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POLICY DOCUMENT- Operators’ In Service Debt
Reference information
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Policy type
Operators’ Lifecycle Issue
Ref
Policy issue 8
Date
18 September 2013
Status
Active
Author
Ravi Chauhan, Contracts and Policy Advisor
Owner
Agents’ Contracts and Policy Development Manager
Review Date
January 2014
Key stakeholders I Contracts Team:
John Breeden
Lin Norbury
Andrew Carpenter
Anne Allaker
Finance Service Centre:
Alison Bolsover
Jacqueline Whitham
Paul Dann
Andrew Winn
Jenny Smith
Finance:
Mike Hallas (Tax implications)
Carl Nielsen
Kirk Webster
Security Team
Tony Newman
Legal Services:
Jessica Madron
Rodric Williams
Sabrina Jethwa
Ben Thorp
Approval
Role
Name(s)
Date
Assurance
Paul Inwood, Contracts and Policy Manager
18 September 2013
Page 1 of 14
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[Authorised I Craig Tuthill, Head of Network Services
[18 September 2013 I
Version control
Version No. Reason for issue Date
Version Policy review to assess the relevance and fitness for I 18 September 2013
1.0 purpose of existing POL contractual policies and
processes for all Post Office branch models.
CONTENTS
PART 1
1.0 Statement
2.0 Glossary
3.0 Introduction and purpose
4.0 Background
5.0 Right of recovery of sums due
6.0 Repayment of outstanding debt
7.0 Repayment options for former Operators
8.0 Pluralist Operators and multiple partners
9.0 Death in service
10.0 Risk register/ Branch profile
11.0 Securing the debt
12.0 Write offs
13.0 Debt disputes — Transactional debt
14.0 Debt disputes — Non-transactional debt
PART 2 — Policy Implementation
1.0 Applicability
2.0 Related policies
3.0 Implementation procedures
4.0 Standard letters and documents
SUBJECT: Policy for dealing with the recovery of Operator’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 Operators of all Post Office branches. This
policy supercedes custom and practice formerly implemented to recover debt incurred in
service.
2.0Glossary
Word/term Definition
Agreement Standard contractual conditions for the operation of a Local Post
Office® and Main Post Office®, Scale Payment Sub-Office (SPSO),
Modified Subpostmaster Post Office (MSPO), Company Franchise Post
Office (CFPO), Independent Franchise Post Office (IFPO), Community
Post Office and Restricted Hours Post Office
Assistant A person employed by the Operator (who is approved by Post Office
Ltd) to work in the Branch
Basic Business
The type of business carried on by the Operator on its own
account from the Branch Premises
Branch
The Post Office branch operated by the Operator
Branch
Discrepancy
When Branch Trading is completed, Horizon calculates the
expected cash 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 a cash shortage or surplus.
transactional
Debt
Branch The premises from which the Post Office Branch and the Basic
Premises Business are Operated
Branch Trading I The act of the monthly balancing of the branch accounts. The
Operator 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 remuneration
Existing A contract currently in place between Post Office Ltd and the Operator
Contract (or, as appropriate, a shareholder and/or a director of the Operator) for
the operation of a Post Office branch at the Branch Premises
FSC Finance Service Centre
NBSC Network Business Support Centre
Non- Refers to debt incurred outside of branch transactions. Incurred due
to unpaid invoices for example: Franchise Insurance Waivers (once
a year); Lease of electronic scales (once every quarter); Property
projects (e.g. refurbishment work).
Operator Any individual, company or partnership (including Subpostmasters and
Franchisees) responsible for the operation of any Post Office branch,
POL Post Office Limited
Settle Centrally
In Horizon Operators 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
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to initiate.
Transaction Transaction Corrections are sent to the branches via their Horizon
Correction system when a discrepancy has occurred in their accounting. These
are sent out by teams within Finance Service Centre who deal with
various clients/products.
Transactional Refers to debt incurred in branch. Usually created by a Transaction
Debt Correction or a Branch Discrepancy which has occurred in the office
accounts at branch trading.
3.0 Introduction and purpose
3.1 In order for POL to be modernised and sustainable it is vital that it works to prevent
and minimise financial loss, and mitigate the impact of financial loss on POL and the
network. Aside from the direct cost to POL of incurring losses, some of which are
ultimately written off, all losses involve administrative costs in dealing with recovering
the debt and with the errors that cause them.
3.2 This policy is designed to provide clear and consistent guidelines and processes for
POL to recover transactional and non-transactional debt incurred whilst in service by
Operators of all Post Office branches whether they are still in service or have
subsequently resigned.
3.3 Process charts and guidance notes for dealing with these requests are included in
Part 2 (Section 3.0) of this policy.
