Prepared for the purposes of mediation
SIGN OFF PAGE
Entire document:
- Chris Aujard
- Angela Van Den Bogerd
- Andy Holt
Individual Sections:
Crown branches (page 5 to 6)
- Angela Bunyan
Horizon & branch accounting (page 8 — 13)
- Sophie Bialeszewski
- Sue Richardson
- lan Trundell
- Dave King
Branch Reporting (page 14 to 19)
- Rod Ismay
Training (page 20 to 23)
- Gayle Peacock
- Sue Richardson
Support for SPMR (page 24 to 29)
- Kendra Dickinson
- Gayle Peacock
- Sue Richardson
Branch Errors (page 30 onwards)
- Gayle Peacock
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Post Office Limited
Initial Complaint Review and Mediation Scheme
Overview of Horizon and branch trading practices
CONFIDENTIAL AND LEGALLY PRIVILEGED DRAFT DOCUMENT
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Contents
Contents...
Introduction.
Post office: an overview
Subpostmasters...
Other branch types.
The National Federation of Subpostmasters ("the NFSP").
Subpostmaster's contract...
Horizon and branching accounting.
Horizon...
Branch account:
Processing transactions on Horizon.
Reconciliation with clients..
Remittances...
Branch reporting and managemen\
Reporting...
Resolving surpluses or losses of cash or stock.
Transaction corrections.
Training.
Standard training.
New Local Operator.
New Main Operator...
Support for subpostmasters.
NBSC...
Field Support.
Auditing...
Branch errors..
Miss-key...
Mixing retail and Post:Office business
Errors in cash handling
Accidental loss...
Miscounting cash.on hand.
Cash remittance errors.
Stock remittances.
Cheque handling.
Connectivity...
Transacting from the wrong stock unit.
Outstanding transfers between stock units.
Transaction Acknowledgements...
Product specific errors eg. DVLA Motor Vehicle Licences.
Theft from Post Office.....
Theft from customers...
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Introduction
This overview has been prepared with a view to informing the reader of the basic functions of
the Horizon system and Post Office's branch trading practices.
It is not exhaustive — there are a number of product and scenario specific processes that are
not described in this overview.
Post office: an overview
1. Post Office is a commercial business with a public purpose. The majority of its income is
self-generated but it does receive financial support from its ultimate shareholder, the UK
government. It has around 11,500 branches, sells more than 170 products and services
and employs almost 8,000 people.
2. Although traditionally, Post Office is thought of a place to post mail, its branch network
now provides a full range of products and services, from financial services such as
commercial / personal banking and access to government benefits through to home
telecommunications. A non-exhaustive list of products’sold by Post Office is at Sehedule”
4.
3. Historically, Post Office was part of the Royal Mail Group with operations and services
centrally controlled for both businesses. In April 2012, the two businesses separated and
Post Office has since traded as.a separate company.
Subpostmasters
4. The majority of PostOffice branches are run by independent subpostmasters and are
known as "agency" branches. Subpostmasters are, in the main, individuals who are
contracted to run Post Office branches. They are individual contractors and not
employees of Post Office and their position is similar to that of a franchisee.
5. A subpostmaster does not need to render personal service — they may employ
"assistants" to conduct branch business. In some cases, a subpostmaster may employ a
manager to run his/her branch and may have minimal personal involvement in day-to-day
operations. The employment of assistants is the subpostmaster's responsibility. In this
documents, where an activity is said to be undertaken by a subpostmaster, this activity
could also be undertaken by an assistant in most cases.
6. Each subpostmaster owns (or leases from a third party landlord) the premises for which
the branch is run. Other than setting minimum standards from the premises (in terms of
legal ownership rights, physical security, etc.) it is the subpostmaster's responsibility to
provide the branch premises.
7. Typically, the premises will be part of an existing business like a local shop or café. This
existing business is typically referred to as the "retail business". Part of the premises is
given up to transacting Post Office business and the Post Office equipment, cash and
stock is generally kept separate on the Post Office side, away from the retail business,
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although the new “local model” which has been introduced as part of the Network
Transformation Programme (see paragraph xx below) has changed this position.
8. In terms of transacting Post Office business, the subpostmaster is an agent of Post
Office. In legal terms, Post Office business is a transaction between the customer and
Post Office Limited, with the subpostmaster acting as Post Office's agent to complete the
transaction. As the subpostmaster is not undertaking business in his own name, all the
cash and stock held at a branch are owned by Post Office. In effect, the subpostmaster
is a steward of this cash and stock, and although it is under the subpostmaster's control, it
is not owned by the subpostmaster.
Other branch types
9. Crown - There are around 350 "Crown" branches that are directly owned and run by Post
Office. The staff at Crown branches are employees of Post,Office Limited and the branch
is run by an employed “branch manager’ rather than a subpostmaster. The operating
procedures at Crown branches are largely the same as those at agency branches.
Further information is available at paragraph XX below.
10. Crown branches also operate Horizon and Crown employees who access)Horizon are
given their own unique user ID in the same way as Subpostmasters and their staff in
agency branches. The navigation and operation of Horizon, including the processes used
to sell products, run reports and transaction corrections are the same across agency and
Crown branches. Crown branches are also audited.
11. As Crown branches are directly managed by Post Office; the reporting and procedures in
terms of balancing and cash declarations are slightly different, for example, Crown
branches work in weekly balancing,periods (and therefore roll over weekly instead of
monthly — see further below at paragraph XXX) and in an effort to minimise losses, there
is also a requirement for misbalance:checks to be performed on all stock units which
misbalance by £30 and over.
12. Branch managers of Crown branches, unlike subpostmasters, are not liable for any
losses thata Crown branch may suffer. This is because branch managers are employees
of Post Officeé.and Post Office, as the owner of the branch, directly carries any loss. That
is not to say thatPost Office does not take action against employees based in Crown
branches if discrepancies arise, but such action is taken pursuant to the
employer/employee relationship (unlike in the case of a subpostmaster where action is
taken pursuant to the subpostmaster’s contract). However, if Post Office has reason to
believe that a criminal offence has taken place at a Crown branch it will bring criminal
proceedings against Crown employees in the same way it can against subpostmasters.
13. Multiples — Sometimes branches are located in much larger businesses such as
Cooperative convenience stores or WH Smiths. These larger businesses tend to have
multiple branches and are therefore called "multiples". The operating procedures at
multiples are largely the same as those at agency branches.
The Network Transformation Programme
14. The Network Transformation Programme (NT Programme) that is currently underway is
seeking to change the way that Post Office services are offered in branches.
