a message from the audit and finance committee

The Committee monitors the Postal Service's financial reporting and internal control procedures to ensure compliance with best corporate practices, promote good governance and enhance transparency. This was an area of major accomplishment in 2004. This year, the Committee oversaw the completion of the multiyear modernization of most postal accounting systems. As recommended by the Committee and approved by the Board, the Postal Service began the process of voluntary adherence to those provisions of the Sarbanes-Oxley Act that are applicable to a non-publicly traded company.

To facilitate comparison of its own financials with those of other organizations, the Postal Service has adopted monthly reporting in place of its long-standing 28-day accounting period reporting system. Under the guidance of the Audit and Finance Committee, the Postal Service has restructured its interim and annual financial reports. The Postal Service issues quarterly financial reports and has expanded both the Management Discussion and Analysis and the forward-looking information provided in its quarterly and annual reports. This Security and Exchange Commission (SEC)-type reporting of information is similar to 8-K, 10-K and 10-Q reports. These improvements enhance the financial transparency of the Postal Service and flow directly from specific recommendations of the President's Commission on the United States Postal Service. These reports, as well as current and historical reports on revenues, volumes, costs and annual financial plans are posted on usps.com, the Postal Service's universal access website. The Postal Service continues to meet the voluminous reporting requirements of the Postal Rate Commission, Congress, the Government Accountability Office, the federal Office of Personnel Management and the federal Office of Management and Budget.

In directing the conduct of the 2004 financial statement audit, the Committee met with Ernst & Young LLP, and concurred with the scope and materiality levels they established in their work plan for the task. The Committee met jointly and independently with Ernst & Young LLP, the Inspector General, management and the General Counsel to discuss the progress of the audit and ensure independence and objectivity in the audit programs.

Accordingly, the Committee recommended, and the Board approved, the financial statements for 2004.

Robert F. Rider
Chairman, Audit and Finance Committee
December 7, 2004