Huge fees, no mail! - AG says arrangements with postal agents to deliver mail uneconomical

A performance audit of the public postal service, which was conducted by the Pamela Monroe Ellis-led Auditor General's Department, revealed that the arrangements with postal agents to deliver mail were uneconomical as the agents handled little or no mail but were paid retainer fees totalling $41 million during the 2016-2017 financial year.

The tax dollar appeared to be going down the proverbial drain, with the auditor general pointing out that of 260 postal agents, 58 did not receive or dispatch any mail during financial year 2016-2017 but were paid sums amounting to $6.8 million.

Another 95 agents each received and delivered fewer than 50 items of mail throughout the year, costing the Post and

Telecommunications Department (PTD) $13.6 million in retainer fees for them to handle 1,606 items of mail, averaging $8,471 per item of mail.

The performance audit was done to determine whether the current operations were cost effective in delivering the service to customers. The audit also sought to assess the Postal Corporation of Jamaica's progress towards modernising and commercialising the public postal service as previously mandated by the Government.

Monroe Ellis noted that while the PTD collated data provided by postal agents on their activity levels, no analysis had been undertaken by the department to determine the extent to which it was obtaining value from the contractual relationships with the agents.

The PTD is reported to have closed 15 agencies between 2012 and 2017 owing to inactivity.

For years, the PTD has been plagued by inefficiency while being propped up by Jamaican taxpayers through massive government subsidy. The department has been racking up annual deficits averaging $529 million.

The auditor general reported that the PTD increased its reliance on government subsidy, which rose by 51 per cent between financial years 2012-13 and 2016-17. Government subsidy as a per cent of the total expenditure increased to 36 per cent in 2016-17 from 19 per cent in 2012-13.

Monroe Ellis pointed out that the increasing level of subsidy runs counter to the Government's intention for the PTD to become self-sustainable and to come off the national budget.

An analysis of a sample of 30 post offices for the period April 2016 to March 2017 revealed that more than half handled an average of 620 items of mail at a cost of $2,302 per item of mail, while only two post offices handled in excess of 5,000 items of mail, with each costing an average of $456 and $95 per item of mail.

The auditor general reported that the record-management system was not structured to allow her department to assess the financial performance of the 263 post offices. "This limitation could have undermined the PTD's ability to make timely informed decisions," she added.

Auditor General's recommendations:

Urgently review the business model - For sustainability, Postal Corporation of Jamaica (PostCorp) must assess the main cost drivers, with a view to rationalising and focusing on areas where the PTD has competitive advantage.

(PostCorp was formed to be a transition company to commercialise and modernise the postal service.)

Implement the strategy to modernise and regulate the postal service - The Ministry of Science, Energy and Technology must finalise the Postal Service Bill if the mail service industry is to be strategically aligned to the Vision 2030 objective of promoting cross-border trade.