[Annual Report of the Postmaster General, 1982]
[From the U.S. Government Publishing Office, www.gpo.gov]

ANNUAL
REPORT
OF THE
POSTMASTER GENERAL
1982
SAN DSF.GO PUBLIC LIPp"Bt
MiSZ/83 17«<^
Contents
1 Financial and Operating Highlights
2 Postmaster General's Letter
4 Review of 1982 Highlights
12 Financial Statements
16 Notes to Financial Statements
23 Independent Accountants' Report
24 Analysis of Expenses
25 Revenue Forgone Subsidy
26 Analysis of Mail Volume
27 Financial History Summary
28 Operating Statistics
32 Board of Governors and Senior Officials
Financial and Operating Highlights
(in units indicated)
Year Ended
Sept. 30, 1982
Year Ended
Sept. 30, 1981
Year Ended
Sept. 30, 1980
Year Ended
Sept. 30, 1979
Year Ended
Sept. 30, 1978
Pieces of mail (millions) 114,049 110,130 106,311 99,829 96,913
Percent change 3.6 3.6 6.5 3.0 5.1
Operating revenue $22,600 $19,133
(dollars in millions)
$17,143 $16,106 $14,133
Percent change 18.1 11.6 6.4 14.0 8.7
Public service appropriation $ 12 $ 486 $ 828 $ 920 $ 920
Percent change -97.5 -41.3 -10.0 0.0 0.0
Revenue forgone appropriation $ 695 $ 789 $ 782 $ 800 $ 802
Percent change -12.0 0.9 -2.2 -0.2 1.2
Total appropriations $ 707 $ 1,275 $ 1,610 $ 1,720 $ 1,722
Percent change -44.6 -20.8 -6.4 -0.1 0.6
Total operating expenses $22,826 $21,369 $19,413 $17,529 $16,220
Percent change 6.8 10.1 10.7 8.1 5.9
Net income (loss) $ 802 ($ 588) ($ 306) $ 470 ($ 379)
Percent change — 91.8 — — -44.8
Fixed assets (net of depreciation) $ 4,132 $ 3,995 $ 3,917 $ 3,687 $ 3,510
Percent change 3.4 2.0 6.2 5.0 6.1
Equity (deficiency) ($ 505) ($ 1,307) ($ 719) ($ 444) ($ 945)
Percent change 61.3 -81.8 -62.0 53.1 -60.9
* 1978-81 recast to reflect 1980 census information.
U.S. population January 1 (*millions)
Percent change
231.0
1.0
228.8
1.1
226.4
1.1
223.9
1.1
221.5
1.0
Pieces of mail per capita 494 481 469 446 438
Percent change 2.6 2.5 5.3 1.9 4.0
Operating revenue per capita $ 97.83 $ 83.61 $ 75.70 $ 71.94 $ 63.81
Percent change 17.0 10.4 5.2 12.7 7.6
Accrued cost per piece of mail 20.01C 19.40c 18.26c 17.56c 16.74c
Percent change 3.1 6.2 4.0 4.9 0.8
Operating revenue per piece of mail 19.82C 17.37C 16.13c 16.13c 14.58c
Percent change 14.1 7.7 0.0 10.6 3.5
Net income (loss) per piece of mail 0.70C (0.53c) (0.29c) 0.47c (0.39C)
Percent change — 82.8 — — -48.0
Pieces of mail per work year 167,650 161,879 156,528 148,322 146,404
Percent change 3.6 3.4 5.5 1.3 6.0
Work years 680,280 680,327 679,184 673,057 661,958
Percent change — 0.2 0.9 1.7 -0.9
Employees 669,557 670,239 666,823 663,067 655,567
Percent change -0.1 0.5 0.6 1.1 0.1
3 1336 06403 6719
Postmaster General's Letter
to the Board of Governors
The year 1982 will go down in
postal history as a year of record
achievement. It is a year about which
I am extremely proud to report.
Starting with the financial picture,
I report a net income, or surplus, of
$802 million. This was the second
finish in the black for the Postal
Service in the last four years, a feat
the old Post Office Department last
achieved back in 1945.
Such an accomplishment cannot be
attributed to any one factor. Sound
management—from Headquarters to
the regional and district offices to
our sectional centers and associate offices—
contributed greatly, as did
lowered inflation, increased volume
and productivity, an area in which
we made gains for the eighth consecutive
year.
The year will be recorded in postal
history as the beginning of the age
of automation. A logical extension of
the mechanization program we embarked
on many years ago and accelerated
at the time of Postal Reorganization
in 1970, automation will
eventually improve our organization
even more than the innovations of
the past. In September, the first of
$277 million in sophisticated electronic
equipment was placed in
postal facilities.
In experimental use at several facilities
since 1965, automated equipment
was authorized as a full-scale
undertaking by the Postal Service
Board of Governors in 1980. Exhaustive
testing has resulted in equipment
that will produce great savings
through increased productivity, reduced
errors and less scheme training
for distribution clerks.
Automation will not happen overnight,
though, nor will we realize its
benefits right away. We confront a
challenge over the next five years as
we make the transition from mechanization
to automation. The equipment
will be used initially to process
First-Class letter mail bearing fivedigit
ZIP Codes. After October 1,
1983, the automated equipment will
begin moving letter mail bearing the
expanded ZIP+ 4 Code.
The year 1982 set another
record—this one for use of presort
by mailers. We will pursue our goal
of establishing additional price incentives
to encourage the use of presort,
a cost-saving program that greatly
benefits both the Postal Service and
the mailer, a program that will remain
important to us all as we sail
into and through the automation era.
Our safety efforts produced the
best results in recent years. Total accidents
and injuries declined substantially,
as we strove for a safer
work environment for all employees.
It is with deep appreciation of the
efforts and cooperation of our team
of 670,000—executive staff, managers
and supervisors, postmasters and
craft employees—that I present this
report on fiscal year 1982.
It is with dedication, determination
and enthusiasm that together we take
on the challenges of 1983.
William F. Bolger
Postmaster General
January 1983
2
Volume and Work Force Trends, 1960-1982 (shown as percentage of change since 1960)
3
Postmaster General's Review
of 1982 Highlights
Deficits & Surpluses, 1978-82
1981
$588
million
1982
$802
million
1980
$306
million
1979
1978 $470
$379 million
million
Finances
For the second time since enactment
of the Postal Reorganization
Act 12 years ago, the Postal Service
ended the fiscal year with a net income.
Achievement of a net income
of $802 million in fiscal year 1982
confirms that the Postal Service is
making good on one of the key
goals of the 1970 Act: establishment
of a national postal system no longer
ridden with deficits that burden the
tax-paying public.
The Postal Service's record for the
five-year period ending in 1982 bears
witness that the "break-even" requirement
of the Postal Reorganization
Act is being met. As the accompanying
chart shows, the $1,272 billion
net income achieved in two of the
last five years equals almost exactly
the $1,273 billion net loss experienced
in the remaining three years.
Several favorable factors contributed
to the Postal Service's strong
performance in fiscal 1982. Despite
lagging demand in other industrial
sectors and the previous year's rate
increases, mail volume continued to
grow. The 3.6 percent increase exceeded
projections and mail volume
climbed to an all-time record high of
114 billion pieces, with First-Class
posting a 1.3 percent gain and Third-
Class volume up 9.3 percent. This
performance in the face of a nationwide
recession is further evidence of
the link between growth in mail volume
and rate stability—pacing increases
at multi-year intervals that
allow mailers to undertake long-term
financial planning with confidence.
Growth in mail volume also helps
the Postal Service realize the economies
of scale which in turn yield productivity
increases that hold down
rates for users of all classes of mail.
The measure of the impact of these
gains is the unbroken string of productivity
increases of the last eight
years. This record contrasts sharply
with that of the old Post Office Department,
whose productivity actually
declined from 1966 to 1970.
In fiscal 1982, the Postal Service
bettered its own goal of a three percent
productivity increase by a significant
margin. The 3.6 percent productivity
increase recorded for the
year made possible the delivery of
an additional four billion pieces of
mail without an accompanying increase
in the number of postal employees
or the hours they collectively
worked.
On the other side of the ledger,
expenses from wages were lower
than expected in fiscal 1982 due to
the dramatic drop in the rate of inflation.
Declining oil prices similarly reduced
energy costs below anticipated
levels.
The year that saw the Postal Service
achieve its best-ever financial position
also brought a sharp drop in its
remaining public service subsidy.
Congress appropriated a $12 million
public service subsidy in fiscal 1982,
down from the $920 million appropriated
in each fiscal year from 1972
through 1979. The $12 million subsidy
was an infinitesimal part of the
Postal Service's $23.7 billion budget
in fiscal 1982—five hundredths of
one percent of total revenue.
Another significant benefit of this
year's net income was the substantial
restoration of the Postal Service's
equity.
