In the Matter of the Petition by                                )
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ALPHONSO L. GAYDON, SR.                                )
P.O. Box 4076                                                        )
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at                                                                            )
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Winston-Salem, NC 27115-4076                            )    P.S. Docket No. DCA-173

APPEARANCE FOR PETITIONER:                           Melvyn H. Brown, Jr., Esq.
508 West Brookline Street
Winston-Salem, NC 27127-2836

APPEARANCE FOR RESPONDENT:                       Jeffrey F. Perrotta
Labor Relations Specialist
United States Postal Service
3701 W. Wendover Avenue
Greensboro, NC 27495-0001

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Alphonso L. Gaydon, Sr., filed a petition requesting an oral hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. § 5514(a), based on a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act he received July 14, 1993. The Notice advised Petitioner of the Postal Service's intention to make withholdings from his salary to collect $365.92 the Postal Service claimed from Petitioner based on the results of an April, 1993 audit of the Wallburg, North Carolina, Post Office, at which Petitioner is the postmaster.

A hearing was held in Winston-Salem, North Carolina, on August 24, 1993. Testifying at the hearing were Judy Stanley, former relief clerk at the Wallburg Post Office, Carol Campbell, the Postal Systems Coordinator for the Greensboro District of the Postal Service, which includes Wallburg, who conducted the audit, Marchia Wells, a Postal Systems Coordinator who assisted on the audit, Dennis Peterman, Postmaster, Mocksville, North Carolina, who assisted on the audit, and Petitioner.

FINDINGS OF FACT

1. Petitioner became postmaster of the Wallburg, North Carolina, Post Office, on July 27, 1992 (Transcript pages ("Tr.") 98, 101; Respondent's Exhibit ("RX") 9).

2. An audit of the post office, including a count of all stock and cash, was done at the time Petitioner assumed responsibility, and no shortages or other deficiencies in the accounts of the office were passed on to Petitioner (Tr. 43-44, 49-51, 54, 97; RX 9). Petitioner participated in the inventory of the office and signed the Certificate of Transfer of United States Post Office transferring the postmaster's accountability from the outgoing officer-in-charge to Petitioner; Petitioner's signature follows the inventory and stock listing and the printed words: "I ACCEPT RESPONSIBILITY" (RX 9 p. 4).

3. In March of 1993, Petitioner instructed a relief clerk assigned to Wallburg to work from Petitioner's accountability on the first two occasions she worked for him (Tr. 12-13, 62). Section 433.22 of Handbook F-1, Post Office Accounting Procedures ("F-1"), which should be available in every post office (Tr. 64), provides, "No employee, supervisor, or postmaster may have access to the stamp credit of another employee." See Tr. 28-29. After the second time without her own accountability, the relief clerk called the Manager, Post Office Operations, in Greensboro, and told him she was uncomfortable working out of someone else's accountability (Tr. 16). Thereafter, on her third assignment to Wallburg, Petitioner assigned the clerk her own window credit of stamps and cash (Tr. 17).

4. On April 5, 1993, an audit of the Wallburg Post Office was commenced in response to direction from the Manager, Post Office Operations (Tr. 23, 32).

5. The audit took three days, concluding on April 7. The auditors found the accounts of the post office to be in disarray: for example, records were not always filed where they could be found; Form 1412's, Daily Financial Reports, dating from December 1992 through March of 1993, had not been completed as required by postal regulations; entries in the office accounts had not always been recorded where they should have been; backup documentation for many transactions by the post office had not been properly maintained; the main stamp stock was mixed in with the regular stock and Petitioner's credit was not kept separate from the main stock; some stamps were stored in envelope drawers instead of in the safe; trust fund accounts were not being handled properly (Tr. 24-27, 37, 40, 47, 72-73; RX 3).

6. The audit report contained a recommendation that Petitioner be assessed $365.92 for shortages discovered in the audit. Of that total, $281.37 stemmed from a difference between the total stock and cash that should have been on hand according to the accounts of the office and the amount actually at the office as determined by a count of the stock and cash. The remaining $84.55 was based on the difference between what the office's account book showed had been deposited in trust and the amount that could be supported by the backup documentation (receipts for customer deposits, notice of employee overages, etc.) for the trust account (RX 3). The auditors were not able to identify the exact cause of the discrepancies or exactly when they occurred (Tr. 41, 68).

