Breast Cancer Research Stamp: Millions Raised for Research, but Better
Cost Recovery Criteria Needed (Testimony, 05/25/2000, GAO/T-GGD-00-137).
The breast cancer research stamp was the first stamp ever issued by the
Postal Service to raise money for a nonpostal purpose--in this case
medical research on breast cancer. The stamp is a "blockbuster"
commemorative stamp that costs 40 cents, or seven cents above the cost
of a regular first-class postage stamp. The Postal Service is authorized
to deduct from the seven-cent surcharge its costs to print, sell, and
distribute the stamp. GAO found that it is unclear how much it cost to
develop and sell the stamp because the Postal Service did not track
these expenses. Postal officials said that these costs were
inconsequential or immaterial and it would have been too expensive to
track them. In March, the Postal Service reported that the bulk of its
costs to develop and sell the stamp through the end of 1999 was $5.9
million. About $5.4 million of these costs were recovered through the
33-cent first-class portion of the stamp, and the remaining $482,000 had
been recouped from the surcharge revenues. GAO was concerned that the
Postal Service had not formalized its criteria for determining what
costs would be recouped from the surcharge revenue and was not
consistently applying its informal criteria, which changed over time. In
response to GAO's recommendation, the Postal Service indicated that it
would formalize and consistently apply its cost recovery criteria. The
Postal Service plans to recoup costs from the surcharge revenue that
were over and above the costs normally incurred with a "blockbuster"
commemorative stamp issue or a new postal product. The U.S. Mint's
experiences offer lessons that may be applicable to semipostals, because
there are many similarities between the two. In the mid-1990s, GAO
reviewed the commemorative coin program and found that some coins were
unpopular and did not sell well. GAO also found that as the number of
commemorative coins proliferated, the market became saturated and sales
fell. As sales fell, the U.S. Mint was unable to cover its costs on some
commemorative coin programs. This testimony summarizes the April 2000
report, GAO/GGD-00-80.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-GGD-00-137
TITLE: Breast Cancer Research Stamp: Millions Raised for
Research, but Better Cost Recovery Criteria Needed
DATE: 05/25/2000
SUBJECT: Breast cancer
Cancer research
Cost analysis
Postal service
Postal rates
IDENTIFIER: USPS Breast Cancer Research Semipostal Program
Germany
Netherlands
Belgium
New Zealand
Austria
Canada
United Kingdom
Sweden
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GAO/T-GGD-00-137
United States General Accounting Office
GAO
Testimony
Before the Subcommittee on International
Security, Proliferation, and Federal Services
Committee on Governmental Affairs
U. S. Senate
For Release on Delivery
Expected at
10:00 a.m. EDT
on Thursday
May 25, 2000
GAO/T-GGD-00-137
BREAST CANCER RESEARCH STAMP
Millions Raised for Research, but Better Cost
Recovery Criteria Needed
Statement of Bernard L. Ungar
Director, Government Business Operations Issues
General Government Division
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Summary
Breast Cancer Research Stamp: Millions Raised for
Research, but Better Cost Recovery Criteria Needed
Page 2 GAO/T-GGD-00-137
The Stamp Out Breast Cancer Act directed the U.S.
Postal Service to create the Breast Cancer
Research Semipostal (BCRS), the first-ever
semipostal in this nation's history. The BCRS
sells for 40 cents-with 33 cents covering the
First-Class postage rate. After recouping its
reasonable costs, the Service is to remit the net
surcharge revenue to the National Institutes of
Health and Department of Defense for breast cancer
research.
The public and a majority of key stakeholders GAO
spoke with believe it is appropriate to use
semipostals issued by the Service to raise funds
for special purposes-such as breast cancer
research. The Service, although supportive of the
BCRS, is generally opposed to semipostals because
the Service believes them to be outside its
mission. In GAO's opinion, the BCRS has been an
effective fund-raiser. It has raised millions
and, at the same time, has been convenient and
voluntary. By the time BCRS sales conclude on
July 28, 2000, the Service estimates it will have
raised about $14 million for breast cancer
research. The average monthly surcharge revenue
generated by the BCRS compared favorably with 7 of
the 12 foreign semipostals included in GAO's
survey, although it did not raise as much money as
most of the foreign semipostals on a per capita
basis.