This achievement is all the more
significant given that it has been the
Deficits Surpluses
4
Postal Service's practice since 1976 to
fund capital investments out of cash
on hand. Borrowing funds for these
investments during periods of high
inflation—and the high interest rates
that accompanied them—would only
have created additional and unnecessary
costs that ultimately would be
passed along to users of the mails
through higher prices.
Loan repayments of $67 million
for earlier outstanding debts were
made on schedule during fiscal 1982.
Productivity
Productivity increased 3.6 percent
this year, with pieces of mail processed
per work year rising from
161,879 in fiscal 1981 to an all-time
high of 167,650 in fiscal 1982.
Since passage of the Postal Reorganization
Act, the Postal Service's
productivity has climbed 43.4 percent.
In comparison, the productivity
of private, non-financial corporations
has gone up just 18.4 percent in that
time. Postal productivity gains have
exceeded those of the private sector
for nine of the last 13 years.
During the last 12 years, the Postal
Service has focused on streamlining
operations and modernizing methods
to keep pace with the rest of industrial
America. The result is that
Americans have the most productive
postal system in the world and enjoy
postage rates among the lowest in
the Western world. Yet, the postal
systems of other nations carry far less
mail—the combined mail volume of
all the Western European nations,
plus Japan and Canada, is substantially
less than that of the United
States.
Public Service Subsidy, 1972-1982
(dollars in millions)
$900
800
700
600
500
400
300
200
100
0
1972 73 74 75 76 77 78 79 80 81 82
5
Automation
170
In September 1982, the first of a
new line of computer-driven optical
character readers were installed in
postal facilities in Los Angeles, California
and Norman, Oklahoma. By
July 1984, when the first phase of
the Postal Service's automation program
will be completed, 252 optical
character readers and 248 bar code
sorters will be in place in 118 mail
processing centers. These facilities
handle 75 percent of all outgoing
mail and 68 percent of incoming
mail.
ZIP+ 4, which will enable the
Postal Service to realize the largest
possible productivity gains from
automation, received the endorsement
of the General Accounting Office
in January 1983. GAO summarized
its findings in the title of its
report: "Conversion To Automated
Mail Processing Should Continue;
Nine-Digit ZIP Code Should Be
Adopted If Conditions Are Met."
These conditions include a rate incentive
for mailers who convert to
ZIP+ 4.
Automation of letter-mail sorting is
just one of the ways in which the
Postal Service is using new technology
to hold down costs and improve
service. Electronic scales and calculators
were installed in 2,000 retail
windows across the nation during the
past year, and another 2,000 will be
installed during the coming year.
The Postal Service plans to expand
automation of both mail sorting and
retail operations. As the necessary
technological underpinnings are perfected,
the Postal Service will endeavor
to automate sorting of parcels,
sacks and flat mail. Testing of
6
automated retail terminals that provide
more complete information for
both clerks and customers is underway.
Performance
During fiscal 1982, the Postal Service
bettered its record for on-time
delivery of stamped First-Class Mail
for the first time in three years.
Moreover, service consistently improved
as the year progressed.
During the first half of the year,
performance was in line with the
Postal Service's 95 percent next-day
delivery goal for stamped First-Class
Mail traveling within local or metropolitan
areas. During the second half
of the year, the Postal Service exceeded
its own 95 percent goal,
achieving next-day delivery 96 percent
of the time.
Significant gains were made with
stamped First-Class Mail targeted for
two- and three-day delivery. In the
two-day category, performance improved
two percentage points over
fiscal 1981 to 88 percent. In the
three-day category, performance improved
three percentage points over
fiscal 1981 to 90 percent.
Fifty-seven percent of stamped
First-Class Mail falls into the overnight
delivery category, as determined
by the distance it must travel.
In fiscal 1982, two-thirds of all
stamped First-Class Mail reached its
destination overnight, meaning that a
substantial amount of mail that fell
into the two-day delivery zone was
in fact delivered the next day.
Customers continued to register
7
high levels of satisfaction with their
mail service. The Postal Service recorded
predictable shifts in its own
semi-annual surveys: the proportion
giving postal performance an overall
favorable rating declined to 67 percent
in the October 1981 survey
conducted in the wake of two general
rate increase announcements, but
rebounded to 74 percent in the survey
that followed just six months
later.
Other results of the April 1982
survey also were consistent with past
findings. The Postal Service received
"above average" ratings for employee
courtesy and knowledge, service, efficiency,
reasonable delivery times,
convenient hours, service after loss
or damage, concern for customers,
reputation and comparability with
other public services. It received "below
average" ratings for charging reasonable
rates and providing up-todate
products and services.
The independent Roper organization
registered a marked increase in
overall levels of satisfaction with
postal performance. In August 1981,
84 percent of those polled by the
Roper organization said they were
completely or fairly satisfied with
their mail service; in September
1982, that rose to 89 percent.
National Academy's Assessment
On July 2, 1981, the tenth anniversary
of the creation of the Postal
Service, the National Academy of
Public Administration was commissioned
to review the organization's
performance durings its first decade.
In particular, the Academy was asked
to analyze the aims of the Postal Reorganization
Act, evaluate the Postal
Service's efforts to carry it out, and
indicate whether further legislative or
operational changes ought to be
made.
The Academy released its findings
on July 1, 1982. It characterized the
National Delivery for Qualified First-Class Mail, 1973-1982
Local delivery (overnight)
■■ Delivery within 600-mile radius (two days)
SM Cross-country delivery (three days)
8
Postal Reorganization Act as "a landmark
piece of legislation without
which postal operations in this country
might very well have broken
down" and called the Postal Service's
implementation of the law "outstanding."
A major legislative initiative suggested
was a rethinking of the ratemaking
process with an eye toward
streamlining it and perhaps giving the
Postal Service a larger say in setting
rates.
In addition, the Academy praised
the Postal Service's merit evaluation
and promotion systems, training and
development programs, efforts to improve
labor-management relations by
initiating a process to improve the
quality of working life, productivity
gains realized through mechanization
and plans to continue those gains
with automation and ZIP+ 4.
On the other hand, the Academy
cited an "imbalance" between
achievements in these areas and the
Postal Service's public image. It
found more widespread dissatisfaction
with mail service than surveys
conducted by either the Postal Service
or the Roper organization. The
Academy believes this is because
service goals are often misunderstood.
The Academy also observed
that postal customers are not always
treated with the courtesy they rightfully
expect.
The Postal Service is committed to
righting the perceived imbalance between
fulfillment of its mandate to
operate on sound business principles
and its responsibilities as a provider
of service. Toward this end, it will
work to meet delivery commitments
and eliminate discourtesy.
★Foreign exchange rates prevailing January 5, 1983, as reported in the Washington Post,
January 6, 1983.
Rates for First Unit of Domestic Letter Postage
Nation National Currency U.S. *Currency
Federal Republic of Germany .80 mark 34.2 cents
Norway 2.00 krona 28.7 cents
France 1.80 franc 27.1 cents
Australia .27 AS 26.7 cents
Japan 60.00 yen 26.3 cents
Canada .32 *C*$ 26.0 cents
United Kingdom .15 pound 25.2 cents
Netherlands .65 guilder 25.0 cents
Austria 4.00 schilling 24.2 cents
Sweden 1.65 krona 22.8 cents
Italy 300.00 lira 22.2 cents
Switzerland .40 S. franc 20.6 cents
United States .20 USS 20.0 cents
Belgium 9.00 B. franc 19.5 cents
★★Effective February 15, 1983.
Meeting Customers' Needs
Perhaps the most fundamental way
of meeting postal customers' needs is
helping them get the most for their
mailing dollar. From this commitment—
at once a reflection of the
Postal Service's mandate to operate
on sound business principles and its
public service responsibilities—
proceeds the past year's initiatives to
broaden and refine the postal product
mix.
The year saw the removal of significant
obstacles to the development
of INTELPOST, the international
electronic transmission service that
made its debut two years ago. Tariffs
filed by American firms went into
effect, enabling them to offer international
facsimile circuitry to the Postal
Service. The Postal Service had been
obliged to obtain such circuitry from
Canada, which had the effect of limiting
INTELPOST service to Canada,
the United Kingdom and the Netherlands.
In late 1982, INTELPOST service
to the Federal Republic of Germany
and Argentina became available, in
each case by means of direct satellite
circuitry offered under one of the
new tariffs. France and Brazil indicated
they will join INTELPOST in
early 1983, and Australia, Colombia,
Hong Kong, Ireland, Kuwait, Mexico,
Saudi Arabia, Singapore and Venezuela
all have expressed interest.
E-COM, the new domestic service
for computer-originated mail introduced
in January, is another example -
of the latest technology at work for
the mailing public. E-COM enables
telecommunications common carriers
to relay batches of 200 or more messages
from computers in customers'
offices to 25 specially equipped Serving
Post Offices throughout the nation.
