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Former Subpostmaster
End To End Debt Review
@
STRICTLY CONFIDENTIAL
Ps)
Author : Andy Greening
V0.5 December 2009
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Introduction
As part of the Back Office Efficiency Programme a project was initiated in July 2009
to review and document all end to end former Subpostmaster debt activities and
processes within Post Office Limited.
Objectives
= To reduce future debt.
= To improve debt recovery processes.
= To acquire consensus across key stakeholders on the short, medium and
longer term initiatives to both reduce future debt and improve debt recovery
processes.
Scope
= Subpostmasters that are no longer agents with the Post Office, but still owe
monies in the form of debt to Post Office Limited.
= All key stakeholders involved in the e2e debt processes including; Product
and Branch Accounting (P&BA), Contract Advisors, Network Field Support,
Security and Investigation, Human Resources, Network, and Legal Services.
Key Deliverables
(1) High level process maps including current, and future state where applicable.
(2) Project report including current state, issues, and recommendations.
(3) A ‘Results Chain’ identifying potential initiatives and their link to desired strategic
outcomes.
Approach & Methodology
The review involved a series of interviews / discussions and workshops with the
stakeholders shown in Appendix 1.
A list of the technical terms pertinent to this review is shown in Appendix 2.
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Management Summary
This study is part of a much wider review which includes current and former
Subpostmaster debt, Multiple Partner debt, and Crown Office losses. The focus of
this review is former Subpostmaster debt. The objectives of this review are to reduce
future debt, and improve debt recovery processes.
At the end of September 2009 there were 831 debt cases relating to former
Subpostmasters, with an approximate value of £11.4M. The top 20% of cases
represented 88% of the total debt value.
There is no ‘one’ single action or individual that will reverse this position. However,
with a combination of existing business wide initiatives and the deployment of the 46
recommendations made in this review the Post Office can make a real difference to
its bottom line. This review has identified savings of approximately £900K per annum
and one off benefits of approximately £5.1M.
The review identified a large number of diverse and complex processes involving
numerous stakeholders within the Post Office. These included Contract
Management, Human Resources, Network Field Support (formerly Audit), Security
and Investigation, and Finance. There is also additional legal support from within
Royal Mail Group. With the exception of Human Resources and third party solicitors,
46 individuals are directly involved in the recovery of former Subpostmaster debt.
A conservative estimate of debt recovery costs is approximately £1.6M per annum.
No attempt is made to recover these costs as part of the debt recovery process. The
full year forecast for 2009/10 is debt recovery in the region of £3.4M (i.e. for every £1
cost of debt recovery, £2.12 is recovered from former Subpostmasters).
This review has made a number of recommendations to improve the current level of
legal support. Without improvement insourcing legal support may be considered as a
viable alternative.
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There is wide recognition and agreement that all stakeholders currently involved in
the existing process will play an active part in future activities to both reduce future
debt and improve debt recovery processes.
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Current Business Process Documentation
The review identified a large number of stakeholders and activities.
1. Network Field Support Team, (formerly Audit) Network, Post Office Limited
The primary role of the Network Field Support Team is to prioritise, plan and conduct
both financial and compliance audits at Post Office branches. All ‘special requests’
to carry out audits are dealt with within 48 hours (e.g. Suspicious activities). A full
cash check and a check of all high value stock items must be carried out in the
presence of the Subpostmaster. Additionally, all suspense accounts must be
cleared. All findings and discrepancies are reported in a timely fashion to the
relevant stakeholder groups (i.e. Security Team, Contract Advisors and Product and
Branch Accounting). The Contract Advisor is notified of all discrepancies. All
discrepancies >£10K are escalated to the National Contracts Manager, and >£25K,
to the Head of Business Development respectively. The lead auditor will also seek
proposals from the Subpostmaster to make good the discrepancy.
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2. Product and Branch Accounting, Finance Team, Post Office Limited
The primary role of Product and Branch Accounting is the recovery of former
Subpostmaster debt. Activities include managing open items in Post Office Limited’s
Finance System (e.g. Transaction Corrections, surpluses and losses), case
management, viability of debt recovery, write off authority, processing repayment of
debt, and production of monthly debt reports. This function also liaises with a
number of key stakeholders including Security and Investigation, Legal Services and
Contract Advisors.
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3. Crime Risk, (formerly Casework Team), Security Team, Post Office Limited
The Casework Team’s primary role is recording and reporting cases under
investigation. This process involves recording and tracking all incidents /
discrepancies at Post Office branches that may result in some form of
Subpostmaster debt. A separate strand involves monitoring the investigation and
recovery of monies from Subpostmasters in the event of burglaries, robberies and
theft (i.e. The Subpostmaster’s culpability). The Security Team recommends the
level of culpability, albeit, the Contract Advisor role has the final decision. However,
it is very rare for culpability to result in former Subpostmaster debt.
2) ) ) (=I
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4. Investigation Team, Security Team, Post Office Limited
The primary role of the Investigation Team is to investigate suspicious and known
criminal activity, and pursue these matters following advice from Royal Mail’s
Criminal Law Team. A key part of this process is identifying weaknesses and / or
other failures in business process, that helps maximise recovery and mitigate against
subsequent loss (e.g. The Subpostmaster failed to retain transaction documentation
or failed to record the customer's identification). Another major part of the
investigation process is gathering facts and further evidence, interviewing offenders,
preparing the ‘Committal Bundle’ for subsequent legal proceedings, and attending
court hearings to name but a few.
a) fe
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5. Financial Investigation Unit, Security Team, Post Office Limited
The primary role of the Financial Investigation Unit is to investigate criminal activities
and help recover Subpostmaster debt. All Financial Investigators are accredited
under the ‘The Proceeds of Crime Act 2002 (POCA)’ (i.e. An Act which provides for
civil recovery of the proceeds from crime).
These positions are very specialist roles and are heavily involved from a legal
perspective (i.e. Assessing the likelihood of offenders dissipating of assets, issuing
restraint orders to secure assets for subsequent debt recovery and attending Court
Hearings and Sentencing to name but a few).
je! 2)
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6. Fraud Risk Team, Security Team, Post Office Limited
The 'Fraud Risk Team’ also plays a key role within the wider Security Team. These
include ‘Fraud Programmes' that mitigate against subsequent loss / crime.
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7. Legal Services, Civil law, Royal Mail Group
The primary role of Legal Services is to engage 3” party solicitors on behalf of the
Former Agents Debt Team within Product and Branch Accounting (i.e. To recover
monies for debt cases which require specialist civil law knowledge). This function
also employs Private Detective Agencies to conduct asset checks of former
Subpostmasters (i.e. To ascertain whether former Subpostmasters have assets
which can be drawn against for subsequent debt recovery). Other activities include
dealing with requests for information from 3" party solicitors (e.g. Gathering further
evidence) and tracking legal costs. In summary, Legal Services is an extension to
Product and Branch Accounting, providing asset checks and specialist legal support
and advice. All key processes and interfaces are contained in the Product and
Branch Accounting process documentation detailed earlier in this report.
8. Legal Services, Criminal law, Royal Mail Group
The primary role of the Criminal Law Team is to engage 3° party solicitors where
legal proceedings are necessary to prosecute former Subpostmasters for criminal
activity. The Criminal Law Team work very closely and support the Security Team.
They provide legal advice and assist with the preparation of the ‘Committal Bundle’.
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9. Contract Management, Network, Post Office Limited
The Contract Advisor role primarily deals with the appointment and termination of all
Subpostmaster contracts. There are currently 10 Contract Advisors nationwide (See
Appendix 3). All branches have a dedicated Contract Advisor. The Finance Team
supports the appointment process through Agency Business Plans, as part of the
Agent Recruitment Process.
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The Contract Advisor is empowered to suspend and / or terminate a
Subpostmaster’s contract, particularly where there is evidence of debt. The Network
Field Support Team (i.e. Formerly Audit) will notify Contract Advisors of all branch
discrepancies. All Subpostmasters who are reinstated must repay debt. Where a
Subpostmaster’s contract is terminated and there are no monies available to repay
the debt, the Contract Advisor will notify the Former Agent’s Debt Team. All Contract
Advisors have objectives to carry out 46 cash checks (i.e. 460 asset checks per
annum). In the event of a robbery or burglary (See Casework Team and Culpability
processes above), the Contract Advisor role will decide the level of culpability and
subsequent repayment terms.
The Contract Advisor role also intervenes when there are branch transfers (i.e. They
will not allow branch transfers to happen where there is evidence of debt).
a)
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10. Human Resource (HR)
The primary role of HR is to support the appointment process and set up deductions
from remuneration for the subsequent repayment of debt. No process doucmentation
has been produced as part of this review (i.e. largely because it was considered non
core from a debt perspective).
11. Stakeholders and Activities.
The process map below shows a high level overview of all stakeholders and their
activities within the end to end former Subpostmaster debt recovery processes.
mt)
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12. Results Chain
A ‘Results Chain’ or ‘Benefits Realisation’ is a technique which essentially helps
identify business conditions and initiatives that are required to achieve desired
outcomes. It provides an extensive set of tools to help organisations:
Establish what actions are required to deliver certain outcomes.
Help identify financial and non-financial benefits.
Delivers programmes of work to deliver the benefits.
It provides a framework for measuring the delivery of benefits.
Shows a clear link between deliverables and benefits.
It builds consensus within and across stakeholder groups.
NQaR ONS
Identifies risks early in the process and facilitate management as part of the
framework.
The ‘Results Chain’ attached below provides a very comprehensive illustration and
road map across the wider debt reviews (i.e. Including Current and former
Subpostmaster debt, Multiple Partners and some link with Crown Offices losses).
a
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Please note due to the size of the ‘Results Chain’, specialist printing equipment is required.
All requests for hard copy prints should be made to Andy Greening.
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13. Workshop Outputs
A number of Senior Managers attended a debt workshop on the 21% September
2009. The primary objective was to gain consensus to (1) Identify preventative
measures to reduce future debt and losses and (2) Improve debt recovery
processes.
Outputs comprised of the following:
1. An 'agreed' decision making criteria was adopted to help prioritise the initiatives in
order of importance.
2. All initiatives were ranked by order of importance.
3. An acceptance that all the initiatives were split into four categories:
(i) Existing projects with a direct or indirect link to reducing debt.
(ii) ‘Quick Wins' or ‘Just Do It’.
(iii) *Strategic initiatives.
(
iv) Low priorities.
# Agreement that the strategic initiatives would require further feasibility to allow
individuals to commit additional resources.
Agreement that all stakeholders will play an active part in future activities to both
reduce future debt and improve debt recovery processes.
Existing Projects
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Quick Wins / Just Do It
a)
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Strategic Initiatives
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Low Priorities
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Current Business Process Weaknesses
1. Network Field Support Team, (formerly Audit) Network, Post Office Limited
The audit process was fairly robust and there were limited improvement
opportunities from a debt perspective. The only improvement opportunity highlighted
during the review was to provide as much evidence and clarity regarding the
discrepancy as possible. This information is essential where legal proceedings are
necessary to recovery debts.
2. Product and Branch Accounting, Finance Team, Post Office Limited
The Former Subpostmaster Debt Team within Product and Branch Accounting plays
a pivotal role in the recovery of former Subpostmaster debt. Although, the Former
Subpostmaster Debt Recovery Team recovers debt directly from former
Subpostmasters, there are also a number of other key stakeholders involved in the
debt recovery process. A key part of this team’s responsibilities involves tracking
and coordinating efforts with these other stakeholders. Stakeholders include
Contract Advisors, Security and Investigation, and Legal Services. The interface with
legal services tends to deal with all civil legal proceedings. All stakeholders recover
monies either directly or indirectly via the legal system.
At the end of September ’09, the Former Subpostmaster Debt Recovery Team was
directly involved in the recovery of monies for 535 (or 64%) of all debt recovery
cases (i.e. 535 out of 831) (See Appendices 4 and 17). The total value of these
cases was approximately £2.2M with an average value of approx. £4.1K per case.
The total debt on hand at period 6 2009/10 was approximately £11.4M. The top 20%
(167 cases from 831) by value accounted for 88% of the total debt (See Appendix
5). The top 20 cases by value represented approximately 30% of the total debt.
