FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, a supervisor in Charlotte, North Carolina, filed this Petition on July 23, 1997, after receiving a Notice of Involuntary Administrative Salary Offsets on July 10, 1997 from David P. Levett, Manager, Finance for the Mid-Carolina District. This Notice stated the Postal Service's intention to withhold $1,715.00 from Petitioner's salary to cover a shortage in his account, revealed by an audit on April 8, 1997.

A hearing was held in Charlotte, North Carolina on September 19, 1997. The Postal Service presented testimony from Mr. Levett and from Ms. Reid, who conducted the April 8, 1997 audit. Mr. Osborne testified in his own behalf, and both sides presented documentary evidence. Each representative made an oral summation at the close of the hearing.⁽¹⁾ The following findings of fact are based on the entire record, including observation of the witnesses and their demeanor.

FINDINGS OF FACT

1. Petitioner has been a Postal Service employee for thirty-four years. He has been a supervisor of customer services since 1990, and since August 1994 has held that position at the Starmount Station in Charlotte, North Carolina. (Tr. 47, 54).

2. Starmount is what is known as a "finance station." It is a post office with window clerks and post office boxes, but no mail carriers work from that station. (Tr. 41, 60). Petitioner, Mr. Osborne, is the supervisor in charge of the Starmount Station. The "station manager" at Minuet Station, another post office in Charlotte, is his boss. (Tr. 60).

3. Petitioner is the accountable custodian of the cash and stamp stock, known as the unit reserve, at Starmount Station. (Tr. 9).

4. Several "contract stations" are also under Mr. Osborne's supervision. A contract station is a small post office located on some other business premises, and run by that other business as an adjunct to its principal business, in order to provide a convenient service to its customers. Personnel who operate a contract station are not Postal Service employees. (Tr. 64-65). Mr. Osborne is responsible for supplying stamp stock to these stations. The procedure for issuing stock to a contract station is the same as for issuing stock to another postal employee, i.e., the recipient of the stock signs a Form 17, acknowledging receipt of the specified amount of stamp stock. The custodian, in this case Mr. Osborne, would then reduce his own account by the amount delivered. (Tr. 12-13; 55-56).

5. Barbara Reid, the postmaster at Locust, North Carolina, was assigned to do an audit of Petitioner's stock, the unit reserve, and did so on April 8, 1997. When she arrived to do the audit, and before the count was done, Petitioner told Ms. Reid that he knew he was short fifty rolls of 32¢ stamps.⁽²⁾ He offered no documentation to confirm this, but later told Ms. Reid that he believed it was likely the shortage occurred when he took stock to his contract stations, at the time of the last stamp price increase in 1995. (Tr. 10, 13, 28).

6. Together, Ms. Reid and Mr. Osborne counted all the stock and found a shortage of $1,715.00. Their count showed that a specific part of the shortage was that fifty rolls of 32¢ stamps were missing. (Tr. 11-12; Answer, Ex. 5). Petitioner signed the inventory printout on April 8, 1997, indicating that he agreed with the count. (Tr. 12; Answer, Ex. 5).

7. Postal Service Handbook F-1, Post Office Accounting Procedures, effective November 1996, provides that employees to whom postal funds and accountable paper are consigned (such as Petitioner) "are held strictly accountable for any loss unless evidence establishes that they followed the postal procedures established when performing their duties." Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), Section 141.

8. The preceding version of the F-1 Handbook, that of April 1991, addressed an employee's liability for a shortage differently, providing that employees would be "held strictly accountable for any loss unless evidence establishes they exercised reasonable care in the performance of their duties." Postal Service Handbook F-1, Post Office Accounting Procedures (April 1991), Section 132. The "reasonable care" standard also appears in Respondent's Financial Management Manual (June 1983), Sections 341.2 and 842.2, which sections remain unchanged.

Contentions of the Parties

Respondent's position is simply that the April 8, 1997 audit proves there was a shortage in the stock for which Petitioner was accountable, and that the evidence does not show that Petitioner exercised reasonable care in safeguarding that stock.

Petitioner contends that the fifty rolls ($1,600.00) had been missing since early 1995, and that he should not be held liable for the loss because other responsible officials were aware of the shortage and did nothing. He testified that he discovered the shortage in February 1995 during a routine self-inventory, and that he reported it to a postal inspector and someone in "accountable paper." He also testified that audits similar to the one performed by Ms. Reid had been done later in 1995 and again in 1996, that the fifty coils were missing from his inventory on both occasions, but that no record was made of it and no action was taken either time. (Tr. 48-50, 61-64). Petitioner presented no evidence, or argument, about the other $115.00 of the total shortage.

DECISION

Respondent's burden of proof, in cases of unexplained shortage such as this, is to establish a loss, and to show that Petitioner was accountable for the stock from which the loss occurred. Respondent is not required to prove any specific dereliction, or act of negligence, by Petitioner. When a properly conducted inventory, or audit, shows a stock shortage relative to a previously established balance, this constitutes proof of loss unless other evidence raises sufficient doubt about the accuracy of the inventory or the previously established balance, or otherwise suggests that there may have been no actual loss. In this case there is no such evidence, and a loss of $1,715.00 is established. Petitioner does not dispute the fact that he was accountable for the stock in question. Once Respondent has met its burden, the burden shifts to Petitioner to show that he exercised reasonable care.

Under the April 1991 version of the F-1 Handbook, as well as the current formulation of the standard in the Financial Management Manual, Petitioner will be strictly accountable for the loss unless evidence establishes that he exercised reasonable care in the performance of his duties (Finding 8). The November 1996 version of the F-1 Handbook gives no indication when the newer standard--whether Petitioner "followed the postal procedures established when performing [his] duties" (Finding 7)--is to be applicable. However, as the shortage could have occurred before November 1996 (Findings 5 and 6), Petitioner will not be liable for the loss if the evidence demonstrates that he met either standard; i.e., that when managing his accountability he exercised reasonable care, or that he followed the postal procedures established.⁽³⁾

The facts do not demonstrate that Petitioner exercised reasonable care, and his argument that the failure of others to take action should relieve him of liability is not persuasive, nor is it supported by the evidence. As to the latter point, Petitioner's testimony, unsupported by any documentation, or testimony from any other witness, is not credible. If he reported the $1,600.00 shortage in 1995, and if that shortage was noticed on audits done in 1995 and 1996, it must be assumed that some records would be available, or that some witness would have been presented, to support this contention. Even assuming that Petitioner did discover the shortage in February 1995 and report it to someone, however, this is not a basis for relieving him of liability. There is still an established loss from the account for which he was, and is, responsible, and he has not carried his burden of demonstrating that he exercised reasonable care, or that he followed established Postal Service procedures. To the contrary, his statement that the $1,600.00 loss probably occurred when he delivered stock to his contract stations suggests that he may not always have exercised reasonable care, or followed proper procedures, when transferring stock.

CONCLUSION

The Petition is denied. Respondent may collect $1,715.00 from Petitioner's salary.

Bruce R. Houston
Chief Administrative Law Judge

1. Because of a delay in scheduling the hearing on a date suitable to both parties, the parties waived the requirement for a decision within 60 days of the filing of the Petition.

2. Each roll contains 100 stamps - total value: $.32 x 100 x 50 = $1,600.00.

3. Because it is not necessary to the decision in this case, I have not made any finding whether the liability standard set forth in the November 1996 F-1 Handbook (Finding 7) differs from the reasonable care standard of the April 1991 F-1 Handbook (Finding 8).