April 6, 2000 In the Matter of the Petition by JOYCE S. HAMILTON 14778 Compass Drive at Jacksonville, FL 32226-1216 P.S. Docket No. DCA 00-47 APPEARANCE FOR PETITIONER: Charles Scialla 453 Preakness Avenue, #5 Paterson, NJ 07502-1121 APPEARANCE FOR RESPONDENT: Barbara Kawchak Labor Relations Specialist United States Postal Service P.O. Box 40005 Jacksonville, FL 32203-0005
FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982
Petitioner, Joyce S. Hamilton, filed a Petition requesting a hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. §5514(a), after receiving two Notices of Involuntary Administrative Salary Offsets from Respondent, United States Postal Service. The Notices informed Petitioner that Respondent intended to deduct a total of $2,853.23 from her salary to make up for shortages occurring in accounts for which Petitioner was responsible.
A hearing was held at which the parties presented evidence and made arguments in support of their positions.
FINDINGS OF FACT
1. In February 1999, Petitioner became the Retail Supervisor for the Arlington Station in Jacksonville, Florida (Transcript Page ("Tr.") 9, 31).
2. As part of her duties, she assumed financial responsibility for the station’s unit reserve stock. The reserve stock consists of the stamps and accountable paper consigned to the station but not yet issued to the window clerks. It was Petitioner’s responsibility to account for stock issued to the station and to issue stock from the unit reserve to the window clerks in the office and to maintain the financial records related to the unit reserve balances. (Tr. 9; Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), Section 429.2, 429.21).
3. When she took over the reserve stock of the station, she and her predecessor counted the stamps, and once the account was put into balance, she accepted responsibility for it. At that point, the stamps in the unit reserve agreed with what the station’s financial records showed should be on hand. (Tr. 10, 32).
4. Petitioner’s predecessor had not managed the unit reserve stock well. When Petitioner took it over, the stock was in disarray, and the reserve contained far more nonsaleable, out-of-date stock than it should have. This stock—referred to as "redeemed" stock—should have been sent to a stamp destruction office for disposal long before Petitioner took over the unit reserve. (Tr. 33-34).
5. When stock is sent to the stamp destruction office for disposal, the custodian of the stock (Petitioner in this case) counts it and provides an itemized list of the quantities of each type of stamp and the value of each type and the total value of the shipment. This listing, or "certificate", is sent along with the shipment to the stamp destruction office, but the stamps remain listed in the accountability and inventory of the submitting station. Once the stamp destruction committee confirms the quantities and values on the certificate by counting the stock, the certificate is returned to the station. Once the destruction certificate is received by the station, the custodian reduces her accountability by removing the redeemed stock from her accountability and inventory listing. (Tr. 72).
6. In 1999, the Arlington Station was slated for conversion to a new computer accounting system, known as POS (Point of Sale), replacing what was known as the IRT computerized system. The POS system had many accounting, tracking and reporting features not available on the IRT system. (Tr. 12-13).
7. All of the accounts at Arlington Station had to be transferred to the POS system. With many offices this could be done by simply uploading the data from the IRT system by telephone and entering it automatically into the POS system. However, at Arlington Station, this automatic computer-to-computer transfer was not done. (Tr. 27-30, 56).
8. Instead, in early April 1999, a POS conversion team was dispatched to Arlington Station to transfer the station’s data to the POS system manually.
9. By that time, Petitioner had already dispatched a very large amount of stamp stock (about $70,000 worth) to the stamp destruction office from Arlington’s unit reserve, which was all of the stock from the unit reserve that was subject to redemption. The process had not been concluded by return of the certificates confirming destruction of the stock, so all of the redeemed stock remained on the books at Arlington Station. Therefore, the POS conversion team had to enter every type of stamp, the number of each and their value manually from the inventory list of the redeemed stock to the POS system. Although Petitioner was responsible for maintaining all accounts relating to the accountability of the unit reserve, she was not involved in this transfer of data. (Tr. 32, 35, 37, 57, 60-63).
10. Immediately before the transfer to POS, Petitioner did a self-audit of the unit reserve stock and found it to be in balance. In other words, the amount of stock on hand when added to the redeemed stock in transit equaled what the station’s financial records indicated should have been on hand. (Tr. 38-40, 56, 64).
11. The stamp destruction committee returned the certificates after Arlington Station had been converted to POS. The certificates indicated that the destruction committee agreed with Petitioner’s inventory of what was sent, but as she removed from the unit reserve accounts the stock she had sent for redemption, Petitioner noticed in the post-POS records that some redeemed stock was still recorded as being in the unit reserve. Petitioner knew that she had sent in all redeemed stock that had been in the unit reserve, and thus the certificates should have accounted for all of the stock, leaving none still showing on the station’s records. She suspected that there had been an error made by the POS conversion team when entering to the POS system the many lines of information from the inventory of the redeemed stock shipment. (Tr. 20, 32, 35, 54-56).
12. On two occasions in 1999, Petitioner issued stamps totaling $940.23 to a window clerk in the office but failed to record the transaction in the unit reserve records—she did not reduce the amount of stock for which she was responsible in the station’s records as she should have. The clerk also failed to enter the stock as received in his records, and in subsequent audits, he had overages totaling $940.23, which he agreed were properly attributable to the unit reserve. (Tr. 37, 41-42, 48-49, 53-54; PX 1).
