Reducing state postage and mail services costs / Georgia Department of Audits and Accounts, Performance Audit Operations

4Performance Audit 09-11

March 2010

Why we did this review
This audit was started at the request of the Department of Administrative Services, which provides mail and courier services to state entities within a 35-mile radius of the State Capitol. DOAS requested that we assess whether costs savings might be achieved through centralizing state mail services in the Capitol Hill area. We elected to expand on this request and conduct an overall evaluation of state postage costs to identify potential savings.
Who we are
The Performance Audit Operations Division was established in 1971 to conduct in-depth reviews of state programs. The purpose of these reviews is to determine if programs are meeting their goals and objectives; provide measurements of program results and effectiveness; identify other means of meeting goals; evaluate the efficiency of resource allocation; and assess compliance with laws and regulations.
Website: www.audits.state.ga.us Phone: 404-657-5220 Fax: 404-656-7535

Reducing State Postage and Mail Services Costs
Opportunities Exist For Significant Cost Savings
What we found
In fiscal year 2008, state entities (which include state agencies, their subunits, and colleges and universities) expended a combined total of over $33.2 million in postage costs plus an undetermined amount associated with operating individual mail rooms at some state entities. Our review identified significant opportunities for state entities to reduce their costs by taking advantage of mail presort discounts, outsourcing mail services, and increasing their use of technology. For example, while Georgia initiated a statewide contract for presorting mail in 2004, not all entities are using it.1 In the metro Atlanta area alone, we identified nearly $550,000 in postage costs that could have been saved if entities had maximized their use of the presort contract. In addition, we determined that it may be advantageous to rebid the statewide presort contract to encourage greater competition among vendors and to include large-sized "flat mail". Given the volume of flat mail processed in fiscal year 2008 at five state entities, the state could have saved nearly $160,000 if flat mail at these entities was processed under the statewide presort contract.
While the Department of Administrative Services (DOAS) currently provides mail metering and courier services to state entities within a 35-mile radius of the State Capitol, additional money could be saved by outsourcing these functions. In fiscal year 2009, DOAS' operating expenditures for its metering

1 The presort contract was established to allow entities to take advantage of negotiated discounts on postage resulting from presorting mail before it is delivered to the U.S. Postal Service. Discounts are based on the number of pieces going to a particular ZIP Code. For example, if at least 150 pieces of mail are being sent to one (5-digit) ZIP Code, the cost is reduced from $0.44 to $0.335 per standard size letter.

services exceeded its operating revenues by about $184,000. Outsourcing the metering function could save the state approximately $257,000 annually (based on current activity levels). In addition, DOAS should take steps to determine if it provides interagency courier services at a lower cost than comparable commercial vendors by issuing a Request for Proposals. If DOAS were to outsource its metering and courier services, it could shift its focus to streamlining mail operations across state government, as opposed to serving as a vendor, and assist state entities by collecting, analyzing, and disseminating information that would help identify methods for reducing postage costs. Our review of state entities' mail practices identified significant variation in entities' efforts to analyze and minimize costs associated with their mail room operations. Currently, the extent to which a state entity's postage and mail services costs are minimized is largely dependent on the knowledge and/or interest of one or two individuals with mail room responsibilities. Beyond these individuals, mail room operations are often an after-thought for entities whose efforts are largely focused on their core mission.
Based on site visits and in-depth reviews with four of the five state entities2 with the largest postage expenditures, we determined that the Department of Revenue and the University of Georgia, which operate in-house mail sorting operations, could realize annual savings of $98,000 and $36,000, respectively, if their presorting operations were outsourced under the current statewide contract. In addition, the need to eventually replace sorting equipment costing $600,000 to $800,000 would be avoided by outsourcing these presorting operations.
We also identified additional opportunities for postage and mail services cost savings that could not be quantified. Fifty-four state entities headquartered in the metro Atlanta area reported annual equipment lease and maintenance costs of about $437,000 (excluding the original purchase cost of any equipment that might be owned by the entity) related to in-house metering operations. These entities could also save on their mail services costs (and possibly on their postage costs) by outsourcing these metering operations. In addition, we noted the following examples of cost savings techniques that were used by some state entities, but not consistently throughout the state:
Use of presort contractors outside metro Atlanta Use of remote printing and mailing Use of electronic presorting Reducing the size of mailed items Use of non-profit presort rates for educational entities Use of electronic return receipts for certified mail Use of electronic transactions, including electronic funds transfers
We also found that more data is needed regarding mail and postage activities at state entities to help identify cost savings opportunities. While sufficient information was available to identify postage savings obtained on most of the items processed through the entities' mailrooms, information needed to identify if any postage savings were obtained on items processed and mailed directly by program staff, from field locations, or by some contractors was typically not available. Such information would be useful for determining if postage savings are being maximized.
Agency responses to the draft of this report generally noted agreement with the recommendations for improvement and identified planned actions. Specific comments and responses from agencies mentioned in this report are summarized in the remainder of this report.
2 The five entities were the Department of Community Health, Department of Human Resources (currently the Department of Human Services), Department of Labor , Department of Revenue, and the University of Georgia. The Department of Labor did not provide information regarding postage costs, so they were not included in our analysis.

Reducing State Postage and Mail Services Costs

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Table of Contents

Audit Purpose

1

Background

1

Entity Postage Operations

1

USPS Postage Prices and Discounts

1

DOAS Mail and Courier Services

3

Statewide Presort Contract

5

Findings and Recommendations

6

The Department of Administrative Services should reconsider its business model for

providing mail metering and courier services to state entities.

6

Many state entities headquartered in metro Atlanta are not maximizing the savings

opportunities available through the statewide presort contract.

9

The Department of Administrative Services needs to periodically re-bid the statewide

presort contract. DOAS should also clarify that the contract includes larger size "flat"

mail pieces and that state entities outside the Capitol Hill area can utilize the "statewide"

contract.

11

The Department of Revenue and the University of Georgia should consider outsourcing

their presorting operations in order to reduce costs.

12

State entities could benefit from cost savings techniques that are currently being used by

several state entities.

14

More data regarding mail and postage activities at state entities is needed to help

identify cost savings opportunities.

16

Appendices

18

Appendix A: Objectives, Scope, and Methodology

18

Appendix B: Postage Expenditure Totals By State Entity

20

Appendix C: Postage Costs and Presort Techniques Used By Entities

Headquartered in Metro Atlanta

23

Reducing State Postage and Mail Services Costs

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Reducing State Postage and Mail Services Costs

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Audit Purpose
The purpose of this review was to identify opportunities for postage cost savings for state entities in Georgia. Details about our objectives, scope, and methodology are included in Appendix A. Findings in this report have been communicated to appropriate personnel representing the state entities assessed in this review. In addition, a draft copy of the report was provided to the Department of Administrative Services (DOAS) for its review and comment. Pertinent responses have been included in the report as appropriate.

Background
Entity Postage Operations
State entities mail millions of items annually. Larger entities typically have dedicated mailroom staff, while personnel at smaller entities may be responsible for mail-related duties in addition to other administrative tasks. State entities can apply postage to outgoing mail by attaching stamps, metering the mail utilizing commercial metering equipment, sending the mail to outside vendors for metering (including a metering service provided by DOAS), or by purchasing a permit account, which allows them to print envelopes with a permit account number affixed. Information obtained from accounting system records, as well as a statewide survey of 141 state entities conducted by the audit team, revealed that approximately $33.2 million was spent by state entities on postage during fiscal year 2008 (not including personnel and equipment costs related to an entity's postage operations). (See Appendix B for detailed information on postage expenditures by entity.)

