In the Matter of the ) July 12, 1994 Petition by ) ) ERNEST R. JEFFERIES ) 218 Charlotte Drive ) ) at ) ) Portsmouth, VA 23701-1434 ) P.S. Docket No. DCA-192 APPEARANCE FOR PETITIONER: Ed Heintzman Postmaster Representative National Association of Postmasters P.O. Box 464 Oak Hill, WV 25901-0464 APPEARANCE FOR RESPONDENT: R. A. Murmer Labor Relations Specialist United States Postal Service 1801 Brook Road Richmond, VA 23232-9402
FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982
Petitioner, Ernest R. Jefferies, filed a petition for a hearing based solely on written submissions after receiving a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act. The April 29, 1994 Notice asserted the Postal Service's intention to make withholdings from Petitioner's salary to collect $23,386.32 based on the results of audits of the Dahlgren, Virginia Post Office during the time Petitioner was the postmaster of the office.
An earlier petition filed by Petitioner (Docket No. DCA-188) was dismissed April 4, 1994, for lack of jurisdiction because it preceded issuance of a Notice of Involuntary Administrative Salary Offsets. Records filed by Petitioner as part of that earlier case have been considered part of the record for this decision.
FINDINGS OF FACT
1. Postal Service Handbook F-1, Post Office Accounting Procedures, April 1991 ("Handbook F-1")1 establishes the financial and accounting requirements applicable to post offices (section 111). It is the responsibility of the postmaster to know post office accounting requirements and to ensure that the requirements are met in his or her post office (sections 121, 154).
2. Section 131 of Handbook F-1 provides:
"When an accountable financial loss occurs and evidence shows the postmaster conscientiously enforced 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 the postmaster met those conditions, the Postal Service charges the postmaster with the full amount of the loss."
3. Petitioner became the postmaster of Dahlgren in January, 1989 (Respondent's Exhibit Tab ("RX") 2, Memorandum of Interview, Ernest Jefferies, April 8, 1993 ("Jefferies, 4/8/93")).
4. As postmaster, Petitioner was accountable for all postage stock consigned to the Dahlgren Post Office (sections 414.1, 414.21, 431.1). He personally managed and was responsible for the main stock, his own flexible credit for window transactions and the vending machine credit (RX 2, Memorandum of Interview, Ernest Jefferies, October 13, 1993 ("Jefferies, 10/13/93")).
5. Section 431.31 of Handbook F-1 provides, "Only the Main Stock custodian shall have access to the Main Stock . . . " Section 144.2 is to the same effect. Combinations for safes or vaults "must be held in the most secure vault or safe at that office in a compartment under the exclusive control of the postmaster or designated supervisor." (Section 362.32).
6. During the time Petitioner was the Dahlgren Postmaster, at least until March 1993, he kept the combination to the safe containing the main stock taped to the bottom of a drawer in his office (Jefferies, 10/13/93; RX 2, Memorandum of Interview, Joyce Hicks, May 20, 1993 ("Hicks"); RX 2, Memorandum of Interview, Margaret Rennoe, October 13, 1993 ("Rennoe, 10/13/93")). The clerks in the post office knew where the combination was maintained (Id.). When Petitioner was away from the office for any length of time, it was his practice to leave a quantity of stock from the main stock unsecured so clerks could replenish their stock "on the honor system" in his absence (Jefferies, 10/13/93; RX 2, Memorandum of Interview, Margaret Rennoe, June 8, 1993 ("Rennoe, 6/8/93")).
7. Section 433.22 provides, "No employee, supervisor, or postmaster may have access to the stamp credit of another employee."
8. During the time Petitioner was the Dahlgren Postmaster, at least until March 1993, Petitioner regularly had other clerks work out of his flexible credit (Jefferies, 10/13/93; Hicks; RX 2, Memorandum of Interview, Yvonne Hall, June 8, 1993 ("Hall, 6/8/93"); RX 2, Memorandum of Interview, Yvonne Hall, October 13, 1993 ("Hall, 10/13/93"); Rennoe, 6/8/93; Rennoe, 10/13/93; RX 2, Memorandum of Interview, Peggy Mullen, June 8, 1993 ("Mullen")). One of the clerks also worked with the vending machine credit (Mullen).
9. Money order forms are to be kept in a safe, security container or vault (section 431.34), they are to be assigned to clerks in serial number sequence and clerks assigned blank money orders must acknowledge receipt by signing a control register (section 542.22).
10. During the time Petitioner was the Dahlgren Postmaster, at least until March 1993, clerks were not required to sign for money order forms, the forms were not issued in order and they were left unsecured (Jefferies, 10/13/93; Hicks; Hall, 10/13/93).
