In the Matter of the Petition by

WILLIAM D. VOGEL, JR.
2390 Deblin Drive

          at

Cincinnati, OH 45239-5612

P. S. Docket No. DCA 99-396

APPEARANCE FOR PETITIONER:     Timothy B. Theissen, Esq.
                                                         Strauss & Troy
                                                         50 East Rivercenter Blvd., Suite 1400
                                                         Covington, KY 41011-5994

APPEARANCE FOR RESPONDENT: Vincent Catalano
                                                         Labor Relations Specialist
                                                         United States Postal Service
                                                         1591 Dalton Avenue
                                                         Cincinnati, OH 45234-9994

Petitioner, William Vogel, filed a timely Petition after receiving a Notice of Involuntary Administrative Salary Offsets, dated August 31, 1999, from the Supervisor, Accounting Services, Cincinnati District. This Notice stated the Postal Service's intention to withhold $29,939.43 from his salary to recover for shortages in various accounts at the Batesville, Indiana Post Office.

During records reviews and negotiations between the parties in preparation for the hearing, Petitioner was given credit for several overages and the alleged debt was reduced to $7,088.03. A hearing was held in Cincinnati, Ohio on May 2, 2000. The Postal Service presented testimony from Barbara Hubbard, who conducted an audit of the Batesville Post Office in June 1999, William Robinson, who participated in the audit and succeeded Petitioner as Officer-in-Charge of the Batesville office, Geri LaCalameto, Post Office Operations Manager, and Jim Christophel, the accounting supervisor. Petitioner testified in his own behalf, and Mrs. Vogel testified about family financial matters. Both sides relied on documents filed with the Petition and the Answer, and Petitioner submitted several additional documents at the hearing. By Order, dated June 20, 2000, the parties were directed to comment on the relevance of two Postal Service policy memoranda that were not part of the record in this case, but were potentially relevant to a portion of the debt alleged against Petitioner. Both parties filed responses. The following findings of fact are based on the entire record, including observation of the witnesses and their demeanor.

1. Petitioner has worked for the Postal Service since 1978. From March 1993 until June 1999, he was the postmaster at Batesville, Indiana. (Tr. 86, 178; Pet. Ex. A).¹

2. In June 1999, Petitioner was removed from his position as postmaster and replaced by William Robinson. From June 15 through 18, in order to effect the transfer of accountability from Petitioner to Mr. Robinson, an audit of the entire office was conducted by Ms. Hubbard, Mr. Robinson, and Mr. Neil Whittington, a postmaster from a neighboring community. Petitioner was on medical leave and was not present. Because several office accounts were not in balance, and the auditors were attempting to find records that would account for the discrepancies, the audit took more than three days to complete. (Tr. 22-23, 120-21).

3. While he was postmaster at Batesville, Petitioner also worked sometimes as a window clerk and had an assigned account similar to that of a window clerk. During the audit, Ms. Hubbard and Mr. Robinson counted Petitioner's individual account on June 17, 1999, and found it to be $710.71 short. The opening balance in the post office records was $7,739.99, but only $7,029.28 in stock was on hand. (Tr. 25-26, 89-90; PS Ex. A, pp. 22-25).

4. Petitioner was not present during the audit of his individual account, nor was any witness designated by Petitioner. Petitioner was aware that the general audit of his office was being done and neither voiced any objection to it, nor asked that anyone else witness the audit. Neither Ms. Hubbard nor Mr. Robinson told Petitioner that his individual account was also going to be audited, or asked Petitioner if he wanted another witness to be present. (Tr. 53-54, 87-88, 103-04, 215).

5. Postal Service Handbook F-1, Post Office Accounting Procedures, §426.2, states that an employee has "the opportunity to be present whenever his or her financial accountability is inventoried or audited." This section then states, "If the employee is not available, a witness of the employee's choice must be present." Each employee is required to designate, in writing on a PS Form 3977, two witnesses, in order of preference. Petitioner's Form 3977 is not part of the record, but Mr. Robinson knew that Petitioner had designated Mr. Ertel as a witness. (Tr. 53-54, 103-04).

6. Another account that was not in balance at the time of the audit in June 1999 involved business reply mail. Companies that seek return mail from customers, with no postage charged to the customers, establish a trust account at the post office through which their reply mail is received. The company deposits money in the trust account to cover the postage on any replies they receive. When business reply mail comes through the post office, the office makes the appropriate deduction from the company's trust account. When the account nears depletion, the company must deposit more money. (Tr. 79-81).