USPS Postage Prices and Discounts
As shown in Exhibit 1, the standard postage rate for a first class letter (of 1 ounce or less) is 44 cents (as of January 2010). However, the U.S. Postal Service (USPS) offers discounted postage rates based on the extent to which mail is sorted and bar-coded before it is submitted to the USPS for delivery. For a standard letter, a maximum discount of 10.5 cents per piece can be realized if at least 150 pieces are grouped by the same five-digit ZIP Code (referred to as "5-digit" sort). A discount of 8.3 cents can be realized if at least 150 pieces are grouped by the same first three digits of the ZIP Code (referred to as "3-digit" sort). Smaller discounts are also available based on sorting by distribution center (facilities that collect and distribute mail to associated ZIP Codes). In addition, similar discounts are available for post cards and flats (large envelopes and flat rectangular mail pieces like magazines and circulars).
The USPS offers these discounts as a way to allow customers to save money while eliminating much of the presorting work that would ordinarily have to be completed by USPS personnel and equipment. Mail with the highest level of presorting and bar-coding may be sent directly to the destination post office without additional processing. Industry representatives indicated that presorted mail is typically delivered in about the same amount of time as the traditional method. To achieve the highest levels of presort discounts, mail for most state entities would need to be combined with mail from other entities (including private entities) to achieve the minimum volume levels required to qualify for discounted rates.

Reducing State Postage and Mail Services Costs

Letters

11 " max

"6 max

Exhibit 1 USPS Postal Prices and Discounts
As of July 2009

Description

Weight
(in ounces)

Retail Rate

Discounted Rates

(Requires a minimum of 150 pieces to qualify for the discounted rate.)

5-Digit1 Sort Rate

3D-Disigciot2unt RaAteAsDC3

Sort Rate

Rate

Mixed4 AADC Rate

Letters

1

6 1/8"max

(Common size envelopes, large

2

postcards, and folded pieces, such

3

as letters, bills, and newsletters.)

3.5

$0.440 $0.610 $0.780 $0.950

Description

Retail Price

Post Cards

4 " max

(Often the least expensive way to

All

$0.280

send advertising, invitations, and

business reply mail.)

$0.335 $0.460 $0.585 $0.710
$0.205

$0.357 $0.482 $0.607 $0.732
$0.218

$0.360 $0.485 $0.610 $0.735
$0.220

$0.382 $0.507 $0.632 $0.757
$0.230

Description

1

Flats

2

(Large envelopes and flat

3

12" max rectangular mailpieces, such as

4

magazines, catalogs, circulars, or

5

important documents that should

6

not be folded.)

7

8

$0.880 $1.050 $1.220 $1.390 $1.560 $1.730 $1.900 $2.070

$0.380 $0.550 $0.720 $0.890 $1.060 $1.230 $1.400 $1.570

$D0i.s5c4o2unt Ra$t0e.s603

$0.712

$0.773

$0.882

$0.943

$1.052

$1.113

$1.222

$1.283

$1.392

$1.453

$1.562

$1.623

$1.732

$1.793

$0.725 $0.895 $1.065 $1.235 $1.405 $1.575 $1.745 $1.915

15 " max

1 Mailpieces that are sorted to 5 digits share the same ZIP Code and are usually concentrated in one small town or neighborhood. 2 After sorting all possible 5 digits, all remaining mailpieces that share the same first 3 ZIP Code digits are grouped together. 3 After sorting to the first 3 digits, all remaining mailpieces are sorted to Automated Area Distribution Centers (AADCs), which are areas that serve several 3-digit ZIP Codes. 4 After sorting to AADCs, all remaining mailpieces are sorted to the mixed AADC level. Mixed AADC presort includes mail that is sent to all parts of the country.
Source: USPS Pricing Guide, 2009; An Introduction to Mailing for Business and Organizations, 2009.

2

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DOAS Mail and Courier Services
The Department of Administrative Services (DOAS) provides interagency courier and mail metering services to state entities within a defined service area (which extends about 35 miles from downtown Atlanta). The DOAS Mail and Courier operation is staffed with nine courier drivers, two mail metering employees, and one manager. As of January 2009, DOAS had 243 contracts with 58 state entities (25 entities had courier and metering service contracts, 31 only had courier contracts and two only had metering service contracts).
DOAS' courier service includes regular pickups and deliveries to contracted locations and special deliveries to other locations or for items that exceed predetermined specifications. When a state entity signs a contract for interagency courier services with DOAS, it designates the number of times they want DOAS to make "stops" at their location and they are billed for each stop. In April 2009, customers of DOAS' courier service were offered discounted rates on courier services in exchange for renewing their service before a rate increase was implemented in July 2009. (For courier service zones and rates, see Exhibit 2 on the following page.) DOAS currently operates nine courier vans and makes an estimated 66,000 stops per year.
Interagency courier service enables state entities to save postage costs for items sent to other state entities in the metro Atlanta area. For example, an entity in Zone 1 with a daily per-stop charge of $5.60 would only need to have an average of 13 interagency delivery items in order to obtain a postage savings of $5.72 (13 x $0.44). (This level of activity would more than cover an entity's courier charges and additional deliveries would result in more savings). Other courier services are available at additional costs. These include early/late pickup, farther travel distances, and heavier parcels. During fiscal year 2009, DOAS expenditures for courier services totaled $621,000 (including direct and indirect costs). Revenue received for the services totaled about $514,000.
Most entities apply postage to their mail in-house; however, DOAS has contracts with 27 state entities to provide metering service (only 18 of those entities utilized the metering service during fiscal year 2009 and about 646,000 items were metered). These entities submit their mail through interagency courier to the DOAS mail facility. Once at the DOAS facility, DOAS personnel use one of the Department's two metering machines to meter the mail at the discounted rate for 3-digit presorting and DOAS charges entities an administrative fee of 20% of the postage cost for this service. For example, the discounted rate for a standard $0.44 letter is $0.357 and the administrative fee is 7.1 cents (20% of $0.357) which effectively brings the total charged to the entities to 42.8 cents (resulting in a savings to entities of only 1.2 cents per letter). After metering, the mail is sent to a contracted firm to sort the mail prior to delivery to the post office in order to qualify for the 5-digit discounted rate. During fiscal year 2009, DOAS' expenditures for metering services totaled $262,000 (including direct and indirect costs). Revenue received for these services totaled about $78,000.

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Exhibit 2 DOAS Courier Zones and Rates
As of July 2009

5 Miles

15 Miles

35 Miles

Charge Type

Description

Interoffice Courier Service
Adjustment Charges
Special Courier Services

ZONE 1 Walking Distance From Capitol Square ZONE 2 Within 5 miles of Capitol Square ZONE 3 Within 5 to 15 miles of Capitol Square ZONE 4 Within 15 to 35 miles of Capitol Square
Early/Late Service (Before 9:15AM or after 3:00PM)
Special Delivery Charge (Stops not on interagency network or requests for immediate delivery) Excess Package Charge (More than 5 packages, bags, trays, or boxes)
Oversized Load Charge (Greater than 70lbs. Total weight)

Rate Per Stop

With Discount
Effective 4/13/09
$5.00

Without Discount
Effective 7/1/2009
$5.60

$10.00

$10.60

$12.25

$12.85

Zone 3 charge +$0.75 per mile over 15

Zone charge +25%

$10.00

$1.00 per piece

$0.75 per lb.

