WASHINGTON?Rising costs and slipping mail volume are giving the Postal Service an increasingly bleak financial outlook, according to a General Accounting Office report.

It urges Congress to give the agency more operating flexibility.

The post office reported a $1.68 billion loss last year, the report said, and costs are increasing faster than income.

In addition, dealing with the terror attacks and the anthrax mailings have cost the agency millions of dollars, as will continuing efforts to protect the mail.

The report, prepared by the congressional investigative arm for the Senate Governmental Affairs Committee, comes just weeks before the post office is expected to send Congress a transition plan to improve its operation and finances.

Last year the GAO placed the Postal Service on its list of top government agencies at risk of severe financial mismanagement.