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Summary of discussion on Compliance, Conformance, Losses and Debt
Keith Woollard
Lynn P Hobbs
Shared papers on compliance, conformance, network costs and efficiency
Activity plan submitted indicating unscoped benefit of £500k (minimum figure to register during
Strategic Planning round) plus a budget bid for £950k (undefined and again simply an initial
figure to register there is likely to be some cost attached to this) a
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The areas that could be in scope are, Rod sorrows Kat Support
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Conformance — achieving a change in culture
Compliance — achieving a step change to reduce costs
Risk Management including the Risk Model
P&BA activities
Minimising losses and debt and management of losses and debt
Security issues
Investigation cases
Product design }
Sterling and Foreign cash holdings y
Approach Aton - Qugio Dy -
Consider cross functional programme with working parties QOo-2as
Workshop in January with all interested parties to scope the programme \
Dates to be offered for January workshop: 7, 11, 15 - location likely to Rugby php? ye Spl
Potential attendees: . . wp
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Martin Rouse Vicky Noble Gayle Laverick I John Breeden
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LJillKennedy I AnnCruttenden__Ij[Marketing input] I [Comms] [Neil Ennis] leant I
Meeting to be held 30/11 to scope workshop s) °
JB/GLVN responsible for designing and organising workshop
Mixture of ‘Show and Tell’ in respect of current or planned initiatives plus syndicate work
Aim will be to prioritise and rationalise competing demands and initiatives to ensure we focus on
what will deliver the biggest improvements for the limited resource available
Offer Gary Hockey Morley opportunity to send product managers to the workshop to make links
between non conformance and product design
Need to understand how this links with initiatives within LEAN programme to avoid any double
counting of benefits.
Need clarity from Strategic Planning session on any other activity plans focusing on these areas
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Network Transformation (Cost and Efficiency)
There are a number of areas to consider under this heading. The whole subject of network transformation can be as narrow
or as wide as we care to make it.
We need to scope the costs areas in the network, review all of these to understand the size of prize, the cost of delivering the
prize and where the tipping point is i.e. where the level of additional activity exceeds the benefit.
Other teams are key to the success of this project and involvement from Finance (P&BA, Compliance and Security), Property,
Marketing (Product managers) is essential
Compliance
We build in and expect non-compliance across the whole network. Compliance is the key to achieving a significant cost
reduction in BAU activities, in reducing debt, in increasing customer satisfaction and therefore improving the overall bottom
line.
LEAN
This would involve a fundamental review of everything we do and how we do it to achieve a more cost effective, customer
focused approach that should deliver savings or provide opportunities to redirect resource to grow sales.
Neil Ennis is leading this programme and we need to work closely with Neil to ensure we maximise the benefits to network
from LEAN
Losses and Debt management
We need to understand in financial terms the level of branch discrepancies resulting in real cash losses to PO Ltd to
determine what we could do to reduce this figure and limit our exposure to unrecoverable losses accepting that to eliminate
all losses and debt would probably require a cost in excess of the benefit. Crown Office losses should be included.
Branches
The cost of operating many of our branches far exceeds what we earn from them in income. The review should include:
® Feasibility of closing/ relocating specific branches including Crowns with potential expensive lease increases
® Operating models that reduce costs and deliver essential service
Recommendations
Compliance
® — Establish a cross-functional programme with initial responsibility to’
® Define what's ‘in scope’
® Quantify the potential ‘size of the prize’
® Quantify the resource to deliver and impact on other activity
® — Identify quick wins and priorities
LEAN
@ Understand the impact of LEAN in terms of how it affects the Network Directorate and agree an approach to delivering
cost efficiencies
Branches
® Consider radical approaches to branches costing money to run
Losses and debt recovery
® Understand the actual cost to the network — what ends up on the bottom line?
® Quantify the cost of non conformance
@ Determine actions to improve conformance, what would these cost and how would we deliver these?
® Agree approaches with other PO Ltd tearns — cash management, P&BA, audit and compliance
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Network Efficiency
The whole subject of network efficiency can be as narrow or as wide as we care to make it.
My view is that if we consider the costs areas in the network we need to review all of these to understand the prize, the
cost of delivering the prize and where the tipping point is.
