BCRS and planned to recoup from

the surcharge revenue. We reviewed the Service’s application of its criteria

and pointed out to the Service that it did not appear to have consistently

applied its criteria to all 18 cost items. For example, we questioned, among

other things, why $1.5 million in advertising and promotion costs were not

being recouped from the surcharge revenue, given that the Service does

not normally spend money advertising and promoting regular

commemorative stamps. After additional discussion, postal officials told

us they had revised their informal criteria to reflect their plans to recoup

costs unique to the BCRS that were above and beyond the costs normally

incurred with a blockbuster commemorative stamp for the 18 cost items.

Applying its revised criteria, they said that advertising and promoting is

normally done with a blockbuster commemorative stamp, and these costs

are recovered through the 33-cent First-Class postage rate.

Using the 18 cost items and the costs normally incurred with a blockbuster

commemorative stamp as its informal criteria, we again asked the Service

to review the cost items it was tracking to decide which costs should be

recouped from the surcharge revenue. The Service applied its informal

criteria to the $5,921,000 in BCRS reported costs through December 31,

1999, and decided that $482,000 of the costs were unique to the BCRS and

should be recouped from the surcharge revenue. Postal officials said there

may be some additional costs to be recouped before BCRS sales are

scheduled to end on July 28, 2000.

Informal Criteria Evolved

Over Time and Were Not

Always Consistently

Applied
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Postal officials told us that the remaining $5,439,000 in BCRS costs are

common to a blockbuster commemorative stamp, and are recovered

through the 33-cent First-Class postage rate. Therefore, the Service does

not view these remaining costs as subject to recovery from the surcharge

revenue. According to postal officials, the Service does not plan to recoup

these remaining costs from the surcharge revenue because to do so would

be double-charging. Table 2 identifies the unique costs the Service plans to

recoup from the surcharge revenue.

Allocation of costs

Cost item Reported Cost

Costs common to a

blockbuster

commemorative stamp

Costs recouped or to

be recouped from

surcharge revenue

Stamp design $40,000 $40,000

Shipping to stamp

distribution

offices/stamp

distribution networks

$0a $0a

Printing and

manufacturing

$2,100,000 $2,100,000

Training $612,000 $612,000

Rural training $0b $0b

Reprogramming

window automation

devices

$352,000 $176,000c $176,000c, d

Posting to cashbook

(nonintegrated retail

terminal)

$0a $0a

Inventory costs $0a $0a

Destruction costs $0a $0a

Market research $56,000 $56,000

Flyer cost $231,000 $231,000

Advertising and

promotion

$1,505,000 $1,505,000

Postage to Post

Offices

$0a $0a

Customer receipts $7,000 $7,000d

Packaging for selfservice$989,000 $950,000e $39,000e

Vending machine

training costs

$0b $0b

Vending machine

reconfiguration

$7,000 $7,000

Legal fees $22,000 $22,000d

Total $5,921,000 $5,439,000 $482,000

a

The Service considers these costs to be minimal and does not track them.

b

Rural training and vending machine training costs are included in the cost item labeled training.

Table 2: Costs Reported Through

December 31, 1999, That the Service

plans to Recoup from the BCRS

Surcharge
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c

Automated download did not work and changes had to be manually loaded. Because of this problem,

one-half of the reprogramming cost was charged to the BCRS, and the remaining one-half was

categorized as common to a blockbuster commemorative stamp.

d

These costs had been recouped from the BCRS’ surcharge revenue as of December 31,1999.

e

The cost of including a receipt in shrink-wrapped and cellophane stamp holders was determined to

be unique to the BCRS. The remaining cost was determined to be common to a blockbuster

commemorative stamp.

Source: U.S. Postal Service.

We reviewed the Service’s application of its criteria to all of the cost items

it is tracking. In the course of our review, we found three instances,

totaling $1,019,000, where the Service did not consistently apply its

criteria.

The first instance involved the $612,000 spent on training. Although postal

officials acknowledged that the training in question was unique to the

BCRS, they decided the costs should be considered part of routine

operations covered by the 33-cent First-Class postage rate. They

acknowledged that training has not been provided for other

commemorative stamps, including blockbusters. However, they explained

that their decision not to recoup the cost of training was influenced by

their belief that the BCRS is similar to a new postal product, and postal

employees receive training on all new products. The officials stated that

the training provided on the BCRS took about 15 or 20 minutes to

complete and was similar to the training provided on any new product. The

officials said that had the training for the BCRS been more substantive,

they would have decided to recoup the cost from the BCRS’ surcharge

revenue.

The second instance involved the $176,000 spent on reprogramming

window automation devices that the Service decided not to recoup from

the surcharge revenue. The Service acknowledged that none of the total

$352,000 associated with reprogramming window automation devices

would have been spent had it not been for the BCRS. However, the Service

stated that because it ran into an unexpected computer reprogramming

problem, which it considers to be its fault, it decided not to charge all of

the reprogramming costs to the BCRS. Therefore, the Service decided that

it would recoup one-half of the reprogramming costs from the surcharge

revenue. The Service said it considered the other half to have been

recovered through the 33-cent First-Class postage rate.

The third instance involved the $231,000 spent on flyers. The Service

acknowledged that it does not normally incur flyer costs with a

blockbuster commemorative stamp. Nevertheless, the Service had initially
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decided that in the case of the BCRS, it considered flyer costs to have been

recovered through the 33-cent First-Class postage rate and therefore not to

be recouped from the surcharge revenue. After we had additional

discussions with the Service, officials agreed with us that the $231,000

spent on flyers should be recouped from the BCRS surcharge revenue.

Postal officials told us on March 16, 2000, that the Service plans to recoup

these costs from the surcharge revenue before making the next transfers

to NIH and DOD.

In the instances involving training and reprogramming window automation

devices, postal officials said they stood by their decision not to recoup

these costs from the BCRS surcharge revenue because they considered

these costs to have been recovered through the 33-cent First-Class postage

rate. However, postal officials provided no data or analysis showing

whether or how BCRS costs were recovered through the 33-cent FirstClass postage rate. These data and analysis are key to both establishing the

appropriateness of the Service’s decision regarding those costs to be

recouped from the surcharge revenue and providing assurance that postal

rate payers who have not purchased the BCRS are not involuntarily

contributing funds to breast cancer research.

The Stamp Out Breast Cancer Act did not provide quantitative measures

for evaluating the effectiveness of the BCRS as a fund-raiser. However, the

act provided that the BCRS would provide the public a voluntary and

convenient way of raising funds for breast cancer research. To these ends,

the BCRS has been successful—it is voluntary, convenient, and has raised

millions for breast cancer research.

Because the act did not provide quantitative measures for evaluating the

effectiveness of the BCRS, and historic comparisons were not possible

because this is the first-ever U.S. semipostal, we developed what we

believe to be reasonable measures of effectiveness. On the basis of the

results of those measures, we believe the BCRS has been an effective fundraiser.

First, as provided by the act, the BCRS has raised money for breast cancer

research and at the same time has been voluntary and convenient. Second,

key stakeholders, for the most part, viewed the BCRS as an effective fundraiser. Third, the public’s view of the BCRS was generally positive; and a

majority of the adults responding to our public opinion survey expressed a

desire to see more semipostals in the future for other special, nonpostal

purposes. Finally, the BCRS’ performance, compared to foreign

semipostals, was mixed. The average monthly surcharge revenue

Effectiveness of the

BCRS as a Fund-Raiser
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generated by the BCRS compared favorably with the foreign semipostals

included in our survey, although it did not raise as much money as most

foreign semipostals on a per capita basis.

The BCRS is voluntary and convenient, and it has raised millions of dollars

for breast cancer research. As provided for by the act, purchasing the

BCRS is to be voluntary and convenient. The BCRS is voluntary in that

postal patrons may choose to purchase the BCRS for First-Class postage at

40 cents or purchase any of the Service’s other, non-semipostal First-Class

stamps at 33 cents. The BCRS is convenient in that it is widely available—

e.g., it is to be available for purchase at all post offices and postal stores,

from rural carriers and some postal vending machines, and at some special

events. Additionally, our public opinion poll, conducted by ICR, showed

that an estimated 68 percent of adults 18 years of age or older in the United

States viewed semipostals as a convenient way to contribute to designated

causes.

Also, as envisioned by the act, the BCRS has raised money for breast

cancer research. As of December 31, 1999, 144.8 million BCRSs had been

sold—generating $10.8 million in surcharge revenue. The Postal Service

projects that by the time sales are scheduled to end on July 28, 2000, about

194.8 million BCRSs will have been sold—generating about $14.3 million in

surcharge revenue. In accordance with the act, the surcharge revenue

generated by the BCRS, less the Postal Service’s reasonable costs, is to be

transferred to NIH and DOD for breast cancer research.

