According to a new report from the USPS Office of Inspector General, the Postal Service did not properly support justifications for some workshare discounts that exceeded avoided costs in 2008 and 2009. Workshare discounts – which generally take the form of reduced postage – are given to mailers for presorting, pre-barcoding and other activities that enable the USPS to streamline its workforce and reduce mailing costs. Approximately, 80% of mail volume was workshared in 2008, enabling the USPS to avoid $14.8 billion in costs while providing $15 billion in discounts to mailers. While the Postal Accountability and Enhancement Act of 2006 allows workshare discounts to exceed the cost the Postal Service avoids as a result of the workshare activity under certain circumstances, the OIG report, which was conducted between March and December of 2010, found the USPS did not properly justify 19 of 30 workshare discounts that exceeded avoided costs in 2009 and 23 of 35 discounts that exceeded avoided costs in 2008. Unsupported discounts exceeding avoided costs occur because the Postal Service has not documented the process it uses to reach its pricing decisions and does not maintain sufficient documentation to support these discounts, according to the report. The OIG’s research found that the Postal Service’s process for workshare discounts does not include a documented process outlining how it reaches pricing decisions and uses a qualitative approach in setting rates that involves extensive discussions with stakeholders from within and outside the Postal Service. In addition, the Postal Service’s cost avoidance models may not accurately reflect avoided costs for workshared mail. Until the Postal Service adequately supports justifications for discounts exceeding avoided costs, there is an increased risk that some mailers benefit from discounts at the expense of other mailers, the report continues. In addition, discounts exceeding avoided costs may result in higher mail processing costs and inefficient mailer processing decisions. The OIG makes the following recommendations: that the USPS prepare and maintain data, analyses or other documentation to properly support the amount of discounts that exceed avoided costs and document the methodology and decision making process used to determine the reasonableness of discount amounts that exceed avoided costs. USPS management agreed with the first recommendation, saying it intended to comply with the PRC’s guidance on the content for justifications where discounts exceed avoided costs. The USPS did not agree with the second recommendation, saying that “no further regulatory justification…is required.”