Lean programme
In a nutshell and as I understand it this is about fundamentally changing our approach, our processes and how we
deliver across a range of internal activities. One area that has been reviewed is Crown Offices and it's unfortunate that
our meeting on 7/1 1is in advance of the presentation to be delivered by the Borton Group who are consultants
providing support to Neil Ennis about what the prize might look like.
Areas in Crowns likely to be highlighted in the review are:
Counter serving — are we as effective and efficient at this as we might be particularly following changes to product
mix. The review may well highlight the inefficient way in which we find any number of ways to process what arguably
seem like very similar or the same type of product
Back office admin — what is it costing and are there better ways of doing this
BM support — we're in the process of changing this — is now the right time? Is it a done deal in terms of Bol financial
support
There are other areas within the team where Lean could make a difference and I'll be in a position to discuss in more
detail after the presentation on 8/11
Branches
The cost of operating some of our branches far exceeds what we earn from them in income. I'm not sure how much
of this has been factored into the NC area pians, certainly I know some has but the information to base some of these
decisions on has not been as good as it might be. The following gives a favour of where there could be opportunities.
We currently pay £1.125m per year in property costs to keep open 20 branches
We have around 50 branches where we have temporary agents running the branches and we are paying a fixed sum
over and above the remuneration warranted by the branch to keep it open. The additional cost hasn't been quantified
because of the way in which this is recorded in Salford. Work is underway to quantify this
We have a number of branches operating with a temp for a considerable length of time, years in some cases. We
might want to consider advertising these branches and if no-one is interested taking a pragmatic decision to close
We are committed to paying transition or top-up payments in branches converted to franchise status from Crowns.
There is little we can do about this unless we have an opportunity to franchise with an alternative partner which might
reduce the payment
We run three branches in various Government buildings e.g. House of Commons. These are operated by employees
and are Crown Offices. There could be scope to run these as agency branches and make a saving not yet quantified
We have 46 Crown branches with lease breaks over the next three to four years, 19 of these are within haif a mile of a
WHS location and whilst some of the WHS stores may not be able to accommodate the Crown branch there could be
scope for further franchising dependent on the ET's view of commitments given
Losses and Debt management
We need to understand in financial terms the level of branch discrepancies resulting in real cash losses to PO Ltd to
determine what more we could do to reduce this figure and whether the cost of not doing something else is greater in
the long term.
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Avery brief analysis of the audit findings revealed the following:
2006/07
* 1396 branches were audited in 2006/07
* Shortages were discovered in 937 branches
* — The total amount of discrepancies found in branches following these audits was (£3.788m). This figure includes a
number of accounting discrepancies including Transaction Corrections waiting to be issued by P&BA;
unfortunately this is not quantifiable from the information provided.
* 895 branches were visited as a result of being identified by the Risk Model as requiring an audit. Shortages were
found in 593 of these branches resulting in an overall discrepancy of (£1.285m)
* 295 branches were visited following requests from various people (Outlet Support team, BDMs, P&BA, and
Investigation) for ‘special audits’. Shortages were found in 237 branches resulting in an overall discrepancy of
(£2.411m),
* — Shortages in 82 branches were due to ‘dishonest acts’ and the resultant discrepancy was £945k
* — Shortages of over £50k were discovered in 19 branches. The discrepancies in these branches amounted to
(£1.629m) in total
* — (£1.782m) was posted to late accounts which in the main means we have to chase this debt with ex
subpostmasters
2007/08 (information up to P6 - end Sept)
* 544 branches have been audited up to the end of period 6
* — Shortages were discovered in 406 branches
* The total amount of discrepancies found in branches following these audits was (£3.865m) although a shortage
of (£1.46m) in one branch has now been resolved. Even so the trend is upward. This figure includes a number of
accounting discrepancies including Transaction Corrections waiting to be issued by P&BA; unfortunately this is not
quantifiable from the information provided.
* 325 branches were visited as a result of being identified by the Risk Model as requiring an audit. Shortages were
found in 233 of these branches resulting in an overall discrepancy of (£2.322m)
* 188 branches were visited following requests from various people (Outlet Support team, BDMs, P&BA, and
Investigation) for 'special audits’. Shortages were found in 153 branches resulting in an overall discrepancy of
(£1.532m).
