LARRY PACHECO

P.S. Docket No. DCA 08-144

APPEARANCE FOR PETITIONER
Albert E. Lum

APPEARANCE FOR RESPONDENT
Brian D. Jackson

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

            Petitioner, Larry Pacheco, filed a timely Petition for Hearing after receiving a Notice of Involuntary Administrative Salary Offsets dated April 22, 2008.  The Notice stated the Postal Service’s intention to withhold $2,232.26 from Petitioner’s salary to recover a shortage in an account for which Petitioner was responsible.

            A hearing was held in Colorado Springs, Colorado on August 27, 2008.[1]  The Postal Service presented testimony from a Financial Control and Support Analyst in the Colorado-Wyoming District.  Petitioner testified in his own behalf and presented testimony from a retail systems coordinator for the Postal Service and a customer service supervisor at Petitioner’s station.  Both parties also relied on documents admitted into the record at the hearing.  The following findings of fact are based on the entire record.

FINDINGS OF FACT

            1.  At the time pertinent to this case, Petitioner was the Manager of Customer Services at the North End Postal Station in Colorado Springs and was the custodian of the station’s unit reserve (Transcript of Hearing, pages (“Tr.”) 30, 45).  The unit reserve holds the station’s stamps for eventual issuance to the floor stock, from which the clerks make postage sales (Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996) (“F-1 Handbook”), sections 413, 483-6).[2]

            2.  Until May of 2006, the North End Station operated an IBM software system to manage its retail sales, including keeping a record of the accountability of the unit reserve, i.e. recording the type and amount of stamps that should be found in the station’s vault.  (Tr. 9-11).

            3.  As of May 23, 2006, the office unit reserve accountability (i.e. the amount of stamps listed in the IBM computer system) was $90,891.55 (Tr. 11; Respondent’s Exhibit (“Resp. Exh.”) 1, 11 (p. 8)).

            4.  On May 24, 2006, the Postal Service converted North End Station to an NCR computer system.  After conversion, the NCR software reported the unit reserve accountability to be $90,891.55.  (Tr. 9, 11, 34; Resp. Exh. 2, 11 (pp. 4, 9)).

            5.  In the course of converting the inventory listing for North End Station, the NCR system failed to recognize some stamp item codes from the IBM system.  By default, the NCR system put the values of those unrecognized stamps in the detailed inventory list of the unit reserve accountability under code 9100 instead of under the appropriate codes.  (Tr. 11, 12-14, 37-39).

            6.  Petitioner and an employee of his office counted the stock in the unit reserve on May 27, 2006 (Tr. 70, 90-91; Resp. Exh. 3, 8).

            7.  Before counting the stamps, Petitioner printed out an “Inventory Reconciliation Count Sheet,” dated May 26, 2006.  That Count Sheet included an itemized list of stamps and stamp stock that, according to the computer records of the station, should have been held in the unit reserve.  The list did not indicate the quantity of each item, but printed a blank line next to each type of stamp.  Petitioner used this Count Sheet as a worksheet during his count, handwriting the actual quantity of each item counted adjacent to the appropriate printed entry and also handwriting the code number and quantities counted of a number of types of stamps that did not appear in the printed Count Sheet.  (Tr. 25, 41-42, 90, 93-94, 99-100; Petitioner’s Exhibits (“Pet. Exh.”) A3, A4; Resp. Exh. 8).

            8.  Once Petitioner finalized the count and entered the results into the computer, the system automatically generated a “Cash/Credit Count Report” as of May 27, 2006 at 9:59 a.m., which report indicated that the count had resulted in a shortage of $2,310.75.  The Report calculated the shortage by comparing the pre-count accountability of the unit reserve ($90,891.55 (Findings 3, 4, above)) with the amount of stock on hand in the unit reserve when Petitioner counted it ($88,580.80).  (Pet. Exh. A1; Tr. 25, 99).

            9.  The system then automatically created a “Financial Adjustment Memorandum” that transferred the $2,310.75 shortage from the unit reserve to another accounting classification in the station’s financial records (Pet. Exh. A2; Tr. 92, 95, 99).

            10.  The system then updated the accountability for the unit reserve to match the results of the actual count.  Petitioner printed out a copy of the updated record of the unit reserve accountability (“Active Inventory Items” report of May 27, 2006 at 11:04 a.m.).  (Tr. 10, 15, 92, 93, 95, 99-101; Pet. Exh. A5, A6).

            11.  Petitioner had a number of conversations and email exchanges with postal finance officials after the shortage was discovered, contending that the apparent shortage originated in the process of converting the unit reserve records from the IBM to the NCR system and was not a true shortage in the unit reserve.  The finance officials opined that Petitioner would not be liable for the shortage if it turned out that it resulted from the conversion of the station’s computer system from IBM to NCR.  (Tr. 10, 17-18, 52-56, 89, 102; Resp. Exh. 3, 7).

            12.  Respondent’s officials investigated that possibility, and concluded that the shortage did not result from the conversion.  A number of other stations under the Colorado Springs Post Office had been converted from the IBM system to NCR at about the same time as North End’s conversion, and none had shortages after the conversion.  (Tr. 13-14, 16-18, 35-38, 103; Resp. Exh. 8).

            13.  A December 14, 2006 count of Petitioner’s unit reserve reflected an overage of $78.49.  Respondent credited this amount against the amount of the May 27, 2006 shortage, resulting in a net debt claimed by Respondent of $2,232.26.  (Tr. 16, 59, 84; Resp. Exh. 4 (p. 2), 10).

