In the Matter of the Petition by ) May 8, 1996 ) RONALD E. HERBERT ) P.O. Box 298 ) ) at ) ) West Sacramento, CA 95691-0298 ) P.S. Docket No. DCA 95-400 APPEARANCE FOR PETITIONER: Rebecca Bernard National League of Postmasters 781 South Washington St. Sonora, CA 95370-9998 APPEARANCE FOR RESPONDENT: Gerald Cager United States Postal Service 3775 Industrial Blvd. West Sacramento, CA 95799-0061
Petitioner, Ronald E. Herbert, filed a petition requesting an oral hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. §5514(a), when Respondent, United States Postal Service, notified him of its intention to collect from his salary for a shortage discovered in the main stock of the West Sacramento, California Post Office. Petitioner, the West Sacramento Postmaster and main stock custodian, contends that the main stock reflected a shortage only because Respondent improperly adjusted downward the amount of stock Petitioner had sent for routine destruction.
An oral hearing was held in West Sacramento, California, and the parties made closing arguments at the conclusion of the hearing.
1. When Petitioner became postmaster of the West Sacramento Post Office in February 1993, a supervisor had responsibility for the main stock(1) (Transcript of Hearing, pages ("Tr.") 11, 31; Petitioner's Exhibit ("PX") 2). In July 1994, Petitioner assumed responsibility for the main stock (Tr. 12-13, 31; Respondent's Exhibit ("RX") 9, page 3 and Inspection Service Exhibits 8, 10).
2. At the time Petitioner became postmaster, the West Sacramento Post Office was using a software program known as "Ted's Stock" to maintain a detailed inventory by denomination of the stamps in the main stock. The program had proven satisfactory, and finance officials to whom the West Sacramento Post Office reported in the Sacramento District Finance Office ("Finance") knew of and did not object to its use. (Tr. 12-13, 32-39, 80-83, 94-97). The program crashed in August 1994, soon after Petitioner assumed responsibility for the main stock, and was never restored. Shortly after the crash, Petitioner called Finance and requested assistance (Tr. 34, 39-40; Petitioner's Exhibit ("PX") 6).
3. The West Sacramento Post Office had an Integrated Retail Terminal ("IRT") computer system that provided the capability for maintaining an inventory of the main stock, but detailed information regarding the number of each kind and denomination of stamps had never been entered into it. Only the bottom-line accountability of the main stock, i.e., the total value of all the stock, was maintained in the IRT, the "Ted's Stock" program being used in lieu of the IRT for the detailed inventory. The failure of the "Ted's Stock" program, therefore, left the post office with no detailed inventory of the number, types and denominations of stamps in the main stock. It was not until June 1995 that a detailed inventory was entered into the post office's IRT computer system by Finance. (Tr. 34-35, 37-40, 46, 55, 80, 94-97; PX 6).
4. Postal regulations require that post offices such as West Sacramento maintain a perpetual inventory of the main stock by denomination and record details of inventory transactions affecting the value of the stock. (F-1 Handbook, Post Office Accounting Procedures, Sections 415, 443.61).
5. On March 17, 1995, pursuant to instructions received from the Stamp Distribution Office, Petitioner and the finance clerk in his office prepared a shipment of nonsalable stock from the main stock to send to the stamp destruction committee (Tr. 13-14, 69-74, 90-94, 102-104; PX 2)
6. Petitioner and the finance clerk each independently counted the stock to be sent for destruction. After the stock was counted, they placed it in nine boxes and prepared a PS Form 17, Stamp Requisition, for each box, recording the number, denominations and total value of the stamps as reflected by their counts. After the boxes were sealed, they were sent by Registered Mail™ to the stamp destruction committee. Petitioner signed each of the Form 17s, and, although the finance clerk witnessed the counts for all of the boxes, she inadvertently failed to sign as the witness on the Form 17 for box #7. (Tr. 13-14, 69-71, 74, 86-87, 90-94, 102-104; RX 9, Inspection Service Exhibit 3b).