The act specifies that after deducting its reasonable costs, the Service is to

transfer 70 and 30 percent of the remaining surcharge revenue generated

by the BCRS to NIH and DOD, respectively. The act further specifies that

such transfers are to be made at least twice yearly under arrangements as

agreed to between the Service and those agencies. The specifics regarding

these transfers are contained in Memorandums of Understanding (MOU)

signed by NIH, DOD, and Postal Service officials. Under the MOUs, the

Postal Service will make five transfers to NIH and DOD at specified times.

To date, the Service has complied with the requirements in the act and

MOUs regarding the transfers of surcharge revenue to NIH and DOD for

breast cancer research.

Table 3 shows, as of December 31, 1999, the three transfers that have been

made since the BCRS was issued in July 1998.

The BCRS Is Voluntary and

Convenient, and It Has

Raised Millions for

Research

Transfers of Surcharge

Revenue to NIH and DOD

for Breast Cancer Research
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Date of transfer

Amount transferred

to NIH (dollars in

millions)

Amount transferred

to DOD (dollars in

millions)

Total transferred to

NIH and DOD

(dollars in millions)

November 2, 1998 $1.9 $0.8 $2.7

April 15, 1999 2.3 1.0 3.3

November 1, 1999 1.9 0.8 2.7

Total $6.1 $2.6 $8.7

Source: U.S. Postal Service.

The fourth transfer is to be made on or before April 15, 2000. This transfer

to NIH and DOD, per the MOUs, will be 50 percent of the surcharge

revenue available at that time. A final transfer, which is intended to include

the available balance (i.e., surcharge revenue less reasonable costs) in

connection with the fourth transfer, as well as any other amounts that are

available, is to be made within 120 days after stamp sales are scheduled to

end on July 28, 2000.

As of December 31, 1999, the Service had recouped $205,000 from the

surcharge revenue generated by the BCRS to cover certain costs

associated with developing and selling the BCRS. The Service did not

recoup any of its costs before making the November 2, 1998, transfers to

NIH and DOD. However, the Service recouped $183,000 from the BCRS’

surcharge revenue before making the second transfers to NIH and DOD.

The $183,000 was to cover the cost of printing customer receipts and onehalf of the cost associated with reprogramming window automation

devices. The Service also recouped $22,000 for legal expenses before

making the third transfers. The Service plans to recoup $277,000 before

making final transfers to NIH and DOD to cover the costs of reconfiguring

vending machines, flyers, and including a receipt in shrink-wrapped and

cellophane stamp holders. The total amount of costs recouped as of

December 31, 1999, plus the additional $277,000, totals $482,000.

The key stakeholders we talked with that expressed a view regarding the

effectiveness of the BCRS believed it had been effective in raising funds

for breast cancer research. Some of the stakeholders that chose not to

express a view on the effectiveness of the BCRS offered other comments

concerning semipostals.

Key stakeholders expressing the view that the BCRS was an effective fundraiser included the Postal Service, the Susan G. Komen Breast Cancer

Foundation, and Dr. B. I. Bodai.

Table 3: Transfers Made to NIH and DOD

for Breast Cancer Research as of

December 31, 1999

Key Stakeholders Believe

the BCRS Has Been an

Effective Fund-Raiser

Key Stakeholders That

Expressed the View That the

BCRS Has Been an Effective

Fund-Raiser
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According to postal officials, a number of indicators support the Service’s

belief that the BCRS has been an effective fund-raiser. First, and most

notably, is the estimated $14.3 million in surcharge revenue that the BCRS

is expected to generate. Second are the additional printings of the BCRS

that had to be done based on inventory reductions at the stamp

distribution offices. Third is the Gold “REGGIE” award the Service

received from the Promotion Marketing Association for its efforts in

promoting the BCRS. Fourth is the fact that sales of the BCRS compare

favorably with the sales of some of the Service’s most popular

commemorative stamps.

Dr. B. I. Bodai and the Susan G. Komen Breast Cancer Foundation also

believe the BCRS has been an effective fund-raiser. The Susan G. Komen

Breast Cancer Foundation stated that the BCRS has been an effective

program because it has been a unique and innovative fund-raising tool and

has enhanced breast cancer awareness on a global scale. Dr. Bodai

believes the BCRS has been an effective fund-raiser primarily on the basis

of the amount of money the BCRS raised for breast cancer research.

However, Dr. Bodai stated that BCRS sales would have been even higher

had the Postal Service and breast cancer organizations promoted it more

heavily.

The National Breast Cancer Coalition (NBCC) believes there are more

effective ways of raising money for research than using semipostals. NBCC

believes that effectively lobbying Congress holds the most promise for

raising significant amounts of research money. NBCC officials were also

concerned (1) that the BCRS’ administrative and advertising costs could be

high in relation to the total surcharge revenue generated by the BCRS, (2)

about how the Service would treat BCRS administrative and advertising

costs, and (3) about whether future semipostals would be treated the same

way.

American Cancer Society officials said it is too early to label the BCRS as

either effective or ineffective. The officials said their primary concern has

always been that funds generated by the BCRS should never be used to

supplant appropriated dollars for breast cancer research. The officials said

they support the BCRS as long as it does not take momentum away from

federal funding for breast cancer research or adversely affect fund-raising

organizations’ ability to raise research funds. The officials said they have

seen no evidence, to date, to suggest that any of these concerns have

materialized.

Comments Made by Other Key

Stakeholders on Semipostals as

Fund-Raisers
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The Curator of the Smithsonian Institution’s National Philatelic Collection

said semipostals are effective fund-raisers in many European countries,

and he sees no reason why that experience cannot be duplicated within

the United States. He believes that the Service, by participating in fundraising activities, enhances its public image.

The American Philatelic Society does not believe the true cost of the BCRS

will ever be known; therefore, it believes that any evaluation of

effectiveness will always be subjective, at best. The Society does not

believe the Service is equipped to track all of the costs associated with

developing and selling the BCRS. Although the Society actively supports

breast cancer research, it is opposed to semipostals regardless of the

cause. It views semipostals as a tax on its members’ hobby.

To determine the public’s awareness of the BCRS and its view of

semipostals in general, we included pertinent questions in our survey of

adults 18 years of age or older in the continental United States, which was

conducted by ICR. Although most respondents to our public opinion poll

were not aware of the BCRS 1 year after it was issued, the public, in

general, viewed semipostals in a positive light.

About 24 percent of the survey participants responded that they were

aware of the BCRS prior to our inquiry—which occurred 1 year after it was

issued. About 29 percent of the female and about 18 percent of the male

respondents were aware of the BCRS.

Most respondents were enthusiastic about semipostals in general. About

65 percent of the survey respondents said they would like to see the Postal

Service issue, on a recurring basis, more semipostals to raise money for

other special, nonpostal purposes.

The average monthly surcharge revenue generated by the various

semipostals included in our survey varied considerably. In terms of the

average monthly surcharge revenue generated, the BCRS raised more

money for its designated beneficiary than most of the foreign semipostals

that provided us information. However, when the population size of the

host country was factored into the analysis, the BCRS’ monthly surcharge

revenue, per million population, was less than the surcharge revenue

generated by most of the other semipostals. In terms of the percent of total

surcharge revenue generated that was transferred to the semipostal’s

designated beneficiary, the BCRS, as of December 1999, compared

favorably with the foreign semipostals.

Survey Respondents View

Semipostals in a Positive

Light

The BCRS Compared

Favorably With Foreign

Semipostals in Some, But

Not All, Respects
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In terms of average monthly surcharge revenue generated, the BCRS

outperformed 7 of the 12 foreign semipostals for which we received

information. However, when the monthly sales data were adjusted to

account for differences in population size of the host country, the BCRS

did not fare as well as most of the other semipostals. The BCRS

outperformed the four semipostals issued by the postal administrations in

Canada and Belgium but did not perform as well as the eight semipostals

issued by the postal administrations in Austria, New Zealand, The

Netherlands, and Germany. The results of this analysis are shown in table

4, with the semipostals ranked from highest to lowest in terms of average

monthly surcharge revenue per million population.