3.4 Standard letters and documents are included in Part 2 (Section 4.0) of this policy.
4.0 Background
4.1From a purely contractual perspective the Operator of a Post Office branch is
responsible for:
e Making good any loss of Post Office cash and stock without delay.
e Making good any losses incurred whilst operating under their respective
contractual agreements that come to light following termination of the agreement.
e All losses incurred through their own negligence, carelessness or error and also
for losses caused by their Assistants.
4.2 To ensure that this policy is consistent with the contractual relationships between POL
and the Operators it is designed to clarify circumstances where mitigation may be
appropriate and to provide a clear framework of repayment options, where immediate
repayment is not possible.
5.0 Right of recovery of sums due
Traditional contracts
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5.1 POL has a common law right to set off sums owed by the Operator to POL against
some payments made by POL to the Operator.
Main and Local agreements
5.2 Where money is owed by an Operator to POL or any other member of the Royal Mail
Group 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 Agreement or the Existing Contract, including their
remuneration 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.
6.0 Repayment of outstanding debt
6.1 The contractual position is that Operators should repay the debt immediately. POL
understands that in some circumstances immediate repayment of the debt is not
always possible. It is within POL’s interests to ensure the continuation of Post Office
services and branches, motivate Operators, and where appropriate limit the risk of
resignation by an Operator whilst taking steps to recover the debt.
6.2 Therefore there will be circumstances in which POL will give due consideration to
offering one or both of the following repayment options to Operators:
e Repayment of full amount in one instalment.
« Repayment plan where Operator proposes a reasonable repayment plan up to 12
months.
Each repayment option is considered in turn below.
6.3 Repayment of full amount in one instalment
6.3.1 The default option for repayment of debt should be in full either via direct payments or
by deducting amounts from remuneration. Note that the priority order for payment
options is to be defined as card payment, automatic transfer (bacs or chaps
payment), one deduction from remuneration, with the last option being payment via
cheque.
6.4 Operator proposes a reasonable monthly repayment plan up to 12 months
6.4.1 Operators will not always be able to repay the debt in one payment. POL will consider
reasonable repayment plans suggested by Operators. Operators must provide a
reason for why they are proposing the repayment plan as opposed to paying the
amount in full.
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6.4.2 The Operator can propose to repay a debt on a monthly basis over a maximum period
of 12 months either via direct payments or by deducting amounts from remuneration.
Note that the priority order for payment options is to be defined as card payment,
automatic transfer (bacs or chaps payment) with the last option being deduction from
remuneration over the shortest possible period (see Fig 1 below). Further note that
the repayment plan will commence from the date of the plan being set up.
6.4.3 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 Operator to repay
the balance and this must be received prior to the end date of the repayment plan in
cleared funds.
6.4.4 For transactional debt only one instalment plan can be in place at any time. This
should be confirmed in writing to the Operator, using Standard Letter C, when the
initial repayment plan is established. Following repayment — no further instalment
plans will be allowed for a further 12 month period. The 12 month period would
commence from the date of the final payment being paid on the previous instalment
plan. Details of when the last repayment plan was repaid is to be included on the
concurrence report issued by the Current Agents Debt Team. Should an Operator
appear on the report whilst they have a repayment plan in place or in the twelve
month period after repayment of a plan, the Contract Advisor should request full
repayment. A conversation must be conducted with the Operator to assess the
financial position/problems being experienced at the branch.
6.4.5 Where the Operator has agreed to repay the debt any repayment plan should be
6.4.6
recorded in writing, using Standard Letter D. The letter will state the agreed sum due,
when instalments are to be paid and for how much. The letter should also expressly
reserve all of POL’s rights and remedies under the contract. POL and the Operator
should then sign off the plan as having been agreed. Note that agreement is not
required to deduct the amount from remuneration where the Operator has failed to
repay the debt subsequent to warning from the FSC and Contract Advisors (See
Process Chart A). In such cases Standard Letter E or F can be used to communicate
the arrangement to the Operator.
Note that where the Operator proposes a repayment plan of beyond 12 months it is at
the discretion of Network Contract Deployment Managers, in consultation with the
respective Contract Advisor, to approve or reject such a request subsequent to
assessment of the circumstances (See Process Chart D). Pro forma A may be sent by
the Contract Advisor to the Operator for completion to enable the Contract Advisor to
assess the current financial position of the Operator POL can also request the
Operator to carry out a credit check and to provide a copy of the report to support their
case.
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Fig 1 - Deduction from remuneration
a. Where direct payment is not made by card payment or automatic transfer (bacs or chaps
payment), the debt can be paid by deducting amounts from the Operator’s remuneration
over the agreed repayment period. Where the debt amount exceeds £1000.00, the
Current Agents Debt Team will send out a concurrence report to Contract Advisors,
seeking concurrence to commence to collect this outstanding debt by deduction from
remuneration.
