In the Matter of the Petition by

RAYMOND KEITH DAVIS

P.S. Docket No. DCA 09-107

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

APPEARANCE FOR RESPONDENT:
Ray R. Huey
Labor Relations Representative
United States Postal Service

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

            Petitioner, Raymond Keith Davis, timely filed a Petition for Hearing under the Debt Collection Act after having received a Notice of Involuntary Administrative Salary Offsets.  The Notice asserted the Postal Service’s intention to offset $1,413.88 from Petitioner’s salary to recover a stamp stock shortage in the unit reserve account at the North Little Rock Main Street Station for which Petitioner was the accountable employee.

            On May 29, 2009, a hearing was conducted in Little Rock, Arkansas, with the undersigned Administrative Judge presiding by speaker telephone from Arlington, Virginia.  All other participants, including the court reporter, were present in a conference room at the hearing site.  The Postal Service introduced testimony from the North Little Rock Postmaster, and from a Manager of Financial Control and Support.  Petitioner testified on his own behalf and introduced testimony from the Supervisor, Customer Service, at the North Little Rock Main Post Office and from the window clerk of the North Little Rock Main Street Station. 

FINDINGS OF FACT

1.          During the time at issue, Petitioner was the off-site manager of a postal finance station known as the North Little Rock Main Street Station (the “Finance Station”), that generally was staffed by a single employee, a window clerk (Hearing Transcript (Tr.) 12, 83).

2.          Petitioner served as the Finance Station’s unit reserve stamp stock custodian, a responsibility he began in January 2007 (Tr. 12, 85, 96).  Stamps sold in the retail unit of the Finance Station are requisitioned from its unit reserve stock, and such requisitions are recorded in a postal accounting system (Tr. 27, 34).

3.          The stamps comprising the unit reserve were kept in a locked vault, requiring entry by use of a key and a combination (Tr. 26).   

4.          Petitioner provided unfettered access to the unit reserve to the window clerk at the Finance Station.  Petitioner provided the window clerk with his key to the vault, the combination to the lock, and his password to the accounting system (Tr. 65, 74-75, 86, 97, 101, 104).  Petitioner testified that this was done as a matter of convenience, as the window clerk was the sole employee located at the Finance Station while Petitioner was located at a facility ten minutes away (Tr. 86, 102-03).  The window clerk routinely transferred stamps from the unit reserve to the retail unit without Petitioner’s knowledge, and recorded such activity in the postal accounting system using Petitioner’s password (Tr. 28, 63-64, 101, 104).

5.          Petitioner’s supervisor did not instruct him to provide such access to the unit reserve and doing so violated postal policy (Tr. 17, 85, 97).

6.          In April 2008, Petitioner began a detail assignment during which he did not manage the Finance Station.  Petitioner was aware that he was required to transfer the unit reserve custodian accountability during his detail assignment.  However, Petitioner did not re-assign unit reserve custodian responsibilities for the Finance Station, although he did re-assign such responsibilities for another facility at which he also was unit reserve custodian.  (Tr. 22-24, 29, 56, 86-87, 96, 98).

7.          At the start of Petitioner’s April 2008 detail, a unit reserve audit was conducted at the Finance Station which found the unit reserve to be balanced within tolerance (Tr. 86; Petitioner’s Exhibit (Pet. Ex.) B). 

8.          During the period of Petitioner’s detail assignment, the Finance Station’s window clerk retained the access to the unit reserve provided by Petitioner, and performed stamp stock transfers (Tr. 80).

9.          On July 8, 2008, $7,423.90 of stamp stock that had become obsolete due to a postage rate change was transferred from the Finance Station  by the window clerk for destruction, and on July 9, 2008, an additional $3,131.83 of obsolete stamp stock was transferred from the Finance Station by the window clerk for destruction (Tr. 51, 69-71, 76-77, 91-94, 102; Pet. Exs. C-1, C-3, D, F, G).

10.        On July 14, 2008, the Finance Station’s retail unit was audited, revealing an overage of $1,372.90 (Pet. Exs. B, E; Respondent’s Exhibits (Resp. Exs.) B, C).   

11.        On July 15, 2008, the unit reserve was audited, revealing a stamp stock shortage in the amount of $1,413.88 (Tr. 14-15; Pet. Exs. A, D; Resp. Ex. D).  Petitioner does not contest the accuracy of the audit (Tr. 101).  This shortage was calculated by comparing $11,189.95 of counted stamps with the accounting system count of $12,603.85. 

12.        On September 29, 2008, the North Little Rock Postmaster sent Petitioner a Notice of Determination of Debt assessing the $1,413.88 unit reserve shortage (Resp. Ex. H).

13.        Petitioner reviewed all available stamp stock records but was unable to determine the reason for the unit reserve shortage or to correlate the missing stamps with the stamp overages revealed by the retail unit audit (Tr. 90, 108, 109-10, 112).  The window clerk at the Finance Station believes that the unit reserve shortage must be attributable to his actions, but he cannot explain the basis of the shortage (Tr. 78-79).  The system accounting at the Finance Station was poorly done, and was described by Petitioner as a “mess” (Tr. 90, 103, 105-06, 110).

14.        On October 7, 2008, the Manager of Financial Control and Support rejected Petitioner’s request for a waiver of the accountable shortage because he could not identify a correlation between the unit reserve shortage and the retail overage (Tr. 36-37, 52-53; Resp. Ex. A).  The waiver rejection letter concluded that the missing unit reserve stamp item numbers and the overage retail stamp item numbers were unrelated (Resp. Ex. A).

