Filed on behalf of the: Defendant
Witness: Angela Margaret Van Den Bogerd
Statement No.: First
Date Made: 23 July 2018
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ROYAL COURTS OF JUSTICE
BETWEEN:
ALAN BATES AND OTHERS.
Claimant
AND
POST OFFICE LIMITED
Defendant
WITNESS STATEMENT OF ANGELA MARGARET VAN DEN
BOGERD
1, ANGELA MARGARET VAN DEN BOGERD WILL SAY as follows:
= I am Angela Margaret Van Den Bogerd, People Services Director, of Post Office
Limited (Post Office).
ist I make this statement in support of Post Office's Defence in these proceedings.
4. The facts set out in this statement are within my own knowledge, or if they are
outside my knowledge, I have explained the source of my information or belief.
Background
5: I started my employment with Post Office on 1 April 1985, and since that date I
have worked in a number of positions as follows:
5.1 A Branch Counter Assistant as part of the directly managed network for around 2
years. During this time I was also called upon to undertake on-site training for
newly appointed Postmasters.
5.2 A Branch Manager responsible for the maintenance, day to day management and
financial performance of Directly Managed Branches between 1987 and 1996.
5.3 A Retail Network Manager between 1996 and 2001 responsible at an area level
for the maintenance, day-to-day management and financial performance of 24
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5.5
5.6
5.7
5.8
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post offices: 6 main branch offices employing approx. 130 staff and 18 Subpost
offices managed via a contract for services. As part of this role I was responsible
for interviewing the Postmaster, appointing the Postmaster, managing
performance through the contract for services and dealing with any contract
breaches including contract termination as appropriate.
Head of Area for the rural agency in Wales between 2001 and 2005 responsible
for the maintenance, day-to-day management and financial performance of the
rural network of 950 post offices in Wales & the Marches. As part of this role I
was accountable for a line management team of 18 and 950 agent
Subpostmasters, and for the delivery of post office services to quality and
efficiency standards.
General Manager for the Community Network of post offices in the UK between
2005 and 2006, responsible for a team of 9 senior managers and a field based
team of 40 managers, and for the day-to-day management of 9000 rural and 500
urban deprived post offices.
As National Network Development Manager between 2006 and 2009 I designed,
developed and deployed the process (known as the Network Change
Programme) to deliver 3000 changes to the Post Office network (2500 closures
and the establishment of 500 new type services).
As Head of Network Services between 2009 and 2012 with a UK wide
geographically dispersed field team of 200 people, I delivered a yearly average
of (a) 1200 network change projects (i.e. post office relocations, refurbishments,
closures and re-openings) across the Post Office network, (b) in excess of 5500
financial and compliance branch audits and interventions (c) new entrant training
to approximately 1000 agents/franchisees and employees and (d) 2000
recruitment and/or contractual interviews.
As Head of Network Services, I was responsible for the maintenance of the
network of post offices and part of that was the decision of whether a branch
should be advertised in a given situation e.g. whether a post office in a new
location (Greenfield) was warranted. Decisions were taken with input from the
Network Modelling team and the business ACCs to ensure consistency of
approach. The code of practice and consultation with consumer groups policed
any proposals.
At that time (and today) Post Office had a Government requirement that it
maintained the network at no fewer than 11,500 branches. There was certain
criteria which Post Office had to fill as part of this requirement, such as a
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percentage of the population had to live within three miles of a Post Office
branch and another percentage within one mile of a Post Office for example.
That in itself was the starting position which drove the size of the network.
Post Office also has a modelling team, which I have worked with, who use
software which analyses where would be a good location to have a Post Office
branch. Post Office would also be approached by people who were purchasing
premises and considering having a Post Office. If so, Post Office would, by
walking the ground and observing local trading patterns, consider whether the
location would be viable and a good opportunity or whether we would be
poaching business from other established Post Offices. We also had a decision
matrix to support all location decision making.
As Head of Partnerships between September 2012 and August 2013, I was
responsible for the relationship with CWU, Unite CMA for managers and also the
National Federation of Subpostmasters.
As Programme Director for the Branch Support Programme between August
2013 and March 2015, I was responsible for making improvements to ways of
working across Post Office. In parallel, I led the investigations of mediation
scheme cases and was a member of the Working Group. At this time I took the
opportunity to create a specialist team called the Support Services Resolution
Team (SSRT) to support Postmasters and colleagues in identifying the more
complex in-branch transactional issues and where possible resolving them.
As Director of Support Services between April 2015 and December 2016, I was
responsible for our helpline for Postmasters, our customer helpline, the Financial
Service Centre (FSC), the Human Resources Service Centre (HRSC) and also
managing the Contract Admin team.
From January 2017 until January 2018 I was the People and Change Director,
responsible for HRSC and Health and Safety and the Change Portfolio across the
organisation. Since January 2018 until present, in my role as People Services
Director, I am responsible for HR services within the Finance & Operations
business unit, Health, Safety and well-being and the HR Service Centre.
I have operated at all levels during my career — from branch level to senior
positions remaining at all times close to the operational procedures. I worked in
branch when the paper-based accounting system was in place. When Horizon
was introduced, in my role as RNM, I supported this transition from manual ways
of working to the computerised system. This included supporting branches during
roll-out by visiting branches before, during and after go live. I recognised that this
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was a new way of working and supported Postmasters in this transitional period. I
have a very hands on knowledge of how branches worked in the paper based
system, Horizon and Horizon Online.
I have always lived in Swansea, however having been field based for the majority
of my time with Post Office I have travelled around the UK.
Overview of Post Office business
10.
Post Office is a limited company under the Companies Act 2006. As of 1 April
2012, Post Office has been separately owned and managed from Royal Mail
Group plc. The sole shareholder of Post Office is the Secretary of State for
Business, Energy and Industry Strategy (BEIS) but Post Office acts under the
direction of its chairman and board of directors, rather than ministerial control.
However, because the sole owner of Post Office is the government, it is common
place and appropriate to describe Post Office as expending public funds and
owes duties associated with its responsibilities for managing public money.
Post office is the UK's largest retail network and financial services chain with
over 11,800 branches. [can we have more detail on this and how it has
numbers. Accessibility criteria were originally laid down by Government in 2007
and have been reconfirmed by successive Governments since. The
Government's national access criteria are: 99% of UK population to be within
three miles of their nearest Post Office outlet; 90% of the UK population to be
within one mile of their nearest Post Office outlet; 99% of total population in
deprived urban areas across the UK to be within one mile of their nearest Post
Office outlet; 95% of the total urban population across the UK to be within one
mile of their nearest Post Office outlet; 95% of the total rural population across
the UK to be within three miles of the nearest Post Office outlet. In addition the
following applies at local level to ensure a minimum level of access for
customers living in remove rural areas: 95% of the population of every postcode
district to be within six miles of their nearest Post Office outlet. The Post Office
produces a Network Report against this criteria. This is publicly available — it is
placed in the House Library and the Post Office publishes it on its corporate
website. The Network Report also contains tables of figures showing fluctuations
of number of branches over time including quarterly change figures showing the
quarterly change in network size. The Network Report for 17/18 has been placed
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in the House Library and shows that at the end of March 2018 there were 11,547
Post Office branches. The size of the network has been stable for more than a
decade. It has been significantly larger in the decades/ years before — its peak
was 25,056 branches in 1965/66. Decline over subsequent decades was driven
by a number of factors including Government business reducing as proportion of
Post Office revenue (it fell from 43% in 2003/4 to 26% in 2007-2008), particularly
because of the Government move to pay pensions and benefits directly into bank
accounts. In addition consumer trends, particularly growth of online business,
and increasing competition have played a part. To reflect such marketplace
changes, improve the network's prospects and avoid unmanaged decline there
have been periodic closure programmes, notably the Urban Network Reinvention
Programme [2001-4] and Network Change [2007], both of which were supported
with Government funding, as well as periodic reviews of directly managed
(Crown) branches involving some moving to a franchise model or closing.
Government policy has continued to reflect the need for the Post Office to operate
commercially - and reduce reliance on taxpayer subsidy - whilst recognising its
important social purpose for all communities, including those where branches cannot be
commercially profitable. The Post Office's network continues to evolve and its current
strategy is to provide better proximity to customers where they live and work, offering
increased flexibility and choice by working with retail partners to open more Post Offices
within
shops, particularly in urban areas. This strategy is also to encourage new
customers and help grow the business so that we can continue to invest in the network.
Numbers of open branches reported April 2018 - Numbers reported to
Government Regional Split:
East Midlands 543 266 72
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881
East of England 677 396 41
1,114
London 7 536 126
669
NI 324 76 87
487
North East 244 151 94
489
North West 387 468 265
1,120
Scotland 918 333 145
1,396
South East 693 625 56
1,374
South West 867 342 61
1,270
Wales 631 157 130
918
West Midlands 364 377 160
901
Bao] 0] 00INIo]}un] ]oo} ro}
Yorkshire and The Humber 470 321 165
956
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612) 4 o48
1,402
11,57
Total
MAIN 3,354
LOCAL 3,754
Crown 257
Franchise 34
MSPO 39
SPSO 2,598
Outreach 1,477
Satellite 57
Locally Funded 2
Total 11,575
Below is also the full breakdown as the Network Numbers as at April 2018 Open & Temp Closed
Status Open Status (Multiple Items)
Row Labels Count of 6-FAD Row Labels Count of 6-FAD
SAT 57 SAT 29
ACPT 1287 ACPT 45
CFPO 27 CFPO 8
Crown 257 IFPO 1
cso 1 LM 217
HOME 138 LPM 58
IFPO 7 MAIN 38
LACPT 4 MsPO. 2
LM 2216 PART 7
LOCF i. SPSO 524
LPM 1538 Grand Total 929
MAIN 3354
MsPO. 39
PART 53
SPSO 2597
Grand Total 11576
1, It provides more than 170 different products and services to the public. A Post
Office branch is often a vital part of the local community. Approximately 2835
the branches are operated directly by Post Office, known either as directly
managed branches (DMBs) or Crown Branches, in which the staff are employees
of Post Office.
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"1 Taken from Corporate website
Ivan Roots, 23/07/2018 01:39 PM
MC2 I will check this figure — it has probably reduced.
Melanie Corfield, 24/07/2018 09:49 PM
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12. The remainder of the branches are run by Subpostmasters/postmasters on an
agency basis, under contracts with Post Office. Subpostmasters operate
independent businesses and are independent business people. Many operate
additional businesses, and it is commonplace that the Post Office branch is found
within a wider retail business such as a newsagent or general store. Every
branch has a quantity — varying according to local demand and branch size — of
Post Office cash and stock (such as stamps) for which the Subpostmaster must
account to Post Office. Clause 1 of the standard contract between Post Office
and Subpostmasters states that the Subpostmaster is an agent of Post Office.
the (relevant) commercial and political forces operating on it requiring constant review /
improvement/changel Tid Post Office has [130)1727H) will CHECK IFUMBEF] clients
including large companies such as Royal Mail, Bank of Ireland and the High Street
banks. Working with its main clients Post Office is operating in mails, financial services,
banking, telecoms and bill payments marketplaces amongst others and is subject to
significant competition. Senior managerial roles within the Post Office are responsible for
managing the relationships with different clients.
A key benefit for our clients is our large physical network which reaches customers
throughout the UK, including rural areas. For example banks have been reducing their
own branch networks (which is controversial in some areas) because some are not
commercially viable as online transacting increases. However there is still demand for
everyday banking, such as cash withdrawals and deposits, and the Post Office’s network
can provide this on their behalf. Similarly Royal Mail need a physical presence for
customers aside from their own estate of Mail Centres, Delivery Offices and postboxes
and Post Office branches provide this. Other clients have very little or no physical
network of their own. Government departments, although increasing online solutions for
customers, need to provide diverse groups of people for particular services and the
geographical spread of Post Offices meets this requirement.
Some client services (eg banking) are offered at all Post Office branches, others are
provided in agreement with clients and with consideration of our own business needs at
branches which best fits their requirements (eg MVLs, identity services, Lottery). pa
The Post Office has competitors - such as PayPoint - who also have a large network
within retailers (PayPoint is the key competitor in bill payments market) but the Post
Office is unique in its scope/ range of services, providing a ‘hub’ for vital services.
Key relationships - clients:
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MC3
MCc4
This is very wide ranging topic so I have put down some material which
I am sure needs developing! I suggest Mark Siviter, Martin Kearsley,
Owen Woodley & Andrew Goddard will be good people to help input re
on their specific marketplaces and how they work with our clients.
Melanie Corfield, 24/07/2018 10:52 PM
More detail on how decisions are made regarding choice of branches at
which services available to be supplied from client leads
Melanie Corfield, 26/07/2018 02:44 PM
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Mails continues to be a very large part of the Post Office’s business and , with the
separation of Royal Mail and Post Office in 2012, a commercial agreement is in place
that enables close working for the benefit of customers. With the separation of Post
Office from Royal Mail Group (RMG) a Mails Distribution Agreement (MDA) was signed
between Royal Mail Group and the Post Office in January 2012 and started on 26 March
2012 (with a 10 year term). The agreement is the terms on which Post Office makes
RMG products and stamps available to customers and provide services to and on behalf
of RMG. Within the agreement Post Office submits weekly revenue data and payment to
RMG and RMG pays Post Office for sales. Other Post Office obligations include
maintaining all regulatory approvals, general performance standards, assistance
obligations regarding RMG's licence, good faith obligations regarding new products and
services and sales conversations. Branch requirement obligations were also included
under the agreement (a network of at least 11,500 branches until March 2015, best
endeavours to carry out the Network Transformation programme, meeting branch
opening requirements, training to be carried out in accordance with basic requirements,
customer satisfaction targets and forum and Post Office liability for financial effect on
RMG of any branch change.
