In the Matter of the Petition by

HENRY F. SCIPIONE, JR.
2411 South 21st Street

Philadelphia, PA 19145-4206

P.S. Docket No. DCA 00-417

APPEARANCE FOR PETITIONER:
Vincent J. Giusini, Esq.
1026 Winter Street, Suite 300A
Philadelphia, PA 19107-1808

APPEARANCE FOR RESPONDENT:
Kenneth Giles
Labor Relations Specialist
United States Postal Service
Post Office Box 7956
Philadelphia, PA 19101-7956

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Henry F. Scipione, Jr., 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 August 3, 2000. The Notice advised Petitioner that he was indebted to the Postal Service in the amount of $7,858.25, resulting from a "1412 shortage" of $2,845.60 on August 13, 1999, a "bank shortage" of $2,785.00 on October 4, 1999, and a "cash retained shortage" of $2,227.65 on October 8, 1999, all occurring at the Paschall Station of the Philadelphia Post Office where Petitioner was the manager.

A hearing was held on March 15, 2001, in Philadelphia, PA. The Postal Service presented the testimony of six witnesses. Petitioner cross-examined Respondent’s witnesses but did not call any witnesses or testify in his own behalf. In addition to the transcript of this hearing, the record consists of Respondent’s exhibits RX-1 through RX-31. The parties submitted written arguments after receipt of the transcript of the hearing.

FINDINGS OF FACT

1. Petitioner was the manager of the Paschall Station in Philadelphia, PA during the time period that the shortages involved in this Petition were discovered (August through October in 1999). The Paschall Station is operated as a Postal Store. (Transcript pages (Tr.) 126-129).

2. On August 13, 1999, the Paschall Station experienced an accounting shortage of $2,845.60. The daily 1412 report (daily accounting closeout for the station) indicated that $16,581.78 should have been deposited in the bank, whereas the bank deposit on that night was for $13,736.18. Petitioner prepared the bank deposit on this date. (Tr. 18, 38, 40; Respondent’s Exhibits (RX) 13, 14, 27).

3. Such "1412 shortages" can represent real shortages or can occur through clerical entry errors or computer malfunctions. Discrepancies between the amounts listed on the 1412 for a particular post office, and the amount deposited in the bank for the same date occurred on a daily basis throughout Philadelphia. The cause of the $2,845.60 "1412 shortage" at the Paschall Station on August 13, 1999 was never investigated. (Tr. 40, 41, 49, 51, 52, 182).

4. On October 4, 1999, Petitioner was on leave, but was called in to close out the station. Although Petitioner began preparation of the nightly bank deposit with David Merrick, another employee at the station, Mr. Merrick was called away before completing the count of the cash, signing the deposit slip and initialing the register envelope. Petitioner signed his own initials and Mr. Merrick’s initials on the envelope. The deposit slip indicated that $33,489.00 was being deposited. However, when the registered bank deposit was opened and counted at the bank, it contained only $30,704.00, leaving a shortage of $2,785.00. A review of the bank’s videotape of the bank clerks counting the deposit did not show any irregularities occurring at the bank. (Tr. 11, 12, 28-30, 42; RX 6, 15, 16, 20, 25).

5. Proper Postal Service procedure for preparing a bank deposit is found in Handbook F-1, Post Office Accounting Procedures, §333.2, which specifies that funds should be counted in the presence of a witness, and that the witness must make an independent count in the presence of the preparer. The preparer and witness are then required to sign the deposit slip and initial the register envelope seal. If no witness is available, the preparer is required to note that fact on the copy of the deposit slip retained at the station. (Tr. 44, 45, 123; RX 29).

6. On October 8, 1999, an audit was conducted of the Paschall Station. The audit determined that there was a $3,138.36 stamp stock shortage and a $2,227.65 shortage in the amount of cash retained at the station. As manager of the station, Petitioner was responsible for the cash retained account. While conducting the audit, the auditors found both loose bills and coin of approximately $3,200 in the vault area where it was accessible to the station’s clerks and security guards. Petitioner was on leave and not present at the station during the week the audit took place. A shortage in the "cash retained" account was a recurring problem at the station. The closeout clerk routinely inflated the cash retained account by approximately $2,000 each night in order to balance the station’s accountability and thereby complete the closeout. (Tr. 88, 89, 126-129; RX 25, 26, 31).