15.        On March 13, 2009, Petitioner received a Notice of Involuntary Administrative Salary Offsets for the amount of the July 15, 2008 unit reserve shortage, and on March 19, 2009, timely petitioned for hearing under the Debt Collection Act (Resp. Ex. H-2, Petition).

DECISION

            The parties agree that revised accountability regulations in effect at the time of the July 15, 2008 audit should control this case (Petitioner’s May 16, 2009 Prehearing Submission; Respondent’s May 20, 2009 Prehearing Submission).  In consideration of this agreement and under the circumstances of this case, I will analyze the findings of fact against the revised regulations.  Those regulations, effective July 7, 2008, provide generally for the imposition of personal liability of an accountable employee for a shortage in unit reserve stamp stock.  Postal Service Handbook F-101, Field Accounting Procedures (July 2008, updated January 2009) provides:

The unit reserve stock custodian is accountable for the value of all items in the unit reserve stock, is responsible for managing the stamp stock inventory, and must report unit reserve stock activities.
Handbook F-101, § 13-2.5.  Postal Service Handbook F-1, Accounting and Reporting Policy, (July 2008, updated January 2009) provides:

Managers, supervisors, employees, and contractors are responsible for accountable paper assigned to them and may be held liable for missing accountable paper, depending upon the circumstances of the loss.
. . .
Employees may be relieved from personal responsibility to repay a loss if evidence exists that established policies and procedures were followed at the time of loss.

Handbook F-1, §§ 4-11.1.1; 4-11.3.      

            Under these regulations, an accountable employee is personally liable for a unit reserve loss representing an actual loss to the Postal Service unless evidence demonstrates exonerating circumstances such as evidence establishing that the employee followed postal procedures when performing his or her duties.  See, e.g., Charles Mulidore, P.S. Docket No. DCA 07-126 (September 21, 2007); Handbook F-1, §§ 4-11.1.1; 4-11.3.      

            I first analyze whether the unit reserve shortage represents an actual loss to the Postal Service.  The audit demonstrated a loss of accountable stamps in the unit reserve.  Petitioner offers two arguments for his position that an actual loss to the Postal Service has not been demonstrated.  First, he argues, without specific or persuasive proof, that the stamp stock transferred from the Finance Station for destruction following a postage rate change was incorrectly accounted for in the postal accounting system.  However, neither Petitioner nor any witness was able to identify the alleged error, and Petitioner’s argument in this regard is speculative.  Further, any accounting problems were the responsibility of Petitioner, either through his own actions or through those of the window clerk, for whom Petitioner was responsible due to his relinquishment of accountability responsibilities. 

            Second, Petitioner argues that the retail unit overage revealed by the July 14, 2008 audit should be used to offset the unit reserve shortage revealed by the July 15, 2008 audit.  However, no correlation between the two, other than a rough similarity in amount, has been shown.  This alone is insufficient to allow such an offset (Findings of Fact 13-14; compare Resp. Ex. C with Resp. Ex. D).  See Phil Kennelty-Cohen, P.S. Docket No. DCA 04-46 (July 14, 2004) (rejecting offset of similar contemporaneous audit results and describing “general rule” that offset is not appropriate unless the evidence establishes a probable relationship between the two, in that the overage and the shortage represent the same stamp stock); Thomas R. Guinee, P.S. Docket No. DCA 09-42 (May 21, 2009) (actual loss not proved where same stamp stock item numbers identified in retail audit overage were basis of unit reserve shortage revealed in audit).  I conclude that an actual loss has been demonstrated.

            I next analyze whether Petitioner should be excused from personal liability to repay the loss because established policies and procedures were followed at the time of loss.  Handbook F.1, § 4-11.3.  The unit reserve shortage is attributable to the period between the audits conducted in April 2008 and July 2008, while Petitioner had relinquished his unit reserve responsibilities without oversight during a detail (Findings of Fact 4, 6-8, 12).  Petitioner improperly entrusted the Finance Station’s window clerk with the unit reserve custodian responsibilities that Petitioner officially bore, and which Petitioner should have transferred during his absence (Findings of Fact 2, 4-6, 8; see Handbook F-101, § 11-10.2.1 (“Accountability for stamp stock must be transferred when the unit reserve stock custodian is replaced or is scheduled to be absent for a period during which access to the unit reserve stock may be necessary.”)).  Whether Petitioner was motivated by his own convenience or the convenience of customers of the Finance Station as he asserts, it plainly was improper and demonstrates that Petitioner did not follow established policies and procedures at the time of the demonstrated loss.  For this reason and because the record does not reflect any other basis for relieving Petitioner of the debt, imposition of personal liability upon Petitioner is warranted.  See Dave Huggins, P.S. Docket No. DCA 01-315 (January 28, 2002) (“clearly . . . contrary to regulations” to allow any other person to have access to the unit reserve, and custodian assumes the risk of an accountable shortage by departing without transferring accountability); Anthony Royal, P.S. Docket No. DCA 04-73 (August 23, 2004) (custodian’s responsibility to transfer the unit reserve to protect himself from potential liability).  This consideration of the circumstances of the loss envisioned by Handbook F-1, § 4-11.1.1 results in Petitioner’s personal accountability. 

              As the responsible custodian of the Finance Station’s unit reserve, Petitioner is liable for the shortage under the circumstances of the loss which reveal that he failed to follow established policies and procedures at the time of the loss.  The Petition is denied.  Respondent may collect $1,413.88 from Petitioner’s salary.

Gary E. Shapiro
Administrative Judge