[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
  OVERSIGHT OF THE U.S. POSTAL SERVICE: INSPECTOR GENERAL OF THE U.S. 
          POSTAL SERVICE, GOVERNORS OF THE U.S. POSTAL SERVICE
=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON THE POSTAL SERVICE

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM
                             AND OVERSIGHT
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 19, 1997
                               __________

                           Serial No. 105-39
                               __________

Printed for the use of the Committee on Government Reform and Oversight





                        U.S. GOVERNMENT PRINTING OFFICE
43-746                          WASHINGTON : 1997
_____________________________________________________________________________
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              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois          TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland       ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
STEVEN SCHIFF, New Mexico            EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida         GARY A. CONDIT, California
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEPHEN HORN, California             THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida                ELEANOR HOLMES NORTON, Washington, 
THOMAS M. DAVIS, Virginia                DC
DAVID M. McINTOSH, Indiana           CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana              TIM HOLDEN, Pennsylvania
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
JOHN B. SHADEGG, Arizona             DENNIS J. KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio           ROD R. BLAGOJEVICH, Illinois
MARSHALL ``MARK'' SANFORD, South     DANNY K. DAVIS, Illinois
    Carolina                         JOHN F. TIERNEY, Massachusetts
JOHN E. SUNUNU, New Hampshire        JIM TURNER, Texas
PETE SESSIONS, Texas                 THOMAS H. ALLEN, Maine
MICHAEL PAPPAS, New Jersey                       ------
VINCE SNOWBARGER, Kansas             BERNARD SANDERS, Vermont 
BOB BARR, Georgia                        (Independent)
------ ------
                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                       Judith McCoy, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

                   Subcommittee on the Postal Service

                   JOHN M. McHUGH, New York, Chairman
MARSHALL ``MARK'' SANFORD, South     CHAKA FATTAH, Pennsylvania
    Carolina                         MAJOR R. OWENS, New York
BENJAMIN A. GILMAN, New York         DANNY K. DAVIS, Illinois
STEVEN C. LaTOURETTE, Ohio
PETE SESSIONS, Texas

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                       Dan Blair, Staff Director
             Heea Vazirani-Fales, Professional Staff Member
                 Robert Taub, Professional Staff Member
               Steve Williams, Professional Staff Member
               Jane Hatcherson, Professional Staff Member
                         Jennifer Tracey, Clerk
          Cedric Hendricks, Minority Professional Staff Member











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 19, 1997...................................     1
Statement of:
    Corcoran, Karla W., Inspector General, U.S. Postal Service, 
      accompanied by Thomas Coogan, Acting Counsel, U.S. Postal 
      Service; and Sylvia Owens, Deputy Assistant Inspector 
      General for Investigations, U.S. Postal Service............    11
    Del Junco, Tirso, M.D., chairman, Board of Governors, U.S. 
      Postal Service; Susan E. Alvarado, Governor, U.S. Postal 
      Service; Bert H. Mackie, Governor, U.S. Postal Service; 
      Einar V. Dyhrkopp, Governor, U.S. Postal Service; and S. 
      David Fineman, Governor, U.S. Postal Service...............    59
Letters, statements, etc., submitted for the record by:
    Corcoran, Karla W., Inspector General, U.S. Postal Service:
        Followup questions and responses.........................    34
        Prepared statement of....................................    14
    Del Junco, Tirso, M.D., chairman, Board of Governors, U.S. 
      Postal Service, prepared statement of......................    62
    Fattah, Hon. Chaka, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............     9
    Gilman, Hon. Benjamin A., a Representative in Congress from 
      the State of New York, prepared statement of...............    79
    McHugh, Hon. John M., a Representative in Congress from the 
      State of New York, prepared statement of...................     4








  OVERSIGHT OF THE U.S. POSTAL SERVICE: INSPECTOR GENERAL OF THE U.S. 
          POSTAL SERVICE, GOVERNORS OF THE U.S. POSTAL SERVICE

                              ----------                              


                       WEDNESDAY, MARCH 19, 1997

                  House of Representatives,
                Subcommittee on the Postal Service,
              Committee on Government Reform and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2154, Rayburn House Office Building, Hon. John McHugh 
(chairman of the subcommittee) presiding.
    Present: Representatives McHugh, Fattah, and Davis.
    Staff present: Dan Blair, staff director; Robert Taub, Heea 
Vazirani-Fales, Steve Williams, and Jane Hatcherson, 
professional staff members; Jennifer Tracey, clerk; and Cedric 
Hendricks, minority professional staff member.
    Mr. McHugh. The hearing will come to order. Good afternoon. 
I want to welcome you to the first oversight hearing of the 
Subcommittee on the Postal Service for the 105th Congress. At 
the outset, I want to pay particular welcome to our new ranking 
member, the gentleman from Pennsylvania, Mr. Chaka Fattah. I 
have no doubt that it's due to his great influence that we have 
been elevated to the full committee room and we appreciate 
that.
    This is an exciting opportunity for us. We do have, I 
think, a good mix and balance of people who have been involved 
on the subcommittee in prior years and those who are joining us 
for the first time. Those of you who have suffered through 
these hearings in the past may recall that I tried to 
repeatedly say that, while some of us may not have had a great 
length of service in this subcommittee, we're trying to make 
lemonade out of lemons and use our lack of intelligence, per 
se, forge it into an asset, and bring a fresh perspective.
    I think that that has been helpful and has added to the 
process. And I feel very strongly about those who are joining 
the subcommittee for the first time. I look forward to their 
participation. I have a formal statement that I'd like to have 
submitted for the full record. But I would like to open up, 
with an abbreviated statement. As I mentioned, today does 
represent our first hearing in the 105th Congress.
    Unfortunately, our prior session was rescheduled from last 
Wednesday due to the Postmaster General's unexpected illness. 
We certainly extend to him our best wishes for a full and 
speedy recovery. We look forward to hearing from the Postmaster 
General at a later date, hopefully very soon. This afternoon we 
are pleased to welcome the new Postal Service Inspector 
General, Ms. Karla Corcoran, and the Governors of the Postal 
Service.
    We all recognize that this is Ms. Corcoran's first 
appearance before the subcommittee, and it is our first 
opportunity to talk with her. The new office that Ms. Corcoran 
holds is the product of efforts to establish an independent 
Office of the Inspector General for the Postal Service that 
really came to a conclusion during the final session of the 
104th Congress.
    Ms. Corcoran was appointed to her position by the Governors 
this past January and has been working, I understand, very 
diligently on establishing the parameters of her new office. We 
all recognize that she is starting from scratch in terms of 
defining needed resources and areas of responsibility. I would 
want the record to show that she has this subcommittee, 
certainly this chairman's, full support as she proceeds with 
this complex and, probably, very delicate task.
    Recognizing that Ms. Corcoran's time has truly been 
monopolized by the responsibilities of setting up her new shop, 
I hope she can highlight here today those areas she intends to 
review, including any investigative initiatives she might have 
made so far. We're also interested in hearing from Ms. Corcoran 
regarding her thoughts on ways her office can better facilitate 
labor and management relations in the Postal Service in the 
days ahead.
    I also want to welcome our second panel of witnesses, the 
Governors of the Postal Service. As the governing body of that 
organization, ladies and gentlemen, you have tremendous 
responsibilities for helping to shape the course and direction 
of the largest agency in the Federal Government. And your job, 
I understand, is often a thankless one. Some of us on this 
subcommittee can relate to that at times.
    Up until recently, you were reimbursed at the same level of 
compensation as your predecessors first appointed in 1970. So I 
think it's fair to note that, for whatever else may be said, no 
one can charge you with being in it for the money. We 
appreciate your interest in what we all know is an important 
activity in this great country. We also look forward to hearing 
from the Governors and the Inspector General detailing, for the 
subcommittee, the recently approved designation of functions 
between the Inspection Service and the IG.
    I also understand that the Governors approved an interim 
budget for the IG, which will enable the office to employ the 
necessary personnel as well as equip itself appropriately. For 
the Governors, we hope that they, as well as the IG, can 
comment regarding ways to strengthen the ethics environment for 
the Postal Service. Recent news articles have, unfortunately, 
cast a shadow on the enforcement provisions regarding 
procurement and compliance with conflict of interest 
procedures.
    Where we fail to observe these important requirements, 
there is an understandable loss of confidence on the part of 
the public and the institutions that wrongly divert attention 
and resources from the need to strengthen the ability of the 
Postal Service to perform its core mission. We all are aware of 
the tremendous crossroads at which the Postal Service finds 
itself. The institution envisioned by the 1970 Postal Reform 
Act finds itself at an increasing disadvantage as the 
marketplace in which it operates dramatically changes and 
continues to change.
    While this hearing is devoted to questions of oversight, 
the issue of postal reform is obviously inherent in determining 
what course the service shall take in the years to come. We 
urge the Governors today to give us their sense of the 
direction the Postal Service is going and what they believe the 
future may hold for this valued institution should the current 
statutory structure remain, and if Congress fails to consider 
what I, at least, believe are needed reforms.
    So with that, we'd like to proceed with the hearing. But 
before doing that, I welcome the opportunity to yield to our 
new ranking member, the gentleman from Pennsylvania, for any 
comments he may wish to make at this time. Mr. Fattah.
    [The prepared statement of Hon. John M. McHugh follows:] 
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    Mr. Fattah. Well, let me thank you, Mr. Chairman. And I do 
look forward, as do the other members of the minority on this 
subcommittee, to working with you as we seek to perform our 
role in terms of oversight. I want to welcome today's 
witnesses. I have a formal statement that I will have entered 
into the record. But I look forward to hearing from both the 
Inspector General and from the chairman and members of the 
Board of Governors.
    This is a very important function that affects the everyday 
lives of Americans throughout our country. And it is an issue 
of extraordinary importance, I think, to Members of the 
Congress, that we provide a framework that's necessary for the 
Postal Service to continue to do its job and to do it well. 
Thank you.
    [The prepared statement of Hon. Chaka Fattah follows:] 
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    Mr. McHugh. Well, I thank the gentleman, certainly. There 
will be no objection, I know, in having his full statement 
placed in the record. Let me restate how happy I am that you 
have joined us and how we're all looking forward to working 
with you toward the common good. We thank you for your 
comments.
    With that, I would call forward Ms. Corcoran. Under the 
rules of the full committee, it's required that every witness 
except Members of Congress have to take an oath that they will 
present testimony that's truthful. So if you will raise your 
right hand and repeat after me.
    [Witnesses sworn.]
    Mr. McHugh. Let the record show that Ms. Corcoran and her 
two associates have responded in the positive. I will refer to 
Ms. Corcoran for the purposes of introduction as she may see 
fit. But before we do that, we do have another Member who has 
joined us, the gentleman from Illinois, the Hon. Danny Davis. I 
would happily defer to him for any opening comments if he 
chooses to make them at this time.
    Mr. Davis. Thank you very much.
    Mr. McHugh. We said awful nice things about you. We're 
sorry you missed it. But we thank the gentleman and welcome him 
to the subcommittee. And we're looking forward to working with 
you. So with that, Ms. Corcoran, the attention of the full room 
is yours. We look forward to your comments.

