® 1 Sarbanes-Oxley (SOX) and Business Mail Acceptance Greater NY PCC Monthly Meeting June 16, 2010 Robert Galaher Manager Business Mail Acceptance

® 2 Agenda  Sarbanes Oxley (SOX)  Next Schedule Full Service Software Release  Advisories  Business Mail Acceptance Direction

® SOX  Sarbanes-Oxley (SOX) Overview  What SOX Means for the Postal Service  What SOX Means for Our Customers  Questions? 3

® SOX Overview What is SOX?  The Sarbanes-Oxley Act of 2002 (SOX) is administered to: ●Improve confidence in financial reporting through increased corporate governance ●Reduce fraudulent practices and accounting inconsistencies  We must comply with the Sarbanes-Oxley Act by September 30, 2010 as a result of the Postal Accountability and Enhancement Act of

® What SOX Means for the Postal Service Certification Requirements  The Postal Service must certify the strength of its internal controls over financial reporting  Certification requires: ●A quarterly certification (Section 302), started December 31, 2007 ●An annual certification (Section 404), as of September 30, 2010 ●Senior management must:  State its responsibility for establishing and maintaining adequate internal controls for financial reporting  Make an assertion on the effectiveness of the internal controls for financial reporting  Provide annual certifications for FY 2010 and beyond ●Our external auditor annually certifies all internal controls 5

® What SOX Means for the Postal Service SOX Accomplishments 6 Determine Materiality and Scope Establish Steering Committee Develop Communications and Training plan FY 2007 Prepare FY 2008 Document Prepare Documentation Identify Controls and Gaps Initiate Gap Remediation Continue Gap Remediation Update Documentation as Needed Perform Readiness Testing FY 2009 Test Update Documentation Test Controls CEO and CFO Certification FY 2010 Full Assessment

® Update Documentation Test Controls CEO and CFO Certification FY 2010 Full Assessment What SOX Means for the Postal Service FY 2010 SOX Milestones 7  Complete first round of FY 2010 testing  Remediation of gaps from first round testing  Complete second round of FY 2010 testing  Remediation of gaps from second round testing  Finalize testing of Q4 quarterly and annual key controls  PMG and CFO conclude on effectiveness of internal controls over financial reporting as of September 30, 2010

® What SOX Means for the Postal Service Our Vision  The SOX vision is a strategic transformation beyond compliance to improve business performance  Our goal is to continuously improve our processes and financial performance 8

® What Does SOX Mean for Customers?  The majority of SOX efforts will take place away from customer-facing roles  The standard of service will not change – SOX will make the Postal Service a better run business  Customers can support SOX efforts in several ways, including: ●Accurately preparing mailings ●Completing postage statements ●Submitting documentation electronically 9 The focus remains on moving the mail

® 10 SOX Internal Testing  SOX Testing ●Who, When ●Results of Reviews, Issues ●Impact on Mailers ●Visibility into DM-109 and Revenue Deficiencies ●Staffing at DMUs

® 11 SOX Testing- Who and When  Financial Control Group  Testing began June 1, completed by August 31 ●BMEUs, Associate Offices/Post Offices, Detached Mail Units ●Induction Sites

® 12 National Implementation Results of Reviews, Issues

® 13 Results of Reviews, Issues  386 NDC and P&DC sites have been reviewed to date National Implementation

® 14 Impact on Mailers  Focus Areas ●BMEUs, Associate Offices ●DMUs ●Induction Sites, NDCs, SCFs, etc

® 15 Verification Perform initial verification Perform in-depth verification if necessary Record results, contact mailer if necessary Finalize/Clear Finalize postage statements Affix 3607P/ Complete 8017/8125 Move to cleared staging area Reconciliation Perform management concurrence Print End-of-Day Reconciliation Report Ensure all mailings are accounted for Sign End-of-Day Reconciliation Report Check-in Ensure funds on hand and fees paid Ensure completed postage statements Check mailing into PostalOne! Standardized Process for BMEU / AO

® 16 Profile of DMUs  All DMUs must follow the DM-109  DMUs with SPPS must have ●An agreement on file ●A verification SOP on file  Standardized SOPs  Customized SOPs ●SOP Supersedes DM-109 Acceptance and Verification at DMUs

® 17 Verification Perform cursory verification Perform in-depth verification if necessary Perform SOP process if necessary Record results, contact mailer if necessary Finalize/Clear Finalize postage statements Complete 5111R/ 8017/ 8125 Observe origin entry vehicle loading Reconciliation Perform management concurrence Print End-of-Day Reconciliation Report Ensure all mailings are accounted for Sign End-of-Day Reconciliation Report Check-in Ensure funds on hand and fees paid Ensure completed postage statements Check mailing into PostalOne! Standardized Process for DMU

® 18 Special Postage Payment System (SPPS) Type Combined Mailings (Value Added Refunds) (COM, CVAR) Optional Procedures (OP) Drop-Ship Management System (DSMS) Manifest Mailing Systems (MMS) Copal/Co-tray (Copal) Postage Due Weight Averaging (PDWA) One-Pass Finalization (One-Pass) Alternate Mailing System eVS Profile of DMUs

® 19 Review Ensure 8125 is complete and accurate Ensure 8125 is not altered Contact origin to resolve issues Receive Match 8125 against mail Contact origin to resolve issues Record Record issues on 8125, eMIR Close out appointment in FAST Retain 8125s for 1 year ® ® ® Standardized Process for Drop-Ship

