jurisdiction: US

text: b"September 27, 2001\n\nDONNA M. PEAK\nVICE PRESIDENT, FINANCE, CONTROLLER\n\nSUBJECT: Audit Report \xe2\x80\x93 Decision Analysis Report Process\n (Report Number DA-AR-01-005)\n\nThis report presents the results of our self-initiated audit of the Decision Analysis Report\nProcess (Project Number 00BA001DA000). The overall objective of our audit was to\ndetermine whether major capital investments made by the Postal Service are properly\nsupported, documented, approved, and controlled.\n\nWe determined that the Postal Service generally followed the established capital project\napproval process for the major projects reviewed in this audit. However, the audit\nrevealed that several projects were not adequately validated and were approved without\nconsideration of all test results, adequate support for savings and costs methodology, or\ncomplete spares cost estimates. In addition, we noted limitations in the mechanisms for\nreporting project performance to Postal Service management.\n\nWe made 12 recommendations to improve accountability for the Postal Service\xe2\x80\x99s capital\ninvestments. We recommend revising the policy to require more complete\ndocumentation and analysis for validating and monitoring project performance. We also\nrecommend selecting effective performance measures to report project performance in\nthe Investment Highlights. Finally, we recommend developing policies and procedures\nfor selecting and monitoring projects for cost studies and reassessing the procedures to\nperform cost studies. Management generally agreed with all of our recommendations.\nHowever, management did not agree with some of the findings. Specifically, they\ncommented on the individual projects we cite in the report. Management\xe2\x80\x99s comments\nand our evaluation of these comments are included in the report.\n\nThe Office of Inspector General (OIG) considers recommendations 1 \xe2\x80\x93 10 significant\nand, therefore, requires OIG concurrence before closure. Consequently, the OIG\nrequests written confirmation when corrective actions are completed. These\nrecommendations should not be closed in the follow-up tracking system until the OIG\nprovides written confirmation that the recommendations can be closed. We appreciate\n\x0cthe cooperation and courtesies provided by your staff during the audit. If you have any\nquestions, or need additional information please contact Tracy LaPoint, director,\nDevelopmental, at (703) 248-2100, or me at (703) 248-2300.\n\n\n\nRobert L. Emmons\nAssistant Inspector General\n for eBusiness\n\nAttachment\n\ncc: Richard J. Strasser, Jr.\n Patrick R. Donahoe\n John A. Rapp\n Thomas G. Day\n William T. Johnstone\n John R. Gunnels\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n TABLE OF CONTENTS\n Executive Summary i\n\n Part l\n\n Introduction 1\n\n Background 1\n Objectives, Scope, and Methodology 3\n Prior Audit Coverage 5\n\n Part II\n\n Audit Results 8\n\n Decision Analysis Reports Were Not Adequately Validated 8\n Test Results and Analysis Not Considered 10\n Recommendations 11\n Management\xe2\x80\x99s Comments 12\n Evaluation of Management\xe2\x80\x99s Comments 12\n\n Savings and Cost Methodology Not Adequately Supported 15\n Recommendations 16\n Management\xe2\x80\x99s Comments 17\n Evaluation of Management\xe2\x80\x99s Comments 17\n\n Review of Spare Parts Estimates Not Complete 20\n Recommendation 20\n Management\xe2\x80\x99s Comments 21\n Evaluation of Management\xe2\x80\x99s Comments 21\n\n Inadequate and Untimely Performance Reporting 22\n Investment Highlights and Compliance Reports Lacked 22\n Performance Measures\n Recommendations 24\n Management\xe2\x80\x99s Comments 25\n Evaluation of Management\xe2\x80\x99s Comments 25\n\n Cost Studies Were Not Timely and Frequent 26\n Recommendations 27\n Management\xe2\x80\x99s Comments 27\n Evaluation of Management\xe2\x80\x99s Comments 27\n\n Appendix. Management\xe2\x80\x99s Comments 28\n\n\n\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n EXECUTIVE SUMMARY\n Introduction Since 1997, we have reviewed Postal Service major\n developmental projects with investments totaling over\n $1.9 billion.1 Our reviews have revealed trends such as\n project delays, cost overruns, and inaccurate performance\n projections.\n\n As a result of these recurring issues, we initiated an audit of\n the Decision Analysis Report process to determine whether\n major capital investments made by the Postal Service were\n properly supported, documented, approved, and controlled.\n The objectives of the audit were to determine whether\n (1) Decision Analysis Reports were adequately validated,\n and (2) the performance of approved projects was\n measured and reported. This report addresses key controls\n for validating and monitoring Decision Analysis Report\n projects and focuses on major Decision Analysis Reports for\n seven projects. These included five equipment projects and\n two projects for replacing Postal Service operations with\n contractor-operated centers. We plan to conduct additional\n audits on other aspects of the Decision Analysis Report\n process.\n\n Results in Brief We determined that the Postal Service generally followed\n the established capital project approval process for the\n major projects that were reviewed in this audit. However,\n our audit and several prior Office of Inspector General (OIG)\n audits have indicated that seven projects in excess of\n $800 million in approved capital investments2 were\n validated without fully documented consideration of all test\n results, adequate support for savings and costs\n methodology, or complete spares cost estimates. Since the\n Board of Governors relies on the validation process to\n ensure projects are adequately justified before approval, the\n Postal Service Finance department must thoroughly review\n\n\n1\n Project name and approved capital and expense amount: Point of Service ONE, $899 million; Tray\nManagement System, $558 million; Priority Mail Processing Center Network, $19 million; Robotics Containerization\nSystem, $81 million; Delivery Operations Information System, $120 million; Singulate, Scan, Induction Unit,\n$103 million; Automatic Airline Assignment/Semi-Automatic Scan Where You Band, $112 million; Mail Transport\nEquipment Service Center, $1.3 million.\n2\n Project name and approved capital amount: Automatic Airline Assignment/Semi-Automatic Scan Where You\nBand, $109 million; Delivery Operations Information System, $120 million; Mail Transport Equipment Service Center\nNetwork, $1.3 million; Priority Mail Processing Center Network, $1.4 million; Robotics Containerization System,\n$80 million; Singulate, Scan, Induction Unit, $102 million; Tray Management System-Phase III, $396 million.\n\n\n\n i\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n and validate all major projects.3 This is particularly\n important because the Postal Service projects a\n $1.65 billion loss in fiscal year (FY) 2001, which significantly\n reduces the availability of funding for capital investments\n and warrants more stringent validation requirements for\n future Decision Analysis Reports.\n\n Although Finance communicates the cost and schedule\n status of capital investment projects to the Board of\n Governors, we noted limitations in the mechanisms for\n reporting project performance to Postal Service\n management. While compliance reports were performed\n regularly, they did not provide adequate project information\n to reevaluate investment decisions. On the other hand, cost\n studies that provided more information were neither timely\n nor frequent. Together, these weaknesses in the reporting\n processes did not ensure projects achieved financial and\n operational Decision Analysis Report projections. Effective\n monitoring and reporting of project performance is critical\n given the $17.5 billion in planned capital investments for\n FYs 2001 to 2005 and because the Board of Governors has\n directed the Postal Service to defer $1 billion of the\n $3.6 billion in FY 2001 planned capital investments.\n\n Summary of We made 12 recommendations to improve accountability for\n Recommendations the Postal Service\xe2\x80\x99s capital investments. We recommended\n revising the policy to require more complete documentation\n and analysis for validating and monitoring project\n performance. We also recommended selecting effective\n performance measures to report project performance in the\n Investment Highlights. Finally, we recommended\n developing policies and procedures for selecting and\n monitoring projects for cost studies and reassessing the\n procedures to perform cost studies.