STATEMENTS OF KARLA W. CORCORAN, INSPECTOR GENERAL, U.S. POSTAL 
  SERVICE, ACCOMPANIED BY THOMAS COOGAN, ACTING COUNSEL, U.S. 
 POSTAL SERVICE; AND SYLVIA OWENS, DEPUTY ASSISTANT INSPECTOR 
        GENERAL FOR INVESTIGATIONS, U.S. POSTAL SERVICE

    Ms. Corcoran. Mr. Chairman and members of the committee, I 
appreciate the opportunity to appear before you today to 
discuss our progress in implementing the Inspector General 
legislation for the U.S. Postal Service. Joining me are Tom 
Coogan, my acting counsel, and Sylvia Owens, my Deputy 
Assistant Inspector General for Investigations.
    With your permission, I would like to submit my full 
statement for the record and take this opportunity to briefly 
discuss our major accomplishments.
    Mr. McHugh. Without objection. So ordered.
    Ms. Corcoran. Thank you, Mr. Chairman. Since 1988, the 
Postal Inspection Service has performed the functions of the 
Inspector General. However, late last year, Congress enacted 
legislation creating a new Office of Inspector General within 
the Postal Service. The law required the Postal Service 
Governors to appoint an independent Inspector General within 90 
days. Further, the requirements necessary to establish an OIG 
were to occur no later than 60 days after the Inspector 
General's appointment.
    I am proud to report that we met these challenging 
requirements. I was sworn in as Inspector General on January 6, 
1997. One month later, I presented, and the Governors approved, 
a pay and benefits package for the organization. This was a 
necessary first step to begin recruiting and hiring qualified 
candidates. At the March Governors' meeting, I presented, and 
the Governors approved, our designation of audit and 
investigative functions. During this period, I also assembled a 
transition team of 12 people with diverse professional 
experiences from other Federal agencies and the Postal Service.
    Our first priority was to enter into an interim Memorandum 
of Understanding with the Chief Postal Inspector. This ensured 
that the Inspection Service would continue to perform the 
responsibilities under the Inspector General Act. The agreement 
provides that these functions are to be assumed by my office as 
positions are filled. As directed in the legislation, we 
developed a pay and benefits package that is comparable to 
other OIGs.
    Additionally, we decided to use pay bands similar to those 
used by the General Accounting Office. The use of pay bands was 
recognized by the National Performance Review as a better way 
to tie compensation to performance. Next, a transition team 
identified the functions to be performed by the OIG. We 
discussed Postal Service issues with congressional staff, 
General Accounting Office representatives and the Postal 
Service community, to obtain their perspectives.
    We identified current Inspection Service functions that 
should be performed by the OIG. We also identified additional 
work, including oversight of the Inspection Service, that we 
will perform to meet the requirements of the Inspector General 
Act. The OIG will focus on functions that lend themselves to 
service-wide reviews. For example, the OIG will conduct all 
financial statement audit activities above the district level.
    This allows the OIG to focus on key events leading to the 
consolidated annual financial statement. Additionally, the OIG 
will audit postal-wide performance issues, systems development, 
contract administration, and new facilities construction over 
$10 million. With respect to investigations, the OIG will have 
primary responsibility for bribery, kickback, conflict of 
interest and service-wide investigations.
    We will also be actively involved in the workers' 
compensation program by issuing subpoenas, conducting 
investigations of health care providers, and partnering with 
the Inspection Service. In addition, we will conduct or partner 
significant embezzlement cases. All investigations involving 
Postal Service executives will be performed by the OIG.
    We also identified a number of program areas where 
additional or expanded work is necessary. For example, the OIG 
will review the Postal Service's ratemaking processes, revenue 
generation initiatives and labor-management issues. Further, we 
will have a separate division responsible for overseeing the 
Inspection Service. This designation of functions meets the 
requirements and goals of the Inspector General Act.
    It results in three categories of work: Inspector General 
work, Inspection Service work, and shared, but not duplicated 
work. Also, the designation of functions leverages resources 
and minimizes adverse impact on Inspection Service employees. 
We are now developing a Memorandum of Understanding with the 
Chief Postal Inspector to implement our individual and shared 
responsibilities.
    My goal for the OIG is to have sufficient positions filled 
by June so we can initiate our own audits and investigations. 
To date, I have hired the Deputy Assistant Inspector General 
for Investigations, Sylvia Owens, and the Director of Contract 
Audits, among others. In addition, we are giving priority to 
hiring staff that will enable us to issue subpoenas and staff 
the hotline.
    Our next area of progress has been the development of an 
organizational structure to quickly implement the OIG's 
functions. We have developed an organizational structure with 
Assistant Inspectors General for Audit and Investigations. This 
complies with the Inspector General Act. The structure also 
supports the primary goals of the Postal Service. Now, I would 
like to turn to our progress in developing a budget for the 
OIG.
    We used the designation of functions as the basis for 
developing our budget estimates. We are now refining these 
estimates and will provide a budget for the Governors' approval 
at their April meeting. The Governors recognized at the March 
meeting the need to fund operations in the interim, and 
approved a 60-day budget of $5 million. Additionally, at the 
March meeting, the Governors approved a resolution authorizing 
the office to conduct investigations of postal crimes, carry 
firearms, serve subpoenas and warrants, and make arrests.
    In closing, I would like to acknowledge the support of the 
House and Senate staff, the Governors, and the employees of the 
Postal Service. In particular, I would like to thank Chief 
Inspector Ken Hunter and the employees of the Inspection 
Service for their assistance in helping us gain an 
understanding of the programs, activities, and functions of the 
Postal Service.
    Thank you, Mr. Chairman. I would be happy to respond to 
your questions.
    [The prepared statement of Ms. Corcoran follows:] 
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    Mr. McHugh. Thank you, Ms Corcoran. We're looking forward 
to that opportunity. In consultation with the ranking member--
as you heard the bells--we thought it would be best if we just 
recessed, hopefully for a brief period, while we go cast these 
votes, and then come back. So I apologize, but if you can bear 
with us, we'll try to return as quickly as possible.
    [Recess.]
    Mr. McHugh. We're going to reconvene the hearing. I 
apologize beforehand, the Murphy's law of legislation and votes 
is the minute you try to do something, they have votes. And we 
have two 10-minute votes coming up. So we're going to be off 
and on. It's just a fact of life. So if we could proceed with 
the permission of Mr. Fattah. I appreciate that. First of all, 
welcome.
    Ms. Corcoran. Thank you.
    Mr. McHugh. The provision of this office was a part of the 
original Postal Reform Act that we introduced last year. We 
felt it was important enough to try to pursue an initiative 
separately along with some other questions that we feel very 
appropriately and very fortunately were passed. And we're very 
much looking forward to your office being established and going 
forward with what we think is some very important work.
    And I want to state, again, what I tried to make clear last 
year. Our interest in creating this new office was not in any 
way intended to be a slight toward, particularly those 
individuals--Mr. Hunter, especially--involved in the combined 
office of years past. Quite the contrary, that particular 
gentleman has amassed an exemplary record in service to the 
post office and now the Postal Service. That is to be 
commended.
    But we do feel that there are some important functions and 
some impressions of heightened propriety that the creation of 
your office--and, now, with you in that position--can further. 
I was very pleased to hear, both in your abbreviated statement 
and in your full statement that I had the opportunity to read 
several nights ago, what I take as a spirit of cooperation 
between the Inspection Service and your office as you try to 
work your way through what I intended to indicate in my opening 
statement must be a rather challenging chore, to draw lines of 
demarcation as to who does what.
    You mentioned in your comments that you're working on an 
MOU with Mr. Hunter. We'd be pleased to hear how you're 
progressing with that. Have you encountered any difficulties to 
this point that may seem insoluble or of particularly difficult 
dimensions, and, also, when you think that MOU will be 
completed and executed?
    Ms. Corcoran. I expect the MOU to be completed about the 
time of the next board meeting, so, hopefully, we can present 
it to the board at the same time that we present the budget. We 
have not come across any problems in drafting the MOU thus far, 
mainly because we had worked out so many of the issues in the 
MOU while doing our designation of functions.
    What we are doing with the MOU is just putting a lot of 
meat around the bones that is shown in the chart that is in the 
longer statement concerning the designation of functions. We're 
also outlining some notification requirements which will just 
make smooth operation between the two offices.
    Mr. McHugh. When you say the next board meeting, you mean 
the April meeting?
    Ms. Corcoran. Yes, sir.
    Mr. McHugh. So this is pretty fast track, then?
    Ms. Corcoran. We're hoping that it will be on a fairly fast 
track so that we can keep things moving.
    Mr. McHugh. For the record, it's certainly not my intention 
to involve ourselves as a subcommittee directly in the issues 
that you're trying to resolve. But I would say that we are 
obviously very interested in ensuring that this new office is 
empowered to do those things that are consistent with the 
Inspector General Act, that we think are consistent with the 
objective of a Postal Service that is running as efficiently 
and smoothly as it can.
    A part of that function, obviously, is your office's 
ability to operate as unfettered as possible. We're going to be 
very interested and paying close attention to these 
developments as they go forward. And so, I would say to you 
that if you ever feel there is a need for our having 
information on any matter, we would greatly appreciate that 
information, just as an open offer and not as a challenge or as 
a demand. But we think this is important work.
    Ms. Corcoran. Thank you. I appreciate that.
    Mr. McHugh. If I could take it one step further. You are 
evolving a budget. I think the Governors acted very responsibly 
in issuing you the $5 million 60-day budget. But in terms of 
resource allocation--and I'm speaking for the Governors where I 
have no right to--but let me try to put myself in their 
position. Were I to ever be able to aspire to such high and 
lofty positions, I would be very concerned about the cost of 
the entire operation of the administration of the Postal 
Service.
    This is a new function, and it's going to cost money. I 
would imagine they're trying to see what they can do to try and 
limit the increase of costs, vis-a-vis the old combined 
service. I've heard talk, for example, about the contemplation 
of a dollar for dollar tradeoff. In other words, every dollar 
that goes to your operation somehow, by necessity, has to be a 
dollar coming out of the old Inspection Service.
    Have those kinds of issues been resolved as you work toward 
a full budget? Because, before you answer, let me say, I 
haven't aspired to such a lofty position. While I understand 
and even laud what I suspect is their intention to hold that 
down, it is certainly not the intention of this chairman to 
have such a dollar for dollar tradeoff, because I don't think 
that's possible.
    I think your testimony states fairly clearly, in assigned 