Approximately, 28% of debt is greater than 2% years old. (See Appendix 16)
The current headcount comprises of 8 people with staff costs of approximately
£260K per annum (See Appendix 6). The amount recovered during 2009/10 YTD to
P6 was £1.7M. The full year forecast is £3.4M.
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The review highlighted that there was little information provided by the Network Field
Support Team to pinpoint the ‘root causes’ of discrepancies in the event of a branch
closure. It was also apparent that Transaction Corrections that had been raised by
other teams within Product and Branch Accounting, often several weeks or months
after the initial transaction, lacked supporting evidence and information to help
recover subsequent debt.
All new cases currently require a ‘hard copy’ facing sheet. This is currently manually
handwritten and includes branch details, Subpostmaster name, and discrepancy
details to name but a few. Additionally, all new case details are recorded in Microsoft
Excel (e.g. Account number, FAD code, former Subpostmaster’s name, value of
debt, action taken). There are a number of workbooks used to record this
information. All cases and workloads are recorded and allocated on an ‘out of date’
organisation structure basis (i.e. Recorded by region).
Higher value debt cases are generally given a higher priority (i.e. On the basis there
is more potential for recovery). However, lower value cases (e.g. £100) are also
pursued either by a telephone call or via the standard UK postal system (i.e. Using
1 Class). The decision making process as to whether it is economically viable to
proceed with debt recovery is repeated at various stages during the investigation.
However, there is currently no form of weighting in place to review the likelihood of
debt recovery (See Appendix 7).
Initial contact with former Subpostmasters to recover monies is made via debt
recovery correspondence. After the thrid attempt without success, a telephone call is
made between the hours of 09:00am-17:00pm. This part of the process is supported
by a telephone script which was provided by the Civil Legal Services Team within
Post Office Limited. However, it is important to note that often, it is more common
practice to contact debtors outside the more traditional working hours of 09:00am —
17:00pm (i.e. More likely to make contact with offenders).
Other forms of written debt collection correspondence have also been reviewed and
improved during this review. One of the debt collection letters is no longer issued as
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part of this process. The third letter in the process or ‘letter before action’ is now
issued by the Former Subpostmaster Debt Recovery Team and not Legal Services.
A letter before action is a letter sent to the offender informing them that unless they
take certain steps (e.g. Repay a debt) then legal proceedings will commence. The
legal tone and the firm stance are retained to encourage a more speedy recovery of
monies. Although, it is too early to review the effectiveness, lead times have been
reduced from 56 days to 42 days. These changes are seen as positive steps.
A statement showing the outstanding debt is produced directly from the Post Office
Limited Finance System. The ‘hard copy’ statement is subsequently forwarded to
the former Subpostmaster with a covering letter. The statement was viewed as very
unprofessional and did not easily convey the outstanding debt.
Typically where the fourth attempt to contact the offender is unsuccessful, a request
is made to Legal Services to request a full trace. Tracing Agents specialise in tracing
debtors and usually operate on a no trace, no fee basis. Post Office Limited is
currently charged approximately £150.00 plus VAT per search. The results of
searches provide authentic forwarding addresses, allowing Product and Branch
Accounting to contact the former Subpostmaster (See Appendix 8) or piece of mind
that all debt correspondence is being forwarded onto the legitimate address). It was
not possible to identify how many cases involved a Tracing Agent. This information
is not readily available.
There are a number of tailored debt recovery and tracing tools available on the open
market that can help locate former employees, and manage effective debt collection
strategies in a much more timely and cost effective manner. However, further
investigation would be required to mitigate against liability to Post Office Limited for
using and sharing this type of information (i.e. largely due to data protection and
other sensitivity reasons) (See Appendix 9). The Security and Investigation Team
are currently exploring opportunities to carry out financial checks both during the
recruitment stage of Subpostmasters and on an ongoing basis. However, there are a
number of data protection and legal ramifications to address.
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It is not currently possible to identify with any degree of accuracy how much debt
was recovered by each stakeholder involved in the existing debt recovery process.
(e.g. Product and Branch Accounting includes recoveries made by both Contract
Advisors and the Civil Law Team). Similarly, Security and Investigation is grouped
together with the Criminal Law Team. There are also three separate functions within
the Security Team. The total amount recovered during 2008/09 was approximately
£3.1M (20%) of the total debt. The amount recovered at the end of September 2009
was approximately £1.7M (12.8%) of the total debt, an improvement of approximately
5% compared to last year (See Appendix 10). Targeted recoveries for 2009/10 are
approximately £3.42M (See appendix 15).
A further issue is that the costs increase as correspondence is transferred between
Product and Branch Accounting / Legal Services and 3” party solicitors. There is no
standard check list of information required by 3” party solicitors which are required
to take subsequent legal proceedings.
There are currently a number of ways in which former Subpostmasters can repay
debts owed to Post Office Limited (See Appendix 11). There is no information
readily available to show the split of repayment by repayment type. As a
consequence, it is difficult to understand the costs associated with repayment of debt
(i.e. Repayment of debt using credit cards is very expensive compared with standing
orders and debit card repayment methods). Similarly, there is no recovery of debt
repayment costs, where credit card payments represent a % of the total debt value.
Where the former Subpostmaster doesn’t make good the debt (i.e. At quite a late
stage in the process — Step 38) it is sometimes necessary to initiate alternative
means of debt recovery (e.g. Placing a charge against the offender’s property and /
or an attachment of their earnings). At this late stage in the process there is often a
requirement to engage a Tracing Agent to complete a more thorough asset check of
the defendant (i.e. Assets that may be used to recover monies). However, by the
time these checks are complete, significant time and resource has already been
committed by both Product and Branch Accounting and Legal Services. This process
is often mirrored by the Security and Investigation Team.
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Communication with stakeholders and ‘real time’ visibility of all former
Subpostmaster debt cases was less than adequate (e.g. Where Subpostmasters are
suspended, but reinstated at a later date, it is important that Contract Advisors
advise Product and Branch Accounting of their intentions). This provides clarity as to
what corrective action(s) is necessary. A further example is where the Security and
Investigation Team are already prosecuting a former Subpostmaster but Product and
Branch Accounting have not been made aware of the situation. Additionally, with
such a large number of stakeholders involved in the recovery of former
Subpostmaster debts there is no ‘real time’ visibility or ‘coordination’ throughout the
lifecycle of a case (See Appendix 12). Although cases were reviewed intermittently
there was no formal review date.
The write-off authority levels are fairly transparent (See Appendix 13). The decision
making process to write-off debt is usually where the cost of recovery outweighs the
debt (e.g. Very high legal costs) and / or the debt is unrecoverable (e.g. Insufficient
evidence, legalities such as ‘Time Spent’, or where there are no assets available to
recover monies). It is important to note that every case is unique, and therefore all
cases are assessed on a Case by case basis.
There is a challenge as to whether the organisation should attempt to sell on debts,
specifically where the costs outweigh the benefits, or the debt is unrecoverable by
PO Ltd. Typically, 3° party debt collection agencies charge a % of the debt
recovered.
The review identified that there was little ‘root cause’ analysis to aid decision making
(i.e. To reduce debt and improve debt recovery processes). The ‘root causes’ are
currently split into four discreet categories. (Suspensions, resignations, Network
Change Programme and Other) (See Appendix 14). These were considered more
symptomatic and not in the true sense ‘root cause’s.
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A further issue is the absence of having a consolidated view of all Subpostmaster
debts. (e.g. Non transaction debt e.g. nil repayment for bullet proof counter screens
or property debt). This project didn’t have time to review this aspect in any detail.
A ‘Witness Statement’ is a statement that summarises the evidence that a witness
will give at trial (i.e. Specific information relating to an offence committed by a former
Subpostmaster). In contrast, a ‘Product Statement’ details the procedural aspects of
how specific transactions should be completed (e.g. Operation Manuals). The
‘Witness Statement’ usually highlights the disparity between the procedural aspects
and what ‘actually’ happened (i.e. Offence). Witness and Product Statements are an
integral part of the legal process (See example below). The review identified a
number of key issues.
Ly
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There is a significant resource commitment required by the witness and 3” party
solicitors to complete these essential statements. Seldom do external solicitors
understand the nature of Post Office Limited’s business and therefore there are often
large numbers of follow-up questions and clarity required. As a consequence, there
are much longer lead times and higher costs. It is not currently possible to quantify
all the associated costs but there are some individual cases where these have costs
have exceeded £30K. Additionally, although most debt cases are unique, the
process largely remains the same. No ‘Witness’ and ‘Product Statements’ are
currently retained for subsequent reuse.
A further issue identified during the review is estimating the costs of taking cases to
court. There is some concern that existing thrid party solicitors are only motivated to
deal with less challenging cases and will attach higher costs to those more complex
(e.g. Bond Pierce estimated an £89K cost versus a £45K debt for the Wednesbury
case), often resulting in writing off the debt. There is little existing support to help
challenge legal costs.
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A further observation is the provision for bad debts. A bad debt provision is usually
the extent to which an organisation expects to write off in its accounts. The provision
for bad debts at the end of September was 36 times or £11.1M overstated (See
Appendix 32) and even exceeds the current level of debt. The current calculation
methodology does not take into account that the Post Office employs 57 employees
with overall debt recovery costs in the region of £1.6M.
There were 170 less cases between April 09 and the end of October '09 (i.e.
approximately 18%). Staffing levels have remained constant with 7 full time
employees (See appendix 28 ) Although, the figures indicate staffing levels are a
little on the high side (i.e. an additional 1.25 heads) it is recommended that this level
is maintained until the end of March 2010.
There are two key activities that involves processing raw data derived from the Post
Office Finance System (POLFS). These are detailed below.
1. Management Information
A comprehensive pack of information is produced each month. This is produced
immediately following the close of the financial accounting period (See example
below).
s)
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The objective is to update the ‘green’ shaded cells with the appropriate data
downloaded from POLFS. There are 5 separate downloads to acquire the salient
information.
The 1% download provides a ‘snapshot’ of all former Subpostmaster debt on hand, at
the close of each financial accounting period. There are 2 separate downloads. The
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14‘ download shows all debt up to, and including the 2004/2005 accounting year.
However, it is important to note that the 1* download does include repayments after
this time (i.e. denoted by types DZ and DG in the attachment below). This essentially
contains all the information that was migrated from the previous Counter Business
Database (CBDB) into POLFS (i.e. essentially stored in a separate table) (See
example below).
a)
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A further download includes all debt post 2004/2005 accounting year, right up to the
present day. An aggregate of the 2 downloads represents all former Subpostmaster
debt. The total debt is manually input into the monthly reporting pack. Clearly, all
manual handling is susceptible to error, rework and incorrect decision making.
The 2™ set of downloads separate aged debt by financial accounting year (i.e. a
separate download is required for each financial accounting year). A routine has
been created in POLFS to make light work of this activity. The information is
subsequently manually input into the monthly reporting pack. (See examples
below).
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The 3 download includes those debts that have been written off and includes write
backs. The latter refers to credits i.e. where debts have previously been written off,
but the business has subsequently received part or full repayment of the debt. The
column headed ‘Assign’ (see attachment below) is used to show the year the debt
was written off. This is manually input but makes it much easier to separate write offs
by financial accounting year. As part of this review this element has been fully
automated.
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a)
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4. The 4" download involves retrieving discrepancies that have only recently come to
light (i.e. often referred to as the ‘TP6’ process). These discrepancies refer to earlier
transactions (i.e. late receipt of errors). The information is tabulated in the following
format.
Over 1 year old
7 - 12 month old
4-6 month old
3 month old
2 month old
Current month
=)
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This is perhaps the most resource hungry aspect. The current process involves
manually numbering each record (e.g. anything with a 1 would denote the current
month, anything with a 2 would denote the discrepancy was 2 months old and so on).
An example of the type of ‘rule’ and Microsoft Excel formula required to automate
this part of the process was presented to the team leader within the Former
Subpostmaster Debt Team as part of this review.