* — Shortages in 36 branches were due to ‘dishonest acts’ and the resultant discrepancy stands at £359k
* — Shortages of over £50k were discovered in 12 branches. The discrepancies in these branches amounted to
(£2.602m) although the largest figure of (£1.46m) in one branch has now been resolved. The question is how can
one community branch accumulate discrepancies of £1.46m without the risk model picking this up?
* — (£1,027m) has been posted to late accounts which in the main means we have to chase this debt with ex
subpostmasters
Ultimately some of the above will not result in loss to the business but there is obviously a cost to the business of
managing all of the errors creating these discrepancies. Branch trading losses are not included in the above which is
another source of significant potential loss
t would hope to have further analysis and proposals around debt management and losses for our meeting
Crown Office losses
These continue at a very high rate and in most cases result in a loss to the bottom line. Again I would hope to have
further analysis for our meeting
Recommendations
Quantify the potential ‘size of the prize’
Quantify the resource to deliver and impact on other activity
LEAN
Understand the impact of LEAN in terms of how it affects the Network Directorate and agree an approach to.
delivering cost efficiencies — suggest further meeting required after 8/11/07
Branches
Consider radical approaches to branches costing money to run based on the following:
@ isthe branch essential to meet the access criteria?
® How much income does it currently make for PO Ltd?
What are the actual costs to PO Ltd?
@ What potential for growth has been identified by the sales Potential model and what would be the impact
financially if a branch achieved these levels
® What level of costs would PO Ltd be prepared to support ongoing to maintain the branch
Losses and debt recovery
Understand the actual cost to the network — what ends up on the bottom line?
Quantify the cost of non conformance —is this feasible?
Determine actions to improve conformance, what would these cost and how would we deliver these?
Agree approaches with other PO Ltd teams — cash management, P&BA, audit and compliance
Crown Office losses
Assess impact of new policy recently communicated
Consider further actions to reduce losses — e.g. possible impact on Goldmine pot?
Other issues to consider
CWU and NFSP
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We also need to get the Inventory Teams to take more ownership up front. Because of the IA, we
don't have enough historical information to prove where we have had influence; they would get
the money back into the cash centres, 6 weeks earlier than we could.
b) FONCH
The size of the prize is very much dependent on the difference between target and actual
performance. Like ONCH above, the intervention that is made should cover the costs of resource
and the interest rate. The problem with the FONCH branches is that we are less likely to see the
return due to the smaller numbers involved. This is not helped by the ratio versus sales that is
used. For example, a branch may sell £1000 of currency per week, and has £3000 of holdings. This
gives the branch a ratio of 1:3 and this is one of the branches that we would focus on. However,
even if we recovered the £1000 surplus, it would not be enough to cover our costs.
Therefore I think our focus needs to change within the team. We should take ownership of the
bigger branches as the intervention would be quicker than the BEMs and the size of the prize
would be a lot bigger.
As mentioned above, we need to be in a position to put a cost against the processes that we
define, to assess whether what we are doing is worth it. If there isn't a financial benefit, we would
need to understand if there are different drivers why we do something, i.e. brand damage, client
dissatisfaction etc. I also agree with John's point that the marketing team don't put non-
conformance into their business cases, as they expect the cost to be absorbed somewhere else.
With regards to other information you needed, the audit results following robbery and burglary
costs weren't included in the info that John provided. This information has been provided by
Chesterfield and currently stands at:
2005/2006 = £1,315,586.94
2006/2007 = £1,784,672.90
2007/2008 = £9
Common sense dictates that the risk is higher at this time of year, so the potential is that this
figure will only increase and exceed last year's out-turn.
[hope this is the type of thing that you are looking for.
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branches would have made a figure of £161k good by putting the cash in, therefore there is a
tisk that in the top 30 branches alone, there is a risk of £678k being unaccounted for.
* 39 branches opted to settle losses centrally that equated to £674k. The ranges for these
branches was a lot lower that the ones who opted to make good, and ranged from £4k to
£57k. This implies that some are not as eager to press settle centrally if they think it is going
to come out of remuneration.