7. Between July 1992 and the date of the audit, the Wallburg Post Office received seven Financial Adjustment Memoranda (Petitioner's Exhibit ("PX") 13). The Financial Adjustment Memoranda were sent by the Greensboro Management Sectional Center ("MSC"), which handled Wallburg's banking, to advise the post office of a shortage (Debit Memoranda) or overage (Credit Memoranda) in the deposits of cash and checks sent by Wallburg directly to the bank (Tr. 33; F-1, Section 352; PX 13). Each Financial Adjustment Memorandum identified the discrepancy in the deposit, instructed the post office what correcting entries to make to the accounts, and directed that a duplicate of the memorandum be signed and returned to the Greensboro MSC the next business day (PX 13; see F-1 section 352.3).

8. The seven Financial Adjustment Memoranda were as follows:

Date                 Discrepancy                   Instructions

9/22/92            Shortage                        $30.00: Decrease AIC^1/ 421
                                                               $30.00: Increase AIC 814
10/16/92          Overage                         $10.00: Increase AIC 421
                                                               $10.00: Increase AIC 080
11/6/92            Overage                         $50.00: Increase AIC 421
                                                               $50.00: Increase AIC 080
1/5/93              Shortage                        $60.00: Decrease AIC 421
                                                               $60.00: Increase AIC 814
2/11/93            Overage                         $180.00: Increase AIC 421
                                                               $180.00: Increase AIC 080
2/11/93            Overage                         $36.54: Increase AIC 421
                                                               $36.54: Increase AIC 080
3/10/93            Overage                         $70.00: Increase AIC 421
                                                               $70.00: Increase AIC 080

(PX 13).

9. Amounts entered in AIC 080 or AIC 814 as a result of discrepancies in bank deposits are to be resolved as soon as possible by relating them to the transaction that resulted in the overage or shortage in the bank deposit and making adjustment to the appropriate AIC (Tr. 34-36; F-1, Sections 352.122, 352.222, 352.3).

10. The copy of each Financial Adjustment Memorandum bore a handwritten notation indicating that the adjustments had been "posted" to the accounts of the post office, and the copies of the two Memoranda dated 2/11/93 bore petitioner's signature in addition to the "posted" notation (PX 13). Corrections to reflect the Financial Adjustment Memoranda were in the account book at the time of the audit (Tr. 120).

11. The auditors did not see any Financial Adjustment Memoranda that had not been recorded in the post office accounts (Tr. 37; RX 3). The existence of such unrecorded Memoranda could have affected the audit's determination that a shortage existed (Tr. 37, 45).

12. Petitioner testified that he had located a stamp shortage of $240.90, which made up for the shortage identified in the audit. However, he did not explain how he arrived at that conclusion. Petitioner submitted in evidence pages from the office account book for the week of February 27 through March 5, 1993 (PX 8, 9), in support of his argument that he had accounted for the audit shortage. However, the unexplained interlineation and edits to those pages did not show that a stamp shortage of $240.90 existed and was related to the overages in the office bank deposits identified in Finding 8, above, none of which related to the week of February 27 through March 5, 1993.

13. Post office trust funds, AIC 080, are comprised largely of customers' advance deposits for permit imprint, second-class, business reply, postage due, and Express Mail, although the trust funds also include overages in bank deposits, money orders, and stamp credit (F-1, Section 381). The audit revealed that the amount shown in the office accounts as having been deposited in trust exceeded the total of the backup documentation for the trust fund deposits, such as receipts given to customers making deposits, by $84.55 (Tr. 68-69; RX 3).

14. On August 6, 1992, a customer brought in a check for $80.00 for payment into its bulk mailing permit account against which the cost of future mailings would be charged. Petitioner gave the customer a receipt for the payment (PX 11), but incorrectly recorded the payment in the post office accounts. Instead of reflecting receipt of funds to be deposited in trust, AIC 080, Petitioner recorded the transaction as payment of the customer's annual bulk mailing fee, AIC 138 (Tr. 102, 108). Correcting entries to the post office accounts were made about a month later (Tr. 109, 112).

15. Section 131 of the F-1 Handbook provides:

"When an accountable financial loss occurs and evidence shows the postmaster conscientiously enforced USPS policies and procedures in managing the post office, the Postal Service grants relief for the full amount of the loss. When evidence fails to show the postmaster met those conditions, the Postal Service charges the postmaster with the full amount of the loss."

16. In an April 13, 1993 letter to Petitioner, the Manager, Post Office Operations, Greensboro, expressed the Postal Service's intention to take action to collect $365.92 from Petitioner's salary based on the results of the audit. A copy of the audit was provided with the letter (PX 5; RX 2).