7. On May 4 and 5, 1995, the three members of the stamp destruction committee independently counted the contents of the nine boxes of stock from the West Sacramento Post Office. The total of the contents of four of the boxes differed from the inventory shown on the respective Form 17s. The Form 17 for box #1 understated by about 2000 the number of 29¢ stamps included in the box and failed to list 1500 $5.80 stamp booklets that were in the box, resulting in a total understatement of the value of the contents box #1 of $9,294.50. The Form 17 for box #6 showed 475 $2.50 stamp booklets when the box contained 500, thus understating the stock shipped by $62.50. The Form 17 for box #7 substantially overstated the number of 29¢ stamps in the box (104,959 listed versus 35,435 actually found in the box by the committee), listed almost $19,000 of other stamps that were not included in the box ($4,700 of which duplicated entries on the Form 17 for box #8 and which stamps were included in box #8), and contained a mathematical error (an entry of $6,262.50 for 16.7¢ stamps should actually have been $62.63). The Form 17 overstated the value of the stamps in box #7 by about $45,000 ($56,331.74 listed versus $10,621.36 actually in the box). The Form 17 for box #8 overstated the value of the stamps in the box by $1,172.76. The shortage of stamps compared to totals on the nine Form 17s was approximately $37,000. (Tr. 87; RX 9, Inspection Service Exhibits 1a, 1b, 2a, 2b, 3a, 3b, 4a, 4b, 5, 6).
8. This was the biggest discrepancy the members of the stamp destruction committee had ever seen, and to make sure of the count, they counted and recounted the stock until they were certain their results were accurate. The stamp destruction committee made adjustments to the Form 17s reflecting the committee's count, and each member initialed the changes. (Tr. 112-117, 120-122).
9. Soon after the committee's May 4 and 5 count, three to five telephone calls were placed to the West Sacramento Post Office by the committee and by the office to which the committee reported, and messages were left advising that the stamp destruction committee had found discrepancies in the post office's shipment of stock and asking that the postmaster call the committee. Petitioner did not call the committee. (Tr. 117, 120-125).
10. On June 5, 1995, Petitioner was advised through a telephone contact from Finance to his office that there had been significant discrepancies in the March 17 shipment of stock (Tr. 14-15, 22-23, 74-75, 107-108).
11. In early May, the stamp destruction committee had prepared a PS Form 1908, Financial Adjustment Memorandum, for each of the four boxes that had inaccurate counts, advising the post office to make appropriate corrections in the office accounts to reduce the recorded value of stamps sent for destruction by about $37,000. These Form 1908s were not received by the West Sacramento Post Office until June 7, 1995. (Tr. 106; RX 9, Inspection Service Exhibits 1a, 2a, 3a, 4a). The stamp destruction committee did not hear from the postmaster, and the stock was destroyed on June 8, 1995 (Tr. 14, 74, 118; RX 9, Inspection Service Exhibit 7). A new practice was instituted after this incident that would prevent destruction of the stock under the circumstances of this case until contact had been made with the postmaster (Tr. 119).
12. When stamps sent for destruction, known as "redeems", are verified and destroyed by the stamp destruction committee, the sending post office's main stock accountability is reduced by the amount of stock destroyed. Until the post office is notified by the stamp destruction committee of the amount of stock destroyed, the redeems stay in the records of the post office as part of the main stock and the main stock custodian remains accountable for them. (Tr. 43-45, 63-64, 88; F-1 Handbook, Post Office Accounting Procedures, Section 431.1).
13. A count of the West Sacramento main stock on June 12, 1995, after adjusting the amount of redeems to conform to the findings of the stamp destruction committee, revealed a shortage of $16,595.74 (Tr. 15-18, 43, 64; RX 4). The main stock was counted again on June 20, and a shortage of $18,454.74 was disclosed, which was placed in suspense, thus reducing the accountability of the main stock by that amount (Tr. 19, 45-46, 49, 56-58; PX 5, Record 4; RX 5). A count on June 22, which included two boxes of stamped envelopes that had been missed in the earlier counts, revealed an overage of $1,883.20 which was credited against the earlier shortage (Tr. 21, 25, 26-29, 50, 58-63, 64; PX 5, Records 5, 6; RX 7). With other minor adjustments, the shortage was fixed at $16,508.91 (PX 1, 5; RX 7).