Within nine months of its introduction,
E-COM volume was at an
annual rate of 13 million pieces.
Express Mail remained one of the
9
Postal Service's fastest growing and
most used services. Among the enhancements
to Express Mail service
introduced this year were a national
forwarding system for undeliverableas-
addressed pieces and a new address
correction system. Locally determined
acceptance times for Express
Mail replaced the uniform deadline
hours that had prevailed, improving
service in some areas and restoring it
to others where it had been discontinued
due to changes in airline
schedules.
A thorough analysis of all aspects
of bulk business mail service was
conducted in fiscal 1982: how customers'
make up their mailings, how
the Postal Service verifies compliance
with established procedures, how
Third-Class mail is transported and
delivered. The verification procedures
ensure that all customers pay their
fair share of mailing costs, while increased
quality control ensures that
the Postal Service consistently delivers
the service it promises.
Other initiatives reflected the
changing face of the nation and the
changing needs of its population. Increasing
numbers of Americans are
picking up mail themselves, as evidenced
by the 875,000 post office
boxes installed this year to accommodate
the demand for this method of
delivery.
In new residential developments,
the trend is toward neighborhood delivery
and collection box units. There
were 66,000 such units serving some
806,000 delivery points at the end of
fiscal 1982, representing a savings of
nearly $21 million over comparable
door-to-door service to those delivery
points.
The Postal Inspection Service emphasized
detection and investigation
of mail fraud schemes which tend to
prey on the elderly and disadvantaged,
focusing on schemes where
use of the mails was essential to the
success of the fraudulent promotion.
This year, 160 false representation
orders and 218 consent agreements
were obtained under title 39, U.S.
Code, section 3005. In addition, the
Inspection Service completed 2,867
criminal investigations and obtained
966 convictions.
Employee Programs
The Postal Service's safety program
received high marks in an Occupational
Safety and Health Administration
report issued late in fiscal 1982.
OSHA found conditions significantly
improved since its last report in
1979.
This time, OSHA pronounced the
Postal Service's health and safety program
well-administered on all organizational
levels, commending in particular
top management's support of the
program and the Postmaster General's
personal commitment to safety. The
report noted the effectiveness of field
safety specialists and the thoroughness
of their inspections. The Postal
Service's safety awareness campaign,
instituted in 1978 and since expanded
service-wide, was cited as a
major contributor to the program's
overall success.
The Postal Service's improved
health and safety record reflects the
success of these efforts, especially in
bulk mail centers. In fiscal 1980, the
lost workday injury rate was 5.5 for
the Postal Service as a whole and
10.4 for bulk mail centers. By the
end of fiscal 1982, the rates had
dropped to 4.2 for the Postal Service
as a whole and 3.8 for bulk mail centers.
A
problem targeted for special attention
this year was dog bites. With
nearly 7,000 letter carriers bitten by
dogs in just one year, the problem is
far more serious than generally recognized.
News releases, public service
announcements, films, pamphlets and
other promotional materials were distributed
to educate both postal employees
and the public about what
can be done to prevent dog bites.
Progress is evident on the affirmative
action front as well. Committees
have been formed at every management
level to monitor goals in this
area. During fiscal 1982, the Postal
Service met or exceeded hiring and
promotional goals for women and
members of minority groups at most
levels of the organization.
Plans to develop and implement a
quality of working life process
moved ahead as joint steering committees
were formed with three of
the four major postal unions.
Through these committees, unions
and management will work together
to realize the common goals of increasing
employees' involvement in
identifying and solving problems of
the work place, thereby improving
the quality of working life and enhancing
the effectiveness of the
Postal Service.
10
Financial and Operating Statistics
Financial Statements
Balance Sheets
United States Postal Service Sept. 30, 1982 Sept. 30, 1981
Assets
Current assets
Cash..............................................................................................................................
U.S. Government securities, at amortized cost which approximates market..........
Receivables
U.S. Government.....................................................................................................
Foreign countries.....................................................................................................
Accrued interest.......................................................................................................
Other........................................................................................................................
Less allowances.......................................................................................................
Supplies, advances and prepayments........................................................................
Total current assets.........................................................................................................
(dollars in thousands)
$ 222,167
2,626,948
$ 228,512
1,968,193
163,765 126,890
9,346 18,883
53,193 43,972
39,070 32,291
265,374 222,036
14,070 13,070
251,304 208,966
252,179 278,755
3,352,598 2,684,426
Other assets—Note 5..................................................................................................... 18,275 12,962
Property and equipment—Notes 1 and 5
Land..............................................................................................................................
Buildings......................................................................................................................
Equipment....................................................................................................................
Less allowances for depreciation.................................................................................
Construction in progress—Note 7...............................................................................
Leasehold improvements, net of amortization..........................................................
493,981
3,509,691
2,243,884
6,247,556
2,115,879
4,131,677
495,880
112,186
4,739,743
455,345
3,291,937
2,181,312
5,928,594
1,933,701
3,994,893
477,653
107,911
4,580,457
Deferred retirement costs—Note 4................................................................................. 11,695,888 10,209,271
$19,806,504 $17,487,116
See notes to financial statements.
12
Sept. 30, 1982 Sept. 30, 1981
Liabilities and deficiency in assets (dollars in thousands)
Current liabilities
Outstanding postal money orders.................................................................... . . . . $ 202,826 $ 201,617
Compensation and employees' benefits—Note 4........................................... . . . . 1,117,895 1,143,317
Amounts payable to other U.S. Government agencies................................. . . . . 149,479 142,731
Other accounts payable and accrued expenses............................................. . . . . 1,113,157 1,096,381
Prepaid permit mail and box rentals.............................................................. . . . . 387,462 329,355
Estimated prepaid postage—Note 1................................................................ . . . . 775,000 770,000
Current portion of long-term debt.................................................................. . . . . 73,000 73,000
Total current liabilities........................................................................................... . . . . 3,818,819 3,756,401
Long-term debt, less current portion—Note 5.................................................... . . . . 1,462,873 1,534,651
Other liabilities
Amounts payable for retirement benefits—Note 4....................................... . . . . 11,487,097 10,044,286
Employees' accumulated leave—Note 6.......................................................... . . . . 661,861 628,478
Workers' Compensation claims—Notes 1 and 2........................................... . . . . 2,861,000 2,810,000
Other.................................................................................................................... .... 20,000 20,000
15,029,958 13,502,764
Deficiency in assets
Capital contributions of U.S. Government—Notes 1 and 6....................... . . . . 2,960,998 2,961,020
Deficit from operations since commencement on July 1, 1971................... . . . . ( 3,466,144) ( 4,267,720)
( 505,146) ( 1,306,700)
Commitments and contingencies—Notes 4, 6, 7 and 8...................................
$19,806,504 $17,487,116
See notes to financial statements.
13
Statements of Operations and Changes in Deficiency in Assets
United States Postal Service
Year Ended
Sept. 30, 1982
Year Ended
Sept. 30, 1981
(dollars in thousands)
Operating revenue........................................................................................................... $22,599,937 $19,133,041
Operating appropriations—Note 3
For public service costs............................................................................................... 12,140 486,000
For revenue forgone for certain classes of mail........................................................ 694,670 789,108
706,810 1,275,108
23,306,747 20,408,149
Operating expenses
Compensation and employees' benefits.................................................................... 19,094,495 17,479,386
Other............................................................................................................................ 3,731,722 3,351,373
22,826,217 20,830,759
480,530 ( 422,610)
Interest income................................................................................................................ 420,118 489,710
900,648 67,100
Interest expense, net—Note 5......................................................................................... 99,072 116,459
Income (loss) before refinements to Workers' Compensation liability and cumulative
effect of change in accounting principle................................................................ 801,576 ( 49,359)
Effect of refinements to estimate of Workers' Compensation liability—Note 2
Reduction in liability due to refinements of estimate............................................ 0 812,600
Reduction of current year's expense resulting from change in
accounting principle............................................................................................. 0 164,020
Income before cumulative effect of change in accounting principle........................... 801,576 927,261
Cumulative effect on prior years (to September 30, 1980) of a change
in accounting principle to include a discount factor net of inflation
in the estimate of Workers' Compensation liability—Note 2............................. _________ 0 1,515,000
Net income (loss).............................................................................................................. 801,576 ( 587,739)
Deficiency in assets at beginning of year....................................................................... ( 1,306,700) ( 718,931)
Withdrawals by the U.S. Government........................................................................... ( 22) (________ 30)
Deficiency in assets at end of year................................................................................. ($ 505,146) ($ 1,306,700)
See notes to financial statements.
14
Statements of Changes in Financial Position
United States Postal Service
Year Ended Year Ended
Sept. 30, 1982 Sept. 30, 1981
Sources of working capital
From operations
Income before cumulative effect of change in accounting principle.......................
Charges to operations not requiring current outlays of working capital
Depreciation and amortization...........................................................................