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15. Under the NT Programme subpostmasters transfer to either a “main branches model” or
“local branches model”. The main branch model continues to offer a dedicated Post
Office counter which is physically separated from the subpostmaster's own retail
business. The local branch model fully integrates Post Office services within the retail
business so that subpostmasters can offer Post Office services from the retail counter
rather than a separate dedicated Post Office counter. This often means that Post Office
services can be offered for much longer hours than before, in many cases from early
morning until late at night, seven days a week.
16. To complement the NT Programme, Post Office has also set up a Crown Transformation
Programme to increase revenue, improve customer experience and control costs of
Crown branches.
The National Federation of Subpostmasters ("the NFSP")
17. The NFSP 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 onthe 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.
18. 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 contract /
employment issues.
19. 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;
Subpostmaster's contract
20. The subpostmaster's contract has been subject to several revisions over the years, most
recently in connection with the NT Programme. However, the core principles have
generally remained unchanged. The majority of subpostmasters currently provide
services to Post Office under the 1994 issue of the standard subpostmaster contract (as
amended from time to time). The terms of the subpostmaster's contract are jointly drawn
up by Post Office and the NFSP and the NFSP approves all subsequent variations to the
contract.
21. Under the standard subpostmaster's contract, subpostmasters are remunerated based on
a combination of fixed and variable sums calculated according to the volume of business
that they transact.
22. A subpostmaster also has responsibility for the safekeeping of Post Office's cash and
stock. A subpostmaster is therefore liable for any loss of cash or stock in their branches if
that loss is caused by their carelessness, negligence or error (clause 12(12)) or by the
carelessness, negligence or error of their assistants (clause 15). If cash or stock is lost by
the fault of the subpostmaster, the subpostmaster is obliged to reimburse Post Office for
that loss. The way that losses can occur is set out in section REFERENCE.
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23. Serious errors by subpostmasters can result in a subpostmaster's contract being
suspended and/or terminated, and/or action being taken against the subpostmaster (or
their assistants) through the civil courts to recover any related loss.
24. Where Post Office discovers evidence of criminal wrongdoing, it may exercise the right to
bring a private criminal prosecution, which right is available to all companies and
individuals. Typical criminal prosecutions are for fraud, theft or false accounting (where a
subpostmaster has declared transactions or stock or cash levels within the branch which
the subpostmater knows are not true). Post Office sometimes refers these prosecutions
to the police/national prosecution service (being the Crown Prosecution Service in
England and Wales and the Procurator Fiscals office in Scotland). However, in the vast
majority of cases, Post Office undertakes a private prosecution of the subpostmaster.
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Horizon and branching accounting
Horizon
25. Horizon is the electronic point of sale IT system used in all Post Office branches to
undertake transactions (from selling lottery scratch cards to cash withdrawals and
currency exchanges). In 1995, Post Office commissioned the Horizon system (“Horizon”)
from the company now known as Fujitsu Services Limited. Horizon is accredited by
Payment Card Industry Data Security Standard and ISO 27001. It is currently used by
more than 68,000 users across 11,500 Post Office branches.
26. The system encompasses the following elements:
26.1 both bespoke and of-the-shelf software packages;
26.2 the computer hardware and communication equipment whichis installed in each
Post Office branch including the touch screen counter terminal and printers;
26.3 the central data centres where transaction data from each branch is stored;
26.4 the control and monitoring systems; and
26.5 the testing and training systems.
27. Horizon stores all transactional data undertaken/at each counter in every branch. Each
terminal communicates with Post Office Data‘Centres via a secure communication line
with a back-up communication system and in order to communicate Horizon must be
‘online’ on the internet. ‘This data is stored by Post Office for a period of seven years in
line with data retention policies.
28. In 2010, Post Office rolled out “Horizon Online” as part of its Horizon Next Generation
(often referred to as "HNG-X") Programme to provide a simplified network based on the
centralised processing of data. The main changes were “behind the scenes” and
principally affected the way each terminal communicates transaction data to the central
Post Office data centres. The main roll out of Horizon Online began in June 2010,
following a pilot involving 1,422 branches, and completed in September 2010.
29. All Horizon transactions are conducted through a “conversation” between the terminal in
the branch and the systems within Post Office data centres. These “conversations” are
conducted over a secure cryptographically protected “VPN” — a virtual private network
which allows private data to be shared securely across the internet. Transactions on
Horizon can only be undertaken physically on a terminal in a branch by a valid user
(through their user ID). Transactions cannot be undertaken remotely.
30. Transactions can compromise of a number of “conversations” each of which has a unique
sequential serial number. Horizon records all data centrally in the Branch Database in the
Post Office data centre. A copy of all “conversations” is also made to a separate audit
server where they are digitally stored independently. Specific security personnel at Post
Office have read-only access to this audit server.
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31
There are a number of reconciliation and integrity checks built into Horizon to guarantee
the integrity of the data. For example, all data passing from Horizon to third parties or to
Post Office’s “back office” (Post Office’s financial systems which receive nightly feeds
from branches to hold a financial view of all transactions undertaken in each branch) are
driven from “one source” to ensure that every recipient receives the same correct data.
Financial transactions such as banking withdrawals and card payments are matched
against the Bank’s view of the transaction i.e. if £100 has been withdrawn at a branch,
this will be recorded in Horizon and will be matched against the Bank’s record that £100
has been withdrawn. If discrepancies arise they will be addressed following Post Office’s
procedures (further details are set out below).
Branch accounts and the principle of double entry accounting
32.
33.
34.
35.
36.
Horizon is also an electronic accounting system. It tracks every transaction made in a
Post Office branch and ensures relevant double entry bookkeeping for it. Those
transactions include both customer serving transactions and record keeping for deliveries
of cash and stock in and out of the branch. Horizon enables staff inthe branch to run trial
balances (“Balance Snapshots”) as and when they require and to look up the amount of
cash and stock on hand.
Entries to Horizon can only be made in branch — either as a real-time part of doing a
transaction or by the branch formally accepting a Transaction Correction (TC) or
Transaction Acknowledgement (TA) sentto them from the,Finance Service Centre. TC’s
and TA’s are explained in section XX.
