US Postal Service 2004 Annual Report Download - page 53

2004 annual report united states postal service | 51
Notes to the financial statements
As฀a฀part฀of฀our฀continuing฀evaluation฀of฀estimates฀required฀
in฀the฀preparation฀of฀management’s฀financial฀statements,฀we฀
recorded฀a฀$104฀million฀decrease฀in฀the฀contingent฀liabilities฀
balance฀in฀2004,฀compared฀to฀a฀decrease฀of฀$92฀million฀in฀
2003฀and฀a฀$187฀million฀increase฀in฀2002.฀We฀recognized฀
settlements,฀payments฀and฀changes฀in฀estimates฀of฀claims฀and฀
lawsuits฀in฀our฀changes฀in฀contingent฀liabilities.฀Management฀
and฀General฀Counsel฀believe฀that฀we฀have฀made฀adequate฀
provision฀for฀the฀probable฀amounts฀due฀under฀the฀suits,฀claims฀
and฀proceedings฀we฀have฀discussed฀here.
Note 11 - emergency preparedness funding
In฀FY฀2002,฀the฀United฀States฀was฀subjected฀to฀biological฀terror-
ism,฀utilizing฀the฀mail฀as฀the฀delivery฀medium.฀฀In฀response,฀we฀
implemented฀process฀changes฀and฀technology฀applications฀
to฀reduce฀the฀risk฀to฀both฀our฀employees฀and฀our฀customers.฀฀
The฀President฀of฀the฀United฀States฀and฀Congress฀authorized฀
funding฀of฀$762฀million฀in฀2002฀to฀assist฀in฀paying฀for฀some฀of฀
these฀safety฀measures,฀and฀to฀replace฀or฀repair฀postal฀facilities฀
damaged฀or฀destroyed฀on฀September฀11,฀2001.฀
In฀2002฀and฀2003,฀the฀majority฀of฀our฀emergency฀prepared-
ness฀expenses฀were฀ for฀one-time฀ activities,฀ such฀ as฀ plant฀
decontamination.฀ We฀ recognized฀ these฀ expenses฀ as฀ non-
operating฀ expenses฀ and฀ the฀ corresponding฀ revenue฀ offset฀
as฀non-operating฀revenue.฀Due฀to฀the฀ongoing฀nature฀of฀the฀
remaining฀expenses,฀such฀as฀depreciation,฀supplies,฀and฀main-
tenance,฀beginning฀in฀2004฀all฀emergency฀preparedness฀items฀
are฀treated฀as฀operating฀expenses฀and฀the฀associated฀revenue฀
as฀operating฀revenue.
Our฀emergency฀preparedness฀expenditures฀are฀not฀all฀covered฀
by฀the฀appropriations฀we฀received.฀The฀emergency฀prepared-
ness฀expenses฀and฀capital฀equipment฀commitments฀for฀the฀
years฀ended฀September฀30฀are฀as฀follows:
฀฀ 2004฀ 2003฀ 2002
Operating฀expenses:
Personnel฀costs฀ $฀฀฀฀฀9฀ $฀฀12฀ $฀฀73
Non-Personnel฀Costs฀ ฀฀฀123฀ ฀฀฀฀฀-฀ ฀฀฀฀฀฀-
Total฀operating฀expenses฀ 132฀ 12฀ 73
Non-operating฀expenses฀ -฀ 184฀฀฀฀฀฀฀฀189
Total฀Expenses฀ $฀132฀ $196฀ $262
฀
Capital฀Equipment฀Commitments฀ $฀222฀ $189฀ $฀฀38
As฀ of฀ September฀ 30,฀ 2004,฀ all฀ emergency฀ preparedness฀฀
appropriations฀have฀been฀fully฀expended฀or฀committed.฀฀We฀
recognize฀these฀appropriations฀as฀revenue฀in฀the฀year฀in฀which฀
the฀related฀expenditure฀is฀recognized฀as฀an฀expense,฀or฀when฀
the฀government฀approves฀the฀reimbursement฀of฀a฀previously฀
incurred฀expense.฀The฀emergency฀preparedness฀appropria-
tions฀revenues฀recognized฀during฀the฀years฀ended฀September฀
30฀were฀$92฀million฀in฀2004,฀$177฀million฀in฀2003฀and฀$179฀
million฀in฀ 2002.฀They฀are฀reflected฀in฀ the฀2004฀and฀2003฀
Statements฀of฀Cash฀Flows฀as฀a฀financing฀activity.
The฀capital฀funds฀spent฀in฀2002฀($38฀million)฀were฀spent฀on฀
irradiation฀equipment฀that฀did฀not฀meet฀our฀needs.฀With฀the฀
approval฀of฀OMB,฀the฀eight฀machines฀valued฀at฀$24฀million฀
were฀transferred฀to฀other฀government฀and฀public฀agencies,฀and฀
the฀manufacturer฀provided฀us฀with฀a฀stronger฀machine฀at฀no฀
additional฀cost.฀This฀new฀machine฀is฀valued฀at฀$14฀million฀and฀
is฀not฀yet฀deployed.
Appropriations฀that฀had฀not฀been฀recognized฀as฀revenue฀as฀of฀
September฀30,฀2004฀and฀2003,฀were฀$314฀million฀and฀$406฀
million,฀respectively.฀The฀balance฀was฀recorded฀as฀an฀accrued฀
expense฀ until฀ spent.฀ Amounts฀ spent฀ on฀ capital฀ equipment฀
are฀deferred฀as฀a฀non-current฀liability฀and฀amortized฀to฀offset฀
depreciation฀expense฀of฀the฀related฀equipment.
(Dollars฀in฀millions)