In the Matter of the Petition by ) May 23, 1997 ) JAMES L. LOEHWING ) 172 Nancy Street ) ) at ) ) York, PA 17402-4716 ) P.S. Docket No. DCA 97-98 APPEARANCE FOR PETITIONER: Charles Scialla 453 Preakness Avenue, #5 Paterson, NJ 07502-1121 APPEARANCE FOR RESPONDENT: John A. Hoffman Labor Relations Specialist United States Postal Service 1905 Old Philadelphia Pike Lancaster, PA 17602-9402
Petitioner, James L. Loehwing, filed a timely petition requesting an oral hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. 5514(a), after receiving a Notice of Involuntary Administrative Salary Offsets on March 10, 1997. The Notice advised Petitioner that he was indebted to the Postal Service in the amount of $15,585.55(1) resulting from a shortage in the unit reserve stock under his responsibility at the West York Post Office, York, Pennsylvania.
A hearing was held on April 29, 1997, in York, Pennsylvania. The Postal Service presented the testimony of two employees. Petitioner presented the testimony of two employees, as well as testifying on his own behalf. In addition to the transcript of the hearing, the record contains Respondent's Exhibits RX-1 through RX-14 (there is no RX-2) and Petitioner's Exhibits PX-1 through PX-3. The parties made closing arguments at the conclusion of the hearing.
FINDINGS OF FACT
1. Petitioner is currently a level 16 supervisor at the Red Lion Post Office in York, Pennsylvania. (Transcript page (Tr.) 64). From 1992 until June 27, 1996, he was the Branch manager and unit reserve custodian of the West York Post Office in York, Pennsylvania. (Tr. 31, 65).
2. At the time of his relief as branch manager of the West York branch, a shortage of $15,583.15 was discovered in the reserve stock (Respondent's Exhibit (RX) 14; Petitioner's Exhibit (PX) 2). Subsequent audits of all the accounts at the West York branch uncovered a net total of $13,155.15 in overages(2) in various other accounts during the same time period, for a net shortage in all the accounts at the branch of $2,428.00 (Tr. 23, 48, 49, 54-57).
3. The York Postmaster did not credit Petitioner with any of the overages at his branch because no direct relationship or correlation could be demonstrated between any of the overages and the $15,583.15 shortage in the unit reserve stock. Also, since most of the overages were found in the accountability of the clerks at the branch, the potential existed that these clerks could claim the overages if subsequent shortages were found in their individual accounts. (Tr. 27, 28).
4. Petitioner did not follow correct procedures with respect to controlling stock accountability while managing the West York branch during his four-year tenure as manager. Instead of issuing stock to the clerks from the unit reserve, and holding each individual clerk accountable for the amount of stock issued, Petitioner would transfer overages of one clerk to cover the shortages of another clerk. Petitioner would also transfer stock from the unit reserve to cover a shortage found in the account of a clerk. In so doing, Petitioner would sometimes alter the audit sheets of individual clerks to show a "balanced" account. Petitioner claimed he did not know he was following an incorrect procedure and made no attempt to keep track of individual overages or shortages. In essence, Petitioner managed all the accounts at the branch as a single unit, in which individual clerks were not accountable for their own stock. (Tr. 19, 38, 50, 65, 70, 72).
5. This method of managing all the accounts at the West York branch as a single unit had been implemented by prior managers and had been in effect for at least fifteen years prior to Petitioner's tenure (Tr. 65, 66).
6. Petitioner's practice of mingling stock between accounts and managing all the accounts at the branch as a single unit (and not keeping track of individual overages or shortages in the various accounts) prevented the possibility of establishing a "paper trail" to identify a correlation between the $15,583.15 shortage in the unit reserve and all or part of the net total of $13,155.15 in overages in various other accounts at the branch (Tr. 28, 72).
7. On March 10, 1997, Respondent issued Petitioner a Notice of Involuntary Administrative Salary Offsets asserting a claim of $15,585.55, and Petitioner filed a timely petition challenging its collection (Petition).
DECISION
The applicable standard of liability in this dispute can be found in Subsection 132, Other Employees, of Handbook F-1, Post Office Accounting Procedures(3). This section provides, inter alia, that employees who are assigned responsibility for postal funds and other accountable paper will be held strictly liable for any financial loss occurring under their responsibility unless they can demonstrate that they exercised reasonable care in the performance of their duties. Thus, the Postal Service must first show that a financial loss to the Postal Service actually occurred and that Petitioner was responsible for the funds lost. See Linda R. Shires, P.S. Docket No. DCA-137 (July 16, 1992). If he is to avoid liability once the Postal Service shows a loss, Petitioner, in turn, must demonstrate that he exercised reasonable care in the performance of his duties.
Petitioner acknowledges that he failed to follow Postal Service financial procedures when he served as the West York Post Office branch manager (Finding of Fact No. (FOF) 4). Petitioner does, however, dispute that the Postal Service actually incurred a loss of $15,585.55, the amount being sought from him in this proceeding.
Respondent, for its part, concedes that audits of the West York branch disclosed net overages in various accounts totaling $13,155.15. Respondent objects to using this amount to offset the shortage of $15,583.15 found in the unit reserve stock because no direct relationship, or "paper trail" exists between any individual overage and the shortage found in the unit reserve. (FOF 3). However, whether or not a "paper trail" exists between the shortage being sought from Petitioner and the various overages found at his branch, Respondent has failed to demonstrate that it has suffered an actual loss equal to the amount it is seeking from Petitioner. Petitioner's method of managing all the accounts at the West York branch as a single unit did not provide sufficient accounting information to ever identify a direct relationship between a shortage in one account and an overage in another account at the same branch. Nevertheless, since Petitioner managed all the accounts at the branch as a single unit, his method of management strongly suggests that overages in one account should be applied against shortages in another to determine the true magnitude of overall financial loss to the Postal Service.
An assessment against Petitioner for the full amount of the shortage in the unit reserve account, without crediting Petitioner with any of the overages in the same time period in other accounts at the branch, would create a windfall for the Postal Service. A net of $13,155.15 in overages were found in all the other accounts at the West York branch in the same time period as the $15,583.15 shortage in the unit reserve, for a net overall shortage at the branch of $2,428.00 (FOF 2). Accordingly, the extent of actual financial loss suffered by the Postal Service is $2,428.00 and, as the evidence does not show that Petitioner exercised reasonable care in the performance of his duties, that is the amount that may be recovered from him.
This petition is sustained to the extent that Petitioner's debt is reduced to $2,428.00.
William K. Mahn Administrative Judge
2 Overages are placed in a trust account for one year, after which they revert to miscellaneous Postal Service funds (Tr. 11, 42).
3 The F-1 Handbook was revised effective November 1996. However, as the events relevant to this case arose under the old version, that is the version which will be applied to determine Petitioner's liability in this case.