The system's core principle is that of double entry i.e there are two equal and opposite
financial entries (a debit and a:credit) arising from each transaction recorded. The double
entries drive the trial balance of the branch — snapshot reports for which can be run as
and when required in the branch. These will show the cash and stock on hand at that
point in time and summary of the receipts and payments (customer transactions and cash
deliveries etc) which have led to the changevin cash and stock on hand since the last
balancing periods
A typical example of double entry would be the processing of a “personal banking” cash
withdrawal by a customer. Horizon would record a credit (a reduction) in cash holdings
due to money being paid to the customer. It would also record a debit in the Payments
section of the Balance Snapshot which reflects the debt now due to Post Office Limited
from the relevant customer's bank.
The effect of this double entry system is that an input in one part of the branch's accounts
can cause corresponding changes in other parts of the accounts.
Example:
The levels of stock held in a branch can be manually adjusted. A reduction in stock will
however increase the amount of cash by the same value as Horizon will assume that the
stock has been sold.
So if the amount of first class stamps recorded on Horizon is manually reduced by £10,
the amount of cash recorded on Horizon is automatically increased by £10.
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If this reduction in stamps was incorrect (say it was done by accident), when the amount
of physical cash actually held in the branch is then compared to the amount of cash
recorded on Horizon, the branch will be £10 short and will be showing a loss of £10 in
cash. In this way, the error in accounting for stamps has migrated across the accounts to
manifest as a loss of cash.
However, the branch should also now be actually holding £10 more in first class stamps
than that the amount of first class stamps shown on Horizon. This creates a "surplus" of
stamps physically in the branch.
In this scenario, there is therefore no net overall loss. The error can be corrected by
manually increasing the value of first class stamps recorded on Horizon by £10, which will
then automatically decrease the amount of cash recorded on Horizon by £10 (as Horizon
will assume that as there are now more stamps in the branch, those extra stamps must
not have been sold). This will bring in line (or "balance") the branch's accounts recorded
on Horizon with the actual cash and stock holdings in the branch.
Processing transactions on Horizon
37. In simple terms, most customer transactions are processedias follows:
37.1 A customer approaches the branch counter and requests certain transactions.
37.2 The subpostmaster selects the appropriate product or service on the Horizon
terminal and, if necessary, inputs the value ofthe transaction (eg. cash withdrawal
from a bank account of £100).
37.3. This process is repeated for each individual transaction requested by the customer
(eg. at the same time as the cash withdrawal, the customer purchases £10 of
stamps).
37.4 Horizon groups the individual transactions together in a "basket" of transactions
and displays the netamount to be paid to the customer or which needs to be taken
from the customer (eg, in the above situation, the net cash due to the customer is
£90).
37.5 If paymentis to be taken from the customer, the subpostmaster selects the
payment method (eg. cash, cheque, debit card, etc.).
37.6 The subpostmaster takes the payment from the customer or pays out cash to the
customer as required. This final payment out or in (whether by cash, cheque or
other method) records a final line to the transaction record that offsets the net
value of the transactions and brings the basket total to zero. (eg. Customer buys
£10 of stamps for cash. The stamps would show as a negative £10 and the cash
received would show as a positive £10, thereby bringing the basket total to zero).
37.7 The subpostmaster completes the transaction on Horizon which closes that basket
and updates the branch's cash and stock records on Horizon (eg, in the scenario
above involving a stamp purchase and cash the withdrawal, the branch's cash will
have decreased by £90 and stamps by £10). The basket is also simultaneously
recorded to the central data centre. The overall double entry to this net reduction
of cash and stock of £100 is also
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38.
39.
40.
For many transactions, the whole of the accounting and the whole of the service is completed at
the point of sale with the customer present. For example a banking cash withdrawal or a barcoded
utility bill payment are completed totally online with no related paperwork to process and no use
of other terminals not connected to Horizon
There are exceptions to the above due to the specific accounting requirements of certain
products (eg. Lottery transactions must be transacted on the separate national lottery
terminal. Horizon is then updated next day by Transaction Acknowledgement as
explained in Section XX)).
There may also be various other steps that the subpostmaster needs to take to complete
the transaction which are specific to the product in question (eg. completing and sending
off various receipts and paperwork).
Reconciliation with clients
4
42.
43.
A number of the products and services available‘at Post Office branches are provided by
third parties — see the product list at section REFEREN@E: These third parties are
commonly referred to as "clients".
When a client product is transacted, details of this transaction are communicated to the
client. Sometimes, this reconciliation is conducted, in real time, and sometimes it is
conducted at a later point. Post Office is then liable tovaccount to the client for the
transaction value (or vice versa). This 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 Ltd.
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.
The double entry to this in Horizon would be a debit in the Payments section of the
Balance Snapshot representing the debt due to Post Office Ltd for the cash withdrawn
by the customer.
Likewise, the customer's account at the client bank will be reduced by £100 to reflect
the cash withdrawal done in the Post Office branch.
The branch books balance as above. Post Office Ltd gets its money back from the
relevant partner bank by way of client settlement activities administered in the Finance
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Service Centre. The FSC would match the transactions records fed from Horizon with
the LINK bank payments file from the partner bank and agree the relevant amount to
be received from or paid to that bank for their customers’ activity in Post Office
branches for the settlement period in question.
Post Office Ltd would receive funds from the banks where there is net withdrawal
activity by customers. It would pay funds to the banks if there is net deposit activity in
a period.
Remittances
44. Branches send or receive cash and stock to and from Post Office central processing
centres. This movement of cash and stock is called a "remittance" (and is often referred
to as "remming in" or "remming out"). Branches may also take cheques as a method of
payment from customers. These are treated as a “stock item” in Horizon and require
“remming out” to the cheque processing centre.
45. Post Office monitors the cash levels of each branch/Branches are either classed as
“cash surplus’ or “cash deficit” in terms of cash management. Those branches that are
classed as cash surplus receive more customers who make'deposits (eg. by making cash
deposits to bank accounts or by buying products with,cash) than customers who require
cash withdrawals. For example, cash surplus branches tend to be in areas where there
are lots of business customers making.large deposits but not many benefit customers
making withdrawals. These branches do not require cash remittances to be sent to the
branch from Post Office as they will have a net inflow.of cash from customers. These
branches are however required to return cash to:their nominated Post Office cash depots
via a Cash Vehicle in Transit (assecure means of transporting cash) in order to prevent
the branch holding too much cash on site. Post Office cash depots are placed in
geographical locations around the UK and each branch will be “tagged” to a particular
depot.
46. Cash deficit branches are those where the money deposited by customers to the branch
does not cover the amount,that the branch has to pay out. These branches rely on Post
Office cash depots to send cash to the branch in order to ensure that there is sufficient
cash in the branch to meet its needs.
