In the Matter of the Petition by                         )
                                                                        )
KENNETH PEDERSON                                      )
39 Yosemite Road                                           )
                                                                        )
at                                                                     )
                                                                        )
San Rafael, CA 94903-2275                           ) P.S. Docket No. DCA 95-387

APPEARANCE FOR PETITIONER:                   Michael W. Miller
                                                                       National Association of Postal Supervisors
                                                                       P.O. Box 5445
                                                                       Walnut Creek, CA 94596-5445

APPEARANCE FOR RESPONDENT:                 Alma Sanchez
                                                                        Labor Relations Specialist
                                                                        United States Postal Service
                                                                        1150 N. McDowell Blvd.
                                                                        Petaluma, CA 94999-9401

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Kenneth Pederson, filed a petition requesting an oral hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. §5514 (a), after receiving a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act. The October 5, 1995 Notice asserted the Postal Service's intention to make withholdings from Petitioner's salary to collect $1,950.95 based on the results of a count of the unit reserve stock at the Civic Center Station in San Rafael, California during the time Petitioner was the station manager.

An oral hearing was held in San Francisco on November 29, 1995.

FINDINGS OF FACTS

1. Petitioner has been the manager of the Civic Center Station and custodian of the station's unit reserve stock since about February of 1994. Civic Center Station reports to the San Rafael, California Post Office. (Transcript page ("Tr.") 99-100; Petitioner's Exhibits ("PX") B, K).

2. In late May 1995, a general audit of the operations of the San Rafael Post Office, including Civic Center Station, was conducted by the Postal Inspection Service. A May 30, 1995 count of the Civic Center Station unit reserve stock completed as part of that audit revealed a shortage of $1,950.95. (Tr. 107; PX B-16, -20; Inventory Adjustment Worksheet, Page 71 of Inspection Service Report Exhibits attached to Petition).

3. Before the audit of May 1995, Petitioner stored stamp stock belonging to the unit reserve in a locked closet adjacent to the station counter which closet was accessible to the window clerks. The postmaster was not informed of this practice. Postal Service regulations in Handbook F-1, Post Office Accounting Procedures, a copy of which was available at Civic Center Station, require that the custodian have exclusive access to the unit reserve. Petitioner is now taking steps to free up additional space in his safe for storage of stamp stock. (Tr. 54, 72, 108-112; PX B-30; Handbook F-1, section 432.1).

4. On two occasions prior to the May audit, Petitioner informally adjusted overages disclosed in counts of window clerks' credits. The official form reflecting the count of each clerk was altered to show a count within tolerance when the actual count had exceeded tolerance, and stock equal to the overages was taken from the clerks' credits and placed in the unit reserve without entering the transactions in the books of the post office. This was done to adjust for shortages in the unit reserve stock. The postmaster had not been informed of this practice. (Tr. 107-108, 112; PX B-22).

5. The credits of two of the Civic Center Station window clerks were audited in early June 1995, revealing overages totaling $773.29, and these overages remain in trust in the station accounts. Both clerks have given written statements in which they express their opinions that their overages directly relate to the shortage in the unit reserve stock at Civic Center Station. Both agree that their overages may be applied to Petitioner's reserve stock shortage. Another clerk was audited in July and also had an overage, but she did not express a view regarding a relationship between her overage and the unit reserve shortage or any willingness to relinquish her overage to Petitioner's shortage. (PX I, N-1).

6. Petitioner, as the unit reserve custodian, is "strictly liable for any loss unless evidence establishes that [he] exercised reasonable care in the performance of [his] duties." (Handbook F-1, section 132).

7. Respondent's efforts to collect the amount of the shortage from Petitioner culminated in the issuance, on October 5, 1995, of a Notice of Involuntary Administrative Salary Offsets which prompted Petitioner to seek a hearing under the Debt Collection Act to challenge the debt (PX B-7).

