In the Matter of the Petition by:

RITA M. BALLARD,
2433 66th Avenue,
Oakland, CA 94605-1916

P.S. Docket No. DCA-134

06/09/92

Grant, Quentin E.

APPEARANCE FOR PETITIONER: Rita M. Ballard, Pro Se, 2433 66th Avenue,
Oakland, CA 94605-1916

APPEARANCE FOR POSTAL SERVICE: Sylvia Woodside, Field Director,
Human Resources, Oakland Division, United States Postal Service,
1675 7th Street, Room 427, Oakland, CA 94615-9994

FINAL DECISION UNDER THE DEBT COLLECTION OF 1982

By petition filed April 20, 1992, Petitioner Rita M. Ballard requested a hearing based solely on written submissions on a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act issued to, and received by, her on April 3, 1992. The Postal Service expressed no objection to a hearing on written submissions. Both parties have submitted numerous documents relevant to the matter all of which have been considered in reaching this decision. The record was closed on May 22, 1992.

FINDINGS OF FACT

1. During the period relevant to this matter, Petitioner Rita M. Ballard was Supervisor, Accountable Papers, Oakland Division, United States Postal Service, a position she has occupied since December 8, 1984.

2. On April 3, 1992, the Oakland Division issued to her a Notice of Involuntary Administrative Offsets Under the Debt Collection Act (Notice) advising her of the Postal Service's intent to deduct $151.00 from her paycheck commencing on May 8, 1992, on account of indebtedness in the amount of $57,467.85 which she had failed to repay following a demand therefor dated February 10, 1992.

3. The amount demanded, $57,467.85, covers two shortages in Petitioner's accountability for 19 cent postal cards, one, a shortage of 10,000 cards from a quantity of 250,000 shipped on February 1, 1991, received February 13, 1991, and the other a shortage of 300,000 cards from a quantity of 500,000 shipped on March 26, 1991, received on April 11, 1991. Petitioner signed the Advice of Shipment Invoice, as receiving employee, for both shipments. The Notice states that the debt is based on Ms. Ballard's failure to follow prescribed procedures relating to the receipt of stock.

4. Petitioner denies liability for the amount demanded on the grounds that she is not responsible for the non-receipt of 310,000 postal cards, that she took appropriate steps to report and deal with the shortages, and that there is no proof that the Postal Service has actually incurred a loss. She also suggests that the Postal Service's failure to give her "Formal Training" for her position contributed to the problem.

The 10,000 Postal Card Shortage

6. On February 13, 1991, the Oakland Division Accounting Unit received a shipment of 19-cent postal cards accompanied by Advice of Shipment showing the quantity shipped (on February 1) as 250,000. Petitioner Rita M. Ballard signed for the shipment as the receiving employee and Irene Jerome signed as witness. The shipment when opened was found to be 10,000 cards short. Ms. Ballard immediately called Postal Service Headquarters, Stamps Division reporting the shortage and inquiring what action she should take. She was told to "pick up" accountability for the 250,000 cards and that the remaining 10,000 would probably show up in a few days. The missing cards were never received. On March 8, 1991, in a letter prepared by Ms. Ballard, signed by Linda A Deaktor, Field Director, Marketing and Communications, Oakland Division, the Stamps Division, USPS Hq., was notified of this shortage and was advised that procedures stated in F-1 Handbook, Section 527.23, had been followed. Ms. Ballard followed up this letter with phone calls to USPS Headquarters on April 17, August 21, and September 17, 1991. On September 18, Headquarters wrote to the Oakland Postmaster stating that the Government Printing Office had reported that 250,000 cards had been shipped to the Oakland Post Office by USPS truck on February 1, 1991. Headquarters advised that a claim for loss of the missing 10,000 cards should be filed with the New York Postal Data Center and that the full value shown on the Advice of Shipment should be entered in AIC 005 and the value of the missing stock should be entered as a memorandum in 805. These instructions were followed.

7. Ms. Ballard attempted to file a claim for loss on October 31, 1991 through the Division Controller who returned the claim on November 5 for additional information which Ms. Ballard says she furnished. However, the claim does not appear to have been processed by the Controller to PDC and has, in effect, been denied by the Controller.

The 300,000 Postal Card Shortage

8. On April 11, 1991, the Oakland Division Accounting Unit received 40 cartons of 19-cent postal cards without an Advice of Shipment on a so-called "Dummy" or temporary, invoice, on which Item No. 2204 showed the quantity shipped as 200,000 postal cards in 40 cartons. The "dummy" invoice was sent by the Accounting Unit to Ms. Ballard as Supervisor, Accountable Papers. Ms. Ballard signed the "dummy" invoice which was witnessed by Irene Jennings and returned it to the accounting unit. Ms. Ballard, at the time, thought that the 40 cartons were the total shipment.