$1.00 per lb.

Source: DOAS Price List

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Statewide Presort Contract
DOAS implemented a statewide contract with a private company (Dependable Mail Services, or DMS) in 2004 to handle the actual mail sorting that is required to qualify for USPS postage discounts. Mail from 18 state entities is metered by DOAS and sent to DMS for presorting. DMS' presort facilities are located in the metro Atlanta area, so state entities around Atlanta also have the option of utilizing the statewide contract by metering their own mail and sending it to DMS for presorting. Bypassing DOAS' metering services eliminates the 20% administrative mark-up on metering mail while still allowing state entities to obtain presort discounts through the statewide contractor. We identified eleven state entities (in addition to DOAS), that were metering their own mail and directly contracting for presort services with DMS.
Each day, a driver from DMS picks up mail from six locations in the Capitol Hill area and delivers it to the DMS facility for processing and sorting. DMS is able to sort and group most of the mail it processes by three or five digits of the ZIP Code using specialized equipment. (DMS has five large sorting machines that reportedly cost up to $1 million each.) Mail is grouped by account, and is fed into the sorting machine where it is automatically bar-coded and sorted into one of 300 bins representing individual ZIP Codes. A majority of DMS' mail sorting operations take place overnight to ensure that mail is delivered to its destination as quickly as possible.
DMS is able to qualify for USPS' maximum allowable presorting discounts by combining the mail of multiple customers in order to achieve the volume levels needed to qualify for the discounts (at least 150 items for each ZIP Code). Therefore, the more customers (and mail) a presort vendor has, the more its customers can benefit. Without the economies of scale achieved by combining state mail with mail from other customers, it is doubtful that state entities could collectively achieve the level of discounts that are obtained through the contracted vendor. Interviews with DMS personnel indicated that it currently processes between 1.3 and 1.6 million mail pieces daily, and each of its sorting machines can process approximately 56,000 pieces per hour. State entity mail activity is about 2% of DMS' total activity.
After the mail has been processed by DMS, it is picked up by the USPS. Since items are metered at the 3-digit rate ($0.357 for a standard letter) by the entity or by DOAS, but have been processed by DMS to qualify for the lower 5-digit rate ($0.335 for a standard letter), the USPS reimburses DMS for the difference ($.022 for a standard letter). This is how DMS is compensated for its services. If DMS has to add postage to an item because it is overweight or is an unusual shape, DMS will bill the entity that submitted the item for any required additional postage (could be referred to as a "billback" charge). Our review of entity billbacks for fiscal year 2008 indicated that, on average, entities received billback charges that were approximately 8% of their presort discount savings.

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Findings and Recommendations
The Department of Administrative Services should reconsider its business model for providing mail metering and courier services to state entities.
The cost of DOAS' mail metering operation greatly exceeds the revenue it receives for these services. As a result, it appears that these services could be delivered much more economically if outsourced. In addition, DOAS needs to determine if its courier services are less costly than comparable commercial services to identify if any savings might be obtained by outsourcing this function. In lieu of these services, DOAS should consider collecting, analyzing, and disseminating information to help state entities save on postage costs incurred both inside and outside the metro Atlanta area. These issues are discussed in more detail below:
Mail Metering Services Due to the relatively low volume of items metered and the high fixed costs of its metering operation, the entity's operating expenditures for its metering services exceeded its operating revenues in recent years. For example, its expenditures exceeded its revenues by about $184,000 in fiscal year 2009. As shown in Exhibit 3, DOAS' metering operations cost approximately $262,000 ($197,000 in direct costs and $65,000 in indirect administrative costs) for fiscal year 2009. The Program metered approximately 646,000 items resulting in an average cost per metered item of about 40.5 cents. To fund these operations, DOAS charges entities a 20% service charge per metered item. During fiscal year 2009, DOAS earned approximately $78,000 in mail metering revenue (or average revenue per metered item of about 12.1 cents).

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In comparison, the audit team found a vendor that informally offered to pick-up and meter items for about 4 cents per item, and the vendor that currently provides presorting services also informally indicated that it could provide metering services (along with its presort services) for about 0.8 cents per item. The current presort vendor did not want to formally commit to a price for this service until it developed its response to a new contract bid request; however, based on this informal estimate, it appears that all but about $5,000 (646,000 items x $.008) of the entity's metering operations costs (about $262,000) might be saved by contracting out the metering service.
While DOAS might be able to lower its cost per item and cover more of its metering service costs by increasing the volume of items it processes, outsourcing appears to be the better option. DOAS would need to take on additional equipment and personnel costs and would need to convince most of the entities in the metro Atlanta area to use its metering services in order to achieve the economies of scale necessary to generate significant cost savings. On the other hand, outsourcing the function does not require any investment in equipment or personnel, does not put the state at risk if needed processing levels are not achieved, and would immediately generate savings on every item processed.
Our survey found that 54 of the 64 state entities headquartered within metro Atlanta meter their own mail to some degree.3 Information on the volume of mail metered at these entities was not obtained; however, based on items processed at the entities that we reviewed, about 13.7 million additional items might be available for DOAS to process. Even without factoring in cost increases resulting from increased processing volume (which would be unlikely), DOAS would need to process about 6.5 million items to lower its costs down to four cents per item. To lower its costs down to 0.8 cents per item would require a processing volume of almost 33 million items.
Contracting out metering services could also provide additional operational cost savings for the 54 state entities in the metro Atlanta area that meter their own mail. These entities reported that the annual lease and maintenance cost of the equipment used to meter their mail was about $437,000 (in addition to the original purchase cost of any equipment that some entities may have purchased). These operating costs might also be saved if the metering services were outsourced.
Courier Services The audit team's analysis of financial and operations data for DOAS' Courier Service found that the expenditures for this service totaled approximately $621,000 ($428,000 in direct costs, and $193,000 in indirect administrative costs) for fiscal year 2009. During this same period, revenues were approximately $514,000, resulting in a deficit of about $107,000. To compensate for this deficit, the Program initiated price increases that took effect on July 1, 2009. Based on the new rates and the existing customer base, the Department's

3 It appears that DOAS' pricing strategies for its mail metering services may actually be discouraging state entities from using its metering services. While DOAS meters customer mail at the 3-digit rate ($0.357 for a one ounce letter a savings of 8.3 cents), DOAS charges an administrative fee of 20% (7.1 cents) for the services provided. This high fee essentially removes any incentive entities might have to utilize the service.