percentages, the amount of new work that you're going to be 
doing, hopefully. So how is your budget talk going? Are we in a 
dollar-for-dollar tradeoff situation? And believe me--some of 
the Governors are shaking their heads. No, you'll get the 
chance to answer those. But I was curious as to Ms. Corcoran's 
observations.
    Ms. Corcoran. The way that my team has gone about putting 
together the budget has been to actually take a look at what we 
need to run our operation without real consideration of what 
the Inspection Service is doing. Because I work for the 
Governors and the Inspection Service is working for management 
and the PMG, I have taken what I need to set up this operation 
and make it operate efficiently.
    The thing we have done with the Inspection Service, and we 
are continuing to do, is try to look to see how we can minimize 
the impact on the Inspection Service by phasing in our budget 
over a 5-year period. But we do have a lot of startup cost and 
just things that you need to get an office running that will 
make it very hard to keep costs down a lot in terms of making 
it budget-neutral.
    Mr. McHugh. Thank you for that. As I indicated prior to the 
gentleman from Pennsylvania's return, we understand there are 
going to be votes. He and his staff have been very gracious 
about allowing us to proceed under less than ideal conditions. 
So I don't want to hog this time. I'd be happy to yield to the 
gentleman for any questions he may have at this time, and, with 
that, say thanks, as well, for his cooperation.
    Mr. Fattah. Let me thank the chairman. I note that in your 
abbreviated testimony, you refer to the fact there were--it's 
on page 6 at the bottom--additional program areas where 
expanded work would be necessary. And one of them that you 
identify is labor-management issues, which is also indicated on 
your chart. If you could expound upon that for the benefit of 
the committee as to where you see, in terms of the program 
area, meaningful work being done?
    Ms. Corcoran. The Postal Service, with approximately 
850,000 employees, certainly has the nucleus for looking for 
new ways to do things and different ways to do things. There 
has been talk over years by GAO and other people that there 
needs to be improvement in many of the processes. In the past, 
the Inspection Service has dealt with labor-management issues 
mainly through hotline inquiries. The purpose of this group 
will be to actually take an independent look at what is going 
on in the workplace, to try to see whether or not there are 
improvements that can be made to the environment.
    Mr. Fattah. Your previous service was with the Air Force. 
Is that correct?
    Ms. Corcoran. That is correct.
    Mr. Fattah. It's a very large organization in and of 
itself.
    Ms. Corcoran. That is correct.
    Mr. Fattah. And one of the things that the armed services 
have been quite successful at is to affirmatively include 
people into leadership ranks. One of the labor-management 
issues that I have some concerns--or questions, really--not 
concerns, because I don't know enough yet about the whole issue 
of affirmative inclusion in the operation, the leadership 
elements in the police station.
    So hopefully, that will be one of the areas that you will 
give that you have some expertise from the Air Force--be able 
to follow suit with. Let me go back to the question about the 
budget that the chairman raised, the $5 million for the 60-day 
budget. Do you have any--I know that you're in the budget 
preparation process--but do you have any sense of what the 
outer limits are of what is going to be necessary for you to be 
fully staffed and at what point--I know that you suggest that 
in maybe 60 percent of the workload by 2001--when do you plan 
on being fully engaged and at what round ballpark figure are we 
talking about?
    Ms. Corcoran. I plan to present that information to the 
Governors April 6th and 7th at their meeting. We are in the 
process of still formulating the information. I'd be more than 
happy to provide it to you at that time. We are in the process 
of trying to make sure that we have included everything. When 
you have a startup operation, it's fairly difficult to know 
exactly what numbers you need for some of these operations, 
because you don't have any history to base them on--like the 
labor-management area. So we're still trying to resolve some of 
those issues. And as soon as we have them resolved and 
presented to the Governors, I'd be more than happy to present 
them to you, as well.
    Mr. Fattah. Let me ask you one more question on this labor-
management side, which is a big issue with the Postal Service 
as I've come to understand. One of the issues is that there's a 
significant case load backlog in the grievance procedures. And 
perhaps that's an area where some new thinking could apply 
itself to how that could be fast tracked in a way in which 
legitimate grievances could be heard over some reasonable 
period of time and resolved. That might be an area where there 
could be some usefulness for your office to engage itself in 
early on in this process.
    Ms. Corcoran. Thank you. We'll certainly put that on our 
list.
    Mr. Fattah. Mr. Chairman, I heard the bells go off again, 
so I'll yield back to you to get a few more----
    Mr. McHugh. Thank you. I thank the gentleman. Let me take 
one of the things the ranking member brought up and pose it a 
little bit further, because you also mentioned in your comments 
about involving yourself in rate setting. How might such a 
function work in your estimation? What do you view as your role 
in the rate setting process?
    Ms. Corcoran. Much of the information that comes and is 
used by the Postal Rate Commission is actually generated within 
the Postal Service. In the 2\1/2\ months that I've been at the 
Postal Service, I've heard much discussion that there's not a 
lot of confidence that the data that they receive is valid, 
accurate, that the estimates and the modeling used is 
appropriate. So I see that within the four walls of the Postal 
Service, we will be looking at the data to ensure that it is 
valid and it is usable for--useful for what it needs to be used 
for.
    Mr. McHugh. Listening to you, I almost thought that I gave 
you that answer. I want the record to show that I didn't. 
Because one of the things I, certainly, have been most 
concerned about--or, let me rephrase that--one of the things 
that I believe has been a primary obstacle to a better-running 
system from all sides--whether it be the Postal Service, 
whether it be the PRC, whether it be the customers--is that 
there is a great deal of question as to the veracity, validity, 
verifiability of data that are used in various processes. If 
you can help us through that one and uplift the acceptability 
by all parties interested in the process, you've made all of 
our efforts worthwhile.
    So certainly this subcommittee is very supportive of your 
efforts in that regard. I think it's an important one and I'm 
delighted that you responded that way. As I said, we are going 
to be interrupted. We're down to a 10-minute vote. So with the 
ranking member's agreement, we'll recess yet again and beg your 
indulgence. We'll be back as soon as we can. Thank you.
    [Recess.]
    Mr. McHugh. If we could come back to order, please. Just so 
everyone is aware, we have about another 10 minutes before a 
vote. So we'll be doing this again, because I know it's so much 
fun. It's hard to have any sense of continuity here. Ms. 
Corcoran, I apologize for the interruptions, but let's talk 
about your function as I expect there will be, to ensure that 
the contracting procedures with the Postal Service are proper. 
How do you view your--for lack of a better term--power to 
follow the money? In other words, do you see your duties 
stopping--as to questions of propriety--at the post office 
door, or do you feel that you have, where there are problems of 
questionable contracts, the power to go into those interests 
that were actually contracted with the Postal Service, as well?
    Ms. Corcoran. I see that it goes beyond the doors of the 
Postal Service. But Ms. Owens is an expert in contracting, 
which is one of the reasons I brought her on. So maybe you'd 
like to address the question?
    Ms. Owens. Sure. I don't know if I can say I'm an expert. I 
always try and shy away from that title. But I think in the 
area of contracting, certainly, there has been, historically, a 
lot of fraud, a lot of fraudulent things, a lot of product 
substitution. And because of that, I think we have to move, 
sometimes, outside of the doors of the post office to make sure 
that the customer is getting what we've contracted for as well 
as the right product at the right price. So I think there could 
be a lot of work outside the door, looking at the contracting 
process.
    Mr. McHugh. Let us create a hypothetical where it may not 
be the question of where the contract with the Postal Service 
is receiving the product they envisioned, but, rather, where 
there was a contract between the Postal Service and an outside 
source that may have been questionable from both sides. In 
other words, there may have been--did you use the word 
``fraud?''
    Ms. Owens. I think I did.
    Mr. McHugh. Well, let's use your word. That, rather than 
mine. Where there may be fraud or collusion. I'm not suggesting 
any circumstance, and I do not know of any, but I'm just 
saying, do you have the opportunity, the power and the 
prerogatives to pursue that outside contractor who may be 
involved in complicity or fraud of some nature?
    Ms. Owens. Yes, sir. We would. If it was--as long as it was 
on a contract with the post office--with the Postal Service. 
And certainly, if not, we would have the ability to refer it to 
some agency which would be able to follow it to its logical 
conclusion. But we would be able to. Yes.
    Mr. McHugh. I appreciate your response. On an attendant 
issue, there have been over the years--and I suspect there will 
be into the future, as there are with all Federal agencies--
reports by, for example, GAO and others, that have found 
problems with, if not accountability problems, with efficient 
use of resources to maximize results. The GAO issued a report, 
for example, raising what I think any reasonable person would 
agree were some serious concerns about lost revenues on bulk 
mail. Would it be the role of this office, as you envision it, 
to followup on those kinds of reports--No. 1--and No. 2, to 
ensure that, even down the road where you may have taken 
remedial action, that standards continue to be maintained?
    Ms. Corcoran. Absolutely. That would be part of our role. 
It is management's job to take the corrective actions, but it 
is within the Office of the Inspector General's role to assure 
that those changes are appropriate and that they really fix the 
problem that was identified.
    Mr. McHugh. One of the things that we were talking about 
the other night--and it has come up in discussions that we've 
had on the issue before--is that the Whistleblower Protection 
Acts, as it applies to the Postal Service, are not universal. 
It is our understanding, for example, that whistleblower 
protection in law is not extended to some administrative 
personnel. Has that been something you've had a chance to look 
at? And if it is, do you envision that to be a potential 
problem in terms of people feeling unfettered to come to you 
and share with you, without fear of recrimination, issues that 
they feel are just not right?
    Ms. Corcoran. We have had some discussions with the legal 
department about the Whistleblower Protection Act. I'm going to 
ask Mr. Coogan to address this issue further.
    Mr. Coogan. My understanding, Mr. Chairman, is that you are 
correct. The Whistleblower Protection Act that covers most 
other Federal agency employees does not cover Postal Service 
employees. Well, that may be a question that we can address, 
again, through the Law Department. However, the Inspector 
General Act itself has a provision that provides for 
whistleblower protection in cases of employee complainants. And 
certainly, the Inspector General's Office would treat all 
complaints as confidential to the extent possible and would 
look into allegations of reprisal and retaliation as a result 
of bringing those matters to the attention of the Inspector 
General.
    Mr. McHugh. So your analysis is that, while there may not 
be specific protection, there are, perhaps, cross-references 