. In determining the amount to be deducted from remuneration (DFR), POL must consider
the rirciimetancreac af thea O)neratnrec hranch inchidinn ite ramiineratinn far the nravini ic
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7.0 Repayment options for former Operators
7.1 The following options are available to former Operators for the repayment of debt
incurred in service:
a. Lump sum payment - via cash, cheque, postal order or debit card.
b. Standing order - over a period agreed with POL. Where this option is agreed the
former Operator will be required to complete and submit pro forma B - income and
expenditure form.
c. Recovery from sums due — Where Operators decide to leave the Post Office
Network under the Network Transformation Programme, POL can deduct monies
due to it from the Operator's compensation payment.
d. Recovery from third party — Some former Operators will appoint a third party
(e.g. Payplan) to consolidate all of the former Operator’s debts. The third party will
then allocate repayment to the various creditors. This will likely involve a discount
to the full sum due.
7.2 In the circumstance that POL successfully pursues legal routes for recovering debt,
recovery may be via cheques received from various County Courts to credit the
former Operator’.
8.0Pluralist Operators and multiple partners
8.1In the case of pluralist Operators 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.
9.0 Death in service
9.1 The recovery of debt from an Operator 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.
9.2 The Former Agents Debt team will write (recorded 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
Operator’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 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.
9.3 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.
9.4 In regards the repayment options available to former Operators refer to section 8.0
above.
10.0 Risk register/Branch profile
10.1 Operators that fall into the following categories are to be highlighted by the Branch
Standards Team on the branch risk register/branch performance profile as being
potentially a higher risk as they are to not able to repay outstanding losses in full.
e Operators that cannot pay within 12 months and/or need a lump sum to settle the
debt.
e Operators on a current repayment plan.
10.2 The Security team will be notified via the DFR Report of this information.
Consideration should be given to organising a cash verification visit for these cases.
11.0 Securing the debt
11.1 There may be circumstances where POL wants extra comfort that it can recover
losses incurred by securing the debt, particularly where there are concerns about the
Operator’s accounts or where there is the risk that the Operator may leave the
network. POL loses significant amounts of money to former Operators.
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11.2 The debt may be secured in two ways:
a. Personal guarantees (proactive) — under the Local and Mains Post Office
agreements Operators operating as a company are obliged to provide personal
guarantees to secure the performance of the Operator’s obligations under the
agreement, where the company has existed for less then three years, or if the
company is deemed a financial risk. It is important that POL explains clearly to the
guarantor that they will be liable for the debt.
b. Charges on property (reactive) - POL may consider securing the debt against
property of the Operator by placing a charge on their property.
11.3. The above measures should not be implemented without informed advice from Legal
Services.
11.4 The Operator should obtain independent legal advice before providing a Personal
Guarantee or a Charge. POL should obtain an Independent Legal Advice (“ILA”)
certificate confirming this. This will minimise the risk of the Personal Guarantee or
Charge being set aside.
12.0 Write offs
12.1 Decisions in respect of write-offs are not taken by groups but are the responsibility of
individual managers, who bear P&L accountability for those decisions. The reasons
for a write-off must be fully documented and may be subject to audit.
12.2 The Network Directorate authorises its write-offs as follows:
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Up to £5,000 Head of Network Services or BAU Regional
Manager
Up to £25,000 Head of Network Operations
Up to £100,000 General Manager Network Agency Sales,
Services & Transformation
£100,001+ Network and Sales Director
12.3 The write-offs are then processed within the Finance Service Centre. The authority
limits for write-offs within FSC is as follows:
Up to £1,000 Team Leader
Up to £5,000 Senior Manager
Up to £100,000 Head of FSC
£100,001+
Finance Director
12.4 For write-offs pertaining to debt owed by former Operators the authority limits for write-
offs are as follows:
Up to £1,000 Former Agents Debt Team Leader
Up to £15,000 Relationship Manager
Up to £25,000 Former Agents Debt Team Senior Manager
£25,001+ Head of FSC
13.0 Debt disputes -Transactional debt
13.1 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 Operators without reasonable time to investigate, challenge and resolve
individual amounts.
13.2 There are two routes by which Operators might instigate the dispute process:
« Transaction Corrections
e Branch Discrepancies
13.3 Transaction Corrections
13.3.1 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.
13.3.2 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.
13.3.3 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 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.
13.3.4 Branches should contact NBSC land request further time to
investigate and present supporting information. ‘A reference number will be provided.
13.3.5 Supporting information to support any dispute must then be presented by the
Operator in writing via Special Delivery to The Current Agents Accounting Team
(Debt recovery), 7, within 7 days quoting the
above reference number.
