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POLICY DOCUMENT- Postmasters’ In Service Debt
A
Reference information
Policy type Postmasters’ Lifecycle Issue
Ref Policy issue 8
Date
Status Cleared for use.
Version no. Version 3.0
Author Ravi Chauhan, Contracts and Policy Advisor
Owner Paul Inwood Postmaster Contracts and Policy Development Manager
Review Date I April 2018.
Key Contracts Team: John Breeden, Lin Norbury, Andrew Carpenter, Carol Ballan
stakeholders I Finance Service Centre: Alison Bolsover, Michelle Stevens, Dawn Wall
Finance: Carl Nielsen Fraud Analysis Team: Sally Smith, Kim Abbotts
Approval
Role Name(s) Date
Authorised Paul Inwood, Contracts and Policy Manager April 2017
Version control
Version No. Reason for issue Date
Version 1.0 Policy review to assess the relevance and fitness for 18 September 2013
purpose of existing POL contractual policies and processes
for all Post Office branch models.
Version 1.1 Amendment to version 1.0, Section 12.0 referring to the 22 October 2013
write off authority levels for Network Services.
Version 2.0 Version following post implementation review of version 4 December 2014
a1.
Version 3.0 Amendments following further review. April 2017
CONTENTS
PART 1
1.0 Statement
2.0 Glossary
3.0 Contractual position
4.0 Right of recovery of sums due
5.0 Repayment of outstanding debt
6.0 Pluralist Postmasters and multiple partners
7.0 Death in service
Page 1 of 10
8.0 Securing the debt
9.0 Write offs
10.0 Debt disputes — Transactional debt
11.0 Debt disputes — Non-transactional debt
PART 2 - Policy Implementation
1.0 Implementation procedures
2.0 Standard letters and documents
SUBJECT: Policy for dealing with the recovery of Postmaster’s in service debt
PART1
1.0 Statement
1.1 The purpose of this policy is to clearly set out the processes Post Office Ltd (POL) will follow to
recover debt incurred in service by Postmasters of all Post Office branches. This policy supersedes
custom and practice formerly implemented to recover debt incurred in service.
2.0 Glossary
Word/term Definition
AAT Agents Accounting Team
Branch The Post Office branch operated by the Postmaster.
Branch When Branch Trading is completed, Horizon calculates the expected cash
Discrepancy position, using the transactions completed through Horizon. The branch
then counts the actual cash in the branch and declares this. A branch
discrepancy is where there is a difference between these two values, either
acash shortage or surplus.
Branch Trading The act of the monthly balancing of the branch accounts. The Postmaster is
required to reconcile the cash and stock in his branch against what the
Horizon system is displaying there should exist in real terms.
DFR Deduction from fees/ remuneration
Existing Contract Acontract currently in place between Post Office Ltd and the Postmaster (or, as
appropriate, a shareholder and/or a director of the Postmaster) for the
operation of a Post Office branch.
FSC Finance Service Centre
NBSC Network Business Support Centre
Non-transactional I Refers to debt incurred outside of branch transactions. Incurred due to
Debt unpaid invoices for example: Franchise Insurance Waivers (once a year);
Lease of electronic scales (once every quarter); Property projects (e.g.
refurbishment work).
NT Agreement Contractual conditions for the operation of a Local Post Office® and Main Post
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Office®.
Operator Refers to an individual, company or partnership responsible for the
operation of a Local or Main branch under an NT Agreement only
Postmaster This is the collective term for an individual, company or partnership contracting
with POL as an Operator, Subpostmaster or Franchisee.
POL Post Office Limited
Settle Centrally
In Horizon Postmasters can choose the option to “Accept and Settle
Centrally” which signifies acceptance of a loss or gain within a branch unless
the dispute process is instigated. “Settle Centrally” does not prohibit
further investigation which might offset all or part of the loss/ gain
accepted earlier, but this is the branch’s responsibility to initiate.
Subpostmaster/ Refers to an individual, company or partnership responsible for the
Franchisee operation of a Post Office branch under a Traditional Contract
Traditional Traditional contracts include: Subpostmasters Contract; Community
Contract Subpostmasters Contract; Modified Subpostmasters Contract; Franchise
Agreement; Franchise Independent Retailer Agreement; Satellite contract;
Outreach Agreements; Company Operated Contract; Local Funded; Paystation
Direct Settlement; PO Essential; Temporary Subpostmasters Contract
Transaction Transaction Corrections are sent to the branches via their Horizon system
Correction when a discrepancy has occurred in their accounting or where a branch is
considered liable for payment processing failures such as negligent
acceptance of counterfeit currency. A discrepancy may not have arisen in
branch but a loss has been identified at some point which is attributable to
the specific branch. These are sent out by teams within Finance Service
Centre who deal with various clients/products.