9. At a later date (not shown in the record), the Accounting Unit received the Advice of Shipment covering Item No. 2204. It showed a shipment of 500,000 postal cards in 100 cartons. It was forwarded to Ms. Ballard who signed the Advice of Shipment and noted thereon that the actual quantity which had been received (as reflected on the witnessed, "dummy" invoice) was only 200,000 cards. She states that she returned the signed and noted Advice of Shipment to the Accounting Unit. The Controller's letter of January 30, 1992, states that the Advice of Shipment was not returned to Accounting Services but reflects that Accounting Services was aware of a shortage in the statement that Accounting Services was waiting for Accountable Paper (Ms. Ballard) to notify them when the balance of this shipment was received.

10. By letter dated June 5, 1991, Ms. Ballard advised the Stamps Division at Postal Service Headquarters of the shortage in Item 2204. This letter was received on June 10, 1991. Ms. Ballard followed up this written notification with phone calls on August 21 and September 17, 1991. In a letter dated September 18, 1991, the Oakland Postmaster was advised by Gardenia Watts, Accountable Paper Control Assistant, Stamp Distribution Branch, Postal Service Headquarters, that the Government Printing Office had reported that 500,000 postal cards were shipped (Item No. 2204) to the Oakland Post Office on a USPS truck on March 26, 1991, that the full value of the reported shipment should be entered in AIC 005, the value of the missing stock be shown as a memorandum item in 805, and that in view of the lapse of time since shipment, a claim for loss should be filed with the New York Postal Data Center. The letter concluded with the advice that a copy thereof was being furnished to the Postal Inspection Service. Presumably, that was done.

11. Ms. Ballard, in a letter dated February 24, 1992 to Dave Laughlin, Manager, Technical Sales and Services, Oakland Division, stated as follows with respect to the instruction in the September 18 letter from Headquarters that a claim for loss be filed:

On September 18, 1991, Headquarters wrote and told me to file a claim for loss. I did not follow the instructions from Headquarters because I never picked up the additional 60 boxes [300,000] post cards [in her accountability] until I was instructed by you to do so on February 4, 1992. I was still having problems with the $1900.00 claim for loss, [the 10,000 card shortage, findings 6 and 7, above] so there was no way I was going to add $57,000.00 into my inventory.

12. On January 22, 1992, the New York Postal Data Center called Oakland Accounting Services requesting information on a $57,000 difference of accountability relating to the Advice of Shipment #382 (on which the 300,000 shortage occurred). Concerning this call, Kelly Fong, the Division Controller, wrote to Linda Deaktor, Division Field Director Marketing & Communications, on January 30, as follows:

Accounting Services received a phone call on January 22, 1992, from New York Postal Data Center requesting information on a $57,000 difference of accountability. The difference was for Advice of Shipment invoice number 382 dated March 15, 1991.

The Advice of Shipment invoice was not returned to Accounting Services. Accounting Services did not identify this discrepancy and was waiting for Accountable Papers to notify them when the shipment balance was received.

On January 24, 1992, Ms. Elmira Walton, Postal Accounting Specialist, Sr., called Accountable Papers to confirm the reporting discrepancy of $57,000. Accountable Papers confirmed the discrepancy. The Advice of Shipment invoice was $95,000, however, Accountable Papers sent a Dummy invoice for $38,000 on April 11, 1991 and not the original.

Subsequently Ms. Walton asked to see the original. I am now returning the original Advice of Shipment invoice for your review and processing, as per Handbooks F-1, F-48, F-50 and the AINV Instruction Manuals.

In addition, please review daily recording procedures to prevent a recurrence. I am also conducting a review of Accounting Services procedures to preclude this type of reporting from happening in the future.

We are both late in properly recording this shipment. Resolution of this matter is extremely urgent.

13. Following Ms. Deaktor's receipt of the foregoing letter, Ms. Ballard advised "Finance" by note dated January 31 that she had picked up 300,000 post cards on a "dummy" that day, that she had not received the cards, and that USPS Headquarters had told her to file a claim for loss. Thereafter, Ms. Ballard was ordered by her superior, Dave Laughlin, to pick up the missing 60 boxes (300,000 postal cards) in her inventory and he issued to her a Form 1096 (Cash Receipt) in the amount of $57,000, the face value of the shortage. On the Form 1096, it was noted that the receipt was for "Item 2204 post cards shortage, never received from Headquarters."

14. On February 10, 1992, David Laughlin issued a Letter of Demand to Ms. Ballard stating that she owed the Postal Service $57,467.85 based on an audit of November 19, 1991, as shown on an enclosed invoice. The letter offered her two repayment options, lump sum or voluntary salary offsets.

15. On February 24, Ms. Ballard protested to Mr. Laughlin the February 10 letter of demand, setting forth all the circumstances and explaining that she had not picked up the missing 300,000 cards in her inventory in accordance with Handbook F-48, § 294 because she hadn't been able to get approval of a claim of loss for the earlier 10,000 card shortage "so there was no way I was going to add $57,000.00 [for the missing 300,000 cards] into my inventory." She stated that the letter of demand was unjust and asked that it be removed from her personnel folder.

16. On March 10, Mr. Laughlin denied Ms. Ballard's request for removal of the letter of demand stating that she had to follow the requirements of the applicable handbooks [F-1, F-48 and F-50] and could not decide on her own not to follow instructions.