In summary, it is estimated that production of the monthly reporting pack takes
approximately 3-4 hours per month. Clearly, there are further opportunities to
automate existing data flows and reduce lead times while at the same time also
improving accuracy levels.
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The reconciliation process involves the reconciliation of all the debts currently on
hand (i.e. those cases managed by each administrative / debt collection clerk) with
the debt on hand figure within POLFS. The current process is very efficent and only
takes approximately 5 minutes to complete. However, it is not without complexity.
The existing process has been automated using fairly complex functionality within
Microsoft Excel and there is an over reliance on one key individual within the team.
There are also improvement opportunities to streamline the process further by
acquiring a common denominator that can match cases on hand by individual clerk
with that held in POLFS. It has already been suggested that the individual who
currently owns this part of the process, contacts the Post Office Helpline to discuss
possibilities of using 1 or more of the existing redundant fields (i.e. they could
manually input this common denominator each time a new case is created). This will
simplify the process.
A further risk is that there is no business process documentation to explain the
reconciliation process. This would help mitigate against some of the over reliance on
one key individual within the team. The worse case scenario is that each clerk
completes a manual reconciliation. Historically, this has taken 3-5 days per team
member.
A further point to note is that there are 'text' entries on most of the downloads. The
review did not conclude whether this was really an issue, apart from it appears that
these entries are a language understood, only, by the Former Agent Debt Team.
More detail regarding text entries is held on each case file.
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3. Crime Risk, (formerly Casework Team), Security Team, Post Office Limited
The Crime Risk Team dealt with approximately 190 former Subpostmaster debt
cases during 2008/09 with a value of approximately £3.8M. At the end of September
2009/10 the team had dealt with 80 cases with a value of approximately £1.3M this
financial year. Staff costs are approximately £58.3K per annum (See Appendix 18).
The key issue with this process is that a large proportion of the work involves
recording and updating fundamental case information. Approximately 38% of the
process time is spent updating electronic records. The remaining time is largely
spent receiving, coordinating, and communicating information between the various
stakeholders. A Multi-User Casework and / or Workflow System would allow
individuals responsible for cases to update the information themselves.
However, it is important to observe that the existing recording systems in Microsoft
Excel are also used to facilitate debt management in others areas of the business.
(e.g. Supply Chain)
4. Investigation Team, Security Team, Post Office Limited
The Investigation Team dealt with approximately 191 former Subpostmaster debt
cases during 2008/09 with an approximate value of £3.9M. Total recoveries for the
same period were approximately £1.8M. The position at the end of September 2009
showed 83 cases with a value of approximately £1.4M. Recoveries were
approximately £435K (See Appendix 19).
A key issue highlighted by this review was the removal of audio transcription
services (i.e. Manually typed taped interview manuscripts used for subsequent legal
proceedings). This service was removed within the past three months. A separate
review led by the Security Team highlighted risks of approximately £6.8K of
additional resource costs to manually type tape recordings and a reduction in
recoveries in the region of £74.5K per annum (i.e. lost time spent recovering former
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Subpostmaster debts). However, during this review these audio transmission
services have subsequently been re-instated. Again, this is seen as a positive step.
A further issue centred upon efficiencies acquiring Witness Statements. A
prerequisite of the legal framework is that all statements must be signed and typed
(i.e. Where legal proceedings are required). Historically, Witness Statements were
acquired via face to face meetings with witnesses, which are still viewed as the
preferred method. However, with the absence of portable printers this often involved
a significant travelling commitment to return to the office to print the statement, only
to subsequently revisit the witness to acquire their agreement and signature (i.e. To
ensure it was a true representation of events). The majority of Witness Statements
are now constructed via the telephone and hard copy signatures are acquired via the
UK postal system. There is no measurement in place to review the effectiveness,
albeit, with pressures to reduce travelling expenditure, this seemed a more efficient
option.
There were no further issues as part of this review.
5. Financial Investigation Unit, Security Team, Post Office Limited
The Financial Investigation Unit dealt with 42 debt cases during 2008/09 with a value
of £838.7K. Recoveries for the same period were approximately £863.1K (See
Appendix 20). However, it is important to note that recoveries are only an estimate,
based upon the actions taken by Financial Investigators and are not a true reflection
of the total amount recovered on an individual case basis. Also, it is not unusual for
recoveries to exceed the total amount of debt. This is because they also include
recovery of costs, and other extended benefits (i.e. Where Criminals have benefited
from a crime these monies are also recoverable). Staff costs are approximately
£170K per annum (See Appendix 20). Other costs include Land Registry searches
(i.e. Properties owned by offenders) which were approximately £2K during 2008/09
and £1.1K at the end of September 2009/10 (See appendix 20).
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The review also highlighted that acquiring a Certificate of Conviction may help with a
subsequent civil prosecution. In legal terms, this is a document which provides
tangible evidence that the defence has already been convicted of an indictable
offence. In many circumstances this is not required, albeit, where an application has
been made for compensation, and the legal system does not respond to this request,
because, for example, imprisonment is seen as a more appropriate sentence, or
those cases where the barrister may omit a request for compensation, or the
offender is not the Subpostmaster but an assistant, then a certificate of conviction is
often useful when making a civil prosecution (i.e. Where the defence has agreed
previous convictions then there is no further requirement to prove these in a court of
law).
All Financial Investigators are accredited through the National Policing Improvement
Agency (NPIA). The NPIA Proceeds of Crime Centre has statutory responsibility for
training, accrediting and monitoring financial investigators who work in various
organisations. The NPIA offers a comprehensive training portfolio, which upon
successful completion, empowers and equips individuals with a range of skills and
tools to conduct financial investigations under the Proceeds of Crime Act 2002 (See
WWW.npia.police.uk for further information) (See Appendix 21). No other teams
involved in the debt recovery process contain this specialist knowledge or toolkit to
help recover monies. Financial Investigators are also limited as to how they can
share this information with other parties. There is currently little or no understanding
of these limitations outside of the Financial Investigation Unit (e.g. There are ‘Open’
sources such as the Land Registry which can be shared with other parties. In
contrast, information derived from Her Majesty’s Revenue and Custom’s can only be
used and or shared in the context in which the application was made i.e. for a
criminal investigation). Other limitations that prohibit sharing information include
Data Protection and Freedom of Information legislation. They may conclude a case
by stating there are no identifiable assets associated with a specific individual, but
are not necessarily permitted to share more detailed information (See Appendix 22).
There are currently three accredited Financial Investigators within the Financial
Investigation Unit. To become fully accredited it costs approximately £4-£5K, with a
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lead time of approximately 12-18 months. Additionally, there are monthly
examinations to retain membership. There are currently no known succession plans
for this type of role.
The review also highlighted that there are no Accredited Financial Investigators
qualified to deal with Scottish or Northern Ireland law (i.e. There are different rules
and involvement with the courts). As a consequence, there is a reliance on the
Police Authorities to pursue Scottish and Northern Ireland cases on behalf of the
Post Office. However, the Police Authorities do not always see these cases as
important as their own, and therefore the lead times are likely to be much longer.
Also, where Police Authorities workloads are high, there may be a reluctance to deal
with certain cases. According to the Security and Investigation Team the Post Office
may also loose control of the process and be taken into a direction the Post Office
does not want to go, or which does not produce the best results (i.e. May not recover
all monies available). The position on the 18" November '09 showed that there were
105 cases (i.e. from approx. 831) with a value of approximately £1.3M.
Tracking down criminals, and seizing and confiscating former Subpostmaster’s
assets is further toolkit in the recovery of Subpostmaster debt. A Suspicious Activity
Report (or SAR) is a report regarding suspicious or potentially suspicious activity.
The purpose of the Suspicious Activity Report is to report known or suspected
violations of law or suspicious activity observed by financial institutions. In many
instances, SARs have been instrumental in enabling law enforcement. In short,
Suspicious Activity Reports made available by the financial services industry and
other business Sectors provide valuable intelligence. The Financial Investigation
Unit only has remote access to this database. There is also a general view that more
financial checks, both at appointment stage in the recruitment process and
subsequent ongoing checks will help reduce former Subpostmaster debts (i.e. Cases
dealt with by the Financial Investigation Unit).
The Joint Asset Recovery Database (JARD) records asset recovery information for
all law enforcement activity across the UK, and provides support to financial
investigators wishing to retrieve information. No recovery of monies (i.e. Repayment
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of debt) is permitted through the existing legal system unless specific details
pertinent to the case are recorded onto JARD. Money Web provides further
information providing access to a network of Accredited Financial Investigators in
working in other institutions (e.g. Banks). A key issue with the existing process is that
the Financial Investigation Unit only has remote access to these systems. As a
consequence, the only way of accessing these databases is by pre-arranging visits
to local and / or national Police Stations. This is clearly very inefficient and resource
hungry.
Approximately £10.7K was received as a result of ‘Extended Benefits’ during
2008/09 (i.e. Additional recovery of monies where former Subpostmasters had
benefited from their criminal activity e.g. Initial theft of £50K, but had subsequently
invested these monies in other forms of criminal activity to accumulate £100K i.e. A
£50K extended benefit). The amount of extended benefits received at the end of
September 2009/10 was approximately £18.6K (See appendix 29). This process is
often referred to as either the ‘Post Office Crime Agency (POCA) Incentivisation
Scheme’ or ‘Extended Benefits’. Monies are transferred to Post Office Limited by the
Home Office, the government department in charge of domestic affairs. Post Office
Limited is credited on a quarterly basis. All monies must be spent on initiatives that
mitigate against subsequent criminal activities. Strict guidelines as to how monies
can be spent are issued by the Home Office. The Financial Investigation Unit
subsequently advises the Home Office as to how monies have been spent. Examples
of how monies have been spent include Satellite Navigation Systems to help locate
offender’s premises, and Audio Transcript Services that are used to type taped
interview manuscripts used for subsequent legal proceedings).
The Accredited Financial Investigators play an instrumental role in the recovery of
former Subpostmaster debts. However, it is not clear from existing recording systems
whether further resource (i.e. Accredited Financial Investigators) would increase the
level of recoveries. The Financial Investigation Unit is currently targeted by
recovering 60% of the total loss of all closed cases. (e.g. A recovery of £60K from a
£100K loss). Similarly, it is very difficult to accurately attribute / apportion recoveries,
by specific actions taken by the Financial Investigation Unit.
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6. Fraud Risk Team, Security Team, Post Office Limited
No evaluation of these programmes has taken place as part of this review.
7. Legal Services, Civil law, Royal Mail Group
The Royal Mail Civil Law Team dealt with approximately 127 cases between April
2008 and September 2009. (i.e. Where Civil legal proceedings were necessary to
prosecute former Subpostmasters). The split for 2008/2009 and 2009/10 is not
readily available. The costs are made up of external solicitor’s costs and internal
Royal Mail staff costs. It also remains uncertain as to whether these internal staff
costs are charged to Post Office Limited. External Solicitor costs for 2008/09 were
approximately £130.6K and approximately £87.6K at the end of September 2009/10.
Internal Royal Mail staff costs are estimated at approximately £11K per annum. (See
Appendix 23). There is no current measurement (i.e. internal resources) spent
dealing with debt cases pertinent to Post Office Limited.
It is very difficult to pinpoint all external solicitor costs pertinent to former
Subpostmaster cases in Post Office Limited’s Finance System. As a consequence,
there is little cost control or budgetary responsibilities, albeit, more emphasis must
ensure that costs associated with debt recovery do not exceed the value of debts.
The total value of debts and recoveries on a case by case basis was not readily
available. As a consequence, it was not possible to ascertain the total value of debts
being pursued through the civil legal system, or correlate the level of recoveries with
the total value of debts.
Additionally, the Civil law Team have no specific objectives around debt recovery.
A key part of the Civil Legal Team’s responsibilities is to deal with requests from
Product and Branch Accounting to arrange for Tracing Agents to conduct searches
(i.e. To confirm and / or provide forwarding addresses and asset checks). It is not
currently possible to identify how many cases required a Tracing Agent.