Under the agreement Post Office cannot provide competing mails service or make
available competing mails products in or from any Post Office branches. It also covers
the processes in place for customer complaints handling as well as a dispute resolution
procedure between RMG and Post office."
Post Office and Bank of Ireland have a longstanding partnership (a Joint Venture was
announced in 2003) providing a range of financial services to more than 2.4 million
customers both through branches and via the Post Office's website. [Suggest we ask)
Client transactions:
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When a client product is transacted, details of the transaction are communicated to the
client. In most cases there is then reconciliation between the client’s records and
Horizon's records. Sometimes, this reconciliation is conducted in real time, and
sometimes it is conducted at a later point. Significant volumes of data are therefore
scrutinised in great detail by third party clients — as yet none of those clients have raised
a complaint about that data that could not be resolved through standard reconciliation
processes. Following the reconciliation, Post Office is liable to account to the client for
the transaction value (or vice versa).
The interconnectivity with, and the transfer of information and records to and from,
clients is part of the overall Post Office IT infrastructure. Some client links are direct
from Horizon and some are supported by daily or weekly batch files delivered from
central Finance systems in Post Office to the client.
An example of online connectivity from Horizon to a client would be as follows:
Example:
At Post Office branches, a customer can deposit cash in or withdraw cash from
his/her bank account with a number a major banks (eg. Lloyds, Santander, etc.).
If a customer wishes to withdraw £100 of cash from an account, the Horizon
system connects to the client's computer banking system to confirm that the cash
is available for withdrawal. Once authorised, Horizon will tell the subpostmaster
to proceed with the transaction and to give £100 in cash to the customer
(assuming that there are no other transactions in the basket). The amount of
cash recorded in the branch's accounts on Horizon will be automatically reduced
by £100 to reflect the withdrawal. This way the branch’s accounts are kept in
balance with the amount of cash actually on hand.
Likewise, the customer's account at the client bank will be reduced by £100 to
reflect the cash withdrawal undertaken in the Post Office branch.
The branch books balance as above. Post Office obtains its money back from
the relevant partner bank by way of client settlement activities administered by
the Finance Service Centre (FSC).
This process would happen in reverse for a £100 deposit into a bank account,
with the result that the cash position on Horizon at the transacting branch is
increased by £100, the branch holding £100 more cash on hand and Post Office
making a later payment to the client bank of £100.
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Transaction acknowledgments.
Some Post Office transactions (eg. Lottery / Paystation / Post & Go) are not transacted
through a Horizon terminal but instead via separate machine. However, the cash taken
and stock vended for these transactions needs to be accounted for on Horizon as part of
the overall branch cash and stock holdings. To ensure that Horizon is kept in sync with
the records on the third party equipment, a "transaction acknowledgement" ("TA") is
often used.
Overnight the third party equipment reports the volume / number of transactions to Post
Office. Post Office's data centre then sends an overnight electronic message to each
branch's Horizon terminal which contains details of the volume / number of transactions
conducted within the branch on the third party equipment. This is the transaction
acknowledgement.
The transaction acknowledgement will make an adjustment to the branch's accounts.
For example, if the TA is for sales of Lottery products, the TA will increase the amount of
cash to be held in the branch to reflect the value of the sales.
When the subpostmaster logs on to Horizon the following morning, he will be presented
with the transaction acknowledgement and asked to confirm that it is correct. Once
accepted by the subpostmaster, the above adjustments to the branch's accounts will take
effect.
Commercial: Over the past few decades, the significant changes in technology and the
growth of online business have driven changes to the Post Office structure and
marketplaces. As previously referenced (para 10) revenue from Government business
reduced with the movement of pensions and benefits directly to bank accounts. Currently
the number of Post Office Card Accounts (operated for Department of Work and
Pensions for the payment of pensions and benefits for those without bank accounts is
reducing as the Government takes steps to support and move account holders to
banking to enable them to have the advantages of direct debits etc, ) The Post Office
Annual Report 2016/17 notes a £14 million decrease in turnover from DWP contracts
due to a decline in the number of Post Office Card Accounts.
The growth of online/ changing consumer habits has led to the complete withdrawal of
some products and services completely from sale at Post Office branches (eg NS&l
Premium Bonds) and the mails market has also undergone dramatic changes, with the
decline of personal mail, the growth of online shopping and deregulation.
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Post Office has responded to these and other developments with programmes to change
and adapt the structure of its network (Network Reinvention, Network Change and
Network Transformation programmes of modernisation and rationalisation over the past
18 years); by entering new marketplaces such as financial services and telecoms and by
developing, with clients, online services (eg savings and mortgage products with Bank of
Ireland) via the Post Office website.
In 2000/2001 Post Office introduced Horizon and its later version (2010) Horizon online,
connecting its vast network and helping to provide it with the ability to respond to rapidly
changing marketplaces more quickly and effectively in working with clients to bring new
products and services to branches.
In case useful as background to show evolution & change - to illustrate by way of
example Post Office banking services:
Post Office had arrangements in place for Girobank customers, which used to be
part of the wider GPO (General Post Office, later The Post Office) until 1990, to
continue to withdraw cash and make deposits at branches. Girobank then
transferred to Alliance and Leicester (now part of Santander).
Post Office also started to offer some services to customers of Co-op, Lloyds TSB
and Barclays in the 1990s.
More banks came on board in 2003 when benefits started to be migrated to bank
accounts. Previously benefit recipients received a green giro cheque which they
could cash at the Post Office. It was recognised that some people might still need
to carry on collecting their benefits at their local Post Office so this service
allowed recipients who were customers of major banks to withdraw cash at their
local Post Office from basic bank accounts and current accounts. [Note —
separately there is a Post Office Card Account operated at Post Offices on behalf
of the Government for people without bank accounts; the Government is taking
steps to continue to support and move POCA holders to banking to enable them
to have advantages of facilities such as direct debits. This is a phased
Government plan]
Each bank had very different services — based at the time, on paper slips or
magnetic strip cards or bar coded slips, as well as emerging chip and pin - so the
service types were very different. Some of the banks expanded on these services
to deposits and balance enquiries but there was no consistency of service across
all banks.
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In January 2017 Post Office announced its banking framework agreement — an
agreement with UK’s High Street banks - enabling Post Offices to offer ‘every day’
banking services to their customers. This essentially simplified all services,
removed ‘old’ paper, making it easier for customers, and Post Office branches, to
understand the services on offer.
A specific, granular, example of an ‘on the ground’ change & improvement (driven by
banking industry): The UK banking industry initiated a change which, over the last
decade, has removed paper paying in slips in place of customers making banking
deposits using a chip and pin card. The chip and pin system is more secure and less
prone to error. Historically, with paying in slips, there was a risk with paying in slips that
the deposit value on Horizon (as manually keyed in) and th actual amount deposited to
the customer's account (as per the paying in slip) could differ and generate a discrepancy
(hence the need for the end of day cross check). Under the chip and pin system there is
less likely to be an accounting error as the amount entered into Horizon by the counter
staff is confirmed on the chip and pin by the customer. Therefore the amount deposited
to the customer's account is always the same as the amount on Horizon.
Regulation & compliance: [Do we want to say something about changes in regulation
over the years in the markets we operate in and how we adapt etc — Mark Underwood
best placed to advise who subject expert might be for broad view in first instance?)
Political forces operating on Post Office
UK Government Investments (UKGI) GI oversees government's 100% shareholding in
Post Office on behalf of the department for Business, Energy and Industrial Strategy,
which involves a range of activities. UKGI holds a seat on the POL Board and Audit and
Risk Committee, and oversees and participates in corporate governance activities such
as the approval of the business's longer term strategy, executive and non-executive
recruitment, and director remuneration. The shareholder team monitors financial and
operational performance of the business against that long term strategy, holding the
business to account in delivering against its commercial and policy objectives. UKGI are
also responsible for ensuring the business is provided with sufficient investment and
subsidy funding to achieve its target of being commercially sustainable in the longer
term, whilst meeting its social obligations, particularly around minimum network
coverages requirements. Finally, UKGI advises ministers on both commercial and
policy issues, supporting them in Parliament and with the wider set of stakeholders who
have an interest in Post Office matters. There is a Minister for Postal Affairs (within
BEIS).
Government funding has been vital to the business over many years. In [2001]
Government obtained clearance under the EU State Aids regulations for £180
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mil
jon to enable the Urban Network Reinvention programme and between 2010
and 2017 the Government allocated £2 billion to fund the Post Office’s
modernisation and transformation programme, which included investing £20m in
more than 3000 community branches which are often the last shop in the village.
Post Office is transforming to become self sustaining because Government
subsidy is reducing [I have figures on this].
outlined above the Post Office has continued to adapt over decades, developing and
changing its product and service offering in line with client and consumer demands. To
remain relevant it has replaced some historical traditional functions, such as the payment
of pensions and benefits, and has done so by moving into new marketplaces such as
financial services and telecoms, working in partnership with other organisations, sharing
expertise (and also bringing expertise from our new marketplaces in-house) to develop
and launch new products (eg range of PO branded products, such as savings and
mortgages, with Bank of Ireland). Growth of online has led to the Post Office developing
its digital offering (now the preference for financial services products) and increasing
consumer demand for fast and flexible fulfilment solutions has also driven the
modernisation of our network. Government policy includes the reduction of taxpayer
subsidy over time and this, alongside increased competition, has been a factor in cost
reduction programmes and changes it has made to enable business to be able to
respond quickly to its markets (for example streamlining processes and reducing
bureaucracy .
13. [Please could you set out why Post Office has policies regarding:
13.1 Having a wide geographical spread of branches; This to adhere to Government
policy which sets out access criteria (see para 10) [and client contracts =
ASSUFANCES in ThOSE?] to ensure that the population has reasonable access to
Post Office services, including vulnerable people and those in deprived areas.
13.2 maintaining continuity of service to customers; This is important to ensure we
continue to meet the access criteria and additionally avoid the ‘migration’ of
customers to competitors/ alternatives. It is also a reputational/ brand issue if a
branch is temporarily closed.
Directly Managed (Crown): Operated directly by the Post Office, larger branches usually
located in town and city centres, offering full range of services.
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Franchised former DMBs: Modernisation of the network includes the continuing
franchising of some DMBs. Some have moved to franchise partners such as WHSmith
with others franchised to local independent retailers, sometimes remaining at the same
site or relocating nearby. The services they offer typically remain unchanged (with the
exception of the specialist biometric identity service for the Home Office where this has
been provided. Locations are agreed with the Home Office.).
Local: Branches where the post office is fully integrated in a retail outlet, such as a
convenience store. They provide around [95%] of Post Office services, including all the
most frequently used services. Post Office services can be available when the shop is
open, which in some cases includes evenings and Sundays.
Mains: Branches, like Locals, that are integrated into a retail outlet. These branches are
larger and offer a wider range of services than Locals.
Multiples - Sometimes branches are located in much larger businesses such as Co-
operative stores or WHSmiths. The operating procedures at multiples are largely the
same as those at other agency branches.
Hosted: neighbouring postmaster will visit the village and provide service for a set
number of hours a week and will offer the service from village hall or public house or
local shop.
Mobile Post Offices: Mobile vans visit [over 250 villages - check] in the UK at set times
and on certain days of the week. These Mobile Post Offices offer all frequently used Post
Office services.
13.3 the nature of the products / services sold by the various categories of branches in
Operation; Kath has noted that core and no core — product suites already
provided to WBD
13.4 _ the opening hours of these various categories of branches]. These vary [and are
contractual]. .Typically, but not universally, DMBs are open Monday — Friday
(9am — 5.30pm with 9.30am on Tuesdays to allow for staff training) and Saturday
mornings (9am until 12.30pm) but some open Saturday afternoons; The hours of
Mains and Locals vary depending on shop opening times but typically provide
much longer opening times than directly managed branches, frequently including
evening & Sunday opening for example.”
[Please can you explain in a summary fashion the Network reinvention, Network
transformation, Network Change, Discretionary Fund and other similar programmes J.
The biggest change where segmenting into urban/ rural branches could be seen was
during the Urban Network Reinvention Programme. This programme was primarily a
‘voluntary closure’ programme within the urban segment (c2001-2004). This was the Post
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Page 14 Comments
MC6 This needs Rod/ legal. I am not clear from all the documents about the
contractual obligations and overall principles.
Melanie Corfield, 26/07/2018 04:57 PM
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
Office’s first major work on network optimisation and was supported by Government
funding. Government obtained clearance under the EU State Aids regulations for £180
million to compensate sub postmasters for the loss of value to their business caused by
their exit from the Post Office network.The Government provided the funding for Post
Office to carry out rationalisation in areas where there were too many Post Offices
serving the same district for them all to remain viable. Post Offices in the 10% most
deprived urban areas with no other branch within half a mile were ringfenced and
protected from consideration for closure (other than in exceptional circumstances to
warrant consideration).The programme involved around [21500]closuresffrough the
drawing up of area plans. The programme also involved a £30 million investment fund to
make Post Offices more attractive for customers, as well as compensation to exiting
postmasters.
Network Change Programme [c 2005-2008)"
This was a compulsory closure programme which impacted all the network. It was also
Government funded. In [year] the Department for Business Innovation and Skills and
Post Office agreed a £1.7 billion strategy to make the network financially sustainable,
including a £150 million annual subsidy. One element of the plan was the Network
Change programme, whereby up t0 2,500 Post Office branches Were to be’ closed and)
500/6Fimiore outreach outlets Set Up (eg mobile arrangements). The other elements of
the strategy, alongside Network Change were restoring Crown (directly managed) offices
to profitability, central cost cutting efficiencies and developing and expanding new
business.In announcing the decision to proceed with Network Change BIS undertook to
set out minimum access criteria
Network Transformation — this programme sought to change the way that Post Office
services are offered in branches. Under the NT programme agency branches transferred
to either a Main branch model in which a dedicated counter, physically separated from
the postmaster’s retail business, was maintained or a Local branch model which fully
integrates Post Office services within the retail business (so the postmaster can offer
Post Office services from the retail counter). This often means that Post Office services
can be offered for longer hours than before, in some cases from early morning until late
at night, seven days a week..