\n\n Summary of Management agreed with all 12 recommendations in the\n Management\xe2\x80\x99s report. However, they did not agree with many of the\n Comments findings related to the individual projects we cite in the\n report. Specifically, management made several additional\n comments regarding differing perspectives and concerns\n related to the individual projects. These additional\n comments were not necessarily related to the\n recommendations. Management\xe2\x80\x99s comments, in their\n entirety, are included in the appendix of this report.\n\n3\n The Board of Governors approved $1.6 billion in FY 2000 for 20 new major capital investment projects.\n\n ii\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Overall Evaluation of Management\xe2\x80\x99s comments are fully responsive to our\n Management\xe2\x80\x99s recommendations. However, management disagreed with\n Comments many of the details pertaining to the projects and OIG\n reports that we reviewed and referenced. Management\n repeatedly states that the impact of the report\xe2\x80\x99s findings will\n not have any negative effect on an individual project\xe2\x80\x99s ability\n to achieve its projected financial results.\n\n However, we believe that there has been a significant\n financial impact related to at least two of the projects, Tray\n Management System and the Mail Transport Equipment\n Service Center. The Mail Transport Equipment Service\n Center project, is being pursued through the audit resolution\n process. For the Tray Management System project, the\n OIG and Finance concluded that the project would not\n achieve intended results.\n\n Many of the other projects referenced in the report are still\n either in the deployment phase, or only recently fully\n deployed. As a result, we believe that Finance cannot\n determine if these projects are achieving expected results\n because of the limited deployment and the lack of an\n adequate project performance reporting system.\n\n Nevertheless, the purpose of this audit was to determine if\n (1) Decision Analysis Reports were adequately validated,\n and (2) the performance of approved projects was\n measured and reported. We found that Finance could\n improve their processes for validating and monitoring\n Decision Analysis Report projects. Overall, Finance agreed\n that Handbook F-66 could be strengthened to improve\n controls over validating and monitoring Decision Analysis\n Report projects.\n\n\n\n\n iii\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n INTRODUCTION\n Background The Postal Service\xe2\x80\x99s F-66 Handbook, Investment Policies\n and Procedures 4 (investment policy), establishes the\n approval process, procedures, and responsibilities for\n investments made by the Postal Service. Major capital\n investments, generally defined as exceeding $5 million,\n require a Decision Analysis Report, which is a justification to\n recommend an investment for approval. (Table 1 below\n outlines approval authority for capital investment levels.)\n\n Table 1: Approval Levels for Capital Investments\n\n Approval Authority Amount\n\n Board of Governors Over $10 Million\n\n Postmaster General/Chief Executive Officer Up to $10 Million\n\n Senior Vice Presidents/Others* Up to $7.5 Million\n\n Vice Presidents Up to $5 Million\n *Others include General Counsel, Chief Postal Inspector, and Inspector\n General.\n\n As shown in Table 2, the Decision Analysis Report is\n prepared by the sponsoring organization and sent to\n Finance for validation. Headquarters Finance is responsible\n for independently validating all Decision Analysis Reports\n for major investments to provide assurances to approving\n officials. Specifically, the Finance department provides\n assurance that supporting documentation complies with the\n policy and is reasonable, accurate, logical, valid, and\n auditable.\n\n The vice president Finance, controller, issues a validation\n letter after issues arising from the review are resolved. After\n validation, the appropriate authorities identified in Table 1\n and 2 review and approve the Decision Analysis Report.\n\n\n\n\n4\n The Handbook F-66 Series includes five modules, F-66, F-66A, F-66B, F-66C, and F-66D for investment policies\nand procedures. We reviewed the F-66, General Investment Policies and Procedures and F-66B, Investment\nPolicies and Procedures--Major Equipment.\n\n 1\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Table 2: Decision Analysis Report Process5\n\n Review and\n Approval Process\n Decision\n Headquarters\n Analysis Report\n Vice Presidents Final Decision\n Decision to Finance for\n & Area Concur Analysis Report\n Analysis Report Validation;\n with Decision Prepared and\n Prepared Senior Vice\n Analysis Report Distributed\n Presidents for\n Review\n (as applicable)\n\n\n\n\n Capital\n Controller Vice President Investment\n Validation\n Issues Review & Committee\n Complete\n Validation Letter Approval Review &\n Approval\n\n\n\n\n Postmaster Board of\n Board of\n General/Chief Governors\n Governors\n Executive Capital Projects\n Review &\n Officer Review Committee\n Approval\n & Approval Review\n\n\n\n Post-Approval\n\n\n Contract Award First Article Test Deployment Benefits\n\n\n\n\n After approval, the project sponsor6 is responsible for\n ensuring that costs are tracked and reported using the\n appropriate compliance report format. In addition, Finance\n monitors and reports the status of projects requiring Board\n of Governors\xe2\x80\x99 approval quarterly in the Investment\n Highlights report. This report was initiated in 1996 at the\n request of the Board of Governors.\n\n As shown on the next page, the fiscal year (FY) 2001-2005\n Capital Investment Plan reported $17.5 billion in anticipated\n capital investments. The table illustrates major investment\n categories and 5-year estimates.\n\n\n5\n Approving officials may vary depending on the investment amount. See Table 1, page 1 for capital investment\napproval levels.\n6\n The project sponsor is the Postal Service organization that requests and justifies the investment project.\n\n 2\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Table 3: Postal Service 5-Year Plan\n\n FY 2001-2005 Capital Investment\n Plan Categories ($ billions)\n\n\n 1\n 1.2\n\n 2.2 7.4\n\n\n\n\n 5.6\n\n\n Equipment 7.4 Facilities 5.6\n Infrastructure 2.2 Vehicles 1.2\n Other 1.0\n\n\n\n The Postal Service\xe2\x80\x99s 5-Year Plan dedicates $7.4 billion or\n 43 percent of capital resources to developing equipment\n technology. Most equipment investments consist of\n automation and mechanization projects, which are based on\n economic considerations such as return on investment.\n\n Objectives, Scope, The purpose of our audit was to determine whether major\n and Methodology capital investments made by the Postal Service are properly\n supported, documented, approved, and controlled. The\n objectives of the audit were to determine whether\n (1) Decision Analysis Reports were adequately validated,\n and (2) the performance of approved projects were\n measured and reported.\n\n Our audit focused on seven major Decision Analysis\n Reports. Five projects involved major capital investments in\n equipment and two were major projects for replacing Postal\n Service operations with contractor-operated centers. All\n seven projects required the Board of Governors\xe2\x80\x99 approval.\n\n\n 3\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n Although the two projects for replacing Postal Service\n operations did not require a significant capital investment,\n they represented considerable changes in organizational\n strategy and involved billions of dollars in contracts and\n operating expenses. We also interviewed headquarters\n officials in Engineering, Information Technology, and\n Facilities, to determine their roles in the Decision Analysis\n Report process.