11. Section 472.2 describes the method for handling shortages and overages found in audits of clerks' stamp stock. If a shortage or overage can be related to a countervailing overage or shortage it may be offset, but if it cannot, the difference must be accounted for as a trust account entry (overage) or suspense item (shortage) with the employee required to make up shortages (section 472.222). Differences of more than $100 are to be reported on PS Form 571, Discrepancy of $100 or More in Financial Responsibility (section 472.224).
12. Petitioner adjusted shortages and overages between clerks, even though there was no relationship between the discrepancies, in order to keep the clerks' accounts within tolerance. He also took stock from his flexible credit to make up shortages in clerks' accounts. Petitioner kept no record of these adjustments. (Jefferies, 10/13/93; Jefferies, 4/8/93; Hall, 10/13/93; Rennoe, 6/8/93; Rennoe, 10/13/93).
13. Section 123.2, referring to a provision of criminal law, 18 U.S.C. § 2073, bars false or forced entries in postal accounting records.
14. After making the adjustments for shortages and overages to clerks' accounts, as discussed above, Petitioner erased entries on the original record of the count and entered numbers that would show the clerk to be within tolerance. He also made entries to postage meter sales accounts he could not justify in order to square the accounts with the meter reading (Jefferies, 10/13/93; Hall, 10/13/93; Rennoe, 10/13/93).
15. The postage meter was checked by the manufacturer after Petitioner left Dahlgren and was found to be functioning properly (Hicks; Hall, 10/13/93). Other clerks in the office did not have to adjust meter sales entries when they used the meter (Hall, 6/8/93; Mullen).
16. Postal funds are to be kept in a safe or vault overnight (section 360), and "when funds are not continuously observed, they must be kept in locked receptacles." (Section 143.12).
17. Petitioner regularly left $200 to $400 in cash in an unsecured area of the vault for the clerks to use when they needed change (RX 2, Memorandum of Interview, Patrick Finney, April 14, 1993; Hicks; Hall, 10/13/93; Rennoe, 6/8/93; Rennoe, 10/13/93).
18. "Stamp credits must be placed in a locked container and stored in a security container, safe, or vault following an employee's tour of duty." (Section 433.2).
19. Until corrected at the time of the March 1993 audit, Petitioner stored and permitted the clerks to store stamp stock and stamped paper in unsecured envelope drawers at the counterline (RX 7, Audit Report dated March 30, 1993).
20. Clerks are to obtain stamp stock from the Main Stock (section 442);
"[e]mployees should not trade or purchase stock from one another in order to maintain individual accountability. When necessary to trade or purchase stock from another window clerk, a Form 17 must be completed in duplicate. Enter 'trade' or 'purchase' stock involved, and names of both employees on form 17. Each employee must retain a copy until the next stamp credit examination." (Section 441.25).
21. At least until March of 1993, Petitioner permitted the clerks in his office to trade stamp stock without entering the transaction on a PS Form 17 (Jefferies, 4/8/93).
22. Shortly after he became postmaster, Petitioner counted his stock and found that he was short about $300. He made up the shortage with his own funds, assuming he must have made a mistake. (Jefferies, 4/8/93; RX 5, Letter of Ernest Jefferies dated May 18, 1993 ("Jefferies, 5/18/93")).
23. About 8 to 10 months later, he again audited his own accountability and was short approximately $1500. In an October 1991 count of his stock he found his accountability to be two to four thousand dollars short (Jefferies, 5/18/93). At about the same time, the accountability of a retiring clerk was found to be $700 short, and Petitioner transferred stock in that amount from his own flexible credit to the clerk's credit (Jefferies, 4/8/93; Hall, 6/8/93). He made up these shortages with his own funds in January of 1992 (Jefferies, 4/8/93). He did not report the discrepancy of more than $100 in the clerk's accountability on PS Form 571 or, until June of 1992, any of the shortages he discovered in his own accountability (RX 3).
24. Petitioner received only a few hours of formal postmaster training when he became the postmaster in 1989 (Jefferies, 10/13/93; Jefferies, 5/18/93). In March of 1992, Petitioner went to the Postal Service Management Academy where he received postmaster training (Jefferies, 5/18/93).
25. In about June, 1992, Petitioner found another shortage in his accountability. Between his flexible credit and the main stock, the shortage totaled $7000 (Jefferies, 10/13/93; Jefferies, 5/18/93). He reported this shortage to his superior office and was advised to report it to the Inspection Service, which he did (Jefferies, 5/18/93; Petitioner's Exhibit 4, Statement of Ernest Jefferies, February 22, 1994 ("Jefferies, 2/22/94")).