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Page 15 Comments
MC7
mcs
mcg
Need to check this was achieved
Melanie Corfield, 26/07/2018 05:02 PM
Need to check all the precise dates for these change programmes —
different docs indicate different dates
Melanie Corfield, 26/07/2018 05:04 PM
Again need to check actual resulting numbers in case different
Melanie Corfield, 26/07/2018 05:06 PM
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Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
Kath has indicated responses given to WBD.
The National Federation of Subpostmasters (the NFSP) is an independent
members organisation [how and when set up?] supporting operators of Post
Office branches across the UK and is solely acknowledged by Post Office as a
representative body of operators. The NFSP is the only body with which Post
Office will seek to discuss and consult on matters affecting Subpostmasters.
The NFSP was set up in 1897. It is the organisation recognised by Post Office to
negotiate on behalf of subpostmasters nationwide. It looks to improve the pay and
conditions of service for subpostmasters. It also negotiates with Post Office on the
payment for all services and products transacted over a Post Office counter. The NFSP
works closely with Post Office on a range of other issues including post office security,
operational systems and technology. The NFSP provides a range of services offering
support, advice and information to its members. Its monthly magazine, "The
Subpostmaster", provides up-to-date information on issues affecting subpostmasters. A
24-hour helpline gives advice on matters such as contract issues in relation to the staff
employed by subpostmasters. The NFSP cannot provide Horizon related technical
assistance.Representation and guidance is available from the NFSP in the event of
disputes with Post Office. Subpostmasters have access to local support through local
branches of the NFSP and its Executive Officers. The NFSP also runs a Benevolent
Fund providing financial support to subpostmasters in need.
14. [Please could you explain the role of the NFSP, particularly in relation to
determining / varying the terms of the Subpostmaster contracts, the fees payable
to Subpostmasters, the products and services offered by various parts of the Post
Office network, the operational procedures to be followed by Subpostmasters and
the rights and responsibilities of Subpostmasters)]. Nick Beal to advise on this I
think
15.
drafted them?"*"”
How a Post Office Branch works
Remuneration
16. Post Office offers different remuneration levels for different types of products and
types of contracts. Each product and service attracts a certain level of
commission or remuneration.
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Page 16 Comments
MC10 — I’mafraid I haven’t had a chance to review all the documents yet on this
— it’s a big topic. I will do so asap but would be useful to understand
what this is driving at as I don’t currently understand how to construct
an answer from the material we have — are they getting at the user
friendliness of communications, frequency etc?
Melanie Corfield, 26/07/2018 05:17 PM
17.
18.
19.
20.
21.
22.
23.
24.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
Different model types would be paid different amounts, for example a Mains
contract is different to a Local contract because there are different obligations in
how they operate.
Post Office remuneration has declined over the years. The volume of
transactions in some instances has generally remained steady but the amount of
profit for those transactions has decreased. Post Office’s margins have been
reducing over the years. This meant Post Office had to review how it paid
Postmasters and the profitability of their post office is linked to the remuneration
Post Office can offer its Postmasters.
Part of the reason for implementing Horizon and updating the training to be more
sales-focused was to encourage Postmasters to sell as many products and
services as they could, to generate more income for them.
Horizon Computer System
Horizon is Post Office's accounting computer system, provided by Fujitsu. As a
computer program Horizon does exactly what Post Office asked it to do when we
built it. It is fit for purpose. I have every confidence in the system.
I describe Horizon to new users as a big calculator. It processes the data exactly
as it is input. The Horizon user just needs to remember what they need to do to
initiate a transaction (eg scan the barcode; put the card in the pin-pad or touch
the screen) on the Horizon system and then follow the screen prompts.
The system was tested before it was implemented. Part of this was questioning:
"what if this happens; what do you do?" That thinking process is built into
Horizon.
Horizon records every keystroke. Post Office keeps that information for 7 years,
which enables it to go back and extrapolate that data. It is not an easy process to
do this as this information is archived. When Horizon was built Post Office did
not anticipate it would need to analyse the data on such as large scale as has
been required as a result of this dispute.
The contract Post Office has with Fujitsu evidences that Post Office did not
expect to be required to analyse the data very often. The contract only permits so
many enquiries a month. If there are more queries than provisioned for in the
contract for that month, it becomes very expensive. The cost would also increase
depending on the volume of data required, for example the difference between
two months of data or two years. The data retention function was built into
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Page 17 Comments
111 This is likely to be reduced in length but is being kept in full for the
moment.
Ivan Roots, 23/07/2018 05:29 PM
25.
26.
27.
28.
29.
30.
31.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
Horizon to ensure we kept transaction records, but Post Office never expected to
be routinely extracting data from the archived data.
Sometimes it was not cost effective for Post Office to provide all of the data to
the branch requesting the same. For example, a branch might request the data
for 7 years which would cost many times more to get the data than the value of
the loss particularly when the loss was small. There have been cases where Post
Office have pushed back in such circumstances as it was not a commercial
resolution to the loss.
The Postmaster in a number of cases has requested all of the data in what
appears to be a last hope attempt at identifying the issue, rather than because
there is some evidence that there is an issue to be searched for and addressed.
However in a couple of instances I have felt that we should have been more
receptive to providing the Horizon data.
The ability of the branch to access Horizon data has changed over time. Data
was available to be accessed in branch for 42 days when Horizon was
introduced; this later changed to 60 days.
Post Office's security team would request and use the data extraction function as
part of its investigation into a shortfall at a branch, or a similar issue. The security
team would analyse the raw data to assess what happened at that branch. This
was a labour intensive task. This data would sometime be provided to the
Contracts Advisers if they were considering a potential contract breach.
People expect the system to be fast and have the same reactivity as Google.
One of the issues is that users try to compare it to a system we don't have or
what ideally the system would be. There is a mismatch between expectation and
reality.
In my view the weakness with the Horizon system is that it is a bit "clunky" to use.
It's not always easy to locate the information you want from the system.
The Horizon system requires the user to read the screen and follow the prompts.
It appears that some users don't know how to use Horizon as well as they should
or they have developed bad habits and do not use the system in the correct way.
Unfortunately it is possible for the user just to hit a button and move on the
screens without reading the prompts and trying to shortcut the process. If this
happens the user may have input incorrect information into the system eg
processing a deposit as a withdrawal or vice versa and this could be difficult or in
some instances impossible for the user to realise or remember they've done this.
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32.
33.
34.
35.
36.
37.
38.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
As with any IT system, there are instances where the system or the screen goes
down. The system was built recognising that sometimes connectivity could be
lost, that a power line would go down or the communication could be faulty.
Recovery steps have been built into Horizon to counter this risk.
If power or the connection was lost whilst serving a customer and the Horizon
user was part way through a transaction, there are prompts built in to address
that. For example, the customer might have given the Postmaster money but the
Postmaster may not have completed the transaction on Horizon. If this is the
case, when the system comes back up, it asks the Postmaster questions to
establish at what point he/she was at when they lost power. For example, "Have
you given money to the customer? Have you taken money from the customer?”
Depending on how the user answers these prompts, Horizon would either reject
the transaction or complete the transaction.
I am aware there have been reports made that there were errors with Horizon and
bugs which affected the system. I was involved with the communication of what
those issues were to the affected branches.
Post Office did not notify the whole network of reported issues if they were
isolated incidents. I think there were around 20 branches affected by the reported
issues out of 11,500 branches. If Post Office did flag an issue, the Helpline would
tend to see a flurry of activity regarding that issue which the call centre would
deal with.
I have also been involved with managing how errors or bugs are communicated
to the media.
There have been some software changes to Horizon since it was implemented in
2000. Post Office has moved from Horizon to Horizon Online. Prior to the online
facility the information would be extracted from the branch overnight. The key
difference between Horizon and Horizon Online is that Horizon Online is a live
record of the transactions carried out by the branch.
The hardware is the same as when Horizon was first implemented in 2000. It is
only recently being refreshed. There has been some refinement around the
screen (which has been touchscreen from the start), the usability in terms of how
the screens are set up and how many screens you need to go through to sell a
stamp, for example. Horizon has been improved to try to make it quicker and
easier to use, but in essence it has until recently been the same program built on
the same platform.
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39.
40.
41.
42.
43,
44,
45.
46.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
The Horizon user uses the keyboard to type in numbers and words, such as the
number £1,000. They also have the use of a scanner and a touchscreen. The
hardware has a card swipe functionality and a pin pad for customer use.
When the Horizon system was installed there were Post Office teams on site to
make sure the implementation process went smoothly. The branch network also
had a central coordinator in the office who would field the calls from the
Postmasters whose branches were being trained on Horizon.
Horizon relies on the individual using it to input the correct information. The
training tried to address and mitigate the possibility of human errors.
Post Office supported the Postmaster with balancing the accounts while
transferring from the manual system to Horizon during site visits. Some site visits
I arranged during Horizon's implementation phase lasted until early hours of the
morning. From my experience I was able to share best practice tips with
Postmasters on how to organise themselves in branch in their transition from
manual working to processing transactions and producing their cash account on
the Horizon system.
Some Postmasters were very competent with the manual system but had trouble
with Horizon at first. They needed to follow computer prompts and input certain
data into Horizon. There is a customer basket called a "stack". The prompts
would tell the Postmaster, or whomever was operating Horizon to, for example,
take £x from a customer or pay £x to a customer. When they ended the session
the stack should have been zeroed. The Postmaster could then start the next
transaction. In the mediations I dealt with there were Postmasters who were
forgetting to zero the stack at the end of a transaction.
The system has functions built in to tell the user to physically "take £20 to
customer" or "give £20 to customer". It is then up to the user to follow the
prompts.
Horizon is also colour coded, for example the icons for banking deposit and
withdraw, in which one is red and one is green.
A change made to Horizon to reduce human error was rather than typing in the
customer's account number and sort code, the Horizon user would swipe the
customer's card which brought up the relevant account details. This has been
more recently updated to the customer inputting their pin number. This reduces
the data the Horizon user needs to input, lessening the risk of a typographical
error.
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47.
48.
49.
50.
Si.
52.
53.
54.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
The system has changed in this way over time. I cannot recall when all of the
changes were made.
One of the issues which changes to the system cannot address, is when its users
operate Horizon "on autopilot". This is where the user will just click through the
screens without properly taking notice of the prompts and checking the data entry
for errors at that point in time.
One of the areas where we saw autopilot in practice resulting in irrecoverable
errors was with MoneyGram. This is an instant transfer of money from one
country to another. For example, a customer may be sending money abroad to
their family. Once the transaction is processed, the money can be withdrawn
abroad within a matter of minutes. There is very little room for calling back an
incorrect transaction. This was an area particularly open to fraud risks. To
counter this risk, there are security checks built into the transaction eg typing in
ID reference. Post Office also implemented a prompt that informs the user that
they would never be asked to carry out the transaction over the telephone, such
as where the user would receive a call purporting to be from a Post Office
“engineer” carrying out some "tests of the system" but it is in fact a fraudster and
the "test" transaction is a fraud.
Post Office can see where a postmaster has used Horizon to tell them how much
their discrepancy is before they make a cash declaration. This can sometimes
raise suspicions as they are carrying out the process the wrong way around. You
should be checking cash and stock first, not asking the system what the
discrepancy is and then declaring you have enough cash to balance.
Instruction manuals are stored on Horizon Online. Before Horizon, there was a
hard copy Operations Manual in branch.
A Horizon user can use Horizon Online to search the Operations Manual,
although there isn't a search engine function per se. The Horizon Online help
function is not very easy to navigate, as the Operations Manual was simply
copied and pasted into this online system.
Due to the Horizon Online help system being clunky, Post Office still receives a
high volume of calls into the Helpline regarding this issue. This is something Post
Office is looking to address.
Post Office is looking to simplify its transactions well enough that a Horizon user
ideally would not need Horizon Online help. When Post Office designs a
transaction product, it tries to build it so that one click of a button on the screen
will automatically take the Horizon user where they needed to go.
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55:
56.
57.
58.
59.
60.
61.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
Post Office will never be able to remove the risk of human error, but it has sought
to reduce the risk of that as much as possible by automating processes and the
transfer of information where possible. For example, using barcodes to pull
information directly into the Horizon system and sending transaction
acknowledgements to branches rather than them having to manually input the
data into the Horizon system.
Gayle Peacock (Head of Branch and Customer Support) is leading on the new
case management system that will go into support contact centres. This means
Post Office will get better information, which in turn enables Post Office to assess
what that information is telling it. Post Office can then be more proactive in what
support it provides to branches.
Contact/support during ongoing relationship
Post Office had a team which account managed a number of branches. Pre-
Horizon, these were known as "cluster offices".
The Area Manager would be responsible for the whole life cycle of the
Postmaster. Over time the Area Manager position has had different names such
as Retail Network Manager (RNM) or Business Development Manager (BDM).
The RNM or BDM would have a branch visiting cycle, which was usually
quarterly. Area Managers knew the branches very well due to this high level of
personal contact. Over time, the way we run our business has changed and there
is no longer a planned visiting schedule for all branches.
As we changed how we managed the network not all branches had frequent
visits. As Post Office has less branch face to face contact than it did historically,
it is harder to tell nowadays if there is an underlying problem or if a branch is
struggling. It is a costly model to maintain frequent face to face contact with
branches. Today we use technology where we can.
Post Office has always had a sales focus but it is a focus on how does Post
Office make sure the Postmasters generate sales in the right way and ensure that
they are compliant with the regulations.