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Once ‘Judgement’ is passed (i.e. In legal terms when the final ruling is made) debts
cannot be recovered after six years as they are “statute barred” under the terms of
the Limitation Act 1980, which sets time limits in which legal action can be taken to
recover a debt (i.e. The offender may not have assets at the time of Judgement, but
may acquire assets up to the six year time limitation in which the organisation could
recover monies). At the present time no processes exist to carry out ongoing asset
checks.
Another key part of the process is providing external solicitors with specific
information regarding the case (e.g. Contracts of employment, audit reports). No
processes currently exist to gather and provide this information upfront (i.e. With a
view to reducing lead times and existing solicitor’s charges), albeit, it is accepted
that not all information will always be required.
Consistent with other stakeholders involved in debt recovery processes there is no
effective ‘Case Management System’ in place to coordinate activities across other
stakeholder groups.
In a wider context, there is no consolidation and overall view of all former
Subpostmaster debts. (e.g. Property rent). From a legal perspective it is very
important to understand the whole picture and to consolidate all legal proceedings.
It was not possible to ascertain whether there was any measurement in place to
review the effectiveness of 3” party solicitors.
It was also noted that Transaction Corrections forwarded by Product and Branch
Accounting aren’t always accompanied with a succinct description of the
discrepancy, but often described as ‘Hardship’. A hardship is essentially where a
branch has accepted an error by agreeing to settle the debt centrally (i.e. resulting
from a transaction correction) but hasn’t yet made good the amount. However, where
legal action is required to recover debts it is essential to have a much greater level
of detail (i.e. Hardship is less than useful).
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8. Legal Services, Criminal law, Royal Mail Group
The Royal Mail Criminal Law Team dealt with 102 cases during 2008/09 and 66
cases by the end of September 2009/10 (i.e. Where legal proceedings were
necessary to prosecute former Subpostmasters for criminal activity). (See Appendix
24). The costs are made up of external solicitor’s costs and internal Royal Mail staff
costs. The legal costs for 2008/09 were approximately £154.9K. The amount of debt
recovered during the same period was approximately £199K, with the overall costs
outweighing the total debts. However, the YTD position at period 6 during 2009/10
shows costs of approximately £118K with recoveries approximately £314K (i.e. £2.66
recovered for every £1 spent on debt recovery). Internal Royal Mail staff costs are
not currently measured and as a result could not be included.
The value of cases for 08/09 and 09/10 YTD to P6 were not readily available.
Solicitor’s costs are currently calculated on a fixed fee basis, (i.e. A Charging matrix
for Royal Mail Group) albeit, no information was provided to help understand the
specific impact.
There is no visibility of the external solicitor costs in Post Office Limited’s Finance
System. As a result, there is no cost control or budgetary responsibilities, albeit,
more emphasis should be ensuring that costs associated with debt recovery do not
exceed the value of debts.
There seemed to be lack of clarity as to where priorities lie, from both a business
policy perspective and the legal system, in respect to debt recovery. It is important
that business policies drive behaviours to maximise debt recovery. Similarly, it is
imperative that Post Office Limited works within the legal framework to achieve the
same objectives (e.g. Sometimes the court may award imprisonment without the
recovery of monies for unpaid debts).
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Additionally, the Criminal law Team had no specific objectives around debt recovery
other than to ‘get the job done’.
There was also some reference made to the fact that several cases had caused
much embarrassment in court because losses and/or criminal activities had been
going on for a very long time. One specific case involved losses going back some 8
years. However, it was not possible to quantify how many cases fell into this
category.
9. Contract Management, Network, Post Office Limited
Contract Advisors play a key role ensuring the organisation employs high calibre
Subpostmasters. A crucial part of this process involves scrutinising and vetting
Agency Business Plans. However, there were concerns that the existing process did
not achieve the objectives it originally set out achieve (e.g. A lack of credit checks,
and inconsistencies in levelling with so many Analysts with Finance involved in the
process). Although, there is no readily available information to show a direct
correlation between the existing low quality Agency Business Plans and former
Subpostmaster debt, getting this part right will undoubtedly mitigate against future
debt.
An imminent review of this process is currently underway which will address some of
these fundamental issues including loan to value, credit checks and the costs
associated with ‘not getting it right’ (i.e. Including future debt).
Contract Advisors dealt with 229 debt cases during 2008/09 with staff costs of
approximately £7.3K (135 cases during 2009/10 YTD to P6 with staff costs of
approximately £4.3K slightly ahead of last year’s position) (See Appendix 25).
All Subpostmasters who are reinstated as a result of being suspended due to owing
monies must repay debts. Subpostmasters who are unable to repay debts in a single
instalment have monies are deducted from their remuneration up to a maximum of
25% of their annual remuneration. Instalments are agreed between the
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Subpostmaster and the Contract Advisor and as a ‘rule of thumb’ are usually repaid
over a 12 month period. Where the Subpostmaster incurs subsequent debts every
effort is made to recover additional monies via other means (e.g. Via cheque, credit
card payment). No interest is charged on repayment of debts. All Subpostmasters
that are reinstated are audited 6 months later.
The review identified that seldom do Contract Advisors inform Product and Branch
Accounting when Subpostmasters are reinstated. This dialogue is essential to
update the case file and understand what further actions are required.
Contract Advisors are also targeted to complete 460 cash checks per annum across
the entire Post Office Network. The aim is to verify assets and mitigate against loss
and subsequent debt. Since the beginning of the financial year to September 2009
losses of approximately £25K across 4 Post Office branches were identified.
Approximately, £18K is held against former Subpostmaster debt.
With the imminent roll out of Horizon Next Generation (HNG) a similar one off
exercise is currently underway. This will involve auditing 500 branches over a
concentrated 12 week period commencing 9" November 2009. The aim is to assess
risks of full scale implementation. The lead time to deal with suspensions can take
up to 8 weeks. Additionally, approx. 4-5% of all audits lead to a suspension that may
result in some form of Subpostmaster debt.
This review acknowledges that there are also additional costs to recruit temporary
and / or new Subpostmasters, where it was necessary to suspend and / or terminate
Subpostmaster’s contract (i.e. Where a discrepancy has resulted in debts owed to
Post Office Limited). These costs are currently unknown but have a direct impact on
the costs of debt recovery.
10. Human Resources (HR)
No evaluation of these processes was made as part of this review.
11. Other
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Accountabilities
There was also a lack of clarity and understanding from all stakeholders, of other
team’s accountabilities and responsibilities across the end to end former
Subpostmaster debt process. (See Appendix 26).
12. Outsourcing Debt Collection Activities To Debt Collection Agencies
A number of Senior Managers within the Post Office have discussed the possibility of
outsourcing debt collection activities to 3 party Debt Collection Agencies. However,
this review does not recommend this course of action for a number of reasons.
There are no significant weaknesses that cannot be rectified in house within existing
debt recovery processes. The Post Office already uses 3” party solicitors and is
further supported by internal legal expertise from within the Royal Mail Group. The
latter is also managed separately to deal with the different aspects of law i.e. Civil
and Criminal. There are also some very highly qualified Accredited Financial
Investigators and a host of other expertise within the Post Office.
Additionally, debts are only written off where there are no assets from which to
recover monies i.e. the former Subpostmaster doesn’t have assets or when the debt
is unrecoverable i.e. either because judgement has been passed in a Court of Law
or where it is not economically viable to recover the debt i.e. The costs outweigh the
value of debt. The Post Office is also a large and complex organisation and a
significant part of existing legal costs are incurred by correspondence being passed
between Post Office employees and solicitors. There is also no reason to believe
that outsourcing debt collection activities would reduce lead times.
There is also a view held by many Senior Managers that outsourcing to 3% party
Debt Collection Agencies would be detrimental to the Post Office brand and as a
consequence other commercial activities.
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Recommendations.
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No I Process Description(s) Recommendation Team(s) Owner Delivery —_I Status Benefit
date Tangible Intangible
1 Accountabilities and Empower Branch Conformance and Liaison P&BA. Alison Bolsover. I 30/06/10 To make one
Responsibilities. Manager to be accountable for all debt individual
recovery. i.e. Someone who is ultimately accountable for all
answerable for debt recovery debt recovery
2 Accountabilities and Agree and implement accountabilities shown I P&BA, Crime Alison Bolsover, I 30/06/10 To help clarify
Responsibilities. in Appendix 26. (i.e. A mix of existing and Risk, lain Murphy, existing and future
revised accountabilities and responsibilities). I Investigation Juliet accountabilities
Team, Financial I McFarlane, and
Investigation —_ I John Breeden, responsibilities. To
Unit, Civil law Mandy Talbot. make one
Team, Criminal individual
law Team, answerable for debt
Contract recovery.
Advisors,
Network Field
Support.
3 I Objectives. Set and align stakeholder objectives which (1) IP&BA, Crime I Alison Bolsover, I 30/06/10 Target to reduce I To maximise debt
Aim to reduce future debt and (2) Aim to Risk, lain Murphy, overall debt bya —_I recovery and
improve debt recovery processes. Investigation Juliet further 5-10%. improve debt
Team, Financial I McFarlane, Target to improve I recovery
Investigation John Breeden, overall debt processes.
Unit, Civil law Mandy Talbot. recovery by a
Team, Criminal further 5-10%.
law Team,
Contract
Advisors,
Network Field
Support.
4 Risk & Debt Recovery. Introduce daily and weekly huddles to review I P&BA, Crime Alison Bolsover I 30/06/10 Not able to quantify I To prioritise and
top 20% of all debt cases (i.e. 88% of debt) to I Risk, % increase in debt I coordinate efforts
help people focus efforts and maximise debt _I Investigation recovery. to maximise debt
recovery. Visibility to Senior Management and _I Team, Financial recovery.
all key stakeholders involved in the former Investigation
Subpostmaster end to end debt process. Unit, Civil law
Team, Criminal
law Team,
Contract
Advisors.
5 I Risk & Debt Recovery. implement a weighted score approach to P&BA, Crime I Alison Bolsover I 30/06/10 Not able to quantify I Minmise cost of
compute the likelihood of debt recovery (See Risk, lead role. % increase in debt I debt recovery.
Appendix 7). Investigation recovery. Maximise debt
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Team, Financial recovery,
Investigation
Unit, Civil law
Team, Criminal
law Team,
Contract
Advisors.
6 Risk & Debt Recovery. Assess whether former Subpostmasters have I P&BA, Crime Alison Bolsover, I 30/06/10 Minmise cost of
assets from which to recover debts, ata much I Risk, lain Murphy. debt recovery.
earlier stage in the process. An inherent part of I Investigation Maximise debt
‘computing the likelihood of debt recovery (See I Team, Financial recovery.
recommendation 5). Investigation
Unit.
7 Risk & Debt Recovery. Introduce effective controls to ensure the costs I P&BA, Crime Alison Bolsover, I 30/06/10 Included as part of II To mitigate against
associated with debt recovery do not exceed _I Risk, lain Murphy, recommendation 5. I cost of debt
the total value of debt(s). A link to the weighted I Investigation I Juliet recovery exceeding
score approach (See Appendix 12). Team, Financial I McFarlane, debt vaiue.
Investigation John Breeden,
Unit, Civil law Mandy Talbot.
Team, Criminal
law Team,
Contract
Advisors,
Network Field
Support.
8 I Risk & Debt Recovery. Explore opportunities to use online debt P&BA, Crime I Alison Bolsover I 30/06/10 ‘Opportunities to Potential cost
recovery tracing tools instead of using Tracing I Risk, 7 Andy Hayward reduce costs by reduction, more
Agents. (e.g. CallCredit Limited) (See Investigation / Mandy Talbot combining comprehensive
Appendix 9). Move responsibility from Civil I Team, Financial searches for other I searches, shorter
legal Team to P&BA. Andy Hayward is Investigation debts in the wider I lead times,
already exploring opportu: Unit, Civil law organisation e.g. _I improved debt
asset checks during the rect Team Appointment recovery.
and on an ongoing basis. process,
Telephony.
9 Risk & Debt Recovery. Monitor and review of how much debt is P&BA, Crime Alison Bolsover, I 30/06/10 To help monitor
recovered on a case by case basis. (e.g. £100 I Risk, lain Murphy, recovery of debts.
debt, £80 recovered) Use MI to maximise Investigation Juliet
subsequent recoveries. Team, Financial I McFarlane,
Investigation —_I John Breeden,
Unit, Civil law Mandy Talbot.
