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POLICY DOCUMENT- Postmasters’ In Service Debt
Reference information
A
@)
Date 04/12/2014
Status Active
Version no. I Version 2.0
Author Ravi Chauhan, Contracts and Policy Advisor
Owner Agents’ Contracts and Policy Development Manager
Review Dec 2015
Date
Key Contracts Team:
stakeholde I John Breeden
rs Lin Norbury
Andrew Carpenter
Finance Service Centre:
Alison Bolsover
Dawn Wall
Finance:
Mike Hallas (Tax implications)
Carl Nielsen
Security Team
Sally Smith
Legal Services:
Jessica Madron
Approval
Assurance_I Paul Inwood, Contracts and Policy Manager 04/12/2014
Authorised _ I Paul Inwood, Contracts and Policy Manager 04/12/2014
Version control
Version 1.0 I Policy review to assess the relevance and 18 September 2013
fitness for purpose of existing POL contractual
policies and processes for all Post Office branch
models.
Version 1.1 I Amendment to version 1.0, Section 12.0 22 October 2013
referring to the write off authority levels for
Network Services.
Version 2.0 I Version following post implementation review 4 December 2014
of version 1.1.
CONTENTS
Page 1 of 15
F3/212/1
PART_1
1.0 Statement
2.0 Glossary
3.0 Introduction and purpose
4.0 Background
5.0 Right of recovery of sums due
6.0 Repayment of outstanding debt
7.0 Repayment options for former Postmasters
8.0 Pluralist Postmasters and multiple partners
9.0 Death in service
10.0 Risk Register / Branch Profile
11.0 Securing the debt
12.0 Write offs
13.0 Debt disputes - Transactional debt
14.0 Debt disputes - Non-transactional debt
PART 2 - Policy Implementation
1.0Applicability
2.0Related policies
3.0Implementation procedures
4.0Standard letters and documents
SUBJECT: Policy for dealing with the recovery of Postmaster’s in service
debt
PART 1
1.0 Statement_
1.1 The purpose of this policy is to clearly set out the processes Post Office Ltd
(POL) will follow to recover debt incurred in service by Postmasters of all Post
Office branches. This policy supercedes custom and practice formerly
implemented to recover debt incurred in service.
2.0 Glossary
Word/term Definition
Assistant A person employed by the Postmaster (who is approved by
Post Office Ltd) to work in the Branch
Basic The type of business carried on by the Postmaster on its own
Business account from the Branch Premises
Branch The Post Office branch operated by the Postmaster
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Branch
Discrepancy
When Branch Trading is completed, Horizon calculates the
expected cash position, using the transactions completed
through Horizon. The branch then counts the actual cash in
the branch and declares this. A branch discrepancy is where
there is a difference between these two values, either a
cash shortage or surplus.
Branch The premises from which the Post Office Branch and the Basic
Premises Business are operated
Branch The act of the monthly balancing of the branch accounts.
Trading The Postmaster is required to reconcile the cash and stock
in his branch against what the Horizon system is displaying
there should exist in real terms.
DFR Deduction from fees/ remuneration
Existing A contract currently in place between Post Office Ltd and the
Contract Postmaster (or, as appropriate, a shareholder and/or a director
of the Postmaster) for the operation of a Post Office branch at
the Branch Premises
FSC Finance Service Centre
NBSC Network Business Support Centre
Non- Refers to debt incurred outside of branch transactions.
transactional
Debt
Incurred due to unpaid invoices for example: Franchise
Insurance Waivers (once a year); Lease of electronic scales
(once every quarter); Property projects (e.g. refurbishment
work).
NT Contractual conditions for the operation of a Local Post Office®
Agreement and Main Post Office®
Operator Refers to an individual, company or partnership responsible
for the operation of a Local or Main branch under an NT
Agreement only
Postmaster This is the collective term for an individual, company or
partnership contracting with POL as an Operator,
Subpostmaster or Franchisee.
POL Post Office Limited
Settle In Horizon Postmasters can choose the option to “Accept
Centrally and Settle Centrally” which signifies acceptance of a loss or
gain within a branch unless the dispute process is
instigated. “Settle Centrally” does not prohibit further
investigation which might offset all or part of the loss/ gain
accepted earlier, but this is the branch’s responsibility to
initiate.
