Accounting 101 for the Post Office [Reader Post]

[youtube]http://www.youtube.com/watch?v=lX_WasAnDcM[/youtube]

An onslaught of crying jags by the postal unions and by the liberal media has followed the announcement this week that things have to change at the United States Postal Service to preserve its very existence.  Postal unions are claiming that Republicans irreparably harmed the Post Office by requiring annual payments of about $5.5 billion each year until 2015, which according to the WaPo,  is designed “to prepay into an employee retirement fund each year to ensure that its increasing financial woes will not leave taxpayers shouldering costs.” Balderdash!  The Postal Accountability and Enhancement Act” calls for compliance with GASB Statement 45  and SFAS #106 which bring USPS accounting for health and other non-pension benefits for retirees in line with private company standards by funding “the actuarial present value of all future benefits payable from the Fund  . . .  to current or former employees of the United States Postal Service”. Oddly, Post Office Accounting has ignored the implications of the law by failing to record a liability (or a pre-payment) on its balance sheet. The annual payment has been expensed on a cash basis rather than booking an accrual that is required of single-employer plans under the ERISA law. To this accountant’s way of thinking, the unfunded liability for retiree health (and defined-benefit pension) coverage must far exceed the required payments made over the past four years, else a balance sheet item would show.  If my assumption is correct, this GAO assessment of the dire straits through which the Post Office is sailing, indicates that America’s taxpayers (rather than USPS’s ratepayers) are going to get royally shafted yet again! Postal Service Financial Results and Projections, Fiscal Years 2006 through 2011    (Dollars in billions)

The U.S. Government Accountability Office made these findings:

USPS cannot fund its current level of service and operations from its revenues and urgently needs to restructure to reflect changes in mail volume, revenue, and use of the mail.

•         Although USPS reports $12.5 billion in cost savings since fiscal year 2006, it has not been able to cut costs fast enough to offset the large decline in mail volume and revenue—particularly costs related to its workforce, retail and processing networks, and delivery services.
•         Furthermore, its revenue initiatives have had limited results. USPS can borrow up to $3 billion from the Treasury annually but expects to reach its statutory $15 billion borrowing limit in fiscal year 2011.
•        USPS must align its costs with revenues, generate sufficient funding for capital investment, and manage its growing debt (see table).