            14.  On April 22, 2008, Respondent issued Appellant a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act, in which it stated its intention to recover the amount of $2,232.26 from Petitioner’s salary on account of the May 27, 2006 shortage, and Petitioner filed a Petition for Hearing.  (Petition and Attachment).

            15.  Before May of 2006, Petitioner had not had any shortages in the unit reserve (Resp. Exh. 3 (p. 2), 4 (p. 2); Tr. 47, 54, 69, 84).

            16.  On May 8, 2006, Petitioner sent a package of obsolete stamps to the Denver Stamp Distribution Office for destruction.  His count entered on the shipment form (PS Form 17), reflected stamp stock valued at $7,074.25, but the actual stock Petitioner shipped had a value of $6,149.25 (Resp. Exh. 12 (pp. 22, 24, 25); Tr. 20-22).

            17.  Similarly, in September 2007, a shipment Petitioner prepared to be sent to the Stamp Distribution Office, according to the form Petitioner completed, contained $5,898.56 in stamps, but the shipment actually contained stamps worth only $4,638.56; Petitioner had listed 3,533 Bryce Canyon stamps on the shipment transmittal form but actually included only 1,533.  (Resp. Exh. 12 (pp. 14-15); Tr. 20-22).

            18.  In June 2007, the Stamp Distribution Office returned one of Petitioner’s shipments of obsolete stamps after it found a discrepancy.  Petitioner should have acted promptly to correct the deficiency and complete the shipment of these obsolete stamps from his office.  However, after a few calls to the Stamp Distribution Office failed to resolve the discrepancy, Petitioner did nothing further to ship the stamps until March of 2008 when the financial control office reminded him of the problem.  (Resp. Exh. 12 (pp. 1-12); Tr. 21-23, 64-69, 77-78).

            19.  Section 141 of the Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), provides,

The postmaster or responsible manager consigns postal funds and accountable paper to other career employees.  Employees are held strictly accountable for any loss unless evidence establishes that they followed the postal procedures established when performing their duties.[3]

DECISION

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

            Here, an audit on May 27, 2006, showed a stock shortage relative to the previously established balance of the North End unit reserve.  (Findings 3, 4, 6, 8).  Petitioner challenges neither the previously established balance, which was the same in both the IBM and NCR systems (Findings 3, 4), nor the accuracy of his audit.  He contends, however, that somehow an apparent shortage was erroneously created during the conversion of the station’s computer system.  The record does not support Petitioner’s hypothesis.  He relies mainly on the May 27, 2006 Active Inventory Items report (Finding 10) that he testified he used during the count and that he argues shows that the number of stamps he counted was exactly the same as the number shown in the unit reserve accountability.  From this, he argues that there was no actual shortage.  (Tr. 53, 58-60, 80-83, 94).  However, the Active Inventory Items report was generated after the count had been concluded, after the results of the count had been entered into the computer system, after the previously identified shortage had been transferred out of the unit reserve, and after the unit reserve accountability had been adjusted to match Petitioner’s actual count (Findings 8, 9, 10).  Thus, the May 27 Active Items Inventory report has no bearing on the existence of a shortage before the unit reserve accountability was rebalanced.  The total unit reserve accountability had been the same before and after the conversion of the software from IBM to NCR (Findings 3, 4), and Petitioner’s May 27, 2006 count revealed that a shortage existed (Finding 8).  The initial failure of the NCR system to recognize some IBM system stamp classifications was not shown to have affected the overall accountability or to have created a shortage.

            As Respondent has demonstrated a shortage in Petitioner’s unit reserve that caused a loss to the Postal Service, the burden shifts to Petitioner to show that he followed established procedures, or to present other evidence that would warrant relieving him of liability.  Petitioner points to his history of unit reserve audits with no shortages (Finding 15) as evidence that he was careful in managing the unit reserve and that he followed postal procedures (see Finding 19).  A history of clean audits supports a finding that a unit reserve custodian follows postal procedures.  In this case, the record does not reflect the number of Petitioner’s clean audits or the length of such history, and other evidence in the record suggests that Petitioner did not follow postal procedures regarding the unit reserve.  The instances of errors in counting stock sent to the Stamp Distribution Office for destruction (Findings 16, 17, 18) and his failure to resolve the discrepancy over the June 2007 shipment, allowing the obsolete stamps to remain in the unit reserve for almost 9 months (Finding 18), suggest a lack of care.  In view of the entire record, Petitioner has not demonstrated that he followed established postal procedures in managing the unit reserve.

            Finally, Petitioner argues that postal accounting officials absolved him of liability for the shortage during their discussions immediately after the conversion from IBM to NCR (Finding 11).  This was not proved.  Despite Petitioner’s testimony to the contrary, the credible testimony of Respondent’s Financial Control and Support Analyst was that the finance officials confirmed during those discussions that if it were demonstrated that the shortage resulted from an error in the computer system conversion, Petitioner would not be held liable.  The email exchanges in the record support the Analyst’s testimony.  As discussed above, the shortage was not shown to have resulted from the conversion, and those assurances therefore are not relevant to whether Petitioner is liable for the shortage.

            Respondent’s evidence is sufficient to prove a loss of $2,232.26, and Petitioner has not shown a basis for relief from liability.  The Petition is denied.  Respondent may collect $2,232.26 from Petitioner’s salary.

Norman D. Menegat
Administrative Judge

[1] The hearing was conducted by the undersigned Administrative 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] To the same effect is section 11-2 of Handbook F-101, Field Accounting Procedures, which in July 2008 replaced the F-1 Handbook in matters of post office accounting.

[3] Although the F-1 Handbook has been replaced (see n. 2, above), neither party has suggested a basis for application of a different standard of liability in this case.