7. At the time of the audit, the standard field accounting system showed that the trust accounts for business reply mail at Batesville totaled $7,436.22.² The records at the Batesville Post Office, however, showed that these accounts had a total of $10,420.89. The difference, $2,984.67, is one segment of the total debt alleged to be owed by Petitioner. If the standard field amount is correct, this would indicate that appropriate entries into the standard field system were made, but that someone at Batesville neglected to make the necessary withdrawals from one or more trust accounts when business reply mail was received. If the Batesville amount is correct, this would indicate that someone at Batesville accepted a deposit from a mailer but neglected to input it into the standard field system. There are no records available to determine which account, or accounts, might be in error. In order to "balance the books," the auditors added $2,984.67 to the standard field system. (Tr. 25, 28-29, 81-85; PS Ex. A, pp. 4, 12).

8. Another discrepancy was found in regard to redeemed stock, i.e., obsolete or unusable stamp stock that is turned in for destruction. The Batesville main stock inventory included $10,337.56 that was reported as having been shipped for destruction in April 1999. Because this amount was still listed on the inventory, the auditors categorized it as a shortage. When a post office sends stamps for destruction, the shipment is received by a three-person stamp destruction committee which counts and verifies what is received. When the committee counted the shipment on May 20, 1999, they found that only $7,677.00 was received. This amount was categorized as an overage and, when set off against the shortage, left a net shortage of $2,660.56. This is another segment of the total debt alleged to be owed by Petitioner. (Tr. 25, 27, 66-67; PS Ex. A, pp. 1, 27-29; PS Ex. B; PS Ex. 2).

9. The final segment of the total debt alleged against Petitioner is based on a discrepancy in the "unit accountability."³ The unit accountability for an office is made up of the unit reserve plus the total clerk accountabilities. The unit reserve is all stamp stock received by the window unit of a post office, but not yet consigned to the window clerks. The "Unit 1412" is a computer form generated daily that shows the opening and closing stamp stock balances and total office accountability for that day. Another form, titled "Clerk Balances," includes the total stamp stock in all clerk accounts and the unit reserve. That total is supposed to match the closing balance on the Unit 1412. One of the ways a postmaster carries out the responsibility of managing an office's finances is to check these two entries each day to be sure that they match. The Batesville auditors examined these documents and found that the Batesville office had been "out of balance" since early December 1998. They were unable to determine precisely when, or why, this happened. The amounts varied from day to day. The Unit 1412 for June 15, 1999 showed a total of $216,948.93 and the Clerk Balances showed $215,101.21, a difference of $1,847.72. (Tr. 25, 28, 37-47; PS Ex. A, p. 4; PS Ex. G; Pet. Ex. L).

10. While he was postmaster at Batesville, Petitioner was also the custodian of the unit reserve stock. On June 18, 1999, Mr. Robinson and Mr. Whittington counted the unit reserve, matching the stock on hand against an inventory list, denomination by denomination. Their count showed total overages equaling $15,149.40, and total shortages equaling $13,944.80, a net overage of $1,204.60. (Tr. 34-36, 87-89; PS Ex. A, p. 1; PS Ex. B; PS Ex. C; PS Ex. 8).

11. When a letter of demand was issued to Petitioner, and again in the Notice of Involuntary Administrative Salary Offsets issued on August 31, 1999, the unit reserve "shortage" of $13,944.80, and the redeemed stock "shortage" of $10,337.56, were included as part of the debt owed by Petitioner. (Tr. 69, 167-170; PS Ex. 10-12).⁴

12. The following policy statement was published in a September 16, 1987 memorandum from the Assistant Postmasters General for Employee Relations and Finance. It reiterated a similar statement from a December 4, 1985 memorandum.

"It has been brought to our attention that there is some confusion in regard to the policy of the Postal Service concerning the personal accountability of postmasters and supervisors in situations involving employee credit shortages where contractual or other reasons preclude collection of the shortage from the employee.

The Postal Service will not normally hold postmasters and supervisors personally accountable for such employee shortages if they do not have direct access to the credit or are not involved in collusion with the employee. . . . the policy is not intended to absolve a postmaster, supervisor, or others who have financial accountability for postal funds and accountable paper from conscientiously enforcing Postal Service policies and procedures. However, rather than issuing a letter of demand to these individuals, it is more appropriate to consider counseling or discipline for failure to carry out the duties of their position."