Helpline
Around 1995 Post Office started to centralise the business. As part of this, in
around 1999, Post Office set up the Helpline. This is the corporate helpline for
Postmasters and Post Office employees which was firstly implemented on a
regional basis and later centralised. There is also a customer helpline, which is
currently an automated system.
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62.
63.
64.
65.
66.
67.
68.
69.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
The Postmaster's point of contact changed from their regional helplines to the
Helpline. This was a period of transition for the Postmasters. It was important
however that they used the Helpline as Post Office wanted a record of the calls
reporting issues so that we could understand trends in the volume of calls and
also the type of calls.
One of the purposes of the Helpline was to give greater visibility of what the
queries were, which would allow Post Office to produce trend analysis at a
national level to ascertain whether there are particular things taking place that are
not just one offs. If, for example, Post Office brought a new product in and the
Helpline received a large number of calls, Post Office could consider whether the
training had not landed properly; or that the product design is not quite right. The
Helpline enabled Post Office to do that forensic analysis and the root cause
analysis.
Even if the Postmaster was to get hold of me as an RNM, I would inform them
that they needed to go through the Helpline. I would inform them that the contact
at the Helpline would then page the relevant RNM or BDM and ask the person to
contact the Postmaster. We were always contactable as the second tier of
support.
The Postmaster's call would be logged on the Helpline system. If that call was not
returned by the RNM/ BDM, the only way Post Office would know would be if that
same contact got back in touch with the Helpline again. Overall though I think the
system worked pretty well and that most RNM/BDMs followed up the calls.
Any issue in branch is reported to the Helpline. The Helpline correlates this
information so that Post Office can understand the scale of the issue. If the
Helpline advisor was unable to deal with that issue, they would tell the
Postmaster who they needed to contact.
If the RNM/ BDM was on annual leave, Post Office had a buddy system. There
was always someone the Postmaster could get hold of if they needed to.
After the Helpline was implemented, Post Office informed the applicants at
interview and training that the Helpline was their first port of call for any query.
Post Office has to be able to look to its central cost base and consider how it can
reduce its costs by working smarter. The Helpline helped reduce base costs as it
enabled Post Office to analyse the information it was receiving and form a more
holistic view of the business. The Helpline flagged issues of contentions and
points for improvement. This is something Post Office continues to focus on
today, which I think is very important.
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Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
70. The operation of the Helpline is dealt with in more detail in the statement of
Kendra Dickinson which I have read and agree with.
Subpostmasters
Becoming a Subpostmaster'
71.
72.
73.
74.
75.
76.
We
78.
The vacancy advertising process for appointing new Postmasters has been
relatively consistent over time.
The advertisement was historically by way of a poster which would be displayed
in the branch of the Postmaster vacancy and the nearest three branches.
However in the case of family transfers, providing the family member was
suitable, then no advertising was required.
Post Office later moved to advertising Postmaster vacancies on our Post Office
website. There are guidelines for how long advertisements were posted for and
what was stated in them.
Post Office would advertise any vacancy for a minimum period. Depending on
whether the vacancy was advertised ‘AT’ or ‘AT or NEAR’ applicants would for
‘AT’ be accepted for the existing site only. If ‘AT or NEAR’ then Post Office
accepted applications for existing premises or suitable premises nearby.
If Post Office advertised a vacancy, it would state that we have an opportunity for
a branch and this is a contract that Post Office is willing to engage on. The
applicant can choose to engage with Post Office on the terms offered and be a
part of the Post Office franchise or they can choose not to. There is very little
room for contractual negotiation.
Post Office has previously advertised Postmaster vacancies/franchise
opportunities at franchise roadshows/trade fairs. Also in the local press when
vacancies were long standing.
Some locations would only attract one applicant. It depended predominantly on
the location and the retail opportunity. Following the economic downturn in 2008,
we frequently only had one applicant per vacancy. On occasions where the
applicant wasn’t suitable and the existing Postmaster wanted to leave the
business, it could be a difficult conversation with the Postmaster but nonetheless
one we had to have.
As far as the recruitment process was concerned, Post Office operated on the
basis that its responsibility was for the sustainability of the branch going forward
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Page 24 Comments
12 This section is likely to be dealt with by Sarah Rimmer but is being left
in your statement for now.
Ivan Roots, 23/07/2018 03:37 PM
79.
80.
81.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
and therefore assessed this through a financial and competency based
assessment process.
One of the obligations of postmasters is to keep information confidential and
comply with the Official Secrets Act [is this still the case?]. very often an
applicant would come from within the community and therefore we needed to
really instil in people the importance of, "this is data you cannot share". A
postmaster will see things which are confidential to the customer, such as their
account balance, the amount in their pension or National Savings, how much
they were paying into their bank account each month etc.
{ls it seen as a valuable / profitable thing to do, and why?] Yes. The role of
postmaster is an important one which is held in high regard in communities and
neighbourhoods. The Post Office is a unique and highly trusted UK brand which
drives increased footfall and new customers into a retail store where a branch is
situated where there is a natural synergy between the host retail offer and Post
Office services. This provides postmasters with cross-selling opportunities. Post
Office is the market leader in several trade and financial products. Introducing a
Post Office into a retail store can create three income and profit streams for that
business: the retail income, the Post Office income and the cross sell income
from new customers drawn to the retail store through the Post Office. Key
statistics from research are — Post Office network has 17 million customer visits
a week and this footfall is driven by a wide range of services; 25% of customers
visit the Post Office fortnightly or more regularly; 14p in every £1 spent in the UK
is channelled through a Post Office. Combining a convenience store with a Post
Office can create a highly valued community service and business: In the 2016
Local Shop Report published by the Association of Convenience Stores
recognised the Post Office as the number 1 service for the impact it has on the
local area, ahead of both convenience stores (2"*) and banks (8"). A medium
sized Local Post Office, when mature, typically draws a loyal and broad customer
base of around 600 quality customers — this is the average based on the existing
estate of medium sized Local Post Offices (we help potential postmasters with
more specific forecasts for individual stores). Re: role of a postmaster can
provide choices because the postmaster can work in the business or can employ
managers or assistants to do so. Or the postmaster might choose to live and
work from one premises, with full integration into the community.
Post Office would take into consideration whether an applicant had worked for
Post Office before. However, I can recall appointing an applicant with no prior
post office experience rather than the applicant with post office experience.
When it is your own business, you the Postmaster have to pay the bills, manage
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Page 25 Comments
MC13 I don’t know. Rod best placed to advise I think.
Melanie Corfield, 24/07/2018 10:51 AM
MC14 I’ve included this from existing material but would want to double check
these stats to ensure we have latest here if we are going to use. Might be
better/ more recent ones
Melanie Corfield, 25/07/2018 01:03 AM
82.
83.
84.
85.
86.
87.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
your own accounts and look at your profit margin. So Post Office's assessment
on who would be the best candidate can be very different, depending on the
individual and their experience.
[Are there statistics regarding how many applicants are successful?] Kath’s note
is that she thinks this q is signposted to AAPT or Sarah Rimmer.
Once interviewed, Post Office would carry out checks on the applicant. We would
do CRB checks and a creditworthiness check to inform our view of financial
stability against their business plan.
Section 15 of the Subpostmasters contract dealt with Assistants. The postmaster
had to complete a P250 form giving details of their Assistants so they could be
vetted before being employed by the postmaster) and this was also a
requirement when they take on new people.
Post Office also carries out CRB checks on an incoming Postmaster's assistants.
This was important as this requirement is built into our contracts with clients (so
that clients can be confident about the people working in the Post Office
network). In addition, Post Office is a financial institution and needs to comply
with the FCA. Post Office is also protecting its assets and reputation by carrying
out such checks.
Investments made by Subpostmasters to secure appointment
Kath’s note _ This was a question on the draft defence for lead claimants — refer
to these for consistency? [my note — is this for WBD??]
available?) Before 2001 Post Office sometimes charged a new postmaster a fee
in recognition of the benefit arising from being granted the opportunity to run a
Post Office branch. This fee took the form of a 25% abatement of the
postmaster’s remuneration for the first year. Such charges have now ceased.
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89.
90.
91.
92.
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
Fees paid to Subpostmasters
I consider the contract with Postmasters is a contract for services, rather than a
contract of employment. I recognise some of the reasons why Postmasters want
to be granted employee status.
Postmasters operate as franchisees of Post Office. I was always keen to ensure
applicants realised this from the outset and understood the contract. This is why I
gave so much attention to the meaning of the contract when I carried out
interviews and why Post Office recommended the applicant take independent
legal advice before entering the contract.
The way the relationship operates also indicates that Postmasters are not
employees of Post Office. Contracts with the individuals were always offered on
the understanding that they were self-employed and that the main provisions of
the contract were non-negotiable.
Post Office employees and Postmasters and their staff had access to the same
products, system, equipment, helpline and general communications with Post
Office. Post Office gave Postmasters everything that they would need to be able
to run the branch properly, in accordance with the contract and standards that we
set. The Postmaster is then responsible for running the business on our behalf
under the terms of the contract. The key distinction between the franchises and
the Crown/directly managed branches was the way the contract worked and the
distribution of responsibility for the franchise.
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93.
94.
95.
96.
97.
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Overall the content of the training Postmasters and Crown/managed branch
employees received was the same. It could vary slightly due some of the
restricted products like car tax and passports. Once the training was completed,
the way employees and franchisees were managed was different. For example,
an employee would have to declare a branch loss over a specific sum and this
would be assessed as part of the employee's performance review. It could be
escalated to a disciplinary and eventually to being dismissed. In contrast, if a
Postmaster had a loss which was not made good, the contract could be
terminated. There was no disciplinary or performance review process, as they
were not employees.
Postmasters were not entitled to the same holiday, sickness absence and
maternity pay as Post Office employees. Postmasters, under the SPSO contract,
instead are able to claim holiday and sickness substitution allowance and
maternity to help cover their absence from the branch. The holiday and sickness
contribution is worked out on a two year cycle.
Post Office recognised that it would be good for the business for the Postmaster
to take a break from running the business by having a holiday. Post Office
therefore considered it to be goodwill gesture to give the Postmaster some
financial contribution to assist them in doing that, partly to encourage them to
take a break as it recognises we all need a holiday or to take time out sometimes.
It was in Post Office's interest to make a financial contribution to keep the branch
open. It is not payment in the same way as an employee would be entitled to if
they wanted annual leave. Post Office did not cover the full cost of the
Postmaster taking holiday. Instead, it made a contribution towards it, which is
why it's an allowance.
It is the same with sick substitution. Post Office recognises that we all get ill at
some point. Post Office considered that taking off the pressure financially should
a Postmaster be ill could potentially aid their recovery and as with holiday cover
contributions, enable the branch to remain open. Post Office therefore offers a
contribution for them enabling someone to come into branch and cover the work
when they weren't able to do that.
Some Postmasters chose never to take the contribution, either because they
didn't put in a claim even though they had time off, or were never sick. Some
people never take time away from their small businesses as they feel integral to
its success.
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99. The more recent contracts, such as the Mains and Locals contracts, do not
contain an allowance for holiday and sickness substitution as we contract on a
company to company basis.
100. Postmasters have to carry out their own tax returns, which points to the fact that
they are not employees. They also have to do tax returns for the retail side of
their business.
101. A number of Postmasters I appointed or worked with relished the way the
relationship worked and the level of autonomy granted as a franchisee. For
example, some Postmasters were very good businessmen/ women. They would
sell on the business with the goodwill element and hold onto the freehold and
enter into a lease with the new Postmaster. It was their own business. They
would do this multiple times over. The goodwill element of the post office was at
some point I recall as high as one and a half times remuneration, so this was a
commercially sound plan.
102. The success of a Postmaster very much depends on the type of individual they
are. Some absolutely relished the fact that they are independent business people.
They tended to be the better Postmasters because they come in with the attitude
that "I am here as my own boss, I want to be able to have the influence of
running my own business and have my destiny in my own hands". Such
Postmasters would see Post Office as the umbrella under which they operated as
a franchise banner. We also had Postmasters at the opposite end of scale. The
undertone was that they wanted to be employed with the security and benefits
they thought this offered.
103. I am aware that there are some things which may not traditionally be seen as
things which point towards self-employment, such as PAYE and NI contributions.
Post Office in some instances deducts PAYE and NI contributions at source.
Postmasters elect through their agreement with HMRC as to whether these
payments are deducted in this way or whether they are responsible for paying the
same.
104. There are some other things in the Postmaster contract you wouldn't perhaps
expect to see, such as allowing the Postmaster to attend Territorial Army training.
105. Post Office also makes "small offices payments" to some of the smaller post
offices that do not have the constant flow of business in relation to their opening
hours. In these branches, remuneration worked out on the whole as less than
national minimum wage based on the number of hours the branch was open. The
purpose of the Small Office Payment is to assist Postmasters at smaller
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106.
107.
108.
109.
110.
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branches with the financial consequences of the National Minimum Wage
legislation applying to any staff they might employ to help them run their post
Office. It is not intended that these payments would mirror the National Minimum
Wage or cover all financial circumstances that a Postmaster may have.
I was very aware of the cost to Post Office of this policy when I was Head of Area
for Wales, because in some of the rural communities in Wales the Postmaster
would have a small foot-fall and so would often require "small offices payments".
The cost of this policy to the Post Office was I believe to be a few million back
then. It is approximately £1.3 million per year now.
Post offices sometimes struggled in rural communities. I used to attend public
meetings at which we discussed with the community the possibility of the Post
Office closing down. Some options were reducing the opening hours if the branch
didn't have the business for the operating hours. This could be attractive to
potential Postmasters whilst at the same time help reduce Post Office "small
offices payments".