* 46 branches had a gain, which implies that they can take the money out to balance the
account. In this period, this equated to £1.3m, with a range from £5k to £114k. Again, there is
no confirmation to say that the money has been taken out, or any challenge to the branch to
get them to settle centrally
* Only 21 branches that had a gain decided to settle it centrally. This amount totalled only
£346k and the ranges were from £6k to £48k.
Therefore if we take John's suggestion of charging an interest rate for DFR, there is the
opportunity to deter it coming from remuneration. If we assume that the branches that opt to
settle losses centrally end up as DFR, based on an interest rate of 7.5%, this would equate to
£47,156 in interest per year. However, there would be the risk that money just wouldn't be made
good.
The other issue is that there is no correlation between losses, gains and DFR. There is no tie up or
challenge for branches that have a gain in one week, take the money out, have a loss the next BT
period, dispute the transaction and then opt to pay by DFR, even though we assume they have
had the money.
One suggestion that was made was that we could do something similar to multiples and opt to
settle everything centrally. A customer account would be produced every quarter and the
subpostmaster would be sent an invoice to settle the account.
6. Manage non-conformance more effectively in the short term
I've touched briefly above on what I think we should be doing as a business to manage non-
conformance more effectively in the long term, but we have had a think about what we could do
within our team in the short term.
Basically, we need to be concentrating on things that will bring us a return.
a) ONCH
The size of the prize is basically the difference between current performance and target. We
would have the capacity to make 100 extra calls per month on top of what we already do, but
these would need to generate a cash return to be effective. The calculation has been made that
based on the cost to make the phone call and the interest rate; we would need to ensure that £6k
is returned on each call. Therefore the information that we use would have to be completely
accurate to make sure that we are contacting the right branches.
The other suggestion that we made with ONCH was charging branches for not returning the
expected levels of cash. The branches where we have least control over are the surplus branches,
as we cannot control how much cash is received, but we rely on them to return. Therefore, what
we could do is charge the branch with the cost of delivery, admin fee and the interest rate of the
surplus cash. This would be completely reliant on accurate information and the proviso that we
didn't have a cash van failure, but it may focus the mind.
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remuneration of £18k, we wait until it reaches £25k to go out and have a look. Again, with
things like ONCH levels, there is no correlation with the size of the branch. It becomes a high
tisk branch when it gets to £25k excess, but it doesn't take into consideration the size of the
branch and the variation between in-payments and out-payments.
Therefore, I think the model needs to be reviewed, otherwise we will be wasting our time where
there is no loss, or the loss is that great, we have no chance of ever recovering it.
4. Review what is done following an audit taking place at the branch
Currently, there is no process for what happens following an audit taking place at a branch. The
information is sent for filing, and nobody takes ownership for rectifying the issues in the branch.
The only follow up that the audit team do is where the subpostmaster has been suspended
following a cash shortage and has been re-instated. The branch is classed as high-risk and is then
put back into the model for review.
A full process of how non-conformance identified at audit is then managed needs to be
developed. We also need to define what the process is for how we manage branches that have a
cash shortage, but make it good and are not suspended. A similar approach to the ONCH visits
could be taken, and those branches that have opted to make good are identified and someone
like a member of the Outlet Field Support Team could be asked to go a spot check the cash, a
number of weeks/months after the visit.
5. Manage Losses and Debt more effectively
How we manage debt also needs to be completely reviewed and can be split into 2 areas.
a) Former subpostmaster debt
* In April 2006 we started with a figure of £5.2m to recover from former subpostmasters. By
March 2007, this figure increased to £5.3m. In the 12 months between, £2.1 m was recovered,
meaning that an extra £2.2m had been sent to late account to recover.
* By Period 6 of this financial year, the outstanding debt to recover increased to £6.7 m. In the
past six months, £683k has been recovered, which means that in 6 months alone £2.1 million
has been sent to late account, which is nearly the figure for the whole of last year.