13. On or about June 10, 1999, Petitioner left the Batesville office for the final time and did not return to work (at a different location) until October 1999. During this time he was on medical leave. (Tr. 144-45, 187-88, 214; Pet Ex. J and K).

Respondent arrived at the total amount now alleged to be owed by Petitioner by adding the postmaster's individual account shortage ($710.71), the business reply shortage ($2,984.67), the third class permit shortage ($113.97), the unit accountability shortage ($1,847.72), and the redeemed stock shortage ($2,660.56). These numbers total $8,319.63. From this Respondent subtracted the net overage in the unit reserve ($1,204.60) and a bank overage ($25.00),⁵ to reach the total alleged debt - $7,088.03.

Respondent’s burden of proof in a case of unexplained shortage such as this is to show that a loss occurred from an account for which the employee is accountable. 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.

The only issue here is whether there was a "properly conducted inventory, or audit" of Petitioner's personal account drawer. The evidence establishes that Petitioner was not available, but there is no evidence that he waived his right to have his witness present. Had this been an audit of a regular window clerk's drawer, the matter of a designated witness probably would have occurred to Ms. Hubbard or Mr. Robinson. Because Petitioner was the postmaster, and because the personal drawer was only a small part of the larger audit, they simply did not think of it. There is no reason, however, why the rule stated in §426.2 (see Finding of Fact #5) should not apply to this situation. I conclude that the Postal Service failed to comply with the requirements of the quoted portion of §426, Handbook F-1. Therefore, the results of the audit of Petitioner's window clerk drawer conducted by Ms. Hubbard and Mr. Robinson cannot be used to prove a shortage in Petitioner's account. Joann Graham, P.S. Docket No. DCA 96-386 (January 2, 1997); Larry G. Bender, P.S. Docket No. DCA-178 (October 28, 1993). There being no other evidence to prove a loss of $710.71, Petitioner is not liable for that amount.

Again, Respondent's burden is to prove an actual loss of money to the Postal Service. The difficulty with Respondent's proof on this alleged shortage is that both of the witnesses who testified about this matter, Ms. Hubbard and Ms. LaCalameto, acknowledged that the difference between the standard field system number and the Batesville number could have been caused by an accounting error, rather than an actual loss. (Tr. 85, 161). As described in Finding of Fact #6, the two most likely accounting errors were that withdrawals from the trust accounts were not always made when they should have been, or that deposits by a mailer were accepted but not recorded in the standard field accounting system. While the former type of error seems more likely, and could result in an actual loss to the Postal Service, this has not been proved. Respondent's position seems to be that this uncertainty would not exist if Petitioner had been doing his job properly, i.e., checking each day to see that these accounts balanced. Therefore, Respondent argues, Petitioner should be held liable. We have held many times, however, that accounting discrepancies do not necessarily equate to an actual financial loss, and that the Debt Collection Act is not a means for punishing poor job performance. Gertrude S. Campbell, P.S. Docket No. DCA 99-70 (June 3, 1999); 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). Because Respondent has not proved a loss of $2,984.67, Petitioner is not liable for that amount.

Petitioner was responsible for the main stock/unit reserve at Batesville.⁶ Although there is a line item entry in the Batesville records reporting that $10,337.56 of stamp stock was shipped for destruction, the records of the destruction committee are clear that only $7,677.00 was received. Petitioner presented no evidence to show that the committee certificates were incorrect or that more than $7,677.00 was actually shipped. The difference, $2,660.56, represents a shortage in the main stock for which Petitioner was accountable. Respondent has proved a loss and Petitioner is liable for that amount.

Respondent's position is simply that the discrepancies between the Unit 1412 and the "Clerk Balances" prove a loss, and that a postmaster is ultimately responsible for all financial matters in the office.

As often happens in cases such as this, involving postmasters or supervisors, Respondent presents substantial evidence that the Petitioner did a poor job in monitoring the office's financial transactions and insuring that accurate records of all office accounts were maintained. However, as noted above, accounting discrepancies and poor job performance do not equate to a financial loss. The evidence is clear that this alleged loss was not in the unit reserve. Therefore, if there is a loss it must be from some other account, but there is no evidence as to what account that might be. Presumably, it must be from a clerk account, or accounts, because the evidence shows that the unit accountability consists of the unit reserve plus all the clerk accounts. There was testimony from several witnesses that Petitioner is liable for clerk shortages because he did not conduct audits of clerk accounts within the required time limits. (Tr. 93-94, 122, 157-58, 203-04). To hold a postmaster liable on that basis is directly contrary to the memoranda cited in Finding of Fact #12.