It is not clear precisely how much it cost the
Service to develop and sell the BCRS. The Service
reported that the bulk of its costs, through the
end of 1999, were about $5.9 million. According
to the Service, about $5.4 million of those costs
were recovered through the 33-cent First-Class
portion of the BCRS, and the remaining $482,000
had been recouped from surcharge revenue.
Throughout the review, GAO was concerned that the
Service had not formalized its criteria for
determining what costs would be recouped from the
BCRS' surcharge revenue and was not consistently
applying its informal criteria, which changed over
time. GAO recommended that the Service formalize
and consistently apply its cost recovery criteria;
and in response to that recommendation, the
Postmaster General said the Service would do so
shortly. He said the Service planned to recoup
costs from the surcharge revenue that were over
and above the costs normally incurred with a
"blockbuster" commemorative stamp issue or new
postal product.
The U.S. Mint's experiences offer some lessons
learned that may be applicable to semipostals,
because there are many similarities between the
two. In the mid-1990s, GAO reviewed the
commemorative coin program and found that some
coins were unpopular and did not sell well. GAO
also found that as the number of commemorative
coins proliferated, the market became saturated
and sales declined. As sales declined, the Mint
was unable to cover its costs on some
commemorative coin programs.
Statement
Breast Cancer Research Stamp: Millions Raised for
Research, but Better Cost Recovery Criteria Needed
Page 10 GAO/T-GGD-00-137
Mr. Chairman and Members of the Subcommittee:
We are pleased to be here today to participate in
the Subcommittee's hearing on semipostal postage
stamps, and in particular the Breast Cancer
Research Semipostal, which we will refer to by its
acronym-BCRS.1 As you know, the BCRS-which was
mandated by the Stamp Out Breast Cancer Actis the
first-ever semipostal issued by the U.S. Postal
Service. It costs 40 cents-with 33 cents covering
the First-Class postage rate and the remaining 7
cents, less the Postal Service's reasonable costs,
earmarked for breast cancer research at the
National Institutes of Health (NIH) and Department
of Defense (DOD).
My statement this morning is based primarily on
the work we did in response to the requirement
contained in the act that we review the
appropriateness and effectiveness of the BCRS as a
fund-raiser and the costs associated with
developing and selling the BCRS. The results of
that work are discussed in our recently issued
report entitled Breast Cancer Research Stamp:
Millions Raised for Research, but Better Cost
Recovery Criteria Needed (GAO/GGD-00-80, April 28,
2000.) Today, I would like to highlight for the
Subcommittee some of the key information contained
in that report and also discuss some of the
lessons learned from the work we did several years
ago on the U.S. Mint's commemorative coin program.2
Because of the many similarities between
semipostals and commemorative coins, we thought
this discussion might be helpful to the
Subcommittee as it considers a myriad of
legislative proposals calling for additional
semipostals. Hopefully, by looking at some of the
problems that befell the commemorative coin
program, the government can avoid similar pitfalls
should Congress decide to authorize additional
semipostals.
By way of introduction, I would like to briefly
describe the work we did in response to our
congressional mandate. Because the act did not
specify the criteria to be used for evaluating the
appropriateness and effectiveness of the BCRS as a
fund-raiser, we developed what we believed to be
reasonable measures of appropriateness and
effectiveness. One of those measures was to
obtain the views of key stakeholders, including
(1) the Postal Service, (2) the American Cancer
Society, (3) the National Breast Cancer Coalition,
(4) the Susan G. Komen Breast Cancer Foundation,
(5) the president of the American Philatelic
Society, (6) the Curator of the Smithsonian
Institution's National Philatelic Collection, and
(7) Dr. B.I. Bodai-the individual credited with
conceiving the idea for the BCRS. Another measure
was to conduct a statistically generalizable
survey of adults in the continental United States
to determine the public's opinion of the BCRS and
semipostals in general. We also obtained
information on 12 semipostals issued by 8 foreign
postal administrations that responded to our
request for information. Additionally, we
gathered and analyzed pertinent information on
costs, revenue, and resources used to develop and
sell the BCRS.
