® Predecisional and Privileged, Commercially Sensitive Information – Please do not Disclose. This document is subject to FOIA Exemptions 3, 4, 5 and 39 USC 410 (c) (2). Revenue Deficiency MTAC May 19, 2010

Revenue Deficiency Background  The Revenue Deficiency process is localized in districts and managed by District Finance Managers working with: –District Marketing Managers –Postmasters –Managers of Business Mail Entry Units.  Last update to policy statement in 2008  Mailing requirements and changes in USPS personnel, highlighted the need for more awareness 2

Process Improvements  A headquarters oversight committee was convened and it tasked a subcommittee to optimize the Revenue Deficiency process  Subcommittee determined that increased effectiveness could be accomplished while keeping policy intact: –Clarity in policy statements –Standardization and awareness of procedures –Engagement with customers –Monitoring controls and reporting trends 3

High dollar (> $100k)/high profile deficiencies Uniformity of policies, practices, and procedures Increased transparency and control of process Will engage with mailers High dollar (> $100k)/high profile deficiencies Uniformity of policies, practices, and procedures Increased transparency and control of process Will engage with mailers New Approach Processes assessment letters <$100K Maintains RD Logs for all deficiencies Makes accounting entries at PRU level Engages with mailers Processes assessment letters <$100K Maintains RD Logs for all deficiencies Makes accounting entries at PRU level Engages with mailers Field continues activities: 4 New Headquarters function:

Revenue Assessment & Control, HQ 5 Inspection Service Field Escalation Other Source Revenue Assessment & Control Mailer Revenue Assessment & Control Pricing & Classification Service Center (PCSC) Pricing & Classification Service Center (PCSC) Evaluates documentation based on criteria & prepares assessment as warranted Evaluates and determines: Pay Appeal Responds to MRAC Evaluates mailer response and either resolves or escalates to PCSC through appeals Conducts appeals process and determines final agency decision Identification Evaluation Escalation 5

Management Instruction Update  Management Instruction Update –Incorporates centralized process  Revenue Assessment and Control, HQ  Deficiencies > $100,000  Prepare assessment letters  Conducts discussions on payment options  Initiates Invoices –Defined terms –Outlines minimum requirements for assessment letter 6

Benefits  Customer Benefits –Centralized location to discuss larger deficiencies –More timely notification –Increased consistency –Appeal rights maintained  USPS Benefits –Enhanced controls –Monitoring and reporting –Speedier resolution –Standardization in processes 7

Summary  Policy change is minimal  Revenue Assessment and Control, HQ processes specific deficiencies  Terms in MI have been defined and clarified  Improved consistency  Reporting and monitoring Target Date: June 3,

® Predecisional and Privileged, Commercially Sensitive Information – Please do not Disclose. This document is subject to FOIA Exemptions 3, 4, 5 and 39 USC 410 (c) (2). Sarbanes-Oxley Update MTAC May 19, 2010

Approach of SOX Initiative 10

Overall Testing Progress 11 Completed Initial TestingFailed Controls Manual/Combination37027 Automated Application Controls 780 General Computer Controls 1,782*97 *Represents 182 master controls Data as of May 10, 2010  Exceptions in Headquarters and Headquarters-Related Sites –Lack of documentation –Ineffective performance –Controls not being performed

USPS vs. Industry Benchmarks Gaps Identified Gaps Remediated Deficiencies Not Remediated Significant Deficiencies Not Remediated Material Weaknesses Not Remediated US Postal Service (April 2010) Public Companies – Fortune 1,000 FY 2004 (1) Government Agencies N/A Out of 24 agencies, 7 reported a total of 28* 12 Source: (1) Average figures reported by Charles River Associates dated April 2005 (2) Compliance Week United States Postal ServiceCompanies with Revenue >$50 Billion Number of Key Controls 9561,567 (2) *28 material weaknesses include the following areas: accounts payable and other liabilities, financial systems and security, financial reporting, and property, plant, and equipment

What SOX Means for Customers CCustomers can help with compliance by following business mail policies and procedures –E–Ensure correct payment and accurate customer accounting –R–Receive efficient service and best use of business mail reduced rates Ensuring that our revenue streams are well-managed will enable the Postal Service to provide the best possible services at the best possible prices! 13 Focus remains on moving the mail

® Predecisional and Privileged, Commercially Sensitive Information – Please do not Disclose. This document is subject to FOIA Exemptions 3, 4, 5 and 39 USC 410 (c) (2). Business Mail Acceptance

Verification Perform cursory verification Perform in-depth verification (if required) Record results Contact mailer if necessary Finalize/Clear Finalize postage statements and record adjustments as necessary Affix clearance form (when required) Stage mail for induction Reconciliation Ensure all checked-in mailings are cleared or accounted for Perform End-of Day Reconciliation Check-in Ensure funds are on hand Ensure mailer has completed postage statements Check-in PostalOne! Key Controls – Origin Entered Making “Business” Mail Standardized Process 15

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 ® ® ® Key Controls – Destination Entered Standardized Process for Drop-Ship 16

What USPS Needs from Customers Documentation  Complete Form 8125 entirely and accurately  Work with your software vendors to establish the correct parameters  If changes need to be made, generate a new 8125 –Acceptable alterations at destination are the Mailer Contact Information and Drop Ship Appointment Number 17 Bottom line Paperwork for a mailing needs to accurately match the mail on your trucks

What USPS Needs from Customers Mail Preparation  Prepare containers so that they are correctly placarded  Be sure the mailing corresponds to information on the 8125  Load trailers by 8125 and by destination (in the order of appointments) 18

What USPS Needs from Customers Time and Location  Work with transportation and logistics companies to schedule accurate appointments (Include FAST appointment number on 8125)  Drop off mail at the correct facility, per the 8125  Make sure you qualify for Non-standard Verification before using an “Overnight Time Sensitive Periodicals Drop” 19

Communication to Customers  USPS is working with you to communicate the policies and procedures: –Formal communication to the CFO of the top 400 mailers –Brochures –Webinars –Procedural checklist  Visit USPS’ National Customer Support Center website at for more informationhttp://ribbs.usps.gov 20