Increase in noncurrent Workers' Compensation claims.......................................
Amortization of deferred retirement costs............................................................
Provision for other claims.......................................................................................
Increase in employees' accumulated leave..............................................................
Total sources from operations before cumulative effect of change in
accounting principle.................................................................................................
Cumulative effect on prior years of a change in accounting principle.........................
Total sources from operations.........................................................................................
Increase in noncurrent amounts payable for retirement benefits.................................
Proceeds of long-term debt.............................................................................................
Decrease in other assets...................................................................... .............................
Total sources....................................................................................................................
Uses of working capital
Additions to deferred retirement costs...........................................................................
Reduction of long-term debt...........................................................................................
Additions to property and equipment, net....................................................................
Increase in other assets......................................................................................................
Capital withdrawals by U.S. Government....................................................................
Total uses..........................................................................................................................
Increase (decrease) in working capital.............................................................................
Changes in components of working capital
Increase (decrease) in current assets
Cash and U.S. Government securities.........................................................................
Receivables....................................................................................................................
Supplies, advances and prepayments...........................................................................
Increase (decrease) in current liabilities
Outstanding postal money orders...........................................................................
Compensation and employees' benefits....................................................................
Amounts payable to other U.S. Government agencies..............................................
Other accounts payable and accrued expenses..........................................................
Prepaid permit mail and box rentals...........................................................................
Estimated prepaid postage...........................................................................................
Current portion of long-term debt.............................................................................
Increase (decrease) in working capital.............................................................................
(dollars in thousands)
$ 801,576
276,469
51,000
338,435
0
33,383
1,500,863
0
1,500,863
1,442,811
1,516
0
2,945,190
$ 927,261
249,729
300,000
239,026
( 5,000)
38,576
1,749,592
1,515,000
234,592
277,729
3,731
2,443
518,495
1,825,052 522,697
73,294 72,836
435,755 499,059
5,313 0
22 30
2,339,436 1,094,622
$ 605,754 ($ 576,127)
$ 652,410
42,338
( 26,576)
668,172
1,209
( 25,422)
6,748
16,776
58,107
5,000
0
62,418
$ 605,754
($ 444,229)
725
195,491
( 248,013)
( 9,236)
207,455
11,271
137,612
50,012
95,000
( 164,000)
328,114
($ 576,127)
See notes to financial statements.
15
Notes to Financial Statements
United States Postal Service
Note 1
Postal Reorganization and
Accounting Policies
The United States Postal Service
commenced operations on July 1,
1971, in accordance with the provisions
of the Postal Reorganization Act.
Its initial capital consisted of the equity
of the Government of the United
States in the former Post Office Department,
with assets carried at original
cost less depreciation. All liabilities
attributable to operations of the
former Post Office Department remained
liabilities of the U.S. Government,
except that the unexpended balances
of appropriations made to, held
or used by, or available to the former
Post Office Department and all liabilities
chargeable thereto became assets
and liabilities, respectively, of the
Postal Service.
Property and equipment acquisitions,
including renewals and replacements
when the capacity, operating
efficiency, or useful life of the asset is
significantly extended, are capitalized
at cost. Repairs and maintenance costs
are expensed as incurred.
Depreciation of buildings and
equipment is provided on a straightline
basis and is computed on asset
balances at the beginning of the year.
Depreciation of vehicles and amortization
of leasehold improvements is provided
on the straight-line basis on
balances at the beginning of each accounting
period.
As a result of the Agreement with
the several bargaining units generally
effective July 21, 1981, certain lumpsum
annual payments are payable to
most bargaining unit employees. At the
beginning of each labor contract year
these payments are deferred and
amortized to expense over the contract
year as services are rendered.
Research and development costs, relating
primarily to new equipment
design and amounting to approximately
$34,000,000 in fiscal year
1982 and $40,000,000 in fiscal year
1981, are expensed as incurred.
The Workers' Compensation program
for the Postal Service is administered
by the Department of Labor. In
prior years, the Postal Service has recorded
as an operating expense in the
year of injury the discounted present
value of the total estimated costs of
claims based upon estimates of length
of time claims will be paid depending
upon severity of injury, age, assumed
mortality, and other factors. Note 2
describes the basis of the expense estimate
for Workers' Compensation for
the fiscal year ended September 30,
1982. Under the Postal Reorganization
Act, all payments made by the Department
of Labor for injuries experienced
prior to July 1, 1971, remain
liabilities of the U.S. Government to
be funded by appropriations (see
Notes 2 and 3).
Estimated prepaid postage represents
the estimated revenue collected
prior to the end of the year for
which services will be subsequently
rendered.
1981 1982
1982 on Basis
Comparable to 1981
Cost of current year claims $235 $178 $178
2 ¥2 % net discount factor applied
to the long-term liability for
Workers' Compensation claims 63 70 70
Revaluation of prior years' claims ( 362) 0 ( 420)
($ 64) $248 ($172)
Note 2
Workers' Compensation
As described in Note 1, the Postal
Service's Workers' Compensation program
is administered by the Department
of Labor. At the end of each
prior fiscal year, the Postal Service has
determined the liability for Workers'
Compensation claims and Workers'
Compensation expense based, in part,
on experience trends determined from
data provided by the Department of
Labor. Workers' Compensation expense
included in operating expenses
for fiscal year 1981 consisted of three
components: the cost of current year
claims; the two-and-a-half percent net
discount factor applied to the longterm
liability for Workers' Compensation
claims; and the revaluation of
prior years' claims using more recent
experience trends. As explained
below, no adjustment was made in fiscal
year 1982 for the revaluation of
prior years' claims. The following
table shows the components of Workers'
Compensation expense (associated
with Postal Service employees) included
in operating expenses for fiscal
years 1981 and 1982, as well as what
the amounts for fiscal year 1982
would have been if determined on a
basis comparable to fiscal year 1981
(add 000,000):
16
In fiscal year 1982, due to an unexplained
significant decline in the number
of active compensation cases and
due to the inaccessibility of the data
maintained by the Department of
Labor, the Postal Service was unable
to evaluate the potential that these
cases may become active again in the
future. Accordingly, the Board of
Governors at its January 6, 1983 meeting
determined that the Postal Service
should not reflect a revaluation of
prior years' claims in the fiscal year
1982 financial statements. Had the
Postal Service been able to obtain additional
data from the Department of
Labor, an adjustment reflecting such
revaluation might have been required
to present the liability for Workers'
Compensation claims at September
30, 1982 and Workers' Compensation
expense for the year then ended in
conformity with generally accepted
accounting principles. The revaluation
credit of $420,000,000 (1982 on
a basis comparable to 1981) assumes
that the experience trends indicated
by the data received during fiscal year
1982 from the Department of Labor
will continue. To attempt to explain
the significant decline in the number
of compensation cases in fiscal year
1982 and to determine the amount of
the required adjustment, if any, to the
accompanying financial statements,
the Postal Service has requested permission
from the Department of
Labor to audit the Workers' Compensation
data provided to the Postal
Service.
Under the Postal Reorganization
Act, all payments made by the Department
of Labor for injuries experienced
prior to July 1, 1971 remain
liabilities of the U.S. Government to
be funded by appropriations. As discussed
in Note 3, due to the general
uncertainty of the fiscal year 1983
appropriations, the amount needed to
pay for the required 1983 payment
of approximately $40,000,000 may
not be appropriated. If not appropriated,
the Postal Service will be required
to fund the obligation. The
fiscal year 1982 amount of approximately
$38,000,000 was not appropriated
and was paid and expensed
by the Postal Service in fiscal year
1982.
As a part of the Postal Service's
continuing evaluation of estimates
required in the preparation of its financial
statements, during fiscal
year 1981, four refinements to the
method used to calculate the estimate
of the Workers' Compensation liability
were adopted as follows: first, the
use of a more appropriate age distribution
was implemented to estimate
the life expectancy for permanent
disability cases; second, the life annuity
method was used in place of
the former annuity certain method
for calculating the estimate of the
liability associated with permanent
disability cases; third, a more refined
and detailed method was used to adjust
prior years' data into constant
year dollars; and fourth, separate
calculations were made for medical
and compensatory components of the
long-term liability in lieu of an aggregate
calculation. These refinements
had the combined impact of reducing
the loss for fiscal year 1981 by
$812,600,000 and were made because,
in management's opinion, the
refinements were believed to be significant
improvements in the estimation
process.
Also, in 1981, the basic method
used in estimating the Workers'
Compensation liability was changed.
Formerly, the long-term estimate of
the liability was discounted at a rate
which was believed to approximate
the long-term time value of money
and which did not take into consideration
the effect of inflation on the
liability estimate. Based upon the
recommendation of the General Accounting
Office and others, the
Postal Service changed its method of
computing the estimated long-term
liability by utilizing a prospective net
discount factor that is expected to approximate
the long-term differential
of the yield on ten-year Treasury
Bonds over the rate of inflation as
reflected in the Consumer Price Index.
