U.S. POSTAL 

SERVICE

Projected Capital 

Spending and 

Processes for 

Addressing 

Uncertainties and 

Risks

Report to Congressional Requesters

June 2018

GAO-18-515

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-515, a report to 

congressional requesters

June 2018

U.S. POSTAL SERVICE

Projected Capital Spending and Processes for 

Addressing Uncertainties and Risks

What GAO Found

The United States Postal Service (USPS) projects increased capital spending

over the next 10 years. According to USPS, this spending will support its mission 

and improve its financial position. USPS projects average annual capital cash 

outlays of $2.4 billion from fiscal years 2018–2028—about 70 percent more than 

the $1.4 billion average from fiscal years 2007–2017 (see figure). For example, 

USPS plans to acquire a new fleet of delivery vehicles starting in 2019 to replace 

its aging existing fleet and plans to purchase new mail-processing equipment to 

increase efficiency. However, USPS faces a serious financial situation with 

insufficient revenues to cover expenses. This uncertainty may result in USPS’s

making capital-spending prioritization decisions that can lead to tradeoffs across 

planned capital projects and potentially between capital spending and other 

organizational needs such as operational expenses. Such prioritization could 

lead to USPS’s undertaking less capital spending than currently projected in the 

absence of increased revenues or decreased expenses.

U.S. Postal Service’s Historical (2007–2017) and Projected (2018–2028) Capital Spending 

USPS has processes that help it identify the uncertainties and risks that may

affect its capital spending and adjusts its capital spending accordingly, in line 

with internal control standards adopted by USPS. For example, USPS identifies 

organizational uncertainties, such as mail volumes and revenues, as part of its 

strategic planning process and considers them when creating its capital 

spending budget. It also identifies individual project risks through a project review 

process, and considers tradeoffs inherent in different project scenarios. USPS’s

processes also allow it to respond to these uncertainties and risks. Specifically, 

USPS sets a capital-spending budget in its overall financial plan, to help ensure

that spending is in line with expected resources. USPS’s process also allows it to

shift funds if needed, such as to repair a facility damaged during a natural 

disaster. USPS also reviews individual capital projects during implementation 

and can change specifications or time frames based on changing circumstances.

View GAO-18-515. For more information, 

contact Lori Rectanus at (202) 512-2834 or 

rectanusl@gao.gov.

Why GAO Did This Study

USPS faces significant financial 

challenges as it continues to 

experience declining mail volumes 

and revenues. Capital spending is 

needed to support USPS’s 

operations, but can be affected by 

various uncertainties and risks, such 

as those related to future business 

activities and revenues. In the past, 

USPS has reduced its capital 

spending in response to declining 

revenues.

GAO was asked to review USPS’s

capital-spending plans and examine 

how its capital-spending processes 

address uncertainties and risks. This 

report: (1) describes USPS’s 

projected capital spending over the 

next 10 years and (2) assesses 

whether USPS’s processes support 

its ability to address uncertainties 

and risks that affect its capital 

spending.

GAO reviewed USPS data and 

information on actual capital 

spending from fiscal years 2007 to 

2017 and projected capital spending 

for fiscal years 2018 through 2028. 

GAO also reviewed USPS reports on 

14 approved capital projects in fiscal 

years 2017 and 2018, selected to 

provide a mix of project type and 

value; examined documentation 

related to USPS’s processes that 

affect capital spending and 

compared USPS’s processes to 

internal control standards adopted by 

USPS; and interviewed USPS 

officials. 

On a draft of this report, USPS 

provided technical comments, which 

GAO incorporated as appropriate.
Page i GAO-18-515 U.S. Postal Service

Letter 1

Background 4

USPS Plans to Increase Capital Spending, but Business 

Uncertainties Will Likely Involve Prioritization against Other 

Business Needs and among Capital Projects 9

Various Processes Support USPS’s Ability to Address 

Uncertainties and Risks That Affect Capital Spending 18

Agency Comments 25

Appendix I Objectives, Scope, and Methodology 26

Appendix II Comments from the U.S. Postal Service 30

Appendix III GAO Contact and Staff Acknowledgments 31

Figures

Figure 1: U.S. Postal Service’s Capital-Spending Categories 5

Figure 2: U.S. Postal Service’s (USPS) Historical (2007–2017) 

and Projected (2018–2028) Capital Spending 10

Figure 3: Example of an Off-the-Shelf Delivery Vehicle Acquired 

since Fiscal Year 2017 by U.S. Postal Service 13

Figure 4: U.S. Postal Service Facility Damaged during Hurricane 

Maria 23

Contents
Page ii GAO-18-515 U.S. Postal Service

Abbreviations

COSO Committee of Sponsoring Organizations of the Treadway 

Commission

DAR Decision Analysis Report 

OMB Office of Management and Budget

USPS U.S. Postal Service

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-18-515 U.S. Postal Service

441 G St. N.W.

Washington, DC 20548

June 28, 2018

The Honorable Claire McCaskill

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Tom Carper

Ranking Member

Permanent Subcommittee on Investigations

Committee on Homeland Security and Governmental Affairs

United States Senate

The U.S. Postal Service (USPS) provides crucial support for the nation’s 

communications and commerce. According to USPS, in fiscal year 2017, 

USPS delivered 149-billion pieces of mail, generating about $70 billion in 

revenues. However, USPS—which is structured to be financially selfsupporting—is facing unsustainable financial challenges as First-Class 

Mail volume continues to decline. Although USPS has restructured its 

services and network in various ways to try to improve its financial 

position, total mail volume fell 3.1 percent in fiscal year 2017, resulting in 

an operating loss of $2.6 billion.1 Fiscal year 2017 marked USPS’s 11th 

straight year of operating at a loss.2

Capital spending supports USPS’s ability to meet its organizational 

objectives. For USPS, capital spending includes spending on delivery 

vehicles, mail-processing equipment, post offices and other buildings, and 

other items USPS uses to support operations and meet its universal 

 1

USPS, 2017 Report on Form 10K (Washington, D.C.: Nov. 14, 2017).

2

In part due to these challenges, we have included USPS on our high-risk list, stating that 

USPS faces a serious financial situation that is putting its mission of providing prompt, 

reliable, and efficient universal mail services at risk. We noted that while USPS has taken 

some steps to resolve its financial difficulties, it needs to continue to take actions to 

reduce costs and increase revenues. GAO High Risk Series: Progress on Many High-Risk 

Areas, While Substantial, Efforts Needed on Others GAO-17-317 (Washington, D.C.: Feb. 

15, 2017).

Letter
Page 2 GAO-18-515 U.S. Postal Service

service obligation.3 However, given its challenging financial situation, 

starting in fiscal year 2009, USPS dramatically reduced its capital 

spending and for a number of years, according to USPS, restricted its 

spending to projects it deemed necessary to ensure the health and safety 

of employees and customers or to those projects that could produce a 

large and rapid return on investment. More recently, USPS began 

increasing its capital spending, but its challenging financial situation and 

future uncertainties remain. In addition, individual capital projects can 

face their own project-specific risks. USPS’s continuing financial losses 

and business uncertainties create challenges in its ability to undertake the 

capital-spending needs it has identified.