that protect certain employees because of their inclusion under 
other provisions of an act, and even if they're not, you're 
going to act in a way that would protect their interest?
    Mr. Coogan. Yes.
    Mr. McHugh. I appreciate that. May I put before you a 
suggestion that, if I were an employee, I think I'd be less 
than anxious to come forward if I felt my only shelter would be 
found in a cross reference as legally appropriate as that might 
be? I am not an attorney, nor I suspect would I be one if I 
were over in the Postal Service. I would urge you to re-examine 
the coverage under Whistleblower Protection, particularly as it 
applies to what I understand are some of the administrative 
positions, and see if it might not be helpful to you. Also, if 
it might not be the right thing to do, as a matter of equity, 
to extend those acts to the employees on a primary reference so 
there aren't cross references.
    This is not contained, for example, in the Postal Reform 
Act that we drew up. But we discussed it the other night, and 
it may be. I'd like to have your input on that, because we 
don't want to be going down a road that's totally unnecessary. 
I think it merits some examination, so I'd appreciate that.
    Ms. Corcoran. We'll certainly go back and take a look at 
that and get back with the committee to let you know what needs 
to be done.
    Mr. McHugh. Thank you. I yield back to the gentleman from 
Pennsylvania, the ranking member, Mr. Fattah.
    Mr. Fattah. Just a few more followup questions. The 
Inspection Service, as it relates to its on-going functions 
under the Memorandum of Understanding, to the degree that there 
are going to be functions phased out and picked up by your 
office, how is that going to effect present employees in the 
Inspection Service?
    Ms. Corcoran. That's probably a question that's really 
better addressed to the Chief Inspector and, perhaps, even the 
Governors. In part, it will depend on what they do concerning 
their budget and how they relate to that. There has been an 
agreement made that we will consider inspectors for positions. 
If they are the best person for that particular position, they 
will be brought on board with us. But we are not necessarily 
responsible for hiring those people. So how the transition will 
take place is something that's still being worked out.
    Mr. Fattah. Well, at the end of this road, there's still 
going to be an Inspection Service carrying out certain 
functions?
    Ms. Corcoran. Absolutely.
    Mr. Fattah. Right.
    Ms. Corcoran. They have program responsibility that 
includes mail theft, burglaries, homicides, much of the 
security of the postal buildings, as well as the people who are 
carrying the mail, and the mails themselves. And they still 
have all those program responsibilities that they need to 
handle.
    Mr. Fattah. Now, the auditing functions that they have now, 
you would not envision that they would have any of those?
    Ms. Corcoran. They are going to maintain some of their 
auditing functions as indicated in the designation of functions 
exhibit. Those are going to be at individual facilities. For 
example, under the financial statement audits, they are going 
to continue to do about 200 of those audits where they will be 
looking at individual post offices to see how well their 
internal controls work and the effectiveness of financial 
operations within those individual operations. Those will then 
be rolled up, and we will use them in our overall scope to look 
at how postal-wide operations are doing financially.
    Mr. Fattah. Let me thank you for your appearance here 
today. And let me also, just for the purposes of the record, 
give a mention of the fact that Congressman Clay, in earlier 
sessions of the Congress, had promoted this notion--he's the 
ranking member for the overall committee--of an independent IG. 
And it was through the good efforts of the chairman, the 
gentleman from New York, that in last year's Congress, we were 
able to get this accomplished. So I want to wish you well. And 
I'm sure that we'll be seeing each other again as we go down 
this road. Thank you.
    Ms. Corcoran. Thank you.
    Mr. McHugh. I thank the gentleman for his comments. Indeed, 
in its infinite wisdom, I believe the House actually passed 
Congressman Clay's IG bill at one point. We're following some 
pretty vague and ill-defined footsteps, and we appreciate the 
assist that Congressman Clay's earlier work lent us.
    Let me return to try to better understand where you may be 
headed on your duties. I mentioned in my opening statement the 
question of ethics. The issue that comes to mind, at least when 
we were preparing that portion of the statement, specifically, 
was recently--in March--the Office of Government Ethics sent of 
letter to the Governors--to the General Counsel, Mary Elcano, 
stating that they--the office, OGE--viewed the Postal Service 
in compliance now with ethic standards.
    That was an important development. Because it's also my 
understanding that prior to that there had been some serious 
concerns raised about the implementation of clearly defined, 
well understood, and rigorously conveyed ethical standards, 
particularly in the procurement area, raised by OGE. And 
indeed, while OGE normally reviews departmental ethics program 
once every 5 years, they felt it was necessary to review the 
ethical practices and standards of the Postal Service some six 
times in the last 6 years.
    I think that demonstrates a prior level of concern. I 
commend the Postal Service for apparently, at least as of 
March, meeting that. I think it's fair to say that any program, 
be it one of Government ethic standards or be it one of work 
shop safety standards, needs oversight on a continuing basis to 
ensure that whatever is attained now is attained in the future 
as well. Is it your intention to monitor the ethics standards 
and practices as they apply through the concerns raised by OGE 
in the future, or is that something that you don't think you're 
going to be looking at?
    Ms. Corcoran. The General Counsel Office, as I understand 
it, is the responsible ethics official within the department. 
We may look at that in an overall, systemic type look within 
the Postal Service. However, it is OGE that routinely comes in 
and does these types of reviews and where ethics violations 
would be reported. Generally, they are the ones that would be 
coming in and doing these types of things. With the many issues 
that we have to deal with, that would probably not be one we'd 
deal with right now because of how the Office of Government 
Ethics has dealt with it.
    Mr. McHugh. Yes? You wish to add anything, Mr. Coogan?
    Mr. Coogan. Well, Mr. Chairman, what I would add, also, is, 
as I'm sure you know, the President's Council on Integrity and 
Efficiency and the Executive Council work with the Office of 
Government Ethics. The IG's office also works closely with the 
Justice Department Public Integrity Section, and is very 
sensitive, of course, to these ethics issues. But in general, 
the IG's roles are not to be the program administrators of an 
ethics program, but rather to oversee the process and the 
procedures that should be followed in those programs.
    Mr. McHugh. And you will be doing that latter function? 
Good. Well, let's go to something that probably is more in your 
line. Or, I should say, is it more in your line? Another 
instance was one of recent times where there were dramatic 
overexpenditures in the advertising accounts. One of the more 
frustrating parts of that scenario to those of us on this side 
of the room was that it became so significant before it was 
apparent that many up the line were aware of it. Would it be 
your function to monitor expenditure accounts to ensure that, 
whether it's inadvertent, purposeful, whether the ends were 
totally justifiable or not, but that you do have dramatic over-
expenditures occurring or any over-expenditures before they 
become dramatic? Is that a function that you'd be into or is 
that not more universal? Is that too specific?
    Ms. Corcoran. Again, we will be looking more at service-
wide issues. Along with that, though, we certainly will be 
monitoring for trends or changes in data that would cause a 
question, and try to determine what are the reasons for those 
changes. So hopefully we would be aware of those before they 
became a problem. But like many other things, as you're 
auditing, if you're not in the right place at the right time, 
you don't necessarily find it. We would monitor and try to pick 
up on those types of things. I'm not aware of all the 
circumstances involved around that particular situation. And 
I'd need to look at that particular situation to see what could 
be done to improve the overall system. And once we get our 
people on board, we certainly will be looking at that.
    Mr. McHugh. Thank you. Current law, as I understand it, 
requires that the Postal Service receive an independent 
certification of its financial statement, that that has been 
done for many years, as far as I'm aware, by Ernst and Young. 
I'm not suggesting that my comment is meant to indicate that 
there was any problem with Ernst and Young, that they have done 
anything but a credible job, but the requirement was placed in 
law for the Postal Service prior to that because there was no 
independent audit function, I assume. Well, now there is, 
obviously. So is it your intention? Do you think you meet the 
test of the law if you certified that financial statement, 
thereby internalizing that somewhat more?
    Ms. Corcoran. That certainly is what the CFO Act has done 
for the other IGs throughout Government. It's given them the 
opportunity to either certify it internally or to have an 
external CPA firm certify it. But certainly I will have the 
people on board doing the work, and they could certify the 
statements.
    Mr. McHugh. I know professionally you could. I want to make 
sure I understand your meaning of the word ``could.'' You could 
legally, you believe, meet the test of the law, as currently 
written, by certifying?
    Ms. Corcoran. No, sir. As it's currently written, my 
understanding of the law is that it must be by an independent 
certified public accounting firm.
    Mr. McHugh. OK.
    Ms. Corcoran. Which, obviously, we are an internal 
independent organization.
    Mr. McHugh. OK. However, were the law to be changed, it 
would merely put you in conformity with other agencies that 
have an audit verification mandate, and do it with an 
independent IG. Yes?
    Ms. Corcoran. Yes, sir.
    Mr. McHugh. Thank you. Well, because of how we've gone 
we've taken up almost 1\1/2\ hours of your time and, as you've 
heard, we have another interruption. I'm not going to ask you 
to stay any further. We do appreciate that and Mr. Fattah 
agrees that we should dismiss you. It sounds so funny, doesn't 
it. But thank you for being here. As I indicated earlier, we're 
looking forward to working with you, are anxious to work with 
you in helping you to meet any challenges that may arise, if it 
is appropriate in your view. We try not to get on the wrong 
side of an IG, despite of what you read in the newspapers. So, 
thank you and with that we will recess once again. When we 
return we will move on to the Board of Governors, who have all 
been waiting very patiently and we appreciate that. So we'll 
stand in recess. Thank you very much.
    Ms. Corcoran. Thank you.
    [Recess.]
    [Followup questions and responses follow:] 
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    Mr. McHugh. We'll come back to order. The chairman of the 
Board of Governors tells me that, understandably, some of the 
Governors have time constraints because of scheduled airlines 
and such. We'll try to move as quickly as we can. The good news 
is that we now have about an hour before our next vote, so we 
should be able to make some progress. Again, let me welcome you 
all here today. As we started with the first panel and, I 
believe, as all of you are aware from prior appearances, it is 
the rule of the full committee that all witnesses presenting 
testimony are required to swear to an oath. So if you would 
rise, please.
    [Witnesses sworn.]
    Mr. McHugh. Thank you. The record will show that all five 
witnesses responded in the affirmative. With that and without 
further delay, I happily yield the microphone and the attention 
of the subcommittee to the chairman of the Board of Governors, 
the Honorable Tirso del Junco. Mr. Chairman, welcome.

