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GAO-02-916R 1 (2002-09-12)

handle is hein.gao/gaobaambk0001 and id is 1 raw text is: im Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 September 12, 2002 Mr. John E. Potter Postmaster General Subject: US. Postal Service: Accounting for Postretirement Benefits Dear Mr. Potter: As you know, in 1992 GAO issued a report that, among other things, considered the United States Postal Service's (USPS) accounting for postretirement health benefit costs.' That report concluded that USPS's use of the pay-as-you-go basis of accounting for the postretirement health benefit costs of employers that participate in multiemployer plans was in accordance with existing private sector generally accepted accounting principles (GAAP). However, GAO recommended disclosure of the full amount of the accrued benefits earned by USPS employees and retirees in notes to its financial statements to provide more complete information for making informed judgments about USPS in dealing with oversight matters, assessing rate change requests, and evaluating USPS's overall financial position and performance. While USPS's current disclosures may meet the minimum requirements under GAAP, the enhanced disclosures GAO recommended, which are not precluded under GAAP, would, in our view, provide additional transparency in USPS's financial statements. USPS disagreed with this recommendation and therefore has not implemented it. We recently reviewed and reassessed our 1992 report and have concluded that it did not adequately consider the potential accounting ramifications of the unique statutory obligations that USPS has, which are not applicable to other multiemployer plans - both pension and other postretirement benefit plans. In addition, it is clear that existing GAAP does not directly address the unique characteristics of government plans similar to those that USPS participates in. Given this, combined with the economic and competitive environment USPS now faces, ongoing efforts to transform USPS to address its financial and operational challenges, and both the Congress' and the public's call for more information and transparency regarding financial reporting matters, we believe that it is an appropriate time for USPS to reassess how best to account for and disclose this very significant financial obligation: 'United States General Accounting Office, ffnancial Reporting: Accountingfor the Postal Sen ice'sw Postretirement Health Care Costs, GAO/AFMD-92-32 (Washington, D.C.: May 20, 1992). 'See, e.g., United States General Accounting Office, US. Postal Servlce: Deteriorating ffnancial Outlook Increases Need for Transformation, GAO-02-355 (Washington, D.C.: Feb 22, 2002). GAO-02-916R Postal Service Postretirement Health Obligations

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