You asked us to review USPS’s capital spending plans and how its 

capital-spending processes address uncertainties and risks. This report: 

(1) describes USPS’s projected capital spending over the next 10 years 

and (2) assesses whether USPS’s processes support its ability to address 

uncertainties and risks that affect its capital spending.

To describe USPS’s projected capital spending over the next 10 years, 

we reviewed USPS data on actual capital spending from fiscal years 2007 

through 2017 and USPS documentation on projected capital spending 

from fiscal years 2018 through 2028. In both cases, we focused on fiscal 

year actual or projected capital-spending cash outlays—or the amount of 

cash spent on capital projects—as opposed to capital-spending 

commitments made in that specific fiscal year.4 For historical data, we 

used data from USPS’s annual budgets for fiscal years 2008 through 

2018, which contain data from prior fiscal years. For information on 

USPS’s projected capital spending for fiscal years 2018 through 2028, we 

reviewed USPS’s 10-year capital-spending projection for those years, 

which USPS created in 2017. To determine the reliability of these data, 

we interviewed USPS officials, reviewed data for any obvious errors, and 

reviewed relevant documentation. We determined that these data were 

 3

As part of its universal service obligation, USPS “shall have as its basic function the 

obligation to provide postal services to bind the Nation together through the personal, 

educational, literary, and business correspondence of the people ... [by providing] ... 

prompt, reliable, and efficient services to patrons in all areas and ...postal services to all 

communities.” 39 U.S.C. § 101(a). USPS served about 157-million delivery points at the 

end of fiscal year 2017, an increase of approximately 1.2 million from 2016. USPS, 2017 

Annual Report to Congress.

4

A single capital-spending project may be implemented over multiple years. As a result, a 

spending commitment for the full amount of the project might be made in a given year, 

with the cash outlays for the project spread out over multiple years.
Page 3 GAO-18-515 U.S. Postal Service

sufficiently reliable for the purposes of reporting on USPS’s past and 

projected capital spending. We also selected and reviewed a nongeneralizable sample of 14 of USPS’s 66 approved fiscal year 2017 and 

2018 Decision Analysis Reports (DAR)—internal USPS documents used 

to justify and obtain approval for some proposed capital spending 

projects.5 We selected DARs to provide a mix of types of capital spending 

projects and total project value.6 We reviewed the DARs to obtain 

descriptive information about the projects. While information presented 

from our reviews of the DARs cannot be generalized to all DARs, the 

information provides insights into USPS’s reasons for undertaking capital 

spending projects. In addition, we interviewed USPS officials about the 

organization’s historic and projected capital spending.

To assess whether USPS’s processes support its ability to address 

uncertainties and risks that affect its capital spending, we reviewed 

documentation from USPS, including USPS’s policies and procedures for 

capital spending and internal guidance documents, and interviewed 

USPS officials. We then compared that information against criteria for 

addressing uncertainties and risks. Specifically, we identified criteria from 

the Office of Management and Budget’s (OMB) Capital Programming 

Guide7 and the Committee of Sponsoring Organizations of the Treadway 

Commission’s (COSO) Internal Control-Integrated Framework—internal 

control standards adopted by USPS.8 We evaluated how USPS’s 

processes that affect capital spending are designed to address 

uncertainties and risks. For more details regarding our scope and 

methodology, see appendix I.

 5

USPS creates DARs on an ongoing basis throughout the year. We selected approved 

fiscal year 2017 and 2018 DARs from a list of DARs that had been approved as of 

December 18, 2017.

6

While approved DARs include information on total project costs, we do not report the 

dollar values of specific capital spending projects as USPS considers that information to 

be business sensitive.

7

Office of Management and Budget Capital Programming Guide v 3.0 Supplement to 

Office of Management and Budget Circular A-11Planning, Budgeting, and Acquisition of 

Capital Assets (Washington, D.C.: 2017).

8

Committee of Sponsoring Organizations of the Treadway Commission Internal ControlIntegrated Framework (2013). We are using COSO criteria instead of the Standards for 

Internal Control in the Federal Government because it is the framework used by USPS. 

USPS officials stated that the organization adopted the COSO framework because it is 

widely accepted and used by businesses.
Page 4 GAO-18-515 U.S. Postal Service

We conducted this performance audit from September 2017 to June 2018 

in accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

USPS undertakes capital-spending projects for a number of reasons and 

more than one reason may apply to a single project. According to USPS 

documentation on its capital spending processes, these reasons include:

• to support USPS’s organizational objectives and strategic plan,9

• to help sustain existing operations and meet USPS’s universal service 

obligation,

• to protect the health and safety of employees and customers or meet 

legal requirements, or

• to generate a positive return-on-investment—such as by increasing 

revenues or decreasing costs—thus improving USPS’s finances.

USPS generally categorizes its capital spending in four broad categories: 

vehicles, facilities, information technology and other, and mail processing 

equipment, as shown in figure 1.

 9

USPS’s fiscal year 2017 through 2021 strategic plan includes the following strategic 

goals: (1) deliver a world-class customer experience; (2) equip, empower, and engage 

employees to best meet the needs of USPS’s customers; (3) innovate faster to deliver 

value and provide customers with appropriate products and services; and (4) invest in 

future platforms to deliver services. USPS, Future Ready: U.S. Postal Service Five-Year 

Strategic Plan Fiscal Years 2017 to 2021 (Washington, D.C.: Sept. 30, 2016).

Background
Page 5 GAO-18-515 U.S. Postal Service

Figure 1: U.S. Postal Service’s Capital-Spending Categories 

a

”Other” capital spending in this category includes some equipment, such as customer support 

equipment, and capital projects that do not otherwise fit into the four categories, such as a program to 

reduce waste and increase recycling revenue.

USPS has processes for setting an annual capital-spending budget and 

approving specific capital projects.10 USPS prepares an annual capitalspending budget as part of its annual organization-wide budget. 

According to USPS documentation on its capital spending process, and 

USPS officials the process includes the following steps:

• In advance of each fiscal year, USPS’s Finance and Planning 

Department reviews estimated revenues and expenses to determine 

an appropriate total capital-spending budget.

 10In 2014, we reported on USPS’s capital spending processes. Specifically, we evaluated 

USPS’s capital-spending practices in four phases—planning, selecting, managing, and 

evaluating—against leading best practices and found that USPS’s conformance with those 

best practices varied. We recommended that USPS (1) establish a time frame for 

developing a single set of policies and procedures for selecting capital-spending projects, 

(2) modify its capital-spending policies to align with leading best practices, and (3) 

regularly examine the extent to which USPS executives and managers follow leading best 

practices. USPS partially concurred with the first two recommendations and agreed with 

the third. As of March 2018, USPS had reported that it is updating its capital-spending 

manual to address these recommendations, but the proposed updated manual is not 

finalized. Our 2014 report did not focus specifically on USPS processes to address 

uncertainties and risks related to capital spending. GAO U.S. Postal Service: Actions 

Needed to Strengthen the Capital Investment Process GAO-14-155 (Washington, D.C.: 

Jan. 7, 2014).
Page 6 GAO-18-515 U.S. Postal Service

• Next, USPS’s Executive Leadership Team and the leadership of 

relevant departments develop requests for each department’s 

estimated capital-spending needs for the upcoming year, including a 

ranking of desired projects.11 These lists provide information on 

projects’ purposes, estimated capital and operating expenses, 

potential return-on-investment, and relationship to USPS’s strategic 

initiatives.

