SARBANES-OXLEY February 12, 2011

What is Sarbanes-Oxley? Myth: It is an additional workload. Fact: It is simply following the processes and procedures that exist. Myth: Only pertains to retail transactions Fact: It is all financial transactions Myth: Only for customer services Fact: It is everyone’s responsibility Key Points: Compliance with SOX is not a one-time event. Improving corporate governance and reducing opportunity for fraudulent practices changes the way a company does business and how they are perceived in the public’s eye. The Securities and Exchange Commission (SEC) administers the SOX program and has published guidance on best practices for implementing a SOX compliance program. However, the Postal Service reports to the Postal Regulatory Commission (PRC), not the SEC. 2

Accurate Timely Authorized SOX Buzz words What are the three buzz words for SOX, that if you follow, you will usually be in compliance? Accurate Timely Authorized

FY 11 will be BMA/DMU, PVDS, PRU, Voyager, Smartpay and BRM USPS is testing the effectiveness of financial controls at postal facilities across the country. This phase is an important step as USPS works toward Oct 1, 2010, when its finances will be subject to the terms of the Sarbanes-Oxley (SOX) Act. (USPS News Link Sept 23) Need to be at least 95% compliance in all financial aspects FY 10 Focused on BMA/DMU and PVDS FY 11 will be BMA/DMU, PVDS, PRU, Voyager, Smartpay and BRM

In Compliance Success: BMEU and BRM – Negative balances Inactive Accounts Late Mailing Statements Voyager- Reconciling statements Audits- Clerk cash counts SIA retail floor audits Purchasing- Smartpay card eBUY BRM FY08 South florida district $5.2 mil vs FY 09 $5.2 New area FY 08 $2.2 mil VS $2.2 mil

SOX Tips of the Week PS FORM 3971 Detailed information can be found in Field Finance Training: Timekeeping http://blue.usps.gov/wps/portal/accounting/training/finacctreport#TK PS Form 3971, Request for or Notification of Absence: A PS Form 3971 must be completed for every period of leave taken. This is the supporting documentation for the leave entered. Unscheduled Leave: Employee’s time card is attached to the PS Form 3971 and kept in the Supervisor/Manager office. Employee meets with Supervisor to retrieve their time badge and signs the PS Form 3971. Supervisor finalizes the form and files it in the centralized location in the unit by employee name. Scheduled Leave: Except for emergencies and unexpected illness or injury, leave for all employees must be requested and approved in advance by the appropriate supervisor on a PS Form 3971. Sufficient leave balance to cover the period requested should be verified.

SOX Tips of the Week PS FORM 3971 Detailed information can be found in Field Finance Training: Timekeeping http://blue.usps.gov/wps/portal/accounting/training/finacctreport#TK Future leave: PS Forms 3971 for future leave are kept in a central location in each unit and Plant. The Plants file by tour by date and the Units file by date. Supervisor verifies the leave slips when making the schedule for the following week, inputs the leave into eRMS and finalizes the PS Form 3971. The form is then filed in the central location by employee name. ****see next slide for a properly completed PS Form 3971****

Completing Time and Attendance Forms PS Form 3971, Request for or Notification of Absence

Steps Necessary for Compliance Communication Follow policies and procedures Continue to be aware of policy and procedures changes Promote good business practices; reinforce accountability Ensure processes are in place Provide oversight and follow up

Daily SOX BMEU Certification Daily Certification Daily SOX BMEU Certification Not just a writing exercise Must be completed same day Effective Oct 1st , this will be included in the escalation process Daily SOX Certification Certifying you are completing the checklists and items Tracks the employee who was logged in compares to name typed in

Reviewing documentation Money orders Clerk found guilty of converting money orders for personal use $42,000. PS Form 3533 Refunds Clerk issues false refunds Converting Postal Funds for personal use Clerk does not input each transaction and pockets the funds Not conducting actual audits Hides shortages

Financial transactions eTRAVEL Local travel Duplicate payments Within 5 days of return Purchasing eBuy Smartpay Card Invoices Timekeeping PS Form 3971 PS 1017A & B PS Form 1723 Clock rings

Importance of Key Financial Activities Fully performing the financial activities will help prevent loss of revenue Activities ensure timely and appropriate revenue and expense recognition The absence of any one or a combination of key financial activities could result in a material weakness.

Benefits of Compliance Reinforces public trust in our financial reporting Standardization and streamlining of processes and systems Increased accountability and ownership of controls Improved structure to solve operational issues by working together across functions Consistent documentation of processes and systems Key Points: 14