* We have no information as to the different categories for this debt - Tics, robbery/burglary,
losses on suspension
* The above information shows that we are leaving it too late to tackle the issue and too much
recovery of debt is being pushed in this direction. This has the potential to rise massively with
the Network Change Programme.
b) Current debt
I don't think that even P&BA have a handle on what this looks like. Nicky did some analysis of the
information that is produced in Chesterfield to highlight the branches that have the largest
discrepancies per Branch Trading period, whether that is a loss or a gain.
The reports analysed between 26th July and 20th Sept show the following:
* 30 branches with the largest discrepancies within the network opted to "make good’ a total
loss of £678k. The amounts ranged from £4.5k to £161k. I think that it is unlikely that
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What would be the ideal solution would be the development of a central database that pulls
information from a variety of sources and allocates the branch a performance score and raises
flags when intervention is required, and the severity of the non-conformance levels. This would
work in a similar way to the performance database that is used to support the Core and Outreach
assessment process. This system would also enable you to identify on you "worst" 15% and either
improve them or manage them out.
The risk is that if we can spot things sooner, we may have a higher suspension/termination rate
that we can't cope with. This would be especially difficult to manage if the business don't try and
make the proposition of running a post office an attractive idea.
3. Review of the audit risk model and who controls it
The proposal would be that the central point that analyse the information would also take control
of the audit risk model, and prioritise visits. The current model is operated by a team who engage
very little with Network, and previous findings submitted demonstrate that the line submitting
special audit requests, often results in a greater loss being identified. Looking back over previous
special audit requests submitted for large scale losses, there seems to be a common factor
between them.
* The subpostmaster is often vague regarding what has caused the problem
* When tackled regarding non-conformance, the subpostmaster says they are aware of it but
have actually done nothing to rectify the problem - i.e. not reported faults to NBSC
* The subpostmaster cannot be contacted or is always “unavailable”
* The person who has submitted the audit request has done a bit of digging and communicated
with other people, and often found that other teams are having problems with the same
branch but for different reasons.
Therefore, whilst a model may highlight poor performance, it often takes a personal interaction or
knowledge about the branch that confirms whether the branch is a risk to us as a business.
In the case of Bolinbrook, an initial special audit request was submitted in April 2006 due to
concerns when the branch was having losses at £4k. If that audit had taken place at that point, the
loss to the business would have been far less than the £85k it had escalated to in just over a year.
However, for whatever reason, the request was sidelined and never took place. When Pat
submitted the request again on the 8th May following the 42-day process report, the branch was
visited within 2 days. Only then was it deemed serious enough to warrant a visit.
in terms of the risk model the following has been identified from the information supplied:
* There are 25 data feeds that flow into the audit risk model
* None of the data feeds are given a priority basis, and nothing is classed as more high risk than
the other
* The risk model has not been constructed around where the opportunity is for fraud and the
methods that the subpostmaster would use to take money - i.e. creating a gain to take the
cash, having high cheque figures but rem out a lesser figure (i.e. keeping a personal cheque in
the drawer to cover their cash and carry fund!)
* The data feeds are not very sophisticated to take into account where there may be a problem.
For example, they only look at the value of TCs issues and ignore the volume that the branch
is generating. Only when this gets to a figure of £25k do they class it as high risk. Also, there is
no correlation between the TC volume/value and the branch remuneration. If the branch has a
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input from Gayle Laverick
I've had a look at the Network Efficiencies paper and had a think about what we talked about. As
John points out in his e-mail, these observations/suggestions would need to be fully looked into
before being implemented. I am also sure that someone has probably thought about some of
these before, so apologies if I'm reinventing the wheel or stating the obvious
1. Visibility of Performance and Efficiency Opportunities within the Network
Until we get to a point where we can see the full cost of a branch in P+L terms, we will only be
scratching the surface in terms of what efficiencies can be made. At the moment, we have
different teams holding accountability for how a branch operates within their remit and on their
scorecard. For example, P&BA are measured against debt management, all support costs get
allocated to Operations, whilst Heads of BD see very little other than sales, agents pay, ONCH,
FONCH and compliance. The finance team may see this, but it doesn't filter down to the line or
branch level.