• The Finance and Planning Department then reviews these lists in light 

of the previously determined total capital-spending budget and sets a 

capital spending budget for each of the broad categories of capital 

spending.

• The Executive Leadership Team votes on this preliminary capital 

spending budget, which, if approved, is included in the organizationwide budget that is subject to approval by USPS’s Board of 

Governors.12 The budget approved by the Board of Governors 

includes the total and categorical capital-spending budget, but does 

not include approvals for specific projects.

According to USPS officials, USPS also uses these capital-spending 

requests, along with other information, such as historical capital-spending 

data and information on already identified specific future capital-spending 

projects, to annually update a 10-year projection of capital spending. 

USPS uses this 10-year projection to estimate USPS’s potential future 

capital spending and requirements for capital project cash outlays.

USPS also has processes for approving specific capital projects. Project 

sponsors—those departments that wish to undertake a capital-spending 

 11The Executive Leadership Team is comprised of the Postmaster General, Deputy 

Postmaster General, Chief Operating Officer, Chief Information Officer, Chief Financial 

Officer, General Counsel, Chief Customer and Marketing Officer, and Chief Human 

Resources Officer.

12USPS’s Board of Governors is to be comprised of nine Governors as well as the 

Postmaster General and Deputy Postmaster General. However, since 2016, the Board of 

Governors has not had a quorum due to a large number of vacancies in the Governor 

positions. As a result, some authorities of the board have been delegated to a Temporary 

Emergency Committee, which is currently comprised of the Postmaster General and the 

Deputy Postmaster General due to the fact that there are no Governors in office. The 

Temporary Emergency Committee currently approves USPS’s budget. We have testified 

before Congress that a fully functioning Board of Governors is needed to support USPS’s 

ability to carry out its responsibilities, including setting prices and approving new products. 

See GAO U.S. Postal Service: Key Considerations for Restoring Fiscal Sustainability

GAO-17-404T (Washington, D.C.: Feb. 7, 2017).
Page 7 GAO-18-515 U.S. Postal Service

project—must obtain approval from different groups within USPS to 

initiate capital projects. According to USPS documentation, the level of 

approval required depends on the estimated total cost of the project:13

• Total costs over $5 million: The project sponsor must submit a DAR 

to USPS’s Investment Review Committee for review.14 DARs contain 

estimated project cost, return-on-investment, and other information 

used to justify the project. If the committee approves, it makes a 

recommendation to the Postmaster General for final approval. USPS’s 

Office of Inspector General also reviews and assesses the adequacy 

and the depth of the information in the DAR, assesses whether the 

project is in USPS’s best business interest, and may provide input to 

the Investment Review Committee, which may take that information 

into consideration when reviewing projects.

• Total costs from $1 million to $5 million: The project sponsor must 

submit a DAR to USPS’s Technical Review Committee for review and 

approval.15

• Total costs under $1 million: The project is reviewed by USPS’s 

Finance and Planning department, and approval is subject to the level 

of budgetary resources available. USPS does not require a DAR for 

these projects, although the process involves other documents, such 

as a one-page “Justification of Expense” that is required for many of 

the projects.

USPS faces organization-wide uncertainty that may affect its capital 

spending. We define “organizational uncertainty” as those uncertainties—

such as business, budgetary, legislative or regulatory, or other 

conditions—that may affect USPS’s ability to remain competitive and 

 13The total investment considered for this purpose is the total of capital costs, 

implementation and deployment expenses, and operating expenses for the project for the 

existing fiscal year. As some capital projects may take multiple years to implement, the 

total investment cost may include cash outlays required over multiple years. For the 

purposes of this report we refer to these total investment costs as “total project costs” and 

the cash outlays made in any given year as “capital spending.”

14The Investment Review Committee is comprised of the Chief Financial Officer, Chief 

Operating Officer, Chief Information Officer, Chief Customer and Marketing Officer, 

General Counsel, and Chief Human Resources Officer.

15The Technical Review Committee is comprised of the Vice President, Finance and 

Planning and the Vice President, Information Technology. 
Page 8 GAO-18-515 U.S. Postal Service

achieve its mission.16 For example, in the absence of adequate revenues 

that would cover all of USPS’ expenses, these uncertainties may affect 

the extent to which USPS can undertake its identified capital-spending 

plans. According to USPS, organizational uncertainties include the 

following:

• Business uncertainty includes potential changes to USPS’s business 

and the market for its products and services. Such uncertainty may be 

affected by changing customer preferences—such as continuing 

diversion of First Class Mail to electronic alternatives (e.g., e-mail or 

online banking)—and increased competition for package shipments.

• Budgetary uncertainty includes potential uncertainty and changes to 

revenues and expenses that affect USPS’s finances.

• Legislative or regulatory uncertainty includes potential actions 

intended to address some of USPS’s financial challenges. For 

example, postal reform legislation has been introduced that, if 

enacted, could improve USPS’s financial position. Both H.R. 756 and 

S. 2629 propose to relieve USPS of some of its retiree health and 

pension obligations and provide a reinstatement of a partial rate 

surcharge.17 Similarly, the Postal Regulatory Commission—an 

independent establishment of the executive branch that regulates 

USPS18— is considering providing USPS with additional flexibility on 

pricing, which could also improve USPS’s finances.19

 16Our definition of “organizational uncertainty” for the purposes of this report is based on 

our review of USPS’s financial statements.

17Postal Service Reform Act of 2017, H.R. 756, 115th Cong. (2017) and Postal Service 

Reform Act of 2018, S. 2629, 115th Cong. (2018). However, even if USPS raises rates, it 

may not see an increase in revenues. Economic studies show that, when the price of a 

product increases, the quantity demanded for the product will adjust downward. As a 

result, a rate increase for USPS could lead to a decrease in volume that might offset 

additional revenue from the rate increase.

18The Postal Regulatory Commission is composed of five commissioners, each of whom 

is appointed by the President, with the advice and consent of the Senate, for 6-year terms.