14. On August 17, 1995, Respondent demanded that Petitioner pay Respondent $16,508.91 based on the shortage (RX 3). Petitioner's request for reconsideration was denied (PX 6, 7). The alleged debt was subsequently adjusted to $14,908.91 by crediting Petitioner, at his request, with a $1,600 overage in a window clerk's accountability represented by Petitioner to be related to the shortage in the main stock (Tr. 29; RX 8). On October 13, 1995, Respondent issued Petitioner a Notice of Involuntary Administrative Salary Offsets seeking repayment of $14,908.91 (PX 3), and this Petition followed.
15. Respondent's F-1 Handbook, Post Office Accounting Procedures, Section 131, describes the circumstances under which a postmaster will be held liable for a Postal Service financial loss:
"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."
(Accord Financial Management Manual ("FMM"), section 842.11).
16. When acting as the custodian of the main stock, postmasters, as other employees assigned stamp accountabilities, "are held strictly accountable for any loss unless evidence establishes they exercised reasonable care in the performance of their duties" (F-1 Handbook, Post Office Accounting Procedures, section 132; accord FMM, sections 341.2, 842.12, 842.2).
Respondent argues that it has suffered a loss in the amount of $14,908.91 due to the shortage in the West Sacramento main stock and that Petitioner, as the postmaster, is liable for the loss because the evidence shows that he did not conscientiously enforce Postal Service policies and procedures in managing the West Sacramento Post Office.
Petitioner argues that there was no loss to Respondent. He argues that he sent for destruction the amount of stock listed on the Form 17s he and his clerk prepared and that, therefore, the reduction made to the main stock by Finance to reflect the stamp destruction committee's count was improper. Had the accountability not been adjusted, the June 1995 audits would have revealed a substantial overage in the main stock, not a shortage. Additionally, he argues that the stamp destruction committee failed to notify him of any discrepancies in the redeems shipment before the stock was destroyed, thus depriving him of an opportunity to straighten out the counts of the redeemed stock. Finally, Petitioner argues that he conscientiously enforced Postal Service policies and procedures in managing the office and exercised due care in administering the main stock.
Respondent has demonstrated that there was a shortage in the main stock of $14,908.91. After making adjustments to the value of the redeems shipped to coincide with the committee's count, the audits disclosed a shortage in the main stock, which, after adjustments, was fixed at $14,908.91. For the reasons discussed below, I have accepted the evidence in support of the accuracy of the committee's count.
The testimony of Petitioner and his finance clerk regarding the process they followed in preparing the redeems was credible, and so was the testimony of the chairman of the stamp destruction committee describing the care with which the committee counted the shipment. However, based on the evidence in the record, I find it more likely that when preparing the nonsalable stock for shipment to the stamp destruction committee, Petitioner and his finance clerk made the mistakes identified by the committee than that the committee erroneously counted.
The stamp destruction committee noted significant discrepancies between the stock listed on the Form 17s and the stock in the corresponding boxes as they tried to verify the shipment on May 4 and 5, 1995. Because of the size of the discrepancies--the biggest they had ever seen--the three members of the committee paid particular attention to the counts and were especially thorough in their work. Each member individually counted and recounted the stock until their results were in agreement, and they were certain they were correct before they recorded the adjustments on the Form 17s, initialed the changes and signed the Form 17s (Finding 8). Their early identification of significant discrepancies likely increased their attention to the counts and likely resulted in a more careful count than that of Petitioner and the finance clerk, who were apparently unaware of any errors in the shipment.
Additionally, the Form 17 for box #7 contained errors that can be ascertained without resort to determining whose count was most likely accurate. On that form, Petitioner made a mathematical error that caused the amount of stock listed on the form to exceed by about $6,000 that contained in the box and listed $4,700 worth of stamps that were obviously also listed on the Form 17 for box #8 (in which the stock was actually found). (Finding 7). These errors suggest a lack of care in handling and counting the stock and/or in preparing the forms, and along with other evidence in the record discussed above, cause me to find that the stamp destruction committee accurately counted the stock in the March 17 shipment. Therefore, adjustments to the post office records of the redeems shipment which decreased the recorded count of stock in the West Sacramento main stock was proper. Petitioner has not challenged the accuracy of the counts or the records showing what stock should have been in the main stock on any other basis.