Our bottom-line assessments, based on the work we
did, are that (1) the public and most of the key
stakeholders we spoke with believed it appropriate
to use semipostals issued by the Postal Service to
raise funds for special, nonpostal purposes; (2)
the BCRS has been an effective fund-raiser; and
(3) the cost of developing and selling the BCRS
totaled about $5.9 million as of December 31,
1999. The Service considers about $5.4 million of
those costs to have been recovered through the 33-
cent First-Class postage portion of the BCRS; and
said the remaining $482,000 has been recouped from
the BCRS' surcharge revenue as of April 14, 2000--
-the date of the latest transfers to NIH and DOD.
Throughout our review, we were concerned that the
Service had not formalized its criteria for
determining what costs would be recouped from the
surcharge revenue generated by the BCRS.
Additionally, we were concerned that the Service
was not consistently applying its informal
criteria for making such determinations to all
costs being tracked. We recommended that the
Postmaster General (PMG) promptly issue
regulations that clearly state the Service's
criteria for determining which costs are to be
recouped from the BCRS surcharge revenue and
ensure that the criteria are consistently applied
to all costs. In response to that recommendation,
the PMG stated that the Service will issue final
regulations formalizing its cost recovery criteria
by the time BCRS sales are scheduled to end on
July 28, 2000, and will apply those criteria to
all costs before making the last transfers of
surcharge revenue to NIH and DOD. He said the
Service planned to recoup costs from the surcharge
revenue that were over and above the costs
normally incurred with a "blockbuster"
commemorative stamp issue or a new postal product.3
I will now highlight for the Subcommittee the
results of our work in a little more detail.
Appropriateness of Using Semipostals as a Means of
Fund-Raising
The public and a majority of the key stakeholders
we spoke with believe it is appropriate to use
semipostals for fund-raising. However, there are
some who view fund-raising as outside the
Service's mission and therefore inappropriate.
The Service, although supportive of the BCRS, is
generally opposed to semipostals because it
believes that congressional mandates to issue
semipostals expand the Service's mission beyond
what was defined by the Postal Reorganization Act
of 1970. As discussed in our report, we agree
with the Service that the sale of semipostals is
outside the Service's mission as defined by the
1970 act. Additionally, we do not believe the
Service has the authority to issue semipostals on
its own volition without specific legislation
authorizing it to do so-assuming that it would
ever want to do so. This is not to say, however,
that legislation expanding the Service's mission
and requiring it to participate in fund-raising
activities by issuing semipostals is
inappropriate. That decision is strictly a policy
matter for Congress to decide.
The American Philatelic Society is also opposed to
the use of semipostals as fund-raisers because it
views them as a tax on the Society's members that
falls disproportionately and unfairly on their
hobby. However, the president of the American
Philatelic Society recently stated, in commenting
on a draft of our report, that if a fair process
could be designed for choosing no more than two
semipostals per year, he believed stamp hobbyists
could live with that process.
On the other hand, the public and most of the key
stakeholders we spoke with believed that it is
appropriate to use semipostals issued by the
Service to raise funds for special, nonpostal
purposes. In fact, an estimated 71 percent of
adults 18 years of age or older in the continental
United States support using semipostals as fund-
raisers. Key stakeholders believing it was
appropriate to use the BCRS issued by the Service
to raise funds for breast cancer research included
the American Cancer Society, the Susan G. Komen
Breast Cancer Foundation, Dr. B. I. Bodai, and the
Curator of the Smithsonian Institution's National
Philatelic Collection.
The eight foreign postal administrations that
responded to our survey were evenly split on the
question of the appropriateness of using
semipostals to raise funds for special, nonpostal
purposes. The postal administrations of Germany,
The Netherlands, Belgium, and New Zealand believe
that it is appropriate to use semipostals to raise
funds for nonpostal purposes. Conversely, the
postal administrations of Austria, Canada, the
United Kingdom, and Sweden believe it is
inappropriate to use semipostals to raise funds
for nonpostal purposes. Generally speaking, the
postal administrations that did not believe
semipostals are appropriate stated that
semipostals are not popular with postal patrons in
their countries.
Effectiveness of the Breast Cancer Research
Semipostal as a Fund-Raiser
Next, I would like to discuss the effectiveness of
the BCRS as a fund-raiser.
The Stamp Out Breast Cancer Act did not provide
quantitative measures for evaluating the
effectiveness of the BCRS as a fund-raiser.
However, the act provided that the BCRS was to
provide the public a voluntary and convenient way
of raising funds for breast cancer research.