19The Postal Regulatory Commission issued a Notice of Proposed Rulemaking in 

December 2017 that proposes, among other things, to provide USPS with supplemental 

rate authority for a limited time period as well as additional performance-based rate 

authority, which would allow USPS to raise rates if it meets certain operational efficiency 

criteria. Postal Regulatory Commission, Notice of Proposed Rulemaking for the System 

for Regulating Rates and classes for Market Dominant Products, Order No. 4258, 

(Washington, D.C.: Dec. 1, 2017).
Page 9 GAO-18-515 U.S. Postal Service

According to USPS documentation on capital-spending processes as well 

as DARs for individual capital-spending projects, capital-spending

projects also can face project-specific risks, such as the following:

• Technological risks, which include complexity, quality, and 

security concerns: For example, capital projects deploying new 

technology intended to increase operational efficiency may face the 

risk that the new technology could become obsolete given future 

technological advances.

• Operational risks, which include maintenance and performance 

of projects: For example, equipment purchased as part of a capital 

project could involve the risk that it may not perform as expected.

• Integration risks, which include network and system integration 

and user acceptance of projects: For example, a project involving 

new retail technology may face the risk that USPS’s customers will 

not accept the new technology, and, as a result, the project does not 

meet its target for customer use.

According to USPS, the organization has critical capital-spending needs 

after years of reduced capital spending. Starting in fiscal year 2009, 

USPS sharply decreased its capital spending for several years, in 

response to decreased volume and revenues; however, USPS now plans 

to increase its spending. Specifically, USPS projects average annual 

capital-spending cash outlays of $2.4 billion from fiscal years 2018 

through 2028—about 70 percent more than the average of $1.4 billion 

from fiscal years 2007 through 2017.20 (See fig. 2.) While this projected 

spending is largely driven by plans to acquire a new fleet of delivery 

vehicles, USPS also projects increased spending in the other categories 

of facilities, information technology, and mail-processing equipment. In 

addition, while some of USPS’s planned capital spending is intended 

specifically to generate a return-on-investment—such as by increasing 

revenues or decreasing costs—much of USPS’s planned capital spending 

is to help sustain operations. Specifically, according to our analysis of 

USPS data, roughly 80 percent of USPS’s projected capital spending for 

fiscal year 2018 is for projects intended to help sustain operations.

 20These dollar values, and all others discussed in this report, are in nominal terms. USPS 

officials noted that its 10-year capital-spending projection is only a projection of currently 

identified potential needs and future capital spending may change over time for a number 

of reasons.

USPS Plans to 

Increase Capital 

Spending, but 

Business 

Uncertainties Will 

Likely Involve 

Prioritization against 

Other Business 

Needs and among 

Capital Projects
Page 10 GAO-18-515 U.S. Postal Service

Figure 2: U.S. Postal Service’s (USPS) Historical (2007–2017) and Projected (2018–2028) Capital Spending

a”Other” capital spending in this category includes some equipment, such as customer support 

equipment, and capital projects, such as a program to reduce waste and increase recycling revenue, 

that do not otherwise fit into the four categories.
Page 11 GAO-18-515 U.S. Postal Service

In its latest projection of capital spending, covering fiscal years 2018 

through 2028, USPS projects an annual average of roughly $821 million 

on capital spending for vehicles, primarily driven by a multi-year 

acquisition of new delivery vehicles starting in fiscal year 2019. According 

to USPS officials, USPS decided a number of years ago to defer 

purchasing new delivery vehicles and instead continued using and 

maintaining its existing fleet. Because USPS started acquiring most of its 

existing delivery fleet in 1987, the majority of its delivery vehicles are 

several decades old. USPS officials said these vehicles incur high 

maintenance costs, averaging about $4,500 per vehicle annually.

In acquiring new vehicles, USPS plans to take a number of steps to 

ensure that the vehicles best meet the organization’s needs. According to 

USPS officials, it will spread the acquisition over multiple years to avoid a 

large cash outlay in any given year and to enable USPS to modify the 

vehicle purchases over time to take advantage of any technological 

changes, such as advances in alternative fuel technologies. Officials 

added that USPS is considering vehicles that will encourage operational 

efficiencies. For example, USPS is considering taller vehicles that will 

better allow carriers to handle trays of mail and packages. The officials 

also noted that USPS may consider different vehicle designs for different 

market needs.21 The officials said that USPS is currently testing various 

vehicle prototypes and has not decided on any one vehicle design at this 

time. In total, USPS projects that its acquisition of new delivery vehicles 

will require about $5.7 billion in capital-spending cash outlays distributed 

over a number of years.

In addition to its planned future acquisition of delivery vehicles, USPS has 

also conducted smaller acquisitions of vehicles in recent years. According 

to USPS officials, in the past few years USPS has been replacing most of 

its non-delivery vehicles and will have done so by 2019, while also 

purchasing a small number of delivery vehicles to replace ones that have 

exceeded their useful life or will serve route growth.22 For example, in 

April 2017 USPS approved a capital spending project to purchase more 

than 2,000 cargo vans used to transport large volumes of mail from postal 

 21Specifically, according to USPS officials, USPS may purchase one vehicle type for 

urban areas such as New York City and another for more rural areas.

22USPS’s delivery network is growing by over 1-million new delivery points per year in 

recent years, requiring the creation of new or expanded delivery routes.

Vehicles: Spending 

Planned to Replace Aging 

Fleet
Page 12 GAO-18-515 U.S. Postal Service

plants to post offices and other facilities, and about 375 spotter vehicles 

used to move trailers among docks at processing facilities.23 In May 2017 

USPS approved a capital spending project to purchase approximately 

8,000 off-the-shelf delivery vehicles needed to serve route growth and 

replace existing high-maintenance-cost vehicles.24 (See fig. 3.)

 23In September 2017 USPS approved additional capital spending, based on higher 

contracted costs, to support this project.

24Purchase of off-the-shelf delivery vehicles means these vehicles were purchased from 

the manufacturer with no major modifications and were not custom-designed and built for 

USPS.
Page 13 GAO-18-515 U.S. Postal Service

Figure 3: Example of an Off-the-Shelf Delivery Vehicle Acquired since Fiscal Year 2017 by U.S. Postal Service
Page 14 GAO-18-515 U.S. Postal Service

USPS projects an annual average of about $607 million in capital 

spending for facilities from fiscal years 2018 through 2028.25 According to 

USPS officials, USPS faces little need for capital spending on new facility 

construction given changes to USPS’s business such as decreasing mail 

volumes. As a result, most of USPS’s projected capital spending is for 

rehabilitation and repair of existing facilities, such as the replacement of 

roofs or heating, ventilation, and air-conditioning systems needed to 

sustain operations. For example, in December 2016, USPS approved ca 

capital spending project to replace the roof at a mail processing facility in 

Tulsa, Oklahoma. USPS had concluded that the roof was in a state of 

failure, and there were no economically feasible repair options. In 

addition, in 2017 USPS approved about a capital spending project to 

repair facilities in the U.S. Virgin Islands damaged during Hurricane 

Maria.

