05/2010
Agency Changes Communiqué (ACC)
A
a
To: Contract Advisors CC: Rod Ismay
Network Support Admin Teams Keith Woollard
Heads of Business Development Doug Brown
Senior Account Managers Keith Rann
BDMs John M Scott
Agency Network Change Team Marianne Burgess
Distribution list
From: Gayle Peacock Date: Friday 5° March
2010
Network Efficiency Programme Manager
Subject: Branch Standards and Financial Consequences
Introduction and Purpose
The Branch Standards booklet and supporting contract amendment will be received by all
agency branches week commencing 8" March 2010. The documents will outline the standards
required to run a branch compliantly, securely and efficiently and also the financial and non-
financial consequences for not meeting the standards. The purpose of this ACC is to:
e explain the reasons for the launch of Branch Standards to the agency network,
e explain the rationale behind the inclusion of particular standards,
e outline the consequences for subpostmasters, franchisees and company operators for
not meeting the required Branch Standards,
identify the ownership of Branch Standards and the mechanism for any future changes
to the areas which are included or the consequences that apply.
This ACC should be used in conjunction with the current corrective action ACCs.
Background
The Network Efficiency Programme was established as one of the Forward:3toeleven
Programmes in 2008. The purpose of the Programme was to improve conformance and
compliance across a range of areas, with the aim of reducing costs associated with non-
conformance and non-compliance, reducing Regulatory risk, protecting our brand and more
importantly protecting our customers.
The Programme team worked with a number of key business stakeholders to understand how
the aims identified above could be achieved. It was agreed that the branch network needed to
be made aware of the business standards regarding conformance and compliance and the
implications on our customers, Post Office Ltd and themselves if the standards aren't met. The
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group also agreed that a management information system to highlight performance, a
consistent method of managing performance and the possibility of financial consequences for
not meeting some of the standards were key deliverables to achieving improved conformance
and compliance.
Scope
Whilst Branch Standards are relevant to all branches in the network, the initial scope of this
activity is to launch Branch Standards and the associated consequences within the agency
network, including those branches operated by multiple partners. WHSmith operated
branches are currently out of scope at this point in time, due to the nature of the contract that is
held with the company: however, this is something that will be launched in this part of the
network once all of the contractual complexities have been resolved. It is anticipated that a
phased approach will also be applied within the Crown network.
Branch Standards will apply to Franchisees, but a separate ACC will be circulated with the
relevant documentation.
Approach
The first step for the Programme was to agree with key stakeholders which standards of
compliance and conformance would be within scope of the project. A number of areas were
identified and then prioritised into four main categories:
e Requlatory or client risk — i.e. failure to comply may result in financial penalties to Post
Office Ltd either from Regulatory bodies or clients, legal action, product removal, brand
damage and loss of income
¢ Significant financial cost to Post Office Ltd —i.e. potential extra interest charges on
holding excess cash
e Resource or financial_impact on Post Office Ltd —i.e. the amount of resource required
to manage non-conformance and non-compliance, such as the issuing of Transaction
Corrections and losses incurred by breaches in security
e Brand damage — i.e. failure to follow guidelines may result in extra customer
complaints.
Once the areas had been agreed, the next step was to determine the consequences for not
following procedures. It was identified that the majority of areas within Branch Standards could
be managed within the existing corrective action process for subpostmasters, franchisees and
company operators.
However, it was decided that financial consequences should be introduced for areas which
have the biggest financial impact on or pose the greatest Regulatory risk to Post Office Ltd and
customers. The purpose was not to generate income but to encourage conformance and
compliance. Following the approval to proceed by the Executive Team, a number of proposals
were worked through with Post Office lawyers and an external Legal Team, Camerons.
McKenna. This was to ensure that Post Office Ltd could demonstrate that the financial
consequences being passed to subpostmasters, franchisees and company operators were
either the equivalent to or less than the costs actually incurred. Once the proposals had been
approved by legal, the contractual amendments were drafted to facilitate the implementation of
the financial consequences.
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The proposals for the financial consequences were signed off by the Risk and Compliance
Committee chaired by Alan Cook, and the Network Conformance Executive Team sub-group
chaired by Paula Vennells. The business case requesting funding for the resource to manage
Network Conformance activity was agreed by the Post Office Investment Committee in July
2009.The Communications Team worked with the lawyers to produce the supporting
communications and contractual change, which have been branded Branch Standards.
Discussions have been held with the National Federation of Subpostmasters throughout the
process. However, whilst they are supportive of tackling worst offenders within the network,
they are not supportive of communicating Branch Standards to the whole agency network.
Process
All agency branches will receive the following Branch Standards booklet, which is designed to
act as a reminder of instructions that have been previously communicated. This is not a
replacement for existing operating procedures.
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The following covering letter and contract change will be sent to all individual subpostmasters.
ae, ei
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Multiple partner operated branches will receive a copy of the Branch Standards booklet along
with a different covering letter attached below.
hae,
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Multiple partners will receive a copy of the Branch Standards booklet, a copy of the contractual
change and a different covering letter attached below.
Dror i
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Ascorecard has been produced for each branch and shows the performance against each of
the standards. This will show the performance to date and will be received on a monthly basis.
Current corrective action processes will be followed where subpostmasters, franchisees or
company operators have failed to meet Branch Standards. The following financial
consequences will also apply:
«If branches fail to reach the required Overnight Cash Holding declaration standards,
including those for ATM, despite remote intervention and a visit is required by the
Network Support Field Team to re-train them, the subpostmaster, franchisee or
company operator will be charged for the cost of the visit.
e The principle above will also apply to branches that fail to complete any Regulatory
Compliance training by the required date.
e There will be a £41.50 charge per missing Motor Vehicle Licence discs.
e Remuneration will not be paid for non-compliant bureau de change transactions. This
change was introduced in May 2009 and has now been included within the Network
Conformance Activity.
With the exception of with-holding remuneration for non-compliant bureau de change
transactions, the practice of which is already established, financial consequences will
apply from the 1% June 2010.
The process for managing performance against Branch Standards will be co-ordinated
and managed by the Network Conformance Team that works to the Network Performance
Manager within Network Support. The team will be responsible for:
e issuing the performance scorecard to branches,
e undertaking remote intervention,
* arranging for members of the Network Support Field Team to visit required
branches,
® arranging deductions for financial consequences from remuneration,
e resolving queries regarding performance, including disputes about deductions from
remuneration,
« working with the Conformance Contracts Advisors to ensure that a consistent
approach to managing performance is applied,
e informing the relevant network teams to inform them of action that is being taken
against branches that they have a relationship with.
The Branch Standards booklet and future decisions about which standards need to be
included and the relevant consequences will be owned by the Network Performance
Manager.
New agents: actions for HRSC.
It is important that new agents, on appointment, receive a complete set of the documents
described above. To ensure that happens, HRSC should take steps to ensure that the
contractual change document and accompanying letter / booklet are sent to new agents
along with the main contract and any other appropriate contract variations for that contract
type.
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Contacts
Gayle Peacock — Network Effici
Gayle.a.laverick I
Appendices
Appendix A- Questions and Answers
The following Questions and Answers have been provided to the Network Business
Support Centre and the Human Resources Centre.
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Appendix B — Key Contributors
The following people have provided input to the Branch Standards Communications.
a)
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