7. On August 31, 2000, Petitioner was issued a Notice of Involuntary Administrative Salary Offsets seeking the repayment of $7,858.25. This amount was based on the $2,845.60 "1412" error occurring on August 13, 1999, the $2,785.00 bank deposit shortage occurring on October 4, 1999, and the $2,227.65 cash retained shortage discovered during the October 8, 1999 audit of the Paschall Station. (RX 10).

DECISION

$2,845.60 Accounting Shortage

Petitioner argues that there is no evidence in the record that the 1412 accounting shortage on August 13, 1999, actually represents a loss to the Postal Service and, further, that there is no evidence to show that Petitioner acted negligently in causing the 1412 shortage.

Respondent’s burden of proof in the case of an unexplained shortage is to show that a loss occurred in an account for which Petitioner was accountable. Respondent has not met this burden.

A 1412 accounting shortage does not necessarily mean that there is a corresponding loss to the Postal Service. Such discrepancies can occur through computer malfunctions or clerical entry errors. Many such shortages occur on a daily basis throughout the stations of the Philadelphia Post Office. (Finding of Fact No. (FOF) 3). Respondent did not offer any evidence to demonstrate that the August 13, 1999 accounting shortage actually represented a loss to the Postal Service rather than simply a clerical error or machine malfunction. Accordingly, Respondent has failed its burden of proving that the Postal Service suffered an actual loss as a result of the $2,845.60 accounting shortage that occurred on August 13, 1999.

$2,785.00 Bank Shortage

Respondent argues that Petitioner did not follow Postal Service policies and procedures when preparing the station’s bank deposit on October 4, 1999, and should be held responsible for the $2,785.00 shortage that occurred. Petitioner argues that he was not negligent or derelict in preparing the bank deposit and, therefore, should not be held responsible.

The applicable standard for determining an employee’s liability in a case such as this provides that employees to whom postal funds are consigned "are held strictly accountable for any loss unless evidence establishes that they followed postal procedures established when performing their duties." Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), §141.

Petitioner prepared the bank deposit on October 4, 1999, and signed the deposit slip. As such, he was responsible for Postal Service funds in the amount indicated on the deposit slip. The fact that the bank received $2,745.00 less than the amount indicated on the deposit slip establishes a loss to the Postal Service in that amount. Petitioner did not follow established Postal Service procedures in preparing the bank deposit on October 4. He did not have a witness make an independent count and then sign the deposit slip and initial the register envelope. Furthermore, he did not note that a witness was unavailable. (FOF 5). There is no evidence of irregularities occurring at the bank when the deposit was counted. (FOF 4). Accordingly, it is no defense that Petitioner did not act negligently in preparing the deposit, and Petitioner is strictly liable for the loss that occurred.

Respondent argues that Petitioner, as station manager, was responsible for the cash retained account. Respondent argues, therefore, that Petitioner should be held liable for the shortage of $2,227.65 that was discovered in the cash retained account when the station was audited on October 8, 1999. Petitioner did not offer any arguments concerning this shortage.

As station manager, Petitioner was responsible for the cash retained account at the station (FOF 6). There is considerable evidence of lax procedures at the Paschall Station concerning the cash retained account. At the time of the audit, the auditors discovered approximately $3,200 in bills and coin that was left in an area where it was accessible to the station’s clerks and security guards. In addition, a shortage in the cash retained account was a recurring problem at the station that required the close-out clerk to artificially inflate the cash retained account on a nightly basis by approximately $2,000 in order to balance the station’s accountability. (FOF 6). Petitioner did not dispute his responsibility for the station’s cash retained account and offered no explanation for $2,227.65 shortage found during the October 8, 1999 audit, nor did he dispute the accuracy of the amount of the shortage. Accordingly, the $2,227.65 cash retained shortage represents a loss to the Postal Service in that same amount, and Petitioner is liable for the loss.

CONCLUSION

Petitioner is relieved of liability to repay the Postal Service the $2,845.60 accounting shortage that occurred on August 13, 1999, but is liable to repay both the $2,785.00 bank shortage that occurred on October 4, 1999, and the $2,227.65 cash retained shortage discovered on October 8, 1999. Respondent may recover $5,012.65 from Petitioner’s salary.