13. Petitioner was also responsible for the unit reserve of the Pottsburg Station. On September 10, 1999, that stock was counted and reflected a shortage of $251.07. That station had also been converted to POS, but that conversion was done by a more experienced team, and the few errors found were corrected promptly after the conversion. Petitioner believed that the shortage resulted from her issuance of stamped post cards to a clerk without completing the paperwork to record the transfer. (Tr. 44-46, 51-53, 70).
14. On November 3, 1999, Petitioner and her supervisor counted the unit reserve at Arlington Station, and that count revealed that the value of stock in the reserve was $2,602.16 less than reflected in the applicable financial records of the station. The missing stock that appeared to account for the shortage was redeemed stock shown on the inventory, but not actually present in the unit reserve. (Tr. 35, 58, 67-68; RX 12).
15. On November 19, 1999, Respondent issued Petitioner a letter of demand in the amount of $2,602.16 based on the November 3 audit at Arlington Station (RX 8).
16. Also on November 19, 1999, Respondent issued Petitioner a letter of demand for the $251.07 based on the September 10, 1999 audit at Pottsburg Station (RX 9).
17. On January 27, 2000, Respondent issued Petitioner two Notices of Involuntary Administrative Salary Offsets, one in the amount of $2,602.16 (RX 2) and one in the amount of $251.07 (RX 3).
18. Petitioner filed a timely Petition challenging collection of the alleged debts.
19. Postal Service regulations establish liability for financial losses from accounts, including a unit reserve, as follows:
"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." (RX 14, Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), Section 141).
20. If a shortage in the accountability of one employee is found to be related to an overage in the accountability of another employee, Respondent’s regulations provide that the shortage may be reduced by the amount of the overage. Respondent’s managers are expected to exercise judgment when determining the existence of a relationship that may warrant offsetting overages against shortages. (Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), Section 429.16).
DECISION
In a Debt Collection Act proceeding, it is Respondent’s burden to demonstrate that it suffered a loss in the amount of the debt claimed against the employee. Normally, demonstrating a shortage in an account such as the unit reserve for which the employee is responsible is sufficient to do this. A shortage is demonstrated if the amount of stock on hand as counted is less than what the financial records relating to the particular accountability indicate should be on hand. Generally, the financial records of the station that establish the amount of stock that should be on hand are maintained by the custodian of the unit reserve. When the reserve is first transferred to the employee, she agrees to a beginning figure through her participation in a count of the stock. The custodian is responsible thereafter for accurately recording incoming and outgoing stock and thereby maintaining a running balance in the station’s financial records of what should be in the unit reserve. In Debt Collection Act proceedings, it is reasonable to allow Respondent to rely on the beginning balance figure to show a shortage exists because the beginning balance is a figure maintained by the employee.
In this case, Petitioner has challenged the accuracy of the beginning balance figure. She has presented evidence that suggests that errors might have been made in the transfer of the many individual inventory items from the old IRT records to the POS system (Findings 4-9). She sent all stock subject to redemption for disposal and listed all such stock on the destruction certificates (Finding 9). Yet after the destruction certificates were returned and Petitioner removed the redeemed stock from her inventory list, the list still included stock subject to redemption (Finding 11). That stock was still listed in the inventory when the stock was counted in November, but the redeemed stock was not on hand (Finding 14). This raises a question about the accuracy of the transfer of the inventory data from the IRT system to the POS system, and since Petitioner did not personally transfer the many individual inventory items from the old to the new system (Finding 9), it would be unfair to hold her responsible for any errors made in the transfer. In view of this uncertainty about the accuracy of the beginning balance, it is concluded that Respondent has not demonstrated that a true shortage existed or that it suffered a loss in the amount of $2,602.16.(1)
No similar question is raised regarding the beginning balance used in determining that a $251.07 shortage existed in the unit reserve for Pottsburg (Finding 13). Accordingly, Respondent has shown that a shortage in that amount occurred in the Pottsburg Station unit reserve.
Petitioner alleged that that shortage resulted from her issuance of post cards to a clerk without sufficient record keeping. However, there was no corroboration from the receiving clerk, no evidence that the clerk had a subsequent overage or other evidence to support her supposition. Accordingly, Respondent has demonstrated that it incurred a loss in the amount of $251.07, and unless the evidence demonstrates that Petitioner followed established procedures in managing the unit reserves, she will be held liable for the shortage (Finding 19).
Petitioner did not demonstrate that she followed established procedures. In this case, the incident she raises as a defense demonstrates that she did not follow the established procedures, in that she issued accountable stamped post cards without using proper requisition forms and procedures. Additionally, the issuance of stock in Arlington Station without proper recording (Finding 12) also undermines any finding that Petitioner followed established procedures in performing her duties as a unit reserve custodian. Therefore, she is liable for repayment of the $251.07, and Respondent may collect that amount from her salary. Respondent may not collect the claimed $2,602.16.
The Petition is sustained to the extent set forth above and is otherwise denied.
Norman D. Menegat Administrative Judge