The historic average of this differential
has amounted to approximately
one-and-a-half percent to two
percent. In accordance with usual actuarial
practice, the Postal Service
believes a prospective rate of two-anda-
half percent for the future long-term
period is more reflective of the
expected differential than the past
historical rate. The difference between
the historical rate differential and the
two-and-a-half percent rate, which was
not material to fiscal year 1982 or
fiscal year 1981, is not expected to
have a material effect on the results of
operations in future years. The Postal
Service believes that the new method
better reflects the present value of the
estimated long-term liability by
stabilizing the impact of fluctuating
interest and inflation rates. The effect
of the change in 1981 was to increase
income before the cumulative effect
adjustment as shown by the statement
of operations by approximately
$164,020,000. The adjustment of
$1,515,000,000 to apply retroactively
the new method is included in net loss
for fiscal year 1981.
17
Note 3
Operating Appropriations
The Postal Reorganization Act appropriated
to the Postal Service all
revenue received by it and, additionally,
authorized to be appropriated
“for public service costs incurred by it
in providing a maximum degree of effective
and regular postal service nationwide"
the following amounts: for
each of the fiscal years 1972 through
1979, an amount equal to 10 percent
($920,000,000) of the sum appropriated
to the former Post Office Department
by Congress for its use in fiscal
1971; and for fiscal years 1980
through 1984, that amount reduced
by one percent each year to a level of
five percent. After fiscal year 1984,
the Postal Service could reduce the
amount authorized to be appropriated
if it found the amounts so determined
were no longer required to operate it
in accordance with the policies of the
Act.
Further, the Act authorized to be
appropriated each year a sum determined
by the Postal Service to be
equal to revenue forgone by it in providing
certain mail services free or at
reduced rates.
The Omnibus Budget Reconciliation
Act of 1981 amended the
Postal Reorganization Act, authorizing
public service appropriations of
$250,000,000 for fiscal year 1982,
$100,000,000 for fiscal year 1983, and
none for fiscal year 1984; and revenue
forgone appropriations in an amount
not to exceed $696,000,000 for fiscal
year 1982, $708,000,000 for fiscal
year 1983, and $760,000,000 for fiscal
year 1984. The Omnibus Budget Reconciliation
Act of 1981 also deferred
until fiscal year 1985 the fiscal year
1982, 1983, and 1984 authorizations
for transitional appropriations covering
Post Office Department liabilities
for annual leave, as described in Note
6, and for payments made by the Department
of Labor for injuries experienced
prior to July 1, 1971, as
described in Note 2, while requiring
the Postal Service Fund to meet these
expenses in the interim.
Operating appropriations received
during fiscal years 1982 and 1981
amounted to $706,810,000 and
$1,275,108,000, respectively, including
appropriations of $166,000,000
and $366,910,000, respectively, to
offset the effect of Congress extending
the period of phasing rates of certain
classes of mail. The fiscal year
1982 and 1981 appropriations
reflected rescissions of $208,660,000
and $250,000,000, respectively, of the
public service subsidy from amounts
previously appropriated.
The Postal Service Appropriation Request
for fiscal year 1983, on a basis
consistent with that formerly authorized
by the Postal Reorganization Act,
would have been $1,530,000,000. The
appropriation request for fiscal year
1983 on a basis consistent with the
Omnibus Budget Reconciliation Act
of 1981 is $808,000,000. On October
2, 1982, the President signed a continuing
resolution under which the
Postal Service received $220,000,000
on October 4, 1982 for the first quarter
of fiscal year 1983, all for revenue
forgone on free or reduced postage.
The regular fiscal year 1983 appropriation
bills as reported in both the
House of Representatives and the Senate
currently propose an appropriation i
of $708,000,000 for revenue forgone.
The President's budget submission
would limit the appropriation to 1
$500,000,000. Both the Congressional
version and the President's budget
submission would limit annual obligations
against borrowing authority to
no more than $1,000,000,000 of
which no more than $500,000,000
could be for operating purposes (see
Note 5).
Note 4
Retirement Program
The Postal Reorganization Act provides
that officers and employees of
the Postal Service shall be covered
by the Civil Service Retirement Program
and the Postal Service shall
withhold from pay and shall pay to
the Civil Service Retirement and Disability
Fund the amounts specified by
such program. The Postal Service and
its employees each contributes seven
percent of basic annual salary to the
Fund.
In addition, unlike most government
agencies, the Postal Service is
liable for that portion of any estimated
increase in the unfunded liability
of the Civil Service Retirement
and Disability Fund which is attributable
to any benefits payable from
the Fund when the increase results
from Postal Service employee-management
agreements which authorize
increases in pay on which benefits „
18
are computed. The estimated increase
in the unfunded liability as determined
by the Office of Personnel
Management is to be paid by the
Postal Service in 30 equal annual installments
with interest computed at
the rate used in the most recent valuation
of the Civil Service Retirement
System (currently five percent), with
the first payment thereof due at the
end of the fiscal year in which an increase
in pay becomes effective. The
accompanying financial statements reflect
the Postal Service's legal obligation
to the Civil Service Retirement
and Disability Fund as a liability in
an amount equal to the present value
of the equal annual installments due
to the Fund as determined by the
Office of Personnel Management
(amounts due within one year are
classified as a current liability) with
offsetting charges to deferred retirement
costs applicable to operations
of future years. Amounts charged to
operating expense each year are approximately
equivalent to amounts
funded.
As part of the Postal Service employee-
management agreements that
were generally effective as of July
21, 1981, general increases in basic
annual salary upon which retirement
annuities are computed resulted in
additional annual payments to the
Civil Service Retirement and Disability
Fund to fund the increase in the
unfunded liability. In addition, cost
of living increases (COLAs), resulting
from prior agreements, become part
of basic annual salary in two phases.
For those employees who so elected
and who were eligible for optional
retirement at July 21, 1981, or who
become eligible by July 21, 1987, the
addition occurred in November 1981.
For other employees, the addition
will occur in October 1984. The increased
annual unfunded liability
payments of the November 1981
addition were approximately
$62,000,000. The October 1984 addition
to the annual payments is expected
to approximate $195,000,000.
The total increase in the annual payment
that resulted from the basic annual
salary increases and the COLAs
rolled into annual salary was approximately
$113,000,000 and $32,000,000
for fiscal years 1982 and 1981, respectively.
In fiscal year 1982, the Office of
Fiscal Year
1983
1984
1985
1986
1987
Thereafter
Less amount representing interest and the
portion classified as a current liability
Personnel Management (OPM) informed
the Postal Service that
COLAs automatically are now considered
by OPM to be part of basic
annual salary for the purposes of
contributions to the retirement fund.
The Postal Service contends that
COLAs are "allowances" or "pay
given in addition to the base pay
fixed by law or regulation" and
therefore are not part of basic annual
salary unless agreed to as such by
employee-management agreements. If
OPM's position were to prevail, the
Postal Service would be responsible
for immediate additional contributions
relating to all COLA increases
granted to date that have not yet
been included in basic annual salary.
In the opinion of management and
General Counsel, the likelihood of
OPM's position prevailing is remote.
The estimated future minimum annual
payments required to fund the
unfunded liability associated with
amounts payable for retirement benefits
at September 30, 1982 is as follows:
Amount
$ 842,530,000
842,530,000
842,530,000 »
842,530,000
842,530,000
16,395,997,000
20,608,647,000
9,121,550,000
$11,487,097,000
Aggregate retirement costs for
fiscal years 1982 and 1981 were
$1,720,000,000 and $1,539,000,000,
respectively, including $852,500,000
and $738,100,000 attributable to
amortization of deferred retirement
costs and interest on the unfunded liability.
19
Note 5
Long-Term Debt and Interest Costs
The Postal Reorganization Act
authorizes the Postal Service to issue
and sell obligations not to exceed
$10,000,000,000 outstanding at any
one time. The net increase outstanding
in any one year shall not exceed
$1,500,000,000 for capital improvements
and $500,000,000 for operating
expenses. Such obligations shall not be
obligations of the U.S. Government
unless the Secretary of the Treasury,
upon request of the Postal Service, determines
that it would be in the public
interest to pledge the full faith and
credit of the Government of the
United States.
