In the Matter of the Petition by

ROSE E. BENJAMIN

P.S. Docket No. DCA 06-10

APPEARANCE FOR PETITIONER:
Albert E. Lum
Scialla Associates, Inc.

APPEARANCE FOR RESPONDENT:
John W. Fry, II
Labor Relations Manager
United States Postal Service

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

            Petitioner, Rose Benjamin, filed a Petition for Hearing after receiving a Notice of Involuntary Administrative Salary Offsets, dated December 29, 2005, from her postmaster.  This Notice stated the Postal Service's intention to withhold $25,449.01 from Petitioner's salary to recover shortages in three stamp stock accounts at Petitioner’s post office.

            A hearing was held in Norfolk, Virginia on February 24, 2006.  The Postal Service presented testimony from the station manager at a neighboring post office, who performed audits at Petitioner’s post office.  Petitioner testified on her 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 had been the station manager at Churchland Post Office in Portsmouth, Virginia for approximately two years.  She was the assigned custodian of the unit reserve stamp stock.  (Tr. 91).^[1]

            2.  On or about March 15, 2005, Petitioner and the clerk assigned to the vending machine account began an audit of the vending account in anticipation of the account being turned over to another clerk.  They found a shortage of approximately $15,000.  Due to intervening events, they were unable to complete the count and neither knew how to enter the shortage into the POS computer system.  (Tr. 72-73; PS Ex. 6 (IS Ex. 3)).

            3.  In an attempt to balance the vending account, Petitioner directed the clerk to record a transfer of approximately $15,000 in stamp stock from the vending account to the unit reserve.  No stamps were actually moved, but Petitioner (for the unit reserve account) and the clerk (for the vending account) made entries into the POS system showing that $15,000 in stamp stock was moved.  The effect of this was to decrease the accountability of the vending account and increase the accountability of the unit reserve by approximately $15,000.  (Tr. 14-18, 51-55, 63-65, 73-75; PS Supp., pp. 6-14).

            4.  On April 1, 2005, because the result of the vending audit had not been entered into the POS system, the Portsmouth Postmaster asked Mr. Hooper, the manager at another station and who is knowledgeable in financial matters, to come to Churchland and assist.  Because the available paperwork did not show a clear result of the earlier audit, Mr. Hooper conducted a new audit.  Two clerks counted the vending account and he was the overseer.  The result of their count was a $15,731.38 shortage.  (Tr. 8-11, 56-58; PS Ex. 5, pp. 16-21).

            5.  On April 4, 2005, when Petitioner returned to the office after a period of leave, she and Mr. Hooper audited the unit reserve account in an attempt to find an overage that would offset the large vending shortage.  Instead, they found a shortage of more than $21,000.  At this time, Mr. Hooper was not aware of the $15,000 “paper” transfer from the vending account and Petitioner did not mention it.  (Tr. 11-12; PS Ex. 3, pp. 39-48; PS Ex. 6 (IS Ex. 1)).

            6.  In an effort to account for the large unit reserve shortage, Mr. Hooper examined available records and discovered the $15,000 transfer from the vending account to the unit reserve on March 17, 2005.  He asked Petitioner about this but she said she did not recall anything about it.  (Tr. 12; PS Ex. 6 (IS Ex. 1)).

            7.  During Mr. Hooper’s investigation into the unit reserve shortage, Petitioner produced a PS Form 17, a form used to document the movement of stamp stock from one account to another, showing a transfer of $5,680 from the unit reserve to the vending account that had not been entered into the POS system.  Accordingly, Mr. Hooper reduced the unit reserve accountability by that amount, thereby reducing the apparent shortage to about $16,000.  On April 7, 2005, Mr. Hooper and Petitioner counted the unit reserve again and found the shortage to be $16,384.52.^[2]  (Tr. 19-20; PS Ex. 3, pp. 52-71; PS Ex. 6 (IS Ex. 1)).

            8.  On April 6, 2005, Mr. Hooper and the postmaster conducted an audit of the retail floor stock at Churchland and found a $7,275.26 shortage.  The retail floor stock is not assigned to any individual for personal accountability but is available to all window clerks for sale to the public.  Stamp stock for the floor is issued from the unit reserve by the unit reserve custodian.  (Tr. 19, 68-69; PS Ex. 3, pp. 20-36).

            9.  The last previous audits of the unit reserve and the floor stock were conducted on March 9-10, 2005 by Petitioner and another clerk and both were found to be in balance within two dollars.  (Tr. 26-27; PS Ex. 3, pp. 25-34; PS Ex. 4, pp. 1-8; PS Ex. 6 (IS Ex. 2)).

            10.  On April 17, 2005, Mr. Hooper and the postmaster, continuing to look into all the shortages, examined all the several safes at Churchland in which stamp stock was contained.  They found a locked compartment in a safe that contained primarily retail floor stock, but also had some unit reserve stock locked in separate compartments.  Realizing that this one locked compartment had never been opened during any of Mr. Hooper’s audits, they looked for someone who had a key to the compartment.  No one did, so they pried it open and found 500 coils of 37¢ stamps, worth $18,500.  They were unable to determine what account these stamps belonged to.  They were not included in the March 9, 2005 audit of the unit reserve.  (Tr. 24-27, 45-46, 66, 69, 86-87; PS Ex. 6 (IS Ex. 1)).

