US Postal Service 2013 Annual Report Download - page 76

2013 Report on Form 10-K United States Postal Service 74
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, 2013 and
2012, 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, 2013. 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, 2013 and 2012, and the results of its operations and its cash flows for
each of the three years in the period ended September 30, 2013, 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 continuing operating losses and statutory
funding requirements for employee benefit obligations. The Postal Service has incurred recurring losses from its
operations 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 2013, the Postal Service defaulted on a $5.6 billion prefunding payment 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, by September 30, 2013 and has not satisfied $11.1 billion of required prior year prefunding
payments. The Postal Service does not expect to have sufficient cash to satisfy these obligations in arrears or to satisfy
the related additional prefunding payment due by September 30, 2014 for $5.7 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 2014 to address the short-term funding requirements of the United States Postal Service and to address
regulatory restrictions that have not allowed the Postal Service to adjust its operations to levels commensurate with its
current revenue base.
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, 2013, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (1992 framework) and our report dated November 15, 2013 expressed an unqualified
opinion thereon.
In accordance with Government Auditing Standards, we also have issued our report dated November 15, 2013 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, 2013