Although most facilities spending is related to rehabilitation and repair, 

some USPS capital spending is on new facilities. According to USPS 

officials, new facilities projects are generally approved because of the 

need to completely replace an existing facility that is beyond repair or to 

construct a new facility that will replace multiple existing facilities. For 

example, in May 2017 USPS approved a capital spending project to 

construct a mail-processing facility in Nashville, Tennessee. The facility is 

intended to replace and close four existing facilities which will eliminate 

space deficiencies, reduce transportation costs, and improve operating 

efficiencies. In addition, according to USPS officials, USPS may need to 

make capital spending investments to facilities to accommodate growth in 

package volume, should that growth continue.

USPS projects an annual average of about $541 million in capital 

spending for information technology and other capital projects, such as 

customer support equipment, from fiscal years 2018 through 2028.26

Information technology spending, which makes up an average of 98 

percent of the projected spending in this category from fiscal years 2018 

through 2028, is intended to maintain the infrastructure used to support 

USPS and provide security from cyber-threats, among other things. 

 25USPS capital spending forecast for fiscal years 2018 to 2028.

26USPS capital-spending forecast for fiscal years 2018 to 2028.

Facilities: Spending 

Primarily Intended for 

Repairs of Existing 

Facilities

Information Technology 

and Other: Spending 

Intended to Support 

USPS’s Network and 

Cybersecurity Efforts
Page 15 GAO-18-515 U.S. Postal Service

According to USPS officials, while it is difficult to project capital spending 

on information technology because future needs are uncertain, they can 

more accurately predict some future needs, such as hardware 

replacement. For example, there is a baseline of projected costs to 

replace servers because USPS knows the length of the technologies’

useful lives and when they will need to be replaced. According to USPS 

officials, while much of its capital spending on information technology is 

intended to replace outdated servers and other hardware, some spending 

is for developing new information technology systems. For example, in 

March 2017 USPS approved a capital spending project to purchase 67 

video conferencing systems intended to increase productivity and 

encourage collaboration among USPS offices. In addition, USPS officials 

told us that in recent years USPS has undertaken more capital spending 

than expected on cybersecurity, a trend that will likely continue for the 

next few years. According to a DAR for cybersecurity investments, USPS 

is undertaking such investments to proactively identify and respond to 

security threats that have the potential to cause financial or other damage 

to the organization’s assets or employees, including threats that could 

disrupt or destroy information.

Capital spending on information technology can also support USPS 

strategic goals and provide a positive return-on-investment. For example, 

in January 2017 USPS approved an additional capital spending to 

support development of its Informed Visibility program, which is a system 

that provides tracking and reporting of mail shipments for commercial 

mailers.27 According to the Informed Visibility DAR, these capabilities will 

provide users with access to valuable business information, helping 

improve operational efficiencies and marketing, among other things. 

According to the DAR, Informed Visibility will also provide a positive 

return-on-investment by eliminating some redundant costs and programs.

 27USPS initially approved capital spending to support Informed Visibility in October 2014 

and additional funding to support it in October 2015.
Page 16 GAO-18-515 U.S. Postal Service

USPS projects an annual average of about $464 million on capital 

spending for mail-processing equipment from fiscal years 2018 through 

2028.28 USPS intends to maintain or replace existing aging equipment 

used to process mail and purchase new equipment that USPS expects 

will increase efficiency and provide other business benefits. According to 

USPS officials, equipment projects can also generate a positive returnon-investment in a number of ways, such as by increasing automation to 

reduce costs or by improving customer service. For example, in August 

2017 USPS approved a capital spending project to provide new control 

systems for about 1,000 bar code sorter machines that USPS expects will 

decrease mail-processing costs.

Some of USPS’s mail-processing equipment investments may also 

specifically address the growing market for package shipments. For 

example, in July 2017 USPS approved a capital spending project for 

upgrades to automated package-processing machines—upgrades 

intended to reduce package-handling costs and improve collection of data 

on when and where packages are processed. USPS first deployed these 

machines in 2004. According to the DAR, by 2017, the machines were 

nearing the end of their useful life, resulting in reduced reliability.

Although USPS is projecting increased capital spending over the next 10 

years, it has reported that it faces uncertainties, such as the level of future 

revenues, that could affect its ability to undertake planned and projected 

spending. USPS faces continuing declines in First Class Mail volume, and 

while it has experienced increased volume in packages, future increases 

in package volume are uncertain.29 Specifically, according to USPS, 

some of its major shipping customers are now building their own delivery 

capability that may enable them to divert some package shipments away 

from USPS. USPS has also stated that it faces challenges in ensuring 

that future operations generate sufficient revenues to support planned 

capital spending and that it is constrained in its ability to reduce costs.30

 28USPS capital spending forecast for fiscal years 2018 to 2028.

29In addition, package shipments are generally less profitable for USPS than First Class 

Mail.

30USPS, 2017 Report on Form 10K.

Mail-Processing 

Equipment: Projected 

Spending Intended to 

Increase Automation and 

Efficiency

USPS’s Projected Capital 

Spending Will Likely 

Involve Prioritization 

Decisions
Page 17 GAO-18-515 U.S. Postal Service

We have previously testified that USPS continues to face a serious 

financial situation with insufficient revenues to cover its expenses.31

This uncertain financial outlook may result in USPS changing its current 

capital-spending plans, including setting new priorities across its planned 

projects and other business needs. These prioritization decisions can 

involve tradeoffs among projects and between capital and operations 

spending. USPS has already faced these types of tradeoffs, as in fiscal 

year 2017, when it did not make $6.9 billion in required prefunding 

payments for retiree health and pension benefits, stating that it lacked 

sufficient cash to make those payments while ensuring it could continue 

to provide service, and stating that it required sufficient cash reserves for 

capital spending.32 While USPS officials noted that USPS must always 

make prioritization decisions regarding capital spending, its financial 

future may make such decisions more critical given its currently projected 

increased capital spending. For example, unless USPS increases its 

revenues or decreases other expenses, such prioritization decisions may 

involve USPS undertaking less future capital spending than it currently 

projects over the next 10 years. Further, even if USPS’s financial situation 

were to dramatically improve, USPS may not necessarily undertake more 

capital spending than currently projected, because of significant other 

business needs, such as funding operating expenses.33 Should USPS 

have more resources than expected in the coming years, though, USPS 

may be able to make fewer tradeoffs regarding capital spending.

 31GAO-17-404T.

32The Postal Accountability and Enhancement Act established the Postal Service Retiree 

Health Benefits Fund and required USPS to begin prefunding health benefits for its current 

and future postal retirees, with annual payments of $5.4 billion to $5.8 billion from fiscal 

years 2007 through 2016, followed by actuarially determined prefunding payments 

beginning in 2017 and every year thereafter. Pub. L. No. 109-435, § 803, 120 Stat. 3198 

(2006), codified at 5 U.S.C. § 8909a. USPS has not made its required payments for a 

number of years and owes a total of $38.2 billion. We are currently examining the issue of 

USPS’s retiree health benefits and expect to issue a report later this year.