Host countrya /

semipostal

Average monthly

surcharge revenueb

Population of host

country (in millions)

Average monthly

surcharge revenue

per million

populationc

Austria/Philately $509,622 8.1 $62,916

The Netherlands/

Children

980,569 15.7 62,457

Germany/Youth 1,475,935 82.1 17,977

Germany/Welfare 1 1,328,065 82.1 16,176

Germany/Welfare 2 1,101,432 82.1 13,416

Germany/Sports 1,031,722 82.1 12,567

The Netherlands/

Elderly

128,976 15.7 8,215

New Zealand/

Children’s Health

10,678 3.8 2,810

U.S./Breast Cancer

Research

684,644 274.0 2,499

Belgium/Philately 17,844 10.1 1,767

Belgium/Sports 16,144 10.1 1,598

Canada/Literacy 48,773 30.6 1,594

Belgium/Solidarity 4,390 10.1 435

a

The United Kingdom and Sweden did not provide sales data on their semipostals but reported sales

were low.

b

After converting sales data reported in foreign currencies to U.S. dollars and adjusting the data to

1999 dollars, we computed the average monthly surcharge revenue generated for each semipostal by

dividing its adjusted sales data by the number of months covered by the reported sales (i.e., if the

reported sales were generated over a 12-month period we divided the adjusted sales data by 12). We

used the first 12 months of sales for the BCRS for comparison purposes because none of the foreign

postal administrations reported sales covering a period longer than 12 months. We made the

conversions in November 1999 using the exchange rates for the relevant years from the Federal

Reserve Bulletin and adjusted to 1999 dollars using the Gross Domestic Product (GDP) price index

from the Department of Commerce.

c

To compute the average monthly surcharge revenue per million population, we divided the adjusted

average monthly surcharge revenue generated by the 1998 population of the host country as reported

by the Population Division, Department of Economic and Social Affairs, United Nations.

Source: Selected postal administrations, United Nations, and GAO calculations.

Comparison of Sales of BCRS

With Foreign Semipostals

Table 4: Average Monthly Surcharge

Revenue Generated and Average

Monthly Surcharge Revenue per Million

Population for the 13 Semipostals

Included in Our Survey
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In comparing the performance of semipostals, we recognize that the

population size of the host country is not the only factor that affects sales.

Other factors, such as tradition, the subject matter of the semipostal and

its beneficiary, the method used to promote sales, the amount of the

surcharge, sales techniques, and other factors may also influence how well

a particular semipostal sells. For example, The Netherlands had two

semipostals—one to benefit children and the other to benefit the elderly.

The sales methods differed greatly for these two semipostals. Although

both semipostals were sold in post offices, school children also sold the

children’s semipostal door-to-door. The result was that the average

monthly sales of the semipostal for children were seven times greater than

sales of the semipostal for the elderly. We were not able to adjust the data

to account for such differences as sales techniques; however, in appendix

II, we discuss factors that might affect sales of semipostals.

Thus far, the BCRS compares favorably with the foreign semipostals

included in our survey in terms of the percent of total surcharge revenue

turned over to the designated beneficiary after the costs borne by the

semipostal for its development and sale are deducted. For the 13

semipostals included in table 4, the percentages ranged from a low of 71.51

to 100 percent. Two postal administrations—Canada and New Zealand—

did not withhold any surcharge revenue to recover costs. To date, the U.S.

Postal Service has recouped 2.33 percent of the surcharge revenue

generated by the BCRS to cover certain costs. Table 5 shows the percent

of surcharge revenue that the postal administrations reported transferring

to designated beneficiaries, ranked from highest to lowest.

Host countrya/semipostal

Percent of total surcharge revenue

transferred to designated beneficary

New Zealand/Children’s Health 100.00

Canada/Literacy 100.00

Germany/Youth 98.00

Germany/Welfare 1 98.00

Germany/Welfare 2 98.00

Germany/Sports 98.00

U.S./Breast Cancer Research 97.67b

The Netherlands/Children 93.85

The Netherlands/Elderly 85.00

Belgium/Philately 80.30

Belgium/Sports 79.64

Belgium/Solidarity 75.89

Austria/Philately 71.51

a

The United Kingdom and Sweden did not provide data on the percentage of surcharge revenue

withheld to cover costs.

Percent of Total Surcharge

Revenue Turned Over to

Designated Beneficiary for the

Semipostals Included in Our

Survey

Table 5: Percent of Total Surcharge

Revenue Reported as Being Transferred

to the 13 Semipostals’ Designated

Beneficiaries
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b

This percentage was based on the transfers made to NIH and DOD and the amounts deducted from

the BCRS’ surcharge revenue as of December 31,1999.

Source: U.S. Postal Service and foreign postal administrations that responded to GAO survey.

The foreign postal administrations included in our survey differed in their

views on the effectiveness of their semipostals as fund-raisers. Five of the

eight foreign postal administrations responding to our request for

information considered semipostals to be effective fund-raisers, and three

did not. Postal administrations in Belgium, Germany, The Netherlands,

New Zealand, and Sweden rated semipostals as either very effective or

somewhat effective fund-raisers. Postal administrations in Austria,

Canada, and the United Kingdom rated semipostals as either very

ineffective or somewhat ineffective fund-raisers. Those rating semipostals

as ineffective generally attributed the reasons to public and postal

employee dislike of semipostals. In general, they said the public does not

like to pay more for a stamp than necessary, especially when there is no

option as to the recipient of the surcharge. They reported that some postal

employees dislike semipostals because they have to deal with the negative

public reactions to semipostals. Although the Austrian postal

administration considers semipostals to be very ineffective fund-raisers

because of opposition from philatelists, it continues to issue them annually

at the direction of its legislative body. Sweden, on the other hand,

considers semipostals to be somewhat effective fund-raisers but decided

not to issue any more semipostals because of negative public reaction.

The appropriateness of using semipostals as a means of fund-raising has

been somewhat controversial. The Postal Service has, historically, been

opposed to raising revenue for purposes other than the maintenance of the

mail delivery system. In a 1997 letter to a Member of Congress, former

Postmaster General Marvin Runyon stated his belief that issuing a special

“hybrid” stamp to raise money for breast cancer research would “...open

the floodgates for all worthy social causes.” Since the act was passed,

there have been eight additional bills calling for semipostals to raise funds

for special, nonpostal purposes. Thus far, none of these bills have been

enacted into law. According to postal officials, the Service supports the

BCRS and is striving to make it a success. However, the officials said the

Service remains, in principle, opposed to issuing any more semipostals to

raise money for special, nonpostal purposes.

Although the Service is generally opposed to semipostals, the public and

most of the key stakeholders we spoke with believed that it was

appropriate for the Service to issue the BCRS. They also believed that it

was appropriate for the Service to issue other semipostals in the future to

Foreign Postal Administrations

Had Differing Views on the

Effectiveness of Semipostals as

Fund-Raisers

Appropriateness of

Using Semipostals as a

Means of Fund-Raising
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Page 25 GAO/GGD-00-80 Breast Cancer Research Stamp

raise funds for special, nonpostal purposes—although there are some who

do not share that opinion. Stamp collectors, for example, generally oppose

semipostals, viewing them as an additional tax on their hobby. The eight

foreign postal administrations that responded to our survey were evenly

split regarding whether or not it is appropriate for their countries to use

semipostals to raise funds for nonpostal purposes.

The Stamp Out Breast Cancer Act gave the Postal Service specific

authority to issue the BCRS. However, we do not believe that the Postal

Service has the authority to issue the BCRS, or any other semipostal, on its

own volition without specific legislation authorizing it to do so.

The Postal Service stated that although it supports the BCRS, it is opposed,

in principle, to using the Service to raise funds for special, nonpostal

purposes. Consequently, postal officials said that as a general rule, they are

opposed to semipostals.

Our public opinion survey indicated that most respondents believed it was

appropriate for the Postal Service to issue semipostals, as did most of the

key stakeholders we spoke with. There were, however, some that opposed

semipostals. The foreign postal administrations that responded to our

survey were evenly split on the question of the appropriateness of their

countries using semipostals to raise funds for special, nonpostal purposes.

The Postal Service has, historically, opposed semipostals. Its position has

been that because the United States already had a philanthropic tradition

unmatched by other nations, semipostals would be perceived as yet

another solicitation and a public intrusion in an area where private

initiative and generosity have had very beneficial results. Further, the

Service believed that if it were required to routinely issue semipostals, it

might be placed in the difficult, uncomfortable position of determining

which organizations should have a semipostal and which should not.

Initially, the Postal Service strongly opposed legislation directing it to issue

the BCRS. Its position was that its basic mission is universal mail service,

and it would be inappropriate for it to raise revenue for purposes other

than the maintenance of a national mail delivery system. As noted by

former Postmaster General Marvin Runyon in a 1997 letter to a Member of

Congress, the Service feared that a semipostal breast cancer research

stamp “...would open the floodgates for all worthy social causes...and that

in very short order, (it) would find itself devoting considerable time and

expense as a fund raiser.” The Service did not believe that was its role and

did not think it should be.

Opinions of the Postal

Service, Key Stakeholders,

and Others Regarding

Appropriateness

Views of Postal Service and

Other Key Stakeholders
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Page 26 GAO/GGD-00-80 Breast Cancer Research Stamp

Nevertheless, postal officials told us that because Congress expressed

itself so strongly through the Stamp Out Breast Cancer Act, the Service

decided to enthusiastically support and promote the BCRS program.