\n\n For our review, we selected three approved Postal Service\n equipment projects, which are being audited or were\n audited by the Office of Inspector General (OIG) this year:\n\n \xe2\x80\xa2 Singulate, Scan, Induction Unit\n\n \xe2\x80\xa2 Automatic Airline Assignment/Semi-Automatic Scan\n Where You Band\n\n \xe2\x80\xa2 Delivery Operation Information System\n\n In addition, we relied on prior OIG audit reports that\n identified internal control weaknesses with the Decision\n Analysis Report process. Two of the prior audits were\n major equipment projects and two were major projects that\n replaced Postal Service operations with contractor-operated\n centers; all required the Board of Governors\xe2\x80\x99 approval.\n These audit reports and Postal Service management\n responses are summarized in the Prior Audit Coverage\n section:\n\n \xe2\x80\xa2 Priority Mail Processing Center Network\n \xe2\x80\xa2 Tray Management System\n \xe2\x80\xa2 Robotics Containerization System\n \xe2\x80\xa2 Mail Transport Equipment Service Center\n\n The OIG has also issued reports that identified internal\n control issues regarding the Decision Analysis Report\n process for two other major projects:\n\n \xe2\x80\xa2 Point of Service ONE\n \xe2\x80\xa2 International Mail\n\n Although these reports are listed in the Prior Audit Coverage\n section, we have not included their findings as examples\n\n\n\n\n 4\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n in this report. The issues reported on these two projects did\n not pertain directly to this phase of the Decision Analysis\n Report audit.\n\n To address the first objective we determined whether major\n Decision Analysis Reports had (1) adequate supporting\n documentation and analysis, and (2) were sufficiently\n validated to ensure costs and benefits were accurately\n represented. To address the second objective, we reviewed\n the adequacy and completeness of the processes in place\n to monitor and report the actual project performance of\n approved major capital projects.\n\n In planning our audit we used the General Accounting\n Office\xe2\x80\x99s (GAO) Executive Guide for Leading Practices in\n Capital Decision-Making, Exposure Draft, April 1998. This\n guide summarizes the fundamental practices that have\n been successfully implemented in governmental and private\n sector organizations recognized for their outstanding capital\n decision-making practices.\n\n This audit was conducted between July 2000 and\n September 2001 in accordance with generally accepted\n government auditing standards, and included such tests of\n internal controls as were considered necessary under the\n circumstances. We discussed our findings and\n recommendations with appropriate management officials\n and included their comments where appropriate.\n\n Prior Audit Coverage Previous audit reports concluded that management\n presented projects to the Board of Governors for approval\n without adequate documentation and analyses, or that the\n projects may not achieve anticipated performance and\n financial results.\n\n \xe2\x80\xa2 Point of Service ONE (DA-AR-99-002), dated\n September 20, 1999, disclosed that during\n development and deployment, the system was not\n achieving the results outlined in the Decision\n Analysis Report. We recommended that\n management improve the monitoring of controls to\n ensure project accountability. Management agreed\n with our recommendations.\n\n\n\n\n 5\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n \xe2\x80\xa2 Priority Mail Processing Center Network (DA-AR-99-\n 001), dated September 24,1999, revealed that the\n project did not report all costs and did not meet\n service improvement goals. Management generally\n agreed with our recommendations; however, they did\n not agree with all of our findings, and claimed the\n project was prematurely evaluated.\n\n \xe2\x80\xa2 Tray Management System (DA-AR-00-002), dated\n March 31, 2000, disclosed that the Tray Management\n System was experiencing a negative return on\n investment because anticipated savings were\n overstated in three areas by $462 million.\n Management did not initially agree to reevaluate\n savings and reassess continued deployment, stating\n the methodologies they used in validation were\n sufficiently accurate and fully achievable. However,\n management subsequently agreed to reevaluate\n savings projections. In May 2001, at the request of\n the Board of Governors, the OIG reassessed the\n actual return on investment of the project. We\n determined that the project was still experiencing a\n negative return on investment. The Postal Service\n also recomputed the return on investment for the\n system and concluded the project was achieving\n about a 1 percent return.\n\n \xe2\x80\xa2 International Mail (AC-AR-00-005), dated\n September 29, 2000, disclosed project changes were\n made that altered the overall concept and increased\n costs without submitting Decision Analysis Report\n modifications. Management agreed with the report\n recommendation to modify the Decision Analysis\n Report and to report the actual use of funds, but\n disagreed with the finding.\n\n \xe2\x80\xa2 Robotics Containerization System (DA-AR-01-002),\n dated February 26, 2001, concluded that work hour\n savings projected at $347 million in the Decision\n Analysis Report would not be realized unless\n planned staffing levels were achieved. The report\n also stated that the cost of spare parts was\n understated in the Decision Analysis Report.\n Management generally agreed with our\n recommendations. However, Engineering officials\n indicated current operations are achieving planned\n\n 6\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n staffing levels and they expect to realize the savings\n projected in the Decision Analysis Report.\n\n \xe2\x80\xa2 Delivery Operations Information System (DA-AR-01-\n 003), dated March 29, 2001, disclosed weaknesses\n in the methods and assumptions used to derive\n productivity savings and the related return on\n investment. Management agreed to incorporate\n lessons learned into future Information Platform\n projects.\n\n \xe2\x80\xa2 Mail Transport Equipment Service Center Decision\n Analysis Report, Performance, and Financial Benefits\n (TR-AR-01-003), dated May 4, 2001, concluded that\n the Decision Analysis Report was inaccurate and a\n significant portion of the savings was incorrectly\n calculated. As a result, the network would not\n achieve anticipated savings and the costs would\n exceed forecasts by more than $1.4 billion.\n Management did not agree to prepare a Decision\n Analysis Report modification. This recommendation\n is being pursued through the audit resolution\n process.\n\n\n\n\n 7\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n AUDIT RESULTS\n Decision Analysis Our audit and several prior OIG reviews indicated that\n Reports Were Not seven projects in excess of $800 million in approved capital\n Adequately Validated investments were not adequately validated before approval.\n Specifically, Finance\xe2\x80\x99s documentation did not always\n completely support or fully disclose various elements of the\n validation process. For example, Finance validated these\n projects without documented consideration of all test results,\n adequate support for savings and costs methodology, or\n complete spare parts cost estimates. Three of the projects\n we reviewed were major equipment projects. Two of the\n prior audits were major equipment projects and two were\n major projects involving replacing Postal Service operations\n with contractor-operated centers; all required the Board of\n Governors\xe2\x80\x99 approval. The two projects for contractor-\n operated centers did not require a significant capital\n investment, but involved considerable changes in\n organizational strategy and involved billions of dollars in\n contracts and operating expenses. As shown in Table 4,\n major projects totaling $809 million in approved capital were\n reviewed by Finance and submitted to the Board of\n Governors with inadequate documentation and analysis.\n\n\n\n\n 8\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n Table 4: Projects with Inadequate Documentation and\n Analysis\n Project Test Inventory\n 7\n Approved Results Cost and Specialists\xe2\x80\x99\n Capital and Savings Review of Spare\n (millions) Analysis Methodology Parts Estimates\n AAA/SASWYB X X X\n $109\n DOIS X\n $120\n RCS X X\n $80\n SSIU X X X\n $102\n TMS Phase III X\n $396\n PMPC X\n $1\n MTESC X\n $1\n Total\n $809\n *Note: X denotes areas with inadequate information.