Subpostmast I Refers to an individual, company or partnership responsible
er/ for the operation of a Post Office branch under a Traditional
Franchisee Contract
Traditional Contract for the operation of Post Office branches, signed prior
Contract to the introduction of Local and Main agreements. Traditional
contracts include:
Subpostmasters Contract; Community Subpostmasters
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Contract; Modified Subpostmasters Contract; Franchise
Agreement; Franchise Independent Retailer Agreement;
Satellite contract; Outreach Agreements; Company Operated
Contract; Local Funded; Paystation Direct Settlement; PO
Essential;
Temporary Subpostmasters Contract
Transaction I Transaction Corrections are sent to the branches via their
Correction Horizon system when a discrepancy has occurred in their
accounting or where a branch is considered liable for
payment processing failures such as negligent acceptance
of counterfeit currency.. A discrepancy may not have arisen
in branch but a loss has been identified at some point which
is attributable to the specific branch. These are sent out by
teams within Finance Service Centre who deal with various
clients/products.
Transactiona I Refers to debt incurred in branch. Usually created by a
I Debt Transaction Correction or a Branch Discrepancy which has
occurred in the office accounts at branch trading.
3.0 Introduction and purpose
3.11n order for POL to be modernised and sustainable it is vital that it works to
prevent and minimise financial loss, and mitigate the impact of financial
loss on POL and the network. Aside from the direct cost to POL of incurring
losses, some of which are ultimately written off, all losses involve
administrative costs in dealing with recovering the debt and with the errors
that cause them.
3.2This policy is designed to provide clear and consistent guidelines and
processes for POL to recover transactional and non-transactional debt
incurred whilst in service by Postmasters of all Post Office branches
whether they are still in service or have subsequently resigned.
3.3Process charts and guidance notes for dealing with these requests are
included in Part 2 (Section 3.0) of this policy.
3.4Standard letters (inclusive of those which are sent via Finance System and
documents are included in Part 2 (Section 4.0) of this policy.
4.0 Background
4.1From a purely contractual perspective the Postmaster of a Post Office
branch is responsible for:
e Making good any loss of Post Office cash and stock without delay.
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e Making good any losses incurred whilst operating under their respective
contractual agreements that come to light following termination of the
agreement.
e All losses incurred through their own negligence, carelessness or error
and also for losses caused by their Assistants.
4.2To ensure that this policy is consistent with the contractual relationships
between POL and the Postmasters it is designed to clarify circumstances
where mitigation may be appropriate and to provide a clear framework of
repayment options, where immediate repayment is not possible.
5.0 Right of recovery of sums due
Traditional contracts
5.1POL has a common law right to set off sums owed by the
Subpostmaster/Franchisee to POL against some payments made by POL to
the Subpostmaster/Franchisee.
NT Agreements
5.2 Where money is owed by an Operator to POL or any other member of the
Royal Mail Group whether that money is owed under an Existing Contract
or lease of premises or otherwise, POL at its own discretion may recover all
of that money from any sum due to the Operator under the NT Agreement
or the Existing Contract, including their remuneration fees or any
termination payment owing to Operators leaving the Post Office network.
This right does not affect POL’s right to require an Operator to make good
any deficiencies identified through the late account procedure and/or repay
any other debts due. Also note that POL has made a business
decision that sums owed by the Operator cannot be recovered
from funds POL releases to the Operator under the Network
Transformation Programme namely investment payments, or
conversion or transition payments.
6.0 Repayment of outstanding debt
6.1The contractual position is that Postmasters should repay the debt
immediately. POL understands that in some circumstances immediate
repayment of the debt is not always possible. It is within POL’s interests to
ensure the continuation of Post Office services and branches, by motivating
Postmasters to repay debt whilst continuing service, and where appropriate
limiting the risk of resignation or notice of termination by an Postmaster
whilst taking steps to recover the debt.
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6.2Therefore there will be circumstances in which POL will give due
consideration to offering one or both of the following repayment options to
Postmasters:
e Repayment of full amount in one instalment.
e Repayment plan where Postmaster proposes a reasonable repayment
plan up to 12 months.