Team, Criminal
law Team,
Contract
Advisors,
Network Field
Support.
10 Risk & Debt Recovery. Introduce a more effective process of Civil law Team, I Mandy Talbot,
estimating the legal costs of taking cases to _I Criminal law Juliet
court. Team, McFarlane
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41 I Case Management Review the quality of information provided by I Network Field I Andy Bayfield I 30/06/40 Higher quality
the Network Field Support Team i.e. regarding I Support. evidence to help
discrepancies and supporting evidence. maximise debt
recovery.
12 Case Management. Undertake feasibility study to create an end to I P&BA, Crime TBA. 30/06/10 Reduce debt
‘end Casework Management System that would I Risk, recovery lead
provide ‘real time’ end to end visibility of all Investigation times, real time
debts across all stakeholders involved in the Team, Financial visibility, efficent
process (See Appendix 12). See also draft _I Investigation and effective
‘Terms of Reference’ in Appendix 30. Unit, Civil law processes.
Team, Criminal
law Team,
Contract
Advisors.
13 Case Management. Agree and develop a list of information P&BA, Crime Alison Bolsover, I 30/06/10 £20.5K (See To reduce lead
requirements to support legal proceedings. Risk, Juliet Appendix 31) times and legal
(i.e. A ‘Committal Bundle’ for both criminal and I Investigation McFarlane, costs.
civil prosecutions). Implement standard Team, Financial I Mandy Talbot.
processes to acquire the appropriate Investigation
documentation and evidence to support legal__I Unit, Civil law
proceedings. Already in place within the Team, Criminal
Security Teams. law Team
14 Case Management. To ensure all Transaction Corrections P&BA. Alison Bolsover. I 30/06/10 Target 5% cost To reduce lead
forwarded to legal services are accompanied reduction. Included I times and legal
with a concise description. (i.e. To help with as part of costs.
subsequent legal proceedings). recommendation
13.
15 Case Management. Retain and recycle ‘Witness / Product P&BA, Civil law I Alison Bolsover. I 30/06/10 Tangible benefits To help reduce
Statements’ for subsequent use where legal Team, Criminal Incl. in lead times and
proceedings are necessary law Team, recommendation _I legal costs.
13.
16 I Case Management ‘Acquire a ‘Certificate of Conviction’ for all Financial Tain Murphy, 30/06/10 To help accelerate
criminal investigations where it is likely Investigation —_I Mandy Talbot. civil legal action
subsequent civil action is required Unit, Civil law and subsequent
Team. recovery of monies
17 Case Management. Conduct feasibility study to trial debt collection I P&BA. Alison Bolsover. I 30/06/10 3 month trial should I Reduce lead times
methods outside normal working hours (i.e. result in a 5% and improve debt
Using the telephone between the hours of increase in debt recovery.
17:00pm and 08:00pm). To record increase / recovery. i.e.
decrease in contacting debtors and debt Approx £38.5K
recoveries based upon 2
people. (See
Appendix 31)
18 Case Management. To develop SLAs with existing Solicitors and Civil law Team, I Juliet 30/06/10 Included as part of I To maximise ‘value
review on an ongoing basis (e.g. Cost, quality I Criminal law McFarlane, above for money’ for all 3%
and timeliness) to ensure the business Team. Mandy Talbot. recommendation. __ party solicitor
receives ‘value for money’. costs.
19 I Case Management. Develop and agree formal process to improve I P&BA, Contract I Alison Bolsover, I 30/06/10 To help focus
communications between Contract Advisors
Advisors.
John Breeden.
efforts and reduce
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and Product and Branch Accounting, when
Subpostmasters are suspended as a result of
potential debts. (ie. To ensure P&BA can
manage cases appropriately and effectively).
debt recovery lead
times.
20 I Case Management. Maintain fundamental information regarding _I Civillaw Team, I Juliet 30/06/10 Target of 5-10% I To continuously
debt recovery (e.g. debt values, value of Criminal law I McFarlane, improvement of _I review 3° party
recoveries, external solicitor costs, Tracing I Team. Mandy Talbot debt recovery costs I solicitors and debt
Agents and internal staff costs on a case by versus debt recovery
case basis) to help review effectiveness of recovery. processes.
existing debt recovery processes.
21 I Case Management. Conduct ongoing asset checks for all aged P&BA, Alison Bolsover, I 30/06/10 Not able to quantify I To maximise debt
debt cases. (i.e. Specifically where the Investigation —_I lain Murphy. % improvement in I recovery
offender didn't have any assets at the time of I Team, Financial debt recovery. opportunities.
‘Judgement’ and there are still outstanding Investigation
debts). To be achieved either by Accredited I Unit.
Financial Investigators or Online credit checks
(See recommendations 8 & 36).
22 I Case Management. Conduct feasibility study to assess costs and I Crime Risk, lain Murphy. I 30/06/10 Improve debt
benefits of having direct access to Suspicious I Investigation, recovery and
Activity Reports, Joint Asset Recovery Financial reduce lead times.
Database, and Money Web. (See Terms of _I Investigation
Reference in Appendix 30) Unit.
23 I Case Management. Improve the design of existing debt statements I P&BA. Alison Bolsover I 30/06/10 A more
produced from POLFS. professional debt
statement for
former
Subpostmaster to
act upon
24 I Case Management. Allocate workloads i.e. debt cases on a volume I P&BA. Alison Bolsover I 30/06/10 I Rejectedi.e. on I Approx. £16K per _I Improved alignment
basis, not on a ‘Regional’ basis. All cases to the basis that I annum. (See of resource to
be prioritised by value and likelihood of team members I Appendix 31) workloads.
recovery. also perform Maximise debt
other roles such recovery.
as attending
court.
25 I Case Management. Acquire and confirm Subpostmaster address I Network Field I Andy Bayfield I 30/06/10
and contact details as part of the audit Support
process. Communicate information to Product
and Branch Accounting Former Subpostmaster
Debt Recovery Team
26 I Cost Management. Agree and develop a monthly debt recovery I P&BA, Crime I Deborah 30/06/10 £305.1K of debt _I Visibility of all the
cost report to identify all the costs incurred as_I Risk, Holmes. recovery costs (i.e. I associated costs
part of existing debt recovery process. i.e. To I Investigation 21% of total debt —_I involved in debt
recover debt recovery costs. €.g. Staff costs, I Team, Financial recovery costs recovery. Maximise
non staff costs, and repayment costs e.g. Investigation based on 2009/10 I debt recovery by
repayment using credit cards. Unit, Civil law position). (See recovering those
Team, Criminal Appendix 31) costs incurred
law Team, within existing debt
Contract recovery process.
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Advisors.
27 I Cost Management. Develop a charging matrix to charge interest I P&BA,Crime __I Alison Bolsover, I 30/06/10 To charge interest I To maximise
on outstanding debts and other costs Risk, Deborah rate set at Bank of I recovery of debt
associated with debt recovery. (See Investigation _I Holmes. England base rate I recovry costs.
recommnedations 7 & 8). Team, Financial or above on all
Investigation debts repayable
Unit, Civil law >90 days.
Team, Criminal
law Team,
Contract
Advisors,
Network Field
Support.
28 Cost Management. Introduce more transparency of internal Royal I Civil law Team, I Juliet 30/06/10 See below. Visibility of all debt
Mail staff costs to help understand the ‘true’ Criminal law McFarlane, recovery costs.
costs associated with debt recovery. Team. Mandy Talbot.
29 Cost Management. Introduce more transparency of external Civil law Team, I Juliet 30/06/10 To ensure debt Visibility of all debt
solicitor costs in Post Office Finance Systems I Criminal law McFarlane, recovery costs do_I recovery costs.
including budgetary responsibility. Also, linked I Team. Mandy Talbot. not exceed total
closely to ensure costs associated with debt value of debt.
recovery do not exceed the total value of
debt(s). i.e. The latter is more important than
exceeding a budget.
30 Cost Management. Undertake benchmark of external solicitors Civil law Team, I Juliet 30/06/10 Target to reduce To reduce 3° party
(ie. Civil legal solicitors with Criminal legal Criminal law McFarlane, costs by approx 5% I external solicitor
solicitors) to maximise value for money. How I Team. Mandy Talbot. per annum. costs.
much would it take to take a case through the
legal process?
El Debt Provisioning Agree and revise how bad debt provision is P&BA. Alison Bolsover. I 30/06/10 One off benefit of To more accurately
calculated to better reflect the amount the Circa. £5.1M reflect bad debt
organisation expects to write off (i.e. Total debt provisions.
less expected recoveries).
32 I Debt Repayment Methods. Introduce a monitoring and recording system I P&BA, Crime _I Alison Bolsover, I 30/06/10 Identify and
to capture the repayment method. To Include _I Risk, lain Murphy, recovery of
the costs associated with each repayment Investigation —_I Juliet repayment costs.
method. Team, Financial I McFarlane,
Investigation John Breeden,
Unit, Civil law Mandy Talbot.
Team, Criminal
law Team.
33 Debt Repayment Methods. Influence debtors to repay debts using most P&BA, Crime Alison Bolsover, I 30/06/10 Included in Influence debtors to
cost effective repayment method (See Risk, lain Murphy, Recommendation I make good debts
Appendix 11). Investigation —_I Juliet 26 below. using the most
Team, Financial I McFarlane, efficient and cost
Investigation John Breeden, effective methods.
Unit, Civil law Mandy Talbot.
Team, Criminal
law Team,
Contract
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Advisors.
34 I Debt Repayment Methods. Review Subpostmaster contractual P&BA, HR, TBA. 30/08/10 To charge interest I Improve debt
arrangements for the provision and repayment I Contract rate set at Bank of I recovery (i.e.
of debts (i.e. No interest free loans, Advisors. England base rate I Including recovery
consolidation of debts, repayment terms). or above on all of debt recovery
debts repayable costs) and
>90 days. repayment terms.
35 Human Resources. Agree and review former Subpostmaster Debt I P&BA. Alison Bolsover I 31/03/11 On hold. A potential saving I Improve alignment
Team staffing levels with workloads. A Agreed to of £24.6K per of resource to
reduction in workloads of approx. 18% since utilise surplus I annum. (See workloads.
April 09 suggests that current staff levels are resource to Appendix 31)
approx. 1.25 heads surplus. help implement
recommendatio
ns as part of
this review.
36 I Training & Development. Implement measures to review effectiveness _ I Financial Tain Murphy, 30/06/10 Target to improve _I Skill up to improve
(ie. Debt recovery) of existing Accredited Investigation Alison Bolsover. upon current debt recovery.
Financial Investigators, with a view to Unit, P&BA. performance by
‘extending this level of expertise across the approx. 5-10%.
debt recovery processes.
37 _ I Training & Development. Investigate impact of not having Accredited Crime Risk, Tain Murphy. 30/06/10 To help improve
Financial Investigators to deal with Scottish Investigation, debt recovery in
and Northern Ireland laws (i.e. Impact on debt I Financial both Scottish and
recovery). Investigation Norther Ireland
Unit. areas.
38 I Training & Development. ‘Acquire a more indepth understanding of what I P&BA, Tain Murphy. 30/06/10 Not able to quantify I More effectives use
information can be shared by Financial Investigation % improvement in _I of MI to help with
Investigators i.e. across other stakeholder Team, Financial debt recovery. debt recovery.
groups within the debt recovery process. (e.g. I Investigation
A tabulation of data sources, information, and I Unit.
limitations).
39 Management Information Implement a business wide KPI to measure the I P&BA, Crime Alison Bolsover, I 30/06/10 10% reduction in To help monitor all
cost of debt recovery versus the value of Risk, lain Murphy, debt recovery costs I the costs
recoveries. (i.e. A ratio by individual Investigation —_I Juliet (£157K) (See associated with
stakeholder including Security and Team, Financial I McFarlane, Appendix 31) debt recovery
Investigation, Criminal legal Services, Civil Investigation John Breeden,
legal Services, Former Subpostmaster Debt —_I Unit, Civil law _ I Mandy Talbot.