However, the officials stated that the Service’s position on semipostals, in

principle, remains the same. The Postmaster General (PMG) stated, in

commenting on a draft of this report, that the Service will continue to

enthusiastically promote the BCRS throughout the remainder of the sales

period, and the Service has been pleased and gratified by the success of

the BCRS in raising funds for breast cancer research. Nevertheless, he

stated that it remains the Service’s position that Congress should not, at

this time, enact legislation mandating additional semipostal stamps. He

cited three reasons for the Service’s position. First, the Service believes

that fund-raising through the sale of semipostals is an activity outside the

scope of the Service’s mission as defined by the Postal Reorganization Act.

Second, the popularity of the BCRS does not ensure the success of future

semipostals, and it is possible that future semipostals might generate only

modest amounts of revenue while still requiring substantial postal

expenditures. Third, enacting legislation creating more semipostals would

put Congress in the difficult position of having to choose, from among

many worthy causes, which organizations would get a semipostal stamp.

Regardless of the Postal Service’s general position against semipostals,

however, since the act was passed, eight additional bills have called for

special semipostals to raise funds for (1) AIDS research and education, (2)

Alzheimer’s disease research, (3) diabetes research, (4) domestic violence

programs, (5) emergency food relief within the United States, (6) highwayrail grade crossing safety, (7) organ and tissue donation awareness, and (8)

prostate cancer research. Thus far, none of these bills have been enacted

into law.

Most of the other key stakeholders we spoke with believed that it was

appropriate for the Postal Service to issue the BCRS and that it would be

appropriate for the Service to issue other semipostals in the future to raise

funds for special, nonpostal purposes. However, there were some

stakeholders who did not share that opinion.

The American Cancer Society supported the Stamp Out Breast Cancer Act

and did not believe it to be inappropriate for the Postal Service to issue the

BCRS. Society officials stated that the Society has participated with the

Postal Service at several fund-raising events where the BCRS was

promoted and has used the BCRS to mail some of its own correspondence.

The officials also noted that in December 1998, the Society and Senator

Dianne Feinstein sent a joint letter to Fortune 1000 companies
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encouraging them to promote the BCRS. The only concern the officials

expressed about the BCRS was that Congress not use revenues from it to

supplant appropriations to NIH and DOD for breast cancer research—even

though the act stated that it was the sense of Congress that enactment of

the Stamp Out Breast Cancer Act should not cause this to happen. The

officials felt strongly that the surcharge revenue from the BCRS should be

used to supplement, not supplant, appropriations for breast cancer

research.

The Susan G. Komen Breast Cancer Foundation believed the BCRS was

appropriate and fully supported it. The Foundation stated that eradicating

breast cancer should be a national priority and will take a collaborative

effort between public and private stakeholders. It felt that the BCRS was a

good example of a public initiative with widespread public support.

Dr. B.I. Bodai believed that using semipostals for worthy, nonpostal

causes—such as breast cancer research—is very appropriate. Dr. Bodai

stated that using a public organization, such as the Postal Service, to help

raise funds for research to eliminate diseases, such as breast cancer, is an

example of what good government is all about.

The Curator of the Smithsonian Institution’s National Philatelic Collection

said he believed that legislation directing the Postal Service to issue the

BCRS was very appropriate. He said the BCRS was good for the Nation,

good for NIH and DOD, and good for the Postal Service in that it helps

bolster the public’s opinion of the Service. He cautioned, however, that

other charities would soon be asking Congress for semipostals, possibly

leading to a wave of new legislation. He suggested that one possible

solution to control and deal fairly with this situation would be to have the

Postal Service’s Citizen’s Stamp Advisory Committee select one applicant

per year for a semipostal.9

NBCC reserved judgment on the appropriateness of the BCRS. Although

NBCC did not take an official position on the legislation creating the

BCRS, NBCC officials said that at the time the legislation was being

considered, NBCC had some reservations. For example, some members of

NBCC’s Board of Directors were concerned that Congress might substitute

revenues from the BCRS for appropriations for breast cancer research—

 

9

 The Citizens’ Stamp Advisory Committee is a group of individuals (nonpostal employees) appointed

by the Service to review suggestions for postage stamp subjects and to recommend those subjects to

be adopted for postage stamps and postal stationery. The Committee, which meets several times a

year, includes artists, historians, educators, and philatelists with backgrounds related to the subjects

and stamp designs.
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especially appropriations to DOD. Some Board Members were also

concerned that the BCRS might be more of a symbolic gesture, on

Congress’ part, than an all-out commitment to fund whatever research is

needed to eradicate breast cancer in the shortest possible time.

The president of the American Philatelic Society stated that the Society

fully supports efforts to raise money for breast cancer research but

opposes the use of semipostals. In a July 30, 1997, letter to President

Clinton, the former president of the Society encouraged the President to

veto the legislation creating the BCRS. The letter acknowledged the

Society’s full support of efforts to promote breast cancer awareness and

noted that the Society had recently teamed with a breast cancer

organization to raise funds for breast cancer research. However, the letter

went on to explain that the Society’s objections to semipostals have

nothing to do with opposition to worthwhile charitable causes, but to what

the Society’s members see as a tax that falls disproportionately and

unfairly on their hobby.

The American Philatelic Society also opposed the BCRS because it

believed that allowing even one semipostal to be issued would establish a

precedent and that many more semipostals would follow. The president of

the American Philatelic Society said he was particularly concerned that the

BCRS not usher in a return to the days before the creation of the Citizens’

Stamp Advisory Committee, when the content of the American stamp

program was heavily influenced by the political process through

congressional direction of stamp subjects. However, he said that if a fair

process could be designed in which no more than two semipostals would

be chosen per year, he believed stamp hobbyists could live with that

process. Finally, the Society was concerned that the Postal Service might

not have an efficient system for tracking the administrative costs

associated with developing and selling semipostals. It believed that if the

Postal Service were unable to accurately identify and fully recoup its

administrative costs, those costs would be, in effect, subsidized by postal

patrons. The Society believes that as a matter of principle, American stamp

collectors prefer to make their own choices about charities to which they

give their money.

The ICR survey indicated that an estimated 71 percent of adults 18 years of

age or older in the continental United States believe it is appropriate to use

semipostals issued by the Postal Service, such as the BCRS, to raise funds

for nonpostal purposes. Twenty-six percent of respondents thought it was

somewhat inappropriate or very inappropriate. The remaining 3 percent

The Public’s View
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had no opinion, said they didn’t know, or said it would depend on the

cause for which the semipostal was being used to raise money.

Of those respondents who thought it inappropriate for the Postal Service

to issue semipostals, 40 percent said the Postal Service/federal government

shouldn’t be doing fund-raising. Eighteen percent thought people should

contribute to a charity of their own choosing. Fifteen percent were not

sure funds raised by a semipostal would be distributed appropriately or to

the charities most in need. Nine percent thought the Postal Service should

not issue semipostals because postage is already expensive enough. The

remaining respondents who did not think the Postal Service should be

issuing semipostals offered varying reasons, such as (1) a concern that the

elderly would be confused or misled by semipostals and (2) a belief that

research should be conducted through government grants or other means

besides semipostals.

The eight foreign postal administrations that responded to our survey were

evenly split on the question of the appropriateness of their countries using

semipostals to raise funds for special, nonpostal purposes. The postal

administrations of Germany, The Netherlands, Belgium, and New Zealand

believed that it is appropriate to use semipostals to raise funds for

nonpostal purposes. Conversely, the postal administrations of Austria,

Canada, the United Kingdom, and Sweden believed it was inappropriate to

use semipostals to raise funds for nonpostal purposes. (See table 6.)

“Based on your postal administration’s experience, how appropriate or inappropriate is it to use semipostal stamps to raise

funds for nonpostal purposes?”

Foreign postal

administration

Very

appropriate

Somewhat

appropropriate

Neither appropriate

nor inappropriate

Somewhat

inappropriate

Very

inappropriate

Austria •

Belgium •

Canada •

Germany •

United Kingdom •

The Netherlands •

New Zealand •

Sweden •

Source: Foreign postal administrations that responded to GAO survey.

The United Kingdom and Sweden have permanently discontinued the sales

of semipostals, and Canada does not currently have any semipostals for

sale—although it has not ruled out selling them at some future date. The

Foreign Postal Administrations’

Views

Table 6: Appropriateness of Semipostals
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United Kingdom and Sweden both noted that semipostals were

discontinued because they were not popular with the public or the postal

administration. The Canadian postal administration believed it to be

inappropriate to sell semipostals because Canadians are resistant to paying

more for stamps and would rather give directly to charities of their choice.

