KPMG Case Study: USPS

Duties of The Board

Postal Accountability & Enhancement Act

• Directing and controlling expenditures
• Reviewing practices
• Conducting planning
• Setting policies
• Handling capital investments
• Approving officer compensation

• Represent public interest
• No more than 5 belong to same political party
• Experience in public service, law, accounting & ability to manage sizable organizations

Committees of The Board

• Audit and Finance
• Governance, Regulatory & Strategic Planning
• Compensation and Management Resources

Board of Governors

Issac Andon

Maria Londono

Gilbert Marte

Johnatan Milton

Julian Bermeo

?

Mickey D. Barnett

(Vice Chairman)

United States

Postal Service

Case Study Competition

?

Dennis J. Toner

(Member)

James H. Bilbray (Member)

Ellen C. Williams

(Member)

Louis J. Giuliano (Member)

SWOT Analysis

Significant Accounting Policies

Weaknesses

Strengths

• Postal Act 2006
• Overfunded retirement funds
• Aging infrastructure
• Congressional oversight

• Name brand
• Competitive pricing
• Wide coverage
• Competitor dependance

Opportunities

Threats

FORM 10-K

Who & What?

Compensation & Benefits

Workers Compensation

• 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

Contingent Liabilities

• 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

Liabilities

Dollars (Millions)

Deferred Revenue - Prepaid Postage

2011

Compensation & Benefits

2010

• 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

Variance

2,338

Workers Compensation

Percentage

2,924

(586)

Deferred Revenue

1,255

-20.0%

1,115

140

3,497

Contingent Liabilities & Other

12.6%

Liabilities

2,584

Deferred Revenue - Prepaid Postage

913

Dollars (Millions)

768

35.3%

248

2011

• 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

520

Compensation & Benefits

209.7%

2010

Variance

Workers Compensation

2,338

Percentage

2,924

(586)

Deferred Revenue

1,255

Postages In the Hand Of the Public (PIHOP):

-20.0%

1,115

140

3,497

Liabilities

Deferred Revenue - Prepaid Postage

Contingent Liabilities & Other

12.6%

2,584

Dollars (Millions)

913

768

35.3%

248

2011

520

Compensation & Benefits

2010

• Decrease in Mail Usage is leading to a decrease in Deferred Revenue

209.7%

Variance

Workers Compensation

2,338

Percentage

2,924

Deferred Revenue

1,255

(586)

Stamp Sales

Deferred Revenue-Prepaid Postage

1,115

-20.0%

• Increased in Deferred Revenue since 2007

Dollars (Millions)

140

-

3,497

Contingent Liabilities & Other

12.6%

2,584

913

2011

768

Forever Stamps

• Increase in Technology

2010

35.3%

(Estimated Stamp Usage)

248

Percent Change

520

2,527

Non-Forever Stamps

1,323

209.7%

=

Meters

91%

246

488

Future Obligations

-49%

459

Mail-In-Transit

-

506

Based on Revenue, Pieces and Weight data

-9.3%

247

Other; Precanceled Stamps

254

(Breakage Factor)

18

-2.6%

13

Total

38%

=

3,497

2,584

35%

Net Obligation

• Sluggish Economy

• Baby Boomers

• Cash
• Receivables & Allowances
• Supplies
• Property & Equipment
• Impaired Assets
• Leasehold Improvements
• Retiree Health Benefits
• Compensation & Benefits
• Workers' Compensation
• Contingent Liabilities
• Deferred Revenue - Prepaid Postage

• Electronic media services
• Baby boomers
• Competition (UPS & FedEx)
• Limits of entering new markets

• Become smarter and efficient
• Strengthen business-customer network
• Improve customer experience
• Expand package business

• 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

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

Proposed bill by USPS

Innovate to Deliver Act 2011

"To enhance the long-term profitability of the United States Postal Service through enhanced innovation, operational flexibility, workforce realignment, and regulatory relief."