Each repayment option is considered in turn below.
6.3 Repayment of full amount in one instalment
6.3.1 The default option for repayment of debt should be in full either via
direct payments or by deducting amounts from fees/remuneration. Note
that the priority order for payment options is to be defined as card
payment, automatic transfer (bacs or chaps payment), one deduction from
remuneration, with the last option being payment via cheque.
6.4Postmaster proposes a reasonable monthly repayment plan up to 12
months
6.4.1 Postmasters will not always be able to repay the debt in one payment.
POL will consider reasonable repayment plans suggested by Postmasters.
Postmasters must provide a reason for why they are proposing the
repayment plan as opposed to paying the amount in full.
6.4.2 The Postmaster can propose to repay a debt on a monthly basis over a
maximum period of 12 months either via direct payments or by deducting
amounts from fees/remuneration. Note that the priority order for payment
options is to be defined as card payment, automatic transfer (bacs or
chaps payment) with the last option being deduction from
fees/remuneration over the shortest possible period (see Fig 1 below).
Further note that the repayment plan will commence from the date of the
next remuneration payment following the date that POL signs the
repayment plan as sent to the Postmaster (subject to remuneration cut off
dates).
6.4.3. In cases where the monthly instalments would be insufficient to repay
the debt over the agreed repayment period, a lump sum will be required
from the Postmaster to repay the balance and this must be received prior
to the end date of the repayment plan in cleared funds.
6.4.4 For transactional debt only one instalment plan can be in place at any
time. This should be confirmed in writing to the Operator, using Standard
Letter D, when the initial repayment plan is established. Following
repayment - no further instalment plans will be allowed for a further 12
month period. If the Postmaster incurs a further transactional debt which
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he has settled centrally, the debt shall be added to any existing instalment
plan using Standard Letter K or I and is payable in one payment by the next
month. The 12 month period would commence from the date of the final
payment being paid on the previous instalment plan. Details of when the
last repayment plan was repaid is to be included on the concurrence report
issued by the Agents Accounting Team. Should a Postmaster appear on the
report whilst they have a repayment plan in place or in the twelve month
period after repayment of a plan, the Contract Advisor should request full
repayment. A conversation must be conducted with the Operator to assess
the financial position/problems being experienced at the branch.
6.4.5 Where the Postmaster has agreed to repay the debt any repayment plan
should be recorded in writing, using Standard Letter D. The letter will state
the agreed sum due, when instalments are to be paid and for how much.
The letter should also expressly reserve all of POL’s rights and remedies
under the contract. POL and the Postmaster should then sign off the plan
as having been agreed. Note that agreement is not required to deduct the
amount from fees/remuneration where the Postmaster has failed to repay
the debt subsequent to warning from the Contract Advisors (See Process
Chart A). In such cases Standard Letter E or F can be used to communicate
the arrangement to the Postmaster.
Fig 1 - Deduction from fees/remuneration
a. Where direct payment is not made by card payment or automatic transfer
(bacs or chaps payment), the debt can be paid by deducting amounts from
the Postmaster’s fees/remuneration over the agreed repayment period.
Where the debt amount exceeds £1000.00, the Agents Accounting Team will
send out a concurrence report to Contract Advisors, seeking concurrence to
commence collection of this outstanding debt by deduction from
remuneration.
b. In determining the amount to be deducted from fees/remuneration (DFR),
POL must consider the circumstances of the Postmaster’s branch including its
fees/remuneration for the previous 12 months and the term remaining on the
Postmaster’s agreement (this is of particular relevance where a Postmaster
has given notice to terminate in accordance with his respective Agreement).
c. Once the above considerations have been made POL will calculate the level
of deduction. The maximum amount that can be deducted each month is
25% of the monthly fees/remuneration, unless the Postmaster voluntarily
offered more.
d. In cases where the monthly instalments would be insufficient to repay the
debt over the agreed repayment period, a lump sum will be required from the
Postmaster to repay the balance and this must be received prior to the end
date of the repayment plan in cleared funds. Where the Postmaster is still
unable to repay the outstanding balance POL should seek legal advice to
consider the options set out below, at Section 11.0, to secure the debt.