47. Post Office’s Retail’;Cash Management team are responsible for monitoring the cash
levels within the branch network to ensure that branches have enough cash to serve
customers and to support effective working capital management for the network. All this
cash is owned by Post Office and is financed by a Facility provided by Government
48. The decision on how much cash a branch needs to rem in or out is determined by Post
Office’s Flexible Planning System which is an IT SAP-based software tool used by the
Retail Cash Management team. In essence, it compares the cash declaration figures that
are entered into Horizon by subpostmasters and against the sales (receipts and
payments) information. It also takes account of the average transactions occurring over
the past 6 weeks trading history to identify how much cash the branch should return or
send back on their next scheduled cash delivery. This information is communicated to
subpostmasters via Horizon which will show a Flexible Planning Advice Note. The
subpostmaster has the option to amend or cancel the cash that is planned to be returned
or sent to the branch by contacting the Retail Cash Management team.
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49. Where cash is to be remmed out to Post Office cash depots, the branch is responsible for
placing the correct amount of cash into a remittance pouch, entering the amount that is
being remmed out onto Horizon and then either handing the remittance pouch to the
Cash in Transit Driver, or sending it back to Post Office via Royal Mail Special Delivery.
This will decrease the amount of cash recorded in the branch accounts on Horizon.
50. Where cash is remmed into a branch, the cash remittance is sent by Post Office to the
branch either via a Cash in Transit Driver or via Royal Mail Special Delivery. The branch
is responsible for checking that the remittance pouch contains the amount of cash stated
on the remittance and then logging the receipt of cash on to Horizon. This will increase
the amount of cash recorded in the branch accounts on Horizon.
51. Royal Mail Special Delivery is only used, on a risk assessed basis, for certain remittances under
£2,500 and, for example, for remittances to Scottish Islands where ferries and logistics constraints
prohibit the use of the large, heavy armoured cash delivery vans.
52. Cheques are required to be remmed out daily by branches. There are dedicated Horizon
processes, batch control vouchers and special envelopes which branches should use and
put into the mail as part of standard end of day mailcollections. Post Office Ltd contracts
with a banking industry cheque processing organisation who validates cheques received
against batch vouchers, highlights any anomialies to the Post Office Finance Service
Centre, submits the paper cheques and an “IBDE” cheque data file to UK cheque
clearing, and provides data to Post Office FSC about cheques successfully processed
and about cheques that bounced (unpaid
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Branch reporting and management
Reporting
53. Subpostmasters are required to run and review in-branch reports to manage the cash and
stock in their custody and to ensure Post Office Ltd can review and take relevant action
regarding individual branch balances and consolidated balances across the network.
These include:
53.1 Daily Cash Declaration — it is a procedural requirement for staff at each branch to
count and declare the cash stored in each stock unit at the end of each day (for
explanation of stock units please see paragraph xx). The*actual cash on hand is
input onto Horizon by the subpostmaster or his/her assistants. Horizon then shows
any "discrepancy" between the cash on hand and the amount of cash that should
be in the branch in order for the branch to balance.
If a discrepancy is identified then the cash should be recounted)and the paperwork
re-checked. If there has been an error in the counting of the cash, then the cash
should be re-declared. It is also best practice to open and check any stock and
cash pouches made up ready to return to Post Office in case there has been any
error when filling the pouches.
There are a number of tools on Horizon that can assist,subpostmasters with tracing
or identifying discrepancies. For example, transaction logs can be run which show
the transactions that have taken place; these logs can be searched using
parameters such as product type, userand time of the transaction. Event logs also
provide information about user activity and a balance snapshot shows what
Horizon believesis the state of the branch accounts at that point in time. Therefore
subpostmasters can ascertain what transactions have taken place in branch and
the amount that has been recorded against that transaction.
53.2 Weekly Balance — Post Office policy recommends that every week, a branch
undertakes a full cashiand stock count. The actual amounts on hand of cash and
stock can then be compared to the figures recorded in Horizon. This helps the
branch to identify and correct any discrepancies.
In the event thata discrepancy is found on a weekly balance, the discrepancy can
be declared. If the discrepancy is declared, it will be transferred into a “surplus
account” until it is resolved. This is a separate line in the branch accounts which
records any losses or surpluses so that the daily trading accounts can be put into
balance. Amounts are typically held in suspense for a period of time to allow the
subpostmaster time to try to resolve the discrepancy.
The Daily Cash Declaration and the Weekly Balance are tools for the
subpostmaster to use to manage their branch. Declaring a loss or surplus through
either of these reports does not trigger any action by Post Office.
53.3 Monthly Trading Period Rollover — This is similar to the Weekly Balance but is
mandatory every month. It also requires any discrepancies (including those put
into suspense during the month) to be resolved. This process is also called "rolling
over" or the "end of trading period" process. At the end of the process, the
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subpostmaster must print off and sign a "Branch Trading Statement". This
statement confirms that the cash and stock shown in the accounts reflect the cash
and stock held in the branch (with any discrepancy having been declared — see
below).
If a branch does not rollover it does not need to address cash/stock discrepancies
or transaction corrections at that time. However, it is a term of the contract between
Post Office and subpostmasters that a monthly balance will take place and, in the
event a branch does not rollover, this will cause Post Office to contact the branch
to investigate why there has not been a rollover and to ensure that a rollover is
carried out as soon as possible. It is at this point that the cash/stock discrepancies
or transaction correction will need to be addressed.
53.4 Cut off routines - Mandatory daily and weekly “cut off routines” are in place in to
enable branches to validate transactions and to ensure that the paper records
match Horizon. This also assists to identify errors. For example, validating the
physical cheques held in branch (as against Horizon’s records) to send to clearing
or banking summaries to send to Santander. Validations of,physical paperwork
against Horizon records can detect errors or omissions, for example, if a cheque
transaction has incorrectly been recorded as a cash transaction on Horizon.
Resolving surpluses or losses of cash or stock
54. It is possible, for all sorts of reasons, that a branchmay experience or believe it has
experienced a shortage or surplus of cash or stock. In many cases these are resolvable
in branch by looking at commonareas of manual error. An error in the selection of a type
of stock or an error in recording cash or cheque as a method of payment can cause
classification issues which can be resolved locally. A branch may, however, have
misrecorded the value of a transaction or not recorded it at all. In some cases the branch
may be able to resolve these itself and in some cases it may require a Transaction
Correction (TC) fromithe FinanceService Centre.
55. As a generalisation, money may be mislaid but it does not appear out of thin air.
Shortages, may therefore reflect errors in recording transactions, in change giving or in the
extreme the loss or theft of cash. Surpluses, on the other hand, typically reflect the
money from previous period’s shortages subsequently being found or an error or
omission in recording a transaction.