I think the reason behind offering these extras was because of the ethos of Post
Office. There is also an argument that in situations where the Postmaster was
struggling, Post Office offered goodwill gestures such as the "small offices
payments" to stop the branch closing down and to maintain Post Office presence
within that community.
We expected the applicant to provide their own premises from which to operate a
Post Office. They had to meet certain conditions in terms of size, so that Post
Office could fit a counter in and make sure it was secure. It would do all the
security checks and make sure that the Post Office element itself was secure and
alarmed.
The Postmasters' premises are assessed to ensure they can operate out of them;
that the premises are kept in good order and that they have liability insurance in
place. This forms part of the contractual relationship with the Postmaster and will
be flagged to them in an interview.
Post Office's interest in the premises is establishing whether the Postmaster
owned or leased them and whether they have a license to trade from them. Post
Office would require the Postmaster to evidence that they have a legal
arrangement to operate from there. Not all Postmasters live on the premises.
Post Office did not restrict who lived in the property or worked in the premises
save for standard checks and staff CRB checks.
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112.
113.
115.
116.
117.
[Why was it commercially necessary / inevitable for Subpostmasters to be responsible
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Post Office also needed to reduce the risk of a “tiger kidnapping". Postmasters
are at risk to this crime (albeit a very low risk in later years) as they have access
to large amounts of cash, often work with close family members who will not
raise the alarm to protect the hostage meaning the police could not be notified
until after the event. The first consideration is always to protect the Postmaster
and his/ her staff whilst in the Post Office. Post Office offered guidance on the
obvious security points and referred the Postmasters to the Security Manual
which is part of the appointment pack.
Post Office historically charged an introductory fee, licence fee or franchise fee
when an incoming Postmaster began to operate a new branch. The rationale for
charging this fee was that there was an inherent commercial benefit to a retailer
in operating a Post Office branch. Obviously, incoming Postmasters traded under
Post Office's brand and they often received additional footfall, however in my
view the basis of the fee was never really explained well enough internally or
externally. The fee was a bone of contention for a number of people.
At present Post Office does not charge introductory fees, or licence fees.
The circumstances when introductory payments were applicable were set out in
an Agency Change Communique (ACC) but in essence if the Postmaster was
buying the business as a going concern, which we called "commercial transfer",
Post Office wouldn't charge a fee. If it was a Greenfield site, a new business and
there was no commercial transfer Post Office would charge the equivalent of 3
months remuneration. For Franchise contracts the fee was calculated on the
number of counter positions.
Rather than paying the equivalent of the 3 months remuneration up front the
Postmaster was able to have a 25% reduction in the remuneration arrangement
for the first year.
Post Office influences the retail side of the business, as it has restrictions on
what can be sold in the branch to tie in with Post Office products and services.
Trust and Confidence
people/ entities running multiple branches)? The Postmaster had a choice of whether
he/she would do personal service. Many Post Offices were operated by a spouse/partner
team or family business as part of a larger estate of retail outlet/s. Alternatively, the
Postmaster who chose to be an absentee would usually have the benefit of additional
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income streams from alternative employment/consultancy/own business. Essentially, the
set up operation of a post office and with the vast majority of the network being operated
by ‘agents’ had a variety of operating modes and it would be commercially unsustainable
if the network of at one time [more than 20,000] branches to be operated by post office.
The diversity in geography, community, size by way of example would have rendered
this to be unstainable both in the cost and management of it. Notwithstanding that,
Postmasters wanted to have control over their business and staffing so that they could
choose to have multi skilled staff or family members working alongside them and
assisting the development of their business. It is the postmaster who is best placed to
arrange staffing to ensure the success of both his retail business and Post Office (for
example he can employ assistants who can work within both businesses as he/she
chooses/ needs). Some branches are operated by larger retailers such as WHSmith and
there are also examples of smaller independent companies who operate several
branches and appoint managers to operate them as they obviously cannot provide
personal service themselves in this situation. It is the retailer who owns/ leases the
premises and other than Post Office setting minimum standards for the premises (in
terms of legal ownership rights/ physical security etc) it is a postmaster’s responsibility to
provide and operate premises (which of course the staff will be working in).It is the
retailer/ postmaster who will be more knowledgeable about local customer needs/
customer flows etc which will influence decisions on the best way to staff the business to
ensure good customer service.
118. When Post Office enters into a contract with a Postmaster it provides them with a
starting amount of cash, stock and all the equipment. It also gives the Postmaster
practical training around how to carry out transactions and how to balance the
branch.
119. Post Office engages them to run that branch. They are on site. The Postmaster
or their staff carry out transactions with Post Office customers, with Post Office
cash and stock.
120. In practical terms, this means that when a new Subpostmaster takes over an
existing branch, he takes on responsibility for the Assistants of the previous
Subpostmaster. It is up to him whether to identify whether they are suitable. If
required to take them on due to TUPE regulations, this would need to be factored
into the decision he had to make as to whether to take on the branch or whether
to use those staff in the Post office side of the business as opposed to the retail
side.
121. This also meant that, once he had taken them on, he was also responsible for
ensuring that they were adequately trained. If he felt that he was struggling to
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123.
124.
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provide that training, he should have identified that with Post Office and arranged
for additional training, taking advantage of the support that was available from
Post Office such as Helpline and post-appointment visits.
Post Office will also know what button they have pressed through Horizon, but
only the Horizon user will know why they have pressed the button and whether it
was the right button to press.
Post Office can review the Horizon logs to ascertain whether or not a transaction
or pattern of behaviour looks normal. Post Office considers it normal behaviour
to count the cash and enter onto Horizon as you count your cash. Then the
Horizon user presses the button that tells you what your discrepancy is. If the
stock unit is an individual stock unit the amount of discrepancy will automatically
present. In the case of shared stock units then the branch user is required to
request a variance check (the cash declaration is mandatory daily process but the
variance check is not mandatory). If there is a discrepancy, it is normal to go
back in and check it and then to make some adjustments because you've found a
mistake somewhere. It is not normal behaviour to say how much am I out before
I make my account declaration. This could suggest falsifying the accounts. There
were instances where a Postmaster may be less than £50 out and would think "I
am not going to bother looking for that amount. I will accept this position and
make good the loss".
At the heart of Post Office's relationship with Postmasters is trust. Post Office
trusts the Postmaster to give it the right information and supports the postmasters
with its systems and training. Post Office will build its processes to try and see
where it is not getting that accurate information. Post Office can't possibly say it
is better placed than the Postmaster to know what is going on in that branch.
The relationship needs to be mutual for it to work. Post Office is not dishonest.
We and Postmasters need to have confidence and trust in each other. We are a
financial institution and are held in very high regard. We are probably the most
trusted brand in the country and Post Office holds that very dear. Post Office's
reputation is partly why it has survived as long as a business.
the consequence if Subpostmasters let Post Office down: From Kath:
Postmasters were given the initial training, and ongoing training and support to
operate their business. (over the years this has changed from the way the roles in
the network operated, but the support was on offer remotely and face to face.
The Postmaster was encouraged to contact the helplines or formerly the
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dedicated field support to request support /training etc. Ange- I have a document
I pulled together for you and WBD about the roles/responsibilities over the years.
131.1 Did not follow relevant operational procedures? Postmasters
were provided with a variety of comms on operational procedures
such as hard copy operational manuals, counter news, branch
focus and the support of regional and then the national NBSC.
helplines. Since the change to Horizon on Line, Postmasters
have also been able to access the HOL help to support without
the need to contact the branch. Failure to carry out procedures
would/could result in a variety of circumstances, by way of
example, discrepancies in branch, unhappy customers, letters
from RNM in early period and CA in later years. Essentially, a
conduct process could be instigated such as warning/remedy
letters, invite to interviews to discuss issues and ultimately the
loss of the contract by termination/notice period given, if all other
action had failed and persistent offending occurred which could in
more severe cases lead to damage to brand.
Did not train assistants well or employed incompetent assistants? From KA:
Failure of the above could lead to the outcomes outlined in 131.1. Post Office,
did offer assistants training for example when Horizon was introduced; invites to
small group seminars on product launches; supported the Postmaster in sales
programmes such as STEP, Customer Relationship Managers ( currently in
ASPM branches)
Ange - there is info in the old RNM manual about assistants/ the modernising the
network journey of a branch in NT etc
Did not explain problems properly to the helpline etc? The failure to do so could
lead to errors being compounded resulting in a discrepancy, loss of trust and
confidence, loss of customer. Ultimately could lead to reticence to contact the
helpline for future support, leading to potential discrepancies, negative
postmasters and decline in business if this impacts the customer. Could also lead
to lengthy calls which have an adverse effect on customers and a knock on effect
to other callers response time. The helpline operates a 2 tier system and now has
HORIce which gives the real time view of the branch. Recently, case
management has been rolled out and still is and gives a more holistic/ one line of
sight of the branch to mitigate issues and get to the root cause earlier potentially
and allow POL to offer appropriate support.
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126. Quality of transaction data typed into Horizon? Training and support that is
provided all underlines the importance of avoiding human error when carrying out
transactions and includes support about how to minimise the risk of this. Whilst
Transaction Corrections can be issued to rectify accounting errors from a wide
range of issues including mis-keying or not entering the transaction date, there
are some errors (eg giving customer the wrong change) that will not be
reconciled. KA — evidence of misskeys in TCs/NSBC logs/SSET cases etc.
Quality of accounts submitted to Post Office (effect of concealing shortfalls by false.
accounts etc)? By falsifying the accounts (whether through the inflation of cash on hand
or otherwise) postmasters or their assistants prevent Post Office from being able to
identify the transactions that may have caused discrepancies and losses. The first step in
identifying a genuine error is to determine the days on which the cash position in the
accounts is different from the cash on hand. Where the cash on hand figure has been
falsely stated, this is not possible.
The false accounting therefore hides any genuine errors from Post Office. It hides it at
the time the losses occur and it remains the case that Post Office is not then later able to
identify which transactions may have caused the losses. False accounting by
postmasters or their assistants prevents Post Office from investigating the underlying
losses.
KA note- false declarations and concealing shortfall via non completion of TP, rem
suppression, manipulation of suspense account, rolling losses
126.1 Relevant statistics? KA — Gayle would have the detail
127. Subpostmasters were not required to provide personal service but those who
chose to spend at least 18 hours per week working at their branches could
subject to certain conditions claim a holiday substitution allowance from Post
Office as a contribution towards the cost of providing a substitute for themselves
while they were on holiday. [Please could you explain the holiday substitute
allowance system, why it exists and how it works]. KA has noted ACC and
documents in pack but I have not yet been able to review all the docs
127.1 What is Post Office's death in service procedure? As above
127.2 [Would a Post Office employee have met with an individual who was taking over
the business following the death of the former Subpostmaster?] KA — Yes in
majority of cases, this would be modus operandi — refer ACCs and Barkham lead
claimant
Training
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Subpostmasters
The following is the summary of training (taken from Second Sight's P1 report from
information provided by Post Office). It does not answer all of the more detailed
questions below however so will need advice from subject expert.
Training
Post Office will typically provide new Subpostmasters with training both prior to and after
taking up their position in branch. Training can cover matters such as how to transact
products and services; reconcile the day's transactions; “remming” in and out cash and
stock (see below); and despatching cheques to processing centres.
Subpostmasters are also advised on how to balance the branch on a weekly basis, roll
over into the next weekly balancing period and how to balance at the end of the monthly
“trading period’. As part of this training, Subpostmasters are shown how to verify
transactions and the cash and stock on hand if discrepancies arise; how to accept or to
challenge Transaction Corrections; how to make good any losses and gains; and how to
raise issues about errors/discrepancies.
As set out below the nature of this training has evolved over time and a summary of the
type of training that has been provided by Post Office in the past is set out below. In
addition to ongoing training related to operational processes, specific training was
provided as part of the introduction and implementation of the original Horizon system
and then the migration to Horizon On Line.
2001 — 2002
Classroom training was offered to new Subpostmasters followed by ten or eleven days of
onsite training and support. This would be followed by one day of follow-up support on
how to carry out balancing at the end of the trading period, referred to as “balance
support”.
2003 — 2006
Between five and ten days of classroom training was offered to new Subpostmasters (the
training being optional) and five to ten days of onsite training and support was then given
depending on whether the classroom training was attended. This would be followed by a
further day of follow-up balance support.
2007 — 2011
New Subpostmasters received five, eight or ten days of training on foundation, sales and
other specialised modules. Six days of onsite training and support was provided, again
followed by one day of follow-up balance support. In 2007, after a pilot scheme, follow-up
telephone calls were introduced at intervals of one month and six months after a branch
was taken over by a new Subpostmaster, with a one-day site visit taking place three
months after the branch was taken over.
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A Subpostmaster may choose not to attend training, or only attend part of a training
session if, for example, he or she has worked in a branch previously and therefore
already knows how to operate Horizon and carry out transactions. Once initial training
has been provided, it is the responsibility of the Subpostmaster to train his or her staff
and ensure that updates or new procedures are followed and communicated to their staff.
Equally, it is for the Subpostmaster to ask for further training and/or assistance if it is
required.
In 2012, as part of the wider steps being taken to “transform” the network, Post Office
tailored its training to reflect the specific role being undertaken and rolled out further
training depending on, for example, the experience of the Subpostmaster, the type of
contract they would be operating and the number of employees they have.
The precise training given to a Subpostmaster therefore depends on a number of factors
such as whether the Subpostmaster is completely new to the role, whether he/she is
taking over an existing branch with existing staff, the size of the branch, the branch
operating model (i.e. Main or Local) and the types of products and services to be
transacted. Post Office’s approach to structuring its relationships with Subpostmasters
has evolved over time, as have roles and titles.
Training for Subpostmasters [at a very high level], including: Note from KA - Ange- I
haven't responded per each bullet — I have various training packages including us
reconstructing a 2006 classroom course from the info on Relativity. We also have the
archive and other training info. Also see factifile and my summary of roles document.
