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POLARC14 (3)
14/18 - 14/28
POST OFFICE LIMITED
(Company no. 2154540)
(the Company)
Minutes of a meeting of the AUDIT, RISK AND COMPLIANCE SUB-COMMITTEE held
on 15 May 2014 at 148 Old Street, London, EC1V 9HQ
Present:
Alasdair Marnoch Chairman of Committee
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director (by telephone)
In attendance:
Alice Perkins Chairman
Chris Aujard General Counsel
Chris Day CFO
Sarah Hall Head of Financial Control and Compliance
Malcolm Zack Head of Internal Audit
Mark Davies Communications Director (Minute POLARC 14/20-14/21 only)
Angus Grant Partner, Ernst & Young
Steve Lyon Ernst & Young
Belinda Crowe Programme Director Project Sparrow (Minute POLARC 14/23
only)
Gill Catcheside Assistant Company Secretary
POLARG INTRODUCTION
1418
A quorum being present, the Chairman of the Committee opened the
meeting and welcomed all those present.
POLARC MINUTES OF THE LAST MEETING AND MATTERS ARISING
14119
{a} The Committee approved the minutes of the meeting held on 6 March
2014 for signature by the Chairman of the Committee.
{b) The Committee noted the actions list dated 8 May 2014.
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POLARG AUDIT RESULTS REPORT
14/21
(a) Copies of the report produced by Ernst and Young, setting out the
external auditor's preliminary conclusions on the financial position and
results of operations for the Post Office for the financial year ended 30
March 2014 had been circulated to all those present at the meeting.
(b) Angus Grant confirmed the independence of the external auditor and
commented on the approach to the audit and its scope.
(c) The significant audit and accounting issues set out in the report were
discussed in detail, together with the key internal control findings. Steve
Lyon advised that the approach by the Business was in line with the plan
submitted to the Committee last year. It was noted that there were no
unadjusted misstatements.
(d) The management dispute of the information provided by Fujitsu for
Homephone was discussed. It was reported that there was a difference of
£2.8m between billing and recognised revenue. The CFO advised that a
jessons learned review would be carried out, but that a greater degree of
contro! within contractual negotiations was required. The Committee was
ACTION: advised that Fujitsu had agreed to a forensic audit of the revenue data. It
CFO was agreed that an update would be provided to a future meeting.
(i) The Committee noted the report.
(j) Mark Davies left the meeting.
POLARC DATA CENTRE PROCUREMENT
14/22
(a) The Committee received an update on the risk management evaluation of
the Data Centre Tower Procurement. It was noted that the update had
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been considered by the Executive Committee the previous week.
(b)
(c) The Committee discussed the single bidder scenario, and why other
bidders had withdrawn from the process. It was suggested that
something might have been wrong with the tender, which should have
been reviewed and assessed at the time.
(d) The extent to which the Post Office could be liable for the costs incurred
by Fujitsu (the bidding party) was discussed. The CFO advised that
bidders had a 30 day window after cancellation of a contract to lodge an
objection and make a claim for costs, but that nothing had been received
from Fujitsu.
(e) The Committee agreed that it was important to learn from the issues
raised, and that there was a need for formality around the process and
documentation.
‘f) The Committee noted the paper and asked that a short summary of the
ACTION: CA management actions that were proposed to be taken in consequence of
the matters identified in the paper be submitted to the July Board,
following further discussion at the Executive Committee.
(g) The current relationship with Fujitsu was discussed. The CFO reported
that internal governance processes were being tightened up by the IT
Transformation Steering Group.
POLARC PROJECT SPARROW
14/23
(a) Belinda Crowe joined the meeting.
(b) The Committee received a report on lessons learned from the handling of
the commissioning of the Second Sight investigation into Horizon and
subsequent events.
(c) It was noted that there was a need for a formal protocol for enterprise
wide response to enable the Business to respond quickly and effectively
to any crisis, high risk or high profile issue. The Committee also
discussed whether there was a need for an identified in-house team ready
to deal with such issues.
(d) It was agreed that establishing such a team (or teams) would be sensible
action, and that appropriate oversight by the CEO and/or the Board was
important. The Committee also suggested that scenario planning should
be considered, and a virtual crisis management team and support
(lawyers, accountants, internal and external resources) be put together.
{e) Chris Aujard was asked to raise the matter at the Executive Committee,
with a view to bringing a recommendation to the Board in due course. The
Committee asked that the matter be considered as quickly as possible
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ACTION: CA and a team assembled and leader identified as soon as possible.
(f) IThe Committee noted the report.
(g) Belinda Crowe left the meeting.
Irrelevant
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POLARG ANY OTHER BUSINESS
14126
(a) Malcolm Zack reported that the [T Risk Advisory work on engaging third
parties by PWC was almost complete, and would be considered initially
by the Transformation Committee before being submitted to the
Committee.
POLARC DATE OF NEXT MEETING
14/27
The date of the next meeting is 10 November 2014 12.00 — 14.00.
POLARG CLOSE
14128
There being no further business, the meeting was declared closed.
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