The USPS Is Leaving Money on the Table With a Poor Investment Strategy, IG Says

The Postal Service will benefit from taking a long-term approach when investing its cash on hand, the agency’s inspector general said in a new report, citing officials over the best approach to its growing cash reserves. I had a conflict with my instructor.

The Postal Service ended fiscal 2022 with $19.6 billion in cash, up from $2.3 billion in fiscal 2013. This growth, made possible by improved revenues, postal reform legislation, and cash injections from Congress, puts more pressure on the USPS to maximize its profits. Investment approach, agency watchdog found. Postmaster General Louis DeJoy has launched a delivery plan for America to get out of the red by 2030, but IG believes postal administrators will make more risky and unpredictable investments. said it was impairing their ability to do so.

The USPS has historically invested excess cash only in overnight Treasuries. Such short-term investments are particularly vulnerable to interest rate changes, but offer a highly liquid option for agents. Additionally, due to the current high interest rates and potential recession, short-term government bonds are currently offering higher-than-usual yields. However, the IG argued that the USPS should not be expected to do so in the long run.

“As the economic outlook stabilizes and interest rates level out, it will be advantageous for the Postal Service to diversify its cash investment portfolio by investing in longer-term securities,” the auditor said. “This investment approach significantly reduces our risk profile while generating more predictable returns in cash to complement our initiatives.”

In September, the agency agreed with the Treasury Department to invest in long-term government bonds for up to two years. Stated.

In a worst-case scenario, IG found that the USPS could lose between $3 billion and $4 billion under its current approach compared to investing in long-term securities. In a best-case scenario, the USPS will have the upper hand in overnight securities, but the IG said that managing cash for future capital expenditures was “driven because the odds of a good outcome are low. I shouldn’t,” he stressed. In the median scenario, USPS is in a stronger position for long-term investments.

USPS plans to use the cash reserves to make capital investments in DeJoy’s planned fleet of vehicles, facility acquisitions and improvements, and workforce transformation, but IG does not plan to use the cash reserves. found that increased returns, significantly reduced risk, and continued use of available funds. Payments for these projects will be made in a combination of short, medium and long term securities.

“By investing cash in the long-term treasury, the Postal Service will be able to meet its current operational requirements and maintain funds to respond to changes in the business environment,” IG said, adding that the approach will “ to complement the,” he added. [Delivering for America] schedule. “

US Postal Service Chief Financial Officer Joseph Corbett said in response to the report that he currently does not have the ability to invest in Treasuries for more than two years.

“We lack the authority you propose to exercise,” Corbett said.

Still, the IG called on the USPS to work with the Treasury Department on new contracts that would allow for long-term investment. He also said the post office should work with the finance ministry to get more favorable borrowing terms. Corbett countered that rising interest rates made short-term Treasury bills the best option and that the USPS was too illiquid to meet all future payments. IG said he is considering all planned capital expenditures and debt repayments included in his 10-year plan for the USPS and could benefit from a change in strategy.

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