Austria’s postal administration believed it to be inappropriate to sell

semipostals because philatelists consider the surcharge to be a tax on their

hobby. Nevertheless, the Austria postal administration continues to sell

semipostals at the direction of its legislative body.

The Postal Service had clear, specific statutory authority to issue the BCRS

under the Stamp Out Breast Cancer Act. However, to help address the

issue of the appropriateness of using the Service, and semipostals in

general, as a means of fund-raising, we reviewed the Service’s underlying

legal authority to carry out its mission. In addition, we requested the views

of the Service on this matter.

There is no express legal authority for the Service to issue semipostals or

to conduct its operations for charitable fund-raising purposes other than

under the Stamp Out Breast Cancer Act. The Service stated that it

undoubtedly has the authority to sell stamp products with retail prices

exceeding their postage or face value. However, the Service further stated

that it is unclear whether it has the authority to sell a particular stamp with

a retail price exceeding its postage value and designate the differential

revenue for charitable purposes. We do not believe that the Service’s

enabling legislation can be interpreted as providing the Service with such

authority in the absence of express statutory authority for it to do so.

Under section 404 of Title 39 of the United States Code, the Postal Service

has broad authority to “provide and sell postage stamps” and to “provide

philatelic services.” According to the Postal Service, section 404 provides

the Service with the authority to issue stamp products at any given value,

regardless of the applicable First-Class Mail rate, and to sell stamp

products with a retail price exceeding their postage or face value. This is

the case with philatelic products and stamped cards, e.g., a post card with

a BCRS cancelled on the first day of issue.

In the absence of express statutory authority to issue semipostals, the

Postal Service states that it is unclear whether selling a particular stamp

with a retail price exceeding its postage value, and making a firm

representation to the public that the “differential”/surcharge revenue

would be donated to a charitable cause, would be consistent with 39 U.S.C.

3621. Section 3621 provides that postage rates and fees “shall provide

Statutory Authorities and

Constraints
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sufficient revenues so that the total estimated income and appropriations

to the Postal Service will equal as nearly as practicable total estimated

costs of the Postal Service.” According to the Postal Service, it is unclear

whether the Service could, in advance of the close of a given fiscal year,

publicly commit to setting aside a portion of the revenues from the sale of

a particular semipostal for charitable purposes, particularly if the Service’s

other operating expenses exceed operating revenues in a given year.

In our view, the Service does not have the authority to issue semipostals in

the absence of specific authorizing legislation. Under 39 U.S.C. 3261, rates

of postage the Postal Service is authorized to charge should “equal as

nearly as practicable the total estimated costs of the Postal Service.” That

language is not consistent, in our view, with setting postage rates for a

particular stamp at an amount that is intended to generate excess revenues

that would be used for charitable purposes.

Further, the Service’s authority under 39 U.S.C. 401 (3) to “determine the

character of, and necessity for, its expenditures” does not in our view

provide it with the authority to make charitable contributions. Although

such authority, similar to the authority often provided to government

corporations, may provide the Postal Service with greater discretion than

is provided to ordinary executive branch agencies, such discretion is not

unlimited. In the absence of specific authority to make charitable

contributions, the Postal Service can only do so, in our view, if it can

reasonably determine that such contributions are a necessary expense to

help it perform its statutory mission. The Postal Service has not made such

an argument, nor are we aware of any possible basis to support the view

that making charitable contributions would help the Service carry out its

mission.

The Stamp Out Breast Cancer Act did not provide quantitative measures

for evaluating the effectiveness of the BCRS as a fund-raiser. The act

provides that the BCRS would be convenient and voluntary and would

raise money for breast cancer research. On the basis of the fact that the

BCRS has successfully met these three measures and generally met the

additional measures we developed to evaluate effectiveness, we would

conclude that overall, the BCRS has been an effective fund-raiser.

Additionally, the public and most key stakeholders we spoke with believed

that it was appropriate to use semipostals issued by the Postal Service to

raise funds for nonpostal purposes.

The act required that the Service prescribe regulations setting forth the

criteria it would use to determine the reasonable costs to be recouped

Conclusions
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from the BCRS’ surcharge revenue. The act provided the Service flexibility

to accomplish this task and did not specify a date by which the regulations

should be issued.

We are concerned that the Service has not clearly articulated the criteria to

be applied in deciding what costs it would recoup from the surcharge

revenue. As of March 2000, the Service had not issued formal, written

criteria to determine which of the BCRS costs it was tracking would be

recouped from the surcharge revenue as contemplated by the act. The

Service’s informal criteria for determining the costs to be recouped from

the surcharge revenue have evolved over time and have not been

consistently applied. For example, the latest informal criteria the Service

used were the costs normally incurred with a blockbuster commemorative

stamp for the 18 cost items. However, the Service deviated from its criteria

when it decided not to recoup all of the costs unique to the BCRS from the

surcharge revenue. Rather, the Service has said that it will recoup $482,000

from the surcharge revenue. Although postal officials said they considered

all other costs to have been recovered through the 33-cent First-Class

postage rate, they provided no data or analysis showing that these costs

have been recovered. Understanding what criteria the Service is applying

as well as the data or analysis underlying its recovery decisions are key to

establishing the appropriateness of the Service’s decision regarding those

costs to be recouped from the surcharge revenue. Moreover, this

information is essential to providing postal rate payers, who have not

purchased the BCRS, assurance that they are not involuntarily contributing

funds to breast cancer research.

We recognize that the act provides the Service with the discretion to

establish reasonable criteria for determining the BCRS costs to be

recouped from the surcharge revenue. However, until such time that the

Service prescribes formal, written criteria and consistently applies those

criteria to all BCRS costs, it is difficult for Congress, us, and others to

evaluate how well the Service is implementing its legislative mandate to

recoup reasonable costs. The Service’s failure to prescribe formal, written

criteria also makes it difficult for Congress to determine whether it

believes the Service’s criteria are appropriate. The need to prescribe

formal, written criteria as soon as possible is particularly acute given that

the Service’s actions are potentially precedent-setting, and eight bills have

been introduced in Congress that would mandate additional semipostals.

Each of those bills contains the same language as the BCRS act about

recouping reasonable costs.
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If Congress decides that the Postal Service is not recouping its reasonable

costs associated with the BCRS, Congress may wish to consider (1)

amending the Stamp Out Breast Cancer Act to specify any additional costs

associated with the BCRS that the Postal Service must recoup, and (2) in

any future semipostal legislation, specifying the explicit criteria the

Service should use in determining costs to be recouped from the

semipostal’s surcharge revenue.

We recommend that the Postmaster General

• promptly issue regulations that clearly state the Service’s criteria for

determining which costs are to be recouped from the BCRS surcharge

revenue and ensure that the criteria are consistently applied to all cost

items associated with the BCRS, and

• direct postal management to make available the data and analysis showing

which BCRS costs have been recovered through the 33-cent First-Class

postage rate to provide assurance that postal ratepayers are not

involuntarily contributing funds to breast cancer research.

In commenting on a draft of this report, in a letter dated April 11, 2000, the

PMG stated that the Service concurred with the report’s findings and

recommendations. In responding to our conclusion that the Service had

not clearly articulated the criteria to be applied in deciding what costs it

would recoup from the BCRS’ surcharge revenue, the PMG stated that it is

the Service’s intent to recoup, from the surcharge revenue, those costs that

are over and above the costs normally incurred with the development and

sale of blockbuster commemorative stamp issues or new postal products.

The PMG further stated that the Service will issue final regulations

formalizing its cost recovery criteria by the time BCRS sales are scheduled

to end on July 28, 2000, and will apply those criteria to all identified BCRS

costs before making the last transfers of surcharge revenue to NIH and

DOD. We believe these actions, if properly implemented, should satisfy our

recommendation that the PMG promptly issue regulations that clearly

state the Service’s criteria for determining which costs are to be recouped

from the BCRS surcharge revenue and ensure that the criteria are

consistently applied to all cost items associated with the BCRS. Issuance

of these criteria is particularly important in view of the currently pending

legislative proposal to extend the sales period for the BCRS.

In response to our recommendation that the Service make available the

data and analysis showing which BCRS costs have been recovered through

the 33-cent First-Class postage rate, the PMG stated that the Service

Matters for

Consideration by

Congress

Recommendations

Agency Comments and

Our Evaluation
B-282358

Page 34 GAO/GGD-00-80 Breast Cancer Research Stamp

intends to provide that information to its congressional oversight

committees within 60 days after the end of the BCRS sales period. The

PMG noted that the Service’s 1998 and 1999 Cost and Revenue Analysis

(CRA) reports, which contain data that are audited annually and used as a

basis for the Service’s rate cases, provide information on the costs of items

covered by the First-Class postage rate. On the basis of discussions with

the Postal Service, however, we believe that the CRA reports lack the

specificity and detail to allow interested parties to clearly see which BCRS

costs have been recovered through the 33-cent First-Class postage rate.