Because the act did not provide quantitative
measures for evaluating the effectiveness of the
BCRS, and historic comparisons were not possible
because this is the first-ever U.S. semipostal, we
developed what we believed to be reasonable
measures of effectiveness. Those measures
included (1) determining whether the BCRS raised
funds for breast cancer research and was voluntary
and convenient; (2) obtaining the views of key
stakeholders, including the Postal Service; (3)
obtaining the public's view of the BCRS and
semipostals in general; and (4) comparing the
BCRS' performance with several semipostals issued
by foreign postal administrations. On the basis
of the results of those measures, we believe that
the BCRS has been an effective fund-raiser.
First, as provided by the act, the BCRS has raised
money for breast cancer research and, at the same
time, has been voluntary and convenient. Second,
key stakeholders, for the most part, viewed the
BCRS as an effective fund-raiser. Third, the
public's view of the BCRS was generally positive;
and a majority of the adults responding to our
public opinion survey expressed a desire to see
more semipostals in the future for other special,
nonpostal purposes. Finally, the average monthly
surcharge revenue generated by the BCRS compared
favorably with 7 of the 12 foreign semipostals
included in our survey, although it did not raise
as much money as 8 of the 12 foreign semipostals
on a per capita basis.
As of March 24, 2000, the Service had sold about
170 million BCRSs, which generated about $12.5
million in surcharge revenue. The Service
estimates that by the time sales are scheduled to
end on July 28, 2000, about 194.8 million BCRSs
will have been sold-generating about $14.3 million
in surcharge revenue.4 In accordance with the
act, the surcharge revenue generated by the BCRS,
less the Service's reasonable costs, is to be
transferred to NIH and DOD. The act specifies
that NIH is to receive 70 percent of the net
proceeds, and DOD is to receive 30 percent. As of
April 14, 2000-the date of the last
transfers-about $7.3 million had been transferred
to NIH, and about $3.1 million had been
transferred to DOD for breast cancer research.
Monetary and Other Resources Used to Develop and
Sell the Breast Cancer Research Semipostal
Next, I would like to discuss the costs associated
with developing and selling the BCRS. At this
point in my statement I should mention that this
is the area where we had the most concerns with
the BCRS program.
It is not precisely clear how much it cost the
Postal Service to develop and sell the BCRS.
There were costs the Service did not track because
it believed those costs would be inconsequential
or immaterial, such as minor accounting functions,
including posting sales receipts to cashbooks in
nonautomated post offices. As mentioned earlier,
the Service reported that the bulk of its costs,
through December 31, 1999, were about $5.9
million. The $5.9 million includes $488,000 in
costs identified by the Postal Office of Inspector
General that had not been previously identified by
the Service. At the time we concluded our review,
there was an additional $348,000 in costs that the
Postal Office of Inspector General believed was
attributable to the BCRS, but the Service
disagreed.
Of the $5.9 million, the Service considers about
$482,000 to be unique to the BCRS and had recouped
those costs from the surcharge revenue as of April
14, 2000-the date of the last transfers to NIH and
DOD. According to the Service, all other costs--
about $5.4 million--would have been incurred with
any blockbuster commemorative stamp issue or new
postal product, and those costs have been
recovered through the 33 cents that constitutes
the First-Class postage portion of the BCRS.
The Stamp Out Breast Cancer Act required that the
Service prescribe regulations setting forth the
criteria it would use to determine the reasonable
costs to be recouped from the surcharge revenue
generated by the BCRS. However, the act did not
establish a deadline to prescribe such
regulations.
As of mid-May 2000, the Service had not prescribed
regulations containing formal, written criteria
for determining the reasonable costs to be
recouped from the BCRS' surcharge revenue.
Through much of the BCRS' sales period, the
Service has used an evolving set of informal
criteria to decide what costs it would recoup from
the surcharge revenue. Additionally, our review
indicated that the Service did not consistently
apply its informal criteria to all costs.