Numerous information/responses have been given for the led claimants as this is an area
that is key issue. Rather than send over all perhaps we can see what WBD and Ivan has
seen and what you would like — we have info given for Counsel. Specific responses to
questions posed by WBD on the specific cases, Factfile, balancing guides/aide memoirs/
PSAs, PTVs etc
127.3. The policies applied and effort made in formulating adequate training, in ensuring
127.4 What initial training was given, what training was given when Horizon was
127.5
=
is
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Page 37 Comments
MC15 I found a reference from Select Committee when George Thomson said
he still had his pack for the training for this but can find no other
references at the moment regarding how this was carried out. Are we in
touch with any people involved in its delivery at the time?
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127.6 The policies applied in deciding whether extra training would be provided if a
127.7 Whether and in what circumstances Subpostmasters knew that they could
127.8
127.9
127.11
[yes according to information above]
127.1.2
Assistants
128. The standard position is that the postmaster is responsible for training his or her
staff but if there is availability on a local training course they will be put onto that
course or placed on a reserve list. [Can we say more?] KA suggestion — use
some of what we use re incompetent assistants par i.e. Post Office did offer
assistants training for example when Horizon was introduced; invites to small
group seminars on product launches; supported postmaster in sales programmes
such as STEP
129. The aim of the training is that the Postmaster is equipped to do the role that they
have been asked to do. The training is offered to the Postmaster as part of the
induction process.
130. The training offered to Postmasters has changed over the years. Post Office has
continually sought to improve the quality of the training and how that training is
received.
131. I Pre-Horizon (which was introduced in 2000), the training was carried out on site
(at the branch) over a period of around two weeks, as “on the job" training. I
believe training at this time was one week for branches with no car tax and two
weeks for those that did car tax. There were two follow up balances and more if
needed. For a short while I was an on-site trainer and used to visit and train
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132.
133.
134.
135.
136.
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Postmasters on the manual system. It was a condition of the appointment that
the applicant attended the training course.
Post Office wanted to ensure that before the Postmaster took on the
appointment, they had had the opportunity to ask questions because different
branches have different transactions, depending partly on the location of the
branches and the services and products they were responsible for. The training
would therefore be tailored in part depending on what sort of branch the applicant
was going to run.
More recently, since the introduction of new contracts, different models of training
were provided to the Postmaster depending on whether they were on a Mains or
Local contract. The number of days over which the training took place depended
on which model of training was provided. The training usually took place over 8
to 10 days. Both courses involved some classroom and on-site training.
When a trainer went on site, they did a transfer of a cash and stock and showed
the Postmaster how to put all their cash and stock into the system. The trainer
would also run through balancing the books with the Postmaster as well. Most
often, it would be the same person who would come back to carry out the transfer
audit after the applicant had completed the training.
It could be a stressful time for the incoming Postmaster as they were often also
moving house as well as buying a business and entering into a commercial
transaction with the Post Office. I always stressed to them what this commercial
relationship entailed and offered suggestions on how they may want to organise
themselves in the branch. I also stressed how important it was to be "present" at
the training to equip them properly for running the branch.
We would historically offer training to not only Postmasters, but also their staff if
there was space on the course. Now, it depends what type of contract Post Office
has with the Postmaster. I believe under the standard Local contract the
postmaster is required to train their staff. In this situation, Post Office trains the
Postmaster, and they train their staff. In the Mains contract, there is an obligation
that a number of their Assistants are required to be trained by Post Office as well.
At the training sessions, I would impress on the applicants that they as
Postmaster were responsible for the branch and his/ her staff and potentially
liable to Post Office under the contract for actions not only of themselves but also
their staff. I would also impress the importance of the postmaster being
comfortable that their staff were properly trained; that they were accurately
declaring their cash and that when they as Postmaster signed off the cash
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account it was accurate ie the amount of cash they said they had was what was
in the branch.
138. Even if a Postmaster had experience with the Post Office before, it was important
that they attend refresher training as the training was always evolving. If there
was space on the course I would suggest that the Postmaster bring their staff with
them to utilise the spaces on the course. With the new Mains and Local contract
the training is set out explicitly: for Mains the Postmaster and up to 50% of their
staff are invited to attend the training. For Locals if the Postmaster has more than
5 staff then in addition to the Postmaster sufficient spaces will be offered to train
50% of their staff.
139. Once the applicant has been accepted, the current position is that they will be
sent a link to the online training that they access on their own device eg laptop.
The online training is interactive and requires user participation. Recently, Post
Office has provided online training as a precursor to classroom and on-site
training. This is a change I introduced in 2015; this approach ensures the
Postmaster has a variety of methods to take in the training — on-line, classroom
and on-site.
140. A Postmaster is now required to complete the on-line training before attending
the classroom training. This approach equips the Postmaster with a certain level
of basic knowledge to process to classroom training. The classroom training is
intended to reinforce the online training, familiarise themselves with the Horizon
equipment and navigation of the screens and put into effect the practical skills,
such as working on the counter.
141. The Postmaster is required to reach a level of competency through the online
and classroom training. The on-site training reinforces the on-line and classroom
training in the live situation. Once the training is completed the Postmaster
should be sufficiently competent to run their post office effectively. If the trainer
has any concerns about the Postmaster they would arrange further training for
the Postmaster.
142. The content and set up of the training courses has changed and improved over
time. One noticeable change is that the current content combines integrated
selling techniques into the transaction.
143. When Post Office introduces new products or changes to products, the type of
training is determined by the type of change or the level of complexity around the
product. If a new product is introduced that is similar to a product Post Office has
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already trained its Postmasters to use, then Post Office wouldn't do face to face
training. Instead we would issue instructions and easy to use guides.
144. There have been examples where some Postmasters weren't happy with the
level of training they received in relation to the ATMs. When we first introduced
ATMs into our network the training was done by the installing engineers and Post
Office issued written instructions on how to balance the ATM and how to account
for the transactions on the Horizon system. We later moved to Post Office
trainers providing training when ATMs were installed in post offices. On transfer
of a post office if there was already an ATM installed then training would be
provided by the Post Office trainer during the on-site training period.
145. In recent years training on certain products has also been by way of video links
(like YouTube). These were typically filmed using NBSC staff.
Discrepancies and Investigations
Audits
146. Post Office used to have separate audit and training functions, so they ran as
separate teams. These teams were later merged. When I took over the Audit and
Training team in about 2009, they were already multi skilled for both the training
and audit functions and have continued to be so. The audits were and are still
carried out by the audit and training team.
147. The audit is not an audit in the traditional sense as carried out by accountants. It
is a detailed check of cash, cheques, stock and vouchers on site. The auditors
would use audit tools such as p32/FAT tool (accessed on the auditor's laptop) and
guidance notes when carrying out the audit. It was a process driven approach.
148. The Postmaster is not given advance notice that the auditors will be attending.
The lead auditor would have a conversation about what would happen on the
day. Around 2011 we introduced a document which explained what would happen
in the branch on the day of the audit. This document was shared across the
network to help make the audit process transparent. It explained that if a
discrepancy was discovered on the day of the audit, the Postmaster would have
the opportunity to discuss it with Post Office.
149. The branch is closed for the audit. The auditor talks through with the Postmaster
what is going to happen. The lead auditor asks the Postmaster to add them to the
system so that they can call off the reports they need to do the audit. If the
Postmaster is absent and there is no-one with manager access then the auditor
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150.
51.
152.
153.
154.
155.
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global password is used. This is recognisable by the "*" and initials of the auditor
followed by "1" usually.
Post Office would always inform the Postmaster this is what it was going to do.
For example, when checking the cash the auditor would request that the
Postmaster observes and checks what they are doing and would always
recommend that they do so.
A Postmaster is asked sign the auditor's findings. The auditor will discuss any
findings at that point in time so the Postmaster is completely clear on the audit
output. A copy of the audit report is sent to the branch. The content of the audit
reports has changed over the years. The report is now automated. It is called a
Financial Audit Tool report, internally known as a "FAT" report.
When I was involved with the audit team between 2009 — 2012, it was carrying
out around 5000 audits a year. These were broken down into random audits, risk
based audits, special audits, branch transfer and compliance audits.
Around 100 random audits are carried out each year.
The "risk based audits" were for branches which had been identified using a risk
model. The risk based audit system generates a list of between 50 and 100
branches that are potentially at risk of carrying a loss/funds at risk. That list forms
a schedule of audits that Post Office carries out on a monthly basis.
There are a number of factors that would deem a branch to be an "at risk
branch". For example where Post Office knows how much working cash should
be in the branch when it has considered the number of deposits and withdrawals
(this is called their overnight cash holding target) and the branch is holding more
than that. In that example, Post Office would investigate why. It might be that
they are just holding too much cash and Post Office will ask them to send it back
or it might be that they appear to be holding more in their accounts because they
actually physically haven't got as much as they tell Post Office they have.
There are also "special audits" which were carried out when something doesn’t
feel quite right. This isn't through the profiling system. It may be from a
conversation somebody might have with a Postmaster or some intelligence Post
Office has received from a third party or client. These audits are arranged within
24 to 48 hours due to the urgent nature of the circumstances which has deemed
it necessary to carry out an almost instant audit.
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157.
158.
159.
160.
161.
162.
163.
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Another type of audit is carried out when there was a transfer from one branch to
the next. Post Office would carry out an audit at that time to enable the hand
over process.
Due to the wide range of skills, the Audit and Training team were able to help
with shortfall queries. They had a very good working knowledge of how the whole
thing came together and were very competent users of Horizon. The team
understood not just the numbers but also the transactions to get to those
numbers.
The Audit and Training team could identify where Postmasters could be hiding a
loss and would work together with the SSRT to identify where that loss may be
hidden. An example the team dealt with (although the figures I give are made up)
was where a Postmaster declared that they had £40,000 in the ATM, when
actually they only had £20,000 in the ATM. This was a way to hide the loss as the
ATM was separate to the branch's main cash.
Post Office stores audit data so that it can analyse what the trend has been over
the years in terms of the number of audits carried out. From this data, it can be
seen what the average loss level for each of those audits is. Post Office can also
sort this data by type of audit.
The format of the audit report and audit tool has changed slightly but the basic
things checked have remained fundamentally the same.
The way we produce the report has changed due to Horizon. When Post Office
operated using a manual system, it produced a handwritten paper report. We now
use an electronic version which shows the cash count and stock and some
narrative.
If there is a large loss, the auditor would tell the Postmaster that they will need to
take advice from the Contracts Adviser. The Postmaster would then have a
telephone discussion with the Contracts Adviser to discuss the loss.
Investigations
The process was that the Contracts Adviser would gather more facts and
evaluate the loss. Often, the Contracts Adviser would explain to the Postmaster
that they needed time to investigate the loss. They may say "I will come back to
you because I am considering whether I need to suspend you as a precaution or
not".
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165.
166.
167.
168.
169.
170.
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The Contracts Adviser will then carry out their investigation. This is usually on the
day of the audit but in exceptional circumstances can be later. Depending on the
level of loss and what they find, the Contracts Adviser will then seek authority
from their manager to take the recommended decision as to whether to suspend
or not.
There is a process map which contains clearly defined steps, the process and
what the consideration points are in terms of coming to a decision on whether the
Contracts Adviser should precautionary suspend the Postmaster or not. If the
Postmaster is suspended, the process map also covers whether the Postmaster
should be reinstated or have their contract terminated.
The Contracts Adviser will need to record the decision rationale. A series of
letters will be sent to the Postmaster during this time inviting them to a meeting,
keeping them updated of the investigation and the outcome.
If a Postmaster doesn't agree with the outcome, there is an appeals process.
There is an appeals process documented in the Subpostmaster Contract. There
isn’t an appeals process as part of Mains and Locals but the Postmaster can
request an audience with a senior manager if they feel they have something they
want to discuss. I have attended such meetings myself before.
A Postmaster will declare a discrepancy on a branch trading statement. At that
point it is declared as a loss or gain. The Postmaster then has the opportunity to
dispute the discrepancy and ask Post Office to investigate by contacting the
Helpline.
If the Postmaster had asked Post Office to investigate, Post Office would not
usually seek to recover the loss then. The loss goes into the Postmaster
customer account and is put on hold until investigations are complete. The SSRT
usually helps with these investigations.
why a loss appearing in his branch accounts actually occurred.) KA: Provided that
the Postmaster and /or his/her staff follow the end of day mandatory procedures,
then any branch discrepancy will be pinpointed to within that day of operation.
This will not necessarily allow the Postmaster to identify the source of the loss, by
way of example an assistant may have finished their shift for the day and may
have been the one to have made an error. That said, this short timescale will
allow Postmasters to look at the very most the day’s transactions. There are
checks that the Postmaster can undertake to allow detection of an error.
However, it may be difficult to find the root cause if for example the incorrect
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amount has been taken/given to customers and the customer has not realised an
error has been made, or choosing not to alert the counter clerk. Some errors
could be detected but by their very nature would require a TC to be issued once
client settlement has been completed and /or where required customer
agreement sought. Ange — I have lots of info that I provided to Amy following
meeting with Counsel, so I can send this over as well or can signpost Ivan to
this?