            11.  During the time that Petitioner was the Churchland Station Manager, maintenance technicians were called to Churchland at least thirty times to correct vending machine problems.  Machine malfunctions included dispensing either too little or too much stamps or money, or otherwise not working properly.  (Tr. 84-86; PS Ex. 5, pp. 58-67).

            12.  On July 6, 2005, Petitioner was issued a letter of indebtedness for $25,449.01.  This amount was calculated by adding the unit reserve shortage, $16,364.52, the floor stock shortage, $7,275.26, and the vending shortage, $20, 309.23,^[3] and then subtracting $18,500 to give credit for the stamps that were found.  The Notice of Involuntary Administrative Salary Offsets for the same amount was issued on December 29, 2005.  (PS Exs. 1 and 2).

            13.  Postal Service Handbook P102, Self Service Vending Operational and Marketing Program, May 1999, Updated with Postal Bulletin Revisions Through September 15, 2005, states, in the sections dealing with shortages:

643 Shortages

* * *

643.12  Other Operational Problems

Servicing personnel do not have complete control, at all times, of the assigned credit; therefore, shortages must be assumed to be the result of machine malfunction, unless the following can be determined:

a.  Fire, theft, robbery, errors on PS Forms 17, Stamp Requisition, customer refunds, acceptance of bogus and/or foreign coin-like and bill-like objects, or any other procedural errors.

b.  The loss was the direct result of negligence on the part of the servicing personnel.

c.  Theft, embezzlement, etc., by the servicing personnel with sufficient evidence to prefer charges.

            14.  Section 643.23 of the same Handbook requires the servicing person and the supervisor to conduct an examination of the vending account any time there is a major machine malfunction.  Petitioner and her clerk did not always do this.  (Tr. 84-85).

            15.  Postal Service Handbook F-1, Post Office Accounting Procedures, November 1996, Updated with Postal Bulletin Revisions Through June 9, 2005, contains the following provisions pertinent to this case:

Section 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 (USPS) policies and procedures 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.

            Section 48 of the Handbook F-1 covers the rules and procedures applicable to offices with Segmented Inventory Accountability (SIA), as is Churchland.  This section speaks often of the “responsibility” of all employees for complying with prescribed procedures and protecting the security of postal property and assets.  It also speaks of the “accountability” of specific employees for specific items.  The first part of section 482.2 refers to the responsibility of all employees to ensure “financial integrity,” and other matters, then states:

“Employees are accountable for:

•Cash directly assigned to them.
•Money order stock directly assigned to them.
•Stamp stock directly assigned to them.”

483 Unit Reserve Responsibility

*  *  *

3>   The individual assigned to the unit reserve is referred to as the unit reserve custodian.  The unit reserve custodian is directly accountable for the value of all items in the unit reserve stock.

484.2 Segments Assigned from the Unit Reserve

*  *  *

•Retail Floor Stock  -  Stock for this inventory is issued from the unit reserve.  The purpose is to provide a common inventory for use by the associates in units as defined in section 481.1. This credit is not accountable to any individual.

484.3 Documentation of Stock Assignments

484.31 POS ONE Offices

1>  Assignments of all individually accountable credits and unit reserve stock are documented by the completion of Form 3369. In these instances, assigned employees are accountable for all stock, accountable paper, money orders, and money in their respective credits.

*  *  *

3>  Retail floor stock is issued directly from the unit reserve.  Although no individual is accountable for this stock, each associate making sales from this credit is responsible for ensuring adequate protection and security of Postal Service resources.^[4]

DECISION

            Respondent argues that, as the station manager, Petitioner was responsible for maintaining the financial integrity of her entire office and that her failure to do so should result in liability for all the established losses.  Respondent points out that Petitioner failed to audit the vending account as often as required, and failed to follow the regulatory requirement to audit the vending account after machine malfunctions.  Respondent also argued that Petitioner had access to the vending machine stock.^[5]  As to the unit reserve, Respondent’s position is that, even if the account was artificially inflated by the “phantom” transfer from the vending account, Petitioner accepted that amount as part of her unit reserve.  Since it is not there, Petitioner is liable for it.  Finally, Respondent argues that Petitioner failed to exercise control over the floor stock as it was her responsibility as station manager to do.

            Petitioner makes a series of arguments.  First, as to the vending shortage, she points out that the vending machine account was not assigned to her, and contends that Respondent has not proved any misconduct or negligence on her part that postal regulations require for holding an employee liable for vending losses.  Likewise, as to the retail floor stock shortage, she argues that no individual has personal accountability for this segment and that Respondent has not proved any basis for holding her liable under her general responsibility for running the office.  As to the unit reserve, she agrees that she was the accountable custodian, but argues that the real loss from the unit reserve was very small because the accountability was artificially inflated by the “phantom” transfer from the vending account.  Further, Petitioner argues that any shortage in the unit reserve is erased by the found $18,500, which should all be credited to the unit reserve.