\n\n\n The GAO\xe2\x80\x99s Executive Guide for Leading Practices in Capital\n Decision-Making states that leading organizations have\n capital review processes in place that determine the level of\n analysis and review based on the size, complexity, and cost\n of the project. Projects that are expensive and are crucial to\n an organization\xe2\x80\x99s strategy usually require more analysis,\n support, and review than projects that cost less or have less\n organization-wide impact.\n\n Since the Board of Governors relies on the validation\n process to ensure that projects are sufficiently justified\n before approval, Finance must thoroughly review all major\n projects.8 This is particularly important because the Postal\n Service projects a $1.65 billion loss in FY 2001, which\n significantly reduces the availability of funding for capital\n investments and warrants more stringent validation\n requirements for future projects.\n\n\n\n7\n AAA/SASWYB: Automatic Airline Assignment/Semi-Automatic Scan Where You Band; DOIS: Delivery Operations\nInformation System; RCS: Robotics Containerization System; SSIU: Singulate, Scan, Induction Unit; TMS: Tray\nManagement System-Phase III; PMPC: Priority Mail Processing Center; MTESC: Mail Transport Equipment Service\nCenter.\n8\n The Board of Governors approved $1.6 billion in FY 2000 for 20 new major capital investment projects.\n\n 9\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Test Results and Our audit showed that in three major equipment projects\n Analysis Not with total approved capital investments of $291 million,\n Considered project sponsors did not submit adequate supporting\n documentation for analyses of test results. This\n condition existed although Handbook F-66B requires the use\n of detailed information, such as machine performance, to\n support assumptions in the Decision Analysis Report. For\n example:\n\n \xe2\x80\xa2 Singulate, Scan, Induction Unit \xe2\x80\x93 Prototype results\n were included in the supporting documentation;\n however, competitive test results and analysis were\n not included although the test had been performed\n before final validation.\n\n \xe2\x80\xa2 Automatic Airline Assignment/Semi-Automatic Scan\n Where You Band \xe2\x80\x93 Finance validated the Decision\n Analysis Report with unsubstantiated results from\n prequalification tests. In addition, the Decision\n Analysis Report indicated that competitive testing was\n scheduled before approval by the Board of\n Governors; however, competitive tests were\n completed after approval, and Finance\xe2\x80\x99s\n documentation did not include competitive testing\n results and analysis.\n\n \xe2\x80\xa2 Robotics Containerization System \xe2\x80\x93 Finance\n validated the Decision Analysis Report, although test\n results consistently failed to meet system\n performance targets.\n\n Our audit highlighted the following weaknesses in Postal\n Service policy and procedures that if corrected could provide\n improvements to the validation process:\n\n \xe2\x80\xa2 Although the investment policy states that detailed\n supplemental information is required to support\n assumptions in a Decision Analysis Report, it does\n not provide specific guidelines for sponsors to\n document project tests and analysis for validation.\n\n \xe2\x80\xa2 Investment policy does not require Finance to monitor\n equipment performance assumptions by documenting\n summary competitive test results and analyses when\n validation is performed prior to the completion\n\n 10\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n of competitive testing. Finance relies on sponsors\xe2\x80\x99\n assurances that test results and analyses met\n projections in Decision Analysis Reports.\n\n \xe2\x80\xa2 Investment policy does not require Finance to assure\n equipment performance tests are completed before\n Decision Analysis Reports are validated and\n approved. Equipment performance testing was not\n always completed before validation and approval of\n Decision Analysis Reports.\n\n \xe2\x80\xa2 Finance's internal procedures do not require\n independent reviews of conditionally accepted\n projects. Engineering stated that many systems were\n released for deployment after the First Article Test9\n under a conditional acceptance, and in some\n instances, the acceptance criteria were revised when\n original parameters seemed unreasonable or\n unattainable. Project sponsors were responsible for\n ensuring that conditionally accepted equipment was\n consistent with performance projections in Decision\n Analysis Reports.\n\n As a result, the Postal Service approved investments in\n projects, such as the Tray Management System, when\n expected cost and benefit projections in the Decision\n Analysis Report were not supported. It is imperative that\n projects submitted to the Board of Governors demonstrate a\n high probability of meeting operational and financial\n projections through independently validated test results.\n\n Recommendation We recommend the vice president, Finance, controller,\n revise Handbook F-66, Investment Policies and Procedures,\n to require that:\n\n 1. Project sponsors provide Finance with test plans,\n summary data, and an analysis of available test\n results to ensure projections in Decision Analysis\n Reports are reasonable.\n\n\n\n\n9\n After funding is approved and the contract is awarded, the project sponsor conducts the First Article Test to\nevaluate equipment for functionality, quality, and compliance with contract specifications.\n\n\n\n 11\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Management\xe2\x80\x99s Management agreed with the recommendation, but not with\n Comments the findings. They agreed that Handbook F-66 requires\n verification of operating costs variances and the review of\n assumptions. As such, management will prepare a\n memorandum by the end of quarter II, FY 2002, to remind\n the sponsors and Program Evaluation staff of this\n requirement. Lastly, management will strengthen the\n appropriate Handbook F-66 areas as identified in their\n response.\n\n Management also included comments on our discussion of\n the Singulate Scan Induction Unit projects\xe2\x80\x99 lack of\n documentation for the competitive test results. They\n indicated that they do not believe this finding has any\n negative effect on the project\xe2\x80\x99s ability to achieve its\n projected financial results.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed to notify sponsors\n Comments and Finance staff of this requirement. Management also\n agreed to strengthen the Handbook F-66 by requiring\n sponsors to include a summary of any available test results.\n We believe the actions planned, if implemented, should\n correct the issues identified in our report.\n\n We do not agree with management\xe2\x80\x99s comments regarding\n the Singulate Scan Induction Unit project. Management\n states they believe their lack of documented competitive test\n results and analysis for this project has no negative effect on\n the project\xe2\x80\x99s ability to achieve its projected financial results.\n However, we question how Finance can reach this\n conclusion without validating the summary competitive test\n results and analysis, or having an adequate performance\n measurement system.\n\n Recommendation 2. If validation is performed prior to the completion of\n competitive testing, Finance will obtain the\n summaries of competitive test results and analyses,\n and compare them to the Decision Analysis Report\n assumptions, taking the appropriate notification\n action if the performance significantly varies from\n the Decision Analysis Report assumptions.\n\n\n\n\n 12\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Management\xe2\x80\x99s Management agreed with this recommendation and will\n Comments obtain the summaries of competitive test results and\n analyses, and compare them to the Decision Analysis\n Report assumptions. Management will also take the\n appropriate notification action and follow up if performance\n significantly varies from Decision Analysis Report\n assumptions. Management agreed to strengthen the\n Handbook F-66 to include reviews of completed test results\n after validation.\n\n Management also included comments on our discussion of\n the Automated Airline Assignment projects\xe2\x80\x99 competitive tests\n results. They stated that competitive test results exceeded\n prequalification test results in the trays per minute measure.\n Management also indicated that the impact of\n unsubstantiated test results and analysis for the project has\n no negative effect on its ability to achieve projected financial\n results.