Transactional
Debt
Refers to debt incurred in branch. Usually created by a Transaction
Correction or a Branch Discrepancy which has occurred in the office
accounts at branch trading.
3.0 Contractual position
3.1 From a purely contractual perspective the Postmaster of a Post Office branch is responsible for
making good without delay:
e any loss of Post Office cash and stock;
e any losses incurred whilst operating under their respective contractual agreements that
come to light following termination of the agreement;
¢ all losses incurred through their own negligence, carelessness or error and also for losses
caused by their Post Office assistants.
4.0 Right of recovery of sums due
Traditional contracts
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4.2
5.0
5.1
5.2
POL has a common law right to set off sums owed by the Subpostmaster/Franchisee to POL
against some payments made by POL to the Subpostmaster/Franchisee.
NT Agreements
Where money is owed by an Operator to POL whether that money is owed under an Existing
Contract or lease of premises or otherwise, POL at its own discretion may recover all of that
money from any sum due to the Operator under the NT Agreement or the Existing Contract,
including their fees or any termination payment owing to Operators leaving the Post Office
network. This right does not affect POL’s right to require an Operator to make good any
deficiencies identified through the late account procedure and/or repay any other debts due.
Also note that POL has made a business decision that sums owed by the Operator cannot
be recovered from funds POL releases to the Operator under the Network Transformation
Programme namely investment payments, or conversion or transition payments.
Repayment of outstanding debt
To ensure that this policy is consistent with the contractual relationships between POL and the
Postmasters it is designed to provide a clear framework of repayment options, where
immediate repayment is not possible.
POL’s main objective should be to recover debt as promptly as possible via the following
payment methods:
Repayment method Authorisation Payment options
1. Repayment of full amount in one Agents Accounting 1. Card payment;
instalment. Team
2. Repayment plan where Postmaster Agents Accounting 2. Automatic transfers
proposes a reasonable repayment Team Leader (bacs or chaps
plan up to 24 months. payment);
3. Repayment plan where Postmaster Senior Debt Recovery
proposes a reasonable repayment Manager & Head of 3. Deduction from
plan beyond 24 months. Agency Contracts remuneration; or
4. Cheque.
5.3 The following rules apply to repayment plans:
5.3.1 Only one instalment plan can be in place at any time. However where the Postmaster:
5.3.1.1 incurs further transactional debt during a time they already have an
instalment plan in place; and
5.3.1.2 is currently repaying that debt via DFR; and
5.3.1.3 the existing deductions from DFR are below 25% of the Branch fees/
remuneration;
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then the AAT Leader may provide authority for the Postmaster to add the repayment
of the new debt to the existing DFR plan, however monthly repayments must not
exceed the 25% remuneration threshold. Additionally if the Postmaster takes up this
option then the length of the existing instalment plan will not be extended unless
agreed by the AAT Leader;
5.3.2 In cases where the monthly instalments would be insufficient to repay the debt over
the agreed repayment period, a lump sum will be required from the Postmaster to
repay the balance and this must be received by the AAT prior to the end date of the
repayment plan in cleared funds;
5.3.3 Where repayment is being made via DFR:
5.3.1.1 POL must consider the circumstances of the Postmaster’s branch including
its fees/remuneration for the previous 12 months and the term remaining
on the Postmaster’s agreement (this is of particular relevance where a
Postmaster has given notice to terminate in accordance with his respective
operating contract);
5.3.1.2 the maximum amount that can be deducted each month is 25% of the
monthly remuneration, unless the Postmaster voluntarily offered more;
5.3.1.3 If the case involves a pluralist Postmaster the percentage of
fees/remuneration deducted is to be calculated in the aggregated
fees/remuneration for all branches operated by the Postmaster.
6.0 Pluralist Postmasters and multiple partners
6.1
In the case of pluralist Postmasters and multiple partners, POL will consider the aggregated
remuneration of all of the pluralist’s or multiple partners’ branches as opposed to the
individual position of the site where the loss has occurred.