Long-term debt consists of the following:
Sept. 30, 1982 Sept. 30, 1981
6 7/8 % Postal Service Bonds,
Series A, due February 1, 1997 $ 250,000,000 $ 250,000,000
Notes payable to Federal Financing Bank
8.20% payable $20,000,000 each May 30
with balance due May 30, 1985 360,000,000 380,000,000
8.075% payable $32,000,000 each year
to May 30, 2000 576,000,000 608,000,000
7.80% payable $15,000,000 each year to
May 30, 2001 285,000,000 300,000,000
Mortgage notes payable monthly including
interest of 4 % to 15 % maturing from
fiscal years 1983 through 2004 secured
by land and buildings with a carrying
amount of approximately $120,000,000 64,873,000 69,651,000
Less current portion
1,535,873,000
73,000,000
1,607,651,000
73,000,000
$1,462,873,000 $1,534,651,000
The 6 7/8 % Postal Service Bonds,
Series A, were issued under a Trust Indenture
dated February 1, 1972, and
are secured by a first lien on the revenue,
income, fees, rents, appropriations,
and other receipts of the Postal
Service; the proceeds of all obligations
issued by the Postal Service; and all
sinking and improvement funds established
pursuant to the Indenture. On
July 31 of each year, the Postal Service
is required to deposit in a sinking
and improvement fund the sum of
$10,000,000 either in cash or reacquired
Series A Bonds. The Trust Indenture
further provides, however,
that, at the option of the Postal Service,
such sinking fund requirements
may be applied to the payment of
costs of capital additions or improvements
to properties of the Postal Service.
Since the commencement of the
sinking fund in 1978, the Postal Service
has applied $40,000,000 to the
construction of mail facilities. The balance
of the sinking fund ($10,000,000)
is classified with other assets at September
30, 1982 in the accompanying
balance sheet. The bonds are redeemable
prior to maturity, at the option
of the Postal Service, on or after
February 1, 1982, at the principal
amount plus accrued interest.
At September 30,1982 , the maturities
of long-term debt are as follows:
$1,535,873,000
Year Amount
1983 $ 73,000,000
1984 73,000,000
1985 373,000,000
1986 53,000,000
1987 53,000,000
Thereafter 910,873,000
Total interest costs incurred during
fiscal years 1982 and 1981 were
$122,722,000 and $136,459,000, respectively,
of which $23,650,000 and
$20,000,000, respectively, were capitalized
as part of the cost of newly
constructed property and equipment.
20
Note 6
Accumulated Leave
Employees are permitted to accumulate
certain unused annual leave
which is payable when taken, upon
severance of employment, or retirement.
The former Post Office Department
consistently accrued such accumulated
annual leave and, at July 1,
1971, its balance was recorded on the
books of the Postal Service. In the
opinion of General Counsel, the U.S.
Government is primarily liable on the
obligation. However, General Counsel
believes that the Postal Service can appropriately
be viewed as being secondarily
liable for the accrued annual
leave and could be held to make payment
thereof if Congress fails to appropriate
funds. For fiscal years 1972
through 1981, the Postal Service recorded
as a receivable a portion of the
appropriated funds to cover onetwelfth
of the annual leave liability
carried forward at July 1, 1971. As
discussed in Note 3, the Omnibus
Reconciliation Act of 1981 deferred
until fiscal year 1985, the fiscal years
1982, 1983, and 1984 authorizations
for transitional appropriations of annual
leave and therefore no amount
was accrued at September 30, 1981
and September 30, 1982.
Employees are permitted to accumulate
unused sick leave but such
amounts are not vested; therefore,
sick leave is expensed when paid.
Note 7
Commitments
At September 30, 1982, the estimated
cost to complete approved
Noncancelable real estate leases, including
related taxes (1982-529,700,000; 1981-
$28,600,000)
Facilities leased from GSA subject to 30-
day notice of cancellation
Equipment and other short-term rentals
At September 30, 1982, the future
minimum rentals for all noncancelable
leases approximated the following:
Year Amount
1983 $ 220,000,000
1984 200,000,000
1985 175,000,000
1986 140,000,000
1987 110,000,000
Thereafter 535,000,000
$1,380,000,000
Most of these leases contain renewal
options for periods ranging
from ten to 40 years. Certain noncancelable
real estate leases have options
to purchase the facilities at
prices specified in the leases.
Postal Service capital projects was approximately
$470,000,000.
Total rental expense for the years
ended September 30, 1982 and 1981
is summarized as follows:
1982 1981
$264,300,000 $244,970,000
29,600,000 29,440,000
33,000,000 23,610,000
$326,900,000 $298,020,000
21
Note 8
Contingent Liabilities
An amendment to the Fair Labor
Standards Act which was enacted on
May 1, 1974, caused the Postal Service
to have an obligation for additional
compensation since that date.
This additional compensation relates
to the payroll practices of the Postal
Service in relation to the requirements
of the Act. The Postal Service
payroll system was redesigned to
provide the necessary capability for
satisfying the Act's requirements and
the revised system was completed
and implemented in May 1978. Prior
to fiscal year 1978, two series of lawsuits
were filed by over 80,000 employees
seeking back pay under the
Act.
During fiscal year 1978 a settlement
agreement was entered into in
each series of cases which, when
fully implemented, will resolve the
issues presented in these suits. One
agreement provided for the payment
of approximately $60,000,000 for
previously uncompensated overtime.
Such payments were made in fiscal
year 1979. The second agreement
provides for the development of an
administrative procedure for resolving
issues related to compensation for
certain training, study, and travel not
previously included in compensatory
time. In addition, during fiscal year
1978 the Secretary of Labor filed a
comprehensive suit on behalf of all
other postal employees not exempt
from the provisions of the Fair Labor
Standards Act alleging violations of
the Act similar to those presented in
the prior suits. Since fiscal year 1979,
additional suits have been filed
which claim various and assorted violations
of the Act. In fiscal year
1981, in an order issued by the District
Court, the Postal Service was
held obligated to compensate those
employees who were not covered by
the 1978 settlement. The Postal Service
has been engaged in developing
a system by which an efficient and
timely compliance with the Court's
order can be achieved. Also, by
terms of another order of the District
Court, the Postal Service was found
liable for compensation to some employees
for certain study time in
which they may have engaged. The
Postal Service and the other parties
have been reviewing various approaches
relative to a method for determining
which employees may be
entitled to compensation and the
amount, if any, to which they may
be entitled.
A conditional Settlement Agreement
approved by the District Court
on October 21, 1982 calls for up to
$400,000,000 to be paid to current
and former employees. Such conditional
Settlement Agreement and the
District Court approval are still subject
to appeal and are still subject to
the Department of Labor ruling on
certain current payroll practices.
Management is of the opinion that
adequate provision has been made in
prior years for this matter.
On September 30, 1981, there was
litigation pending in the United States
Court of Appeals in which parties
challenged the then-existing postage
rates, which had been placed in effect
on March 22, 1981, pursuant to the
Governors' Decision of March 10,
1981. On November 2, 1981, the
Court of Appeals issued a decision
which upheld the principal position
taken by the Governors in their decision
of March 10. The United States
Supreme Court has agreed to review
the decision of the Court of Appeals.
The final decision of the Supreme
Court could affect the Postal Service's
future rate setting procedures, but
should have no impact on the rates
currently in effect.
Parties have also challenged the
Governors' Decision of September 29,
1981, which modified the Postal Rate
Commission Recommended Decision
of September 18 and resulted in new
rates of postage and fees effective November
1, 1981. The United States
Court of Appeals, in an opinion issued
July 9, 1982, has instructed the Governors
that they must provide a more
adequate explanation of how they arrived
at the November 1 rates if they
wish to leave those rates in effect. In
addition, the Court ruled that the
Governors lacked authority to set
"permanent" third-class bulk rates (as
opposed to "temporary") because the
Postal Rate Commission had not recommended
third-class bulk rates that
22
were capable of being implemented.
In August of 1982, the Board of
Governors, therefore, implemented
the current third-class bulk rates as
temporary rates, which was an option
presented by the Court. The Governors
are awaiting a Recommended
Decision from the Postal Rate Commission
on permanent rates for thirdclass
bulk rate mail. In management's
opinion, the ultimate resolution of
these matters will not have a material
effect on the financial condition of the
Postal Service.
Several equal employment opportunity
class action lawsuits are pending
against the Postal Service. Although
the Postal Service believes it has good
defenses in these suits, the final outcome
and the ultimate liability, if any,
cannot be predicted at this time.
In addition, there are certain pending
suits and claims resulting from
traffic accidents involving postal
vehicles and injuries on postal properties,
suits involving personal claims,
and suits and claims arising out of
postal contracts.
In the opinion of management and
General Counsel, adequate provision
has been made for amounts which
may become due under the suits,
claims, and proceedings discussed in
the preceding paragraphs, and the
likelihood of the aggregate final settlement
of the above suits, claims, and
proceedings having a material effect
on the accompanying financial statements
is remote.
Report of Independent Accountants
Board of Governors
United States Postal Service
Washington, D.C. 20260
We have examined the balance
sheets of the United States Postal
Service as of September 30, 1982 and
1981, and the related statements of
operations and changes in deficiency
in assets and of changes in financial
position for the years then ended. Except
as explained in the following
paragraph, our examinations were
made in accordance with generally accepted
auditing standards and, accordingly,
included such tests of the accounting
records and such other auditing
procedures as we considered necessary
in the circumstances.
