P.S. Docket No. DCA 04-46
July 14, 2004
In the Matter of the Petition by
PHIL KENNELTY-COHEN
P.O. Box 574
at
Merrick, NY 11566-0574
P.S. Docket No. DCA 04-46
APPEARANCE FOR PETITIONER:
Albert E. Lum
5240 72nd Place
Maspeth, NY 11378-1516
APPEARANCE FOR RESPONDENT:
Jim Scanna
Labor Relations Specialist
United States Postal Service
P.O. Box 7401
Islandia, NY 11760-9401
FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982
Petitioner, Phil Kennelty-Cohen, filed a Petition for Hearing after receiving a Notice of Involuntary Administrative Salary Offsets, dated March 19, 2004. This Notice stated the Postal Service's intention to withhold $350.45 from Petitioner's salary to recover a shortage in an account for which Petitioner was accountable.
A hearing was held in Islandia, New York on June 9, 2004.[1] The Postal Service presented testimony from the Merrick, New York Postmaster, and a financial systems coordinator. Petitioner testified in his own behalf, and both parties relied on documents that had previously been filed. The following findings of fact are based on the entire record.
FINDINGS OF FACT
1. At the time pertinent to this case, Petitioner was a customer service supervisor at the Merrick, New York Post Office. He had held that position since 1988. (Tr. 18, 36-37).[2]
2. As of approximately September 2001, Petitioner was the unit reserve stock custodian for both the main Merrick Post Office and a branch office known as Bank Plaza Station. The two unit reserves were maintained separately. (Tr. 37-38).
3. Bank Plaza Station operates on what is known as a segmented inventory accounting (SIA) system, which means, in part, that stamps are sold to the public from a segment known as the “retail floor stock” or the “store,” for which no individual employee is accountable. The unit reserve custodian is personally accountable for the unit reserve and is the only person with access to that account. Stamps are supplied from the unit reserve to the floor stock, usually to a designated clerk who is authorized to verify the “shipment.” As the supervisor in charge of financial matters, Petitioner was responsible for controlling, managing, and recording transfers between the unit reserve and the floor stock account. (Tr. 46-47).
4. While the unit reserve is normally the only source of stamps for the retail floor stock, overages in the floor stock can also result from clerk errors in making sales, a customer returning stamps and a clerk not properly making the required entry into the POS system, or even by a customer inadvertently leaving stamps after paying for them (Tr. 33-34).
5. On February 13, 2002, Petitioner and a subordinate audited the retail floor stock at Bank Plaza Station, as is required at least every three months. They found the floor stock account to be $559.28 over, i.e. they counted $13,924.27 actually present, but the inventory showed only $13,364.99 in the account. (Tr. 18-19, 40; PS Ex. 2).
6. Petitioner reported this overage to the postmaster, who immediately sent another supervisor to assist Petitioner in counting the unit reserve account at Bank Plaza Station. They did so, also on February 13, 2002, and found that account to be short $522.45. The inventory showed $85,983.93 in the account, but only $85,461.48 was present. (Tr. 18-19, 41-42; PS Ex. A, pp. 1, 4; PS Ex. B).
7. In a memo to the district finance manager dated February 19, 2002, the postmaster asked that the floor stock overage be offset against the unit reserve shortage (Tr. 7-8; PS Ex. A, p. 6).
8. A financial systems coordinator then reviewed the February 13, 2002 audits of the unit reserve and the retail floor stock and compared the inventory lists and count sheets line by line. She determined that only $172.00 of the floor stock overage should be offset against the unit reserve shortage. This was based on her conclusion that an overage of 80¢ stamps in the floor stock corresponded to a shortage of the same denomination in the unit reserve, but that there was no other such corresponding overage and shortage. She recommended that the balance of the unit reserve shortage, $522.45 - $172.00 = $350.45, be collected from Petitioner. (Tr. 22-24, 32; PS Ex. E).
9. The postmaster accepted this recommendation and, on September 3, 2003, notified Petitioner that he was liable for $350.45. A Notice of Involuntary Administrative Salary Offsets for the same amount was issued to Petitioner by the postmaster’s successor on March 19, 2004. (Notice attached to Petition).
DECISION
The standard for determining an employee’s liability in a case such as this 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 the postal procedures established when performing their duties.” Handbook F‑1, Post Office Accounting Procedures (November 1996), §141.
Respondent’s burden of proof in a case of unexplained shortage 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.
In this case, there is no dispute over the accuracy of the February 2002 audits, but Petitioner contends that there was no loss to the Postal Service because the shortage in his unit reserve should be completely offset by the larger overage in the retail floor stock.
The general rule on offsetting overages against shortages is that an offset is not appropriate unless the evidence establishes a probable relationship between the two, i.e., that the overage and the shortage represent the same stamp stock.[3] Petitioner argues that a sufficient relationship is established in this case because the two audits were done on the same day, the two amounts are very close, and that because the unit reserve is the only source of stock for the floor, any overage in the retail floor stock almost certainly had to come from the unit reserve.
Petitioner also asserts that there was an occasion when his clerks needed a quantity of 80¢ airmail stamps and $3.50 priority mail stamps for a customer, and that the clerk who was designated to accept transfers of stock from the unit reserve was not at work (see Finding #3). Petitioner testified that he completed a Form 17, the form used to document transfers of stamp stock from one account to another, and had it witnessed by two clerks, intending to make the computer entries when the designated clerk returned. Because she did not return for a few days, he testified that he forgot about the matter and that the Form 17 was lost. (Tr. 47-48; PS Ex. A, p.4).
Although the episode described by Petitioner would show a correlation between the shortage and the overage if it were true, Respondent contends that Petitioner’s story is not credible and that there is no evidence to support it. Respondent also argues, citing testimony from the financial systems coordinator as well as from Petitioner, that an overage in the floor stock can be caused by things other than an error in issuing stock from the unit reserve. To simply assume a relationship any time there is an overage in the floor stock would set a dangerous precedent, Respondent argues, because it would permit dishonest employees to then take stamps from the unit reserve.[4]
Respondent’s argument is persuasive. There is evidence that a floor stock overage could easily be caused by things other than an error in issuing stock from the unit reserve. It should not be automatic, therefore, to credit every floor stock overage against a unit reserve shortage.
Petitioner’s testimony about the lost Form 17 is not persuasive. His explanation as to how this occurred was uncertain and improbable and it was not supported by testimony from any other person. Further, he did not mention this when he first gave a written explanation of the apparent shortage on March 23, 2002. (PS Ex. A, p. 1). Based on the totality of evidence, including the thorough analysis by the financial systems coordinator that showed no corresponding overage and shortage of any specific denomination of stamps other than the 80¢ stamps, Petitioner has not carried his burden of demonstrating a relationship between the overage and the shortage.
Respondent has carried its burden of proving by a preponderance of evidence that there was a loss of $350.45 from Petitioner’s account.
The Petition is denied. Respondent may collect $350.45 from Petitioner’s salary.
Bruce R. Houston
Chief Administrative Law Judge
[1] The hearing was conducted by the undersigned Administrative Law Judge via speaker telephone from Arlington, Virginia. All other participants, including the court reporter, were present in a conference room at the hearing site.
[2] References to the hearing transcript are “Tr._.” References to documents filed by Respondent with the Answer, and in a supplemental filing, will be identified as “PS Ex._.”
[4] In making this argument, Respondent’s representative stated that he not did believe Petitioner to be such a person.