POLB(11)4"
POLB 11/18 - 22
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Royal Mail - Strictly Confidential
Post Office Limited
(company no. 2154540)
Minutes of the meeting of the Board of Directors
held at 100 Victoria Embankment, London, EC4Y 0HQ on 27 May 2011
Present:
Donald Brydon
Matthew Lester
Mike Moores
Les Owen (by phone)
David Smith
Paula Vennells
In attendance:
Jon Millidge
Susan Crichton
POLB11/18
(a)
ACTION:
Jon Millidge
POLB11/19
(a)
(b)
(c)
Chairman, Royal Mail Holdings plc
Chief Finance Officer, Royal Mail Group
Finance Director, Post Office Ltd
Non Executive Director, Royal Mail Holdings ple
Chief Customer Officer, Royal Mail Group
Managing Director, Post Office Ltd
Company Secretary, Royal Mail Group
Company Secretary, Post Office Ltd
MATTERS ARISING
The Board was advised that the Group Chief Executive had been
briefed on the remit proposals for the Supply Chain employees. The
Board asked that the remit be circulated to the Royal Mail Holdings
Board for approval.
FINANCIAL STATEMENTS FOR 2010-11 POLB(11)19
The Board reviewed the draft financial statements for 2010-11 and
the covering paper produced by Mike Moores. The Board noted
that:
i. Asa legal entity within the Group structure the Company
had to produce audited financial statements and its results
would be included within the Group consolidated financial
statements; :
ii, Post Office Ltd’s statutory financial statements would be
signed at the same time or within a few days of the Group
financial statements;
iii. There had been no new accounting standards affecting the
presentation of the financial statements nor any change in
accounting policy;
the Board considered the review of the going concern position
outlined in Annex B of the paper. The Board agreed that the
approval of the State Aid submission given on 23 March 2011 had
improved the going concern position of Post Office-Ltd and that the
Company was in a position to meet its liabilities as they fell due for
the foreseeable future. The Board noted that the continuation of this
position would depend upon the state aid process for the working
capital facility, the equity funding and the Network Subsidy Payment
for 2012/13 to 2014/15;
The Board noted that the Royal Mail Group Board had not yet
POLB11/20
(d)
(e)
()
(a)
(b)
(c)
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concluded on the going concern status of the Group and it was not
therefore possible to conclude.that Post Office Ltd was a going
concern. The Board agreed; however, that subject to the Group
concluding that it was a going concern, the financial position as
presented supported the Board in concluding that Post Office Ltd
was a'going concern;
Mike Moores and Paula Vennells confirmed that the letter of
representation was an accurate reflection of the position and
assured the Board that it could rely upon their assurance. The
Board thanked them for their confirmation and noted that it relied
upon that in approving the letter. The Board further noted that the
Royal Mail Group Audit and Risk committee had considered the
effectiveness of the controls relating to the financial statements.
Further the Group CEO and POL acting Chairman had met'with the
auditors to discuss the issues arising and accordingly the board
confirmed that it was satisfied that the disclosure relating to controls
in the company’s financial statements was adequate. The Board
noted that the next agenda item covered one such issue;
the Board noted the summary of Audit Differences in Annex C and
concluded that they were not material;
the Board noted the undertakings and statements in Annex D.
Subject to the Royal Mail Group Board concluding that the Group
Was a going concern, the Board approved the financial statements
and appointed a sub committee of any two directors of Donald
Brydon, Matthew Lester and Paula Vennells to sign off the final
statement. All directors were invited to submit any final comments
to Mike Moores who would also ensure that there Were no
inappropriate differences between the Group and Post Office
statements.
FINANCIAL AUDIT (IT) COMMENTARY
The Board noted that the auditors had raised concerns about the IT
change management processes, access controls, the Fujitsu
managed service and POL’s oversight and assurance of key
activities. Lesley Sewell had been invited to advise the Board on the
steps taken to improve the controls;
the main issue. of concern centred around the inability to use a
SAS70 standard for evidencing that the controls are in place. These
had two main concerns for the Board:
i. Without the SAS70 controls it was difficult to evidence that
the controls were in place. Such a protocol was standard in
all major organisations operating in North America and it
was difficult to conceive that an organisation as large as
Fujitsu would not have such an arrangement;
ii. The cost of audit would increase if there were no such
arrangements in place;
the Board noted that activity had already commenced to remedy the
issues identified by Ernst & Young, including establishing a POL IT
POLB11/21
POLB11/22
(a)
(b)
(c)
(a)
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Board. The Board agreed that the end result should be that either
SAS70 applies. or a set of controls is established that Ernst & Young
are happy with.
ANY OTHER BUSINESS
The Board noted that the State Aid application for funding from
2012-13 to 2014-15 had been pre-notified to the European
Commission. There was some concern about the Commission's
view that it may be covered by the Postal Service Directive;
the Chairman advised the Board that good progress was being
made with a preferred candidate for the role of POL Chairman. He
also advised that a meeting had been held internally and with the
Shareholder Executive.on progressing new governance
arrangements;
the Chairman noted that this was the last Board that Mike Moores
was scheduled to attend and he expressed his gratitude and that of
the Company for Mike’s service to Post Office Ltd and the wider
Group.
CLOSE
There being no other business, the Chairman closed the meeting.