56. Transaction Corrections are, in many cases, sent to branches to resolve these issues.
57. Subpostmasters are required to make good the shortages or surpluses they encounter.
Where it has not proven possible to identify and resolve a transaction then this may mean
the subpostmaster being asked to “put money in” to cover the shortfall. As a corollary
(and where a surplus may relate to the resolution of a shortage in a previous period, then
subpostmasters may “take money out”.
58. However, the fundamental requirement is that the transactional issue be resolved,
particularly as a customer may be impacted by this too. Surpluses, and particularly large
surpluses, typically reflect errors in recording deposits and inpayments by customers.
59. Ina little more detail, for shortages or surpluses of cash or stock, subpostmasters may:
59.1 for stock issues do a sale or sales reversal to correct the volume of stock shown on Horizon,
making sure it balances to the volume of stock held in the branch.
59.2 For asurplus of cash (when the cash on handi.e. in branch is more than the amount
of cash recorded in Horizon), the subpostmaster mayphysically remove from the
branch sufficient cash to bring the branch back into balance. This excess cash
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60.
should be held safely and segregated from other branch cash, but with the onus on
continuing to determine what the transactional issue was that led to this anomaly.
There is sometimes a perception that such money can then become the
subpostmaster's property but this would be contrary to resolving the transactional
error that led to the surplus.. Often subpostmasters keep surplus cash in a
separate location (like the retail business safe) and then use this cash to balance
out any subsequent shortages.
If following the monthly rollover there is a shortage of cash (when the cash on hand is
less than the amount of cash recorded in Horizon), Horizon presents the subpostmaster
with three options:
60.1 Make good - the subpostmaster can elect to put additional cash into the branch
from their own personal funds to make up the shortage. The subpostmaster can for
example elect to put a cheque into the branch from their own personal funds to
make up a shortage.
60.2 Settle centrally and pay — the shortage is transferred to the subpostmaster's
personal account with Post Office. The cash figure on Horizon,is reduced to bring
it in line with the actual cash on hand at the’branch. However, the subpostmaster
personally 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 remuneration.
60.3. Settle centrally and dispute the shortage - if the subpostmaster believes that the
shortage was not his/her fault or could be resolved through other means (see
below), then the debt will be suspended toallow time for the shortage to
investigated and remedied. The subpostmaster disputes a shortage by contacting
the Network Business Service Centre, Cash Centre (for remittance disputes) or the
Finance Service Centre ("FSC") at Post Office to have the debt suspended
pending an investigation.
Transaction corrections
61.
62.
63.
The FSC (often referred to as “Chesterfield” by subpostmasters because of its
geographical location)is Post Office Ltds behind the scenes account processing centre. It
provides daily services.to clients, branches, multiple partners and customers.
The FSC is the originator of Transaction Corrections (“TCs”).. These aresent by the FSC
to branches when errors are found which have not been resolvable by the branch
themselves. Even if the branch's accounts are balancing (ie. there is no discrepancy
between cash and stock on hand and the cash and stock levels on Horizon), it may be
that the branch has processed transactions erroneously or in a way that causes a Post
Office client to refuse to reconcile the transaction with Post Office, thereby causing a
discrepancy.
TCs can be issued for a wide range of issues resulting from matters such as errors or
omissions in data entry, such as mis-keying, forgetting to enter data, failing to close a
customer basket from previous customer session, delays in sending cheques for
processing, incomplete cheques, bounced cheques and card payment issues. In
2012/13 the most common reason for TCs being issued to branches was due to errors in
"cash remittances from branch".
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Example:
A branch records remitting out £100 in cash and sends the cash pouch to the cash
centre. However, upon opening the cash pouch at the cash centre the pouch contains
£110. This creates a discrepancy at the cash centre and (assuming the branch is
otherwise balancing) the branch will reporta £10 shortfall during the next cash
declaration. The FSC will then raise a credit TC to the branch. When the branch formally
accepts the TC, it will have the effect of reducing the reported Horizon cash balance by
£10 in line with the reality of cash on hand. The double entry to this is to increase the
values recorded as remmed out. The branch should then balance in respect of this
specific incident.
64. Due to the fact TCs are often generated due to a discrepancy between Horizon and a
client's records, there can be a time lag between the error occurring and the TC being
issued.
Example:
A customer deposits £100 into their bank accountsbut, through a keying)in error, the
branch only records a deposit of £10 on Horizon.
Ideally the branch or the customer would spot this at the point of sale and follow a
documented process for resolution of the.error. If, however, it is not spotted at the point of
sale then it may be spotted either as part of daily cash balancing in the branch or by the
custome subqeuently checking their receipt or theinbank statement.
In the former case, and especially in a busy office or one with many similar value
transactions, then it may not be obvious from the transactional records in Horizon which
one was mis-keyed. It is also possible that the surplus on this transaction could coincide
with shortages on other transactionsvand in the extreme nothing be visible as the branch
seems to balance OK comparing physical cash to the net balance on Horizon.
In these situations, Post Office Ltd and the branch may be reliant on the customer
pointing out the error. They would do so either by contacting their bank or the Post Office
Customer Services Team. In either case the issue would be reported through to the FSC
to handle the enquiry with the branch.
65. The time taken to identify the error is therefore sometimes outside of Post Office's control.
66. When a TC is sent to a branch through Horizon, the branch is provided with hardcopy
evidence of how the error has occurred. TCs are often preceded by enquiries with
branch, particularly if a large number of TCs are being sent to that branch. For example,
the FSC can make interventions by letter and telephone to obtain further details.
67. Branches are required to accept a TC through Horizon before completing their Branch
Trading Statement. The branch does not have to accept the TC on receipt (although it
may be prudent to do so) and can instead print the transaction correction narrative off
and take the necessary action within the days remaining until their Branch Trading Period
End (maximum 35 days away if the TC is received on Day 1 of a 5 week period).
68. Processing a TC often results in an adjustment to the cash or stock position at the branch
within the branch's accounts. TCs can debit or credit the branch's cash figure in Horizon.
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It is, however, important to note that this often (as the name implies) corrects the
recording of the transaction such that the reported balance in Horizon will align with the
physical cash handled in the transaction. TC’s are not primarily about creating debt. The
rarer occasions when a TC may create debt or a loss to a subpostmaster are such as
when counterfeit notes are taken from a customer when the branch had been provided
with the tools and guidance to detect such counterfeits, and as a consequence are then
found liable.