    STATEMENTS OF TIRSO DEL JUNCO, M.D., CHAIRMAN, BOARD OF 
 GOVERNORS, U.S. POSTAL SERVICE; SUSAN E. ALVARADO, GOVERNOR, 
  U.S. POSTAL SERVICE; BERT H. MACKIE, GOVERNOR, U.S. POSTAL 
SERVICE; EINAR V. DYHRKOPP, GOVERNOR, U.S. POSTAL SERVICE; AND 
        S. DAVID FINEMAN, GOVERNOR, U.S. POSTAL SERVICE

    Dr. del Junco. Thank you very much, Mr. Chairman. And good 
afternoon to you and all the Members. I'm Tirso del Junco, the 
chairman of the Board of Governors of the Postal Service. 
Joining me here today are Governor Alvarado, Governor Dyhrkopp, 
Governor Fineman and Governor Mackie. We are very pleased to be 
here to talk to you about the performance of the Postal Service 
over the last year. As the governing body of the Postal 
Service, the Board of Governors is comparable to the board of 
directors of a private corporation.
    Nine members of the board are appointed by the President 
and confirmed by the Senate. The two other members of the Board 
are the Postmaster General and the Deputy Postmaster General. 
The Governors are chosen to represent the public interest in 
general, and not as representatives for a specific interest in 
using the Postal Service. They bring a wide variety of 
backgrounds and viewpoints to the service on this board. I 
would believe that this diversity helps us to guide the 
management of this unique and vital public establishment.
    Even more than the typical outside directors of a private 
corporation, the Governors oversee the activities of executives 
and operating management within the organization. The board 
reviews business practices, directs and controls expenditures, 
and conducts long range planning and sets major policy on all 
postal matters. This, we believe, is an important public 
service. It requires each Governor to invest many hours each 
month in postal work. Serving as a Governor is, in a sense, a 
part-time job that requires full time attention.
    In return, quite apart from financial compensation, we 
experience the satisfaction and the occasional frustration of 
guiding the operation of a complex organization with revenues 
in excess of $56 billion and more than 760,000 full-time 
employees. To help us meet this obligation, the board is 
organized into four key committees dealing with audits, 
compensation, strategic planning and capital projects. Over 
time, we have continued to improve our by-laws, to sharpen the 
focus of these standing committees and, indeed, enhance the 
level of oversight we can bring to these crucial areas. We 
believe that in many areas our efforts have contributed to some 
notable successes.
    The Postal Service has just completed its two best 
financial years in postal history with a total of about $3.4 
billion of net income in these 2 past years. To put that figure 
into perspective, it is more than the total net income of all 
previous years of Postal Service operations. And in accordance 
with our directions--and I want to emphasize that--postal 
management has devoted a large chunk of that net income to the 
restoration of equity and recovery of prior years' losses.
    Last year we reduced our negative equity by 37.4 percent, 
down to $2.6 billion. Together with previous gains, that means 
we have reduced our negative equity by more than half in 2 
years. We have also directed management to proceed with the 
most ambitious capital investment program in postal history, 
totaling $14 billion over the next 5 years.
    That's $14 billion with a ``B.'' We are banking on these 
investments in facilities, technology and equipment. Together, 
with sustained efforts to control labor and transportation 
costs over time, we will bring a financially stable and 
productive Postal Service into the next century. And if our 
efforts continue to succeed, we will be able to keep postal 
rates stable and affordable while we do all this. With all our 
efforts to secure the financial health of the Postal Service, 
we cannot allow ourselves to lose site of the basic reason for 
the creation of this institution: to provide a maximum level of 
fundamental, universal public service.
    For that reason we take particular pleasure in the fact 
that overnight delivery scores have been hitting record highs 
over the past 2 years, and we are well underway to meeting this 
year's goals of 92 percent on time performance. These 
achievements are particularly remarkable in light of the Postal 
Service's mind boggling work load; 603 million pieces of mail 
per day delivered to 128 million addresses 6 days per week, 
totaling more than 182 billion pieces of mail per year.
    Or to put it another way, about 43 percent of the world 
entire mail volume. We recognize in the words of an old folk 
saying that ``no condition is permanent.'' Simply maintaining 
recent levels of financial and service success will require 
constant vigilance and much more hard work. And improving upon 
them will require even a greater effort at all levels of the 
postal management.
    There are two areas that will require our particular 
attention in the coming year. One is the improvement of 2 and 3 
day services levels where improvement, indeed, is long overdue. 
The other is establishing long-term control over the more than 
80 percent of postal costs that are linked to labor. But for 
today and the immediate future, we can report that the Postal 
Service is moving in the right direction. Over the next few 
years, the board will have even more tools to monitor and, when 
necessary, correct the actions of postal management. One of 
those tools, the Government Performance and Results Act of 1993 
will be coming into effect at the end of this fiscal year.
    We will carefully scrutinize the strategic and performance 
plans that are being prepared under that legislation to help us 
direct the course of the postal management. In addition, over 
the coming months, we will be working with the new Inspector 
General of the Postal Service as she begins the operation of 
her office. The appointment of the new Inspector General, the 
approval of a pay and benefit package for her office, and the 
initial designation of functions between the inspection service 
and the Inspector General are only the beginning.
    Establishing an office of such importance is by no means a 
turn-key operation, but, indeed, much more of a developmental 
process. We are very pleased with the progress of our new 
Inspector General, and want to make it clear that she will have 
our utmost confidence and support in this matter. I also want 
to say, Mr. Chairman, that the Governors remain committed to 
working with you, with the subcommittee, the Congress, the 
administration, postal management, and all the many and varied 
groups who have a stake in the continued health of the postal 
system as we approach this next century.
    Thank you very much, Mr. Chairman. That concludes my 
prepared statement.
    [The prepared statement of Dr. del Junco follows:] 
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    Mr. McHugh. Thank you, Mr. Chairman. I would, as I hope 
would be a minimum act of courtesy, extend the opportunity for 
any of the other Governors to make a statement at this time, if 
they choose. Hearing none, we'll move on. Well, why don't we 
just start with the easy stuff. Can you update the subcommittee 
on any plans you might have to file a universal rate increase 
this year?
    Dr. del Junco. Well, we are currently studying this very 
closely, and we have had presentations about the methodology 
procedures and the current financial situation. And we expect 
to address this in a pretty definite manner within the next 60 
or 90 days. And it is indeed true that we're committed not to 
have a postal rate increase through 1997. But at the present 
time, until we review those figures, we can't commit any 
further.
    Mr. McHugh. The record will show that Mr. del Junco 
exercised his vast ability in Republican politics and didn't 
really answer the question.
    Dr. del Junco. I apologize----
    Mr. McHugh. No, no. I understand what you're saying and----
    Dr. del Junco. I would love to tell you it's going to be 
1999, year 2000. But I do not want to mislead the committee or 
the public.
    Mr. McHugh. Well, respecting the process you're in, and I 
do, I understand your response. I don't mean to be too 
facetious. Let me move to a subset of the question. You noted 
very accurately that your revenue picture over the last 2 years 
has been on the plus side, to say the least. You have made 
decisions, as you are required, to allocate those resources on 
the one hand, I presume, to consider forestalling a rate 
increase. On the other hand, as your testimony noted, to make, 
I think, very appreciable cuts into your negative equity and 
your fund balance's prior years' losses.
    How do you decide which to do? How do you come about the 
process of saying, ``Well, we're going to reduce prior years' 
losses and our negative net equity versus putting the money 
toward forestalling a rate increase?'' Obviously you know. This 
is a subject of much debate amongst the postal community, as it 
should be. And it would be interesting, as well as helpful, to 
have you comment on that process because I know it's not an 
easy one.
    Dr. del Junco. Congressman, this is a very complex issue--
that is, the issue of negative equity and the restoration of 
that negative equity. I'll try to be as succinct as possible, 
and my fellow Governors probably will have to come in and help. 
But in 1994, we had reached a negative income of some $9 point 
plus billion. The Postal Rate Commission was pressing us very 
severely because this had come to very high figures.
    We then entered into an agreement with the Postal Rate 
Commission that we would retire this negative income--equity 
over a period of 9 years. And therefore, this means that we 
must retire according to the agreement and because the law 
requires that we do not have a permanent negative equity at the 
rate of $900 million. And we've been doing so since 1994.
    Our revenues have allowed us to do such a retirement. But 
as you proceed ahead, since the revenue remains stable and the 
cost increases because of commitments through our labor 
negotiations, our commitments to capital, and, indeed, the $900 
million that we must pay back, this has been drawing 
progressively to the degree that we cannot continue unless--and 
this is what, by the way--it brings us into the postal rate 
issue.
    And this is why I cannot tell you exactly until those 
figures are presented to us, when and where the decision is 
going to be made. I think the impression is out there that we--
No. 1--can engage into a negative equity ad infinitum, and--No. 
2--that we don't--are not, and do not have to, by law, retire 
that negative equity. We are, right now, complying with the 
commitment that this board made to the Postal Rate Commission 
in 1994. I hope that answers the question.
    Mr. McHugh. It does. I appreciate it. I believe you said 
you were going to defer to the other Governors if they wanted 
to make a comment.
    Mr. Mackie. Mr. Chairman, basically over the last 20 some 
years, we have used our surplus income to extend rate cases. 
And so, our equity continued to go more and more into the 
deficit. As a banker, I won't sleep well until we get our 
deficit down to even. And as our chairman mentioned, our income 
is fairly level while our expenditures continue to climb. And 
hopefully, this will all work and come together, you know, 
before our next rate case.
    Mr. Fineman. Mr. Chairman, I would just like to emphasize 
one point, and that is, that at no time has the repayment of 
the negative equity been accelerated. And I think the public 
should understand that. We are trying to do this over a 9-year 
