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KPMG Case Study: USPS

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johnatan Milton

on 10 December 2015

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Transcript of KPMG Case Study: USPS

UNITED STATES
POSTAL REGULATORY COMMISSION
Washington, D.C. 20268-0001


(Mark One)
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended SEPTEMBER 30, 2011
or
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number N/A
UNITED STATES POSTAL SERVICE
(Exact name of registrant as specified in its charter)
Washington, D.C. 41-0760000 475 L’Enfant Plaza, S.W.
Washington, DC 20260
(202) 268-2000
(Address and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered

Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes No  Not Applicable 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.  Not Applicable 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer  Non-accelerated filer  Smaller reporting company  Not Applicable 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The aggregate market value of shares of common stock held by non-affiliates at September 30, 2011, was N/A
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Common Stock Outstanding Shares at November 15, 2011
No Common Stock N/A

DOCUMENTS INCORPORATED BY REFERENCE
FORM 10-K
Who & What?
Independent establishment of the Executive Branch
Dates back to July 26, 1775
Headquartered in Washington D.C.
574,000 employees
2011 revenue of $66 billion
?
Mickey D. Barnett
(Vice Chairman)
Patrick R. Donahoe
(Postmaster General & Chief Executive Officer)
Ellen C. Williams
(Member)
Dennis J. Toner
(Member)
Louis J. Giuliano (Member)
James H. Bilbray (Member)
?
?
Strengths
Weaknesses
Opportunities
Threats
SWOT Analysis
Name brand
Competitive pricing
Wide coverage
Competitor dependance
Postal Act 2006
Overfunded retirement funds
Aging infrastructure
Congressional oversight

Become smarter and efficient
Strengthen business-customer network
Improve customer experience
Expand package business
Significant Accounting Policies
Comprised of salaries and benefits owed to current and past employees
Compensation & Benefits account for about 68% of all operating expenses (2011) ($48.31 B / $70.634 B)
Costs from compensation and benefits are fixed and beyond Postal Service control
FERS account is overfunded by about $10.9 billion as of Sept 30, 2011
Compensation & Benefits

Made up of employee medical expenses, compensation for wages lost and Department of Labor administrative fees
Workers Compensation accounts for about 5% of all operating expenses ($3.672 B / $70.634 B)
Variances in this account may result from changes in new compensation, medical cases and actuarial estimates
Estimation of workers compensation liability is highly sensitive to changes in inflation and discount rates
Workers Compensation
Deferred Revenue - Prepaid Postage
Stamps and Postage Meters are the largest components
Estimates stamp usage and breakage factor
Meter postage makes up a significantly lower percentage of Deferred Revenue
Deferred Revenue from Forever stamps increased 91% in 2011
Total Deferred Revenue increased 35% for 2010 to 2011
Dollars (Millions)
2011
2010
Variance
Percentage
Compensation & Benefits
Workers Compensation
Deferred Revenue
Contingent Liabilities & Other
2,338
1,255
3,497
768
2,924
1,115
2,584
248
(586)
140
913
520
-20.0%
12.6%
35.3%
209.7%
Contingent Liabilities
Labor-Employment, Environmental, Tort and Contractual Liabilities
Labor-Employment makes up 86% of total Contingent Liabilities ($662 M / $768 M)
Liabilities are estimated in accordance with ASC Topic 450 contingency, when losses are probable and reasonably estimated
Claims and litigation are evaluated and estimations adjusted
Cash
Receivables & Allowances
Supplies
Property & Equipment
Impaired Assets
Leasehold Improvements
Retiree Health Benefits
Compensation & Benefits
Workers' Compensation
Contingent Liabilities
Deferred Revenue - Prepaid Postage

Liabilities
Liabilities
Dollars (Millions)
2011
2010
Variance
Percentage
Compensation & Benefits
Workers Compensation
Deferred Revenue
Contingent Liabilities & Other
2,338
1,255
3,497
768
2,924
1,115
2,584
248
(586)
140
913
520
-20.0%
12.6%
35.3%
209.7%
Liabilities
Dollars (Millions)
2011
2010
Variance
Percentage
Compensation & Benefits
Workers Compensation
Deferred Revenue
Contingent Liabilities & Other
2,338
1,255
3,497
768
2,924
1,115
2,584
248
(586)
140
913
520
-20.0%
12.6%
35.3%
209.7%
Deferred Revenue-Prepaid Postage
Dollars (Millions)
2011
2010
Percent Change
Forever Stamps
Non-Forever Stamps
Meters
Mail-In-Transit
2,527
246
459
247
1,323
488
506
254
91%
-49%
-9.3%
-2.6%
Patrick R. Donahoe
(Postmaster General & Chief Executive Officer)
Ronald A. Stroman
(Deputy Postmaster General)
Megan J. Brennan
(Chief Operating Officer & Executive Vice President)
Joseph Corbett
(Chief Information Officer
& Executive Vice President)
Stephen Masse
(Chief Financial Officer
& Executive Vice President)
Mary Anne Gibbons
(General Counsel & Executive Vice President)
Nagisa Manabe
(Chief Marketing & Sales Officer,
Executive Vice President)
Anthony J. Vegliante
(Chief Human Resources Officer
& Executive Vice President)
Paul Vogel
(President, Digital Solutions)
USPS Executives
Other; Precanceled Stamps
18
13
38%
Total
3,497
2,584
35%
Electronic media services
Baby boomers
Competition (UPS & FedEx)
Limits of entering new markets
United States
Postal Service

Case Study Competition
Issac Andon
Maria Londono
Gilbert Marte
Johnatan Milton
Julian Bermeo

Deferred Revenue - Prepaid Postage
Increased in Deferred Revenue since 2007
Deferred Revenue - Prepaid Postage
Postages In the Hand Of the Public (PIHOP):
Stamp Sales
(Estimated Stamp Usage)
Future Obligations
(Breakage Factor)
Net Obligation
-
-
Thurgood Marshall Jr.
(Chairman)
Increase in Technology
Decrease in Mail Usage is leading to a decrease in Deferred Revenue
Directing and controlling expenditures
Reviewing practices
Conducting planning
Setting policies
Handling capital investments
Approving officer compensation
Duties of The Board
Audit and Finance
Governance, Regulatory & Strategic Planning
Compensation and Management Resources
Committees of The Board
Based on Revenue, Pieces and Weight data
Postal Accountability & Enhancement Act
Represent public interest
No more than 5 belong to same political party
Experience in public service, law, accounting & ability to manage sizable organizations
Board of Governors
Ronald A. Stroman
(Deputy Postmaster General)
=
=
Sluggish Economy

Baby Boomers
Proposed bill by USPS
"To enhance the long-term profitability of the United States Postal Service through enhanced innovation, operational flexibility, workforce realignment, and regulatory relief."
Innovate to Deliver Act 2011
Full transcript