33Additionally, according to USPS officials, USPS does not have a list of capital projects 

that it could quickly undertake should more resources be suddenly available because of 

the length and robustness of the capital-budgeting and spending approval processes.
Page 18 GAO-18-515 U.S. Postal Service

USPS has processes that can help it to identify uncertainties and risks 

that could affect its capital spending and adjust its spending to changing 

circumstances.34 USPS has adopted the Committee of Sponsoring 

Organizations of the Treadway Commission’s (COSO)35 internal control 

framework, which includes how organizations should address 

uncertainties and risks.36 Specifically, this framework states that 

organizations should identify uncertainties and risks to the achievement of 

their objectives and analyze these uncertainties and risks to determine 

how they should be managed. Additionally, COSO’s internal control 

framework asserts that organizations should not only identify and analyze 

uncertainties and risks but also assess any changes in conditions that 

could affect the organization including its capital spending.37

 34For the purposes of this report, we refer to “organizational uncertainties” and “projectspecific risks.” Organizational uncertainties include business and budgetary uncertainties 

which affect USPS as an organization. Project-specific risks include the integration, 

operational, and technological risks inherent to individual capital projects.

35COSO is a private sector committee comprised of a number of accounting and finance 

professional organizations. COSO provides guidance on enterprise risk management and 

internal controls.

36Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal 

Control-Integrated Framework (2013). Internal controls are processes that management 

uses to help an entity achieve its objectives. USPS stated that it adheres to COSO’s 

internal control principles. 

37According to COSO, every organization faces a variety of risks. COSO principles state 

that to manage these risks, an organization “identifies risks to the achievement of its 

objectives across the entity and analyzes risks as a basis for determining how the risks 

should be managed” and further, “... identifies and assesses changes that could 

significantly that could significantly impact the system of internal control.”

Various Processes 

Support USPS’s 

Ability to Address 

Uncertainties and 

Risks That Affect 

Capital Spending

USPS Has Processes 

Designed to Identify 

Uncertainties and Risks 

That Affect Capital 

Spending
Page 19 GAO-18-515 U.S. Postal Service

USPS has processes for identifying and analyzing organizational 

uncertainties, such as business and budgetary uncertainties, which can 

affect capital spending. These processes align with aspects of COSO’s 

internal control framework. For example, according to USPS 

documentation on its strategic-planning process, USPS conducts a 

business environment assessment and an enterprise risk assessment 

every 3 years to identify its organizational uncertainties, such as the effect 

of changes in the number of delivery points or mail volume. Additionally, 

USPS has processes to analyze the effects of its organizational 

uncertainties. For example, some department managers analyze the 

potential effects of organizational uncertainty by modeling different 

scenarios to help inform their department’s capital-spending decisions. 

For example, USPS officials stated that the vehicles department models 

the interactions among key variables—such as stabilizing or declining 

mail volume, route structures, and vehicle cargo sizes—as it considers 

various vehicle acquisition options. In addition, USPS facilities 

department officials told us that they plan to develop on a model to 

consider how key variables, such as mail volume, affect USPS’s facility 

needs.

In addition to identifying and analyzing the potential effects of 

organizational uncertainties, USPS also has processes for assessing 

changes in these organizational uncertainties. For example, USPS 

documentation shows that USPS leadership holds a monthly business 

review meeting in which officials discuss any changes in internal 

conditions, such as labor costs, or external conditions, such as mail 

volume, that could affect the organization and, when applicable, how 

these conditions could affect capital spending. Officials told us that USPS 

also distributes a survey every 18 months to internal and external 

stakeholders to obtain perspectives on changes, if any, in some of the 

conditions addressed by USPS’s strategic plan. The survey also covers 

other conditions such as uncertainty about the extent to which USPS will 

have funds to maintain, repair, and replace infrastructure.

Individual capital projects face inherent risks—such as technological, 

operational, and integration risks. We found that USPS’s capital-spending 

processes align with aspects of COSO’s internal control framework by 

incorporating processes to identify and analyze project-specific risks 

through the use of DARs. As discussed earlier, USPS’s capital spending 

processes require DARs to justify proposed capital projects with total 

costs of $1 million or more. Specifically, internal USPS guidelines state 

Identifying and Analyzing 

Organizational Uncertainties

Identifying and Analyzing 

Project Risks
Page 20 GAO-18-515 U.S. Postal Service

that DARs should identify the technological, operational, and integration 

risks that could affect capital projects and any tradeoffs related to 

potential alternatives to the proposed capital project. For example, we 

reviewed one DAR for mail-processing equipment that explained that the 

project has a low level of operational risk noting that the new equipment 

will not require training for operators, thus avoiding potential costs and 

delays associated with training. Another DAR we reviewed for a project 

intending to improve the customer experience and reduce costs through 

more efficient staffing at retail locations identified integration risks and 

noted that the project's proposed deployment schedule might not allow 

time for delays. USPS leadership may also request additional analyses to 

verify, or support, information in a DAR before deciding whether to 

approve a project. For example, according to documentation we 

reviewed, USPS leadership recently requested that its Finance and 

Planning division review economic data, such as population growth rates, 

to confirm the economic growth projections used in support of a DAR for 

a new facility in Bismarck, North Dakota.
Page 21 GAO-18-515 U.S. Postal Service

We found that USPS has processes that are designed to help it respond 

to identified organizational uncertainties, specifically future budgetary 

uncertainty. According to OMB’s Capital Programming Guide, capital 

spending “...should be consistent with the level of future budgetary 

resources that will be available.”38 USPS officials said USPS seeks to 

minimize the budgetary uncertainty that capital spending will outpace 

available resources by developing its annual capital-spending budget as 

part of USPS’s overall annual budget. As a result, USPS can determine 

an annual capital spending budget based on the most recent conditions, 

including the most recent revenue forecasts, and consider possible 

tradeoffs—such as those between capital spending and other spending 

needs such as operating expenses. Further, while the creation of a 

capital-spending budget establishes capital-spending levels, the process 

does not commit capital spending on any particular project. Instead, 

USPS reviews and approves new capital projects throughout the fiscal 

year, allowing USPS to make capital spending-decisions based on its 

most current financial condition, which may have evolved during the fiscal 

year.

After USPS has set the annual capital spending budget, USPS’s capitalspending process also allows the organization to respond to any changes 

in its financial outlook, business environment, or other organizational 

uncertainties that might occur during the fiscal year. As stated previously, 

USPS’s capital spending budget establishes capital spending levels for 

the fiscal year and does not include approvals for specific projects. 

Project sponsors must obtain approval from different groups within USPS 

to initiate capital projects. USPS may approve less capital spending for 

capital projects than budgeted for at the start of the year. Our analysis of 

capital-spending cash outlays from fiscal year 2007 through 2017 shows 

that on average, USPS spent about 18 percent less than was budgeted 

for at the start of each year.39 According to USPS officials, capital 

spending can be below budgeted levels for a variety of reasons. USPS 

may shift strategic priorities based on business conditions and cancel or 

 38Office of Management and Budget Capital Programming Guide v 3.0 Supplement to 

Office of Management and Budget Circular A-11Planning, Budgeting, and Acquisition of 

Capital Assets (Washington, D.C.: 2017).