period of time, but we haven't accelerated the repayment of 
equity so that we would, therefore, be forced to have a rate 
increase. We are doing this in, what I think, would be a 
prudent manner.
    Mr. McHugh. Am I correct, then, in the impression I'm 
getting, that it is your opinion were you to, say, forestall 
for a year any down payment on the retirement of your negative 
equity, that you would be in violation with the understanding 
of the PRC and would have consequences at your next rate 
hearing?
    Dr. del Junco. Yes. You're absolutely correct. But over and 
above that, I want to point out that 8 years ago our interest, 
because of that negative equity, was something in the 
neighborhood of $700 million. That interest that in 1996 was 
only $250 million. So there is some pluses to begin to retire 
this equity, too. But I think it's essential to understand that 
we have made a commitment with the Postal Rate Commission, and 
rightfully so. I think their demands were just, were absolutely 
correct. I mean, there is a limit as to how far you can take 
this negative equity.
    Mr. McHugh. Thank you for that. I appreciate the other 
Governor's response as well. Let me take a break from my 
questioning and yield to the gentleman from Pennsylvania, the 
ranking member.
    Mr. Fattah. Thank you, Mr. Chairman. Let me followup on the 
negative equity question with the chairman. I note that your 
financing of your debt is through the Federal financing bank. 
Does that represent the entirety of your debt obligations, Mr. 
Chairman?
    Dr. del Junco. Yes. It is. I'm looking to my chief 
financial officer.
    Mr. Fattah. All right.
    Dr. del Junco. I want to be sure that it's not something 
else out there.
    Mr. Fattah. Is that a limitation that is upon the board in 
terms of looking for debt instruments, or is that just a more 
useful entity?
    Dr. del Junco. Well, it is my understanding that our 
capital expenditures cannot exceed $15 billion. We have tried 
to shrink that down. We have made some very, very large 
commitments in the last 24 months. And also, there is a limit 
as to how much we can spend per year--$2 billion.
    Mr. Fattah. $2 billion a year. I'm more interested in the 
use of the Federal financing bank, that entity versus, you 
know, some other vehicle for debt.
    Dr. del Junco. Can I refer----
    Mr. Fineman. I believe that it is statutory.
    Mr. Fattah. My staff is whispering to me that it's 
statutory.
    Mr. Fineman. And let me just indicate to the chairman that 
I know in H.R. 22, which he's introduced, he would change that 
provision, I believe, and I think that that would allow--I 
speak for myself about this--but would allow for freedom for 
that Postal Service to do innovative financing.
    Dr. del Junco. More flexibility.
    Mr. Fattah. And I also note that you have both a short-term 
credit facility and an overnight credit facility, the overnight 
at a higher interest, obviously, of $300 million or so. My 
question is--and maybe we'll have staff deal with this at some 
future point about the decision process that went into that 
now, let me go on. The chairman was asking about this whole 
issue of the decision to pay off debt versus other 
considerations that the board would have--and I guess I should 
first back up a minute and recognize my constituent, Governor 
Fineman, and to welcome him, and the rest of the Governors who 
are here.
    And you said that, while you haven't moved the yard stick 
along, that you're paying this off within the 9 year window. Is 
it correct to assume that that means that you have within the 9 
year window accelerated payments also, or just that you're 
operating within this window?
    Mr. Fineman. I think it's fair to say that we're operating 
within this window, but we have not accelerated payments 
beyond. If we took one ninth of what that debt was at that 
period of time--we went before the Postal Rate Commission--part 
of the case that was presented to the Postal Rate Commission 
was that we would be repaying that debt. And we have, in 
effect, kept that pledge to repay that debt when we went before 
the commission as a result of the budget that we supplied to 
them.
    Mr. Fattah. Let me just say a couple things real quick--and 
I'm not a financial wiz--but, clearly, if you were able to 
operate in other ways in the market in terms of securing 
capital, you could do it at a better interest rate than what's 
represented here. But let me move on to some broader questions. 
I note through the chairman's opening statement that there's a 
lot to be thankful for. I mean, the Postal Service is doing 
well.
    All of you should be credited for your involvement and you 
should be thanked for your service to the Nation. One of the 
things that is a concern, I think, for all of the Members of 
Congress--we all represent some number of the employees who 
work for you. And we hear form them from time to time. And one 
of the more pressing issues is this whole issue of labor-
management relations. And I know that you have a tremendous 
enterprise that you're engaged in in which, in order to achieve 
the results that you've achieved over the last 2 years, that 
has taken a great deal of work, principally by these hundreds 
of thousands of employees who work for you.
    And it has come to my attention that there is not only are 
there the normal complaints that we hear about, there's a major 
backlog in the grievance procedures of some almost 60,000 
cases, some of which have been backlogged for a period of time. 
I see in the board structure that you have a number of 
committees. I assume this compensation committee is where most 
of these labor issues are dealt with, I'm not sure, based on 
the semantics that are used.
    But I'm interested in whether or not there are other 
strategies that you have in terms of beyond making more money 
and working harder at what you're doing, to try to improve the 
overall relationships between the Postal Service and its 
employees, and whether there is some strategic game plan that 
you might want to share with this subcommittee?
    Dr. del Junco. Well, we have had this on-going question 
about labor-management relations for many years. I have been on 
this board for 9 years, and this is an on-going attention. We 
have a vice-president in charge of labor management relations. 
In fact, he just addressed the board at the last board meeting. 
And there is--in fact, there are people on this very board who 
are extremely interested on the labor issue.
    And I don't mind telling you that Governor Fineman 
continues to address this thing, as well as other members of 
the board. But on the other hand, we do not manage the 
grievance committee. We do not address individual problems of 
the individual labor, because that is not the function of the 
board. There are established procedures, a method to carry this 
as far as the 60,000 remaining complaints that we have there. I 
would hope that I could address that in writing and refer it to 
you so we could have a more concise----
    Mr. Fattah. Address it to the chairman, and he'll make sure 
that we all get it. Yes.
    Dr. del Junco. Mr. Chairman, if you allow me, I would like 
to present you with a more explicit answer in writing.
    Mr. McHugh. We would welcome that opportunity.
    Ms. Alvarado. Mr. Chairman, if I--Mr. Chairman, Mr. 
Chairman----
    Dr. del Junco. Governor Alvarado.
    Ms. Alvarado. If I may, I would just like to say that this 
grievance procedure that you mentioned, Congressman Fattah, is 
something that the board has not been able to give adequate 
attention to until recently. And part of the reason is because 
we've been focused elsewhere in all those areas that you gave 
accolades to us for.
    But it is not that it's not--it is not unimportant to us. 
In fact, I hope that through the compensation committee, of 
which I am a member, we can take a closer look at these labor-
management issues, because our work force is our greatest 
resource. And happy workers are productive workers. And the 
fact of the matter is, is if there's a grievance problem, it 
brings everybody down.
    And that productivity goes down, as well. So we are really 
looking into the cause of these and the proliferation of them, 
and we hope to get a handle on them through the compensation 
committee, initially, and before the full board, eventually.
    Mr. Fineman. If I could just add for a minute. Mr. 
Chairman, I would say to you that I want to thank you for 
pushing the labor summit. I know that that has been something 
that has been considered for a long period of time. My basic 
feeling is that if there is communication between the labor 
unions and management, there is an opportunity to bring about 
change. If that communication stops, for whatever reason, there 
won't be an opportunity to bring about change.
    So I want to congratulate you and thank you for doing that. 
But I'd like to--this in my own idea--I have my own feeling 
about this, and that is that one of the feelings that we've 
seen labor change particularly, municipal government change 
over the last 4 or 5 years--I think the Congressman would 
agree. And one of the reasons it has is because there's been a 
communication between people.
    One of the things that's happened, when you're considering 
your omnibus legislation--I'm not sure this is the proper time, 
but I'll bring it up anyway--when you are considering that, one 
of the things that's occurred in industry, private industry, 
when there's been an endemic problem of labor-management 
relations, what they've considered at times--this is not 
radical--it's in the automobile industry, it's in the aviation 
industry--they've actually taken members of the labor unions 
and placed them on the boards.
    It happens at Amtrack. In the telecommunications, as 
Governor Alvarado has whispered into my ear. And I think that 
it's obviously something different, but I think it's something 
that maybe this committee should consider when you're looking 
at the legislation.
    Mr. Fattah. Let me thank you for that suggestion. And it 
will be something that we will work with the chairman on, as he 
has an interest in getting this reform bill moved through the 
Congress. But this is an issue that is obviously of import. 
Because, even with the financial success you've had over the 
last 2 years, one of the pressures on the Postal Service is 
from competitors who want to, you know, continue to make 
headway in of your core business products.
    And it would seem to me that productivity is connected to 
resolving some of these long-standing issues. This is not 
something that's just come up. This is something that has been 
with the Postal Service for a very, very long time. And it 
would seem to me that this board, since you've been so 
successful in attacking some of the other long-standing issues, 
that this is something that would deserve your attention as you 
go forward and as we approach the next century. I want to just 
thank the chairman and I'll yield back to him for a period of 
time.
    Mr. McHugh. I thank the gentleman. First of all, let me 
respond very briefly to Governor Fineman's gracious comments. I 
appreciate that. The principle in my eyes of the labor-
management summit was simply as you said, to talk. I'd like to 
believe that can't hurt. It should be noted, as to your 
suggestion about perhaps a reference in H.R. 22 providing for a 
mandated labor representative on the board.
    GAO, as I'm sure you're aware, is currently doing a study 
of the structure of the Board of Governors, looking at the wide 
range. I wouldn't be surprised if that issue were actually 
dealt with in that report, which, I'm told, will probably be 
