Your March 21, 2001, letter expressed concern about a number of issues pertaining to the United States Postal Service's (USPS) financial condition. This report addresses one of the issues raised in your letter, namely, identifying longer-term structural or operational issues that may affect the Service's ability to provide affordable universal postal service on a break-even basis. One key operational issue involves the Service's retirement costs and future liabilities. The Service's financial outlook has deteriorated significantly over the past few years. The Service finished fiscal year 2000 with a $199 million net loss and recently announced a $1.7 billion net loss for fiscal year 2001. The Service also projects a net loss of $1.35 billion for fiscal year 2002. However, it is unknown what the impact of the events of September 11, 2001 and the subsequent delivery of anthrax spores through the U.S. mail will have on the volume and cost of future mail service. Consequently, estimated losses, and other projections in this report, which we and the Service's independent auditors have not verified, may be changed by USPS at a later date.