39The difference varies by year. For example, in fiscal year 2011 USPS spent about 93 

percent of the amount budgeted for at the start of the year, while in fiscal year 2016 USPS 

spent about 78 percent of the amount budgeted.

USPS Has Processes 

Designed to Respond to 

Identified Uncertainties 

and Risks That Affect 

Capital Spending
Page 22 GAO-18-515 U.S. Postal Service

delay some planned projects that it determines are no longer aligned with 

its priorities. For example, USPS canceled a previously approved 

centralized distribution facility project in Brooklyn, New York, and decided 

to look for less costly alternatives to support the area’s increased 

package processing needs. Also, officials stated that projects could come 

in below budget because of a reduction in project scope or because a 

multi-year project falls behind schedule and has less cash outlays in a 

given year than were planned.

In other instances, USPS’s capital-spending approval process provides 

flexibility to re-allocate capital funds as USPS identifies and assesses 

changing conditions that affect the organization, or when contingencies or 

emergencies arise. For example, according to USPS officials, as USPS 

monitors the economic indicators that affect its business, the indicators 

may signal an increase in package volume. USPS might respond by 

allocating more capital toward additional purchases of package-sorting 

equipment. According to USPS officials, USPS’s capital-spending 

process also allows USPS to respond to contingencies. In fiscal year 

2017, USPS approved capital spending to repair facilities in the U.S. 

Virgin Islands damaged during Hurricane Maria. (See fig. 4.) In the event 

that such unplanned projects arise to repair damages or are required for 

safety, project sponsors can expedite the capital spending approval 

process, such as by submitting an advance funding request to USPS.
Page 23 GAO-18-515 U.S. Postal Service

Figure 4: U.S. Postal Service Facility Damaged during Hurricane Maria

In addition to having processes to respond to organizational uncertainties, 

we also found that USPS has processes for responding to the risks 

affecting individual capital projects. According to USPS documentation, 

capital projects with total costs of over $5 million are reviewed at certain 

stages in their implementation to assess any changes, including changes 

in the return-on-investment, timeline, and performance of the projects. 

USPS may alter project specifications or time frames to respond to these 
Page 24 GAO-18-515 U.S. Postal Service

changes. During the implementation stage of some major capital projects, 

such as the installation of mail-processing equipment, departments may 

initially test a limited number of units with the option to request the 

purchase of additional units if the tests are successful. Additionally, some 

major capital projects, such as the replacement of USPS’s delivery 

vehicles, require acquisitions over multiple years, which, USPS officials 

told us, can be used to limit risk. As mentioned earlier, USPS is planning 

to replace its fleet by purchasing vehicles over a number of years, 

potentially allowing it to capitalize on technological advances that may 

develop over the time period.

After a capital project is complete, USPS has a process for reviewing the 

results as a way to inform and improve future capital-spending decisions, 

including better addressing project risks. USPS’s capital-spending 

process requires USPS to evaluate capital projects with total costs over 

$25 million after project completion, reviewing the cost, schedule, and 

performance results of these projects. For example, in November 2017, 

USPS discussed the results of two package processing and sorting 

projects that experienced delays associated with accommodating new 

equipment at the facilities due to design issues. As a result, USPS 

recommended that project sponsors conduct more research about any 

site-specific risks before submitting a DAR for future package processing 

and sorting projects. In addition, USPS’s Office of Inspector General 

prepares an annual capital-project-compliance report that evaluates the 

soundness of USPS’s capital spending.40 According to USPS officials, the 

organization considers the results of these reports and seeks to address 

any resulting recommendations. For example, we reviewed 

documentation explaining that, in response to one recent Office of 

Inspector General recommendation, USPS stated it would revise its 

capital spending guidance to define review and approval procedures, 

validation, and compliance report requirements for all investments.

 40The Office of Inspector General evaluated 28 DARs in fiscal year 2016 and 64 DARs in 

fiscal year 2017 for its annual capital project compliance reports. While these reports 

include findings about specific projects and their DARs—such as overly optimistic cost 

savings estimates—they found that, overall, USPS’s capital spending decisions for both 

fiscal years were “reasonable business decisions or in the best business interest of the 

Postal Service.” See U.S. Postal Service Office of Inspector General Fiscal Year 2017 

Decision Analysis Report Summary, MI-CAP-18-001 (Washington, D.C.: Feb. 15, 2018.) 

and U.S. Postal Service Office of Inspector General Fiscal Year 2016 Decision Analysis 

Report Summary, CP-CAP-17-001 (Washington, D.C.: Dec. 27, 2016.)
Page 25 GAO-18-515 U.S. Postal Service

We provided a draft of this report to USPS for review and comment.

USPS provided a written letter (see appendix II) in which USPS provided 

no comments. Via email, USPS also provided technical comments, which

we incorporated as appropriate.

We are sending copies of this report to interested congressional 

committees and the Postmaster General. In addition, the report will be 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff that made key contributions to this 

report are listed in appendix III.

Lori Rectanus

Director

Physical Infrastructure Issues

Agency Comments
Appendix I: Objectives, Scope, and 

Methodology

Page 26 GAO-18-515 U.S. Postal Service

Our objectives for this report were to (1) describe the U.S. Postal 

Service’s (USPS) projected capital spending over the next 10 years and 

(2) assess whether USPS’s processes support its ability to address 

uncertainties and risks that affect its capital spending. For our second 

objective, our scope was limited to assessing whether USPS had 

designed processes; that is, we did not assess the quality of any analyses 

that USPS conducted regarding risks or any determinations that USPS 

made regarding capital-spending projects as this was beyond the scope 

of our review. Such assessments are routinely conducted by the USPS 

Office of Inspector General.

To address USPS’s planned capital spending over the next 10 years, we 

reviewed USPS data on capital spending from fiscal years 2007 through 

2017 and USPS documentation on projected capital spending from fiscal 

years 2018 through 2028. In both cases, we focused on a fiscal year’s 

actual or projected capital-spending cash outlays—or the amount of cash 

spent on capital projects—as opposed to capital-spending commitments 

made in that fiscal year.1 For historical data, we used data from USPS’s 

annual budgets, known as Integrated Financial Plans, for fiscal years 

2008 through 2018. Each annual budget contains data on actual capital 

spending levels from prior fiscal years. The annual budgets generally 

report capital spending in four broad categories: vehicles, facilities, 

information technology and other, and mail-processing equipment.2

Because the categories used in past annual budgets were not consistent, 

we recategorized some years’ spending to be consistent. Specifically, we 

considered “mail-processing equipment” or “equipment” as part of “mailprocessing equipment.” We considered “infrastructure and support,”

“information technology and other,” and “customer service and support 

equipment” as part of the “information technology and other” category. 

The past budgets consistently used “facilities” and “vehicles” categories. 

We obtained input from USPS officials on our recategorizations. To 

determine the reliability of these data, we reviewed the data for any 

obvious errors, reviewed relevant documentation, and interviewed 

 1

A single capital-spending project may be implemented over multiple years. As a result, a 

spending commitment for the full amount of the project might be made in a given year, 

with the cash outlays for the project spread out over multiple years. 