26. At a meeting with a postal inspector in July, 1992, Petitioner suggested his shortages resulted from thefts from his flexible accountability at the office counterline. The inspector set up a surveillance camera to observe the counterline, marked a number of stamp coils in Petitioner's drawer so that theft could be detected if it occurred and advised Petitioner not to institute changes that would have prevented thefts from his flexible accountability (RX 3; Jefferies, 5/18/93). Petitioner was not told not to protect the main stock or the vending machine accountability (see RX 2, Inspection Service Report dated November 15, 1993, p. 1).
27. Petitioner eventually sold the marked coils to a customer, and the surveillance camera did not detect any theft from Petitioner's flexible credit (id.). The inspector picked up the camera and film in January 1993 (Jefferies, 5/18/93).
28. On March 19, 22 and 24, 1993, two postal systems examiners audited the accountabilities of all of the employees of the Dahlgren Post Office. The March 30, 1993 report of the audit set out their findings:
Examinations
1. Main Stock: 3/19/93
(3958)[2] Amount of Credit: $94,110.53 (3295)[3] Stamp Stock as Counted: 92,934.87 Shortage 1,175.66 Placed in suspense, inventory adjustment. Form 571 initiated.* * *4
5. Ernest R. Jefferies (Flexible Credit): 3/22/93 (1412) Amount of Credit: $15,768.77 (3294) Cash & Stock Counted: 6,336.65 Shortage 9,432.12 Placed in suspense. Form 571 initiated. 6. Vending #1: 3/24/93 (1412) Amount of Credit: $4,344.00 (3293) Cash & Stamp Stock Counted: 2,488.02 Shortage 1,855.98 Placed in suspense. Form 571 initiated. 7. Vending #3: 3/24/93 (1412) Amount of Credit: $1,203.00 (3293) Cash & Stamp Stock Counted 1,203.00 -0- The total office accountability was also out of balance and the following adjustments were made on 3/26/93; AIC 805 -- Postage Stock in Account Book[5] $131,220.94 Total of clerk balances plus main stock 123,423.04 Shortage 7,797.90 Placed in suspense. Form 571 initiated. The total unresolved shortage for this office including main stock, flexible credit, vending and office out of balance is $20,261.66. All documents used in this audit are attached." (RX 7).
29. The March 19, 1993 Form 3294, Cash and Stamp Stock Count and Summary, which was used to record the count of the main stock bears the signature of the postal systems examiner, but the line for the employee's signature is blank (Petitioner's Exhibit 3)
30. On April 12, 1993, incident to Petitioner's detail to another office, his flexible credit was counted and found to be short $3,124.666 (Form 3294 dated April 12, 1993).
31. On May 6, 1993, Respondent sent Petitioner a letter of demand for payment of $23,386.32, setting out the shortages identified in the March 30 audit report as the bases for the claim against Petitioner. In addition to the $20,261.66 identified in the audit report, the letter of demand sought from Petitioner the $3,124.66 identified as a shortage in the April 12, 1993 count of Petitioner's accountability:
"On April 12, 1993, your flexible credit was again audited. This audit revealed a difference in the flexible credit as follows"
(1412) Amount of Credit: $10,219.20 (3294) Cash and Stamp Stock Counted: $-7,094.54 Difference $-3,124.66" (RX 6).
32. Petitioner's May 18, 1993 appeal of the letter of demand (RX 5) was denied by Respondent on June 4, 1993 (RX 4).
33. On April 29, 1994, Petitioner was issued a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act stating Respondent's intention to offset from Petitioner's salary to collect the $23,386.32 identified in the May 6, 1993 letter of demand (RX 1), and this timely petition followed.
34. During his service at the Dahlgren Post Office, Petitioner worked long hours, as much as 60 hours per week (Jefferies, 2/22/94).
DECISION
Petitioner concedes that he is liable for the $7000 shortage he discovered in June of 1992, but argues that he is not liable for any growth of that shortage after he contacted the Inspection Service because he was advised by the inspector not to implement procedures to secure his accountability from further theft. Petitioner contends that he was justified in not taking steps to secure his accountability because he was never advised that the investigation was over. He argues that the long hours he was required to work and the lack of postmaster training given him when he took the job at Dahlgren contributed to mistakes he might have made. He also contends a malfunctioning postage meter in the office may have contributed to the losses. Finally, Petitioner contends that the March 19, 1993 Form 3294 recording the count of the main stock cannot establish liability for the shortage shown on the form because Petitioner did not sign the form.
Respondent argues that the evidence demonstrates that petitioner did not act conscientiously in managing the Dahlgren Post Office and that he is therefore liable for the losses Respondent contends are shown in the audit and the Notice of Involuntary Administrative Salary Offsets.
The evidence shows that Petitioner did not conscientiously enforce Postal Service policies and procedures in managing the Dahlgren Post Office. Moreover, the pattern of financial mismanagement and the specific improper practices are the likely causes of the shortages revealed in the audits of Petitioner's accountability. Therefore, he is generally not entitled to relief for losses Respondent is able to demonstrate it suffered. However, he is entitled to relief from losses that result when a failure to enforce Postal Service policies conscientiously is excused, and he is not liable for accounting discrepancies that Respondent cannot demonstrate caused it a financial loss.