Example 1:
If a branch processes a bill payment of £100 as £10 on Horizon, the branch would see a
cash gain of £90. The customer receives a bill reminder that full payment has not been
received and contacts Post Office to resolve the issue. The error is identified and a Debit
TC is issued to the branch in the next trading period. The TC will. drive a double entry to
increase the cash figure in Horizon and to increase the liability. to the bill payment
organisation. This does not create a financial loss to the subpostmaster as it is covered
by the £90 originally deemed a surplus. Nevertheless, viewedin isolation, this shortfall
could be seen by the subpostmaster as an unconnected loss.
Example 2:
A customer presents a Transcash deposit slip to make a,bill payment but it is then
established that an appropriate method of payment is not possible so the transaction is
not recorded on Horizon and no cash changes hands. However, the branch incorrectly
retains the deposit slip and does not follow the,end of day procedure to compare the slips
on hand with the Horizon record of slips received that day. The failure to conduct this
check causes the subposmaster to send the slip.to Santander who administer Transcash
bill payments taken through Post Office branches. , who then process the bill payment (ie.
money is paid from Post Office's account to the customer's service provider's account).
When Post Office later reconciles the»bill payment against Horizon's records, there will be
no matching payment record in‘Horizon anda TC will be sent to the branch. If the branch
accepts the TC, this»will alter the,branch's cash position (so to reflect the subpostmaster's
error). At the.end of the trading period, the TC's effect on the cash position will cause a
shortfall during the trading period in which the TC is sent. This shortfall however reflects
the additional cash that the subposmaster needs to put into their branch in order to
correct the earlier error.
69. TCs can be disputed with the FSC. If the TC dispute is upheld a compensating TC will be
issued to the branch. If itis not upheld a written appeal can be made to the relationship
manager in FSC who will review the case and make a final decision. Any payment
required from the subpostmaster will be suspended until the review is completed.
70. In the financial year 2012/13 84,217 transaction corrections were issued with an average
value of around £100 each. This is against a backdrop of an average 2.5 billion
transactions being completed on Horizon each year.
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Training
Standard training
71. New subpostmasters receive training prior to and after taking up their position in branch.
Training covers matters such as how to transact products and services; reconcile the
day’s transactions; remit in and out cash and stock; despatch cheques to processing
centres. Subpostmasters are also trained on how to balance the branch on a weekly
basis and roll over in to the next balancing period. As part of this training,
subpostmasters are shown how to verify transactions and the cash and stock on hand if
discrepancies arise, as well as how to accept discrepancies, make good any losses and
gains, and how to raise issues about errors/discrepancies.
72. Post Office continually monitors and considers how best to.train subpostmasters and, as
part of the current Branch Support Programme which aims to improve the performance of
all branches, Post Office is reconsidering how best to.train subpostmasters on new
products (currently training on new products is through workbooks and,testing through
Horizon).
73. Examples of the types of training Post Office has offered in the past are as follows:
73.1 2001 — 2002 classroom training: was,offered to new subpostmasters followed by 10
to 11 days of onsite training and support,This would)be followed with one day of
“follow up balance” which is a branch Trading,Statement showing the stock and
cash held in branch.
73.2 2003 — between.5 and 10 days of classroom training was offered to new
subpostmasters (the training being optional) and 6 to 10 days of onsite training and
support was given depending on.whether the classroom training was attended.
This would be followed with one day of follow up balance.
73.3 2004 = 2005 - between 5 and 10 days of classroom training was offered to new
subpostmasters (the training being optional) and 5 to 10 days of onsite training and
support)was given depending on whether the classroom training was attended.
This would)be followed with one day of follow up balance.
73.4 2006 - between’ 5 and 10 days of classroom training was offered to new
Subpostmasters (the training being optional) and 6 days of onsite training and
support was given depending on whether the classroom training was attended.
This would be followed with one day of follow up balance.
73.5 2007 — 2011 — New subpostmasters received 5,8 or 10 days of training on
foundation, sales and other specialised modules. 6 days of onsite training and
support was provided, followed with one day of follow up balance. In 2007
following a pilot scheme follow-up telephone calls were introduced at intervals of 1
month and 6 months after the branch was taken over by the subpostmaster, with a
one day site visit taking place 3 months after the branch was taken over.
74. A subpostmaster may choose not to attend training or only parts of a training session if,
for example, he/she has worked in a branch previously and therefore already knows how
to operate Horizon and carry out transactions. Once initial training is provided it is up to
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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 up to the subpostmaster to ask for
further training and/or assistance if it is required (please see paragraph XX below for
details of the support available to subpostmasters).
75. In 2012, as part of the wider steps being taken to “transform” the network, Post Office
tailored its training depending on the specific role being undertaken and rolled out further
training depending on, for example, the experience of those specific subpostmasters, the
type of contract they would be operating and the number of employees they may have.
The precise training given to subpostmasters will therefore depend 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 and the types
of products sold.
76. For example, Post Office currently offers (amongst other packages) the following
packages of training to new subpostmasters:
New Local Operator
76.1 As part of the NT Programme (see paragraph XX above) Post Office created the
New Post Office Local Operator model for new. subpostmasters (along with the
New Main Operator model). The contract between Post Office and subpostmasters
under these new models is different.to the historic contractual relationship, the
main difference being a shift to variable remuneration,
76.2 Subpostmasters operating under a New Post Office Local Operator tend to have
large retail businesses. which sit alongside the Post Office and so, for example, the
subpostmaster will agree to operate the same opening hours for the Post Office as
for the retail business.
76.3. Prior to the transfer/conversion of a branch to a new subpostmaster 3 hours of
distance learning,is offered.to the subpostmaster and their staff. This includes a
written Foundation Module consisting of compliance for standard Post Office
products.
76.4 The subpostmaster is then offered 3 days of Counter Training Office
(CTO)classroom training. Following the classroom training it is the responsibility of
the subpostmaster to feedback to their staff. However, if the subpostmaster is
employing 6 or more members of staff, Post Office will offer spaces on the course
to up to 50% of the subpostmasters staff.
76.5 Post Office schedule the equivalent of 1 days’ training (normally split over 2 days
depending on availability) for office set-up. This includes matter such as setting up
Horizon log-ins; ensuring the pinpad for payment is set up correctly and connected
to Horizon; connecting hardware such as printers; checking stock and cash and
entering onto Horizon and discuss matters such as security in open plan
environments. Following the office set-up a one day induction is offered to the
subpostmaster and all members of staff.
