In the Matter of the Petition by                                )
                                                                               )
                                                                               )
BESSIE M. KOHN                                                    )
3265 S. Ridge Drive                                               )
                                                                               )
at                                                                            )
                                                                               )
Richmond, CA 94806-5244                                    )    P.S. Docket No. DCA-174

APPEARANCE FOR PETITIONER:                           Marilyn J. Walton
P.O. Box 980911
West Sacramento, CA 95798-0911

APPEARANCE FOR RESPONDENT:                        Harvey Bell
United States Postal Service
1675 7th Street Room 419
Oakland, CA 94615

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Bessie M. Kohn, 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 issued to her July 22, 1993. The Notice asserted the Postal Service's intention to make withholdings from her salary to collect $3294.25 the Postal Service claimed from Petitioner based on the results of a March 22, 1993 audit of the main stamp stock of the Benicia, California, Post Office, at which Petitioner was then the Superintendent of Postal Operations.

A hearing was held in Oakland, California, on October 21, 1993.

FINDINGS OF FACT

1. Until March of 1992, Petitioner was the Superintendent of Postal Operations ("SPO") at the Benicia Post Office in California (Transcript page ("Tr.") 13, 230). Her duties included management of the main stamp stock (Tr. 13, 105, 294; Respondent's Exhibit ("RX") 4; see Handbook F-1, Post Office Accounting Procedures ("F-1"), sections 431.2, 432.1), supervising window clerks and conducting regular audits of their stock, paying the bills of the office, and, as needed, supervising carriers and handling customer complaints (Tr. 13, 144-45). Supervising carriers and handling delivery complaints were technically duties of the other supervisor in the office, but Petitioner often had to perform those functions as well as her own (Tr. 109, 142, 143). She was not responsible for preparation of the office Daily Financial Report, Form 1412 (Tr. 137).

2. In 1991, the Benicia Post Office began experiencing discrepancies between the opening balance it reported on its Daily Financial Report and the closing balance from the previous day as shown in the records of the Oakland Division accounting unit to which Benicia made its financial reports (Tr. 13, 14, 35, 38).

3. The Oakland Division accounting unit noted the discrepancies and notified the Benicia Post Office that the differences must be corrected (Tr. 32, 38, 42, 61; Petitioner's Exhibit ("PX") 22 page 3; RX 1), because the figure for the start of one day's accounts should always be the same as the closing figure for the previous day (Tr. 59-60, 291, 304-305; see F-1 section 223.33). The purpose of the notice was to cause the "out of balance" post office (an office whose accounts do not agree with the division's records) to identify the cause of the discrepancy and to make appropriate corrections to its accounts (Tr. 57, 61). However, at Benicia, unknown to Petitioner, the accounting technician receiving the notice was frequently making adjustments to the beginning balances of the office daily accounts as directed by the Oakland accounting unit without identifying and correcting the underlying cause of the discrepancy (Tr. 17, 61, 112-113, 244, 286).

4. An "out of balance" condition can be caused by window clerks failing to record promptly their receipt of stock from the main stamp stock. This occurred at Benicia and created a temporary "out of balance" situation until the clerks entered the new stock in their individual financial records, because the main stamp stock would have been reduced without a corresponding increase in the accountability of the clerk receiving the stock (Tr. 215, 244-45, 304-305). Incorrectly paying bills of the office and other accounting errors may also cause the post office accounts to be temporarily out of balance with the accounting unit (Tr. 17-18, 120).

5. Petitioner knew the clerks' failure to record promptly their transactions caused temporary "out of balance" situations and, if she could not immediately identify the error, she would often wait a few days after becoming aware of an "out of balance" condition for the proper entries to be made which would bring the accounts back into balance (Tr. 245). However, when the opening balances had already been arbitrarily adjusted upon advice from the Oakland accounting unit, the accounts could be put "out of balance" when the correcting entries were made (Tr. 245, 306).

6. When petitioner discovered that the opening balances were being adjusted arbitrarily upon receipt of an "out of balance" notice from the Oakland accounting unit without identifying the error, she directed the technician not to make such adjustments without receipt of a Form 1908, which would be formal notice of the discrepancy with advice on how to account for it (Tr. 245-246). Both Petitioner and the then Benicia Postmaster opposed directed changes to the beginning balances and asked the Oakland accounting unit to stop (Tr. 16-17, 113-14), as making such arbitrary adjustments is one way an office can get "out of balance" (Tr. 17, 115).