The Service initially planned not to recoup any
costs from the surcharge revenue. We discussed
this approach with postal officials as the sales
program progressed and were told that the Service
had decided to recoup costs that were above and
beyond the costs normally associated with a
commemorative stamp issue. After we examined the
Service's application of those criteria and
expressed concern that the Service had not
consistently applied its commemorative stamp issue
criteria, the Service again revised its informal
criteria. Under its revised criteria, the Service
planned to recoup costs that were above and beyond
the costs normally associated with a blockbuster
commemorative stamp issue. Our analysis of the
Service's application of its revised informal
criteria also showed that the Service was not
consistently applying those criteria to all cost
items. The results of that analysis are discussed
in more detail in our recently issued report. In
commenting on our recommendation that the PMG
formalize and consistently apply the Service's
cost recovery criteria, the PMG announced in a
letter dated April 11, 2000, that the Service had
again revised its informal criteria. He stated
that the Service now plans to recoup costs over
and above the costs normally incurred with a
blockbuster commemorative stamp issue or new
postal product. The PMG also stated that the
Service will consistently apply its latest
criteria to all costs the Service is tracking.
Throughout the review, we were concerned that the
Service had not issued formal, written criteria to
determine which of the BCRS' costs would be
recouped from the surcharge revenue.
Understanding what criteria the Service is
applying, as well as the data or analysis
underlying its cost recovery decisions, is key to
establishing the appropriateness of the Service's
decisions regarding those costs to be recouped
from the surcharge revenue. Moreover, this
information is essential to providing postal rate
payers, who have not purchased the BCRS, assurance
that they are not making involuntary contributions
to breast cancer research. Involuntary
contributions occur when costs that should have
been recouped from the BCRS surcharge were not and
must be covered by revenue generated from other
First-Class postage.
We recognize that the act provides the Service
with the discretion to establish reasonable
criteria for determining the BCRS costs to be
recouped from the surcharge revenue and that the
act did not impose a time restriction. However,
until such time that the Service prescribes
formal, written criteria and consistently applies
those criteria to all BCRS costs, it is difficult
for Congress, us, and others to evaluate how well
the Service is implementing its legislative
mandate to recoup reasonable costs. The Service's
failure to prescribe formal, written criteria also
makes it difficult for Congress and others to
determine whether the Service's criteria are
appropriate. The need to prescribe formal,
written criteria as soon as possible is
particularly acute given that the Service's
actions are potentially precedent-setting. Eight
bills have been introduced in Congress that would
mandate additional semipostals, and each of those
bills contains the same language as the Stamp Out
Breast Cancer Act regarding the recoupment of
reasonable costs. As previously mentioned,
however, the PMG has expressed assurances that the
Service will issue final regulations formalizing
its cost recovery criteria by the time BCRS sales
are scheduled to end on July 28, 2000, and will
apply those criteria to all costs being tracked
before making the last transfers of surcharge
revenue to NIH and DOD.
Lessons Learned From Commemorative Coins
Before concluding my testimony, I would like
to mention some of the lessons learned from work
we did several years ago on the U.S. Mint's
commemorative coin program. We are hopeful that
by looking at some of the problems the Mint
experienced with commemorative coins, the
government may be able to avoid similar pitfalls
should Congress authorize additional semipostals.
Semipostals are similar to commemorative
coins produced by the Mint in that both are
authorized by Congress and produced by government
agencies. The purpose of semipostals and
commemorative coins is also similar. Semipostals
are sold at a surcharge over postal value, with
the net proceeds from the surcharge going to a
special purpose-such as breast cancer research.
Commemorative coins are legal tender but are
typically sold at several times their metal value,
with surcharges being paid to sponsoring groups.
They typically serve to honor certain events or
individuals and raise funds for the coins'
sponsors. For example, the Mint issued a set of
32 coins to commemorate and raise funds for the
1996 summer Olympic games in Atlanta, GA.
In August 1996, at the request of the
Chairman of the Senate Banking, Housing, and Urban
Affairs Committee, we issued a report on the
Mint's commemorative coin program that focused
primarily on coins issued between 1982 and 1996.
Among other things, the Chairman had been
concerned about the proliferation of commemorative
coin programs and the market for commemorative
coins. We believe at least two of the findings
from our report are relevant to semipostals and
merit revisiting.