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courier operations are projected to result in a net profit of approximately $12,000 during fiscal year 2010 (if expenditures remain unchanged).
In February 2009, DOAS solicited bids from commercial vendors for the purpose of outsourcing its courier and metering services. However, this Request for Quotes (RFQ) was cancelled in March of 2009 and the market cost for providing courier services was not determined. This market price is needed to evaluate if the state could achieve cost savings by outsourcing this service.
Cost Savings Strategies Our review of state entities' mail practices found significant variations in entities' efforts to analyze and minimize costs associated with their mail room operations. The extent to which entities' postage costs have been minimized (or the extent to which an entities' mail room operations are cost effective) is largely dependent on the relative knowledge and/or interest of individual mail room operators. In addition, in its current capacity as a provider of metering and courier services, DOAS does not consult with state entities to assist them with identifying or developing postage cost savings strategies. To help ensure that all state entities are aware of effective postage cost savings strategies, an information "clearinghouse" that gathers and distributes information on successful techniques would be beneficial. The General Services Administration's Mail Service Program serves as a clearinghouse for information on postage savings opportunities at the federal level. In addition, with more information on postage costs around the state, DOAS may be able to identify opportunities for coordinating and consolidating postage operations. For example, our review identified 26 state entities with facilities in the Macon area. DOAS may be able to identify opportunities to coordinate postage savings techniques used by the entities located in that area to minimize their postage costs.
DOAS should consider bidding out its mail metering services along with the rebidding of the statewide contract for presorting services so it can eliminate its relatively high cost in-house mail metering operation. The Department should also solicit bids for providing courier services to evaluate if it would be more cost effective to outsource these services. In addition, consideration should be given to having DOAS act as a clearinghouse to gather, analyze, and disseminate information to assist state entities in reducing their postage expenditures. This information might be provided through a website where mail management personnel throughout the state could go to identify cost savings ideas and techniques that might be used at their entities.
Agency Response DOAS indicated that the current statewide contract for presorting mail will be rebid to add additional requirements to better meet the state's needs. The contract will be a mandatory statewide contract providing services within different regions across the state. The presort vendor will pick up mail from specified locations, apply the postage and directly bill each agency on a monthly basis for the actual postage used. The intent is to eliminate the need for mail metering and sorting equipment within any agency. In addition, DOAS indicated that it will also initiate a bid for outsourcing the courier service to determine if a lower price option is available.

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Many state entities headquartered in metro Atlanta are not maximizing the savings opportunities available through the statewide presort contract.
Our review found state entities headquartered in the metro Atlanta area are not taking full advantage of postage discounts available through the statewide presort contract. The audit team estimated that a total of $549,000 could be saved by increased use of the presort contract. Specific areas where more presort savings might be achieved are discussed below:
Entities Not Obtaining Any Presort Savings Of the 64 state entities headquartered within the metro Atlanta area (the DOAS 35mile service area), 27 (42%) indicated in response to our survey that they were not obtaining discounts for presorting mail. (More information on the postage costs for entities headquartered in the metro Atlanta area is provided in Appendix C of this report.) Three of these entities did not have sufficient postage costs to generate savings greater than the courier costs required to transport their mail to the presort contractor. The postage expenditures for the other 24 entities totaled approximately $2.9 million during fiscal year 2008. Our analysis of seven entities that used the statewide presort vendor found that these entities saved an average of 9.3% (ranging from 3.7% to 11%) of their total expenditures by presorting their mail. If these 24 entities started using presort services (and could reduce their postage costs by an average of 9.3%), an annual savings of about $250,000 (which takes into consideration additional courier costs of about $18,000) could collectively be obtained.
Entities That Could Save More By Using the Statewide Presort Contract The audit team identified 15 state entities in the metro Atlanta area that claimed to be obtaining some type of postage savings through presort discounts but were not using the statewide presort contract. (More information on the postage savings techniques used by entities headquartered in the metro Atlanta area is provided in Appendix C of this report.) Five of these entities did not have sufficient postage costs to generate savings that would be greater than the anticipated courier costs to transport their mail to the presort contractor. However, we identified that the remaining 10 entities could save more on their postage by sending all or part of their mail to the presort vendor as described below.
We identified six entities that received discounts on certain items (such as bulk mailings of certain reports and publications); however, most of the regular mail at these locations was sent at full retail rates. We estimated that these entities could have saved an additional $223,000 if they sent all or part of their mail to the statewide presort vendor.4
We identified four entities that were using the statewide presort vendor in fiscal year 2008 that were not receiving statewide contract pricing (Georgia Perimeter College, the Employees' Retirement System, the Teachers' Retirement System, and the Georgia Student Finance Commission).5 These entities were paying processing fees that were not required under the statewide contract. Interviews indicated that the entities were not aware of the statewide contract when they negotiated individual contracts with the presort vendor.
4 Subsequent to this review, two of the six entities (Georgia State University and Georgia Tech) started sending their mail to the presort vendor. 5 The Georgia Student Finance Commission stopped using the presort vendor in fiscal year 2009.

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We estimated that collectively these entities would have saved about $52,000 if they had received statewide contract pricing during fiscal year 2008.
Entities Not Fully Utilizing Presort Services Under the Statewide Contract We also found state entities that did not fully utilize the presort contract by sending all of their mail to the vendor. As described below, we identified $24,000 in additional savings for items that were mailed at full postage at three state entities in the metro Atlanta area.6
DHR mailed about 187,000 letters at the full retail postage rate during fiscal year 2008. (Agency personnel indicated that items received in the mail room after the daily mail pick up are typically mailed out at the full postage rate.) If this mail had been processed through the presort contract, the Department would have saved over $13,000 in that year.
DOAS mailed about 128,000 letters at the full retail postage rate during fiscal year 2008. (These items were risk management letters that were thought to be formatted with information located where the sorting barcode needed to be printed.) If this mail had been processed through the presort contract, the Department would have saved an estimated $8,900.7
DOR estimated that about 28,000 letters were sent out of its Century Center location at the full retail postage rate during fiscal year 2008. (These items were reported to be time-sensitive and DOR personnel did not want to use DOR's presort operation because they thought processing would take an additional one to two days.) If this mail had been processed through the presort contract, the Department would have saved about $1,900. 8
DOAS should work with the state entities headquartered in the metro Atlanta area to help them maximize their postage savings. Entities that are not currently taking advantage of presort savings (or that are not fully utilizing available presort savings) should be identified and educated about the availability of these postage discounts.
Agency Responses DOAS noted that it plans to rebid the presort contract to better meet the state's needs and indicated that it will build a marketing plan to educate all agencies on its new model (which will incorporate webinars, updates on the DOAS web site, emails to all customers and one on one meetings with those agencies that have their own mail processing equipment). It also indicated that it will develop a cost comparison analysis (comparing costs for agencies managing their own mail equipment versus utilizing the presort vendor) to demonstrate any efficiencies that might be realized. DHS indicated that it has changed its procedures for handling mail received in the mailroom after the daily mail pick up and that customers have been informed that mail received late in the day will not be processed until the next business day. DCH reported that it is its policy and practice to utilize the statewide contract for presort services for business envelopes and that it will modify its practices if DOAS expands the contract to cover additional sizes and/or mailings.
6 The audit team scheduled reviews at five entities in the metro Atlanta area. Activity data provided by the Department of Community Health did not have sufficient detail to identify items sent out at full retail postage rates. The Department of Labor did not participate in this review. Therefore, we could not identify items that were mailed at full postage rates. 7 DOAS personnel reported that they resolved the formatting question and started sending these mailings out through the presort vendor after the problem was brought to their attention by the audit team. 8 DOR personnel reported that they started sending all Century Center letter mail through their presort facility subsequent to our review.

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11

DOR indicated that it has security concerns related to allowing access to mail by DOAS and other non-DOR employees. However, DOR reported that it will contact the IRS to evaluate the feasibility of utilizing a contracted vendor for presort services.

