In the Matter of the Petition by                                 )
                                                                                )
DEBRA PEARSON                                                   )
352 Bennett Road                                                   )
                                                                                )
                at                                                             )
                                                                                )
Candler, NC 28715-8223                                         )  P.S. Docket No. DCA 98-559

APPEARANCE FOR PETITIONER:                            Charles Scialla
                                                                                453 Preakness Avenue, #5
                                                                                Paterson, NJ 07502-1121

APPEARANCE FOR RESPONDENT:                         Wendy J. Hankins
                                                                                Labor Relations Specialist
                                                                                United States Postal Service
                                                                                2901 South I-85 Service Road
                                                                                Charlotte, NC 28228-9961

Petitioner, Debra Pearson, filed this Petition after receiving a Notice of Involuntary Administrative Salary Offsets, dated December 4, 1998, from the Asheville, North Carolina Postmaster. This Notice stated the Postal Service’s intention to withhold $4,834.44 from Petitioner’s salary to recover for a shortage in the main stock at the Asheville Post Office, Downtown Station.

A hearing was held in Asheville, North Carolina on January 12, 1999. The Postal Service presented testimony from Tom Dudas, who replaced Ms. Pearson as the Downtown Manager; Doug Hughey, Postal Systems Coordinator, who examined the financial accounts of the Downtown Station; Susan Robinson, who assisted in attempting to reconcile the accounts; and Harry Harvill, the Asheville Postmaster. Petitioner testified in her own behalf, and also presented testimony from Dennis Peek, a clerk. Both sides also relied on documents attached to the Petition and Answer, and Respondent submitted three excerpts from Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996). The following findings of fact are based on the entire record, including observation of the witnesses and their demeanor.

1.  From sometime in 1996 until February 17, 1998, Petitioner was Manager of the Downtown Station in Asheville, North Carolina, and was custodian of the unit reserve stock. This accountability was more than $400,000. (Tr. 7-8, 35, 114-15).⁽¹⁾

2.  On February 17, 1998, Petitioner was transferred to another job, and Thomas Dudas was reassigned to the Downtown Station as the supervisor in charge. Accountability for the unit reserve stock was not transferred from Petitioner to Mr. Dudas, however, until on or about April 16, 1998.⁽²⁾

3.  The hours for Petitioner’s new job were 10:30 p.m. to 7:00 a.m. When it was necessary for her to issue stock to the clerks at the Downtown Station during this interim period (February-April), she would do it at about 6:00 a.m. She did this approximately once every two weeks. (Tr. 35, 108).

4.  Whenever a custodian adds stock to, or issues stock from, an account for which the custodian is responsible, the custodian is required to record the transaction on a PS Form 3958 and make the appropriate entry into the IRT (Integrated Retail Terminal), the computerized system for maintaining stamp stock records (Handbook F-1, Post Office Accounting Procedures, §417). When Petitioner issued stock in the early morning, she did not always make these entries at that time, because the previous day’s activities had to be closed out in the IRT before a new day’s entries could be made, and this was not usually done until mid-morning (Tr. 17, 101).

5.  The custodian of a unit reserve is responsible for ordering stamp stock from a Stamp Distribution Office (SDO) to maintain an adequate supply for all post offices serviced by that custodian. Shipments from the SDO to the Downtown Station are sent by registered mail, and are received and logged in by the clerk responsible for the security of registered mail. This clerk places the shipment inside a locked vault. The custodian of the unit reserve is then responsible for opening and verifying the amount of the shipment, putting it inside a locked "cage" within the vault where the unit reserve is maintained, and making the appropriate entries into the IRT. As custodian, only Petitioner had a key to the "cage," and proper procedure dictates that no one other than the custodian should have access to a main stock, or unit reserve. (Tr. 9, 18, 24, 29, 53-56, 84-88, 116; Handbook F-1, §416.1(5), §422.1).