Recovery Team). Also, to help recover costs I Team, Criminal
from offenders including those cases that law Team,
result in legal proceedings. Contract
Advisors.
40 Management Information. Track all suspension / dismissals resulting Contract John Breeden. 01/05/10> Improve ‘root
from debt from a recruitment perspective. Advisors cause’ analysis to
help reduce
subsequent debt.
41 Management Information. Automate and streamline all data flows P&BA. Alison Bolsover. I 30/06/10 2 hours saving per I Reduce lead times
acquired from POLFS to produce monthly MI month and improve quality
reporting pack. of information.
42 Management Information. Contact Post Office Helpline to discuss P&BA. Alison Bolsover. I 30/06/10 Reduce lead times
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possibilities of using redundant fields in
POLFS download file (i.e. Used to reconcile
debt) to enable team members to input unique
case reference pertinent (i.e. To help match
debt records and simplify process as part of
reconciliation process)
and improve quality
of information
43 I Management Information. Provide business process documentation to I P&BA Alison Bolsover. I 30/06/10 To mitigate against
explain how reconciliation process works. the reliance of one
key individual
within the Team.
44 I Management Information. Explore benefits of introducing a numbering I P&BA Alison Bolsover. I 30/06/10 To improve MI and
system which relates to specific ‘text’ analysis of trends
descriptions within POLFS. This would help
analyse trends, work patterns e.g. To describe
late discrepancies, 1 = TC Correction, 2 = Tax
disc not scanned into Horizon System.
45 I Management Information. ‘Agree and develop more robust ‘root cause’ I P&BA, Crime _I Alison Bolsover I 30/06/10 I Rejected. tis I Targeted correction I To help take
(e.g. Criminal activity, misappropriation of Risk, lead role. seldom action should lead I corrective action to
funds, fraudulent activities) analysis to aid Investigation possible to to a % reduction in I reduce future debts
decision making (i.e. To reduce future debt —_I Team, Financial identify ‘root —_I future debts. and improve debt
and improve debt recovery processes) (See _I Investigation causes’ unless I Typically, a 5-10% I recovery
Appendix 14). Possibly to be based upon Unit, Civil law proven through I year on year processes.
‘suspicion’ where the ‘root cause’ is unknown. I Team, Criminal the legal reduction.
law Team, process.
Contract Therefore, most
Advisors, ‘root cause’
Network Field analysis would
Support. be speculative.
46 I Business Wide Improve visibility of this review with existing I Back Office Andy Greening. I 30/06/10 To highlight
Communication projects that have a direct or indirect Efficency importance of
correlation to debt (e.g. Agency business plans I Programme. robust Agency
review), Business Plans and
debt.
47 I Case Management Auditors to request last three Branch Trading I Network Field I Andy Bayfield Help with debt
Statements from Subpostmasters. This will Support recovery.
support subsequent legal proceedings i.e.
provide visibility of historic financial
accounting.
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Stakeholder list
Name
Julian Tubbs
Andy Hayward
Joanne Hancock
Rod Ismay
Alison Bolsover
Andy Winn
Jackie Whitham
Michael Haworth
John Breeden
Gayle Laverick
Mandy Talbot
Pat Davies
Ged Harbinson
Graham C Ward
Pete B Jackson
Juliet McFarlane
Mark Dinsdale
Christina Wood
Maureen Moors
Team
Security
Security
Security
P&BA
P&BA
P&BA
P&BA
Network
Network
Network
Legal Services
P&BA
Security
Security
Network
Legal Services
Security &
Investigation
Security &
Investigation
Security &
Investigation
Appendix 1
Role
# Senior Security Manager
Senior Fraud Risk Mgr
Senior Security Programme Manager
Head of Product and Branch Accounting
Senior Branch Compliance and Liaison
Manager
Relationship Manager
Former Agents Recovery Team Leader
Contract Account Manager
National Contract Manager (North)
Network Coordination Manager
Principal Lawyer
Former Agents Recovery Team Lead
Accredited Financial Investigations
Financial Investigator
Network Field Support Team Leader
Principle Lawyer Criminal Law Team
Casework Team Leader
Casework Team
Casework Team
* Change of role during review. Julian Tubbs is now Programme Manager, Business
Efficiency Team, Operations.
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Glossary
Abbreviation / Term
Accredited Financial Investigator
Certificate of Conviction
Committal Bundle
Compensation
Confiscation
Debt
Debtor
Extended Benefits
Financial Evaluation Sheet (FES)
Financial Investigation Unit (FIU)
Financial Investigator (Fl)
Horizon Next Generation (HNG)
Indictable Offence
Joint Asset Recover Database (JARD)
Judgement
Land Registry
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Appendix 2
Description
Individuals who are professionally accredited under the
‘The Proceeds of Crime Act 2002 (POCA)’. (i.e. An
Act which provides for civil recovery of the proceeds
from crime).
A document which provides tangible evidence that the
defence has already been convicted of an indictable
offence.
A committal bundle contains sufficient evidence to
cover every element of the offences charged, and to
deal with the reasonably practicable steps the
defendant could have taken to comply with the
relevant duty.
Recompense for debts owed to someone.
To take possession of an individual's assets by force or
legal authority. (i.e. Used for subsequent recovery of
debts).
The state of owing monies (i.e. Repayment of debt).
An individual who owes monies, liable for debts.
Where Criminals benefit from criminal activities in
addition to the consequential loss.
An initial financial summary of the offender prepared
by Security and Investigation.
A key function within the Security directorate within
Post Office Limited. Their principle remit is to
investigate criminal activities and help recover
Subpostmaster debts.
A key function within the Security directorate within
Post Office Limited. Their primary role is to investigate
suspicious and known criminal activity, and pursue
these matters following advice from Royal Mail's
Criminal Law Team.
A strategic programme to enhance the Post Office's
point of sale system.
An indictable offence is an offence which can only be
tried on an indictment after a preliminary hearing to
determine whether there is a prima facie case to
answer or by a grand jury.
The Joint Asset Recovery Database (JARD) records
asset recovery information for all law enforcement
activity across the UK and provides support to financial
investigators wishing to retrieve information
In legal terms when the final ruling is made
A government body which maintains records of land
and property ownership.
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Glossary Cont’d
Abbreviation / Term
Letter Before Action
Money Web
National Police Improvement Agency
(NPIA)
Open Items
Proceeds of Crime Act 2002 (POCA)
Restraint Order
Summons
Suspect Offender Report
Suspicious Activity Report (SAR)
Taped Interview Manuscript
Tracing Agent
Transaction Correction (TC)
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Appendix 2
Description
A letter before action is a letter sent to the offender
informing them that unless they take certain steps (e.g.
repay a debt) then legal proceedings will be
commenced against them.
Money Web is a database that provides host of
information and access to a network of Accredited
Financial Investigators in working in other institutions
(e.g. Banks).
The NPIA is part of the police service. As a policing
organisation they act as a central resource to police
forces, working with authorities and the Home Office to
help improve the way policing works.
A record in an accounting ledger that keeps track of a
particular type of financial activity over a given period
of time. (e.g. An unpaid charge or unapplied credit).
The Proceeds of Crime Act 2002 (c.29) (POCA) is an
Act of the Parliament of the United Kingdom which
provides for civil recovery of the proceeds from crime.
Restraint Orders are used by Prosecuting bodies with
increasing regularity. The effect of a Restraint Order is
to freeze assets of an individual, for the purpose of
protecting them for potential future confiscation
hearings, in the event that an individual is convicted or
pleads guilty to an offence.
A summons is a legal document issued by a court (a
judicial summons) or by an administrative agency of
government (an administrative summons). It is also an
order to appear in person at a given place and time
(i.e. A court hearing).
A report that summarises details salient points
resulting from a suspect offender interview.
A Suspicious Activity Report (or SAR) is a report
regarding suspicious or potentially suspicious activity.
A summary or full manuscript resulting from an
offender interview.
Tracing Agents specialise is tracing debtors and
usually operate on a no trace, no fee basis.
This is a formal process that pushes responsibility /
liability back to the branch to rectify and / or make
good the discrepancy
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Appendix 3
National Contract Managers — Organisation Chart
General Manager ,
Network Support
——_——
National Contract
Manager , North
Contract Managers X 5
National Contract
Manager , South
Contract Managers X 5
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Appendix 4
2009/10 @ P6 No. of Cases by Stakeholder
Ownership No.
Former Agent's Debt Team 535
Legal Teams (Civil law only) 129
Security Investigations (Incl. Criminal law) 82
#* Repayments 85
Total 831
* Includes outstanding debts currently being repaid by instalment.
No. of Cases @ P6 2009/10
@ Former Agent's Debt
10% Team
10% Legal Teams (Civil law
only)
16% oO Security Investigations
64% (Incl. Criminal law)
tO Repayments
(Instalments incl.
outstanding debt)
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Appendix 4 Cont’d
2009/10 @ P6 Value of Cases by Stakeholder
Ownership Value £M %
Former Agent's Debt Team 2.19 19.25%
Legal Teams (Civil law only) 4.22 37.17%
Security Investigations (Incl. Criminal law) 3.61 31.79%
*Repayments 1.34 11.79%
Total 11.36 100.00%
* Includes outstanding debts currently being repaid by instalment.
Value of Cases @ P6 2009/10
Former Agent's Debt
0/ Te
12% 19% eam
Legal Teams (Civil law
only)
32% O Security Investigations
(Incl. Criminal law)
37% Repayments
(Instalments incl.
outstanding debt)
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Appendix 4 Cont’d
Snapshot @ Nov’ 09 of all instalments i.e. Repayment of Debt
Repayment Term No. of Cases_Instalments (£) Balance (£)
<1 Year 14 5185.50 30025.79
1-2 Years 22 5379.00 86750.23
2-3 Years 8 2448.17 71706.64
3-4 Years 7 1738.18 67787.13
4-5 Years 5 370.00 18820.52
>5 Years 21 3610.00 977897.69
77 18730.85 1252988.00
Note:
The position at the end of September ’09 showed that repayment of debt via
instalments was approximately 11.79%. The remaining debt will follow existing debt
recovery processes.
5 cases are being repaid over more than fifty years. The longest duration is a little
over 180 years i.e. this is what was set by the court to be repaid.
Source: Jackie Whitham, Product and Branch Accounting, October ’09.
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Appendix 5
Former Subpostmaster Debt 09/10 YTD To P6
Total Debt @ P6 09/10 £11,361,000.00
Top 20% of Cases @ P6 09/10 by Value £M's
£M %
Former Agents £1.67 16.7%
Legal Services £3.47 34.7%
Investigations £3.79 37.8%
Repayments £1.08 10.8%
Total £10.00 100.0%
Top 20% (167 cases out of 831) of all former Subpostmaster debt cases by
value = 88% of the total debt. (i.e. £10M / £11.36M X 100 = 88%)
% of total
Debt @ P6
Cases £M 09/10
Top 20 3.4 30.4%
Top 50 5.9 51.8%
Top 100 8.3 73.4%
Top 150 9.7 85.2%
Top 167 10.0 88.1%
Source: Jackie Whitham, Product and Branch Accounting, October ’09.
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Former Agent Debt Recovery Team Staff Costs
Grade No Rate
PO 5 £34,676.28
Agency 2 £19,664.00
2A Manager 1 £47,240.28
Total Costs
£173,381.40
£39,328.00
£47,240.28
£259,949.68
Appendix 6
Source: Jackie Whitham, Product and Branch Accounting, October ’09.
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Appendix 7
Example of Weighting : Likelihood of debt recovery
Suggestion Weighting
Have sufficient evidence regarding case. 1 = No evidence, 2 = Some evidence, 3 =
Sufficient evidence.
Have knowledge offender's whereabouts. 1 = No trace, 2 = Know whereabouts.
Able to make contact with offender. 1 = No contact, 2 = Made contact.
1 = No intention of cooperating, 2 =
Willingness to cooperate. Some willingness to cooperate, 3 = Is
willing to cooperate.
1 = No known assets, 2 = Has some
Known assets. assets, 3 = Has more than sufficient
assets
Is cost of recovery likely to outweigh #1 = Yes, 2=No.
debt?