® 20 Your Role  Look for your support in: ●Complete Postage Statements and Documentation ●Complete Clearance Documents  8125  8017 ●Work with Postal acceptance in support of SOPs ●Access to Mail for Verification ●Current Agreements

® 21 Escalation  Support for Mailers ●Manager, Business Mail Entry ●District Marketing Manager ●Business Mailer Support ●PostalOne! Help Desk/  Updating RIBBS to include Access  USPS verification processes will be posted on RIBBS

® Any Questions? 22

® 23 Next Full Service Release November 07, 2010

® 24 PostalOne! Release 25 & Full Service compliance  PostalOne! ® Release will deploy on November 7, The key features of this release are: ●Deploy a process for verifying Intelligent Mail® Full- Service electronic documentation. ●Fees will be charged by Full-Service ACS™ Billing for ACS® records when the same record was provided more than 60 days prior for Full-Service Periodicals and more than 95 days prior for Full-Service Standard Mail® and Bound Printed Matter. ●Full-Service ACS Billing will also charge for records delivered when Full-Service Service Type Identifiers are in the barcodes but they do not match the eDoc. In this case, the fees are chargeable for all classes of mail.

® 25 Full-Service eDOC Verification Process Mailer Submits eDOC eDOC File Checks performed Postage Statement Finalized Full Service eDOC is verified for Barcode Uniqueness Mailer IDs, Service Type, By/For FAST/CSA Results in MicroStrategy reports Provide Full Service eDoc Verification Error Report within 30 days Notify Mailer via & PO! Dashboard Allow payment or reconciliation Track error reports and payments PostalOne! Release 25 & Full Service compliance

® Any Questions? 26

® 27 Recent Advisories

® 28 Plant-Verified Drop Shipment (PVDS) – Nonpostal Documentation  We posted on Postal Explorer® the “Plant-Verified Drop Shipment (PVDS) – Nonpostal Documentation,” Federal Register final rule regarding bills of lading presented by mailers’ transportation providers.  Postal personnel may sign a bill of lading, upon request, as long as it is presented separately from required documentation. A bill of lading is not a substitute for PS Form 8125, Plant-Verified Drop Shipment (PVDS) Verification and Clearance, or for any form of official documentation for USPS® acceptance purposes.  This final rule will be incorporated into the July 6 DMM® update. May 26, 2010

® 29 DMM Advisory on Courtesy Reply Mail  We recently revised the Domestic Mail Manual (DMM®) to postpone the Intelligent Mail® barcode (IMb) requirement for Qualified Business Reply Mail® (QBRM) and permit reply mail (PRM) pieces until May Current DMM standards, which we are not proposing to change, require an IMb on all BRM letters and on all PRM pieces as of May  This advance announcement is intended to provide customers with reasonable time to use up existing stock. We will be publishing a Federal Register proposed rule to require BRM flats (in addition to letters as stated above) to use an Intelligent Mail Barcode as of May In addition, in the Federal Register proposed rule, Courtesy Reply Mail™ that does include a barcode must bear an Intelligent Mail barcode effective May 2011.

® Any Questions? 30

® 31 BMA Direction

® 32 Challenges  Revenue Loss at Acceptance  SOX Compliance Challenges  Manual/Legacy Processes and High Labor Costs  Complex Mail Preparation Strategies  Standardize Processes  Automate & Streamline Services  Optimize Network  Optimize Resource allocations  Lights Out Business Mail Entry Direction

® 33 Business Mail Entry Direction  Standardize Processes ●Acceptance Processes  Automate & Streamline Services ●Streamline Business Mail Entry ●Streamline Support Activities ●Enterprise Payment ●Just-in-Time Entry and Results Based Verification ●Expand/Simplify Induction Visibility: Start-the- Clock  Optimize Network ●Integrate Access and Induction Activities ●Right Size Strategy 2010 – and beyond

® 34 Change Process  Improve Existing Processes ●LEAN/Six Sigma Value Stream Mapping and CPI ●Implement transitional improvements  Business Process Reengineering (BPR) – Leveraging Technology to Change the Process ●LEAN/SixSigma ●Conduct End-to-End Analysis on Existing ●Understand Customer Needs/Issues ●Develop Solution Models – Test and Justify ●Customer/Stakeholder Needs, Business Models, Technology/Innovations, Environmental Impacts ●Make Changes

® 35 Business Mail Entry Direction  How Are We Going To Get There? ●Transitional Activities  eInduction  Specialized Full Service eDoc Verification Results Helpdesk  Expanded Start-the-Clock Visibility ●Business Process Reengineering (BPR) – Leveraging Technology to Change the Process – Four Strategic Initiatives  Streamlined Mail Entry  Enterprise Payment  Customer Support Service  Network (Access and Induction)

® 36 Automate & Streamline Services  Business Process Re-engineering  Streamline the mail acceptance and induction processes through automation and technology innovations  Results-based Automated Verifications  Assess Key Acceptance and Verification Functions for Automation, Streamlining, and Gap Solutions  Provide single account management and payment features to mail customers for greater access to and visibility of products and services

® 37 Automate & Streamline Services  Business Process Re-engineering ●Integrated Customer Support/Feedback  Develop model for centralized/automated key support activities  IM Barcode Support and Approval  BRM Sample Approval  Design Customer Self Service features  Mail piece Design  Mailing Standards Information

® 38 Optimize Network  Business Process Re-engineering ● Optimize BMA Network  Optimize Automated vs. Non-Automated Mail Flows  Leverage Technology and Automation to Optimize Activities  Integrate Access Points (Acceptance and Induction)  Leverage Staffing Model to Right-Size acceptance sites

® Any Questions? 39