Vending Account

            The standard of liability for losses from vending machines, unlike losses from main stock or clerk credits, is not a strict liability standard.  It requires evidence that the loss was caused by the negligence or wrongdoing of the assigned employee (see Finding #13).  Alissa Moore, P. S. Docket No. DCA 04-123 (December 2, 2004); Andrea Quinn, P. S. Docket No. DCA 01-76/77 (June 14, 2001); Beverly M. Dennis, P. S. Docket No. DCA 97-107 (May 22, 1997).  It would be incongruous to use a lesser standard to hold the assigned employee’s supervisor liable.  There is no evidence of theft or embezzlement by Petitioner, and while there is evidence that she did not follow prescribed rules for maintaining control over the vending account, the evidence does not show that the shortage was the “direct result” of her actions.  (See Alvetta S. Callis, P. S. Docket No. DCA 02-125 (June 6, 2002)). 

Floor Stock

            Other than Mr. Hoopers’s testimony about the result of the audit that he and the postmaster conducted on April 6, 2005, there is little evidence about the floor stock, or what might have caused that shortage.  As noted above, accountability for the retail floor stock is not assigned to any individual.

            It is not possible to reconcile Respondent’s interpretation of Handbook F-1, Section 14, with the other specific sections quoted above.  We have said many times that the Debt Collection Act is not a vehicle to punish poor job performance.  It may be that Petitioner did not perform her job well, but postal regulations do not make her personally liable, under a strict liability standard, for losses from an account that is not assigned to her.  Under the regulations quoted above, it is important to note the difference between being "responsible" for complying with procedures and for the security of postal property, and being "accountable" for losses.

            Assuming that Petitioner could be held liable for a floor stock loss if it were proved that some specific act of malfeasance or negligence by her directly caused the loss, Respondent's evidence falls short of that.  (See Albertha Johnson, P. S. Docket No. DCA 04-71 (August 23, 2004); Dale May, P. S. Docket No. DCA 02-381 (November 7, 2002)).

Unit Reserve

            There is no question that Petitioner was the custodian of the unit reserve and that she is strictly accountable for losses from that account.  The issue here is over the amount of loss that is established by the evidence.  In discussing Respondent’s burden of proof in such cases, we state that 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, despite Petitioner’s inexplicable inability to recall it in early April 2005, there is substantial evidence that the opening balance for the unit reserve used by Petitioner and Mr. Hooper for their April 4 and April 7, 2005 counts (see Findings #5 and #7) was incorrectly inflated by the so-called “phantom” transfer from the vending account in March.  Throughout the testimony, this transfer was referred to as “approximately $15,000.”  The only document in the record that contains a specific dollar amount is a summary in Respondent’s supplement (PS Supp., pp. 1-5), that Respondent’s representative stated was prepared by the Portsmouth Postmaster.  The postmaster did not testify, but because Respondent presented the document and Petitioner’s representative referred to it in his direct examination of Petitioner (Tr. 89-90), I will accept the figure, $14,607.15, as being the amount transferred from the vending account to the unit reserve on March 17, 2005.  The reality, therefore, is that the vending account was short this much more than reported and the unit reserve was short this much less.  The likelihood that this is correct is bolstered by the evidence that the unit reserve account was in balance less than a month earlier, when counted by Petitioner and a clerk on March 9-10, 2005 (see Finding #9).

            Subtracting $14,607.15 from the $16,364.52 charged as the unit reserve loss, leaves $1,757.37.  The evidence does not support Petitioner’s argument that the $18,500 of found stamps must be credited to the unit reserve.  Therefore, Petitioner is accountable for the $1,757.37 loss.  For the reasons stated above, Petitioner is not accountable for the vending account or the floor stock account shortages.  Respondent may collect $1,757.37 from Petitioner’s salary.

Bruce R. Houston
Chief Administrative Law Judge

[1]  References to the hearing transcript are "Tr._."  References to documents attached to Respondent's Answer will be "PS Ex._," and documents in Respondent’s supplement will be PS Supp._.”  “IS Ex.” denotes Inspection Service exhibits attached to PS Ex. 6.  References to documents submitted by Petitioner will be "Pet. Ex._."

[2]  For reasons that are not clear, this amount was reduced by $20, to $16,364.52.

[3]  Although it is not clear exactly how this number was calculated, various adjustments to the different accounts were made by Mr. Hooper as more information was obtained during the course of his investigation (Tr. 60-61).  The increase from the $15,731.38 shortage (see Finding #4) is based primarily on the $5,680 adjustment that was made to the unit reserve (see Finding #7).

[4]  Very similar provisions are found in Postal Service Handbook PO-209, Handbook for Retail Operations, April 2005, Chapter 11 – Financial and Item Accountabilities.  This Handbook replaced Handbook PO-208, Retail Operations.

[5]  Petitioner denied that she had access to the vending stock (Tr. 76-78), and Respondent presented no direct evidence to the contrary.