76.6 In addition a comprehensive training guide is sent to the branch for the
subpostmaster and all staff to use, the following onsite training and support is
offered to subpostmasters:
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(a) 6 days if the subpostmaster has 1-2 members of staff,
(b) 7 days if the subpostmaster has 3-4 members of staff; and
(c) 8 days if the subpostmaster has more than 5 members of staff.
76.7 Following completion of the onsite training a follow up balance is arranged 7 days
later to address any issues that have arisen in completing transactions and using
Horizon. After a further 1-2 weeks the Field Team Leader (Sé@ paragraph XX),
who is the line manager for the trainer, will telephone the subpostmaster to seek
feedback on the training and establish if further support is required.
76.8 Post Office will arrange a site visit to the branch to address matters such as
product knowledge, transactions and any training needs at intervals of 1 month
and 3 months after the branch is transferred/converted. Post Office will also
arrange an audit 6-9 months after the transfer/conversion to verify stock and ensure
its regulatory and business processes are being properly followed.
New Main Operator
76.9 Subpostmasters who operate under the New Main Operator model tend to sell
financial products such as insurances and life cover,as well as passports.
76.10 Prior to the transfer/conversion of the branch the subpostmaster and their staff are
provided with a Distance Learning booklet to work through which includes 6
compliance workbooks to complete covering anti-money laundering, financial
services, data protection, mails integrity, dangerous goods and homephone and
broadband.
76.11 A7 day CTO class training session is offered to the subpostmaster and up to 50%
of his/her staff. Itis the responsibility ofthe subpostmaster to feedback the
training to the remainder of théirstaff. An additional day is offered to cover non-
core products for branches which will offer such products. Following completion
of this session an.engagement evening with the Sales Capability Manager is
arranged for the subpostmaster and all their staff to attend. The Sales Capability
Manager provides coaching on selling financial products. The Sales Capability
team then arrange a 2 day workshop for the subpostmaster and one member of
staff to cover sales training. It is the responsibility of the subpostmaster to
feedback the training to the remainder of their staff.
76.12 When the branch is ready to “go-live” an office set-up day is arranged (split over 2
days) with the branch opening at 1. 00pm on “go-live” day. A Field Support
Advisor (“FSA”) (see fUMBEHaESeCtOnDXXIDEloW) will attend the “go-live” day to
provide assistance (an additional FSA will attend if there is more than 6 staff).
Additional onsite training and support is provided for 6 days following the “go-live”
day and the branch will receive a training guide. A follow up balance is arranged 7
days after the onsite training is completed to address any issues that have arisen
in completing transactions and using Horizon. After a further 1-2 weeks the Field
Team Leader will telephone the subpostmaster to seek feedback on the training
and establish if further support is required.
76.13 Post Office will arrange site visits to the branch to address matters such as product
knowledge, transactions and any training at intervals of 1 month and 3 months
after the branch is transferred/converted. Post Office will also arrange an audit 6-
9 months after the transfer/conversion. ]
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Support for subpostmasters
NBSC
77. The Network Business Support Centre ("NBSC") was established on 15 December 1999
to help and support subpostmasters and their staff with customer transactions and
navigation of Horizon. NSBC can support subpostmasters with a wide range of issues
such as providing assistance with transactions carried out through Horizon, navigation,
how to address and deal with mistakes and any issues arising out of the weekly branch
trading statement.
78. NBSC is open 6.00am to 11.00pm Monday to Saturday and 7.00am to 5.00pm on
Sundays and Bank Holidays. Therefore, NSBC is available to support subpostmasters
and their employees during and after the opening hours of their branches. New NBSC
staff receive a 4 week training course and 2 week floor support. Ongoing training is
provided to NBSC staff on new products and services as they are introduced. Through
quality monitoring and coaching Post Office identifies any gaps in graining and provide
further support to advisors.
79. Post Office currently employs 70 people toysit within NBSC, and receive calls, undertake
second line support (where a query cannot be addressed during the telephone call,
second line support will liaise with Post Office productteams to source the answer) and
carry out administration roles. NBSC staff are experienced in Horizon and how branches
operate. NBSC receives 1,700 calls a day, 11,000 calls a week or 600,000 calls a year
(based on data obtained for 2012/13). NBSC operates a two tier escalation process; If
the NBSC advisor is unable to resolve the query/issue with the caller, the call is escalated
to tier 2 where more expert advice will be,provided. _ If this still does not resolve the issue
the Branch Support Team will decide if further training or face to face branch support is
required. The Branch Support Team are an administration team who provide further tier of
support to arrange training or intervention to assist branches outside of NSBC’s remit.
80. NBSC performance is measured on the time advisors take to answer the phone, referred
to as a “Grade of Service”. The target is to answer 70% of calls within 30 seconds and to
have no more than 5% of abandoned calls (i.e. where the caller hangs up before reaching
an advisor). For complaints NBSC’s target is to resolve 95% of complaints within 10
working days.
81. In addition to NBSC, subpostmasters can access Horizon On Line Help and call the
Horizon Service Desk (HSD) which is managed by Post Office’s Service Management
team.
82. HSD deals with technical issues concerning Horizon, for example, if Horizon appears to
be “offline” or there are log-in issues. In the event that a technical issue cannot be
resolved over the telephone HSD can request an engineer to attend the branch to
investigate the issue further.
83. Subpostmasters can directly contact HSD. A small number of calls by subpostmasters are
made to the wrong helpline, for example, a subpostmaster contacts HSD about
navigation issues and, therefore, HSD will transfer the call to NBSC. Approximately 5/6%
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of calls received by HSD are misdirected calls (i.e. do not relate to a technical issue) and
are transferred to NBSC. Approximately 2% of calls received by NBSC require
transferring to HSD because they relate to a technical query. The percentage of
misdirected calls is higher to HSD because often subpostmasters believe their query is
technical without realising it is human error causing the issue.
Field Support
84. Post Office has a large network of branches and subpostmasters which is currently
managed in the following way:
84.1 The Top 2000 branches , which are usually the largest branches with the highest
sales potential, are managed by an Area Sales Manager (“ASM”). These
branches receive face to face visits from the ASM on a regular basis (at least
monthly), primarily to assist with improving business and sales performance, but
other non-sales issues are also addressed if required. Whilst the ASM is trained
to be a sales coach, they are not considered by Post Office as “trainers” and would
go to other “expert domains” such as the Field Support Team to obtain assistance
for subpostmasters with, for example, balancing issues and usingHorizon (see
paragraph kx below). The subpostmasters of these branches are also invited to
attend Quarterly Business Up-dates where a range of topics are discussed.