First, the report noted that as the number of
commemorative coin programs authorized
proliferated, the market became saturated and
sales declined. From 1982 through 1989, Congress
authorized an average of less than one
commemorative coin program per year. During that
period, the total number of commemorative coins
sold averaged 4.5 million annually. From 1990 to
1995, however, Congress authorized an average of
2.7 commemorative coin programs per year, but the
total number of commemorative coins sold per year
fell to an average of 2.8 million. The report
noted that according to coin collectors, the
Director of the Mint, and others, commemorative
coin sales declined in the early 1990s because
there were so many different commemorative coins
that the market became saturated and could not
absorb more. Additionally, they noted that some
commemorative coin themes were not well accepted
by the public. For example, some coins with broad
public appeal sold well, such as those
commemorating the centennial of the Statue of
Liberty and Ellis Island. However, coins with
seemingly narrower appeal, such as the United
Service Organization5 commemorative, did not fare
as well. As a consequence of these
conditions-market saturation and some unpopular
coin themes-commemorative coin sales during the
early 1990s were significantly less than hoped
for.
Second, the report noted that on some
commemorative coin programs, the Mint recorded a
loss because sales were not sufficient to cover
costs. In 1994, for example, the Mint reported
losing $4.1 million on the World Cup coin program.
To help minimize the potential for future
losses, the report concluded, among other things,
that Congress could guard against (1) the
production of more commemorative coins than the
market can absorb, and (2) the selection of themes
that are unlikely to have broad appeal to the
commemorative coin market.
We believe semipostals could be vulnerable to
some of the same pitfalls that befell the
commemorative coin program in the early 1990s. As
we noted in our report on the BCRS, there has
already been a proliferation of semipostal bills
introduced in Congress since the act creating the
BCRS. Passage of several of these bills creating
semipostals with similar sales time frames might
saturate the market and strain, if not overwhelm,
the Service's capacity to effectively and
efficiently develop, distribute, and market these
semipostals.
Additionally, just as some commemorative
coins failed to sell well because of themes
lacking broad market appeal, semipostals with
limited public appeal and marketability might also
fare poorly. The BCRS benefited not only from a
relatively high public awareness of breast cancer
issues, but also from a nationwide network of
health research and support organizations that
supported and promoted the breast cancer
semipostal-such as the Susan G. Komen Breast
Cancer Foundation and the American Cancer Society.
Semipostals for lesser known causes with limited
organized support might not fare as well, possibly
resulting in a monetary loss for the Service and
no surcharge revenue for the stamps'
beneficiaries. Competition from other semipostals
may also have an impact on sales, as was the case
with commemorative coins. For example, the Mint's
experience with commemorative coins shows that
total sales were the highest in years when only
one commemorative coin program was ongoing-not two
or more.
The Service projects that about 195 million
BCRSs will have been sold by July 28, 2000, when
sales are currently scheduled to end. The Service
reports that these sales will cover its cost of
developing and selling the BCRS, plus generate
about $14 million for breast cancer research. A
semipostal without the broad market appeal and
organized support enjoyed by the BCRS might fail
to sell sufficiently to generate even enough
revenue to cover the Service's costs-a situation
that would be both costly and problematic for the
Service in that rate payers would be covering
losses incurred from postal fund-raising
activities.
Mr. Chairman, this concludes my statement. I
would be pleased to respond to any questions you
or Members of the Subcommittee may have.
Contact and Acknowledgements
For future contacts regarding this testimony,
please contact Bernard L. Ungar, Director of
Government Business Operations, on (202) 512-8387.
Individuals making key contributions to this
testimony include Gerald P. Barnes, Charles F.
Wicker, and Roger L. Lively.
_______________________________
1 A semipostal is a stamp sold at a surcharge over
postal value. The additional charge is for a
special purpose.
2 U.S. Mint: Commemorative Coins Could Be More
Profitable (GAO/GGD-96-113, Aug. 7, 1996).
3 A commemorative stamp is a postage stamp that
depicts the cultural and historical heritage of
the United States; e.g., important people, events,
places, or special subjects of national appeal or
significance. A "blockbuster" commemorative is a
commemorative stamp that has mass appeal; garners
Postal Service support on a national level; and,
in most cases, will be highly retained by postal
patrons and not used for postage.
4 H.R. 4069 and S. 2386 were introduced in
Congress on March 23, 2000, and April 11, 2000,
respectively, to extend the sales period for the
Breast Cancer Research semipostal for 2 years.
5 The United Service Organization provides
services to active duty military personnel, such
as emergency housing and food assistance.
*** End of document ***