Because the evidence does not prove a loss of $1,847.72, and also because it would be contrary to Postal Service policy to hold Petitioner liable for shortages in clerk accounts on the facts of this case, Petitioner is not liable for this amount.

Shortly before the hearing, Petitioner filed a brief and motion to dismiss, arguing that the Postal Service violated his rights under the Family and Medical Leave Act (FMLA), 29 U.S.C. §2601 et seq., by initiating this debt collection action while he was on medical leave. That motion was denied, but the parties were advised that this issue would be addressed in the written decision if Petitioner were found liable for the alleged debt.

The FMLA requires employers, including the United States Postal Service, to provide up to 12 weeks of leave to employees in various circumstances, including when an employee suffers from "a serious health condition that makes the employee unable to perform the functions of the position of such employee."⁷ The statute also states that an employer may not "interfere with, restrain, or deny the exercise of . . . any right provided under" the FMLA.⁸ Petitioner argues that, by issuing Mr. Vogel the Notice of Involuntary Administrative Salary Offsets while he was on medical leave, the Postal Service interfered with his rights under the statute.

There is little case law on the implementation of the FMLA, and I find none that supports dismissal of this case. Petitioner was not denied his right to take medical leave. There is nothing in the statute itself, or in the cases interpreting the statute, that per se prohibits the initiation of administrative actions while an employee is in leave status. There is no evidence to suggest that the Notice of Involuntary Administrative Salary Offsets was issued in retaliation for Petitioner's taking medical leave, or to establish that Petitioner's rights under the FMLA were interfered with, or restrained, in any way.

Respondent has proved a loss of $2,660.56 for which Petitioner is responsible. Subtracting the net overage in the main stock ($1,204.60) and the bank overage ($25.00), for which Respondent credited Petitioner in arriving at the total alleged debt, Petitioner's final liability is $1,430.96. Petitioner presented some evidence of financial hardship in arguing that the proposed payroll deduction be reduced. Respondent did not oppose that request. Therefore, Respondent may collect $1,430.96 from Petitioner's salary at the rate of $100.00 per pay period.

Bruce R. Houston
Chief Administrative Law Judge

¹ References to the hearing transcript are "Tr._." References to documents submitted by Petitioner at the hearing are "Pet. Ex. A-T." References to tabbed documents filed by Respondent with the Answer and in a pre-hearing submission are "PS Ex. 1-13", and "PS Ex. A-H."

² The standard field accounting system is a central computerized accounting system that tracks the finances of post offices within a particular area. Entries made into the standard field accounting system with regard to trust accounts such as these are based on information submitted by individual post offices as to deposits and withdrawals.

³ There is also a $113.97 shortage listed, pertaining apparently to third class mail, but there was only a passing reference to this in testimony and the documents are not clear enough to make any factual findings. (PS Ex. A, p. 1; Tr. 25, 29-30).

⁴ As noted earlier, the amount of the alleged debt has since been reduced by offsetting various overages, so Petitioner can claim no harm. However, for Respondent to allege a $29,000.00 debt, knowing that the loss to the Postal Service was at least $22,000.00 less than that does not seem a proper practice. There is a general rule that overages in one account are not automatically offset against shortages in another account, and that some relationship must first be shown. That principle was clearly not applicable here with regard to the unit reserve or to the matter of the redeemed stock. Those overages and shortages were internal, within the same account. A closer examination of the facts, and the exercise of some judgment, should have occurred before the Notice of Involuntary Administrative Salary Offsets was issued to Mr. Vogel.

⁵ There was no testimony about this $25.00 overage. It is listed with other overages and shortages on documents created by the auditors on June 18, 1999.

⁶ The terms "main stock," and "unit reserve" do not mean precisely the same thing, but were used interchangeably in this case and the difference in meaning is not relevant here.

⁷ 29 U.S.C. §2612(a)(1)(D). Chaffin v. John H. Carter Co., Inc., 179 F. 3rd 316, 319 (5th Cir. 1999).

⁸ 29 U.S.C. §2615(a)(1). Id.