In the Matter of the Petition by

ANNIE BAKER

P.S. Docket No.  AO 06-39

APPEARANCE FOR PETITIONER:
Albert E. Lum

APPEARANCE FOR RESPONDENT:
C. L. McDonough
Labor Relations Specialist
United States Postal Service

INITIAL DECISION

            Petitioner, Annie Baker, a former Postal Service employee, filed a Petition for Hearing after money began being withheld from her retirement annuity.^[1]  She challenged the Postal Service's assertion that she owed the Postal Service $48,807.81 for losses at the Mechanicsville, Virginia Post Office while Petitioner was a station manager there. 

            A hearing was held in Richmond, Virginia.  The Postal Service presented testimony from the Mechanicsville Postmaster and a Financial Services Specialist.  Petitioner testified on her own behalf and both parties relied on documents previously filed.  The following findings of fact are based on the entire record.

FINDINGS OF FACT

            1.  Petitioner retired from the Postal Service in January 2006, after more than thirty years’ service.  At the time pertinent to this case, she was the Station Manager of Atlee Station in Mechanicsville, Virginia, and was the custodian of the unit reserve stamp stock at Atlee Station.  She had held that position since 1997.  (Tr. 8-9, 34-35).^[2]

            2.  On August 14, 2005, in preparation for the unit reserve account at Atlee Station being turned over from Petitioner to another supervisor, Petitioner and the other supervisor conducted an audit.  They found the unit reserve to be short $48,807.81.  (Tr. 8, 17-18, 35; PS Ex. B).

            3.  On October 7, 2005, the postmaster issued Petitioner a Letter of Demand for $48,807.81.  (PS Ex. 5).

            4.  By letter, dated October 11, 2005, accompanied by a volume of documents in support of her position, Petitioner requested reconsideration.  She stated that she had returned large quantities of stamps for destruction in 2001 and 2002, and that not all of these stamps had been subtracted from the unit reserve account.  Therefore, she contended that the $48,807.81 shortage did not represent a real loss.  (Tr. 14-15, 49; PS Ex. 6).

            5.  On November 9, 2005, the postmaster denied the request, stating that the request had been reviewed by “Finance.”  (Tr. 14-15; PS Exs. 2 and 4).

            6.  A unit reserve custodian is responsible for returning obsolete or excess stamp stock, sometimes called “redeemed stock,” to a Stamp Destruction Committee for destruction.  The procedure requires that the custodian and a witness count the stock and seal it into boxes that are then shipped by registered mail.  PS Form 17 is used to record the quantity and value, by denomination, in each box.  Four copies of the Form 17 are sent with each box, and the custodian retains a fifth copy.  In 2002 and earlier, the amount of stock shipped for destruction was not subtracted from the unit reserve account in the computerized stamp stock management system until the Stamp Destruction Committee verified the amounts and returned a copy of the Form 17 to the custodian.^[3]  (Tr. 11, 23-27, 37-38; Pet. Exs. B and C).

            7.  On September 19, 2001, Petitioner, following the procedure noted above, shipped $130,140.85 of stamp stock to the Stamp Destruction Committee.  Copies of PS Form 17s confirming the shipment were returned by the Committee on January 31, 2002.  (Tr. 37-39; Pet. Ex. B, pp. 5-14).

            8.  Petitioner did not promptly remove the shipped items from her unit reserve account when she received the confirmation forms, but did so gradually over a period of time.  By June 6, 2002, all the shipped items had been removed from the unit reserve accountability.  (Tr. 39-40; Pet. Ex. B, pp. 1, 3)

            9.  On May 29, 2002, Petitioner, again following the procedure noted above, shipped another $58,307.05 of stamp stock to the Stamp Destruction Committee.  Copies of PS Form 17s confirming the shipment were returned by the Committee on August 29, 2002.  (Tr. 41, 65; Pet. Ex. C, pp. 2-11).

            10.  On June 6, 2002, Petitioner and another employee conducted an audit of the unit reserve account and found it to be short $40,545.87.  Perhaps because it was known that the large quantity of stamps shipped on May 29, 2002 was still on the unit reserve account awaiting confirmation of the shipment, no action was taken to charge anyone for a loss or to balance the account.  (Tr. 42-43, 67; Pet. Ex. C, pp. 12-19).