put out by August. So it is an issue that is being considered. 
I'd like to yield to the gentleman, Mr. Davis from Illinois, if 
he might have any questions or comments at this time.
    Mr. Davis. Thank you very much, Mr. Chairman. Mr. del 
Junco, let me, first of all, just commend you and the other 
Governors for the outstanding public work that I think you do. 
Also, let me acknowledge the presence of Governor Dyhrkopp from 
the great State of Illinois. And I'm delighted to see him. A 
few moments ago, we had testimony from the Inspector General 
which indicated that she, indeed, was on a fast rack in terms 
of identifying problems, recognizing need, and establishing new 
structures to try and deal with those. Are you satisfied that 
all of the problem areas or potential problem areas have been 
identified?
    Dr. del Junco. There's no doubt that the accomplishments in 
these first 60 days are remarkable. I mean, to be able to put 
together this early days, her office. To be able to put 
together a budget which is going to be presented to us by--in a 
couple of weeks, April 7, is remarkable. I think that the board 
was extremely impressed with her presentation about her initial 
functions. But I am sure, as questions are brought out by the 
chairmen, and are brought out by other people within the 
system, those functions will be probably--will be expanded to 
cover other areas of great importance. So I do not want to lead 
anyone in this room to believe that this is the end of the 
project.
    Mr. Davis. Well, I, too, have been tremendously impressed 
with that kind of success in a relatively short period of time. 
And it brought to mind whether or not, and the extent to which 
management personnel had been cooperative. Are you in a 
position to comment on that or would it require commentary 
from----
    Dr. del Junco. I believe that, in her presentation to the 
board last month, and in every presentation, she has been very 
enthused and complimentary to the help that she has received 
from the inspectors and also from management at large. And so 
far, I am not aware of any major problems that have taken 
place.
    Mr. Davis. I'm always interested in the level and fast pace 
of increased technology which we are experiencing as a Nation, 
and, perhaps even, as a society. And in the area of strategic 
planning, I'm wondering whether or not we feel that we're 
keeping pace with the ever-changing technology. Are we up to 
snuff in terms of our planning and are we going to be in a 
position to make the most effective use of that?
    Dr. del Junco. The board is very sensitive to this. And if 
you look at our budget, we have, now, allocated some $14 
billion, precisely, to help out with our automation and with 
our improvement in technology. We have an extensive R&D program 
in place. And indeed, because of this ever-changing turnover in 
technology, this represents an additional expense for us. 
Because we must keep up with that technology if we are going to 
compete in the market place.
    Mr. Davis. I noticed that there was a little bit of 
conversation with the gentleman from Pennsylvania relative to 
the whole question of satisfaction, employee satisfaction, the 
interaction, the interrelationships. Are we finding, for 
example, that technology is seriously reducing the level or 
manpower or manperson or woman-person needs that we have? I 
mean, that is something. I happened to go into a store the 
other night to make a purchase.
    As a new Member of Congress I needed to purchase an ironing 
board and an iron. And I went into this particular store and 
discovered that I could do the whole thing without ever coming 
into contact with a person. And while I was pleased with that 
in terms of the efficiency, it sort of concerned me in terms of 
whether or not there were going to be ample need or 
opportunities for people to work.
    Dr. del Junco. That's the ever-existing question that we 
have before us. I think that we must understand, as you first 
addressed, that this new world of advanced technology. It's 
equally necessary so we can keep the quality of service that 
people expect. I think it's fair to say that as the U.S. Postal 
Service has increased its technologies, has become more 
automated, and we've been able to deal with a larger volume of 
mail, no employee has been displaced or lost his job.
    There has been some attrition. It is true that we do 
today--that we deliver 200 billion pieces of mail a year with 
about the same amount of personnel that we did 15 years ago. 
But this has not been at the expense of displacing any 
employee. But it is absolutely necessary for the Postal Service 
to keep up with the technology so we can deliver the quality of 
services that is required from us.
    Mr. Davis. My final question--I know that we don't 
necessarily always look at competition as the motivator or 
driving force in terms of our own decisionmaking. But how do we 
compare, or how would you compare the efficiency of the Postal 
Service with that of those other entities that could be called 
competitors in this industry.
    Dr. del Junco. I'm going to call--do you want to answer 
that?
    Mr. Fineman. I'm not quite sure I know the numbers. But I 
wanted to get some numbers that are significant to your last 
question.
    Dr. del Junco. That's right.
    Mr. Fineman. And then I'll try to answer your second 
question for you.
    Dr. del Junco. That's why I asked you.
    Mr. Fineman. When the Postal Reorganization Act started, 
there were approximately 730,000 full-time employees. The 
volume was approximately 80 billion pieces of mail. In 
September 1996, there were approximately 760,000 full-time 
employees. And our volume was 180 billion pieces. So what 
you've seen is that as the volume has increased as a result of 
automation, we probably have, you know, gained a few employees, 
but we almost we're getting toward tripling--we're a little bit 
more than two and a half times what our volume is. And I think 
that that's significant. As to the so-called people who are 
competitors of ours, I don't have the numbers in front of me, 
but I remember one statistic--and maybe there are some people 
here--within 1 day we deliver more mail than Federal Express 
will deliver in a year.
    Mr. Davis. Well, thank you very much, Mr. Chairman. That 
concludes my questions and I would yield back any additional 
time I might have.
    Mr. McHugh. Thank you very much, Mr. Davis. Let me follow 
on to the question about automation productivity. Have you been 
able to place a cost savings figure on the automation measures 
that you've made? Have you made estimates as to what your 
accrued savings have been?
    Dr. del Junco. I don't have those figures with me. I'd like 
to answer them in a written form, Mr. Chairman.
    Mr. McHugh. Certainly.
    Dr. del Junco. It's just too specific. And I don't have 
those numbers. We have our return of investments on specific 
projects. But collectively, I don't have those numbers.
    Mr. McHugh. If you could get that to us in the future, I 
think that would be of interest to the subcommittee, please. 
Tell me, what's the status of pack and send?
    Dr. del Junco. Deceased. No. We have stopped the program, 
as you all know--that we've challenged.
    Mr. McHugh. Deceased.
    Dr. del Junco. And in that challenge, we lost our appeal. 
And at the present time, we have sent this back to our legal 
department for consideration. But the whole project has been 
closed down.
    Mr. McHugh. I just want to make sure I understand. You're 
right--as I understand it, the PRC said this was a postal 
service, therefore subject to their review. This is the 
technical status, I believe, at least for the moment, unless 
you're making an announcement here today and I guess that's why 
I'm asking. Is it your intent to go before the PRC with a pack 
and send proposal?
    Dr. del Junco. We are considering that. It's been sent to 
our lawyers, too. And if we do do anything with it, we will 
send it to the PRC and follow the due process. But the decision 
has not been made yet, Mr. Chairman.
    Mr. McHugh. Will that be before or after you decide on the 
rate increase.
    Dr. del Junco. I beg your pardon? Let's just not tie them 
together, because then we're really in trouble.
    Mr. McHugh. OK. You heard me with the IG say that this is 
an oversight committee. You're aware of that and it's a 
responsibility we take very seriously. We pursued some 
questions about ethical reports from the Office of Government 
Ethics and such and she responded to that. I noted that, 
indeed, in March, OGE had issued a letter to you saying that 
your ethics program had now met what they feel were appropriate 
standards.
    I commend you for that. There's obviously another ethics 
situation that is outstanding with regard to the Postal 
Service, and that is the questions which have arisen with 
respect to the awarding of a proposed sole source contract to 
place soda and soft drink vending machines in postal 
facilities. I think it's important for the record to say that 
this subcommittee is deeply concerned about that particular 
issue.
    We also want to state that in response to that concern and 
in recognition of our oversight responsibilities, we wrote to 
the Justice Department asking for an update. They have 
responded. I think it's a fair summation to say that they noted 
to us this was an on-going investigation and that they believed 
it would be inappropriate at this time to disclose any 
particular information. I understand that position.
    I, as chairman, certainly don't want to do anything to 
inappropriately and in an untimely fashion intrude upon a 
weighty matter in an on-going Justice Department investigation. 
So, while we're aware of the situation, and, while under normal 
circumstances, I think it would be an appropriate topic for 
discussion, given the Justice Department's position, it's not 
my intention to pursue specifics at this time. But we will be 
very much involved and carefully weighing whatever reports come 
out of Justice.
    I am aware the Board has been advised that they are not 
subjects of the investigation, but that you have been or will 
be consulted in a witness role. I think that's important to 
note as well. But having said that, I think it, out of 
fairness, is appropriate to me to offer the opportunity for any 
of the members of the Board to comment on this situation should 
they choose. If they do not, I understand. But I would defer to 
you at this moment for that opportunity, Mr. Chairman or any of 
the other Members.
    Dr. del Junco. Mr. Chairman, I have no comment at this 
time. I reserve the right to, in due time, to address the 
issue, too. But it's obvious, for very personal reasons, why I 
want to restrain myself from making any comments at this time.
    Mr. McHugh. I appreciate that and I do understand. Governor 
Alvarado.
    Ms. Alvarado. Mr. Chairman, thank you for providing this 
opportunity. I just think it's important to point out, first of 
all, we appreciate your position on this matter. I think it's 
the correct one, since the investigation is on-going. I think 
it's important, though, to point out that we are, as a board, 
individually, and in whatever capacity called upon, cooperating 
fully with the Justice Department and its investigation. And at 
the appropriate time, deemed appropriate by you or the end of 
the on-going process, we'd be happy to answer any questions you 
have.
    Mr. McHugh. I thank you for that. I would also note that 
there have been no accusations, no findings of guilt, and no 
official allegations, as I said, of any kind. So I'm certainly 
not suggesting that there are those kinds of circumstances 