Is legal action likely to be successful? 1=No, 2 = Yes.
# Where cost of recovery outweighs debt, do not proceed with case.
Pessimistic
1X1X1X1X1X1X1=1
Optimistic
3X2X2X3X3X2X2= 432
Assumptions
All key stakeholders involved in the process would be required to assess the
likelihood of debt recovery. This is only to be used as a decision making tool to help
prioritise and focus efforts (i.e. The likelihood of recovery). If the likelihood of
recovering debt is low, then there may be a requirement to focus more efforts on a
particular case to improve the likelihood of recovering the debt (i.e. Not necessarily
to dismiss the case and write-off values).
Source: Andy Greening, Business Efficiency Team, Operations, November 2009.
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Example of Output from Tracing Agent
To Whom It May Concern:
My agents have now traced the following:
Mrs Old Name
XXXXXXXXX
XXXXXXX
Nottingham
NG2 4PX
Mobile!
They have advised that her correct date of birth is r
Mrs New Name
XXXXXXXXX
XXXXXXX
Coventry
CV2 4PX
Tel
Regards
Legal Services, PO Ltd
Source: Marilyn P Drawwater, legal Services, September 2009.
Appendix 8
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Appendix 9
‘CallTrace Batch’ Service provided by Callcredit Limited
The main focus of this service is “quality” address links and that the solution does
not leave a footprint. This is now the number 1 tool used by major UK Debt
Collection Credit Agencies (DCA’s). The service includes:
= Full Data Cleanse
= PAF Validation
= ER confirmation
= New Address links (Bureau)
«Living as stated (@ address provided within last 90 days)
= Date of Birth Exact matching
= Credit Active (@ new address within last 90 days)
= Deceased
= Insolvent
= Propensity to Pay Collection Score
= Telephone Append
This service is provided with a 24 hour turnaround. It enables organisations to clean
their information, identify the correct addresses, additional phone numbers, and strip
out deceased & insolvent. Prices are dependent on volumes. New address links start
at £2 each, but there are minimum processing charges of £1000. Callcredit also
have license options that allow organisations to cap prices and receive all of the
outputs generated.
“I think the first step is to run a sample of your accounts through CallTrace, test the
quality, see the results and then discuss what variables you require and what we can
do to offer you a flexible commercial deal. I would be able to run through your initial
800 accounts for a capped £1000. All of the data would be returned and I could walk
you through the output, answer any questions you may have etc...”
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Appendix 9 Cont’d
James Connolly, Business Development Manager,
Callcredit Limited, 19" October 2009.
vor
H:\Operations\Debt
Reviews\P&BA Forme
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Appendix 10
Former Subpostmaster Debt 2008/09 Versus 2009/10 YTD To P6
£M’s = % Recovery
Opening debt @ April '08 £ 7.96
New debt 08/09 £ 7.16
£ 15.12
less recoveries £ 3.19 21.08%
£ 11.93
less write-offs £ 0.93
plus write backs £ 0.11
Closing position @ March '09 £ 11.11
Opening debt @ April '09 £ 11.11
New debt 09/10 to P6 £ 2.27
£ 13.38
less recoveries £ 1.71 12.76%
£ 11.68
less write-offs £ 0.52
plus write backs £ 0.21
Closing position @ Sept '09 £ 11.36
Source: Jackie Whitham, Product and Branch Accounting, October ’09.
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Appendix 11
Repayment Methods
Repayment Method Cost
Cheque / Postal Order £0.0275 per transaction
Standing Order £0.02
Credit Card VISA 1.22% of transaction value
Credit Card Mastercard 0.087% of transaction value
Debit Card VISA £0.214
Debit Card Maestro £0.087
Cash £0.0350
*Deduction From Remuneration (DFR) Nil
# Where a former Subpostmaster owns more than one Post Office branch i.e. DFR
cannot apply to those Subpostmasters who are no longer employed and remunerated
by the Post Office.
All charges shown in the above table exclude internal administrative costs.
Source: Sue Oxley, Banking Team, Product and Branch Accounting, October ’09.
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Appendix 11
Repayment Type / Debt Repaid
April '09 To Sept ‘09
Debt Repaid
Repayment Type (£)_ % Repayment Type
Cheques / Postal Order £884,688.0 51%
Standing Order £276,323.1 16%
Deduction From Remuneration £52,661.7 3%
Credit / Debit Card £17,825.2 1%
*Unknown £517,014.5 30%
Total £1,748,512.5 100%
#Recoveries rec'd from Security and Investigation paid directly into
Bank of Ireland Account. Repayment split not available.
% Repayment Type
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Cont’d
© Cheques / Postal Order
@ Standing Order
O Deduction From
Remuneration
O Credit / Debit Card
51%
@ Unknown
Source: Jackie Whitham, Product and Branch Accounting, November ’09.
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Appendix 12
Example: Multi-User Case Management Information System
Suggested
Unique case reference.
Description.
Value.
Reason.
Asset checks completed.
Offender and branch details.
Accountabilities.
Likelihood of debt recovery.
Actions.
Ongoing costs.
Value of recoveries.
Repayment type.
Other known debts.
Comments
e.g. An alpha numeric numbering
system.
A description of the case.
Specific values should drive specific
actions.
As much information regarding the ‘root
case’.
e.g. Ongoing credit checks.
Name of Subpostmaster incl. branch
details.
Single accountability.
Weighted score.
Aconcise description, by date, by
individual, of all the actions to date. (incl.
all pending actions, awaiting
correspondence etc.)
A breakdown of all cumulative costs
associated with the case.
All debts recovered.
e.g. Cheque, credit card
To include other debts such as property.
Updated on a ‘real time’ basis and visible to all relevant stakeholders involved in the
former Subpostmaster debt recovery process.
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Appendix 13
Write-off Authority Limits
Team leader (level 2) 0 - £1,000
Analyst (level 3) £1,001 - £15,000
Accountant (level 4) £15,001 - £25,000
Head of Product and Branch Accounting (PCC) £25,000+
Finance Director (PCC) £25,000+
Source: Jackie Whitham, Product and Branch Accounting, July ’09.
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Appendix 14
Management Information — ‘Root Cause’ Analysis
No. of Cases @ P6 09/10 Value of Cases @ P6 09/10
Reason No. Reason Value £M
Suspension 409 Suspension 10.75
Resignation 262 Resignation 0.40
Network Change 131 Network Change 0.14
Other 29 Other 0.07
Total 831 Total 11.36
No. of Cases by 'Root Cause’ Value of Cases by ‘Root Cause’
4
Alternative ‘Root Cause’ Analysis
Misappropriation of funds
Criminal activity
Fraudulent activity
False accounting
Unexplained discrepancy
Non conformance (intentionally / unintentionally)
Inadequate assessment at recruitment stage
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Targets - Former Subpostmaster Debt
Debt & Recovery forecast 2009/10
Debt carried forward 2008/09
plus New Debt forecast for 2009/10
less Recoveries forecast for 2009/10
less Write offs forecast for 2009/10
Forecast debt at end 2009/10
Impact on P&L Losses 2009/10
Write offs forecast for 2009/10
Increase in provision forecast 2009/10
Forecast Losses 2009/10
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Appendix 15
£M
11.111
5.04 Based on 2007/08 levels
16.151
BAU = 4 people @ £300k = £1.2M
Bus Case = 3 people @ £300k = £0.9M
3.42 Branch Inv early identification = £0.4M
Security based on 08/09 figure =
£0.92M
12.731
0.93 Based on 2008/09 levels
11.801
There were no targets set for 2008/09 to make comparison.
Source: Jackie Whitham, Product and Branch Accounting, October ’09.
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Former Subpostmaster Aged Debt
P12 2007/08
2003/04
2004/05
2005/06
2006/07
2007/08
£M
0.560
0.898
0.842
2.226
3.432
7.958
P12
2008/09
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
£M
0.503
0.841
0.627
1.662
3.127
4.351
11.111
% of Aged
Debt
Recovered
2008/09 P6 2009/10
10.18% 2003/04
6.35% 2004/05
25.53% 2005/06
25.34% 2006/07
8.89% 2007/08
2008/09
2009/10
Source: Jackie Whitham, Product and Branch Accounting, October ‘09
£M
0.500
0.627
0.419
1.615
3.100
4.326
0.774
11.361
% of
Aged
Debt by
Value @
P6 09/10
44%
5.5%
3.7%
14.2%
27.3%
38.1%
6.8%
100.0%
% of Aged
Debt
Recovered
2009/10 To
P6
0.60%
25.45%
33.17%
2.83%
0.86%
0.57%
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Appendix 16
Illustration
e.g. 10.18% of aged debt
at the end of 2003/04
was recovered during
2008/09 financial year.
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Appendix 17
Former Subpostmaster Case Information
2008/09
No. Cases 1008
Value of Cases £M 11.11
Average Value Per Case £11,022
2009/10 @ P6
No. Cases 831
Value of Cases £M 11.36
Average Value Per Case £13,670
Source: Jackie Whitham, Product and Branch Accounting, October ’09.
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Appendix 18
Security Crime Risk Team (formerly Casework Team)
Case Information
Year Number of Cases __ Value of Cases
2008/09 490 £3,844,349.83
2009/10 YTD @ P6_ 80 £1,266,592.41
Staff Costs
Staff Total Costs
1.5 X Postal Officer £34,676.28
1 X 2A Manager £23,620.14
£58,296.42
Source: Mark Dinsdale, Crime Risk Team, November 2009.
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Appendix 19
Security Investigation Team
Case Information
Value of
Year Number of Cases Value of Cases Recoveries
2008/09 191 £3,936,190.27 £1,816,087.49
2009/10 YTD @ P6 83 £1,381,723.55 £435,610.60
Staff Costs
Staff * Total Costs
2 X 3B Managers £93,786.90
15 X 2A Managers £586,582.61
£680,369.51
* Approximately, 82.78% of staff costs relate to former Subpostmaster debt cases.
(i.e. Staff costs shown above represent 82.78% of the total staff costs across the
Security Investigation Teams).
There are also additional costs for audio transcription services (i.e. Typing taped
interview manuscripts). There were 195 taped interviews between November ’08 and
September '09 at £40 per tape, £7,800 during the 11 month period. (i.e. Approx.
£8.5K per annum).
Source: Jason Collins, Security and Investigation, October 2009.
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Appendix 20
Case Information Financial Investigation Unit
Year Number of Cases Value of Cases Value of
Recoveries
2008/09 42 £838,732.23 £863,107.91
2009/10 YTD @ P6 33 £519,468.69 £564,511.43
Note: The value of recoveries shown above are only an estimate based upon actions taken by
Financial Investigators, and DO NOT reflect the actual amount recovered on an individual
case by case basis.
Staff Costs
Staff Salary
3 X 3B Managers £56,648.28
Land Registry Searches
Year No. of Searches Total Cost
2008/09 279 £1,962
2009/10 YTD @P6 114 £1,147
Total Costs
£169,944.85
Ave Cost Per
Search
£7.03
£10.06
Source: Ged Harbinson, Financial Investigation Unit, Security Team.
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Appendix 21
An Accredited Financial Investigator - Key Responsibilities
1. Obtain a production order from a Crown Court which orders a person or
company in possession of data to supply that data to the Financial
Investigator within a specified period.
2. Obtain an account monitoring order from a Crown Court which orders a
financial institution to monitor and report activity on any named bank account
to the Financial Investigator within a specified period.
3. Obtain a customer information order from a Crown Court which orders a
financial institution to release customer information to the Financial
Investigator.
4. Search and seize documents subject to receipt of a production order.
5. Carry out a financial interview of the offender.
6. Obtain financial information from a defendant or suspect by Crown Court
order.
7. Restrain assets.
8. Seize cash.
9. Obtain data from Land Registry without leaving a footprint.
10. Obtain ‘extended data’ from Land Registry.
Source: Ged Harbinson, Financial Investigation Unit, Security Team.