The Department of Administrative Services needs to periodically re-bid the statewide presort contract. DOAS should also clarify that the contract includes larger size "flat" mail pieces and that state entities outside the Capitol Hill area can utilize the "statewide" contract.
The current statewide contract for presort services was initiated in April of 2004 for a period of two years (ending in March of 2006). DOAS subsequently extended the contract on nine occasions. Standard contracting practices call for the periodic rebidding of contracts to encourage competition among vendors to ensure that the best market rates are obtained. DOAS indicated that the contract had not been rebid because "responsibility for the contract has changed hands several times"; however, DOAS also indicated that it intends to rebid the contract in the near future. When rebidding the contract, DOAS should ensure that the following provisions are clarified:
Clarify that presort discounts are available for larger "flat" mail items State entities using the statewide presort contract are not sending their flat mail to the statewide vendor for presorting and, therefore, are not taking advantage of significant postage discounts. For example, a one ounce flat with a full postage cost of $0.88 costs only $0.542 at the 3-digit sort rate, saving entities up to $0.338 per flat depending on the applicable billback rate. These savings of nearly 34 cents per flat are available on all flats meeting certain size, shape, and color requirements. The reason flats are not currently being sent to the presort vendor has been a point of contention and confusion between DOAS and the presort vendor. Correspondence between the two indicates that DOAS had intended that the presort contract include flats. However, the final contract did not clearly specify that flats were included. The presort vendor did not believe that flat-sized mail was included in the current contract, but indicated that they would process flats as long as the items met certain size, shape, and color requirements.
Our analysis of postage costs for flats mailed by DOAS and four of the five state entities9 with the highest postage costs identified significant opportunities for postage savings. As shown in Exhibit 4 on the following page, we estimated that approximately $158,000 could have been saved if presort discounts had been obtained for the flat items that were mailed in fiscal year 2008.

9 DOL did not participate in this review; therefore, we could not estimate potential savings that might result from presorting their flat mail items.

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12

Exhibit 4 Estimated Presort Savings for Flat Mail Items By Entity
Fiscal Year 2008

DOAS1 DHR UGA

Entity

Number of Flats 99,000
117,000 156,000

Estimated Savings $29,000 $35,000 $34,0002

DOR DCH

116,000 88,000

$34,000 $26,000

Total

576,000

$158,000

1 Fiscal year 2008 data was not readily available, therefore the audit team used fiscal year 2009 information that became available subsequent to the fieldwork on this project.

2 This savings is net of costs to transport mail to the current statewide vendor located in the metro Atlanta area. The vendor indicated that they would charge a courier fee of $50 per day to pick up mail at UGA, which would cost an additional $12,450 per year.

Source: Entity Records

Clarify entities that can utilize the statewide contract The University of West Georgia (UWG) is using the statewide vendor, but is not receiving statewide contract pricing. The presort vendor indicated that the UWG was not eligible to participate under the statewide contract due to the fact that they were not located on Capitol Hill (which the vendor thought was required by the contract). However, our review of the contract found that it did not specify any geographic restrictions. We estimate that UWG could have saved nearly $4,300 in fiscal year 2008 if it were able to participate in the statewide contract.
To ensure that the state is achieving the most savings possible, DOAS should rebid the statewide presort contract. DOAS should ensure that a provision to sort flat-size mail is clearly included in the new contract. The new contract should also clearly specify that all agencies and other state entities are eligible to participate in the "statewide" contract.
Agency Response DOAS indicated that it is rebidding the statewide presort contract and that the new contract will include handling "flat" size mail pieces. The new contract is expected to be implemented in July 2010 and the contract will be reviewed each year prior to renewal to ensure that the vendor is providing the agreed upon services and pricing.

The Department of Revenue and the University of Georgia should consider outsourcing their presorting operations in order to reduce costs.
Two of the five state entities with the highest postage costs maintain in-house presorting operations in addition to their other mailroom operations.10 Our review of the operations at the Department of Revenue and the University of Georgia revealed that the two entities could realize annual savings of about $134,000 if their
10 Information was not available on how many other state entities maintain in-house presort operations.

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sorting functions were outsourced under the statewide contract for presort services. Details regarding these potential savings are discussed below.
Department of Revenue DOR's in-house mail sorting operation processed approximately 6.6 million pieces of mail during fiscal year 2008, with postage costs totaling about $2.6 million. Based on average savings for entities currently using the statewide presort contract (and additional courier costs to transport mail from the facility housing the sorter to the presort vendor), we estimate that DOR's in-house processing saved about $32,000 (postage cost net of additional courier costs) more than would have been saved under the statewide contract. However, to achieve this savings DOR expended about $85,000 in labor costs and $45,000 in equipment maintenance and software costs. As a result, DOR's postage savings were outstripped by its operating costs. Had the mail sorting function been outsourced, it is estimated that DOR could have saved approximately $98,000 in fiscal year 2008.
In addition, as discussed in a previous finding, DOR could save an additional $34,000 in postage costs for flats by using the presort vendor since DOR's mail sorting machine cannot sort flats. Finally, DOR's sorting equipment is about 13 years old and an industry representative estimated that this type of equipment has an average useful life of about 10-13 years and a replacement cost of $300,000 to $400,000.
University of Georgia UGA's in-house mail sorting operation processed approximately 973,000 pieces of mail in fiscal year 2008 with postage costs totaling about $337,500. Based on average savings for entities currently using the statewide presort contract (and additional courier costs to transport mail from the facility housing the sorter to the presort vendor), we estimate that UGA's in-house processing saved about $7,900 in postage costs more than would have been saved under the statewide contract (net of additional courier costs). However, to achieve this savings UGA expended about $9,000 in labor costs and $35,000 in equipment maintenance and software costs. As a result, UGA's postage savings were also outstripped by its operating costs. Had the mail sorting function been outsourced, it is estimated that UGA could have saved approximately $36,000 in fiscal year 2008.
In addition, UGA could save another $34,000 in postage costs for its flats by using the presort vendor since UGA's sorting machine cannot sort flats. Finally, UGA's sorting equipment is also about 13 years old, and as previously discussed, an industry representative estimated that this type of equipment has a useful life of about 10-13 years and a replacement cost of $300,000 to $400,000.
Both DOR and UGA should consider closing down their in-house presorting operations and sending their mail to the state's contracted vendor for processing. This transition would provide a net estimated annual savings of about $134,000 and would facilitate obtaining annual savings on presorting flats totaling another $80,000 ($68,000 in estimated savings and $12,000 in duplicate transportation costs already included in UGA's presort savings). In addition, the need to eventually replace sorting equipment costing $600,000 to $800,000 would be avoided by outsourcing these presorting operations.