e. If the case involves a_ pluralist Postmaster the percentage of
fees/remuneration deducted is to be calculated in the aggregated
fees/remuneration for all branches operated by the Postmaster. Similarly if it F3/212/7
len tam
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7.0 Repayment options for former Postmasters
7.1 The following options are available to former Postmasters for the
repayment of debt incurred in service:
a. Lump sum payment - via cash, cheque, BACS/CHAPS, postal order or
debit card.
b. Standing order - over a period agreed with POL. Where this option is
agreed the former Postmaster will be required to complete and submit
pro forma B - income and expenditure form.
c. Recovery from sums due - Where Postmasters decide to leave the
Post Office Network under the Network Transformation Programme, POL
can deduct monies due to it from the Postmaster’s compensation
payment.
d. Recovery from third party - Some former Postmasters will appoint a
third party (e.g. Payplan) to consolidate all of the former Postmaster’s
debts. The third party will then allocate repayment to the various
creditors. This will likely involve a discount to the full sum due.
7.2\In the circumstance that POL successfully pursues legal routes for
recovering debt, recovery may be via cheques received from various
County Courts to reduce the former Postmaster’s debt.
8.0 Pluralist Postmasters and multiple partners
8.11In the case of pluralist Postmasters and multiple partners, POL will consider
the aggregated remuneration of all of the pluralist’s or multiple partners’
F3/212/8
branches as opposed to the individual position of the site where the loss
has occurred.
9.0 Death in service
9.1
9.2
9.3
9.4
The recovery of debt from a Postmaster who has died in service will be
dealt with by the Former Agents Debt team. It is important to note that
each case must be treated with sensitivity and due diligence. Where POL
has contracted with a company, as opposed to an individual, the branch
may be able to continue operating. In such an instance POL will continue to
deploy its business as usual policy.
The Former Agents Debt team will write (recorded delivery) to the next of
kin to notify them of the outstanding debt amount and requesting
repayment, giving 21 days to respond. If a response is received,
repayment details are discussed with the next of kin. If no response is
received the Former Agents Debt team will research whether the address
for the next of kin is correct or whether another contact within the
Postmaster’s family is available. If the address is correct and no response
has been received a second letter is sent out to the next of kin, giving 14
days to respond. Subsequent to this if no response is received a third letter
is sent out, giving 7 days to respond. Further failure to respond prompts
the requirement to send a referral to POL’s legal representatives for further
action.
Note that if POL was unsuccessful in recovery, the Former Agents Debt
team will weigh up the cost effectiveness of pursuing the debt prior to
referring it to POL’s legal representatives.
In regards the repayment options available to former Postmasters refer to
section 8.0 above.
10.0 Risk register/Branch profile
10.1
10.2
11.0
Postmasters that fall into the following categories are to be highlighted by
Contract Advisors on the branch risk register/branch performance profile as
being potentially a higher risk as they are to not able to repay outstanding
losses in full:
a) Postmasters that cannot pay within 12 months and/or need a lump sum
to settle the debt.
b) Postmasters on a current repayment plan.
The Security team will be notified via the DFR Report of this information.
Securing the debt
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11.1 There may be circumstances where POL wants extra comfort that it can
recover losses incurred by securing the debt, particularly where there are
concerns about the Postmaster’s accounts or where there is the risk that
the Postmaster may leave the network. POL loses significant amounts of
money to former Postmasters.
11.2 The debt may be secured in two ways:
a. Guarantees (proactive) - under the Local and Mains Post Office
agreements Operators operating as a company are obliged to provide
guarantees to secure the performance of the Operator’s obligations
under the agreement, where the company has existed for less then
three years, or if the company is deemed a financial risk. It is important
that POL explains clearly to the guarantor that they will be liable for the
debt. The Guarantees in Company to Company relationships policy
should be referred.
b. Charges on property (reactive) - POL may consider securing the
debt against property of the Postmaster by placing a charge on their
property. This measure should not be implemented without informed
advice from Legal Services
11.3 The Postmaster should obtain independent legal advice before providing a
Guarantee or a Charge. POL should obtain an Independent Legal Advice
(“ILA”) certificate confirming this. This will minimise the risk of the
Guarantee or Charge being set aside.