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Appendix 22
Case Closure Correspondence — Financial Investigation Unit
To: Senior Security Manager
From: — Financial Investigation Manager
Fraud Strand
Security Team
Date: = XX/XX/XX
SUBJECT: - INVESTIGATION REF: - POLTD/YYYY/XXXX - OFFICE XXXX / SUSPECT NAME
MR ANONYMOUS
I have completed the financial investigation into the above named person and unfortunately the entire
property portfolio held by Mr Anonymous is in negative equity or indeed close to this position and as
such restraint under POCA 2002 would not be appropriate.
Further to this I am aware that the cheques passed to the Investigation Team by the defendant have
all been referred to the drawer.
In view of the fact that there are no identifiable assets, that may service any confiscation order, the
financial investigation has now been concluded and confiscation should not be evoked. The
Investigator Officer and our agents should request compensation, and costs at any future sentencing
hearing and any outstanding loss should be reported to the Former Subpostmaster Debt Recovery
Team for their action.
The Financial Investigation case file is now formally closed.
Regards,
Financial Investigation Manager
Post Office Ltd, Fraud Strand.
CC. (Senior Lawyer Criminal Law Division)
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Appendix 23
Legal Services, Civil law, Royal Mail Group
Case Information
127 cases were handled between April 2008 and September 2009.
Year External Solicitor Costs
2008/09 £130,565.18
2009/10 YTD @ P6 £87,552.75
Staff Costs
Staff * Total Costs
Senior Manager £7,839.52
2A Manager £3,191.50
£11,031.02
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Appendix 24
Criminal law Team Costs Versus Recoveries
2008/09 2009/10 YTD to P6
Costs Recoveries Costs Recoveries
April 13.1 35.8 9.4 2.0
May 417 26 9.6 89.0
June 76 22.2 24.6 24.0
July 8.6 45 23.9 194.4
Aug 5.4 39.2 6.6 27
Sept 16.0 37.0 34.5 1.5
Oct 18.9 10.4 9.3 -
Nov 14.0 49
Dec 9.7 15.1
Jan 5.8 4.6
Feb 3.9 21.4
March 10.3 14
Total 154.9 198.8 118.0 313.6
Number of Criminal law Cases Handled
2008/09 2009/10 YTD to P6
April 7 12
May 2 9
June 10 1
July 5 12
Aug 2 10
Sept 12 12
Oct 8
Nov 10
Dec 8
Jan 6
Feb 16
March 16
Total 102 66
Source: Juliet McFarlane, Criminal Law Team, Royal Mail Group, October ’09.
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Appendix 25
Contract Advisor Staff Costs
2008/09
*Total
Hours Per Case Time level 3b Total Cost
No. of Cases 229 1.5 343.5 21.3 7316.55
2009/10 YTD to P6
*Total
Hours Per Case Time level 3b Total Cost
No. of Cases 135 1.5 202.5 21.3 4313.25
# Estimate of Contract Advisor's time spent dealing with former
Subpostmaster cases.
Source: John Breeden, 15 October ‘09
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Appendix 26
Former Subpostmaster e2e Debt Processes
High level Objectives
= To reduce future debt.
= To improve debt recovery.
High level Accountabilities (A) and Responsibilities ® (i.e. Combination of
current process and ‘ideal’ state from a debt perspective).
Human Resources
= Administrate payroll for recovery of debts. (i.e. Deductions from
remuneration). (A)
= Support and help design appointment process to attract high calibre new
Subpostmasters. (R)
Finance
= Assess agency business plans to mitigate against potential losses and debts.
(A)
Network Field Support Team (formerly Audit)
= Conduct financial audits in Post Office Branches and report the facts. (A)
= Identify discrepancies and potential debt in Post Office Branches. (R)
= Inform key stakeholders of findings (i.e. Security and Investigation, Product
and Branch Accounting, Contract Advisors). (R)
= Provide appropriate evidence for further investigation and potential legal
proceedings to help recover debts. (R)
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Contract Advisors
Precautionary Suspend a Subpostmaster’s contract. (A)
Investigate and establish if breaches of contract — outcome of investigation is
to either terminate or reinstate the Subpostmaster’s contract (A)
Appoint temporary Subpostmaster this is not the Contract Advisors
accountability and the resource for this work lies in another team within
Network Support (A) — Contract Advisor is to work with all parties to ensure
temporary Subpostmaster is appointed (R).
Conduct interview for appointment of new Subpostmaster and decide if
applicant is successful. (A)
Issue charges against Subpostmaster for breach of contract. (A)
Agree level of culpability in the event of burglaries, robberies and theft based
on recommendation provided by Security Manager (A)
Interview offending Subpostmaster in respect of breaches of contract which
can include discrepancies and / or debts. (i.e. Acquire admission / denial). (R)
Inform key stakeholders of pending actions / outcome (Security and
Investigation i.e. Where there is criminal activity, Product and Branch
Accounting i.e. Where there are debts to be repaid). (R)
To remit any repayments of debt to Finance. (R)
Product and Branch Accounting
Identify discrepancies and potential debt in Post Office Branches. (i.e. late
discrepancies and detection within Post Office Ltd Finance System). (A)
Single ‘case’ accountability. (i.e. Prioritising, controlling, monitoring, and
reviewing all cases). (A)
Financial accounting and processing repayments. (A)
Assess viability and likelihood of recovering debts with the involvement of
other stakeholders. (e.g. Legal services, Security Teams). (A)
Write-off authority. (A)
Delivery against targets to reduce future debt and improve debt recovery. (A)
Create and update case records. (R)
Investigation and debt recovery. (Incl. Use of ‘Tracing’ tools to confirm
address details and identify assets throughout the lifecycle of the case). (R)
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To provide evidence and documentation to key stakeholders. (i.e. Security
and Investigation and legal departments) for subsequent investigation and / or
legal proceedings. (R)
Production and communication of Management Information. (e.g. Number and
value of cases, top 20% of cases by value, aged debt, cost of debt recovery
versus debt recovered, root cause analysis, and value of debts repaid by
repayment type to name but a few). (R)
Security & Investigation
Investigate suspicious and known criminal activity in a cost effective manner.
(e.g. Gathering facts and further evidence, interviewing offenders, prepare
‘Committal Bundle’ for subsequent legal proceedings and attending court
hearings). (A)
Assess the likelihood of offenders dissipating of assets, issue restraint orders
to secure assets for subsequent debt recovery, identify assets for subsequent
confiscation and compensation for the recovery of monies and attend Court
Hearings and Sentencing. (A)
Develop and deliver ‘Fraud Programmes' to mitigate against subsequent loss /
crime. (A) Although ‘owned’ by individuals it is the ‘collective’ that delivers,
and therefore the buck would not necessarily rest with one person.
Delivery against targets to reduce future debt and improve debt recovery. (A)
Although ‘owned’ by individuals it is the ‘collective’ that delivers, and therefore
the buck would not necessarily rest with one person.
Delivery against targets to reduce the cost of debt recovery versus value of
debts recovered. (A) Although ‘owned’ by individuals it is the ‘collective’ that
delivers, and therefore the buck would not necessarily rest with one person.
Create and update records and case files that may or may not result in former
Subpostmaster debt. (R)
Monitor the investigation and recovery of monies from Subpostmasters in the
event of burglaries, robberies and theft and recommend the level of
culpability. (R)
Identify weaknesses and / or other failures in business processes to help
maximise recovery and mitigate against subsequent loss. (R)
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Engage Criminal Legal Team to assist with legal proceedings. (R)
To remit repayments to Finance. (R)
Criminal legal Team
Engage 3” party solicitors where cases require criminal legal services. (A)
To provide legal support and advice. (A)
Delivery against targets to reduce future debt and improve debt recovery. (A)
Delivery against targets to reduce the cost of debt recovery versus value of
debts recovered. (A)
To remit repayments to Finance. (R)
To inform Security Team and Product and Branch Accounting of outcome. (i.e.
Sentence / Recovery of monies). (R)
Civil legal Team
Engage 3” party solicitors where cases require civil legal services. (A)
To provide legal support and advice. (A)
Delivery against targets to reduce future debt and improve debt recovery. (A)
Delivery against targets to reduce the cost of debt recovery versus value of
debts recovered. (A)
To remit repayments to Product and Branch Accounting. (R)
To inform Product and Branch Accounting of outcome. (i.e. Sentence /
Recovery of monies). (R)
Key Conclusions
Alison Bolsover, Senior Manager for the ‘Former Subpostmaster Debt Recovery
Team’ is accountable for managing the overall debt. The Network Team is
accountable for not incurring debt in the first instance.
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Appendix 27
End To End Debt Recovery Costs
Staff Costs Per Annum
Team Costs
Product and Branch Accounting, Finance £259,949.68
Crime Risk Team (formerly Casework Team), Security £58,296.42
Investigation Team, Security Team £680,369.51
Financial Investigation Unit, Security Team £169,944 85
Legal Services, Civil Law Team, Royal Mail Group £11,031.02
Legal Services, Criminal Law Team, Royal Mail Group #Unknown
Contract Management, Network Team £8,626.50
Total Staff Costs £1,188,217.98
# No measurement currently in place. It is assumed that all internal Royal Mail staff
costs are maintained centrally.
External Solicitor Costs
Team Costs
Civil legal Proceedings #£1475,105.50
Criminal legal Proceedings #£936 000.00
Total External Solicitor Costs £411,105.50
* Costs at the end of September '09 were £87,552.75 and £118,000 respectively.
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Appendix 27
End To End Debt Recovery Costs Cont’d
Non Staff Costs
Description Costs
*Land Registry Searches £2,294.00
Audio Transcription Services £8,500.00
* Costs at the end of September ’09 were £1,147.00
Total Costs
Staff Costs £1,188,217.98
Non Staff Costs £10,794.00
External Solicitor Costs £411,105.50
Total £1,610,117.48
Note: Calculations exclude internal Royal Mail Criminal legal team’s staff costs and costs
associated with appointing a temporary / new Subpostmaster. (i.e. Where debts have resulted
in the current Subpostmaster being suspended or having their contract terminated
permanently). Also, excluded are the costs associated with repayment types (e.g. Credit card,
cheque) and Tracing Agents.
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Appendix 28
P&BA Workloads and Staffing Levels 2009/10
Value of
Value of Cases Recoveries
Period
No. Number of Cases £M £K
Period 1 957 £11,353 £197
Period 2 891 £11,340 £295
Period 3 849 £11,306 £382
Period 4 838 £11,037 £514
Period 5 835 £11,144 £181
Period 6 831 £11,361 £139
Period 7 787 £11,325 £290
Ave 855 £11,267 £285
Headcount is 7 full time employees.
2008/09
Ave. Value of
Value of Value of Recoveries Per
Cases £M_ Recoveries £M Month £K
£11.111 £3.075 £256
Source: Jackie Whitham, Product and Branch Accounting, November ’09.
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Extended Crime Benefits
2008/09
Income £10,737.53
Expenditure £10,546.51
2009/10 YTD to P6
Income £18,611.30
Expenditure £9,140.75
Source: Peter Hart, Finance, November ’09.
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Appendix 29
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Case Management System Terms of Reference
ae
H:\Operations\Debt
Reviews\TORs\Case
Debt Recovery System’s Terms of Reference
zl)
H:\Operations\Debt
Reviews\TORs\Debt I
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Appendix 30
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Appendix 31
Tangible Benefits — Rough Calculations
3)
H:\Operations\Debt
Reviews\P&BA Forme
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Appendix 32
Bad Debt Provisions
Year Actual Debt I Write Provision Recovered Times
Off Overstated
07/08 £7,958,000 £741,000 I £8,047,000 £1,666,000 11
08/09 £11,111,000 £818,000 I £11,126,000 £3,075,000 I 14
09/10 To I £11,361,000 I £314,000 I £11,423,000 I £1,708,000 I 36
P6
The current provision for bad debts is overstated by £11,109,000 i.e. £11,423,000
less £314,000 at period 06 2009/10.
Assuming a write off value of £628K for 09/010 and allowing 10 times contingency in
subsequent years the write off value would be £6,280,000.
Therefore, £11,423 less £6,280,000 = £5,143,000 i.e. £5,143,000 overstated.
Source: Martin Knights, Finance, December ’09.
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