As explained in Note 2, the Postal
Service has recorded as Workers'
Compensation expense for fiscal year
1982 an amount equal to the estimated
cost of current year claims and
the two-and-a-half percent net discount
factor applied to the long-term
liability for Workers' Compensation
claims. However, because the Postal
Service was unable to obtain data
from the Department of Labor to adequately
explain significant decline in
the number of active compensation
cases in fiscal year 1982, the liability
for Workers' Compensation claims at
September 30, 1982 was not adjusted
to reflect a revaluation of prior years'
claims. Had the Postal Service been
able to obtain the additional data
from the Department of Labor to explain
adequately the aforementioned
decline and to provide us with sufficient
evidential matter relative
thereto, an adjustment reflecting such
revaluation might have been required
to present the liability for Workers'
Compensation claims at September
30, 1982 and related expense for the
year then ended in a manner consistent
with prior years and in conformity
with generally accepted accounting
principles.
In our opinion, except for the effect
of such adjustment, if any, as might
have been determined by the Postal
Service had it been provided by the
Department of Labor with the data
the Postal Service believes necessary
to enable it to determine the revaluation
of prior years' claims and to provide
us with sufficient evidential matter
with respect thereto (as described
in the preceding paragraph), the financial
statements referred to above present
fairly the financial position of the
United States Postal Service at September
30, 1982 and 1981, and the
results of its operations and the
changes in its financial position for the
years then ended, in conformity with
generally accepted accounting principles
consistently applied during the
period, subsequent to the change,
with which we concur, made as of
October 1, 1980, in the manner in
which the Workers' Compensation
discount rate is calculated as described
in Note 2 to the financial statements.
Ernst & Whinney u
Washington, D.C.
November 12, 1982, except as to
Note 2 which is dated January 6,
1983
23
Analysis of Expenses
Fiscal Year 1982
Financial Operations
Source of Income Millions of Dollars
Mail revenue
Postage $20,859.0
Federal government payments 917.8 $21,776.8
Special services 823.1
Government appropriations
Public service costs 12.1
Revenue forgone subsidy for free
and reduced rate mail 694.7 706.8
Other income, net 321.1
Total income 23,627.8
Total operating expenses 22,826.2
Net income $ 801.6
24
Revenue Forgone *Subsidy
Fiscal Year 1982
* Revenue forgone is that revenue given up or "forgone" by the Postal Service as a result of providing
mail service at a reduced rate. This revenue loss, which is the difference between the
reduced rate and the otherwise applicable rate, is given to the Postal Service by an annual appropriation
of Congress, as specified in the 1970 Postal Reorganization Act.
Class of Service
(dollars in millions)
Total Income
of Service
Income from
Revenues
Income from
Subsidy
Subsidy as %
of Income
First-Class Mail $13,747.3 $13,747.3 none none
Priority Mail 823.1 823.1 none none
Express Mail 339.2 339.2 none none
Mailgram 16.0 16.0 none none
Second-Class *M*ail
Within-the-county $ 110.2 $ 37.7 $ 72.5 65.8
Outside-the-county
Nonprofit publications 216.2 153.5 62.7 29.0
Classroom publications 8.8 2.2 6.6 75.0
Regular-rate publications 769.9 749.5 20.4 2.6
Fees 8.5 8.5 none none
Transient mail 9.7 9.7 none none
Total Second-Class Mail $ 1,123.3 $ 961.1 $ 162.2 14.4
Third-Class Mail
Single-piece rate $ 177.6 $ 177.6 none none
Regular bulk rate 2,667.4 2,667.4 none none
Nonprofit bulk rate 875.7 425.0 $ 450.7 51.5
Fees 33.2 33.2 none none
Total Third-Class Mail $ 3,753.9 $ 3,303.2 $ 450.7 12.0
Fourth-Class Mail
Parcels (zone rate) $ 420.1 $ 420.1 none none
Pound printed matter 86.7 86.7 none none
Special-rate matter 237.1 237.1 none none
Library materials 87.2 40.0 $ 47.2 54.1
Fees 3.7 3.7 none none
Total Fourth-Class Mail $ 834.8 $ 787.6 $ 47.2 5.7
U.S. Government (franked
and penalty) mail $ 917.8 $ 917.8 none none
Free mail for the blind and
handicapped 17.8 none $ 17.8 100.0
International mail 881.5 881.5 none none
Totals $22,454.7 $21,776.8 $ 677.9 3.0
Adjustment for prior years 16.8
Total $ 694.7
In addition, Congress authorized an additional continuing subsidy for certain public benefit mailings
(e.g., by nonprofit organizations). This continuing subsidy provides reimbursement for mandated
free services and for those postal rates which must by statute be set at a reduced rate that
only covers attributable costs and does not help defray the Postal Service's institutional costs.
**Includes the category identified as controlled circulation prior to March 22, 1981.
25
Analysis of Mail Volume
Fiscal Year 1982
Composition of Mail
Fourth-Class .5%
Penalty and franked 3.3%
International .8%
All other .3%
Pieces of Mail
Mail Classification
(in billions) 1982 1981
Percent
Change
First-Class 62.20 61.41 1.3
Second-Class 9.53 9.96 -4.3
Third-Class 36.72 33.61 9.3
Fourth-Class 0.60 0.59 1.2
Penalty and franked 3.72 3.30 12.7
International 0.93 0.89 4.7
All other 0.35 0.37 -6.0
Total mail 114.05 110.13 3.6
26
Financial History Summary
1982 1981 1980 1979 1978
Statement of Operations (dollars in thousands)
Operating revenues
Public service a*ppropriation
Revenue forgone a*ppropriation
$22,599,937
12,140
694,670
$19,133,041
486,000
789,108
$17,142,760
828,000
782,155
$16,106,085
920,000
799,544
$14,133,056
920,000
801,510
Total income 23,306,747 20,408,149 18,752,915 17,825,629 15,854,566
Salaries and benefits 19,094,495 18,017,766 16,541,098 15,162,096 14,031,254
Other expenses 3,731,722 3,351,373 2,871,489 2,367,207 2,188,365
Total operating expenses 22,826,217 21,369,139 19,412,587 17,529,303 16,219,619
Operating income (loss) 480,530 ( 960,990) ( 659,672) 296,326 ( 365,053)
Other income (expense), net 321,046 373,251 353,280 173,510 ( 14,375)
Net income (loss) $ 801,576 ($ 587,739) ($ 306,392) $ 469,836 ($ 379,428)
Balance Sheet
Assets
Current assets $ 3,352,598 $ 2,684,426 $ 2,932,439 $ 2,676,791 $ 2,154,237
Property plant and equipment,
deferred retirement costs, and
other assets 16,453,906 14,802,690 14,272,132 13,715,060 11,225,210
Total assets $19,806,504 $17,487,116 $17,204,571 $16,391,851 $13,379,447
Liabilities
Current liabilities $ 3,818,819 $ 3,756,401 $ 3,428,287 $ 2,608,441 $ 2,606,964
Other liabilities 15,029,958 13,502,764 12,891,459 12,409,465 9,477,840
Long-term debt—bonds, notes,
and mortgages 1,462,873 1,534,651 1,603,756 1,817,637 2,239,865
Equity (deficiency) ( 505,146) ( 1,306,700) ( 718,931) ( 443,692) ( 945,222)
Total liabilities and equity
(deficiency) $19,806,504 $17,487,116 $17,204,571 $16,391,851 $13,379,447
Analysis of Changes in Equity
(Deficiency)
Beginning balance ($ 1,306,700) ($ 718,931) ($ 443,692) ($ 945,222) ($ 587,534)
Deduct:
Net loss 587,739 306,392 379,428
( 1,306,700) ( 1,306,670) ( 750,084) ( 945,222) ( 966,962)
Add:
Net income
Capital contributions
801,576
31,000
469,836
31,000 31,000
Other ( 22) ( 30) 153 694 ( 9,260)
Ending balance ($ 505,146) ($ 1,306,700) ($ 718,931) ($ 443,692) ($ 945,222)
* The United States Postal Service was established
July 1, 1971. Prior to 1972, government
appropriations were made to cover entire Post
Office Department operations and capital
commitments. See Note 3 of financial
statements.
27
Operating Statistics
* Controlled circulation discontinued March 22, 1981.
Statistics are included in Second-Class.