12.0 Write offs
12.1 Decisions in respect of write-offs are not taken by groups but are the
responsibility of individual managers, who bear P&L accountability for
those decisions. The reasons for a write-off must be fully documented and
may be subject to audit.
12.2 The Network Directorate may write off against it cost centre, in which case
the following authorisation levels apply:
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Up to £5,000 Agents Contracts Deployment
Manager or BAU Regional Manager
Up to £25,000 Head of Network Services or Head of
Network Operations
Up to £100,000 General Manager Network Agency
Sales, Services & Transformation
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£100,001+ Network and Sales Director
12.3 Alternatively, FSC may write off debts against its cost centre , in which case
the authorisation limits below will apply:
Up to £1,000 Team Leader
Up to £5,000 Senior Manager
Up to £100,000 Head of FSC
£100,001+ Finance Director
12.4 For write-offs pertaining to debt owed by former Postmasters the authority
limits for write-offs are as follows:
Up to £1,000 Former Agents Debt Team Leader
Up to £15,000 Relationship Manager
Up to £25,000 Former Agents Debt Team Senior
Manager
£25,001+ Head of FSC
13.0 Debt disputes -Transactional debt
13.1 POL acknowledges the potential financial impact and stress that may be
caused by unexpected Transaction Corrections or Branch Discrepancies. An
effective dispute resolution process is essential to ensure that settled
centrally debts are not recovered from Postmasters without reasonable
time to investigate, challenge and resolve individual amounts.
13.2 There are two routes by which Postmasters might instigate the dispute
process:
e Transaction Corrections
e Branch Discrepancies
13.3 Transaction Corrections
13.3.1 Branches should contact the Transaction Correction issuer within 7 days of
acceptance at branch to challenge the evidence provided to support the
Transaction Correction wherever possible. Where time permits prior to
Branch Trading, branches should challenge prior to acceptance.
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13.3.2 If the challenge is accepted by POL in full or part at this stage, a
compensating Transaction Correction will be issued to close the dispute.
13.3.3 On receipt of supporting information the issuing team will suspend the debt
recovery process, if the Transaction Correction was settled centrally, until a
response has been made. Written submissions to the specific team should
receive a written response, within 10 working days, in line with business
standards. It is recommended that written submissions be sent using a
priority service.
Transaction Corrections where there is insufficient time to investigate prior
to Branch Trading roll over.
13.3.4Branches should contact NBSC € and request further time
to investigate and present supporting information. A reference number will
be provided.
13.3.5 Supporting information to support any dispute must then be presented by
the Postmaster in writing via Special Delivery to Agents Accounting Team (,
1 Future Walk, Chesterfield S49 1PF, within 7 days quoting the above
reference number.
13.3.6The Agents Accounting Team will then present to the issuing team who will
suspend the debt recovery process, if the Transaction Correction was
settled centrally, until a written response has been made. FSC will provide
an update on the query or a resolution, within 10 working days.
13.4 Branch Discrepancies
13.4.1 The resolution of branch discrepancies is the responsibility of the branch.
13.4.2 If the Postmaster believes a transaction correction is required they should
contact the appropriate department in FSC via NBSC (€-~ ). Itis
FSC’s sole responsibility to update NBSC of any changes to a department's
contact number. Supporting information should be presented and
resolution then follows the transaction correction process. It is
recommended that this be sent using a priority service. FSC will provide an
update on the query or a resolution, within 10 working days.
13.5 Further Review
13.5.11If the Postmaster believes that the supporting information provided to FSC
adequately supports their dispute but the dispute has not been allowed
they should make a written submission to:
The Relationship Manager
1 Future Walk
Chesterfield
S49 1PF
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13.5.2The debt recovery process, if settled centrally, will be suspended pending a
written response.
13.5.3A written response will be provided, within 10 working days, in line with
Business standards.
13.5.4All correspondence will be included on the Cloud City for the Network to be
able to view.
13.5.5 Where a dispute is subsequently not upheld, a branch then becomes liable
for the settled centrally debt and no repayment will be made for any debt
made good.
13.5.6The decision of the Relationship Manager is final. Decisions are made at
POL’s discretion.