The branch P&L would need to be split into income, controllable and non-controllable costs. The
granularity of the information would depend on the requirements, but you would need to include
things like NBSC allocated costs, costs for Stores and Stock delivery, and if you wanted true costs,
you would also need to build in costs for non-conformance. At the moment we have different
teams such as Product Support, P&BA, Product Managers, NBSC, Inventory Team etc all making
interventions to branches and we have no idea of what this costs. For example, we have just
undertaken an exercise of writing out to community branches who have still failed to do the test.
We have asked them to submit their training receipts to us for checking. My calculation for this is
that this is going to cost us £1200, and this cost never gets allocated anywhere but gets absorbed.
The branch scorecard would create ownership and provide incentive to identify and resolve the
issues, rather than just passing it on.
2. One team analysing information coming into a central point
If you created a branch scorecard, you would also need a central team to pro-actively manage
non-conformance and spot problems before the case becomes a bigger issue and the branch
poses a bigger financial risk. The teams within the different directorates work in silos and don't
talk to each other when they have suspicions about a branch. Even within our own team, the tools
that we have don't help us do this. For example, I had a quick look at the EFC to understand what
went wrong at Bolinbrook, where there was an £85k shortage following audit.
* It took me about an hour to trawl through the documentation and understand all of the
different interventions
* Aconcern had been raised by the Training team in 2006 when the postmaster was appointed,
but nobody took ownership of this
* Branch performance was poor and there were various indicators - rolling losses, lax security
procedures resulting in warnings, compliance workbook not being completed, accumulation of
Transaction Corrections resulting in debt of over £4.5k, warnings being issued for people being
behind counter, non-completion of Horizon roll-over, unauthorised closures, cash declaration
non-conformance and BT bad debt.
* It is only when people start “having a look" that they uncover something more sinister going
on, and this is often too late.
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A greater focus by POL on both sides of the accounts ie. not just focused on income but also
losses.
Greater ownership of cash and stock by all subpostmasters so to try to cut down on careless
errors/better accounting for the stock and cash issue to them (I know Geoff May has advocated on
several occasions subpostmasters should actually own the cash and stock as with any other
franchise type arrangement).
The losses and gains policy needs to be reviewed completely to reflect current and revised
approaches to the issue of debt.
We need to focus our effort in two ways
(i) quick wins on recovery and
(ii) (ii) preventing debt situation deteriorating further.
Who would we need to involve to work on debt management:
P&BA
Finance particularly the MI team
Network Directorate (Outlet Support, Anna Malley's/Julie Thomas's team, Richard Barker and
Adele Henderson's team, NFSP liaison team)
Possibly Legal Services, HRSC
Cash Management potentially
Change team to manage introduction of any changes
NBSC for changes to scripts of operators where appropriate
NFSP at some stage
I am not sure if there could be system work involved with may need IT involvement.
In addition at some stage the product proposals prepared by Marketing should include something
on potential errors that can occur with transactions and how this is built into the overall product
proposition.
Not sure if this fits the bill of radical but hopefully it will provide a start point.
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Waiver Scheme - offer a scheme similar to the insurance waiver on franchise branches in respect
of debt which would be an up front payment which would allow debts to be cleared by POL where
a subpostmaster has been compliant but an error has subsequently arisen they were not likely to
be aware of at the time of the transaction.
Consistency of application of debt management procedures across POL - there are different
approaches adopted to debt management by differing teams in POL which needs to be
eradicated and likewise when a debt can be written off needs consistent application.
Transaction corrections - the production of transaction corrections is very slow and I realise this is
sometimes due to the client but on other occasions it is probably down to POL. Do we puta
deadline on the production of transaction corrections whereby if POL cannot produce within an
acceptable time which would have to be carefully defined this debt is not pursued. (Whilst I realise
it is difficult to draw comparisons between POL and other operators due to the vast number of
transactions undertaken but if you take a bank or a building society it is highly unlikely they
would wait 6 months before notifying an individual of an error in a mortgage/loan payment)
Transaction corrections - there is a need to ensure adequate quality evidence is provided for these
errors which basically is difficult to contest. Redefine how transactions corrections can be
contested i.e. does the subpostmaster have to prove they didn’t make the error for a TC to be
cancelled?