7. After the practice of making arbitrary adjustments was halted at Benicia, Petitioner went back through the office records but was not able to identify all the discrepancies to get the accounts to match the figures of the Oakland accounting unit (Tr. 34, 120, 284). She visited the Oakland accounting unit seeking assistance, but the problems were in the Benicia accounts, and the accounting unit could not provide helpful information beyond identifying the days the Benicia accounts were "out of balance" (Tr. 48-52, 63-64, 122, 251-52, 254-56). Through her postmaster, Petitioner requested additional help, and a financial specialist from the Oakland Division was assigned to visit Benicia and to help Petitioner identify the discrepancies (Tr. 21-23, 122, 189, 256-57).

8. The search for the discrepancies was a very time-consuming and tedious job. Petitioner and the financial specialist had to go back through the office records for each day the accounts were out of balance, pull out each clerk's records for that day and try to resolve the discrepancies by working forward through the accounts day by day (Tr. 21-22, 52, 57, 126-27).

9. Through their efforts, Petitioner and the financial specialist were able to identify the source of discrepancies sufficient to reduce the "out of balance" to $3294.25 (Tr. 122, 199, 251, 284, 286). However, before their work was completed, the specialist was called back to her regular duties which involved division-wide training in new systems being implemented in the division (Tr. 126, 258).

10. In July of 1992, the financial specialist returned to Benicia, but she did not have time to work further on finding the source or sources of the discrepancy. However, so that the Benicia Post Office could be brought back into balance, she created in the Benicia computerized records a "dummy" disk that showed a "phantom" transaction: an entry reflecting receipt of stamp stock in the amount of $3294.25 as of July 22, 1992 (PX 22 p. 12; Tr. 91-92, 96-99, 123-24, 260-61). This did not correct the discrepancy as the "transfer" had not actually occurred, but creating the disk identified and isolated the "out of balance" amount (Tr. 208, 262) so that the Benicia accounts would agree with those of the Oakland accounting unit (Tr. 21-23). It was anticipated that the financial specialist would return at some future time to help Petitioner resolve the discrepancy, and so Petitioner did not work further on finding the cause of the discrepancy (Tr. 126, 200, 208).

12. As Petitioner's accountability for the main stock was, by definition, the difference between the total office accountability and the total of the clerks' assigned accountability, the amount on the "dummy" disk was part of her accountability (Tr. 158, 172-73, 184, 187, 235). From the time the $3294.25 discrepancy was isolated and assigned to the "dummy" disk, Petitioner was able to identify the cause of any subsequent temporary "out of balance" condition and correct it (Tr. 306).

13. Incident to transfer of the post office to a new postmaster and Petitioner's assignment away from Benicia, the main stock was counted on March 22, 1993 (Tr. 30). Although Petitioner did not perform the stock count herself, she witnessed the count and does not disagree with its accuracy (Tr. 204, 231, 289, 294). The main stock balanced exactly with what was shown on the stamp stock inventory disk as the stock (numbers of stamps by type and denomination) that should have been in the Benicia Post Office (Tr. 30, 157, 180-183, 185, 195, 205, 209-211, 232; PX 2, 3). However, once the amount on the "dummy" disk was included in the office accountability, a shortage in the amount of $3294.25 was shown (Tr. 93-94, 95-97, 157, 160, 185, 213-14, 235; PX 3, 4).

14. The former postmaster, who supervised the office until February, 1993 (Tr. 12, 25), believed that there was no real shortage in stock or funds, just a difference between the accounts of the Oakland accounting unit and the Benicia Post Office (Tr. 20-21, 24), and for that reason did not issue a letter of demand to Petitioner (Tr. 24, 129, 264-65, 297). The Benicia accounting technician thought it was only a "paper" error (Tr. 127), and the division financial specialist who worked with Petitioner to locate the source of the discrepancy is convinced it is only a "paper" error, and that if she had continued her work on it, she would have resolved the discrepancy (Tr. 197-98, 199, 202).

15. The accountability of each window clerk in the post office was to be audited at least once every 4 months, and it was Petitioner's responsibility to do so. With the knowledge and consent of the then postmaster, however, Petitioner did not conduct the audits within the time required due to the press of other business in the post office (Tr. 29, 32-33, 139, 266-67, 290). Audits that were to have been conducted in November of 1992 were not done before the former postmaster left in February, 1993 (Tr. 266, 290-91).

