10th anniversary of forever stamp prompts significant USPS accounting adjustments
By Bill McAllister, Washington Correspondent
A pretty significant stamp milestone passed last month with little notice.
It was the 10th anniversary of the first United States forever stamp.
There was no event at U.S. Postal Service headquarters in Washington, D.C., to remember the April 12, 2007, official first day of the first nondenominated (41¢) Liberty Bell forever stamps issued in Philadelphia.
However, postal accounting officials say they celebrated the anniversary last summer when they devised a new formula for calculating how the stamps are used.
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The new formula “really revolutionized” how the U.S. Postal Service figures how many of the stamps are used, said Maura A. McNerney, USPS vice president and controller.
Before forever stamps, she explained, the USPS had a pretty stable way of figuring how U.S. stamps were used. That formula assumed that most denominated stamps would be used within two years of their purchase. The ones that weren’t used were considered “breakage,” stamps tucked into albums by collectors and those lost or destroyed.
But forever stamps were designed to have an unlimited useful life.
As the name implied, the forever stamp was good for mailing a 1-ounce letter in the United States regardless of future rate increases.
And that fact alone required postal accountants to question their old formula.
The accounting rules require that the Postal Service cannot count its stamp revenues until the stamp is actually used. This is why postal accountants long have fretted over the number of stamps held by the public.
To be sure, stamps collectors were a major part of the concern, but lots of stamps were lost or destroyed before they could ever be used.
That adds up to what McNerney says are “stamps that are never going to be used.”
Stamps held by the public are “a liability” against the Postal Service’s promise to deliver a letter.
After the Liberty Bell forever stamps were issued, accountants made some estimates for usage rates.
In 2014, they had to make a $1.3 billion revision because more stamps were being lost, destroyed, or collected than they had expected.
A further correction in summer 2016 required a $1.1 billion change, McNerney said. Again, more stamps were being lost, destroyed, or collected than originally estimated.
These changes added to postal revenues, thus reducing the Postal Service’s net losses, but they did not add any cash to postal operations.
The changes were not considered accounting errors. Rather, they were dictated by better usage rates drawn from actual stamp use, as depicted on envelopes moving through mail-processing equipment.
Those results showed that the “breakage” rate on forever stamps is about 6 percent.
“Six percent of the stamps are never being used for one reason or another,” McNerney said.
That calculation concluded a year of study this past summer, prompting rejoicing among the folks who crunch the numbers at USPS headquarter at L’Enfant Plaza.
It has given McNerney confidence that big billion-dollar readjustments are unlikely in the future.
“It’s all estimates,” she told Linn’s. “All a very big estimate, but a statistically valid estimate.”
Accountants will continue to review the stamp usage numbers on a quarterly basis, she said.
“We have to make sure the numbers are accurate,” said McNerney, a certified public accountant with experience in the private sector.
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