17. In a letter responding to the April 13 letter, Petitioner offered his explanation for the results of the audit, arguing that there was, in fact, no shortage in the office. He explained that the apparent shortage in the stock resulted from his failure to account for overages in the bank deposits of the office properly: "the differences were not reflected in the money order sales, but were reflected in stamp stock shortages, such that there was an appearance of a money shortage, when no such shortage existed." He explained that the discrepancy in the trust fund account resulted when the window clerk erroneously recorded a customer's deposit to its trust fund account as payment of the customer's annual bulk mail permit fee (PX 3).

18. Without specifically responding to Petitioner's explanations except to recognize that Petitioner denied the debt, on July 13, 1993, the Manager, Post Office Operations, sent Petitioner a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act (PX 2; RX 1).

DECISION

Respondent argues that the assessment against Petitioner is justified because the audit demonstrated the existence of a shortage and Petitioner did not conscientiously enforce and follow Postal Service accounting practices in the management of the Wallburg Post Office.

Petitioner does not deny that there may have been problems with the bookkeeping at the Wallburg Post Office, but he argues that, notwithstanding the results of the audit, the Postal Service did not suffer a financial loss. He argues that the main stock shortage can be explained by his failure to account for the overages in his bank deposits properly and the trust fund discrepancy can be explained by the misapplication of a customer's payment into trust for future mailing fees. As to the latter, he argues that if there had been a true shortage in the trust account, some customers would have been given less service than they paid for, and since no customers have come forward to complain, there has been no loss shown. He also suggests that the failure of management officials to consider the explanations he offered before issuing the Notice of Involuntary Administrative Salary Offsets was improper.

Although not urged in Respondent's closing arguments, in earlier correspondence Respondent contended that the initiation of the audit and Respondent's prosecution of its claim against him were racially motivated or in retaliation for his claim for compensation based on an on-the-job injury (PX 1). He also argued that he should not be held personally liable for shortages that existed before he became postmaster or for any shortage at the post office unless it is shown that he is the person that directly engaged in the acts that caused the shortage.

Respondent demonstrated that there was a shortage of $281.37 in the stock of the Wallburg Post Office causing a financial loss to the Postal Service in that amount. The amount that should have been at the post office, as shown in its books, exceeded by $281.37 the stock and cash as verified by a count of all stock and cash in the office. As all of the Financial Adjustment Memoranda had been "posted" to the accounts before the audit, Petitioner's argument that the "apparent" shortage is explained by his failure to record these Memoranda is not persuasive. Although unrecorded bank deposit overages could have affected the audit, those offered into evidence by Petitioner had been recorded. Also, there was no demonstrated relationship between the discrepancies noted in the Memoranda and the office shortage. The Memoranda related to deposits over the course of Petitioner's tenure at Wallburg, and Petitioner did not demonstrate that the "stamp shortage" he claims to have discovered in the records for the week of February 27 through March 5, a week when there were no Financial Adjustment Memoranda, had any relationship to the bank deposit discrepancies.

Postal accounting practices were not followed in the Wallburg Post Office. Petitioner has not shown that he "conscientiously enforced USPS policies and procedures in managing the post office," and therefore he was properly charged for the $281.37 shortage. After an audit which assured that no shortages from the prior manager of the Wallburg Post Office were transferred to him, Petitioner accepted responsibility for the stock and funds of the office when he was appointed to the position of postmaster, and he is liable for the loss to his accountability even though Respondent did not show specifically that Petitioner personally and directly caused the loss.

However, Respondent has not shown that the Postal Service suffered a financial loss from the discrepancy between the amount taken into trust, as reflected by the account book entries, and the total of the trust backup documentation. The documentation for the trust deposits consisted mainly of records reflecting Respondent's obligation to provide customers services for which they had paid in advance. The financial result, if any, of the discrepancy Respondent identified would be that the Postal Service would be called upon to provide less service than it had been paid for. Respondent has not shown how that would result in a financial loss to the Postal Service. Therefore, Respondent has not demonstrated its entitlement to the $84.55 for the trust fund account discrepancy.

Petitioner did not offer any evidence to show that the audit and resulting claim against him were racially motivated or were in retaliation for his filing of a claim for an on-the-job injury. There was also no evidence that the failure of Respondent's officials to respond specifically to the explanations he offered in his letter written before issuance of the Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act reflected bad faith or a failure to give proper consideration to his position.

CONCLUSION

Accordingly, I find Petitioner liable to Respondent in the amount of $281.37 but sustain the petition as to the claim of $84.55 relating to the trust account.

Norman D. Menegat
Administrative Judge

1/ "AIC" refers to the "Account Identifier Code" used in postal accounts to designate the accounts to which receipts and disbursements should be applied. AIC 421 is for funds deposited into a consolidated banking account; AIC 814 is a suspense account; AIC 080 is a trust funds received account. F-1, Appendix A.