16. Section 132 of the F-1 provides:

"The postmaster consigns postal funds and accountable paper to other employees. Employees are held strictly accountable for any loss unless evidence establishes they exercised reasonable care in the performance of their duties."

17. By letter dated April 9, 1993, the new Benicia Postmaster advised Petitioner that she was responsible for payment of $3294.25 (PX 5). Petitioner requested reconsideration of the Postal Service claim (PX 6). By letter dated July 22, 1993, Petitioner was issued a Notice of Involuntary Administrative Salary Offsets, which is the basis of her Petition for Hearing.^1/

DECISION

Respondent argues that the assessment against Petitioner is justified because she was accountable for the main stock at Benicia as of its count on March 22, 1993, and the count showed a shortage of $3294.25. It contends she failed to exercise reasonable care in the performance of her duties by failing to audit window clerks in the office as frequently as required and by allowing clerks to delay picking up their accountability for stock assigned from the main stock.

Petitioner argues that although there is a difference between what the Oakland finance unit carried as the accountability of the Benicia Post Office and what stock the post office had on March 22, 1993, when the stock was counted, the discrepancy is an accounting or "paper" discrepancy only and does not represent a true financial loss to the Postal Service. She contends that when she discovered the practice that led to the "out of balance" condition, she stopped it, but she was unable to locate the source of the differences. She contends she was not given sufficient help by the Oakland accounting unit, and that when the financial specialist worked with her, they were able to resolve part of the discrepancy. If Respondent had not withdrawn the financial specialist's services, Petitioner contends they would have been able to find the source of the discrepancy and resolve it.

Respondent has not shown that a true loss to the Postal Service has occurred. While the cause of the differences between the accountability as shown in the Benicia Post Office accounts and those of the Oakland accounting unit has not been pinpointed, those most knowledgeable of its origin agree that no real loss of stock occurred. Petitioner, the Benicia accounting technician, the postmaster at the time the discrepancy surfaced, and the accounting specialist that helped Petitioner try to resolve the problem all characterize the discrepancy as one on paper only, and Respondent has not demonstrated to the contrary.

The arbitrary adjustments made to the Benicia accounts appear to be at the root of the "out of balance" condition at Benicia, and Respondent has not shown that Petitioner is responsible for the erroneous entries. Once the arbitrary adjustments were made, subsequent entries which should have corrected the condition had the effect of creating another imbalance in the accounts. Petitioner did not personally maintain the Daily Financial Reports of the office, and she was not aware that the arbitrary adjustments were being made. Notably, once the arbitrary adjustments were stopped, at Petitioner's direction, and the dummy disk was created, isolating the discrepancies that had occurred in the past, Petitioner was always able to correct any temporary "out of balance" condition that occurred thereafter. The March 22, 1993 audit showed a "shortage" equal to the amount isolated on the dummy disk, to the penny. This demonstrates that Petitioner had managed the stock accurately since July of 1992 when the disk was made.

That her stock on hand matched the computer inventory for the main stock and that the Benicia accounts matched those of the accounting unit to the penny once the $3294.25 was isolated also support the conclusion that she exercised reasonable care in the performance of her duties. She stopped the arbitrary adjustments once she learned of them, and she was able to identify and correct every out of balance condition that surfaced once the previous discrepancy was isolated on the "dummy" disk. Her efforts to identify and resolve the source of the discrepancy, although unsuccessful, were reasonable.

The postmaster knew about and acquiesced in Petitioner's failure to audit the window clerks when required, which was due to the press of other business in the office. While inconsistent with postal requirements, it has not been shown to be a failure to exercise reasonable care, given Petitioner's other duties at the Benicia Post Office and the postmaster's acquiescence. Additionally, the failure to audit the window clerks' accountability when due in November of 1992 had no bearing on the $3294.25 discrepancy which was isolated on July 22, 1992, and did not vary thereafter. Petitioner's method of dealing with the clerks' failure to record promptly additions to their accountability from the main stock does not appear to have been unreasonable or to have been the cause of the discrepancy as her method has proved successful once the arbitrary adjustments stopped.

I conclude that Petitioner is not liable for the amount claimed by Respondent. The petition is sustained.

Norman D. Menegat
Administrative Judge

1/ The record does not contain a copy of the Notice of Involuntary Administrative Offsets, but Respondent has not contested its issuance nor challenged jurisdiction in this matter (See PX 1, 12).