Although these reports may be useful for making cost determinations

regarding First -Class postage in general, we are concerned that they lack

detailed cost information on a stamp-by-stamp basis. Therefore, we believe

that any data and analysis the Service makes available should be specific

to the BCRS and sufficiently detailed to allow interested parties to clearly

see which BCRS costs have been recovered through the 33-cent First-Class

postage rate.

The PMG stated that the Service will continue to enthusiastically promote

the BCRS throughout the remainder of the sales period, and the Service

has been pleased and gratified by the success of the BCRS in raising funds

for breast cancer research. Nevertheless, he stated that it remains the

Service’s position that Congress should not, at this time, enact legislation

mandating additional semipostals. He cited three reasons for the Service’s

position. First, the Service believes that fund-raising through the sale of

semipostals is an activity outside the scope of the Service’s mission as

defined by the Postal Reorganization Act. Second, the popularity of the

BCRS does not ensure the success of future semipostals, and it is possible

that future semipostals might generate only modest amounts of revenue

while still requiring substantial postal expenditures. Third, enacting

legislation creating more semipostals would put Congress in the difficult

position of having to choose, from among many worthy causes, which

organizations would get a semipostal.

We agree with the Postal Service that the sale of semipostals is outside the

scope of the Service’s mission as defined by the Postal Reorganization Act.

As discussed in our report, we do not believe the Service has the authority

to issue semipostals on its own volition without specific legislation

authorizing it to do so. We also agree that the success of the BCRS may not

predict success for other semipostal issues, and that choosing

beneficiaries for semipostals from among many worthy causes will be

difficult. Although these concerns are valid, they need to be considered,

along with the potential benefits, as Congress deliberates additional

semipostals.
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Although the Stamp Out Breast Cancer Act gave the Service the specific

authority to issue the BCRS, it was silent with regard to the

appropriateness of the Service issuing additional semipostals for other

causes. However, we also discuss the views of key stakeholders, including

the public; and most of the key stakeholders believe it is appropriate to use

semipostals issued by the Service to raise funds for nonpostal purposes.

Since the BCRS was issued, eight bills have been introduced to authorize

additional semipostals. The information in this report should be useful as

Congress deliberates these bills.

The PMG provided updated BCRS sales information as of March 24, 2000,

and stated that he concurred with the matters identified in our report for

congressional consideration. He also stated that Congress might wish to

clarify its intent on the tax-deductibility of the surcharge as a charitable

contribution by postal patrons by enacting specific legislation for that

purpose. His comments are reproduced in appendix III.

We are sending copies of this report to Representative Michael Bilirakis,

Chairman, and Representative Sherrod Brown, Ranking Minority Member,

Subcommittee on Health and Environment, House Committee on

Commerce; and to Representative Christopher Shays, Chairman, and

Representative, Rod R. Blagojevich, Ranking Minority Member,

Subcommittee on National Security, Veterans’ Affairs, and International

Relations, House Committee on Government Reform because of their

involvement in the passage of the act. We are also sending copies of this

report to Senator Dianne Feinstein and Representative Charles F. Bass

because of their expressed interest in the BCRS; Mr. William J. Henderson,

Postmaster General and Chief Executive Officer, United States Postal

Service; Mr. Edward J. Gleiman, Chairman, Postal Rate Commission; and

other interested parties. Copies will also be made available to others upon

request.

Staff acknowledgements are listed in appendix IV. If you have any

questions about this report, please call me on (202) 512-8387.

Bernard L. Ungar

Director, Government Business

 Operations Issues
Page 36 GAO/GGD-00-80 Breast Cancer Research Stamp

Contents

1 Letter

Appendix I 38

Objectives, Scope, and

Methodology

42

The Tradition of Foreign Semipostals 42

Differences in Foreign Semipostal Programs 44

Similarities in Foreign Semipostal Programs 46

Appendix II

Foreign Postal

Administrations’

Experiences With

Semipostals

Appendix III 48

Comments From the

U.S. Postal Service

50

GAO Contact 50

Acknowledgments 50

Appendix IV

GAO Contact and Staff

Acknowledgments

Table 1: Cost of Developing and Selling the BCRS,

Through December 31, 1999, as Reported by the Postal

Service

12

Table 2: Costs Reported Through December 31, 1999,

That the Service plans to Recoup from the BCRS

Surcharge

15

Table 3: Transfers Made to NIH and DOD for Breast

Cancer Research as of December 31, 1999

19

Table 4: Average Monthly Surcharge Revenue Generated

and Average Monthly Surcharge Revenue per Million

Population for the 13 Semipostals Included in Our

Survey

22

Table 5: Percent of Total Surcharge Revenue Reported as

Being Transferred to the 13 Semipostals’ Designated

Beneficiaries

23

Tables

Table 6: Appropriateness of Semipostals 29
Contents

Page 37 GAO/GGD-00-80 Breast Cancer Research Stamp

Table II.1: Year in Which Foreign Postal Administrations

Began Selling Semipostals

43

Table II.2: Foreign Postal Administrations: Number of

Semipostal Issues, 1994 - 1998

44

Table II.3: Foreign Postal Administrations: Beneficiaries

of 1998 Semipostal Surcharge Revenue (Unless

Otherwise Noted)

45

Table II.4: Surcharge Amounts Included by Foreign Postal

Administrations (1998 Unless Otherwise Noted)

46

Figure 1: Reproduction of the 1998 Breast Cancer

Research Semipostal Figures 7

Abbreviations

BCRS Breast Cancer Research Semipostal

DOD Department of Defense

ICR International Communications Research

MOU Memorandum of Understanding

NBCC National Breast Cancer Coalition

NIH National Institutes of Health
Appendix I

Objectives, Scope, and Methodology

Page 38 GAO/GGD-00-80 Breast Cancer Research Stamp

Our objectives were to (1) describe the monetary and other resources

required by the Postal Service to develop and sell the Breast Cancer

Research Semipostal (BCRS), (2) evaluate the effectiveness of using the

BCRS as a means of fund-raising, and (3) evaluate the appropriateness of

using the BCRS as a means of fund-raising.

To describe the monetary and other resources required by the Postal

Service to develop and sell the BCRS, we interviewed officials from the

Postal Service’s Finance and Stamp Services divisions responsible for the

development and oversight of the BCRS. We gathered and analyzed data

on the surcharge revenue raised by the BCRS as well as data on the costs

and resources the Service required to develop and sell the BCRS. We also

reviewed information on BCRS costs and resources included in the Postal

Service Office of Inspector General (OIG) 1998 report on the BCRS and

included this information, as appropriate. During the course of our work,

OIG concluded a follow-up audit of the BCRS program. We reviewed OIG’s

report and incorporated its findings where appropriate.

To assess the accuracy of the financial data provided by the Postal Service,

we discussed financial accountability for the BCRS with officials of the

Postal Inspection Service. Those officials told us that the Inspection

Service conducts financial audits at selected post offices every year to test

internal control systems and verify financial transactions. The Inspection

Service chooses post offices to audit on a random basis, using a stratified

sample that focuses most heavily on those post offices that generate the

most revenue. One aspect of the audits is a review of accountable paper,

which includes postage stamps, money orders, philatelic items, etc.

The Inspection Service officials stated that at the 183 post offices for

which it issued reports between August 3, 1998, and June 18, 1999, it found

some isolated problems with accountable paper, but none were systemic.

Additionally, the officials stated that because the BCRS has a unique

finance accounting code, any internal control, inventory, or financial

transaction problems involving the BCRS would have been specifically

noted in the inspection reports. The officials stated that since the BCRS

went on sale in July 1998, the Inspection Service has not identified any

problems with the BCRS.

We also reviewed 55 reports that we randomly selected from the 183 post

office financial audit reports the Inspection Service issued between August

3, 1998, and June 18, 1999. Our review of those 55 reports noted that at 18

locations, some type of stamp accountability problem was noted—-though

none of the problems were described as potentially systemic in nature.
Appendix I

Objectives, Scope, and Methodology

Page 39 GAO/GGD-00-80 Breast Cancer Research Stamp

None of the 55 reports noted any problems with the BCRS. Our assessment

of the accuracy of BCRS cost data provided by the Service was limited to a

review of the 55 reports and OIG’s March 2000 report on the BCRS

program.

To help in our evaluation of the effectiveness and appropriateness of using

the BCRS as a means of fund-raising, we requested information from 10

foreign postal administrations that had experience with semipostals. Those

10 postal administrations were: (1) Austria, (2) Belgium, (3) Canada, (4)

Germany, (5) the United Kingdom, (6) The Netherlands, (7) New Zealand,

(8) Sweden, (9) France, and (10) Switzerland. In addition to information

about their experiences with semipostals, we requested specific sales data

for calendar year 1998. If those data were unavailable, we requested data

for the most recent year prior to 1998 for which data were available.

