Notes to the Financial Statements

In addition to the cost of workers' compensation claims, Office of Workers Compensation Programs charges us an administrative fee for processing claims. In 2006, the administrative fee, which is included in the expense above, was $45 million, compared to $56 million in 2005 and $44 million in 2004.


Note 12 – Revenue Forgone

Our operating revenue includes accruals for revenue forgone. Revenue is forgone when Congress mandates that we provide free or reduced fee mail for designated mailers. Congress appropriates money to reimburse us for the revenue that we have forgone in providing these services.

In 2006 we included as operating revenue $99 million, $109 million for 2005 and $36 million for 2004.

We estimate the amount of service that will be provided in the current year and send a request to Congress. At the end of the year we reconcile the request with the actual usage. If the actual usage is higher than our estimate we send a supplemental request to Congress for additional funding. If the actual usage is lower, we offset the over funding against the next funding request. The requested amounts are recorded as government receivables until the appropriations are received.

Under the Revenue Forgone Reform Act of 1993, Congress is required to reimburse us $29 million annually through 2035 (42 years). This reimbursement is for two purposes: services we performed in 1991, 1992 and 1993 for which we have not yet been paid; and for shortfalls in the reimbursement for the costs we incurred for processing and delivering certain non-profit mail from 1994 through 1998.

The Revenue Forgone Reform Act of 1993 authorized a total of $1,218 million in payments. We calculated the present value of these future reimbursements, at 7% interest, to be approximately $390 million. We recognized the $390 million as revenue during fiscal years 1991 through 1998. The amount receivable as of the years ended September 30 was $357 million in 2006 and $360 million in 2005.

The total receivable for revenue forgone as of the years ended September 30 was $490 million in 2006 and $470 million in 2005.

Note 13 – Emergency Preparedness Funding

In 2001, the United States was a victim of biological terrorism through the mail. 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 fiscal year 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. As of September 30, 2004, all 2002 emergency preparedness appropriations were fully expended or committed.

In December 2004, an appropriation by Congress of $503 million provided additional funds for Biohazard Detection Systems, Ventilation Filtration Systems, and an irradiation facility. Of these funds $138 million remains to be expended or committed.

We recognize the revenue as we depreciate the capital equipment purchased with the appropriation. The emergency preparedness appropriations revenue recognized during the years ended September 30 were $85 million in 2006, $45 million in 2005 and $92 million in 2004.

Appropriations that have not been recognized as revenue during the years ended September 30 were $687 million in 2006 and $772 million in 2005 with the current portion included in prepaid box rent and other deferred revenue and the long term portion in deferred revenue on our balance sheets.

The emergency preparedness expenses and capital equipment commitments for the years ended September 30 are as follows:

Emergency Preparedness
Expenses and Commitments 		2006 2005 2004
(Dollars in millions)
Operating Expenses:
Personnel Costs $       — $       — $       9
Non-Personnel Costs 196 79 123
Total Operating Expenses $  196 $    79 $  132
Capital Equipment Commitments $    72 $  313 $  222

Not all emergency preparedness expenditures are covered by the appropriations we receive. We are funding other costs of mail security and employee protection such as maintenance and consumable supplies from Postal Service revenue and charging them as operating expense.

Note 14 – Postal Reform

Postal reform legislation was considered in the 109th Congress, the continuation of an effort beginning in 1996. Legislation had not yet been approved as Congress returned from its election recess on November 13, 2006. It is possible that postal reform legislation will be considered during this final session of the 109th Congress.