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Agency Responses DOAS indicated that the presort contract planned for implementation in July 2010 will be a mandatory statewide contract, therefore, the Department of Revenue and the University of Georgia must take advantage of utilizing the new presort vendor (unless a waiver is requested by either entity demonstrating that their in-house function is a more cost effective solution). DOAS also reported that it will initiate a one-on-one meeting with each of these agencies to educate them on the service and cost structure of the new contract, and that the vendor selected through the bid process will provide a cost comparison analysis for each agency. DOR agreed that outsourcing should be pursued if it results in cost savings; however, it noted that it must give primary consideration to state and federal confidentiality laws that protect taxpayer information. DOR noted that it thought that IRS security requirements may result in significant additional costs that must be considered when evaluating an outsourcing agreement. However, DOR indicated that it will contact the IRS to evaluate the feasibility of utilizing a contracted vendor for presort services. DOR also indicated that it believes that using "an outside vendor could make sense if the vendor could do more than just the presort function", and that it is exploring outsourcing possibilities with a vendor that does printing, stuffing, sorting and mailing. UGA indicated that the recommendation that the University (among other agencies) consider presorting operations in order to reduce costs is worthy of further study. It noted that its Campus Mail Department is involved in a study and analysis of a presorting services bid and that while it awaits the outcome of that study, it prefers to continue performing the presort service in-house. UGA further indicated that when a new statewide contract is in place in which UGA can confidently participate, it will seriously consider moving in that direction.
DOAA Comment DOR's concerns about costs to comply with the IRS security requirements are based on IRS Publication 1075, which requires states to initiate strict security measures when contracting out computer facility services (related to the handling of electronic or hard copy tax return data) to private vendors. However, this Publication does not appear to be specifically applicable to the handling of sealed envelopes. It should also be noted that the audit team identified several other states that currently contract with presort vendors and that these states reported no IRS security concerns regarding the contracted services.

State entities could benefit from cost savings techniques that are currently being used by several state entities.
Our review found that mail room personnel at some state entities have identified effective cost savings techniques that have resulted in postage cost savings. However, currently there is no mechanism for state entities to share these techniques in order to maximize the benefits to the state. Some examples of techniques that could be used to reduce entities' postage costs are described below.
Use of Presort Contractors Outside Metro Atlanta: We found that presort opportunities are available outside the metro Atlanta area. Our survey of state entities found six entities outside metro Atlanta that reported use of presort vendors to obtain postage discounts. One of the entities sent mail to a presort vendor in the metro Atlanta area which we estimate resulted in savings of about $13,000 in fiscal year 2008 and another entity sent mail to a presort vendor in Augusta which saved approximately $1,500 during this same period. The remaining entities sent mail to presort vendors located in Albany, Carrollton,

Reducing State Postage and Mail Services Costs

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Columbus, and Savannah. Information was not available on the savings realized from these entities' use of presort vendors.
Use of Remote Printing and Mailing: State entities can have items printed
remotely and mailed from locations where presort services are available. As a result, presort discounts can be achieved regardless of where the mailing originated. The audit team identified six state entities that reported use of remote printing to obtain presort discounts on certain mailings. For example, Macon State College reported that it uses two presort vendors in Macon to presort flyers, annual reports, post cards, and newsletters. The College emails these vendors copies of electronic files and the vendors print and mail the documents at presort rates. The College did not have information regarding the amount of money saved from presorting these documents.
Use of Electronic Presorting: Using specialized software (costing about
$2,000), mailings can be printed in ZIP Code order and mailed at a discount without using a presort service. For example, we estimated that the Mail Center at the University of Georgia (UGA) saved nearly $86,000 in postage in fiscal year 2008 by using electronic presorting software.
Reducing the Size of Mailed Items: In some cases, reducing the size of a mailed
item can result in significant cost savings. For example, the Mail Center at the University of Georgia reported that it recommended reducing the size of a notification sent to students accepted into the University that reminds them to pay their commitment deposits. Decreasing the size of this item to 4.25" by 6" allowed the mail piece to qualify as a postcard which reduced the rate from $0.42 per item to $0.17 per item. Campus Mail staff estimated that this change resulted in annual postage savings of about $900.
Use of non-profit rates for educational entities: State entities that provide educational services (such as colleges and universities) are eligible for non-profit postage rates that are less than standard presort discount rates. For example, we found that UGA utilized non-profit rates for certain mailings in fiscal year 2008 that resulted in about $9,600 in postage cost savings.
Use of Electronic Return Receipt for Certified Mail: Electronic return receipt
confirmation can cost significantly less than the standard receipt confirmation which involves the Post Office returning a signature card to the sender. For example, the Department of Community Health reported that they will soon begin using electronic return receipt in which DCH will receive an email containing the signature, rather than a signature postcard. This will result in savings of $1.20 per letter. They also indicated that when only confirmation of letter delivery is required, they will track the letter's delivery on the USPS website (which is free of charge) and will result in savings of $2.30 per letter. Because DCH is not yet sure how many letters will require return receipt and how many will require just delivery confirmation, estimations of savings have not been developed.
Use of Electronic Transactions: Electronic transactions can be used to reduce postage expenditures. For example, in 2004, the University of Georgia started sending out grades electronically instead of mailing them. Currently, all but 500-600 students receive their grades electronically which has resulted in annual postage savings of approximately $33,000. The State Accounting Office (SAO) is also planning to make changes beginning in January 2010 to facilitate electronic

Reducing State Postage and Mail Services Costs

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transactions to reduce the number of checks mailed out by state entities. SAO is currently developing an estimate of the postage savings that will result from these changes.
As discussed in the finding on page 8, DOAS could act as a clearinghouse to make information on cost savings techniques (like those identified above) available to personnel responsible for mail operations at state entities. This information could be used by management to identify cost savings ideas and techniques that might be used at their entities. DOAS should also consider providing assistance to entities to implement effective savings techniques.
Agency Responses DOAS indicated that it will implement a marketing plan prior to the new contract (scheduled for July 2010). The plan will educate agencies on the changes to the DOAS model of operations and promote the savings available through the contract. DCH reported that it started using electronic return receipt for some of its mail in October 2009, and expect to transition the remainder of the agency's mail by June 30, 2010.

More data regarding mail and postage activities at state entities is needed to
help identify cost savings opportunities.
Our reviews at four of the five state entities11 with the highest postage costs found that more data is needed regarding mail and postage activities to help identify cost savings opportunities. Sufficient information was available to identify postage savings obtained on most of the items processed through these entities' central mailrooms and some items processed by contractors. However, information to determine if any postage cost savings had been obtained on items that were processed and mailed directly by program staff, from field locations, or by some contractors was typically not available. Such information is needed to help entities determine if they have maximized their total postage savings. Specific details regarding the data that was not available at four of the state entities with the highest postage costs are shown in Exhibit 5 on the following page.

11 The Department of Labor had postage expenditures of about $2.8 million in fiscal year 2008; however, despite numerous requests, the Department would not meet with the audit team in order for us to obtain information on their postage expenditures. Therefore, we have no information on the type or amount of activity data that is available at this entity. (Information provided by the presort contractor indicated that about $1 million of the entity's mail went through the contractor.)

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Entity

Exhibit 5

Evaluation of Postage Expenditure Data By Entity

Fiscal Year 2008

Expenditures for which there was not sufficient data to determine if

Total Postage any cost savings techniques were used to minimize postage costs.

Expenditures

Amount

Type of Expenditure

DHR DOR

$5.7 million $4.3 million

$0.95 million $0.75 million $0.90 million $0.40 million

Field office postage expenditures.
Direct postage expenditures by various programs and other miscellaneous postage costs. Postage expenditures for contracts.1
Field office postage expenditures and postage reimbursements to employees.

UGA

$2.4 million

$0.80 million

Postage expenditures for items sent out directly by the University's departments or other campuses.

DCH

$2.2 million

$1.70 million Postage expenditures for contracts.

$0.10 million

Items that went through DCH's mail room and postage reimbursements to employees.