Main Stock: The 3294 for the March 19, 1993 count of the main stock shows a shortage in the amount of $1,175.66. Petitioner's only challenge to that finding is that the form does not bear his signature. While Petitioner's representative speculates that Petitioner might not have participated in the count, Petitioner has not submitted any evidence to that effect or otherwise challenged the accuracy of the count. Therefore, Respondent has shown a loss in the amount of $1,175.66.
Flexible Credit: In July of 1992, Petitioner was specifically instructed by a postal inspector to leave his flexible credit unsecured at the counterline in an effort to determine whether a thief was operating in the Dahlgren Post Office. Petitioner was reasonable in following the instructions of the inspector and cannot be held liable for shortages to his flexible credit that occurred while he was under instructions not to secure that part of his accountability.7 He remains liable for pre-existing shortages however.
As there was no official count made in July 1992 and Petitioner kept no record of his count, the only evidence of the amount of preexisting shortage is Petitioner's admission that a $7000 shortage existed between his flexible credit and the main stock. Assuming that the shortage in the main stock in July of 1992 was the same $1,175.66 revealed in the March 19, 1993 audit, the shortage in Petitioner's flexible credit as of July 1992 would have been $5824.34, the difference between $7000 and $1,175.66. This is a loss for which Petitioner is liable.
At least by the time of the March 1993 audit of his flexible credit, Petitioner knew or should have known that the inspector's July 1992 investigation of possible thefts in the Dahlgren Post Office was finished and that he was no longer under instructions not to protect his flexible credit. After that, therefore, failure to take steps to protect his flexible credit from further loss would not have been consistent with conscientiously enforcing the policies and procedures of the Postal Service. He is therefore liable for the $3,124.66 loss that occurred between March 19 and April 12, 1993.
Vending Machine: Petitioner allowed another clerk access to the vending machine credit. This, Petitioner's admission that he did not understand post office accounting requirements until his March 1992 training, and Petitioner's extensive financial mismanagement of the post office is sufficient to demonstrate a failure to manage this aspect of his accountability conscientiously. He is therefore liable for the loss in the vending machine credit of $1,855.98.
Stock as shown in Account Book: Respondent has not shown that the $7,797.90 difference between "AIC 805--Postage Stock in Account Book" and the "Total of clerk balances plus main stock" reflects a loss to Respondent different from and in addition to the total of the losses discussed above. Those losses were calculated by subtracting the stock and cash on hand in the clerks' credits and the main stock from the amounts that should have been in those accountabilities as shown in certain post office records (Forms 1412 and 3958). The Account Book AIC 805 entry derives from those same records. Respondent has not demonstrated that subtracting the sum of clerks' stamp stock and the main stock on hand from the AIC 805 entry in the Account Book produces a discrepancy that does not overlap the loss it has already claimed from Petitioner and which is allowed in this decision. Therefore, Petitioner is not liable for the $7,797.90 discrepancy.
Respondent's failure to provide Petitioner with postmaster training in 1989 when he became the postmaster at Dahlgren would not excuse his failure to follow the financial practices required of postmasters over the next three years until March of 1992 when he received training. Petitioner had enough knowledge of accounting procedures to discover significant shortages in his accountability which he made up from his own funds, and he should have taken steps to obtain further training if necessary or to master the instructions in the F-1 Handbook and other available postal guidelines for postmasters. Moreover, there is no showing that after he received training in March 1992 he changed his management practices significantly, and, as discussed above, the inspector's instructions and investigation should not have caused Petitioner to fail to manage his office conscientiously in ways unrelated to protecting his stamp drawer from theft. Further, many of Petitioner's practices, such as making up the shortages of other clerks from his own flexible credit, leaving cash unsecured and making stock from the main stock available to clerks on the "honor system" in his absence, were so obviously improper that he must have known they would have significant financial consequences, and he should have taken steps to implement proper and sensible management procedures in the Dahlgren Post Office.
Petitioner has not demonstrated that his failures were caused or excused by the long hours he worked or that a postage meter in the post office malfunctioned, contributing to any of the losses.
In conclusion, Respondent has demonstrated that Petitioner did not conscientiously enforce Postal Service policies and procedures in managing the Dahlgren Post Office. Petitioner is liable to Respondent for a total of $11,980.64 (main stock, $1,175.66; flexible credit, $8,949.00 ($5,824.34 plus $3,124.66); vending machine, $1,855.98), which Respondent may collect by salary offset. The Petition is granted as to the remainder of Respondent's claim.
Norman D. Menegat Administrative Judge