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed to change the\n Comments Handbook F-66 and perform reviews of competitive test\n results and analysis to ensure Decision Analysis Report\n assumptions are still valid. We believe the actions planned,\n if implemented, should correct the issues identified in our\n report.\n\n We do not agree with management\xe2\x80\x99s comments on the\n Automated Airline Assignment program tests results. We\n found that the tray per minute measure is only one of many\n performance measures for this program. Furthermore, we\n determined that the competitive test indicated qualified\n vendors did not meet several other performance measures\n in the competitive test. Without assessing the impact of the\n other performance measures, we question how\n management can definitively state the lack of competitive\n test results has no negative effect on the project\xe2\x80\x99s ability to\n achieve its projected financial results. Further, we question\n how Finance can reach their conclusion without having an\n adequate performance measurement system.\n\n Recommendation 3. The test status is fully disclosed in the validation\n letter when submitting equipment projects for\n approval.\n\n\n\n 13\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Management\xe2\x80\x99s Management agreed with this recommendation. However,\n Comments management stated that since full disclosure is part of the\n validation process and included in the Handbook F-66B,\n Section 5, changes are not needed.\n\n Management also included comments on several projects\n we reviewed, stating specific examples of full disclosure for\n those projects referenced in the report.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed that full disclosure is\n Comments necessary and a part of the validation process. Although\n the policy does not clearly state that the test status should\n be disclosed, we believe that management\xe2\x80\x99s actions for\n recommendations 1 and 2, if implemented, will meet our\n overall intent of improving the controls for validating and\n disclosing test results. We consider including the test status\n in the validation letter as an additional level of disclosure of\n testing accomplished.\n\n We do not agree with management\xe2\x80\x99s comments that the\n Robotics Containerization System test status was fully\n disclosed to the Board of Governors. Management stated\n that the Board of Governors was advised that each vendor\xe2\x80\x99s\n design was tested at their respective plants, and that they\n were successfully meeting the requirements defined in the\n Statement of Work. However, the OIG reported that the\n documentation related to the initial testing indicated vendors\n were not meeting many of the performance goals.\n Furthermore, the competitive test indicated that the\n contractor that received the award did not meet several\n Statement of Work criteria.\n\n Recommendation 4. Sponsors notify Finance of conditionally accepted\n projects and apprise Finance of actions taken to\n improve performance prior to final acceptance. If\n deployment continues, Finance will monitor these\n projects using the performance measures and\n leading indicators process identified in\n recommendations eight and nine.\n\n Management\xe2\x80\x99s Management agreed with the recommendation and will\n Comments prepare a memorandum by the end of quarter II, FY 2002 to\n notify the sponsors and Program Evaluation staff of this\n\n\n\n 14\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n requirement. Also, management agreed to change the\n Handbook F-66 section for compliance reporting to\n strengthen controls for project monitoring.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed to strengthen the\n Comments policy and to notify sponsors and Finance staff of the\n processes for monitoring conditionally accepted projects.\n We believe the actions planned, if implemented, should\n correct the issues identified in our report.\n\n Savings and Cost Postal Service policy requires detailed information to support\n Methodology Not assumptions in Decision Analysis Reports. Our review\n Adequately Supported showed that in six projects with total approved capital of\n $729 million, sponsors did not submit sufficient supporting\n documentation to justify the methodologies used.\n\n Specifically, project sponsors\xe2\x80\x99 documentation did not support\n or fully disclose:\n\n \xe2\x80\xa2 How hardware costs that comprised 45 percent of the\n Singulate, Scan, Induction Unit investment were\n computed.\n\n \xe2\x80\xa2 Their justification for including 20 unassigned\n machines in the savings calculation, which\n represented approximately 5 percent of savings for\n the Automated Airline Assignment/Semi-Automatic\n Scan Where You Band systems. The Decision\n Analysis Report disclosed that these 20 additional\n machines would only be purchased and deployed to\n economically justified sites.\n\n \xe2\x80\xa2 How including savings for three nonconcurring areas\n would impact total Decision Analysis Report savings\n for the Delivery Operations Information System.\n Although Finance\xe2\x80\x99s validation letter stated 3 of\n 11 areas did not concur with savings methodologies,\n it did not disclose that savings were included in the\n Decision Analysis Report for these 3 areas.\n\n\n\n\n 15\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n Furthermore, the three nonconcurring areas also\n identified weaknesses in the testing and savings\n methodologies.10\n\n \xe2\x80\xa2 The inconsistency in the Tray Management System\n Decision Analysis Report, which based the return on\n investment computation on work hour savings\n estimates from equipment deployment sites only,\n while Postal Service management allocated the\n project savings nationally. As a result, the audit\n revealed the return on investment was overstated.\n\n \xe2\x80\xa2 Why savings for the discontinued Greensboro,\n North Carolina, prototype service center were double\n counted in the Mail Transport Equipment Service\n Center Decision Analysis Report. As a result of this\n analytical error, the audit determined that savings for\n the Greensboro service area were overstated by\n $177 million.\n\n Their justification for not including acceptance and\n delivery costs in total network service costs for the\n Priority Mail Processing Center Network. The\n methodology was not an accurate comparison because\n these costs are needed along with contract volume\n variable costs, which are included, to accurately reflect\n total end-to-end service costs. As a result of this\n omission, the audit concluded Priority Mail processed\n through the Priority Mail Processing Center Network in\n FY 1998 cost $101 million or 23 percent more than the\n same volume processed in-house by the Postal Service.\n\n Supporting documentation was inadequate because Postal\n Service policy required detailed supplemental information for\n methodologies, but did not require sponsors to submit\n specific supporting documentation for cost and savings\n methodologies. Without strengthening the policy, there is an\n increased risk that future projects may be validated based\n on unattainable financial expectations.\n\n Recommendation We recommend the vice president, Finance, controller,\n revise Handbook F-66, Investment Policies and Procedures,\n to require that:\n\n10\n Delivery Operations Information System (DA-AR-01-003) identified several weaknesses in testing methodology and\nrelated savings. Postal Service management agreed with our recommendation to incorporate lessons learned from\nthe financial justification of the project in future initiatives.\n\n 16\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 5. Sponsors provide detailed analyses to support the\n adequacy and reasonableness of savings and cost\n methodologies in Decision Analysis Reports.\n\n Management\xe2\x80\x99s Management agreed with our recommendation; however,\n Comments they did not agree with most examples supporting our\n findings. Management agreed to strengthen the policy\n sections for operating variances and Decision Analysis\n Report assumptions.\n\n Management included comments on many of the projects\n we referenced as examples where documentation did not\n support or fully disclose savings and cost methodologies.