Former subpostmaster debt - this is probably where the bigger sums of money are, particular in
relation to Subpostmasters who have been terminated following a loss - there is a certain amount
the individual leading on the conduct case can do to ensure steps are put in place for recovering
debt which if this is focused on as has been proved this financial year to a limited degree can reap
tewards e.g. undertakings with subpostmaster solicitors where the business is being sold so from
the proceeds our debt can be repaid. Whether we need to go further that this in respect of
applying to have a charge registered over a property to secure repayment of debt would I think
need to be taken on a case by case basis and recognise:
(i) the cost involved and
(ii) (ii) a POL/RM charge will always be second to the bank that has the mortgage on the
property.
The greatest area of difficulty in recovery of debt is where there is no surplus cash or the
subpostmaster is declared bankrupt.
Resigning subpostmasters - transaction corrections come through following transfer and the
outgoing is then pursued to clear the outstanding amount - could the last months remuneration
not be retained for a period to allow for these transaction corrections to come through - we would
have to have a cut off point at which time we could still apply transaction corrections against
withheld remuneration before this remuneration is released to the outgoing SUBPOSTMASTER.
Bond - take a bond from subpostmasters up front which can be applied to settle debt - this could
not apply retrospectively I don’t believe and again could attract interest whilst the bond is in place.
MI - we need better MI as at present we don’t appear to have a good reporting system in respect
of debt or if we have I have not seen it e.g. something like the suspense reports which showed
rolling losses etc. My understanding is POLFS has capability to produce an array of reports but!
am not sure we have these in place and if they are timely.
Recognition for staff involved in debt recovery if debt recovery targets were achieved/exceed.
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Input from John Breeden
Following our telephone conversation on Monday and the document you circulated on
efficiencies to Gayle and myself here are some ideas for debt management that might improve
the situation. They are only ideas and would need to be worked up to see viable or politically
acceptable.
Settle Centrally Button - this facility appears to be being abused by parts of the network i.e. this
function is used so the branch can balance on the given night but no real consideration is given to
how the debt will be settled, how it has arisen and then the concurrence process has to kick in to
follow up payment of this debt which is labour intensive. Somehow greater control has to be
implemented on how this button is used (in discussions with Martin Ferlinc and others they are
totally against the suggestion of removing the facility as this apparently is the only way of
knowing what is outstanding with the removal of the suspense account). Perhaps some kind of
reminder needs to be issued under the circumstances which subpostmasters use this facility and
in using the facility what they are agreeing to link to the contractual clauses on losses.
Occasionally this function may be used where a loss is in dispute but this needs to be registered
and authorised as an allowable for using settle centrally.
Repayment of debt - where a subpostmaster looks to repay by deductions from remuneration
(DFR), first we appear to allow this method of repayment irrespective of the individuals ability to
repay being assessed (the old hardship process where accounts were assessed etc does not
happen now) so we would need strict criteria over who qualifies for this method of repayment, the
max term and how many can be running concurrently/if you can top up with further losses.
Additionally for a subpostmaster this is a great way of repaying as it helps their cash flow at the
detriment of POL's and is an interest free loan and if I am not mistaken losses are an allowable
expense in Subpostmasters business accounts. Therefore I would have thought that it is not
unreasonable to charge an admin fee for such and arrangement to reflect the costs of setting up
DFRs and any work undertaken to get to this stage and also that they should be charged interest
on the balance outstanding similar to that charged on any commercial loan/overdraft. (The
present arrangement of an interest free loan which is what a deduction from remuneration is
would probably be viewed as a benefit in kind should the Tax Authorities look at it).
Repayment of debt by debit/credit card - do we look to offer a ‘discount’ off the debt if this
method of payment is used due to the lower costs of processing this type of transaction via the
banking system i.e. they are cheaper than cheques for processing and if payment is rejected this is
identified more quickly.
Debt free branches/compliant settlers of debt - do we offer a bonus to branches who settle debts
as they arise i.e. branch discrepancies and clear all transaction corrections as they arrive or where
they use the settle centrally button clear immediately. This scheme could be set up in bands i.e.
amounts cleared in a year not exceeding in total £1k receive a bonus of x % of their remuneration,
not exceeding £5k a bonus of a lower percentage of their remuneration.