17. Ms. Ballard than appealed to the Oakland Division General Manager who in a letter dated March 20 denied the appeal, stating in pertinent part as follows:

I found that you have failed to take the proper action by notifying Headquarters in writing immediately after you received an advice of shipment and found there was a discrepancy in the quantity of items shipped. Also, on your testimony, you failed to follow instructions received from Headquarters concerning non-receipt of 19 cent postal cards based on your memorandums of March 8 and June 5, 1991. Therefore due to your negligence there is a discrepancy and possible loss of $57,467.85 in your inventory.

18. On April 2, Mr. Laughlin issued a Form 1092 Justification for Billing Accounts Receivable setting forth the computation of the demand for $57,467.85 and stating:

"The failure to follow instructions and manuals * * * as they relate to receiving stock was the cause of the shortage."

19. On April 3, Ms. Ballard appealed the General Manager's March 20 decision to the Regional Director of Human Resources, again reciting the essential facts including the denial of her claim for loss for the 10,000 card shortage.

20. On April 3, 1992, Mr. Laughlin issued to Ms. Ballard the Notice of Involuntary Administrative Offsets under the Debt Collection Act on which Ms. Ballard has asked for this hearing on the written record which has been provided. The Notice states the intent of the Postal Service to collect the $57,467.85 by deduction of $151.00 from each of her pay checks for 380 pay periods (approximately 15 years).

21. On April 3, Mr. Laughlin also issued Ms. Ballard a Letter of Warning - Unacceptable Work Performance/Failure to Follow Instructions for her failure to pick up $57,000 in her inventory pursuant to F-1 Handbook, Section 427.6 and F-48 Handbook sections 293 and 294 in connection with the 300,000 postcard shortage.

22. On April 3, 1992, Ms. Ballard sent directly to the New York Postal Data Center claims for losses in the mail covering both the 10,000 card ($1900.00) and 300,000 card ($57,000.00) shortages.

23. Ms. Ballard filed with the Recorder a timely petition for hearing on the Notice issued to her on April 3, 1992.

24. There was no evidence of tampering observed by Ms. Ballard with either of the two shipments of cards involved in this proceeding.

25. There is no evidence or suggestion that the missing cards were ever physically in Ms. Ballard's possession.

DISCUSSION

The Debt Collection Act of 1982 (5 U.S.C. § 5514) authorizes the deduction from an employee's pay when the employee is indebted to the United States for "a debt to which the United States is entitled to be repaid at the time of the determination" of the indebtedness. In this case, the burden is on the Postal Service to show the existence of an actual loss or shortage and to show reasonable efforts to mitigate its damages in the case of an actual loss (See Sharon Morgan, DCA-29, Final Decison 11/4/88; Carol S. Vellocido, DCA-47, Final Decision 9/19/89).

The General Manager's letter denying Ms. Ballard's appeal from the February 10 Letter of Demand shows that no actual loss - only a "possible" loss - was the basis for the demand. Also the file fails to show any reasonable effort on the part of the Postal Service to locate the missing postal cards and, thus, to mitigate the "indebtedness" it seeks to impose on Ms. Ballard. A statement is made in paragraph 13 of the Postal Service's answer that the Postal Inspection Service was unable to institute an investigation of the $57,000 shortage because it did not receive a Form 971 (Discrepancy of $100 or More in Financial Responsibility) until almost a year after the March 26, 1991 shipment was found to be short. The record shows, however, that the Postal Inspection Service was alerted to non-receipt of the cards by copy of the Headquarters, Stamp Distribution Branch memorandum dated September 18, 1991 (Finding 10, above).

Ms. Ballard acknowledges that she did not comply with F-1, S$427.6 by entering the full value of the 500,000 stamps invoiced and making the other entries required by that section. Although this failure may not be excusable, it is understandable in view of the Controller's failure to approve and forward her claim for loss of the value of the 10,000 card shortage in the February 1 shipment which she had properly handled under § 427.6. But this failure to follow F-1 did not cause the shortage. Ms. Ballard did not hide the discrepancy. She followed the § 427.6 requirement that the shortage be reported to the SDO and reported the shortage in reasonable time to the Stamp Distribution Branch in USPS Headquarters in writing and in several follow-up phone calls.

Moreover, the Controller's letter dated January 30, 1992 (see Finding 12, above) acknowledges fault in the Accounting Services Branch, as well as in Accountable Papers (Ms. Ballard's branch), in the recording of the shipment in which the 300,000 card shortage occurred. Another fact working against the propriety of the demand is that Ms. Ballard has claims for loss covering both shortages pending in the New York PDC.

Ms. Ballard's failure to comply strictly with the requirements of handbooks F-1 and F-48, and other procedures identified in the file, may have justified the issuance of the April 3, 1992 disciplinary letter of warning to her but in the absence of proof of actual loss to the Postal Service and efforts to mitigate damage they do not justify issuance of the April 3, 1992 Notice.

For the above reasons, it is concluded that there was not a proper basis for issuing the April 3, 1992 Notice of Involuntary Administrative Offsets under the Debt Collection Act to Petitioner Rita M. Ballard.

The Petition is sustained.

Grant, Quentin E.,
Chief Administrative Law Judge