[The right to dispute shortfalls and how much support is given to Subpostmasters when
disputing. Why this support is given (in Post Office's interests ete). KA: Postmasters are
able to dispute a discrepancy in their branch. First point of contact should be NBSC to
raise and give details. NBSC will support via tier1 and tier 2 and/or forward if to FSC
depending on what the discrepancy relates to. e.g TC issue. Enlist support via FSC with
client when error involving customer made, challenging TC (if the FSC details not given
- which is unusual) etc. Branch may also choose to speak with the NFSP rep who may
also assist. Depending on complexity/type of error then other teams e.g SSRT will be
asked to review/investigate. . It is in Post Office interest for various reasons; foster good
relationship with Postmaster, support to mitigate stress/financial hardship, mitigate
impact on customer and client relationship, depending on severity could lead to customer
choosing another supplier, client penalties or loss of client business. Ange- I have lots of
documents for over period of time relating to the Dispute Process and also the SSRT
investigation process which have been provided to Amy WBD. Mel: The following is
from our Part Two Response to SS: If, following the monthly rollover, there is a shortage
of cash (when the cash on hand is less thanthe amount of cash recorded in Horizon),
then Horizon presents the Subpostmaster with three options to remedy the deficiency:
Make good — the Subpostmaster can elect to put cash or a cheque into the branch from
his/her personal funds to make up the shortage.
Settle centrally and pay — the shortage is transferred to the Subpostmaster’s personal
account with Post Office. The cash figure in Horizon is reduced to bring it in line with
the actual cash on hand at the branch. At this point, the Subpostmaster owes the cash
loss to Post Office as a debt. This debt can be repaid by either (a) a direct payment from
the Subpostmaster to Post Office or (b) by deductions from the Subpostmaster’s future
remuneration although in this latter option the Subpostmaster may not commit more
than 25% of his/her net pay to such deductions.
Settle centrally and dispute the shortage - if the Subpostmaster believes that the
shortage was not his fault or could be resolved through other means, then the debt will
be suspended to allow time for the shortage to be investigated and remedied. The
Subpostmaster can dispute a shortage by contacting the Network Business Service
Centre, Cash Centre (for remittance disputes) or the Finance Service Centre at Post
Office to have the debt suspended pending an investigation.
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If however a Post Office investigation does not fully eliminate carelessness, negligence
or error then the Subpostmaster is liable for the loss and is required to personally settle
any amounts due. In order for the Subpostmaster to challenge this liability, the burden is
on the Subpostmaster to determine the source of the error and deficiency.
It is very much in the Post Office’s interests to understand the source of discrepancies in
the interests of its network and everyone working in it and its customers so that they
have confidence in the accuracy of the system. Understanding how discrepancies might
arise can drive improvements in training and processes to minimise risk from human
errors.
Why was Bates’ contract terminated when the shortfall was only £1,041.86? from KA:
Summary of POIR and on the addendum prepared by POL for the Lead
Claimants
1. Based on the available evidence, the Applicant did not make good any losses to Post
Office between the date on which Horizon was installed in his branch and the
termination of his Contract for Services with effect from 5 November 2003. His debt
was subsequently written off. Therefore, regardless of whether Horizon was at fault
for any losses in his branch (which Post Office denies) he has suffered no direct loss.
2. The Applicant's Contract for Services was terminated by way of Post Office serving
three months' contractual notice of termination on 5 August 2003 (which it was
lawfully entitled to do, as would the Applicant have been if he wanted to terminate at
any time). Post Office was not required to provide any reason when serving such
notice and 'no fault termination’ provisions are a common term in commercial
contracts.
3. The Applicant was given a clear written warning that his actions could lead to the
termination of his Contract for Services before the decision was taken. He could
therefore have chosen to comply with the terms of his contract and avoid its
termination.
4. Despite Post Office having no legal or contractual obligation to offer any form of
appeal process, two independent senior managers carried out reviews of the
Applicant's case. Both concluded that the decision to terminate his Contract for
Services was appropriate in the circumstances. Given that the Applicant had been
refusing to comply with the terms of his Contract for Services by making good losses
to Post Office this appears to have been a reasonable conclusion.
5. There is evidence of the Applicant being given additional training on Horizon and
receiving support visits from Post Office personnel to discuss his concerns about the
Horizon system.
Ange-no doubt you can add much more here too]
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172. [How does Post Office factor into its financial forecasts the assumption that a
Proportion of Subpostmasters will commit wrongdoing? [I had a very quick chat
with Jenny Ellword, Risk Director, and think the short answer is that we don’t in
that we do not insure and we write off debt but I will ask for a formal response to
the Q]. KA suggests FSC
Investigations (needs to be v high level), including: This is from our response to P2
report: In order to identify a loss of physical cash, an investigator needs two pieces of
key information:
(a) How much cash should be in the branch as a result of the transactions processed in
the branch. This information is provided by the branch accounts stored on Horizon.( b)
How much cash is actually in the branch. This is known by conducting a physical count of
the cash on hand. Any difference between the above two figures generates a
‘discrepancy’ which may either be a shortage or a surplus.
If cash is missing, the first stage of the investigation is to identify the day on which the
cash went missing. The transactions for that day can then be reviewed for anomalies.
e.g.: transactions incorrectly recorded (such as withdrawals being recorded as deposits);
and values incorrectly entered (e.g. entering £2000 instead of £200).
This is done to determine if the branch has made errors that would make the branch
accounts inaccurate. This review must be done by the branch staff as only they will
know the transactions performed on that day and may recall the correct transaction
details. Many branch errors (including the two examples above) are most easily identified
in branch. They would not be evident to Post Office unless, for instance, a complaint was
made by a customer.
Post Office helps correct branch errors where possible by reconciling Horizon records
against data collected on some transactions by third parties such as banks and
government departments. Where Post Office detects an error through this reconciliation
process, it issues a Transaction Correction to a branch notifying them of the error and
requiring an adjustment to the branch accounts.
Transaction Corrections are only issued where there is clear evidence of an error in
branch. Where the cause of loss rests with Post Office or a third party client, Post Office
absorbs that cost and it is not passed back to the branch.
Save when it conducts an audit, Post Office does not have any direct knowledge of what
physical cash is actually in a branch — only Subpostmasters have this information. For
this reason, branches are required to: count the amount of cash in the branch daily and
record this figure on Horizon as a cash declaration; and count all cash and stock at the
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end of each trading period and record these figures on Horizon before making good any
discrepancies.
If daily cash declarations are not made by a branch or declarations are made falsely (by
declaring that there is more cash in the branch than there actually is) then it is impossible
for Post Office, and will be very difficult if not impossible for a Subpostmaster to: know if
cash is missing; identify the day or days on which cash has gone missing; identify which
member of staff may be the source of errors; or locate the erroneous transactions that
caused a loss.
Daily accurate cash declarations are the most critical aspect of branch accounting.
Where these are not performed, losses of cash go unchecked. For this reason, it is
critical that Subpostmasters make accurate daily cash declarations as a fundamental
requirement of their contract with Post Office. The need for daily cash declarations is
known by all Subpostmasters and is easily done — there is no specialist training or
support required.
172.1 The myriad of different circumstances which might call for an investigation and
who would typically perform it — including evidence going to the test cases. KA-
see para on disputing shortfalls and also she notes CAs and Network Field Team
would potentially investigate too
From Second Sight's P1 briefing: This provides a lot of background about types of error
— obviously need more specifics on some aspects to answer above question:
A number of the errors as described below may only be visible to those working in the
branch. When discrepancies occur, Post Office normally seeks to find possible
explanations other than those below. If no other source of the discrepancy can be found
and system error can be eliminated or discounted then, by a process of elimination, the
discrepancy will have most likely occurred through an error in the branch.
Mis-key
A mis-key is the term used when staff enter the wrong value of a transaction into Horizon
compared to the actual amount of the transaction.
Example:
A personal banking customer wishes to deposit £1000 into his/her account and the
person
serving the customer mistakenly enters £10,000 but only £1000 cash is taken from the
customer. This would create a shortage of £9,000 for the branch.
In order to rectify this mistake, the Banking Team within the FSC has to contact the
associated client bank which in turn will contact its customer. The customer will then be
asked to confirm the amount deposited at the branch. However, the only receipt printed
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from Horizon will have been given to the customer and will show a deposit of £10,000
and, therefore, the rectification process relies largely on the actions of the customer and
their bank.
As a result, an easy to make keying error, by branch personnel, could result in a
customer
enjoying a windfall benefit, with the Subpostmaster having to make good this
discrepancy.
Mixing retail and Post Office business
Generally, a branch will maintain a physical separation between retail and Post Office
cash.
Mixing these two sets of cash can lead to Post Office cash being lost to the retail
business and vice versa as it can become difficult to track the amount of cash that
should be allocated to the Post Office and retail sides.
Errors in cash handling
At the end of a customer transaction, payment normally needs to be made to or
received
from the customer. Even if the transaction is correctly recorded in Horizon, branch staff
may take or hand out the wrong amount of cash. This error could be as simple as
miscounting cash before handing it to, or receiving it from, the customer.
In many cases the honesty of the finder and the ability to identify the money as coming
from the branch is required if the money is to be returned to the branch.
Miscounting cash on hand
Cash must be physically counted at the end of each day and when rolling over at the end
of a trading period. When completing the physical cash count, notes and coins can
sometimes be miscounted or missed altogether.
If cash is temporarily mislaid one day and found the next, it can lead to related shortages
and surpluses on different days or in different trading periods. In the midst of many other
activities, branches may not associate the two and may dispute part or all of the
outcomes.
Another instance of where this can happen is when a Post Office product is sold on the
retail side of the business. Most Post Office products must be sold from the Post Office
counter in the branch premises. A few Post Office products, such as National Lottery
scratch cards, are permitted to be sold from the retail business. However, it is the
Subpostmaster’s responsibility to make sure that any cash taken from the sale of such
products is transferred from the retail business to the Post Office side, and properly
counted in any cash declaration.
Cash remittance pouches that have been prepared for the Cash in Transit collection
drivers may be erroneously counted as part of the cash declaration. Horizon does not
include this amount within the cash holding figure (as it is deemed to have been remitted
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out of the branch even if the pouch has not yet been physically collected) and, therefore,
the branch could be declaring a gain or inadvertently hiding a loss.
Cash remittance errors
If there is mistake made between the amount that is “Remmed” in or out and what is
received from, or sent to, the Post Office Cash Centre, then this will lead to a branch
discrepancy. When a pouch is received from a branch, the handling clerk at the Cash
Centre opens the seal and empties the contents onto their workstation, which is
monitored by CCTV.
This is the same for pouches that are made up in the Cash Centres and sent to
branches.
Example:
If a branch has bagged up £25,000 to send to the Cash Centre but enters £20,000 into
the system then there will, in the short term, be a shortage of £5,000.
If the cash has left the branch then the mistake cannot be rectified by the branch. The
cash will be counted at the Cash Centre and a Transaction Correction will be sent to the
branch to rectify the branch account.
Stock remittances
Branches receive their stock (postage stamps, Motor Vehicle Licences, etc.) from Post
Office either via Cash in Transit or Royal Mail Special Delivery. The branch is
responsible for checking at the earliest possible opportunity that the amount of stock
received exactly matches the advice note delivered with the order and “remming” the
stock onto the correct lines in Horizon.
As the delivery can often occur during branch opening hours it may be impractical to
carry
out a full check immediately as to do so in an effective manner could require the branch
to be closed for a period. In these circumstances an immediate cash count would not be
carried out on delivery of the cash unless it was required immediately for operational
Purposes.
Cheque handling
Branches can accept cheques as payment for certain products and services. Customers
can also cash personal cheques up to a certain amount. Branches may also accept
deposits for certain partner banks.
There are set procedures that must be followed in branch at the end of each day to
ensure
that the cheques are handled correctly, the customer's bank account is debited
accordingly and Post Office can settle the client accounts. Typically there are two
scenarios which might cause a loss:
- A cheque has been accepted for a non-cheque acceptable product (i.e. foreign
exchange
sales). By accepting payment by cheque for a non-cheque acceptable product, it may
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not be possible to link a missing cheque to a transaction record. This is because the
Subpostmaster may have taken the cheque for payment from the customer, but
because the product did not permit cheque payment, Horizon would not present this
option on the counter terminal. The Subpostmaster would therefore have to
erroneously select another payment option (i.e. cash).
- The method of payment has not been correctly recorded in Horizon.
Branches should follow a process to ensure that the amount of cheques recorded as
held in branch balances to zero. This process is called “cutting off’. If the cheques are
not “cut off” at the end of the day the cheque listing on the following end of day
procedure will not agree with the actual value of cheques held in branch. This is
corrected in the same way by amending the “cheque on hand” figure to show the correct
value of the actual cheques held in branch. The value of the cheques in branch is then
sent out before a further cheque listing to confirm a zero entry is printed.
It is Post Office policy that a branch will only bear the cost of a lost cheque if the branch
has not followed proper procedures. If the root cause of a lost cheque is unknown or
attributed to some other cause outside of the branch, Post Office will normally absorb
this loss and not pass it on to the Subpostmaster. In the majority of cases, Post Office
either mitigates the loss caused by a lost cheque by obtaining a replacement cheque
from the customer or absorbs the loss itself. Only a small number of missing cheque
cases result in TCs being issued.
Accidental loss
Other losses may occur accidentally in branches. For example, money dropped in bins
with rubbish, money dropped or knocked into mail bags, and money left on counter tops
taken by a customer without branch knowledge.
Transacting from the wrong stock unit
As noted there is a capability within Horizon to create "stock units",
which are, in effect, "virtual tills". A member of staff within a branch, when serving a
customer, will log onto Horizon with their own User ID and password and can tag
themselves to a stockunit containing cash and stock (either their own individual stock
unit or a shared stock unit).
If a user accidentally links or tags to the wrong stock unit and serves a customer or
transferscash or stock, then the accounts will record the transactions against one stock
unit but the physical cash or stock will move in or out of a drawer allocated to a different
stock unit. Any transactions carried out will then be recorded against that stock unit, with
the corresponding changes to cash and stock levels being recorded against that stock
unit's accounts.
If spotted, then this can be corrected by either reversing the transactions and allocating
them to the correct stock unit, or by calculating the cash value of the transactions and
transferring the total amount to the correct stock unit.