Classes of Mail 1982 1981 1980 1979 1978
First-Class
Pieces, number
Weight, pounds
Revenue
62,200,212
2,238,555
$13,747,357
61,410,172
2,214,731
$11,457,145
(in thousands)
60,276,119
2,135,984
$10,145,508 $
57,925,859
2,008,221
9,732,720 $
55,981,255
1,932,251
8,574,655
Priority Mail
Pieces, number
Weight, pounds
Revenue $
258,674
582,084
823,065 $
269,278
634,688
758,268 $
248,150
591,258
611,635 $
228,882
541,323
560,685 $
212,758
509,526
497,336
Express Mail
Pieces, number
Weight, pounds
Revenue $
28,446
106,872
339,188 $
23,848
93,179
269,658 $
17,497
77,949
184,222 $
12,238
64,243
133,582 $
7,955
30,139
88,610
Mailgram
Pieces, number
Revenue $
42,075
15,997 $
42,081
15,517 $
39,142
14,552 $
57,560
14,636 $
31,291
10,749
Second-Class
Pieces, number
Weight, pounds
Revenue $
9,526,570
3,481,712
961,075 $
9,956,032
3,483,201
885,159 $
8,445,625
2,550,121
617,584 $
8,399,710
2,984,958
645,758 $
8,691,432
2,984,134
471,994
Controlled Circulation *Publications
Pieces, number
Weight, pounds
Revenue $
1,774,649
927,572
245,707 $
845,844
557,652
94,937 $
760,951
299,430
67,165
Third-Class
Pieces, number 36,719,323 33,607,405 50,580,886 27,513,132 26,329,813
Weight, pounds 4,295,638 5,758,295 3,240,096 2,994,193 2,725,160
Revenue $ 3,303,187 $ 2,643,363 $ 2,412,326 $ 2,216,255 $ 1,986,478
28
Classes of Mail 1982 1981 1980 1979 1978
Fourth-Class
Pieces, number
Weight, pounds
Revenue $
596,699
2,445,945
787,649 $
589,862
2,479,966
785,656
(in thousands)
633,395
2,660,740
$ 804,644
614,027
2,533,889
$ 747,392 $
691,141
2,778,093
673,420
International Surface
Pieces, number
Weight, pounds
Revenue $
404,619
174,527
233,880 $
412,736
160,123
197,308
450,495
163,773
$ 154,380
447,154
164,998
$ 146,930 $
426,265
165,592
129,578
International Air
Pieces, number
Weight, pounds
*Revenue $
522,922
56,855
647,651 $
472,773
52,055
538,093
513,285
51,868
$ 441,970
507,217
47,764
$ 402,756 $
486,565
43,274
369,151
Includes transit special handling and
miscellaneous revenue.
Penalty
Pieces, number
Weight, pounds
Revenue $
2,946,379
513,046
818,472 $
2,898,082
568,277
706,463
2,992,110
503,463
$ 682,164
2,895,333
503,401
$ 635,064 $
2,823,874
497,714
579,065
Franked
Pieces, number
Weight, pounds
Revenue $
772,696
20,646
99,309 $
400,647
14,164
53,967
511,869
15,504
$ 62,603
374,099
16,752
$ 42,532 $
447,925
14,344
47,053
Free for the Blind
Pieces, number
Weight, pounds
30,590
27,898
47,484
56,103
27,840
39,737
27,828
36,064
21,929
32,884
Totals
Pieces, number
Weight, pounds
Revenue
114,049,205
13,943,778
$21,776,830
110,130,400
13,514,782
$18,310,597
106,311,062
12,958,065
$16,377,295
99,828,883
12,253,438
$15,371,227
96,913,154
12,012,541
$13,495,254
29
Special Services 1982 1981 1980 1979 1978
Registry
Number of articles (paid and free)
Revenue $
53,836
157,888 $
56,191
168,460
(in thousands)
53,652
$ 156,854 $
53,670
157,160 $
55,370
123,295
Certified
Number of pieces
Revenue $
105,708
136,009 $
97,185
121,826 $
94,305
120,168 $
81,385
98,414 $
82,060
80,186
Insurance
Number of articles
Revenue $
47,498
53,374 $
51,993
52,451 $
55,445
55,355 $
59,642
56,497 $
73,330
57,303
Collection-on-Delivery
Number of articles
Revenue $
13,333
25,560 $
13,004
23,480 $
12,736
20,642 $
12,213
19,566 $
15,405
19,519
Special Delivery
Number of articles
Revenue $
25,837
55,440 $
33,160
69,736 $
36,394
73,037 $
40,971
84,769 $
45,326
70,227
Money Orders
Number issued
Revenue fees $
109,479
121,785 $
117,031
111,205 $
119,728
95,331 $
108,162
91,247 $
123,616
88,864
Other
Box rents revenue
Stamped envelope revenue
Other revenue, net
$ 168,049
18,927
86,075
$ 168,339
16,398
90,549
$ 159,948
15,442
68,688
$ 152,930
15,673
58,602
$ 123,605
12,976
61,827
Totals
Special services revenue
Mail revenue
Operating revenue
$ 823,107
21,776,830
$22,599,937
$ 822,444
18,310,597
$19,133,041
$ 765,465
16,377,295
$17,142,760
$ 734,858
15,371,227
$16,106,085
$ 637,802
13,495,254
$14,133,056
30
Employees_________________________________________ 1982 1981 1980 1979 1978
Headquarters employees 3,131 3,293 2,798 2,710 2,719
Field regular employees
Regional and other field units 6,049 6,058 6,228 5,422 5,204
Inspection Service 5,009 5,133 5,242 5,236 5,346
Postmasters 28,670 28,711 28,967 28,400 28,367
Post office supervisors and technical personnel 37,953 37,048 36,481 36,065 36,579
Post office clerks and mail handlers 231,836 232,147 229,232 230,363 226,198
City delivery carriers and vehicle drivers 165,132 164,066 160,348 159,544 156,946
Rural delivery carriers 33,855 33,370 32,863 31,919 30,630
Special delivery messengers 1,850 1,929 1,987 2,094 2,235
Building and equipment maintenance personnel 28,991 28,070 27,.586 27,366 27,243
Vehicle maintenance facility personnel 4,473 4,732 4,641 4,630 4,648
Total full-time employees 546,949 544,557 536,373 533,749 526,115
Total other employees 122,608 125,682 130,450 129,318 129,452
Grand total 669,557 670,239 666,823 663,067 655,567
Offices, Stations and Branches 1982 1981 1980 1979 1978
Number of post offices 30,155 30,242 30,326 30,449 30,518
Number of branches and stations
Classified branches and stations 4,129 4,109 4,109 4,104 4,091
Contract branches and stations 3,508 3,421 3,346 3,415 3,438
Community post offices 1,655 1,685 1,705 1,765 1,823
Total 9,292 9,215 9,160 9,284 9,352
Grand total 39,447 39,457 39,486 39,733 39,870
31
Board of Governors and Officials
United States Postal Service
Board of Governors
David E. Babcock, Vice Chairman
Management Consultant
David E. Babcock & Associates
(term expires December 8, 1988)
C. Neil Benson
Deputy Postmaster General
William F. Bolger
Postmaster General
George W. Camp
Retired Postal Executive
(term expires December 8, 1985)
Robert L. Hardesty, Chairman
President, Southwest Texas State
University
(term expires December 8, 1983)
Paula D. Hughes
First Vice President and Director
Thomson McKinnon Securities, Inc.
(term expires December 8, 1987)
Timothy L. Jenkins
Chairman
MATCH Institution
(term expires December 8, 1982)
John R. McKean
President, John R. McKean
Accountants
(term expires December 8, 1986)
William J. Sullivan
Vice Chancellor and Treasurer
University of Maine
(term expires December 8, 1984)
Peter E. Voss
President and Chief Executive,
Northeastern, Inc.
(term expires December 8, 1990)
Board Committees
Audit
David E. Babcock, Chairman
Paula D. Hughes
William J. Sullivan
John R. McKean
Budget, Finance and Compensation
Paula D. Hughes, Chairman
Timothy L. Jenkins
George W. Camp
C. Neil Benson
Corporate Responsibility
Timothy L. Jenkins, Chairman
Technology, Research and
Development
George W. Camp, Chairman
Electronic Communications
William J. Sullivan, Chairman
Postal Rates
Robert L. Hardesty, Chairman
Senior Officials
William F. Bolger
Postmaster General
C. Neil Benson
Deputy Postmaster General
Francis X. Biglin
Senior Assistant Postmaster General
Administration Group
Anthony P. Cavallo
Senior Assistant Postmaster General
Research and Management Systems
Group
Louis A. Cox
General Counsel
Jim Finch
Senior Assistant Postmaster General
Finance Group
James V. Jettison
Senior Assistant Postmaster General
Operations Group
Joseph F. Morris
Senior Assistant Postmaster General
Employee and Labor Relations Group
Joseph R. Caraveo
Regional Postmaster General
Western Region
Paul N. Carlin
Regional Postmaster General
Central Region
Emmett E. Cooper, Jr.
Regional Postmaster General
Southern Region
E. Herbert Daws
Regional Postmaster General
Eastern Region
John G. Mulligan
Regional Postmaster General
Northeast Region
32

U.S. Postal Service
475 L'Enfant Plaza West, S.W.
Washington, DC 20260-0010
SAN DIEGO PUBLIC LIBRARY
3 1336 06403 6719