6.  Because Petitioner was no longer present at the Downtown Station, stock shipments would sometimes remain in the vault, but not inside the cage with the rest of the unit reserve, for many days before Petitioner entered them into the IRT. She also acknowledged that, on occasion, she had opened stock and issued some to clerks without making the IRT entry that same day. (Tr. 11-12, 18, 127, 131). On some occasions during the interim period, while Mr. Dudas was the Station Manager but Petitioner was still the stock custodian, Mr. Dudas, in order to keep the clerks supplied with stock in Petitioner’s absence, opened stock shipments and issued stock to clerks. He kept records of at least some of these transactions on PS Form 17s, Stamp Requisition (Att. Q to Respondent’s Answer, Exs. 3 & 4), but was unable to make any entries into the IRT. Mr. Dudas ordered some of these stock shipments. Petitioner was not aware that Mr. Dudas had ordered stock, or that he had issued stock to clerks, prior to April 16, 1998. (Tr. 20-21, 25, 27-28, 117, 133-35).⁽³⁾

7.  It was not proper procedure for Mr. Dudas to open stock shipments for which he was not accountable, and issue that stock to clerks. (Tr. 41-42, 52, 84-85).

8.  On April 16 or 17, 1998, Petitioner and Mr. Dudas counted the unit reserve stock and transferred the account to Mr. Dudas. At that time, the account was "out of balance," by some unknown amount (Tr. 10).⁽⁴⁾ The amount actually present in the unit reserve was approximately $402,000.00 (Tr. 35). However, there are no documents in the record that show the result of this count, or that show what amount was supposed to be present.

9.  Following this count, in an effort to balance the account, Petitioner made several entries into the IRT, including entering some of the stock shipments that had previously been received but never entered, as well as entries for stock she had previously issued to clerks (Tr. 10-13, 57; Att. Q to Respondent’s Answer).

10.  In March 1998, Douglas Hughey, Postal Systems Coordinator, was sent to the Downtown Station to review financial documents and attempt to reconcile the unit reserve account.⁽⁵⁾ Part of the effort to do this was to get together with Petitioner and Mr. Dudas, so that both of them could examine available records. This was thwarted, to some extent, by Petitioner’s failure to be present at scheduled meetings. (Tr. 14, 44, 59). In a May 14, 1998 memorandum to the postmaster, Mr. Hughey reported that there was a net shortage of $4,983.44, and that the "main problem seems to be the untimely input of stamp stock transactions into the IRT." He also stated that the shortage "may be a paperwork error, but without the assistance of the former Station Manager, I cannot identify the error(s)." He noted that Petitioner had failed to attend two scheduled meetings, and recommended that she be issued a Letter of Demand for $4,983.44. (Att. Q to Respondent’s Answer, Ex. 6, p. 2).

11.  A Letter of Demand, for $4,983.44, was issued to Petitioner on June 17, 1998, and a Notice of Involuntary Administrative Salary Offsets, for $4,834.44, was issued on December 4, 1998.⁽⁶⁾ This Petition followed.

Contentions of the Parties

Respondent argues that the shortage was caused by Petitioner’s failure to enter daily transactions into the IRT as she was required to do, and that the inability to find a paper trail that would identify and reconcile any paperwork errors was due to Petitioner’s lack of cooperation in that effort. Even though it may have been difficult for Petitioner to manage the main stock account after she changed jobs, she knew it was still her responsibility, and Respondent contends that she could, and should, have made some arrangement to make the necessary entries into the IRT in a timely manner. As for Mr. Dudas’ activities in the main stock even though he did not have the accountability for it, Respondent contends that he kept accurate records of all his transactions on PS Form 17s, and that the account was eventually adjusted to accurately record all those transactions.

Petitioner contends, in essence, that she should not be held liable for things that were not within her control. Specifically, she points to the practical difficulty she had in issuing stock and making IRT entries while working a full time night shift job, and argues that management should bear responsibility for permitting the unwieldy "absent custodian" situation to last for two months. She also argues that there is not a sufficient paper trail to determine whether all of Mr. Dudas’ transactions in the main stock were accurately recorded.

DECISION

Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), Section 14, provides as follows:

14 Liability for Financial Losses

When an accountable financial loss occurs and evidence shows that the postmaster or responsible manager enforced U.S. Postal Service policies in managing the post office, the Postal Service grants relief for the full amount of the loss. When evidence fails to show that the postmaster or responsible manager met those conditions, the Postal Service charges the postmaster or responsible manager with the full amount of the loss.