2

Other” capital spending in this category includes some equipment, such as customer 

support equipment, and capital projects that do not otherwise fit into these four categories, 

such as a program to reduce waste and increase recycling revenue.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 27 GAO-18-515 U.S. Postal Service

officials. We determined that these data were sufficiently reliable for the 

purposes of reporting on USPS’s past capital spending.

For information on USPS’s projected capital spending from fiscal years 

2018 through 2028 we reviewed USPS’s 10-year capital-spending 

forecast for those years, which USPS created in 2017. This 10-year 

forecast is a projection of capital spending, but is not a commitment for 

any level of investment. The 10-year forecast categorizes capital 

spending projects into the following categories: construction and building 

purchases, building improvements, mail processing equipment, vehicles, 

capitalized software, customer service equipment, and postal support 

equipment. For our analysis, we combined “postal support equipment,”

“information technology,” and “customer service equipment” into one 

overall “information technology and other” category, and “construction 

and building purchases” and “building improvements” into one overall 

“facilities” category. USPS officials agreed with this approach. To 

determine the reliability of these data, we interviewed USPS officials, 

reviewed data for any obvious errors, and reviewed relevant 

documentation. We determined that these data were sufficiently reliable 

for the purposes of providing information on USPS’s projected capital 

spending. In addition, we interviewed four USPS vice presidents in 

charge of the departments that correspond with the four broad categories 

of capital-spending investments about historic, ongoing, and projected 

capital spending.

We also selected and reviewed a non-generalizable sample of 14 

Decision Analysis Reports (DAR)—internal USPS documents used to 

justify and obtain approval for some proposed capital-spending projects—

of the 66 approved by USPS for fiscal year 2017 and part of fiscal year 

2018.3 USPS requires DARs for all proposed capital spending projects 

with a total project cost of at least $1 million.4 The DARs contain 

information on, among other things, project specifications, purpose, risks 

 3

USPS creates DARs on an ongoing basis throughout the year. We selected approved 

fiscal year 2017 and 2018 DARs from a list of DARs that had been approved as of 

December 18, 2017. The list USPS provided us included a total of 66 DARs for fiscal year 

2017 and fiscal year 2018 approved as of that date.

4

Total project cost includes total capital costs plus the operating costs during the fiscal 

year in which the DAR is approved.
Appendix I: Objectives, Scope, and 

Methodology

Page 28 GAO-18-515 U.S. Postal Service

and tradeoffs, and timeframes.5 We reviewed the DARs for this and other 

information; we did not review the quality of the analyses contained in the 

DARs.6 We obtained a list of all approved DARs for fiscal years 2017 and 

2018 and selected DARs of the two largest and two smallest capital 

projects by total value in each of the four categories (i.e., vehicles, 

facilities, information technology and other, and mail processing 

equipment).7 Because the vehicles category had only two approved 

DARs at the time we received the list of approved DARs from USPS, we 

reviewed 14 DARs instead of 16. While the information from our reviews 

cannot be generalized to all DARs, the information provides insights into 

USPS’s reasons for undertaking capital spending projects.

To assess whether USPS has processes that support its ability to 

address uncertainties and risks that affect its capital spending, we 

reviewed USPS documentation, including USPS’s policies and 

procedures for capital spending, internal guidance documents, and others 

related to processes that affect its capital spending. We identified criteria 

for addressing uncertainties and risks, including those specific to capital 

spending. Specifically, we identified criteria from the Committee of 

Sponsoring Organizations of the Treadway Commission’s (COSO) 

Internal Control-Integrated Framework (the internal control standards 

adopted by USPS) and the Office of Management and Budget’s Capital 

Programming Guide.8 COSO Principle 7 states, “The organization 

identifies risks to the achievement of its objectives across the entity and 

 5

While approved DARs include information on total project costs, we do not report the 

dollar values of specific capital spending projects as USPS considers that information to 

be business sensitive.

6

For example, while we reviewed DARs for information on estimated project costs and 

return-on-investment, we did not evaluate the quality of those analyses. We also did not 

intend to determine if USPS selected appropriate capital spending projects. We also did 

not review how well USPS’s capital-spending projects were implemented or the extent to 

which expected benefits and costs were realized as this was beyond the scope of our 

review.

7

Because DARs do not include which of these four categories the project is aligned with, 

we determined categorizations based on DAR summaries. We then verified our 

categorizations with USPS.

8

Committee of Sponsoring Organizations of the Treadway Commission Internal ControlIntegrated Framework (2013). We are using COSO criteria instead of the Standards for 

Internal Control in the Federal Government because it is the framework used by USPS. 

USPS officials stated that the organization adopted the COSO framework because it is 

widely accepted and used by businesses.
Appendix I: Objectives, Scope, and 

Methodology

Page 29 GAO-18-515 U.S. Postal Service

analyzes risks as a basis for determining how the risks should be 

managed.” Further, COSO Principle 9 states, “The organization identifies 

and assesses changes that could significantly affect the system of 

control.” The Office of Management and Budget’s Capital Programming 

Guide element I.1.1 states, “The plan should also be consistent with the 

level of future budgetary resources that will be available.”9 We evaluated 

USPS’s processes that affect capital spending against these criteria to 

determine whether USPS had designed processes to address 

uncertainties and risks related to capital spending. We did not review the 

capital spending projects USPS has undertaken to determine, for 

example, if USPS made appropriate decisions regarding selected 

projects. We also interviewed USPS officials regarding USPS’s capitalspending processes. Specifically, we interviewed officials with USPS’s 

Capital Investment and Business Analysis Department; Finance and 

Planning Department; Technical Analysis, Accounting, and Finance 

Department; and the four vice presidents mentioned above about how 

they address uncertainties and risks related to capital spending within 

their departments.

We conducted this performance audit from September 2017 to June 2018 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 9

Specifically, this statement is reference to an organization’s strategic plan; however, the 

Capital Programming Guide identifies strategic planning as part of the “Planning and

Budgeting Phase” of capital planning. Office of Management and Budget Capital 

Programming Guide v 3.0 Supplement to Office of Management and Budget Circular A11Planning, Budgeting, and Acquisition of Capital Assets (Washington, D.C. 2017)
Appendix II: Comments from the U.S. Postal 

Service

Page 30 GAO-18-515 U.S. Postal Service

Appendix II: Comments from the U.S. Postal 

Service
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 31 GAO-18-515 U.S. Postal Service

Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov

In addition to the contact above, Kyle Browning and Faye Morrison 

(Assistant Directors); Matthew Rosenberg (Analyst in Charge); Amy 

Abramowitz; Sara Ann Moessbauer; Josh Ormond; Joshua Parr; Amy 

Rosewarne; and Crystal Wesco made key contributions to this report. 

Also contributing to this report were Carol Henn, Sabine Paul, and 

Carolyn Voltz.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(102294)
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