It is unfortunate that Petitioner was not able to verify the stock before it was destroyed. The stamp destruction committee made a good faith effort to contact Petitioner after the discrepancy was discovered, and it is not evident why Petitioner did not receive their messages and/or return their calls (Finding 9). Nevertheless, I have accepted the stamp destruction committee's counts of the stock, and Petitioner's lack of an opportunity to recount the stock before it was destroyed, under the circumstances of this case where it is not clear whose fault caused that lack of opportunity, does not provide a basis for changing that conclusion. Nor, under the circumstances of this case, is that lack of opportunity a basis for absolving Petitioner of liability for any loss Respondent establishes. That the policy has changed as a result of Petitioner's experience to prevent destruction of stock before the postmaster has been contacted when there is a significant discrepancy does not change this finding.
Therefore, Respondent has demonstrated that it suffered a financial loss of $14,908.91, due to the shortage in the main stock.
Petitioner is liable for the full amount of the loss unless the evidence shows that he conscientiously enforced Postal Service policies and procedures in managing the post office and exercised reasonable care with respect to managing the main stock (Findings 15, 16).
The evidence does not show that Petitioner exercised reasonable care in managing the main stock. First, Petitioner failed to maintain a detailed inventory of the contents of the main stock. Until the August 1994 failure of the "Ted's Stock" program, Petitioner had a detailed inventory using a procedure approved by his superiors. When that program failed and could not be restored, he requested help from Finance, but did not receive it until June 1995, when Finance entered the inventory into the IRT. During this time, Petitioner maintained only a bottom-line accountability for the main stock in the IRT (Findings 2, 3). Postal Service requirements direct that a detailed inventory of stock be maintained and that transactions affecting the main stock be recorded therein (Finding 4). While Finance may share some blame for failing to respond when the Ted's Stock program failed, Petitioner was obliged, as postmaster, to follow the guidelines and maintain an inventory. The IRT system was available and had the capacity to maintain the stock inventory, and Petitioner has not shown any impediment to his counting the main stock and entering the inventory data into that system. Additionally, even if he could not have used the IRT, an inventory could have been maintained on paper. Ordering stock for the post office, monitoring the receipt of incoming stock shipments and filling clerks' stamp requisitions would necessarily have been complicated by the lack of any record of the number, types and denominations of stamps in the main stock. While there is no showing that the failure to maintain an inventory caused the main stock shortage, a detailed record of the inventory would have helped prevent unrecorded or incorrectly recorded transactions with the main stock and facilitated identification and correction of any that occurred by requiring a higher degree of detail in accomplishing transfers of stock to or from the main stock.
Additionally, the significant errors in the preparation of the redeems for shipment support a finding of a lack of reasonable care relating to management of the main stock. While not every single error will negate a finding that a custodian exercised reasonable care, the errors in the March 17 shipment (Finding 7), were numerous and varied and were substantial in amount ($37,000 off in a shipment of just over $211,000). That the Form 17s both overstated and understated the value of stamps suggests that the misstatements were not purposeful, but errors either way in the number and amount present here contribute to a finding that Petitioner failed to exercise due care with respect to the main stock.(2)
Finally, while the identification of a $1,600 overage in a clerk's accountability as related to the main stock shortage served to reduce the amount of the shortage (Finding 14), its existence adds to the evidence supporting a finding of lack of reasonable care because it indicates that in at least one previous main stock transaction Petitioner allowed distribution of $1,600 of stock without making a proper record and adjustment to the main stock accountability.
In sum, because of the errors in the shipment of redeems, the failure to take proper steps to maintain a detailed inventory record of the main stock and the prior $1,600 error in issuance of stock to a clerk, the evidence does not demonstrate Petitioner used reasonable care in managing the main stock. Therefore, Petitioner is liable for the shortage of $14,908.91, which Respondent may collect by offset from Petitioner's salary.
The petition is denied.
Norman D. Menegat Administrative Judge
1. The main stock consists of the post office's stamps and other accountable materials that have not been consigned to window clerks or subordinate units (Tr. 31).
2. If Petitioner's figures for the March 17 shipment had been accepted, counts in June 1995 would have reflected an overage in the main stock in excess of $20,000. This variance, although not a basis for imposing financial liability on Petitioner, would still have suggested that errors had been made in managing the stock.