US Postal Service 2012 Annual Report Download - page 78

2012 Report on Form 10-K United States Postal Service- 77 -
Report of Independent Registered Public Accounting Firm
The Board of Governors of the United States Postal Service
We have audited the accompanying balance sheets of the United States Postal Service as of September 30, 2012 and 2011,
and the related statements of operations, changes in net deficiency, and cash flows for each of the three years in the period
ended September 30, 2012. These financial statements are the responsibility of the United States Postal Service’ s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
United States Postal Service at September 30, 2012 and 2011, and the results of its operations and its cash flows for each
of the three years in the period ended September 30, 2012, in conformity with U.S. generally accepted accounting
principles.
As discussed more fully in Note 2 to the financial statements, the United States Postal Service, an independent
establishment of the executive branch of the Government of the United States, is dependent upon future actions of the
Government to continue its operations in the ordinary course as a result of increasing operating losses and near term
statutory funding requirements for employee benefit obligations. Losses in recent periods have increased primarily due to
sustained declines in mail volume, and statutory and regulatory restrictions have constrained the ability of the Postal
Service to implement strategies to improve efficiency, reduce costs and increase revenues. Due to these conditions, during
fiscal year 2012, the Postal Service defaulted on $11.1 billion of prefunding payments required to be paid to the Postal
Service Retiree Health Benefits Fund by Public Law (P.L.) 109-435, the Postal Accountability and Enhancement Act. The
Postal Service does not expect to have sufficient cash to meet the related additional obligation due by September 30, 2013
for $5.6 billion. The statutory requirement establishing the payments required by P.L. 109-435 contains no provisions
addressing a payment default. The Postal Service does not, at this time, anticipate any legal consequences, under current
law, from its inability to make the required payment. Management expects, but no assurances can be given, that additional
legislation will be enacted in fiscal year 2013 to address the short-term funding requirements of the United States Postal
Service.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the United States Postal Service’ s internal control over financial reporting as of September 30, 2012, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated November 15, 2012 expressed an unqualified opinion thereon.
In accordance with Government Auditing Standards, we also have issued our report dated November 15, 2012 on our
consideration of the United States Postal Service’ s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of
that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results
of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in
assessing the results of our audit.
/s/ Ernst & Young LLP
McLean, Virginia
November 15, 2012