US Postal Service 2006 Annual Report Download - page 40

38 | 2006 Annual Report United States Postal Service
Foreign Currency Exchange Rate Risk
We have foreign currency risk related to the settlement of terminal dues
and transit fees with foreign postal administrations for international mail.
The majority of our international accounts are accounted for based on
International Monetary Fund special drawing rights (SDR). The SDR
exchange rate fluctuates daily based on a basket of currencies comprised
of the euro, Japanese yen, pound sterling, and U.S. dollar. Changes in
the relative value of these currencies will increase or decrease the value
of our settlement accounts and result in a gain or loss from revaluation.
The actual currency used to settle accounts varies by country based on
individual agreements. We purchase the required currency at the time of
settlement, but when we know the timing and the amount of scheduled
payments in advance, we may purchase short duration forward contracts.
At year end, we adjust the reported receivable and payable balances to
reflect the fair value based on the SDR rate published in the Wall Street
Journal on the last day of September. The revaluation did not significantly
impact our financial statements. We do not use derivative financial
instruments to manage the risk of changes in the value of the SDR.
Interest Rate Risk
We have not used derivative financial instruments to manage risk related
to interest rate fluctuations for debt instruments.
We estimate that a 1% increase in interest rates would have an
insignificant impact on our financial statements due to the structure of our
investment portfolio.
Item 8 – Financial Statements
Our Statements of Operations, Balance Sheets, Statements of Changes
in Net Capital, Statements of Cash Flows and Notes are available in the
Financial Statements section of this report, pages 43–55.
Item 9 – Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure
None
Item 9A – Controls and Procedures
Management is responsible for the preparation, integrity, and fair
presentation of the financial statements of the Postal Service.
Internal Controls
We maintain a system of internal control that is designed to provide
reasonable assurance that transactions are executed as authorized and
accurately recorded, that assets are safeguarded, and accounting records
are sufficiently reliable to permit the preparation of financial statements
that conform to accounting principles generally accepted in the United
States. We maintain disclosure controls and procedures designed to
ensure that information to be disclosed by us is recorded, processed,
summarized and reported within the time periods specified by our Board
of Governors and the Office of Management and Budget. We monitor
our internal controls over financial reporting, disclosure controls and
procedures through internal self-assessments.
Code of Ethics
The Standards of Ethical Conduct for Employees of the Executive Branch
at 5 Code of Federal Regulations (C.F.R.) §2635 apply to all postal
employees. The Standards were issued in 1993 by the U.S. Office of
Government Ethics, and replaced the individual agency standards then
applicable to all employees of the executive branch. Our employees
are also covered by the Supplemental Standards of Ethical Conduct for
Employees of the United States Postal Service at 5 C.F.R. §7001. The
Standards and Supplemental Standards are detailed and contain many
examples to help employees recognize and resolve ethical issues. We
give employees a summary of the standards, and other ethical conduct
materials at initial employee orientation training and other times during the
year. We also provide annual ethics training for all employees who file a
financial disclosure report. To support our employees on ethical issues, we
maintain a dedicated phone line and e-mail address for providing ethical
advice.
Financial Section Part II