WASHINGTON (Reuters) - The U.S. Postal Service is seeking permission to show lower retiree costs in upcoming annual financial results, after a delay in a law designed to relieve financial pressure on the mail agency.
Congress had allowed the Postal Service to postpone recognition of billions in prefunded retiree health benefit payments but the legislation was not signed into law until October 1 -- one day after the official end of the government’s 2009 fiscal year.
The Postal Regulatory Commission’s decision will determine whether the Postal Service has to list its 2009 payment to the retiree health benefit fund as $5.4 billion, or $1.4 billion, as intended by the legislation.
“We don’t want a bunch of confused stakeholders,” said Joe Corbett, the agency’s chief financial officer, referring to Congress, the Obama administration, customers and unions.
The Postal Service is pushing for additional legislative measures to ease its financial load, including more relief from prefunding retiree benefits and flexibility to shift to a five-day delivery week from the current six-day week.
An independent federal agency, the Postal Service has struggled with falling mail volumes for years due to increased use of email and competition from FedEx (FDX.N), United Parcel Service (UPS.N) and other delivery services.
It posted net losses in 11 of the last 12 quarters, and the agency feared it could face a year-end cash shortfall of up to $700 million in fiscal 2009 despite aggressive cost-cutting.
Regardless of the decision on its accounting methods, the Postal Service expects to report a net loss for 2009, said Yvonne Yoerger, a spokeswoman for the agency.
In its proposal, the Postal Service said its 2009 annual report would list the traditional benefits payment schedule, while a pro forma column would be added to list the agency’s financial position as if the new law had taken effect.
Similarly, the 2010 report would add a pro forma column which would assume the smaller payment was made in 2009.
Pro forma accounting developed a stigma after dot-com companies in the 1990s used it to hide negative information, prompting the U.S. Securities and Exchange Commission to toughen rules on the practice.
But pro forma information can be useful when it is used in the right circumstances, said Dennis Beresford, a professor of accounting at the University of Georgia.
“If this is a regulatory type of filing, then I suppose they could get permission to do anything they want and for that purpose this might be perfectly appropriate,” Beresford said.
“If it’s something that purports to be in accordance with generally accepted accounting principles, it doesn’t sound quite like it meets the test,” he said.
But Robert Freeman, a former member of the Governmental Accounting Standards Board, said the pro forma data would be acceptable because “the Postal Service does not appear to be attempting to mislead anyone in the current period.”
The public will have until November 2 to submit comments on the Postal Service request.
Additional reporting by Emily Chasan; Editing by Tim Dobbyn