® SOX Overview MTAC Meeting August 7, 2008

The Sarbanes-Oxley Act  Enacted in 2002 as a result of a series of large corporate financial scandals  Improves confidence in financial reporting by –Promoting effective execution of controls –Increasing corporate governance –Reducing fraudulent practices and accounting inconsistencies Paul Sarbanes Michael Oxley 2

What does SOX mean for the Postal Service?  We are the only federal agency required to comply with SOX  As a result of the Postal Act of 2006 –We began quarterly Section 302 certifications in February 2008 –We must comply with Section 404 of SOX by Sept. 30, 2010 –We must file with the Postal Regulatory Commission (rather than the SEC) 3

Section 302 Certification  Certification included in reports 10-Q and 10-K  Under Section 302, the CEO and CFO must –State that the financial statements fairly represent the financial position and results of operations of the Postal Service –State their responsibility for establishing and maintaining effective disclosure controls and procedures  Broadens the current emphasis of integrity and completeness of controls relating to financial reporting

Section 404 Certification  Certification included in 10-K report annually beginning September 30, 2010  Under Section 404, the CEO and CFO must –State their responsibility for establishing and maintaining an adequate internal control structure over financial reporting –Make an assertion on the effectiveness of the internal control structure with regard to financial reporting –Provide annual 404 certifications for fiscal year 2010 and beyond  Public accountant audits the effectiveness of internal controls over financial reporting

Impact of SOX  Communicating the importance of SOX to the organization –Oversight Bodies –All Hands Meetings –Postmaster Conventions –SOX Website –Newsletter

SOX Timeline FY 2007 Prepare Determine Materiality and Scope Establish Steering Committee Develop Communications & Training Plan FY 2008 Document Prepare Documentation Identify Controls and Gaps Initiate Gap Remediation FY 2010 Report Test Controls Update Documentation Report and Certify FY 2009 Test Continue Gap Remediation Readiness Testing Update Documentation

Benefits of SOX Compliance  Reinforce public trust in our financial reporting  Standardize and streamline processes and systems  Target areas of improvement and strengthen our business practices  Increase accountability and ownership of controls  Improve cross-functional support to solve challenges 8

Questions 9

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