Eight of the postal administrations provided information—France and

Switzerland did not. The countries were judgmentally selected after we

considered several factors. First, we wanted our survey to include postal

administrations that are currently issuing semipostals and postal

administrations that have issued semipostals in the past but are not

currently doing so. Of the 10 foreign postal administrations selected, 7 are

currently issuing semipostals, and 3 have issued semipostals in the past

but are not currently doing so. Second, we wanted our survey to include

some postal administrations that have long-standing experiences with

semipostals. Of the 10 selected, 6 issued their first semipostals more than

50 years ago. Third, we wanted to include only postal administrations in

countries with sizeable populations. We defined sizeable as countries with

populations of more than 3 million. Using population size as one of our

selection criteria, we automatically excluded 16 of the 49 countries that

issued semipostals in the 1990s because they had populations of fewer

than 3 million. The 10 countries we selected had populations ranging from

3.8 million to 82.1 million in 1998. Fourth, we wanted to survey foreign

postal administrations that would most likely respond to our request for

information about their experiences with semipostals. To do this, we

included foreign postal administrations that have responded to our prior

requests for information about other program operations, as well as

foreign postal administrations for which the Postal Service could provide

us with the name and address of the counterpart of the Postal Service’s

Manager of Stamp Services. Of the 10 selected, 7 had previously

participated in our 1997 survey concerning mailbox restrictions in foreign

countries.1

 The Postal Service was able to provide us with the names and 1

 See U.S. Postal Service: Information About Restrictions on Mailbox Access (GAO/GGD-97-85, May 30,

1997).
Appendix I

Objectives, Scope, and Methodology

Page 40 GAO/GGD-00-80 Breast Cancer Research Stamp

addresses of appropriate contacts in all 10 foreign postal administrations

selected.

To help ensure that our survey would provide us with sound data on the

experiences of foreign postal administrations, we also discussed, with the

Curator of the Smithsonian Institution’s National Philatelic Collection and

the President of the American Philatelic Society, the list of postal

administrations that we planned to survey. Both the Curator of the

Smithsonian Institution’s National Philatelic Collection and the president

of the American Philatelic Society said our list was sound and should

provide us with useful information for our study. Nevertheless, because

the postal administrations we surveyed were not chosen at random, we

cannot generalize their experiences to all postal administrations that have

issued semipostals.

To obtain the views of key stakeholders involved with breast cancer

research/fund-raising and philately regarding the effectiveness and

appropriateness of the BCRS as a fund-raising tool, we judgmentally

selected and interviewed officials representing (1) the American Cancer

Society, (2) the National Breast Cancer Coalition, (3) the Susan G. Komen

Breast Cancer Foundation, (4) the American Philatelic Society, and (5) the

Smithsonian Institution’s National Philatelic Collection. We also obtained

the views of Postal Service officials and interviewed Dr. B. I. Bodai—the

individual credited with conceiving the idea for the BCRS and

spearheading the lobbying effort that resulted in Congress passing the

Stamp Out Breast Cancer Act. Additionally, we met with officials from the

National Institutes of Health and the Department of Defense to review the

arrangements they had with the Postal Service to receive the surcharge

revenue from the BCRS and to discuss their plans for utilizing the funds

they receive.

 To obtain the public’s opinion of the BCRS, we contracted with

International Communications Research (ICR) of Media, PA, a national

market research firm, to include questions about the semipostal in one of

the national telephone surveys it conducts on a regular basis. The ICR

national telephone survey that included our questions was conducted

during the period between August 4 – 8, 1999. A total of 1,017 adults (507

males/510 females, 18 years of age or older) in the continental United

States were interviewed. ICR’s survey was made up of a random-digitdialing sample of households with telephones. To ensure that survey

results could be generalized to the adult population 18 years of age or

older in the continental United States, ICR adjusted the results from the

survey to account for selection probabilities and to match the
Appendix I

Objectives, Scope, and Methodology

Page 41 GAO/GGD-00-80 Breast Cancer Research Stamp

characteristics of all adults in the general public according to demographic

groups, such as age, gender, region, and education. Because we surveyed a

random sample of the population, the results of the survey have a

measurable precision or sampling error. Sampling errors are stated at a

certain confidence level. The overall results of our survey are surrounded

by 95 percent confidence levels of plus or minus 4 percentage points or

less.

The practical difficulties of conducting any survey may introduce

nonsampling errors. As in any survey, differences in the wording of

questions, in the sources of information available to respondents, or in the

types of people who do not respond can lead to somewhat different

results. We took steps to minimize nonsampling errors. For example, we

developed our survey questions with the aid of a survey specialist and

pretested the questions prior to submitting them to ICR.

Finally, to identify the statutory authorities consistent or in conflict with

using the Postal Service and the BCRS to raise funds for nonpostal

purposes, we researched and analyzed applicable sections of the U.S. Code

and Postal Service regulations. We also discussed, with postal officials, the

legislative history of the act and the Postal Service’s current position on

semipostals.
Appendix II

Foreign Postal Administrations’ Experiences

With Semipostals

Page 42 GAO/GGD-00-80 Breast Cancer Research Stamp

As part of our review of the BCRS, we surveyed 10 foreign postal

administrations to determine their experiences with semipostals. Eight

foreign postal administrations responded to our survey: Austria, Belgium,

Canada, Germany, the United Kingdom, The Netherlands, New Zealand,

and Sweden. Two postal administrations, France and Switzerland, did not

respond. This appendix highlights the information provided by the foreign

postal administrations that was not included as part of our discussions on

the effectiveness and appropriateness of the Postal Service’s BCRS.

We found that semipostals have a long-standing tradition in some

countries. Semipostals first appeared around the turn of the last century

and continue to be used, to this day, to raise money for a number of

charitable causes. We also found more differences than similarities among

countries’ semipostal programs.

According to an article in the July 13, 1998, issue of Linn’s Stamp News,1

the first semipostals were issued in New South Wales (now part of

Australia) in 1897 to raise money for a tuberculosis medical facility in

Sydney. 2 Since then, many other countries have experimented with

semipostals as a way to raise money for charitable causes. According to

research done by the president of the American Philatelic Association,

approximately 50 foreign countries issued semipostals at some time during

the 1990s. Of those, 17 issued semipostals on a routine basis. Those

countries were Argentina, Aruba, Austria, Belgium, Denmark, Finland,

France, Germany, Greenland, Hungary, Indonesia, Luxembourg, The

Netherlands, Netherlands Antilles, New Zealand, Switzerland, and Turkey.

Many of the foreign postal administrations responding to our survey

reported long traditions and enthusiastic support for their semipostals. For

example, Belgium, New Zealand, and The Netherlands reported selling

semipostals before 1930. Table II.1 shows when the foreign postal

administrations responding to our survey began selling semipostals.

 1

 According to the Postal Service, Linn’s Stamp News is one of the Nation’s primary sources of

philatelic news.

2

 Michael Baadke, “New to the U.S., but More Than a Century Old,” Linn’s Stamp News (July 13, 1998).

The Tradition of

Foreign Semipostals
Appendix II

Foreign Postal Administrations’ Experiences With Semipostals

Page 43 GAO/GGD-00-80 Breast Cancer Research Stamp

Foreign postal administration Year first stamp was sold

The Netherlands 1906

Belgium 1910

Austria 1914

Sweden 1928

New Zealand 1929

Germany 1949

Canada 1974

United Kingdom 1975

Source: Foreign postal administrations that responded to GAO survey.

On the other hand, the United Kingdom, Sweden, and Canada have found

semipostals to be unpopular with the public. The United Kingdom and

Sweden have permanently discontinued sales of semipostals, and Canada

has not issued a semipostal since 1996.

The last semipostals issued by the British Post Office (United Kingdom)

were four 1989 Christmas semipostals. The British Post Office worked

with the Charities Aid Foundation, which distributed the surcharge

revenue to selected charities. The British Post Office reported that the

1989 Christmas semipostals were unpopular with postal customers and

Post Office staff. It said some postal customers felt strongly that charitable

giving was a personal and private matter. The Post Office also said that

some postal customers believed they were being pressured into buying

semipostals for their Christmas mail because if they did not, the recipients

of the mail would perceive them to be “mean-spirited.” The British Post

Office reported that other postal customers did not fully appreciate that

none of the money was going towards the benefit of the Post Office, an

organization they thought was already making sufficient profits.

The British Post Office also reported that the 1989 Christmas semipostals

were unpopular with many postal clerks because they had to take time to

explain to postal customers the purpose of the semipostals and why they

carried a surcharge. It also said some post offices reportedly ran out of

regular Christmas stamps that did not carry the surcharge, forcing postal

customers to purchase the Christmas semipostal if they wanted a

Christmas stamp.