In theory, there should be no net overall discrepancy to the branch, as any losses in one
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stock unit will be compensated by the gains in the other stock unit. However, taken in
isolation this can appear as if an error has occurred in one of the stock units and can
cause confusion, obscuring other errors.
Outstanding transfers between stock units
Where a branch has more than one stock unit in use (see above) there may be times
when
cash and/or stock is transferred from one unit to another. For example if stock unit A is
running short of cash, stock unit B may transfer money to allow customer service to
continue smoothly.
The user in stock unit B should choose the transfer out option in Horizon and choose the
correct stock unit (in this case stock unit A) and transfer the cash out. A receipt is printed
which is kept in stock unit B to confirm this.
The user in stock unit A then needs to accept the cash in Horizon and print their own
receipt to confirm this. A report called “Transfer Reconciliation” can be printed from
Horizon to confirm that there are no outstanding transfers pending and that all totals sum
to zero.
Failure to do this can cause cash or stock to be missed from cash and stock counts.
Product specific errors
Failure to follow the correct process for accounting for certain products can also cause
errors. A good example is the accounting process for Motor Vehicle Licence (MVL) discs
(commonly referred to as tax discs).
Branches will receive MVL discs from Post Office, which they have to “Rem” into their
stock using Horizon. When the discs have passed the time where they can be put onto a
vehicle, the branch is responsible for destroying the discs and following a process to
inform Post Office that they have been destroyed.
When destroying the discs, if the branch does not follow all of the steps of “spoiling the
disc” and remitting it to Post Office, Horizon will still record the disc as being in the
branch even though it has been destroyed.
When the branch carries out the end of the trading period rollover process and a full
count
of the discs is undertaken as part of the stock balance, the number of discs in branch will
not match the amount recorded by Horizon.
Whilst this does not create a cash shortage, branches are held liable for missing discs at
a charge of £41.50 per disc, because Post Office is accountable to the DVLA for the
missing discs.
Failure to follow the correct reversal procedure for a MVL disc may also lead to a branch
discrepancy. For example, a customer asks to buy a car tax disc and the transaction is
completed in Horizon, but if no payment is actually taken, the branch has to reverse the
transaction and the disc. If they only reverse the disc out of the system then the stock of
discs will balance, but the branch cash will not balance.
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Theft
Theft by branch staff can and has occurred involving staff taking cash or stock directly
from safes or drawers or colluding with a customer to generate a gain for the customer
and an offsetting loss for the branch (this being ultimately borne by the Subpostmaster).
These shortages would be identified when a physical cash count and declaration is
made,
but it is not possible for Post Office to identify when the actual theft occurred. Unless the
person is caught in the act of taking the cash, it is probable that the loss would only be
discovered at the end of day cash declaration or at the time of completing the Branch
Trading Statement.
The branch staff may then be unaware of how the loss had occurred. Some thefts may
also be accompanied by an effort to disguise the theft (i.e. creating false transactions or
gains).
Whilst it may be possible to identify the User ID that was used to process these
transactions it may be difficult or impossible to prove exactly when the theft occurred.
Example:
Cash or stock may be falsely declared to give the impression that the cash or stock is in
the branch when in fact it has been stolen.
“Phantom” cash remittance pouches could be created to mask an amount of cash that is
missing but the pouch is reversed before the dispatch. For example, Horizon does not
take
into account the amount of cash in pouches when it calculates the amount of cash that it
is expecting to be declared. So, if cash is missing before the cash declaration is made,
the
branch could make up a cash remittance pouch to cover the discrepancy, so in effect the
branch will not show a discrepancy in Horizon. Once the cash is declared, the branch will
reverse the remittance pouch from the system.
181.1. The four or five most common examples of types of
investigation. Most investigations come as unexplained and
Horizon caused the loss, but other areas Comms/Power
failure/stock rems/misskeys/ATM reconciliation/ MG
latency/Reversals only completed the cash element, so no
change often can be the root cause/ TC challenge/ claims that
cash changed since previous one with no declarations — common
cause accepted TA /TC and no physical action of the cash to
correlate. Other areas where the initial error has been
compounded an
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172.2 The policies applied and effort taken in ensuring investigations are properly done,
and why (in Post Office's interests to get it right etc).
181.2 The difficulties in ascertaining the causes of unexplained
discrepancies, including: the main factor that impedes getting to
the cause, is the failure of the branch to completed mandatory
procedure of accurate cash declarations. These are often not
completed at all, remain static over a period of time, or several
declarations to show a clear balance/nil variance. At Trading
Period often statements show a zero discrepancy which masks
issues and/or when discrepancies are declared, the act of make
good on branch is not followed by the physical act of putting
in/withdrawing cash, hence rolling the loss/gain and again does
not give a true picture.
172.21 The myriad of different circumstances in which discrepancies can
arise.
KA- Factfile and other mediation reports refer to this and list provided
to WBD following meeting with Counsel
181.2.1 Post Office does not know what happened in branch. By way of
examples example when branches fail to complete TP, conceal
shortfalls by suppression of Rem pouches, roll losses, false cash
declarations which will take a period of time to see a trend,
manipulation of the suspense account
Branch has access to a variety of reports /logs that can be pulled off Horizon, and
essentially it is the branch that should know what has actually happened at the point of
sale with the customer. Does Post Office have much more information than.
Subpostmasters? No, Post Office extracts the information primarily in excel format, but
the branch has access to both the hard copies for example with ATM the print totals that
POL do not have. Was the relative availability of information better before the
introduction of Horizon? No, there is now a record electronically, (provided it has been
entered on Horizon) especially when in the paper based days that if a customer
bill/deposit/pension docket/cheque etc was handed back to the customer, then it would
be difficult to pin point what had occurred. With Horizon, in the event of similar errors,
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then the propensity to be able to correct is greater. With HOL, there is an extended
period when logs/reports can be obtained in branch, however if the branch were following
daily procedures correctly, then ideally only 1 day of trading would need to be reviewed.
Ange- I provided info following meeting with Counsel
Below is an extract from Post Office response to Part 2 report which addresses
the subject of insufficiency of data for postmasters to investigate and which
addresses the question in part:
Branches have access to a range of reports on different products and transactions to
investigate the possible causes for discrepancies (including a complete line by line listing
of all transactions that day). This also applies at the end of the trading period as a trading
period is either 4 or 5 weeks (28 or 35 days) and the above reports and data have always
been available in branch for a minimum of 42 days (60 days since 2010).
If a Transaction Correction is sent to the branch, the information needed to verify the
Correction will not be the Horizon data (Post Office has this data and takes this into
account when generating the Transaction Correction). The information is likely to be in
the paper records held at the branch.
Some postmasters (during the mediation scheme) raised the issue that some
information is not available to Subpostmasters even on the day that a transaction takes
place. An example provided was where an aggregate amount or volume is provided for
Debit or Credit Card.transactions. An aggregate amount for the number of transactions
was provided at the end of each day rather than a breakdown of the individual
transactions. As a result, some postmasters claimed they were not able to identify the
individual transaction that may have caused a balancing error.
But Debit and credit card information has never been retained on Horizon in branch —
indeed doing so would be a breach of Payment Card Industry standards (and Horizon is
PCI accredited). However, as mentioned above, branches have always had access to
line by line transaction data each day and this data records the method of payment (e.g.
cash, cheque or card).
A Transaction Correction may be issued after the date that data can be retrieved (i.e.
beyond 42 or 60 days) but Subpostmasters may challenge a Transaction Correction
without transaction data. Transaction Corrections are also often preceded by an enquiry
and so even if the Transaction Correction is beyond 42/60 days then an enquiry may well
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have been received within the period enabling the matter to be investigated within the
42/60 day period. There is a wide range of evidence that can be provided to review or
challenge a Transaction Correction. Often it is very product-specific and not a general
view across all data entries. Typically, the necessary data is kept in branch records
rather than on Horizon. These hardcopy documents should be retained beyond the period
that data is available through Horizon and is used by Subpostmasters to challenge or
review a Transaction Correction.
For example, if a branch wishes to contest a Transaction Correction relating to ATM
transactions the information needed is on the paper ‘Totals Receipt printed daily by the
ATM which shows how much cash has been dispensed by the ATM and other important
information. This receipt must be retained in branch. No access to Horizon data is
needed as all the necessary information is on the ‘Totals Receipt’.
181.3 What sorts of information are necessary to identify the causes of
shortfalls? How much of that information: KA - Physical
checking of assets in branch comparison made with Horizon. Can
pinpoint for example errors in remitting in stock. Reversals, TCs
brought to account. Paper slip /cheques and other documents as
appropriate. Other reports as per list provided to WBD for
Counsel.
172.3
181.3.1 is only available to Subpostmasters Postmasters have the hard copy
BTS and final balance. POL has access to these electronically for 6
months on HORIce. ATM print totals are in branch only. POL has the
BOI figures
172.3.1
181.3.2 is only available to Post Office BO! dispensed figures, branch has the
print totals from the ATM similar with Lottery print outs too. TCs are
seen by POL initially then issued to branch for accepting (these can be
disputed also)
172.3.2
172.33 is available to both,
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181.4
181.5
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
No reason why Post Office/Fujitsu staff might seek to falsely find
a Subpostmaster liable for a shortfall? KA - Fujitsu do not have
control of the branch accounts and the shortfall. It is the branch
that reports the shortfalls via being settled centrally or at for
example audit then the amount revealed is/can be settled
centrally. POL will issue on occasions stock TCs or Rem stuck in
suspense TCs which but these are required to be accepted by
branch (Stock TCs can impact the remuneration
positively/negatively. MC - Point we consistently made about
this during mediation scheme is there would be no possible
credible motivation for this. Post Office’s business success
depends on a network of thriving branches, with minimal
disruption through temporary closures or other breaks in service.
It has a very strong and trusted brand which it needs to protect
and which it also needs to attract not just clients and customers
but also new postmasters and franchisees as well as Government
investment. It is a business with an [£x billion] turnover. If any
errors are found for which postmasters are not liable through
carelessness/ negligence/ dishonesty it is in the business's
interests to ensure they are not hidden but put right as efficiently
as possible. Similarly it is difficult to see what motive FJ staff
would have. They would not gain financially and as a company
they, similarly, have every motivation to ensure the efficient
discovery and fix for any errors.
See Factfile paras 101 -109 and also TC paper and information
provided to Counsel Cover transaction corrections within the
the relevant transaction. As above references TCs are required to
be bta at TP end, but over £150 these can be settled centrally.
Less than £150 need to be made good in branch but can still be
challenged. Evidence is usually provided, in the absence of this
can be requested. Essentially, TCs are to correct a previous error
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172.5
172.6
172.7
Claim No: HQ16X01238, HQ17X02637 and HQ17X04248
in branch which should have presented a loss/gain at the time the
error was made. However, this can be masked by other errors. Or
failure to follow procedures correctly such as accurate cash
declarations.
Ate will be generated if there are differences on the accounts that the Branch
has posted vs the Client files we receive and made settlement on. By sending a
TC we are correcting the accounts. We do issue TC’s for both debits and credits
to branch. therefore in basic terms we give money back and we request money.
The TC itself is an electronic message with a narrative on it. The team will put a
narrative on the TC, for example, you have entered £100 on Horizon and we
have only received one cheque for £10. If evidence is required on this example
we can send an image of the cheques or we can post evidence out. For the
Cheques that Branches despatch we receive a scanned copies and we are able
to send the image back showing this, i.e. the cheque is for say £10 not £100
The TCs basically goes to branch for the Postmaster to accept and make good
the cash or settle centrally. They are either putting the cash in so that then
balances their accounts or they settle it centrally. They get the TC via Horizon
and they have to click a button. If they click the button that says make good cash,
they should then put the cash in but if they do not, when they come to balancing
again next time they will be in deficit again.
Office’s clientsThe branch users are responsible for the daily operation of the
branch and what occurs at the point of service. In the event of by way of example
a system failure, or MG latency issue or incorrect remittances, then the branch
are required to either follow screen prompts or raise with NBSC.
181.1 The sort of circumstances in which Post Office does not find that
the Subpostmaster is liable for the shortfall (when Horizon
indicates that he is, or might be, liable]. MC - Would we want to
include info on the receipts/ payments issue during the pilot for
Horizon online and which was fixed? KA- I don’t agree with the
words in brackets. Circumstance could be when an issue has
occurred and it is apparent that there has been a problem,
usually in a small number of branches. Potentially, when
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Page 58 Comments
16 This is taken from Alison Bolsover's Proof of Evidence and can be
adapted as appropriate.
Ivan Roots, 23/07/2018 05:19 PM
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incorrect advice given has led to a shortfall. In the event of a
Robbery/Burglary/Incident where nil culpability is the outcome as
the Pmr has not been negligent and has followed security
procedures. Section 12 para 17 relief from losses appeal to
RGM.
STATEMENT OF TRUTH
I believe that the facts stated in this witness statement are true.
Signed:
Date:
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Filed on behalf of the: Defendant
Witness: Angela Margaret Van Den Bogerd
Statement No.: First
Date Made: 23 July 2018
Claim No: HQ16X01238, HQ17X02637 and
HQ17X04248
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ROYAL COURTS OF JUSTICE
BETWEEN:
ALAN BATES AND OTHERS
Claimant
AND
POST OFFICE LIMITED
Defendant
WITNESS STATEMENT OF ANGELA
MARGARET VAN DEN BOGERD
WOMBLE
BOND
DICKINSON
Womble Bond Dickinson (UK) LLP
Oceana House
39-49 Commercial Road
Southampton
SO15 1GA
Tel: 0345 415 0000
Fax: 0345 415 8200
DX: 38517 Southampton 3
(Our Ref: AP6/IAR1/364065.1369
Solicitors for the Defendant