Reducing state postage and mail services costs : implementation of audit recommendations has reduced costs

Follow-Up Review 12-15

August 2012

Georgia Department of Audits and Accounts
Performance Audit Division
Greg S. Griffin, State Auditor Leslie McGuire, Director

Why we did this review
This follow-up review was conducted to determine the extent to which the Department of Administrative Services (DOAS) has addressed the recommendations presented in our March 2010 performance audit (09-11).
The original performance audit was requested by DOAS to 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 postage costs to identify potential savings.

Follow-Up Review Reducing State Postage and Mail Services Costs
Implementation of audit recommendations has reduced costs
What we found
DOAS has either taken or begun to take action to address the findings and recommendations in our March 2010 performance audit. Our audit identified significant opportunities for state entities to reduce their costs by outsourcing mail services, taking advantage of mail presort discounts, and increasing the use of technology.

Who we are
The Performance Audit Division was established in 1971 to conduct indepth reviews of state programs. The purpose of our 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; assess compliance with laws and regulations; and provide credible management information to decision-makers.
Website: www.audits.ga.gov Phone: 404-657-5220 Fax: 404-656-7535

DOAS' in-house mail metering and courier services operations (including 13 positions and 9 vehicles) were eliminated in 2011 as a result of our audit. Appropriations to DOAS for these units were reduced by $1,079,669. Less the revenue formerly generated by DOAS for these services, the net annual savings to the state resulting from outsourcing these operations is approximately $488,000.
In addition, the new contract for courier services is an average of about 44% less than the charges previously paid by state entities for DOAS' courier services. Based on activity levels at the time of the original audit, state entities are now saving an estimated $253,000 annually on their courier services. The new contract for outsourced mail metering services is approximately 18% less than the charges previously paid by state entities for DOAS' metering services. Based on activity levels at the time of the original audit, state entities are now saving about $14,000 annually on their mail metering services.
DOAS' statewide presort contract was re-bid as recommended in our audit. The re-bid contract clarified that larger sized "flat" mail pieces are included and that state entities outside the

Reducing State Postage and Mail Services Costs

2

Capitol Hill area can utilize the contract. Based on estimated activity at the time of the original audit, state entities are now saving about $90,000 annually on mailing costs for "flats."
Activities to increase use of the statewide presort contract by state entities are also in progress. DOAS made the statewide presort contract mandatory for state entities in the metro Atlanta area. In addition, DOAS has started monitoring agency spending patterns to identify entities with high postage costs so they can educate them about the potential benefits of utilizing the statewide presort contract.
DOAS has also started collecting information on postage savings strategies and is planning to offer training programs and web-based seminars on postage cost savings techniques. In addition, DOAS is developing a repository of "best practices" to help state entities identify ways to save on postage costs as recommended in our audit.
In its response to our follow-up review, DOAS indicated that they agreed with the follow-up report, and that they are continuing to implement the report recommendations. This includes working with and monitoring agencies operating their own independent mail metering operations, as well as providing updated volume discount information to state agencies, and monitoring agency spending patterns.
The following table summarizes the findings and recommendations in our 2010 report and actions taken by DOAS to address them. A copy of the 2010 performance audit report (09-11) may be accessed at http://www.audits.ga.gov/rsaAudits.

Reducing State Postage and Mail Services Costs

3

Reducing State Postage and Mail Services Costs Follow-Up Review, August 2012

Original Findings/Recommendations

Current Status

DOAS should reconsider its business model for providing mail metering and courier services to state entities. It appears that DOAS' mail metering services could be delivered more economically if outsourced, and DOAS needs to determine if additional savings might be obtained by outsourcing its courier services. In lieu of these services, DOAS should consider collecting, analyzing, and disseminating information to help state entities save on postage costs.

Fully Implemented - DOAS outsourced its mail metering and courier services in 2011 and its appropriations were reduced by $1,079,669. Less the revenue formerly generated by DOAS for these services, the net annual savings to the state resulting from outsourcing these operations is about $488,000. The new contract for courier services averages about 44% less than the charges previously paid by state entities for DOAS' courier services. Based on activity at the time of the original audit, state entities are now saving an estimated $253,000 annually on their courier services. DOAS has also started collecting information on postage saving strategies and is planning to offer training programs and web-based seminars on postage cost savings techniques. In addition, DOAS is developing a repository of "best practices" to help state entities identify ways to save on postage costs.

Many state entities headquartered in metro Atlanta are not maximizing the savings opportunities available through the statewide presort contract. Our review identified entities that were not obtaining any presort savings, entities that could save more by using the statewide presort contract, and entities that were not fully utilizing the statewide presort contract.

Fully Implemented - DOAS made the statewide presort contract mandatory for state entities in the metro Atlanta area. DOAS has also started monitoring agency spending patterns to identify entities with high postage costs so they can educate them about the potential benefits of utilizing the statewide presort contract.

DOAS 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.

Fully Implemented - DOAS rebid the statewide presort contract in 2011. The new contract clarified that it includes "flats" and that state entities outside the Capitol Hill area can utilize the statewide contract. The new contract's charges are about 18% less than the charges previously paid by state entities for DOAS' in-house metering services. Based on activity levels at the time of the original audit, state entities are now saving about $14,000 annually on their mail metering services and about $90,000 annually on mailing costs for "flats."

The Department of Revenue and the University of Georgia should consider outsourcing their in-house presorting operations in order to reduce costs. Our review of DOR's and UGA's fiscal 2008 operations identified that they could have saved a total of about $214,000 by using the presort vendor. In addition, their operations had sorting equipment that was about 13 years old (with an estimated useful life of 1013 years) and the need to eventually replace this equipment costing $600,00 to $800,000 would be avoided by outsourcing their presorting operations.

Partially Implemented - DOAS is planning to visit DOR and UGA to review their operations and to identify potential savings available through use of the statewide presort contract.

Reducing State Postage and Mail Services Costs

4

Reducing State Postage and Mail Services Costs Follow-Up Review, August 2012

Original Findings/Recommendations

Current Status

State entities could benefit from increased use of cost savings techniques that are currently being utilized by several state entities. Our review found that mail room personnel at some state entities have identified effective cost saving techniques; however, there is no mechanism for state entities to share these techniques in order to maximize the benefits to the state. Examples of identified techniques that reduced postage costs included: 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 nonprofit postage rates for educational entities, use of electronic receipt for certified mail, and increased use of electronic transactions.

Partially Implemented - DOAS has started collecting information on postage saving strategies and is planning to offer training programs and web-based seminars on postage cost savings techniques. In addition, DOAS is developing a repository of "best practices" to help state entities identify ways to save on postage costs.

More data regarding mail and postage activities at state entities [and their field locations] is needed to help identify cost savings opportunities.

Partially Implemented - DOAS has started monitoring agency spending patterns to identify entities with high postage costs so they can educate them about the potential benefits of utilizing the statewide presort contract.

6 Recommendations

3 Fully Implemented 3 Partially Implemented 0 Not Implemented

Reducing State Postage and Mail Services Costs

5

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