            11.  Although she received confirmation from the Stamp Destruction Committee on or about August 29, 2002 for the May 29, 2002 shipment (see Finding #9), Petitioner did not remove the shipped items from her unit reserve account.  To do so requires the custodian to make entries in the computer system for each separately identified item number.  (Tr. 43, 47, 60, 68).

            12.  There was no audit of the Atlee Station unit reserve between June 2002 and August 2005, although postal regulations require that a count be done annually.  (Tr. 32, 66).

DECISION

            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.  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 question that Petitioner was accountable for the Atlee Station unit reserve.  The issue is whether Respondent has proved an actual loss.

            This is a case, not untypical, in which there appears to be a large shortage,  for which the responsible custodian offers a plausible but not fully convincing explanation, and the available records neither prove nor disprove her claims.  Petitioner contends that the stamp stock she shipped for destruction on May 29, 2002 was never removed from her unit reserve account.^[4]  Therefore, she says, the account was inflated at the time of the June 6, 2002 audit, and the $40,545.87 shortage found at that time was not a real shortage.  Further, she says that the account was never put in balance after the June 2002 audit, so the shortage found in August 2005 was simply the same shortage carried forward.

            Respondent’s position is that Petitioner was responsible for keeping accurate records of unit reserve transactions and that she allowed an apparent shortage to go unreconciled for more than three years.  Therefore, because she is unable to demonstrate conclusively that the $48,807.81 shortage was not a real loss, she should be required to pay that amount.

            At one point during his cross-examination of Petitioner, while attempting to understand her explanation and the documents she was citing, Respondent’s representative stated that he guessed the only way to check the accuracy of what Petitioner was saying would be to “do an accounting.”  (Tr. 61).  A good idea certainly, but perhaps the time to do that would have been before Petitioner was charged with the debt, so that the person or persons who did the accounting could come forward and explain why Petitioner’s explanation is incorrect, if that is what Respondent believes.  If Respondent’s position is that it is Petitioner who should have done the accounting and then persuaded her managers that there was no loss, then what is missing from this record is testimony from someone who reviewed Petitioner’s explanations, understood them, and could demonstrate them to be inadequate.^[5]

            In essence, this is a burden of proof issue.  It is clear that Petitioner did ship more than $50,000.00 of stamp stock for destruction on May 29, 2002.  She maintains that this was never removed from her unit reserve account, and there is no evidence to the contrary.  If that is so, Respondent has not proved the loss, at least in the amount alleged.  The fact that it was Petitioner’s responsibility to keep her account current and accurate, and that she failed to do so, does not equate to liability if no actual loss is proved.  Presumably, if Petitioner had removed these stamps from her account, Respondent could produce a record to show that.

            This does not relieve Petitioner entirely, however.  A review of the available inventory listings showing the results of the August 14, 2005 audit (PS Ex. B), reveals that several portions of the shortage were in 37¢ stamps.^[6]  Taking judicial notice of the fact that the rate increase to 37¢ did not occur until June 30, 2002, Petitioner’s shipment of stamps for destruction in May 2002 cannot account for a shortage in 37¢ stamps.  The inventory listing for the August 14, 2005 audit shows a shortage of at least 4,541 37¢ stamps of various types – total value $1,680.17, and a shortage of 275 $7.40 books – total value $2,035.00.  These shortages represent a loss of $3,715.17, for which Petitioner is liable.

            The Petition is denied in part and granted in part.  Respondent may collect $3,715.17 from Petitioner.  She must be credited with any amount already withheld on account of the alleged debt.

Bruce R. Houston
Chief Administrative Law Judge

[1]  This case was originally docketed as P. S. Docket No. DCA 06-13.  Once it was determined that Petitioner had already retired, that case was dismissed and the case was re-docketed as an Administrative Offset case, to be processed under the rules applicable to former employees.

[2]  References to the hearing transcript are "Tr._."  References to documents attached to Respondent's Answer, and to a supplement to the Answer, are "PS Ex._."  References to documents submitted by Petitioner are “Pet. Ex._.”

[3]  The current procedure is that the custodian subtracts the amount shipped from the unit reserve accountability at the time of shipment.  Any corrections are made later.

[4]  It is not clear whether she claims that none of it was removed, but there are no records in evidence that show any being removed.

[5]  The Finance Specialist who testified was knowledgeable about procedures in general, but not about the specific facts and records in this case.

[6]  It is not clear whether this exhibit is a complete record of the audit, but it is also noted that the total value of all the shortages, listed by item number, does not approach $48,807.81.  No witness gave any testimony about this document.