\n Management disagreed with many of the references from\n the OIG reports and discussions of projects we reviewed in\n the section entitled, \xe2\x80\x9cSavings and Cost Methodology Not\n Adequately Supported.\xe2\x80\x9d\n\n Management states that for the Mail Transport Equipment\n Service Center report the OIG finding is incorrect regarding\n savings being overstated by $177 million for the Greensboro\n service area.\n\n Management states the inconsistencies in the methodology\n used in the Tray Management System savings calculation\n was a management decision fully endorsed by the Board of\n Governors. Further, senior management has the authority\n to determine how budget savings are allocated as long as\n the project meets or exceeds the return on investment.\n Therefore, management believes our finding is irrelevant to\n this audit of the Decision Analysis Report process.\n\n Management commented that the Decision Analysis Report\n for the Delivery Operations Information System included\n savings for three areas that nonconcurred, and that this had\n no impact on the project\xe2\x80\x99s financial results. Management\n notes that it is always senior management\xe2\x80\x99s prerogative to\n increase or decrease budgeted hours as long as the\n Decision Analysis Reports economics have not changed.\n\n Management also did not agree with our conclusion that the\n supporting documentation for the Singulate, Scan, Induction\n Unit hardware costs was not complete.\n\n\n\n\n 17\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed to strengthen\n Comments Handbook F-66, as necessary, for the verification of\n assumptions and operating cost variances, which directly\n relate to project savings. We believe the actions planned, if\n implemented, should begin correcting the issues identified in\n our report.\n\n Regarding management\xe2\x80\x99s disagreements with the examples\n we cited of inadequate support for savings and cost\n methodology, management has yet to provide the OIG with\n evidence to support its position. Specifically, while the OIG\n audit report on the Mail Transport Equipment Service Center\n Decision Analysis Report, Performance and Financial\n Benefits (Report Number TR-AR-01-003, dated May 4,\n 2001) is being pursued through the audit resolution process,\n the Postal Service has not been able to explain why the\n $177 million savings for the Greensboro area was double\n counted. Further, this double counting was not detected in\n Finance\xe2\x80\x99s validation of the projected savings for this project.\n\n We strongly disagree with management\xe2\x80\x99s assertion\n regarding the relevancy of the Tray Management System\n findings to this audit. We believe this example provides a\n good illustration of how the Postal Service\xe2\x80\x99s methodology\n was inadequate in supporting projected savings. The OIG\n determined that savings were applied to sites that did not\n have Tray Management Systems, which inflated the savings\n projection in the Decision Analysis Report. A follow up OIG\n audit of the project confirmed the return on investment was\n significantly overstated, and that the actual return on\n investment was a negative 5 percent instead of the\n 4.9 percent originally projected. Management also\n reevaluated the return on investment and reached similar\n conclusions, although their cost study showed a 1 percent\n return on investment.\n\n\n\n\n 18\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n With respect to management\xe2\x80\x99s comments on the Delivery\n Operations Information System, we believe when three\n areas challenged the validity of the savings, Finance should\n have reassessed the savings methodology. While\n management stated they have the prerogative to increase or\n decrease budgeted hours, this does not absolve Finance\n from its obligation to ensure all projected savings and cost\n analyses presented to the Board of Governors are reliable\n and adequately supported. Lastly, the OIG audit report for\n the Delivery Operations Information System (Report\n Number DA-AR-003 dated March 29, 2001) projects\n disclosed weaknesses in the methods and assumptions\n used to derive productivity savings. Management agreed to\n incorporate lessons learned from this project into future\n efforts.\n\n Management also disagreed with our conclusion that the\n supporting documentation for the Singulate, Scan, Induction\n Unit hardware costs was not complete. We found that\n although the subject matter expert prepared an estimate for\n hardware costs, they did not provide Finance sufficient detail\n to support the per site hardware costs. There was no\n methodology explaining how the per site equipment cost of\n $2.2 million was determined. The total hardware estimate\n of $42 million appears to be based on the minimum amount\n of machines needed (2 per site times 21 sites). The\n Decision Analysis Report equipment requirements ranged\n from 42-58 machines based upon estimated volume and\n throughput. Finally, the hardware cost represented about\n 45 percent of the total investment, which will significantly\n affect the project\xe2\x80\x99s return on investment if mistakenly\n calculated.\n\n Furthermore, most of the other projects discussed in the\n report are either still being deployed or only recently fully\n deployed. As such, Finance cannot definitively determine\n the impact on the projects ability to achieve expected\n results. Finally, the lack of an adequate project performance\n reporting system limits Finance\xe2\x80\x99s assurance the projects are\n achieving the intended productivity savings.\n\n\n\n\n 19\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Recommendation 6. Finance fully discloses savings in the validation\n letter, including factors that may affect return on\n investment.\n\n Management\xe2\x80\x99s Management agreed with this recommendation and stated\n Comments that it is currently part of the Decision Analysis Report\n process.\n\n Management included comments on the projects,\n Automated Airline Assignment, Semi-Automatic Scan Where\n You Band, and Delivery Operations Information System,\n referenced as examples where factors that may affect\n savings were not fully disclosed. Management commented\n that all but four of the Automated Airline Assignment\n machines remain unassigned.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed that full disclosure is\n Comments necessary and a part of the validation process. We still\n believe including risk factors that could negatively impact\n return on investment in the validation letter may provide\n some additional assurance of disclosure. However,\n management\xe2\x80\x99s overall actions for recommendations one\n through five, if implemented, will improve the controls for\n validating project test results and savings.\n\n Also, management agreed that in the future they would\n perform a sensitivity analysis of the savings without the\n unassigned machines for projects where additional units are\n purchased and not yet assigned to a specific site.\n Management agreed to prepare a memorandum by the end\n of quarter II, FY 2002, to notify the Finance staff of this\n requirement.\n\n We disagree with management\xe2\x80\x99s comments on the\n Automated Airline Assignment System. Currently, there are\n six unassigned Automated Airline Assignment machines and\n ten unassigned Semi-Automatic Scan Where You Band\n machines.\n\n We also disagree with management\xe2\x80\x99s comments on the\n Delivery Operations Information System project regarding\n the three areas nonconcurrence with Decision Analysis\n Report savings estimates. Finance states they do not\n\n\n 20\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n believe this will have any negative impact on the project\xe2\x80\x99s\n ability to achieve its projected financial results. However,\n without an adequate system to monitor project performance,\n we do not agree with Finance\xe2\x80\x99s assertion that no financial\n impacts may result.\n\n Review of Spare Parts Although inventory specialists within the Purchasing and\n Estimates Not Materials group provided input on the cost of spare parts,\n Complete they did not have the opportunity to review final estimates in\n Decision Analysis Reports. In three major equipment\n projects that we reviewed with total approved capital of\n $291 million, spare parts estimates were understated by\n millions of dollars.