USPS OIG Audit Report: Optimization of Passport Facilities

Background
The U.S. Postal Service accepts passport applications at over 5,000 post offices nationwide on behalf of the U.S. Department of State. The Postal Service agreed to accept passport applications for a minimum of 5 hours per day. There is a $25 fee for first-time applications and no fee for renewal applications. Some locations offer passport photo services for an additional $15. In fiscal year (FY) 2014, the Postal Service generated $129.4 million in revenue from processing about 5.2 million passport applications.

In 2013, the Postal Service initiated a pilot at five passport acceptance facilities, designating them passport centers. The centers, located in the Pacific Area, offered expanded service hours and dedicated staff to facilitate the passport application process. From FY 2013 to FY 2014, the number of passport applications processed at these centers increased by almost 150 percent, and revenue increased by about $1.2 million. As a result, management plans to increase the number of passport centers nationwide by FY 2016 but has not identified specific facilities.

Our objective was to determine whether opportunities exist for the Postal Service to optimize its passport acceptance facilities.

What the OIG Found 
The Postal Service has opportunities to optimize its passport acceptance facilities, increase passport program revenue, improve customer service, and strengthen the reliability of the passport facility information on its website.

We identified 181 facilities that, like the five pilot passport centers, are close to a U.S. border or a shopping center and offer passport photo services. Revenue at these 181 facilities increased by about $4.4 million, or 34.8 percent, from FY 2012 through FY 2014. Because these passport acceptance facilities are successful and share key attributes with the five centers, the Postal Service could increase revenue by converting them into passport centers.

The Postal Service also has an opportunity to increase revenue from passport photo services. Management did not offer passport photos at some acceptance facilities, stating that this was not a core business function and that the law prohibits the Postal Service from making the passport photo fee market competitive.

Management set a nationwide fee of $15, which was as much as $7 (or 47 percent) higher than competitors’ fees. Based on our analysis, neither the Code of Federal Regulations nor the U.S. Code prohibits a price restructuring of passport photo fees. We estimated the Postal Service could have generated an additional $19.1 million if customers purchased a photo for at least 48.1 percent of every passport application submitted in FY 2014. The Postal Service could further maximize its revenue by making the fee more competitive.

The Postal Service can also improve customer service at its passport acceptance facilities. In FY 2014, its Customer Care Centers received 237 complaints related to the passport program, of which 149 (63 percent) pertained to customer service. These complaints occurred because acceptance facilities do not have dedicated staff to provide passport services.

Lastly, the Postal Service’s website did not accurately specify which post offices accepted passport applications because the Postal Service did not always certify passport facilities data. If the Postal Service does not improve the reliability of information on its website, customers may experience delays and frustrations, leading them to seek other passport service providers.

What the OIG Recommended 
We recommended management evaluate expanding the passport acceptance center pilot program nationwide, establish photo services at all acceptance facilities, and re-evaluate and update the fee charged for passport photos.

We also recommended management educate employees about the importance of passport acceptance to revenue generation and update facilities’ data on the Postal Service’s website.

To read the full OIG report, click here.