7.0 Death in service
71
7.2
The recovery of debt from a Postmaster who has died in service will be dealt with by the
Former Agents Debt team. It is important to note that each case must be treated with
sensitivity and due diligence. Where POL has contracted with a company, as opposed to an
individual, the branch may be able to continue operating. In such an instance POL will continue
to deploy its business as usual policy.
The Former Agents Debt team will write (signed for delivery) to the next of kin to notify them
of the outstanding debt amount and requesting repayment, giving 21 days to respond. If a
response is received, repayment details are discussed with the next of kin. If no response is
received the Former Agents Debt team will research whether the address for the next of kin is
correct or whether another contact within the Postmaster’s family is available. If the address is
correct and no response has been received a second letter is sent out to the next of kin, giving
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14 days to respond. Subsequent to this if no response is received a third letter is sent out,
giving 7 days to respond. Further failure to respond prompts the requirement to send a
referral to POL’s legal representatives for further action.
7.3 Note that if POL was unsuccessful in recovery, the Former Agents Debt team will weigh up the
cost effectiveness of pursuing the debt prior to referring it to POL’s legal representatives.
7.4 In regards the repayment options available to former Postmasters payment must be taken
8.0
8.1
8.2
9.0
10.0
10.1
10.2
10.3
10.3.1
10.3.2
10.3.3
using direct payment methods.
Securing the debt
The debt may be secured via guarantees. The Guarantees in Company to Company
relationships policy should be referred to.
The Postmaster should obtain independent legal advice before providing a Guarantee. POL
should obtain an Independent Legal Advice (“ILA”) certificate confirming this. This will minimise
the risk of the Guarantee being set aside.
Write offs
This section is currently being reviewed.
Debt disputes -Transactional debt
POL acknowledges the potential financial impact and stress that may be caused by
unexpected Transaction Corrections or Branch Discrepancies. An effective dispute resolution
process is essential to ensure that settled centrally debts are not recovered from Postmasters
without reasonable time to investigate, challenge and resolve individual amounts.
There are two routes by which Postmasters might instigate the dispute process:
¢ Transaction Corrections
e Branch Discrepancies
Transaction Corrections
Branches should contact the Transaction Correction issuer within 7 days of acceptance at
branch to challenge the evidence provided to support the Transaction Correction wherever
possible. Where time permits prior to Branch Trading, branches should challenge prior to
acceptance.
If the challenge is accepted by POL in full or part at this stage, a compensating Transaction
Correction will be issued to close the dispute.
On receipt of supporting information the issuing team will suspend the debt recovery process,
if the Transaction Correction was settled centrally, until a response has been made. Written
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submissions to the specific team should receive a written response, within 10 working days, in
line with business standards. It is recommended that written submissions be sent using a
priority service.
Transaction Corrections where there is insufficient time to investigate prior to Branch Trading
roll over.
10.3.4
10.3.5 Supporting information to support any dispute must then be presented by the Postmaster in
writing via Special Delivery to Agents Accounting Team (,/~
within 7 days quoting the above reference number.
10.3.6 The Agents Accounting Team will then present to the issuing team who will suspend the debt
recovery process, if the Transaction Correction was settled centrally, until a written response
has been made. FSC will provide an update on the query or a resolution, where possible within
10 working days.
10.4 Branch Discrepancie
10.4.1 The resolution of branch discrepancies is the responsibility of the branch. If the Postmaster
requires assistance with an unidentified discrepancy, then they should contact NBSC.
10.4.2 If the Postmaster believes a transaction correction is required they should contact the
appropriate department in FSC via NBSC! It is FSC’s sole responsibility to
update NBSC of any changes to a department’s contact number. Supporting information
should be presented and resolution then follows the transaction correction process. It is
recommended that this be sent using a priority service. FSC will provide an update on the
query or a resolution, within 10 working days.
10.5 Further Review
10.5.1 If the Postmaster believes that the supporting information provided to FSC adequately
supports their dispute but the dispute has not been allowed, for transaction corrections only they
should make a written submission using the details provided with the notification. For other types of
enquiry, they should contact NBSC.
10.5.2 The debt recovery process, if settled centrally, will be suspended pending a written
response.
10.5.3. A written response will be provided, within 10 working days, in line with Business
standards.
10.5.4 — All correspondence will be included on the Cloud City for the Network to be able to view.