Sweden Post reported discontinuing semipostals in 1991 because the

general public disliked that form of charitable giving. Sweden Post

reported that using semipostals to collect money for charity is not popular

and is viewed as a very inconvenient method of charitable giving.

Table II.1: Year in Which Foreign Postal

Administrations Began Selling

Semipostals
Appendix II

Foreign Postal Administrations’ Experiences With Semipostals

Page 44 GAO/GGD-00-80 Breast Cancer Research Stamp

Although Canada Post has not discontinued semipostals per se, it has not

issued a semipostal since 1996, when it issued a semipostal to promote

literacy. Canada Post reported that semipostals are not popular in Canada

and sell poorly. Canada Post officials reported that postal customers are

resistant to paying more for semipostals. Postal customers would rather

give directly to the charity of their choice than have Canada Post choose a

charity for them. Canada Post also reported that some postal customers

disliked semipostals because (1) tax receipts were not provided with the

semipostal purchase, and (2) they did not have a choice regarding the

recipient of the surcharge revenue.

Our survey of foreign postal administrations found more differences than

similarities among their semipostal programs. We found differences among

countries in (1) the yearly number of semipostal issues, (2) beneficiaries,

(3) sales methods, (4) the primary promoters of semipostals, and (5)

surcharge amounts.

The typical number of semipostals issued each year varied by postal

administration. Austria and New Zealand had one semipostal issue each

year between 1994 and 1998. During the same period, Germany issued

between four and six semipostals each year and The Netherlands between

two and three. Table II.2 shows the number of semipostal issues between

1994 and 1998 reported by the eight foreign postal administrations that

responded to our survey.

Foreign postal

administration 1994 1995 1996 1997 1998

Germanya 5 4 5 6 4

Belgiuma 3 4 3 3 3

The Netherlands 2 2 2 3 2

Austria 1 1 1 1 1

New Zealand 1 1 1 1 1

Canada 0 0 1 0 0

United Kingdom 0 0 0 0 0

Sweden 0 0 0 0 0 a

Germany and Belgium’s semipostal issues typically encompass several designs. For example, in

1998, Germany issued 4 semipostals that encompassed 17 different designs.

Source: Foreign postal administrations that responded to GAO survey.

The beneficiaries of the surcharge revenue raised by foreign semipostals

also varied, as might be expected. For example, Germany’s 1998

semipostals raised funds for welfare programs, youth programs, and

sports. On the other hand, Austria’s 1998 semipostal raised money for the

Differences in Foreign

Semipostal Programs

Table II.2: Foreign Postal Administrations: Number of Semipostal Issues, 1994 - 1998
Appendix II

Foreign Postal Administrations’ Experiences With Semipostals

Page 45 GAO/GGD-00-80 Breast Cancer Research Stamp

promotion of stamp exhibitions and philatelic activity. Table II.3 shows the

beneficiaries of the 1998 semipostal surcharge revenue for the eight

foreign postal administrations.

Foreign postal administration Beneficiary of surcharge revenue

Austria Philately

Belgium Philately, sports, solidarity (1996)

Canada ABC Canada Literacy Organization (1996)

Germany Sports, youth programs, welfare programs

United Kingdom Charity, philately (in previous years)

The Netherlands Youth and elderly programs

New Zealand Children’s health

Sweden Philately (in previous years)

Source: Foreign postal administrations that responded to GAO survey.

The foreign postal administrations also varied in the ways they sold their

semipostals. For example, in The Netherlands, school children sell a

semipostal to benefit children’s causes door-to-door. This method has a 75-

year tradition and, according to officials, is very effective. On the other

hand, The Netherlands’ semipostals for the elderly are not sold door-todoor, are purchased mostly by collectors, and do not sell nearly as well.

Semipostals in The Netherlands typically remain on sale for 1 year.

In Austria, semipostals typically remain on sale for 5 years; and in

Germany, semipostals are typically sold for only about 3-1⁄2 months. In New

Zealand and Belgium, semipostals are typically sold in post offices for 1-1⁄2

months and 6 months, respectively, and by mail order for 1 year.3

The Austria, Belgium, and The Netherlands postal administrations

reported that the primary promoters of their semipostals were the

semipostals’ beneficiaries. Germany and Sweden reported that the postal

administration was the primary promoter, and Canada reported that the

primary promoters of its 1996 semipostal were the Canadian Government

and the beneficiary of the surcharge revenue. New Zealand reported that

the postal administration and the beneficiary of the surcharge revenue

promoted their semipostals equally.

The eight foreign postal administrations responding to our survey reported

differing surcharges for their semipostals, ranging from 2.7 percent to 50

 

3

 On March 30, 2000, the Belgium postal administration informed us that in the future semipostals will

be sold in all post offices during the month of issue and for 1 additional month. Additionally, the postal

administration stated that semipostals will be sold for 6 monthis in post offices having philatelic

counters and for 1 year by mail order.

Table II.3: Foreign Postal

Administrations: Beneficiaries of 1998

Semipostal Surcharge Revenue (Unless

Otherwise Noted)
Appendix II

Foreign Postal Administrations’ Experiences With Semipostals

Page 46 GAO/GGD-00-80 Breast Cancer Research Stamp

percent over postage value. The United Kingdom, for example, reported

adding a 2.7-percent surcharge to its 1989 Christmas semipostal. The

Netherlands, on the other hand, included a 50-percent surcharge in its

semipostals for the children and the elderly. Table II.4 displays the

surcharges that the eight foreign postal administrations included in their

semipostals.

Foreign postal administration Surcharge percentage included

The Netherlands 50%

Austria 40%

Germany 33% - 50%

Belgium (1996) 17.6% - 25%

United Kingdom (1989) 2.7% - 6.6%

Canada (1996) 11.1%

New Zealand 6.25% - 12.5%

Sweden Information not provided.

Source: Foreign postal administrations that responded to GAO survey.

There were some similarities among a majority of the semipostal programs

of the eight foreign postal administrations responding to our survey. The

similarities were that (1) most foreign postal administrations promoted

their semipostals no more heavily than other postage stamps, and (2) more

organizations wanted to be the beneficiaries of a semipostal’s surcharge

revenue than could be accommodated.

The postal administrations of Austria, The Netherlands, Sweden, and

Canada reported promoting their semipostals at about the same level that

they promoted their other stamps, although Sweden and Canada have not

issued semipostals since 1991 and 1996, respectively. Germany reported

promoting its semipostals less extensively than its other stamps. Belgium

and New Zealand were the only postal administrations that reported

promoting their semipostals more extensively than other stamps.

The most similar experience reported by the foreign postal administrations

was that more organizations wanted to be the beneficiaries of a

semipostal’s surcharge revenue than the postal administration could

accommodate. Of the seven postal administrations commenting about

semipostal beneficiaries, only Sweden reported that it did not have more

organizations that wanted to be the beneficiaries of a semipostal than it

could accommodate (the British Post Office did not comment). Some of

the postal administrations explained how they handled this situation. The

Austrian postal administration reported that the legislature made decisions

regarding which organizations were to have a semipostal to raise money.

Table II.4: Surcharge Amounts Included

by Foreign Postal Administrations (1998

Unless Otherwise Noted)

Similarities in Foreign

Semipostal Programs
Appendix II

Foreign Postal Administrations’ Experiences With Semipostals

Page 47 GAO/GGD-00-80 Breast Cancer Research Stamp

The Belgian postal administration reported that it had developed strict

criteria that were applied in order to determine which organizations

received a semipostal. Canada Post reported that its Stamp Advisory

Committee decides which organizations are to receive semipostals in years

when semipostals are offered. The Netherlands postal administration

reported that its semipostals follow tradition. Each year, one children’s

semipostal and a semipostal for the elderly are issued. Additionally, every

5 years, The Netherlands postal administration issues a semipostal to

benefit The Red Cross.
Appendix III

Comments From the U.S. Postal Service

Page 48 GAO/GGD-00-80 Breast Cancer Research Stamp
Appendix III

Comments From the U.S. Postal Service

Page 49 GAO/GGD-00-80 Breast Cancer Research Stamp
Appendix IV

GAO Contact and Staff Acknowledgments

Page 50 GAO/GGD-00-80 Breast Cancer Research Stamp

Bernard L. Ungar (202) 512-8387

Gerald P. Barnes, Charles F. Wicker, Roger L. Lively, Alan N. Belkin, Jill P.

Sayre, William R. Chatlos, and Stuart M. Kaufman made key contributions

to this report.

GAO Contact

Acknowledgments
Page 51 GAO/GGD-00-80 Breast Cancer Research Stamp
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