\n\n \xe2\x80\xa2 For the Robotics Containerization System, the project\n manager reduced spare parts estimates without\n concurrence from the inventory specialist.\n\n \xe2\x80\xa2 For two separate Decisions Analysis Reports,\n (1) Automated Airline Assignment/Semi-Automatic\n Scan Where You Band, and (2) Singulate, Scan,\n Induction Unit, initial assumptions used to calculate\n spare parts estimates were incorrect. There was no\n indication that an inventory specialist had reviewed\n the estimates for the final Decision Analysis Reports.\n\n These conditions existed because project sponsors were not\n required to consult inventory specialists to confirm final cost\n estimates for spare parts. Without such feedback, there is\n an increased risk of understated projections, which could\n result in spare parts funded outside of the approved\n Decision Analysis Report. More importantly, understated\n projections may result in an overstated return on investment.\n\n Ultimately, the sponsor and project manager are responsible\n for a Decision Analysis Report\xe2\x80\x99s spare parts cost estimates.\n However, Finance should evaluate any differences between\n the inventory specialist\xe2\x80\x99s and project official\xe2\x80\x99s estimates. If a\n resolution is not reached, then the Decision Analysis Report\n should fully disclose the disagreements in spare parts cost\n estimates.\n\n Recommendation We recommend the vice president, Finance, controller:\n\n 7. Revise Handbook F-66, Investment Policies and\n Procedures, to require Finance to ensure inventory\n\n 21\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n specialists review spare parts estimates in the final\n Decision Analysis Report and provide written\n analysis.\n\n Management\xe2\x80\x99s Management agreed with this recommendation and will\n Comments prepare a memorandum by the end of quarter II, FY 2002 to\n notify the sponsors and Program Evaluation staff of this\n requirement. Also, management stated that this\n requirement is addressed in the Handbook F-66, but that\n they will add more specific instructions to provide for further\n reviews of spare parts cost estimates.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. Management agreed with the intent of the\n Comments recommendation and will also communicate this requirement\n in a memorandum. Also, management agreed to change\n the Handbook F-66 to strengthen controls for project\n monitoring. We believe the actions planned, if implemented,\n should correct the issue identified in our report.\n\n\n\n\n 22\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Inadequate and The audit disclosed that the cost and performance of\n Untimely approved projects was not adequately reported to the Board\n Performance of Governors. Although Finance communicates cost and\n Reporting schedule status of major capital investment projects to the\n Board of Governors, we noted the Investment Highlights,11\n compliance reports, and cost studies did not adequately\n report project performance results and costs to Postal\n Service management.\n\n While compliance reports were performed regularly, they did\n not provide adequate project information. On the other\n hand, cost studies that provided more information were\n neither timely nor frequent. As a result, projects exceeding\n cost projections and failing to perform were not brought to\n the attention of the Governors. Consequently, the Board of\n Governors did not have the information they needed to\n reevaluate current and future investments.\n\n Investment Highlights Our audit revealed that compliance reports and Investment\n and Compliance Highlights did not contain key performance measures for\n Reports Lacked evaluating economically justified projects.12 The GAO\xe2\x80\x99s\n Performance Executive Guide for Leading Practices in Capital Decision-\n Measures Making states that leading organizations generally hold\n project managers accountable for meeting performance\n goals. Also, the guide indicates that regular reviews of\n project performance status by individuals outside of the\n project team allows for an independent assessment of\n project success. Although the Postal Service\xe2\x80\x99s Investment\n Highlights report communicated the status of capital project\n costs and whether a project was on schedule, it did not\n provide sufficient information to measure the project\xe2\x80\x99s\n effectiveness in meeting performance and operating cost\n projections.\n\n Compliance reports are intended to provide assurances that\n projects are implemented and savings materialize as stated\n in the approved Decision Analysis Report. Compliance\n reports must be submitted quarterly from the time of\n Decision Analysis Report approval until 18 months after\n deployment. The project sponsor has responsibility for\n11\n Finance\xe2\x80\x99s quarterly report tracking all investment projects approved by the Board of Governors; primarily generated\nfrom compliance reports and project sponsors.\n12\n Projects justified by economic considerations provide a measurable improvement to operations, produce economic\nbenefits, and meet a target hurdle rate.\n\n\n\n 23\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n ensuring that costs for all projects are tracked and reported\n using the appropriate Decision Analysis Report compliance\n report format.\n\n Compliance reports also provide information for key\n measures included in the Investment Highlights reports,\n such as approved capital investment, committed capital\n investment, estimated capital investment at completion,\n capital cash outlays, on-time status and percentage\n complete. Finance routinely validates the committed capital\n and cash outlays through reconciliation with accounting\n systems. However, we determined that while compliance\n reports were performed regularly, they did not provide\n adequate project performance information for actual\n operating costs, work hours, and volume.\n\n The audit revealed that the accounting system used to\n validate compliance reports did not track operating\n expenditures or actual savings for projects. As a result,\n Finance cannot report the actual return on investment for\n projects in the Investment Highlights.\n\n Our audit also disclosed that significant operating cost\n overruns might be incurred and not reported. For example,\n the Audit of the Mail Transport Equipment Service Center\n Decision Analysis Report, Performance and Financial\n Benefits, concluded the projects\xe2\x80\x99 operating expenses would\n exceed estimates by about $1.4 billion. The report states\n that the project\xe2\x80\x99s compliance reports did not fully portray the\n problem, and consequently the Board of Governors may not\n have been fully aware of the situation. The report\n recommended that Postal Service management develop a\n Decision Analysis Report modification to adjust for the\n unanticipated conditions. Postal Service management did\n not concur, stating that operating variances, even of that\n magnitude, did not require a revision.\n\n A minimum return on investment is required to approve\n economic projects; however, actual project savings were not\n tracked and return on investment was not reported in the\n Investment Highlights report. Project savings are the key\n component of return on investment, which is one of the\n primary factors the Board of Governors considers for\n economic projects.\n\n\n\n\n 24\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n In previous audits of equipment projects, we identified\n significant differences between actual and projected labor\n savings. The following examples illustrate overstated\n savings that could result in inflated returns on investment.\n\n \xe2\x80\xa2 For the Robotics Containerization System, the\n Decision Analysis Report projected $347 million in\n labor savings that may not be attainable unless the\n staffing levels meet projections in the Decision\n Analysis Report.\n\n \xe2\x80\xa2 For the Tray Management System, labor savings\n were overstated by $442 million because officials did\n not exclude savings that were projected to be\n achieved at sites not receiving the system.