TOTAL $14.6 million $5.60 million

1 The audit team was eventually able to obtain data from one contractor (with postage costs of $773,000) showing that postage discounts had been obtained.

Source: Audit Team Analysis of Available Data At Entities

Entities should gather more complete information on their mail activities to help entity personnel identify opportunities for additional savings so they can ensure that postage costs have been minimized. Specifically, entities need to obtain at least minimal information from program offices and field offices regarding postage costs and any postage savings techniques that are being utilized. Vendors contracting with state entities for the purpose of mailing items should also be required to provide documentation to verify postage savings that are being obtained. Finally, all entity mail rooms should maintain detailed information on processed items (number and type of items processed at various rates) and cost savings techniques utilized to help them identify if opportunities for additional savings exist.
Agency Responses DOAS indicated that it will post information on mail services on its web site. In addition, the web site will have links to various United States Postal Service (USPS) web sites to help agencies to take advantage of existing services through the USPS. DHS indicated that it will explore the feasibility of obtaining additional information regarding postage expenditures from field offices across the state, and for other postage expenditures by various programs. DCH indicated that it will enhance its current Mail Center policies to require reporting from DCH's Financial Management division on reimbursement requests for mailings. DCH further indicated that it will require contractors execute agreements with presort vendors in order to obtain the most cost effective pricing for postage and to ensure that all savings realized through the establishment of these presort agreements are passed along to DCH.

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Appendix A Objectives, Scope, and Methodology

This performance audit was started at the request of the Department of Administrative Services (DOAS). DOAS requested that we assess whether cost savings might be achieved through centralizing state mail services in the Capitol Hill area. We elected to expand on this request and conduct an overall evaluation of state mail postage costs to identify potential savings. The scope of our review did not include the use of shipping services (Federal Express, UPS, etc.).
In order to identify postage expenditures for each state entity (state agencies and certain subunits of state agencies), the audit team initially reviewed data from the statewide accounting system (PeopleSoft). When postage expenditure data was not available in PeopleSoft, we reviewed data from financial audits, or obtained data directly from entities. To obtain additional information regarding state postal operations around the state, the audit team conducted a survey of state entities. The survey was distributed to 141 entity heads, who were requested to forward the survey to the person in their entity that was most qualified to complete the survey. The survey requested information regarding postage expenditures, the use of vendors to obtain postage discounts, the method(s) by which entity mail is metered, and the types of mail utilized.
Information regarding the postage rates charged by the United States Postal Service (USPS), including the discounts offered, was obtained from the USPS website. In addition, the audit team interviewed the USPS Georgia Business Mail Entry Manager regarding discounts available for presorted mail.
The audit team reviewed the contract with the current vendor providing presort services for the metro Atlanta area. In addition, the audit team made several visits to the vendor's facility to observe the operation and to obtain additional information on the services provided. We also reviewed the metering and courier services provided by DOAS and visited its facility. Finally, we reviewed documentation of the Request for Quotes (RFQ) issued in February of 2009 for metro Atlanta area mail metering and courier services.
To gain a better understanding of entity mailroom operations, we attempted to conduct on-site reviews at the five state entities with the largest postage expenditures during fiscal year 2008 (these entities accounted for about 52% [$17,364,976] of the state's total postage expenditures). Visits were made to mailrooms at the Department of Human Services, the Department of Community Health, the Department of Revenue and the University of Georgia. Despite multiple attempts to obtain information from the Department of Labor, they were not willing to meet with the audit team to discuss their postal processes or provide information on their operations. During the course of these on-site reviews, the audit team interviewed mail service personnel, reviewed documentation of postage transactions to determine discounts that were obtained, and looked for techniques for obtaining additional savings.
The audit team sought to obtain an understanding of internal controls relevant to the audit's objectives. We focused on the controls intended to ensure that state entities are adequately documenting their postage activities and achieving appropriate discounts on postage. The audit team conducted multiple interviews with entity personnel, and reviewed entity documentation at five entities to determine if these internal controls were effective. In addition, the audit team interviewed entity personnel to evaluate controls to address risks related to the possible conversion of state postage to personal use and determined that appropriate controls were in place to mitigate the risk of personal use. These controls, however, were not tested.

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We conducted this performance audit 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. Whenever possible, the audit team used the most reliable data available to conduct our analysis. This includes the use of reports generated from commercial postage use software, vendor reports, and data from the statewide accounting system. We believe that the evidence obtained provides a reasonable basis for our findings, conclusions, and estimations based on our audit objectives.

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Appendix B Postage Expenditure Totals By State Entity
Fiscal Year 2008

State Entity
Human Resources, Department of Revenue, Department of Labor, Department of University of Georgia Community Health, Department of Georgia Institute of Technology Driver Services, Department of Regents of the University System of Georgia, Board Administrative Services, Department of Georgia State University Valdosta State University Medical College of Georgia Georgia Southern University Secretary of State Corrections, Department of Georgia Perimeter College Kennesaw State University Community Affairs, Department of Natural Resources, Department of University of West Georgia Employees' Retirement System of Georgia Transportation, Department of Student Finance Commission, Georgia Teachers Retirement System of Georgia Clayton State University Public Safety, Department of Columbus State University Armstrong Atlantic State University Gwinnett Technical College Investigation, Georgia Bureau of Agriculture, Department of Georgia College and State University Workers' Compensation, State Board of Juvenile Justice, Department of Education, Department of Governor, Office of the Central Georgia Technical College Darton College Abraham Baldwin Agricultural College North Georgia College and State University Technical and Adult Education, Department of Atlanta Metropolitan College Early Care and Learning, Department of Fort Valley State University Southern Polytechnic State University Insurance, Department of Augusta State University Griffin Technical College Superior Court Clerks Cooperative Authority Road and Tollway Authority, State Savannah Technical College Georgia Southwestern State University Gordon College

Entities Headquartered Inside Metro Atlanta
$5,671,627 $4,304,749 $2,802,067
$2,201,575 $1,156,301
$904,325 $771,571 $712,446 $619,815
$407,008 $406,884 $406,086 $374,057 $367,759 $363,884
$257,000 $236,239 $220,000 $199,561 $198,621 $194,809
$188,531 $187,820 $186,274
$170,640 $154,040 $147,031 $141,361
$112,194 $109,665 $108,059
$101,949 $100,402
$92,694 $91,568

Entities Headquartered Outside Metro
Atlanta
$2,384,958
$598,450 $545,959 $479,447
$286,508
$193,246 $190,394
$172,160
$130,514 $119,855 $115,084 $113,956
$103,885 $97,906 $95,444 $90,015 $87,917 $87,600

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Appendix B (Continued) Postage Expenditure Totals By State Entity
Fiscal Year 2008