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13.3.6 The Current 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, within 10 working days.
13.4 Branch Discrepancies
13.4.1 The resolution of branch discrepancies is the responsibility of the branch.
13.4.2 If the Operator believes a transaction correctio1 2y should contact the
appropriate department in FSC via NBSC : i 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.
13.5 Further Review
13.5.1 If the Operator believes that the supporting information provided to FSC adequately
supports their dispute but the dispute has not been allowed they should make a
written submission to:
The Network Relationship Manager
13.5.2 The debt recovery process, if settled centrally, will be suspended pending a written
response.
13.5.3 A written response will be provided, within 10 working days, in line with Business
standards.
13.5.4 All correspondence will be included on the EFC for the Network to be able to view.
13.5.5 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.
13.5.6 The decision of the Relationship Manager is final. Decisions are made at POL’s
discretion.
14.0 Debt Disputes - Non-transactional debt
14.1 Where an Operator disputes the amount of an invoice he should raise a query with
the ESFS Credit Control team in Farnworth. The Credit Control team will then forward
on the query to the responsible individual within POL who raised the invoice. The
responsible individual will respond to the ESFS Credit Control team to confirm the
invoice amount.
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14.2 Where the Operator has successfully disputed an invoice amount (i.e. he has been
charged incorrectly), the responsible individual will send an SDOS form to the ESFS
Billing team who will raise a credit note on to the SAP system to offset against the
discrepancy in the invoice.
Property Project Invoices Sam Boyd, Property Projects Team
Electronic Scales Invoices Julia Johnson, Equipment Team
Franchise Insurance Invoices Andy F Macdonald, Contract Admin Team
Intro Fee Invoices Sarah Rimmer, Agent Recruitment &
Remuneration/STL Agent Services
PART 2
1.0 Applicability
This policy applies to all contracts types and to dealings between POL and all Operators of
Post Office branches.
2.0 Related policies
The following policies require consideration or cross referencing when dealing with the
recovery of in service debt:
Burglaries and Robberies
Suspensions
The above list is not exclusive and consideration of other policies may be required depending
on the particulars of each case.
3.0 Implementation procedures
Process Chart A By
Process for recovery of in service transactional debt incurred by an Trans DebrRecover
r v
Operator. Process Jun 13.4.”
Process Chart B il
Process for recovery of in service non-transactional debt incurred Non-trane Debt
by an Operator. Recovery Jun 13.doc
Process Chart C ml
Process for recovery of in debt incurred by a former Operator.
Former Operator
Process Jun 13.doc
Process Chart D and guidance notes
Process for agreeing a repayment plan beyond 12 months for the
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recovery of in service debt.
Ee
DFR payments 12
month plus Jun 13.pd
mg
Exceptional
Requests for DFR NO
4.0 Standard letters and documents
Standard Letter A
Statement of debt detailing amount of outstanding transactional
debt settled centrally.
Ee)
SLA - Statement of
Debt. doc
Standard Letter B
Reminder of debt, following Standard Letter A, detailing amount of
outstanding transactional debt settled centrally.
‘SLB - Reminder of
Debt.doc
Standard Letter C a")
Letter agreeing with Operator that transactional debt will be
deducted from remuneration in one instalment. instaiment. doe
Standard Letter D a)
Letter agreeing with Operator that transactional debt will be
deducted from remuneration over a number of instalments. Insalpene toe
Standard Letter E ey
Letter of waming to the Operator stating that payment will be taken SLE-DFR
- DFR one
in one instalment from remuneration.
instalment WARNING
Standard Letter F
Letter of waming to the Operator stating that payment will be taken
in a number of instalments from remuneration.
Ey
SLF - DFR
instalments WARNING
Standard Letter G
Letter from Finance Service Centre for the recovery of non-
transactional debt.
Bey
SLG - Recovery of
non-trans debt.do
Standard Letter H
First statement of debt letter to former Operator.
a)
SLH - 1st Letter to
Former Operators.do
Standard Letter I
Second letter to former Operator reminding of unpaid debt.
=)
SLI- 2nd Letter to
Former Operators. do
Standard Letter J
Letter of action to former Operator subsequent to Standard Letter I
13
and J. al)
SLJ - 3rd Letter
before action to Forn
Standard Letter K
Letter to Operator requesting additional information where request
placed to repay the debt beyond a 12 month repayment plan.
(e_
SLK - Exceptional
Request for Instalme
Pro Forma A
Income and expenditure form to be sent to a current Operator for
completion where he requests to repay a debt beyond 12 monthly
instalments.
PFA - Income and
Expenditure Form.d
Pro Forma B
Income and expenditure form for completion by a former Operator
where he requests to repay an outstanding debt via standing order
over an agreed period.
PF B - Former
Operators I&E Form:
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