\n\n According to the Postal Service, operating costs and other\n performance measures that determine project savings are\n difficult to isolate in overlapping equipment projects and\n interrelated operations. However, Finance and Operations\n stated they are exploring ways to identify meaningful\n performance measures such as equipment utilization,\n throughput, and integration with other systems. In addition,\n Finance and Operations suggested a need for sponsors to\n identify leading indicators that support performance\n measures for each Decision Analysis Report. Similarly, the\n GAO\xe2\x80\x99s Executive Guide for Leading Practices in Capital\n Decision-Making discusses the practice and benefit of\n evaluating project results through setting overall\n performance measures and assessing these with specific\n performance indicators.\n\n Postal Service management attributed some of the prior\n reported findings to challenges they faced in the early\n project stages. Nevertheless, without performance\n measures, management cannot easily identify when\n continued deployment of a project is in the best operating\n and financial interest of the Postal Service.\n\n Recommendation We recommend the vice president, Finance, controller:\n\n 8. Identify effective performance measures to be used\n in assessing economic projects during deployment.\n\n\n\n\n 25\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Management\xe2\x80\x99s Management agreed with this recommendation. Finance\n Comments stated that they would require the sponsor of new Decision\n Analysis Reports to include the specific performance\n measures and methodology to be used in assessing\n economic projects during deployment. This effort will be\n coordinated with Engineering and Operations and begin with\n new projects initiated in quarter II, FY 2002.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation.\n Comments\n\n Recommendation 9. Revise Handbook F-66, Investment Policies and\n Procedures, to require project sponsors to identify\n leading indicators that support performance\n measures for each Decision Analysis Report and\n include methodologies in supporting\n documentation.\n\n Management\xe2\x80\x99s Management agreed with this recommendation. In\n Comments conjunction with recommendation 8, the Handbook F-66 will\n be revised to require project sponsors to include specific\n leading indicators and methodologies for measuring project\n success. This change will be effective with new projects\n beginning in quarter II, FY 2002.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation.\n Comments\n\n Recommendation 10. Ensure compliance reports include leading\n indicators to support performance measures, which\n will be reported in the Investment Highlights report.\n\n Management\xe2\x80\x99s Management agreed with this recommendation. In\n Comments conjunction with recommendations 8 and 9, the policy will be\n strengthened to require that the measures of success be\n addressed in the compliance report.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation. If policy changes are implemented with\n Comments new projects beginning in quarter II, FY 2002, changes in\n compliance reporting will be reflective in the subsequent\n issue of the Investment Highlights.\n\n\n 26\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Cost Studies Were Not According to the investment policy, cost studies are intended\n Timely and Frequent to provide assurances that projects are implemented and\n savings materialize as stated in the approved Decision\n Analysis Report. However, only three cost studies were\n completed for projects approved in the past 10 years limiting\n their usefulness. In addition cost studies did not provide\n Postal Service management with timely assurance because\n they are performed at least 18 months after final\n deployment. The audit revealed that policies did not exist\n for selecting projects for cost studies. Similarly, there were\n no procedures for monitoring cost studies.\n\n Finance performs cost studies and also interim studies and\n ad hoc analyses of project performance. We determined\n that cost studies are an effective tool to compare project\n performance to projections in the Decision Analysis Report\n after the project is completed. Unlike compliance reports\n that did not report operating costs and savings, cost studies\n did report these key performance measures. In addition,\n cost studies compared all actual costs and savings to the\n projections in the Decision Analysis Report in determining\n the projects actual return on investment.\n\n Taken collectively, cost studies and compliance reports did\n not assure projects met financial and operational projections\n in Decision Analysis Reports. While compliance reports\n were performed routinely, they did not provide adequate\n project performance information for the Investment\n Highlights, or report projects\xe2\x80\x99 actual operating costs. Cost\n studies reported actual operating costs, however, they were\n neither timely nor frequently prepared.\n\n Since project savings are a key factor the Board of\n Governors considers in approving most major projects, it is\n critical that they receive actual performance results\n indicating whether savings are materializing. Effective\n monitoring and reporting of project performance is critical\n given the $17.5 billion in planned capital investments for\n FY 2001 to 2005. Furthermore, since the Board of\n Governors deferred $1 billion of the $3.6 billion in capital\n investments planned for FY 2001, it is critical for the Postal\n Service to effectively monitor and report program\n performance.\n\n\n\n 27\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n Recommendation In conjunction with the recommendation to identify\n performance measures, we recommend the vice president,\n Finance, controller:\n\n 11. Develop policies and procedures for selecting and\n monitoring projects for cost studies.\n\n Management\xe2\x80\x99s Management agreed with this recommendation and plans to\n Comments put in place a decision matrix to help prioritize projects for\n review in quarter I, FY 2002. However, due to the amount of\n resources involved, they will pursue cost studies that focus\n on high risk/high profile projects such as the Tray\n Management System and the 34 letter mail automation\n projects, which are assessed annually.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation.\n Comments\n\n Recommendation 12. Reassess the procedures to perform cost studies\n before final deployment to improve their timeliness\n and benefit.\n\n Management\xe2\x80\x99s Management agreed with this recommendation.\n Comments Management stated that if efforts addressed in\n recommendations 8, 9, and 10 are successful, the\n reliance on cost studies should be significantly reduced.\n\n Evaluation of Management\xe2\x80\x99s comments are responsive to our\n Management\xe2\x80\x99s recommendation.\n Comments\n\n\n\n\n 28\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n APPENDIX. MANAGEMENT\xe2\x80\x99S COMMENTS\n\n\n\n\n 29\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 30\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 31\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 32\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 33\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 34\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 35\n Restricted Information\n\x0cDecision Analysis Report Process DA-AR-01-005\n\n\n\n\n 36\n Restricted Information\n\x0c"


type: caselaw

jurisdiction: EU

text:
 20.4.2015
 SK
 Úradný vestník Európskej únie
 C 127/44
 Žaloba podaná 16. februára 2015 – ZZ/Parlament
 (Vec F-26/15)
 (2015/C 127/62)
 Jazyk konania: francúzština
 Účastníci konania
 Žalobca: ZZ (v zastúpení: M. Casado García-Hirschfeld, advokát)
 Žalovaný: Európsky parlament
 Predmet a opis sporu
 Zrušenie rozhodnutia, ktorým sa zamieta žalobcovi priznanie príspevku na usídlenie v nadväznosti na jeho presťahovanie z Jemenu do Bruselu, v ktorom má bydlisko jeho manželka, s ktorou žije oddelene, ako aj návrh na uloženie žalovanému povinnosti vyplatiť žalobcovi tento príspevok spolu s úrokmi
 Návrhy žalobcu
 —
 zrušiť napadnuté rozhodnutie z 15. apríla 2014,
 —
 v prípade potreby zrušiť rozhodnutie generálneho tajomníka Európskeho parlamentu zo 17. novembra 2014,
 —
 uložiť Európskemu parlamentu povinnosť vyplatiť žalobcovi príspevok na usídlenie rovnajúci sa mesačnému základnému platu spolu s úrokmi počítanými od dátumov, od ktorých boli tieto sumy splatné podľa prílohy VII služobného poriadku,
 —
 zaviazať žalovaného na náhradu všetkých trov konania.