Savings Pot - allow subpostmasters to save part of their remuneration into a pot which can be
used when a debt arises - this money in the pot could have interest applied to it similar to an
Instant Saver.
Subpostmaster applications - stronger vetting of existing subpostmasters who apply for another
branch in respect of past performance in settling debt and errors in general i.e. transaction
corrections etc
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Lynn Hobbs To: Outlet Support Lead Team
’ cc:
03/03/2008 00:59 Subject: Objectives 2008/09
Folks
We need to agree your objectives and for you to agree the objectives for your team members by the
end of March 2008.
My top three objectives which I've forwarded to Paula are:
1. Completion of WHS roll-out including any additional stores towards 14
2. Deliver support to centrally supported branches in the network (measures to be agreed)
3. Steer Network Transformation Programme to achieve:
@ —£0.5m savings from improved network compliance (speculative, for discussion, activity
benefit was £0.5m but no expenditure was allocated)
2° Conformance- 5% reduction of volume of Transaction Corrections (to be finalised
after scoping with Rod Ismay)
% Foreign Currency cash management- reduce Full year average FONCH to sales ratio
by 0.5.x less than 07/08 average full year outturn
a Sterling cash management- improve ONCH cash declaration conformance volume
and accuracy (target to be defined when baseline has
been ascertained)
2& Delivery of Network loss budget (shared with Richard and Adele)
2 @ — Introduction of service support charter for Community branches
x ® Implementation of 20 POL locals and development of at least one other branch cost
model to pilot.
+6 @ — Roll-out of 4000 Paystation terminals
The areas on our scorecard nest year in addition to the ones we currently have will be:
Agents Pay Fixed Posdipiy Udcne fees?
Agents Pay Variable ~)
Overscale payments
Fixed costs (logistics, NBSC)
Property costs
Subpostmaster losses
Write-offs
Overnight Cash Holdings
Foreign Overnight Cash Holdings
Investment Grant payments
OBC costs
Compliance results
eeeeeeeeeee8
We need to decide where these fall to ground in the team and who takes ownership of specific targets
I would like you to consider the above along with your current BAU activity and forward your draft
objectives to me by end of 11/3/08 so we can discuss them at our meeting on 12/13 March
Thanks
Lynn
Head of Outlet Support
Post Office Ltd
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Network Conformance
Mission
To deliver 98% conformance or better across all compliance and conformance
indicators by end 2008/9 and establish culture of achievement of continuous
improvement in compliance and conformance.
Dimensions
@ All Network segments
o Crowns
o WHS
© Multiples
© Community Box 1
© Community non-box
® Regulatory Compliance
©. Financial services
© Money laundering
o Telephony
© Mails integrity
©. Data protection
® Client contract conformance
o Bank of Ireland
o NS&l
o DVLA
o Camelot
o Etc
@ Branch accounting conformance
oO All products
e Branch/asset security
©. All procedures/controls
o Recruitment
Clients
Product & branch accounting/Finance BPs
Regulators/Bank of Ireland/Royal Mail Group Compliance
Network line managers
Multiples’ line management
Product mangers
P&ODS
e
°
e
°
°
e
e
®
branch profitability (Crowns)
compliance scorecard
line management objectives
Scorecard related
Access to previous audit reports
Access to compliance risk model outputs.
Over £5k bureau transactions
Innovation lab day follow up Working groups:
© Capability
© Communication
© Culture
© Management
© Systems
Re launch of Compliance monthly comms
Training follow up to new appointees
Three strikes process
Losses related
e
Worst 20 — Security initiative to monitor and support worst branches
Security team themes
oO Postage stamp labels
oO Savings stamps
o Cheques
P&BA ‘backlog priorities’
o Cheques
© First Rate
oO ATMs
Crown Office losses Action Group
Internal Controls review follow up to ‘Miscellaneous’ loss posting including
Post Shop losses
Establishment of ‘Fraud Forum’ to identify trends and issues in branch frauds
Benefits sought
Better service to customers
Better service to clients
Reduced regulatory risk
Reduced Operational risk (and actual losses)
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® Reduced costs of investigation and correction
@ Reduced credit exposure to agents