State Entity

Entities Headquartered Inside Metro Atlanta

Pardons and Paroles, State Board of Economic Development, Department of Law, Department of Middle Georgia College College of Coastal Georgia Albany State University Macon State College Atlanta Technical College Chattahoochee Technical College Savannah State University Personnel Administration, State Athens Technical College Southwest Georgia Technical College Albany Technical College DeKalb Technical College Dalton State College Supreme Court of Georgia West Central Technical College Forestry Commission, Georgia Columbus Technical College Valdosta Technical College Ogeechee Technical College Administrative Office of the Courts (Judicial Branch) South Georgia College Moultrie Technical College Bainbridge College Georgia Gwinnett College Flint River Technical College North Georgia Technical College Lanier Technical College Audits and Accounts, Department of Georgia Highlands College Heart of Georgia Technical College Coosa Valley Technical College Public Defender Standards Council, Georgia Augusta Technical College Northwestern Technical College Firefighter's Pension Fund, Georgia Okefenokee Technical College Veterans Service, State Department of General Assembly, Georgia East Georgia College Court of Appeals South Georgia Technical College Public Service Commission Appalachian Technical College West Georgia Technical College Middle Georgia Technical College Financing and Investment Commission, Georgia Sandersville Technical College

$84,760 $82,859 $81,915
$65,566 $65,321 $63,266
$57,968 $52,397
$44,460
$37,859
$35,708
$32,945 $31,942 $31,585 $31,298 $29,592 $27,717
$25,931

Entities Headquartered Outside Metro
Atlanta
$80,240 $73,220 $72,462 $70,076
$63,532
$61,966 $58,987 $58,860
$53,562
$51,045 $50,110 $49,847 $47,053 $46,000
$44,060 $43,445 $43,261
$37,808 $36,969 $36,833
$35,561 $33,851 $32,962
$32,414 $32,363
$31,678
$30,079
$28,549
$27,245 $27,141 $26,378
$25,836

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Appendix B (Continued) Postage Expenditure Totals By State Entity
Fiscal Year 2008

State Entity

Entities Headquartered Inside Metro Atlanta

Entities Headquartered Outside Metro
Atlanta

North Metro Technical College

$25,836

Gainesville College

Defense, Department of

$22,302

East Central Technical College

Banking and Finance, Department of

$18,841

Southeastern Technical College

Subsequent Injury Trust Fund Board of Trustees

$16,536

Superior Courts

$15,513

Accounting Office, State

$15,355

Swainsboro Technical College

Waycross College

Griffin RESA

Altamaha Technical College

Heart of Georgia RESA

First District RESA

State Properties Commission

$7,528

Peace Officers' Annuity and Benefit Fund of Georgia

Soil and Water Conservation Commission, State

Northeast Georgia RESA

Southwest Georgia RESA

Northwest Georgia RESA

North Georgia RESA

West Georgia RESA

Chattahoochee-Flint RESA

Metropolitan RESA

$3,291

Pioneer RESA

Coastal Plains RESA

Central Savannah River Area RESA

Middle Georgia RESA

Okefenokee RESA

Skidaway Institute of Oceanography

Superior Court Clerks' Retirement Fund of Georgia

$759

Oconee RESA Lottery Corporation, Georgia1 Judges of the Probate Court Retirement Fund1 Magistrates Retirement Fund1 Sheriffs' Retirement Fund of Georgia1 Georgia Military College1

TOTAL

$25,677,662

GRAND TOTAL

$33,200,877

1These entities did not provide any information on their postage expenditures in response to our survey.

$23,000
$22,287
$17,418
$14,075 $13,812 $13,553 $12,702
$8,246 $7,528
$7,140 $6,188 $6,000 $5,200 $4,999 $4,329 $3,700 $3,370
$3,115 $3,000 $2,595 $1,771 $1,700
$890
$0
$7,523,215

Source: PeopleSoft, Postage Survey Responses, DOAA State Government Division, MapQuest Information

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Appendix C Postage Costs and Presort Techniques Used By
Entities Headquartered in Metro Atlanta
Fiscal Year 2008

State Entity
Human Resources, Department of Revenue, Department of Labor, Department of Community Health, Department of Georgia Institute of Technology Driver Services, Department of Board of Regents of the University System of Georgia Administrative Services, Department of Georgia State University Secretary of State Corrections, Department of Georgia Perimeter College Kennesaw State University Community Affairs, Department of Natural Resources, Department of Employees' Retirement System of Georgia Transportation, Department of Student Finance Commission, Georgia Teachers' Retirement System of Georgia Clayton State University Public Safety, Department of Gwinnett Technical College Investigation, Georgia Bureau of Agriculture, Department of Workers' Compensation, State Board of Juvenile Justice, Department of Education, Department of Governor, Office of the Technical and Adult Education, Department of (Technical College System of Georgia) Atlanta Metropolitan College Early Care and Learning, Department of Southern Polytechnic State University Insurance, Department of Superior Court Clerks' Cooperative Authority, Georgia Road and Tollway Authority, State Pardons and Paroles, State Board of Economic Development, Department of Law, Department of Atlanta Technical College Chattahoochee Technical College Personnel Administration, State DeKalb Technical College Supreme Court of Georgia Administrative Office of the Courts (Judicial Branch)

FY 2008 Expenditures
$5,671,627 $4,304,749 $2,802,067 $2,201,575 $1,156,301
$904,325
$771,571
$712,446 $619,815 $407,008 $406,884 $406,086 $374,057 $367,759 $363,884 $257,000 $236,239 $220,000 $199,561 $198,621 $194,809 $188,531 $187,820 $186,274 $170,640 $154,040 $147,031 $141,361
$112,194
$109,665 $108,059 $101,949 $100,402
$92,694
$91,568 $84,760 $82,859 $81,915 $65,566 $65,321 $63,266 $57,968 $52,397
$44,460

Statewide Contract







Other Presort Technique 1
1 2 2 2 2 3
3
4

No Presort Savings
4
4
4 4 4 4
4 4 4 4 4 4 4

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Appendix C (Continued)

Postage Costs and Presort Techniques Used by

Entities Headquartered in Metro Atlanta

Fiscal Year 2008

State Entity

FY 2008 Expenditures

Statewide Contract

Other Presort Technique

No Presort Savings

Georgia Gwinnett College

$37,859

3

Audits and Accounts, Department of

$35,708

4

Public Defender Standards Council, Georgia Firefighter's Pension Fund, Georgia

$32,945 $31,942

3

Veteran's Service, State Department of

$31,585



General Assembly, Georgia Court of Appeals

$31,298



$29,592

4

Public Service Commission

$27,717



Financing and Investment Commission, Georgia State North Metro Technical College Defense, Department of Banking and Finance, Department of

$25,931
$25,836 $22,302 $18,841

4 3 3
4

Subsequent Injury Trust Fund Board of Trustees

$16,536

4

Superior Courts (Council of Superior Court Judges)

$15,513

4

Accounting Office, State

$15,355



State Properties Commission

$7,528



Metropolitan RESA

$3,291

3

Superior Court Clerk's Retirement Fund of
Georgia Lottery Corporation, Georgia5

$759 -

3

-

-

Sheriffs Retirement Fund of Georgia5

-

-

-

Totals

20

15

27

GRAND TOTAL

$25,677,662

1 During the course of the audit, these two entities began using the statewide presort contract.

2 These entities were using the state presort vendor in FY 2008 but were not receiving statewide contract pricing.

3 For these entities, the courier costs required for transporting their mail would outweigh our estimates of their savings from using the statewide presort vendor.

4 No additional courier costs would be required because these entities are already using the DOAS courier service.

5 These entities did not provide any information on their postage expenditures in response to our survey.

Source: PeopleSoft, DOAA postage survey responses, DOAA State Government Division, DOAS contract information

For additional information or for copies of this report call 404-657-5220 or see our website: http://www.audits.state.ga.us/internet/pao/rpt_main.html