NOTE 14 — REVENUE FORGONE

Operating revenue includes accruals for revenue forgone. Revenue is forgone when Congress mandates that we provide mail services for designated mailers at free or reduced rates. Congress then appropriates money to reimburse us for the revenue that we have forgone in providing these services.

We estimate the amount of services that will be provided during a given year and forward a funding request to Congress. At the end of the year we reconcile this request with the actual usage. Depending upon whether actual usage is higher or lower than our estimate, we will request additional funding or return the excess funding via a reduction to our next revenue-forgone funding request.

During 2009, we recognized $71 million, including $24 million of imputed interest in revenue from the appropriations, compared to $128 million, including $25 million of imputed interest during 2008. In 2007, we recognized $88 million, including $25 million of imputed interest. We record requested amounts as government receivables until the appropriations are received.

The Revenue Forgone Reform Act of 1993 authorized Congress to make 42 annual payments of $29 million each, beginning in 1994 and continuing through 2035. These payments are reimbursement for services we performed in 1991, 1992 and 1993, for which we have not yet been fully paid, and for shortfalls in the reimbursement of the costs we incurred for processing and delivering certain nonprofit mail entitled to statutorily reduced costs from 1994 through 1998.

The payments authorized by the Revenue Forgone Reform Act of 1993 totaled $1,218 million, for which we calculated the present value, at 7% interest, to be approximately $390 million. We recognized the $390 million as revenue during fiscal years 1991 through 1998. The discounted present value of the remaining future payments as of the years ended September 30 was $344 million in 2009 and $349 million in 2008.

The total receivable for revenue forgone as of the years ended September 30 was $448 million in 2009 and $495 million in 2008.