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10.5.5 Where a dispute is subsequently not upheld, a branch then becomes liable for the settled
centrally debt and no repayment will be made for any debt made good.
11.0 Debt Disputes - Non-transactional debt
11.1 Where the Postmaster disputes the amount of an invoice he should raise a query using the
C ~ “lemail address. The Agents Accounting Team will
then forward on the query to the responsible individual within POL who raised the invoice. The
responsible individual will respond to the Agents Accounting Team to confirm the amount and
will respond to the postmaster accordingly. Where the Postmaster has successfully disputed an
invoice amount (i.e. he has been charged incorrectly), the responsible individual will send an
SD05 form to the Accounts Receivable Team who will raise a credit note to offset against the
invoice.
PART 2
1.0 Implementation procedures
Note that the contracts advisor should not be contacted in cases where the Postmaster is unresponsive.
Alog of contact attempts should be kept by the team tasked with making contact, and in cases of
continued non-response the process should continue beyond that stage of the process, on the basis that
aTCis not anticipated.
Entries into the concurrence reported should contain debts the PM is refusing to repay, but not disputed
items or a lack of response.
Feedback re process maps é
Process chart A — should this include the dispute process if at box 3a or 3b the PMR indicates he
wanted to dispute the debt? Box 2 and 6 of the process chart refer to a £5k limit whereas the notes
for boxes 3a and 3b refer to a £10k figure, not sure why this is different? At box 11 the process
chart indicates the CA consults with FAT whereas the notes indicate FAT and SSRT consult with
the CA. As the case is referred to FAT I would have thought they will consult with the CA (not sure
if SSRT will be involved in this discussion) and I think we need to consider the outputs of the
consultation which could be an audit or progress with debt recovery ie back to recovery in the
process chart and how this is shown. In the flow on the process chart would the decision taken at
box 3a to refer to FAT then take this direct to box 11 or is referral only made if the PMR does not
make good?
Process chart B —I have similar questions and again should this include the dispute process
particularly as this looks for the issue to be referred back to the originator of the invoice —- we have
had a number of NT invoices referred to CAs for non-payment but this is due to the PMR not
agreeing with the amount and only the NT team can resolve these issues and again the case
should not have been referred to the CA until the dispute is resolved.
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Process Charts A and B ey
Process for recovery of in service
. PM01%20Current%2
transactional debt incurred by a ODebt%20Recovery.v:
Postmaster
(B) Process for recovery of in service non-
transactional debt incurred by a
Postmaster.
Process Chart C fel I
Process for recovery of in Service debt
. pcC - Former
incurred by a former Postmaster. Postmaster debt reco
2.0 Standard letters and documents
Standard Letter A
Statement of debt detailing amount of outstanding transactional or non-
transactional debt.
2)
SIA - New Statement
V5 0 15 05 2014.doo
Standard Letter B
Reminder of debt, following Standard Letter A, detailing amount of
outstanding transactional or non-transactional debt.
cul?)
BB - New Dunning
Doc 04 06 2014.docx
Standard Letter C
Subsequent to voluntary agreement, letter agreeing with Postmaster that
transactional or non-transactional debt will be deducted from
fees/remuneration in one instalment.
»)
sIC - Dfr Voluntary
single payment.docx
Standard Letter D
Subsequent to voluntary agreement, letter agreeing with Postmaster that
transactional or non-transactional debt will be deducted from
fees/remuneration over a number of instalments.
_)
ID - Dfr Voluntary
instalments. docx
Standard Letter E
Letter to Postmaster who has an existing instalment plan in place, has
settled a further transactional debt centrally, and POL is deducting the
further debt from fees/remuneration in one instalment.
i
sIK - Dfr Forced
single payment.docx
Standard Letter F
Letter to Postmaster who has an existing instalment plan in place, has
settled a further transactional debt centrally, and POL is deducting the
further debt from fees/remuneration over a number of instalments.
=)
slL - Dfr Forced
instalments.docx
Standard Letter G
First statement of debt letter to former Postmaster.
je
SIG - 1st letter to
former Postmasters.c
Standard Letter H
Second letter to former Postmaster reminding of unpaid debt.
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=)
SIH - 2nd letter to
former Postmasters.c
Standard Letter I
Letter of action to former Postmaster subsequent to Standard Letter I and
J
ay)
sil- 3nd letter to
former Postmasters.c
10
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