there. But it is an issue that I didn't feel we could ignore. 
Yes, Mr. Chairman?
    Dr. del Junco. I want to get clear for the record that the 
Postal Service is fully cooperating with the on-going 
investigation and that we are--we will continue to keep you 
informed. Our legal counsel has been advised, I understand has 
met with your staff. And he will continue on an on-going basis 
communicating with your staff.
    Mr. McHugh. I appreciate that. And yes, for the record, we 
do and have welcomed that opportunity to discuss that. We look 
forward, most importantly, as the issue evolves, to pursue it 
further, because we are concerned. I'd be happy to yield to the 
ranking member for comment at this time.
    Mr. Fattah. Well, I just want to state for the record that 
I join in the chairman's concerns as they have been raised. I 
do want to draw a distinction between those remarks and my own 
in as much as--you know, this is Washington, and it seems as 
though on most days everybody is under investigation.
    And I don't want to have it prejudged in any way, at least 
in my own mind. I think that it is a very open issue. And we 
should await all of the facts before rushing to any 
conclusions. I've read a lot of headlines, including today's, 
involving our own chairman--not our subcommittee chairman, but 
the chairman of the full committee--and Washington just seems 
to be full of headlines of people being investigated. I think 
it's very helpful to wait until the facts are in. And I think 
that the board, even though, I'm sure, this brings some level 
of discomfort, should in all of its actions not prejudge any of 
this, and to--because everyone deserves, I think, an 
appropriate presumption that they are acting in accordance with 
the law until proven otherwise. And we should not let headlines 
ruin people's careers. So I would just want to add my own 
remarks to that. I thank the chairman.
    Mr. McHugh. I thank the ranking member. When I was 
addressing the question earlier to the Inspector General with 
respect to the development of a budget and the concern there is 
a perception that every dollar to her new office should be a 
dollar out of the Inspection Service. Mr. Chairman, you were 
nodding your head and I said that you'd have the opportunity to 
respond and this is that opportunity.
    Dr. del Junco. Well, I believe that, first of all, there 
are new functions that she's assuming which are going to have 
to be underwritten. But I think the focus should not be 
necessarily on the budget of the IG. The board has already 
begun and is committed to fund those functions. However, it 
should be said that up to now, we have not had a report from 
the Inspection Service and we do not know how that's going to 
affect the Inspection Service function.
    There is a number of audit functions that are going to be 
removed. And indeed, the board have talked about how would that 
affect the budget of the Inspection Service. And I believe 
that's what the--really, the issue is. As we transfer functions 
from the Inspection Service to IG, there is going to be a need 
for an adjustment. And we intend to have a report and a 
presentation from the Chief Inspector in the next 90 days. But 
first we want to identify the functions and the budget of the 
IG.
    Mr. McHugh. I think that's a wise approach. I encourage you 
to go about this in a very prudent manner and I know you will. 
I just am concerned and I never heard it from any of you. But 
the proverbial talk on the street were suggestions that there 
was a predetermined policy on a one for one trade.
    Dr. del Junco. The talk in Washington is sometimes awfully 
cheap.
    Mr. McHugh. Sometimes a lot of other things, too. But 
that's true. Well, we're comforted by your response, Mr. 
Chairman, and appreciate that. Recognizing your time 
constraints, we won't be too much longer, I don't believe. In 
your comprehensive statement on postal operations for 1996, 
your annual report, I noted that--and others noted--your TFP--
total factory productivity--was omitted, and yet, as I 
understand it, it's a required part of the report. I was 
wondering why that oversight and omission of TFP occurred.
    Dr. del Junco. This was an administrative oversight. I have 
addressed a letter to the Postmaster General requesting that an 
answer be submitted to you immediately, and that in future 
reports, I can assure that that will be addressed. You should 
be receiving a letter within the next 48, 72 hours. Governor 
Dyhrkopp wants to----
    Mr. Dyhrkopp. We have been quite concerned about the 
matter. It should have been in the report. It wasn't in the 
report. The audit committee, which I'm chairman of, have asked 
for an investigation of it. We want to know why it was left 
out. Whose responsibility it was to have it in there. And who, 
if anybody, had it taken out. We're going to thoroughly 
investigate that matter and find out why that occurred.
    Mr. McHugh. Thank you, Governors, for that. And we'll be 
looking for that letter. I'd be happy because of the time 
constraints of the Governors and their airline schedules to 
yield to either the ranking member or the gentleman from 
Illinois, if they have any followup questions. Mr. Davis.
    Mr. Davis. I've got just one. Thank you very much. I've got 
just one followup. We talked about automation, and then it 
occurred to me that just a few days ago we were discussing 
whether or not we're equipped to handle breakdowns and what 
happens when the equipment doesn't work that we have relied so 
much upon. Are you satisfied with the contingency planning that 
you're doing to be in a position, should there be any equipment 
failure, to still have the kind of efficiency that we're 
looking for?
    Dr. del Junco. It's hard for me, not being a part of 
management, to answer that question. But let me just say a 
couple of things. One: before any of that equipment is placed, 
there is a considerable amount of research, pilot programs, and 
subsequent to that, they have systems to assure that our--there 
is not a breakdown, as you say, where we cannot deliver the 
mail. These are precautions that are part of the system. And it 
doesn't matter what kind of automation we're talking--be at the 
level of the optical character readers or the remote controls 
or whatever--there are systems in place for that. And if you 
need more--a more specific answer, I will have management 
address that question for you.
    Mr. Davis. Well, let me just say, Mr. Chairman, that I 
really appreciate the level at which you are in terms of the 
satisfaction. I know that sometimes, in some of the industries 
and businesses with which I've been involved, I've seen 
computers kind of break down and everything stops. And you 
can't get anything done.
    Dr. del Junco. We can't afford that.
    Mr. Davis. Thank you very much. And I certainly hope that 
you don't have that experience.
    Mr. Fattah. Mr. Chairman, I'll take one last shot, if I 
could, too.
    Mr. McHugh. Mr. Fattah.
    Mr. Fattah. There was some earlier comment about 
competitors. And you referred, Governor Fineman, to FedEx. In 
reality, the U.S. Postal Service, as best as I can discern, 
doesn't have any competitors here domestically. There's nobody 
who is in the same business that you are in, in terms of 
universal service. And a part of the issue for many of us to 
wrestle with is that since you don't have any competitors for 
what your primary public function is and that is to deliver 
mail to everyone no matter where they may be that on some of 
those functions for which you do bring in revenue through other 
activities, to what degree competition in other areas and some 
of the structures, the bureaucratic structures that we've set 
up, like ratemaking hurts your ability to offer a package are 
issues, really, that do need to be grappled with, because we 
don't want to be in a circumstance which is a reality in other 
places in this world, that you can't get mail sent to anywhere 
in the Nation.
    And so, I think there are a lot of issues for us as 
policymakers to ponder. We look forward to working with you. 
But I'd be interested in any response from members of the Board 
of Governors on this whole issue that was raised.
    Dr. del Junco. You know, there is an area which there's no 
competition, we have a monopoly, but there's other areas like 
priority mail and express mail and so on and packages and so 
on, in which the competition is extremely, extremely heavy. Our 
hands are tied down because of the price structure. We are not 
allowed to deduct--to any kind of portion of that fee.
    And to be quite candid with you, we would love to have a 
greater amount of flexibility, where we can compete in the 
market place. It's interesting to me that Federal Express has 
got the contract at the White House, not only this 
administration. During the Republican administration they also 
had the contract. And the reason they have it is because they 
can discount the service. There are a lot of limitations that 
we have imposed upon us in the competitive areas that really, 
really does not allow us to bring in the revenues that we 
should be bringing in.
    Mr. Fineman. Congressman, when you were making those 
remarks, I looked up at where you're sitting, next to 
Congressman McHugh, and what I said to myself is that we have 
to have the ability to deliver mail to every American. And when 
I looked at both of your districts--two places that are very 
different in America. Congressman McHugh represents one of the 
largest rural districts in America, and Congressman Fattah 
represents----
    Mr. Fattah. I'm not going to hold that against him.
    Mr. Fineman. Right. And Congressman Fattah, obviously, 
represents portions of the inner city of Philadelphia. Those 
two places, unless we continue to have a viable postal service, 
those two places and your constituents really won't get mail on 
a regular basis and a uniform rate. And I think that that's 
what we really are here to protect.
    Mr. Fattah. Well, let me thank you for your presence. And 
we'll look forward to engaging on this and many other matters 
as we go forward. Let me thank the chairman for his indulgence.
    Mr. McHugh. Thank you, Mr. Fattah. Let me again say that 
we're really delighted you're here and truly appreciate having 
both you and Mr. Davis with us through the whole hearing. I'm 
not accustomed, at this point in a hearing, looking around and 
seeing anybody but me. It's a nice change and I appreciate it. 
It's a wonderful change. With that, again, I understand you 
have airline schedules. We do have a number of questions that 
we'll be submitting for the record. I would certainly offer to 
the Members in attendance and others of the subcommittee that 
they are welcome to submit written questions should they 
choose, that we would forward to you, Mr. Chairman, and the 
other Governors, in expectation of your response, as in the 
past. We thank you and echo the ranking member's comments about 
your presence here today.
    Let me repeat our appreciation for the thankless task you 
do and for the great way in which you do it. On behalf of all 
Americans, we certainly welcome your high level of achievement 
and your sense of dedication. With that, I would note that we 
will stand adjourned in contemplation of two upcoming 
hearings--the next on April 16, involving ratemaking and after 
that, April 24th, where the Postmaster General will be 
rescheduled to have a hearing with him that was postponed.
    So the subcommittee stands adjourned. Thank you.
    [Whereupon, at 4:45 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Benjamin A. Gilman and 
followup questions and responses follow:] 
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