DECISION

Respondent argues that it has shown that the shortage in the Civic Center Station unit reserve stock resulted in a loss to the Postal Service. It contends that it has demonstrated that Petitioner did not exercise reasonable care in the performance of his duties as the unit reserve custodian and that, therefore, he is strictly accountable for the loss.

Petitioner argues that Respondent has failed to show that any of his actions, whether or not such actions conformed precisely to Postal Service financial management requirements, caused the shortage in the reserve stock. He also argues that he should receive credit for overages in clerks' accountabilities that are currently held in trust at Civic Center Station. Further, Petitioner argues that he did not know that it was improper to transfer clerks' overages to the reserve stock as he did and that in conversations with other postal employees at area meetings he was led to believe that it was acceptable to do so. He contends that security arrangements at the station were inadequate for the amount of stock he had to store and that the practices he followed were those used by his predecessor. Petitioner also argues that the postmaster was aware of at least some of the problems he faced regarding secure storage space. Finally, Petitioner suggests that the postmaster failed to exercise adequate control over the financial operations of the post office and that that failure excuses any lack of reasonable care by Petitioner.

It is Respondent's burden in this proceeding to demonstrate that the May 30, 1995 shortage in the Civic Center Station unit reserve stock represented a loss to the Postal Service. By demonstrating that the stock in the unit reserve was $1,950.95 less than shown in official post office records for the unit reserve, Respondent has made a prima facie showing of a loss. It is not necessary that Respondent show that specific deficiencies in Petitioner's performance of his duties caused the shortage.

However, Petitioner has presented evidence that window clerks with prior overages totaling $773.29 that are now carried as trust entries believe their overages are related to Petitioner's shortage and are willing to relinquish those overages to the unit reserve stock. If the clerks' overages are related to the unit reserve shortage, then, to the extent of the overages, the shortage in Petitioner's stock does not represent a loss to the Postal Service. Respondent has not challenged Petitioner's evidence that the overages are related to his shortage, and, therefore, Petitioner should be credited with $773.29 against the shortage in the unit reserve. Petitioner has presented no evidence that the overage of the third clerk or any other trust entry has any relation to the unit reserve shortage. Therefore, there remains a shortage of $1,177.66 in the unit reserve that represents a loss to the Postal Service. Unless the evidence shows that Petitioner exercised reasonable care in the performance of his duties, he will be liable for the remaining shortage.

The evidence does not establish that Petitioner exercised reasonable care. Storage of stamp stock in a closet that others have access to when Postal Service regulations and common sense dictate that the custodian maintain exclusive access to the stock is not the exercise of reasonable care. The postmaster was not aware of these arrangements, and Petitioner is only now taking steps to free up additional space within his safe. That his predecessor might have followed the same storage practices does not excuse Petitioner's failure to secure the stock adequately more than a year after he became the custodian.

Additionally, altering official records of counts of clerks' credits and transferring their overages to the reserve stock without recording the transaction in the station's books was inappropriate, and it is not a defense that Petitioner may have relied on advice from unnamed Postal Service employees he met at area meetings. This informal advice is not sufficient to excuse compliance with Postal Service regulations that require accurate recording of the results of counts of clerks' credits, entry of any clerks' overages as trust items in the station's books and crediting clerks' overages to reserve stock shortages only if a relationship is shown. Handbook F-1, section 472; Handbook F-50, Examination of Stamp Credits and Main or Unit Reserve Stocks, Chapter 2.

After its review of the operations of the San Rafael Post Office, the Inspection Service was very critical of the financial controls and practices in place. While blame for the inadequate practices undoubtedly lies with others, including the postmaster, as well as Petitioner, those inadequacies have not been shown to excuse Petitioner's failure to exercise reasonable care in his management of the unit reserve stock.

Accordingly, the petition is sustained in part and denied in part. Respondent may collect $1,177.66 by offset from Petitioner's salary.

                                                                                       Norman D. Menegat
                                                                                       Administrative Judge