Compensation, Benefit, and Bonus Authority in Calendar Year 2018

Objective

Our objective was to determine whether the U.S. Postal Service complied with applicable maximum total compensation provisions of the Postal Accountability and Enhancement Act of 2006 (PAEA), related Postal Service policies and guidelines, and related U.S. Internal Revenue Service regulations in calendar year (CY) 2018.

For CY 2018, the annual salary of each Postal Service employee was limited to Executive Schedule Level 1, or $210,700. For this salary limit, compensation includes any federal annuity received. Two exceptions were granted under PAEA that allow the Postal Service to exceed this limit. The first exception provides for bonuses or other rewards such that the employee’s total compensation does not exceed $243,500 (the salary of the U.S Vice President). The second exception allows the Postal Service to exceed the salary of the U.S. Vice President by 20 percent ($292,200) for up to 12 critical senior executives.

Under the two exceptions, total compensation includes merit lump sum; incentive and recruitment bonuses; and the value of spot awards such as gift certificates or stamp yearbooks. Historically, the Postal Service has elected to also include in compensation, the tax impact on employees from spot awards that are cash equivalent items and non-cash tangible awards, which is commonly referred to as the gross up.

The value of benefits such as financial planning, annual leave exchange, health programs, and transportation services are excluded from total compensation, as are payments due to grievance or Equal Employment Opportunity settlements.

Each year the Postal Service is required to report on compensation in an annual comprehensive statement. Since the statement is published in the year following the end of the compensation calendar year, our audit included an assessment of the Postal Service’s compliance with these reporting requirements for CY 2017 compensation as it appeared in the Fiscal Year 2018 Comprehensive Statement of Postal Operations.

Findings

The Postal Service complied with the applicable maximum total compensation provisions of PAEA in CY 2018 based on recent practices. They also complied with Internal Revenue Service regulations for CY 2018 compensation.

However, the Postal Service did not accurately report the amount of bonuses or other payments for 25 employees or the amount by which 16 employees exceeded the CY 2017 compensation limit contained in the Fiscal Year 2018 Comprehensive Statement of Postal Operations. This included seven employees who were not, but should have been, identified as receiving bonuses or other payments that caused the total compensation to exceed the $207,800 limit for CY 2017.

We also identified two types of payments or awards in CY 2018 compensation that are not clearly within the exceptions for total compensation in excess of Executive Schedule Level 1.

  • Twenty-one Postal Career Executive Service employees received spot awards averaging $755 that are not defined within a bonus program approved by the U.S. Postal Service Board of Governors (Board).
  • One employee worked 4,287 regular, overtime, and premium hours during the year supplementing his annual $60,148 salary by more than $163,300. It is not clear within applicable laws, including the PAEA, whether overtime or premium pay should be included in the total compensation calculation. Although not directly relevant to the Postal Service, Title 5 includes some forms of premium pay in aggregate compensation, while overtime is excluded.

Both types of payments contributed to the 22 employees receiving total compensation in excess of Executive Schedule Level 1 in CY 2018.

In addition, the Postal Service did not accurately compensate the Postmaster General and Deputy Postmaster General in CY 2018. The Postmaster General’s salary was $50 below the amount established by the Board because estimates used to establish the salary amount early in the calendar year were not revised when final federal guidance was available. Also, the Deputy Postmaster General’s performance-based merit lump sum award for fiscal year 2017 performance was not paid until July 2019, when the error was brought to management’s attention.

Finally, the Board did not timely notify Congress and the U.S. Office of Personnel Management of the eight individuals receiving CY 2018 compensation in excess of the U.S. Vice President. Due to multiple changes in Board and Postal Service staff, the Board issued the notifications on February 21, 2019, after the January deadlines.

Recommendations

We recommended Postal Service management:

  • Establish comprehensive procedures for preparing the compensation data necessary to comply with annual reporting requirements under the PAEA.
  • Develop and submit for Board certification an updated description of the bonus or reward program under the PAEA that specifically defines all types of cash and non-cash awards, including spot awards, for which executives and officers are eligible.
  • Revise Postal Service policy and handbooks on executive awards and recognition to include clear descriptions of the revised bonus and reward program certified by the Board.
  • Request an interpretation from a third-party legal counsel on the treatment of overtime and premium pay as part of an employee’s compensation under the 39 U.S.C. § 1003(a).
  • Establish procedures for a management review of the accuracy and timely processing of authorized awards and salaries.
  • Implement procedures to provide the Board with the information necessary to meet the reporting requirement for timely annual notification to Congress and the Office of Personnel Management for those employees designated in critical senior executive positions.

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