14.0 Debt Disputes - Non-transactional debt
14.1
Where the Postmaster disputes the amount of an invoice he should raise a
query using the Agents.Accounting.Team email address.
The Agents Accounting Team will then forward on the query to the
responsible individual within POL who raised the invoice. The responsible
individual will respond to the Agents Accounting Team to confirm the
amount and will respond to the postmaster accordingly. Where the
Postmaster has successfully disputed an invoice amount (i.e. he has been
charged incorrectly), the responsible individual will send an SD05 form to
the Accounts Receivable Team who will raise a credit note to offset against
the invoice.
PART 2
1.0 Applicability
This policy applies to all contracts types and to dealings between POL and all
Postmasters of Post Office branches.
2.0 Related policies
The following policies require consideration or cross referencing when dealing with
the recovery of in service debt:
Guarantees in Company to Company relationships
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Contract breach
Burglaries and Robberies
The above list is not exclusive and consideration of other policies may be required
depending on the particulars of each case.
3.0 Implementation procedures
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Process Chart A
Process for recovery of in service transactional debt
incurred by an Postmaster.
pc - Transactional
debt recovery.doc
Process Chart B
Process for recovery of in service non-transactional debt
incurred by an Postmaster.
Non-transactional fun
Process Chart C
Process for recovery of in Service debt incurred by a
former Postmaster.
peC - Former
Postmaster debt reco
Process Chart D
Process for agreeing a repayment plan beyond 12 months
for the recovery of in service debt.
pcD - Instalment
plans beyond 12 mont
4.0 Standard letters and documents
Standard Letter A
Statement of debt detailing amount of outstanding
transactional or non-transactional debt.
slA - New Statement
V5 0 15 05 2014. docx
Standard Letter B
Reminder of debt, following Standard Letter A, detailing
amount of outstanding transactional or non-transactional
debt.
sIB - New Dunning
Doc 04 06 2014.docx
Standard Letter C
Subsequent to voluntary agreement, letter agreeing with
Postmaster that transactional or non-transactional debt
will be deducted from fees/remuneration in one
instalment.
ES
sIC - Dfr Voluntary
single payment. docx
Standard Letter D
Subsequent to voluntary agreement, letter agreeing with
Postmaster that transactional or non-transactional debt
will be deducted from fees/remuneration over a number of
instalments.
sID - Dfr Voluntary
instalments.docx
Standard Letter E
Letter of warming to the Postmaster stating that payment
will be taken in one instalment from fees/remuneration.
SIE - Dfr Forced
single payment. docx
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Standard Letter F
Letter of warning to the Postmaster stating that payment
will be taken in a number of instalments from
fees/remuneration.
BS
SIF - Dfr Forced
instalments. docx
Standard Letter G
First statement of debt letter to former Postmaster.
SiG - 1st letter to
former Postmasters.d
Standard Letter H
Second letter to former Postmaster reminding of unpaid
debt.
SIH - 2nd letter to
former Postmasters.d
Standard Letter I
Letter of action to former Postmaster subsequent to
Standard Letter I and J.
sil- 3nd letter to
former Postmasters.d
Standard Letter J
Letter to Postmaster requesting additional information
where request placed to repay the debt beyond a 12
month repayment plan.
sU - Exceptional
request for Instaimen
Standard Letter K
Letter to Postmaster who has an existing instalment plan
in place, has settled a further transactional debt centrally,
and POL is deducting the further debt from
fees/remuneration in one instalment.
EI
sik - Dfr Forced
single payment. docx
Standard Letter L
Letter to Postmaster who has an existing instalment plan
in place, has settled a further transactional debt centrally,
and POL is deducting the further debt from
fees/remuneration over a number of instalments.
Tie:
siL - Dfr Forced
instalments.docx
Pro Forma A
Income and expenditure form to be sent to a current
Postmaster for completion where he requests to repay a
debt beyond 12 monthly instalments.
pfA - Income and
Expenditure Form Exis
Pro Forma B
Income and expenditure form for completion by a former
Postmaster where he requests to repay an outstanding
debt via standing order over an agreed period.
pfB - Income and
Expenditure Former P
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