In this case, Petitioner was a "responsible manager," but as she was also the stock custodian, Section 141 of Handbook F-1 is also applicable. It provides that employees to whom postal funds and accountable paper are consigned "are held strictly accountable for any loss unless evidence establishes that they followed postal procedures established when performing their duties." Respondent’s burden of proof is to show that the Postal Service suffered a loss of stamp stock, or money, and that the loss occurred from an account for which the Petitioner was responsible. Respondent does not have to prove that some specific dereliction, or act of negligence, by Petitioner caused the loss. If this burden is met, the burden then shifts to Petitioner to show that she followed established procedures in performing duties relative to her accountability, or that she should be relieved of liability for some other reason.

Despite the unusual arrangement whereby Petitioner retained accountability for the main stock for two months after she ceased to be the station manager, there is no doubt that she was the main stock custodian during the time pertinent to this case. There is also little doubt that she did not follow all established procedures in managing that account. The sole issue is whether Respondent has proved a loss. As a general rule, 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.

There are many uncertainties in this case, but the most significant failure in the proof is that there is no evidence showing what the balance in the account was supposed to be when Petitioner and Mr. Dudas counted it on April 16 or 17, 1998, and there is nothing other than Mr. Dudas’ estimate to prove what was actually present (FOF #8). There is only Mr. Hughey’s conclusion that there was a net shortage of $4,983.44. Mr. Hughey testified, in general terms, how one determines what an account balance is supposed to be, but it is unclear how the alleged shortage was arrived at in this case.⁽⁷⁾ Also, Respondent’s argument that Mr. Dudas’ unauthorized issuance of stock from the main stock amounted to harmless error because his Form 17s make all his transactions come out even is not persuasive. Respondent would have us assume that the available Form 17s showing stock issued to various clerks by Mr. Dudas provide a complete and accurate record, but there is no evidence to confirm that.

It may very well be true that Petitioner’s failure to follow certain procedures contributed to some accounting discrepancies, but accounting discrepancies do not necessarily equate to "losses," and Respondent must prove an actual loss. Edward Sheehan, Jr., P.S. Docket No. DCA 98-391, December 11, 1998; Eulalia Anne S. Lee, P.S. Docket No. DCA 97-38, June 13, 1997. Likewise, Petitioner’s failure to attend meetings may have made it more difficult to reconcile records, but this also does not prove a loss.

Because Respondent has not proved a loss, the Petition is sustained. Respondent may not collect $4,834.44 from Petitioner’s salary.

Bruce R. Houston
Chief Administrative Law Judge

1.  References to the hearing transcript are "Tr. _."

2.  Throughout the hearing the stock was alternatively referred to as the "main stock," and the "unit reserve." In this case, there is no significant difference in the terms.

3.  The testimony on this matter was confusing. At first, Mr. Dudas did not recall that he had issued any stock before April 17 (Tr. 20). When shown the Form 17s indicating he had, in amounts totaling nearly $28,000 (Att. Q to Respondent's Answer, Exs. 3 & 4), he recalled the circumstances, but did not recall how he got the stock (Tr. 21, 25), nor did he recall who instructed him to issue stock (Tr. 21, 33).

4.  Mr. Dudas could recall only that the difference was "several thousand dollars" (Tr. 34-35). Petitioner recalled that it was "about $10,000.00" (Tr. 119). One of Mr. Hughey's reports states that it was $138,883.00, before some adjustments were made (Att. Q to Respondent's Answer.

5.  Apparently, even before the count on April 16/17, the District Finance Office was aware of some problems with the main stock records at the Downtown Station. E.g., there are references to the supervisor's disk "crashing" in early March (Tr. 45-46).

6.  It is unclear how the amount charged to Petitioner, and the subject of this case, was reduced to $4,834.44.

7.  The closest we come to this is a note in an attachment to Mr. Hughey's June 16, 1998 memo to the postmaster, that says, "if you then add all the 057 entries and subtract all the 767 entries, the net amount remaining should be - $4,983.44." (Att. Q to Respondent's Answer, Ex. 6, p. 5). There is no paper trail, or any testimony that leads to this conclusion, however. In a chart attached to another Hughey memo that contains the same bottom-line figure - $4,983.44, the list of shortages includes $8,245.59 attributable to redeemed stock - a matter about which there is no evidence in the record. (Att. Q to Respondent's Answer, Ex. 6, p. 3).