Usually about 40-50 branches attend each session and there are at least 2 events
held in each of the 7 regions (North,East, North West, East Midlands, West
Midlands, South West and London, Wales and Scotland and Northern Ireland)
each year. If a branch has also converted to.a MAINs contract’, then the
subpostmaster will also be invited to take part in the “Breakthrough” programme.
This involves intensive.on-site support post conversion by 3 ASMs. The purpose
of this training is to assist with the mind-sets and behaviours of the subpostmaster
and their team to-ensure that the income of the branch is retained and maximised.
84.2 The Next 2000 branches, which are selected either because they have the sales
potential onbecause the geographical location is such that it is not cost effective to
be managed by an ASM as part of the Top 2000 branches (for example branches
located in remote parts of Scotland, Devon and Cornwall), are actively account
managed from a sales perspective by the Telephone Account Management team.
Face to face visits do not routinely occur (unless there are, for example, specific
issues to address), but the Telephone Account Management team make regular
calls (usually every 2 weeks) to the branch to monitor sales progress. The team
can also refer branches to be visited by a Regional Sales Trainer who can visit to
coach the subpostmaster and their staff on sales.
84.3 Remaining branches These branches are classed as “Branch Support” branches.
They are not visited pro-actively and do not have a manager assigned to them.
Their first point of contact is NBSC where they can seek assistance with issues
such as balancing queries and resolving mistakes. If NBSC cannot resolve the
query, there are a number of escalation points depending on the nature of the
issue and, ultimately, if it cannot be resolved over the telephone a visit by a Field
Support Advisor (see paragraph Xx below) can be arranged.
1A MAINs contract is a type of contract that some branches where migrated to as part of the Network
Transformation Programme (further detail of the Network Transformation Programme is available at
paragraph kx).
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85.
86.
87.
88.
Post Office has a dedicated Field Support Team which is responsible for induction and on-
going transactional training for all subpostmasters. Currently the team consists of 227
Field Support Advisors (“FSA”)and 18 Field Team Leaders (“FTLs”). FSAs are multi-
skilled advisors who provide support to the network of branches. This includes delivering
training, subpostmaster queries and auditing. FTLs are the FSAs line managers. The
number of FSAs and FTLs has doubled from 2010 when the team expanded to cope with
the Network Transformation Programme (the “NT Programme”). The NT Programme is a
programme to deliver £1.34billion of investment to transform the branch network. It
involves the migration of some branches to convert to either MAINs or Local operating
models (who will receive significant investment from Post Office). The remaining branches
will remain on the current subpostmaster contract.
The team is responsible for matters such as:
86.1 Delivering classroom training (a 5-8 day course) to all new subpostmasters, who
are going through the NT Programme. This training,takes place before a new
subpostmaster starts work in the branch and further detail.is set out at paragraph
XX.
86.2 Training on site following a branch transfers FSAs will attend the,branch for a
number of days after the transfer and will cover a range of topics so that the
branch can operate effectively. This will be followed up with site visits, telephone
calls and an audit.
86.3 Requests from branches for remedial training from FSAs throughout the year.
This training is delivered as and when requested on a wide range of topics such as
ATMs, DVLA transactions, balancing issues and unexplained losses. The team
received 863 requests for.extra supportin 2013. Generally the subpostmaster will
receive the training and the subpostmaster is then responsible for training their
own staff. However, each request for training is considered on a case by case
basis and Post Office. endeavours to provide the best support necessary to
address the issues raised by the subpostmaster.
86.4 Undertaking Compliance and. Financial audits which also includes providing further
training to subpostmasters on matters that arise out of any issues identified by the
audit. In 2013 there were over 3,000 compliance audits undertaken and cash and
stock checks were completed in 2,873 Post Office branches.
The Field Support Team.is not the only team within Post Office which provide training and
support, either on a face to face basis or remotely via the telephone, for example:
87.1 Mails Development Managers were established in 2010 to visit branches which
receive high volumes of mail. They train these branches on products and sales to
increase business growth in this area.
The Branch Standards Team was established in 2009 and is a telephone-based
intervention team. The teams contacts branches regarding a wide range of
performance issues. Whilst the purpose of the call is to notify the branch of any
errors, they also ensure that the branch knows the correct procedures to follow. If
the branch requires further support at any time, the team request a visit by an FSA.
There are also a number of teams across Post Office who come into contact with
subpostmasters (such as product specific teams like the national lottery team) and may
feel that a visit or further training would be beneficial for support. These teams can
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request further visits and training for subpostmasters through the Branch Support Team
who will decide the most appropriate resource to resolve the issue.
89. Post Office has gone through a number of structure reviews which have influenced the
support Post Office provides to subpostmasters and their branches. These reviews have
been driven by various cost challenges and were often determined by Post Office’s
funding from the UK government for its network of subpostmasters as well as commercial
pressures. As a result, Post Office’s approach to structuring its agency relationships with
subpostmasters has changed over the years, for example:
89.1 Up to 2005 - branches were either designated Urban or Rural. Each Urban
branch and the largest of the Rural branches was assigned a Retail Line Manager
(each Retail Line Manager would manage around 40-60 branches). The smallest
of the Rural branches would be managed by a Performance Advisor (each
Performance Advisor managed approximately 100 branches). Both Retail Line
Managers and Performance Advisors were responsible for performance. The Post
Office training team which sat within Post Office’s HR department was responsible
for matters such as transactional training.
89.2 2005-2006 — the network of subpostmasters was operated undefa structure of
Diamond, Platinum and Gold. This structure was known as a Sales and Service
structure. Most branches operated under the Diamond or Gold network. The
structure had a series of Sales Managers and also had Area Performance
Managers. Again, most branches,had an allocated manager who would visit and
the training team were an extra resource to use for matters such as transactional
training.
89.3 2006 — 2008 — in 2006 there was a full review of Post Office’s structure. Sales
Managers were replaced by either Commercial or Community Business
Development Managers (“BDM”). Each, branch had a BDM assigned to it. _ In the
Commercial network;,the BDM»would manage about 40 branches and in the
Community network about 100 branches. The Commercial Network concentrated
largely on.sales;and the Community network was responsible for picking up non-
sales issues. The Branch Support Team was also established to assist with sales
issues. It was also at this point that the Training team were renamed Network
Field Support Advisors,
89.4 2008 - the financial audit team merged with the Network Field Support Advisor
team so Support Advisors would conduct both training and audits in branches.
89.5 2009 - in around 2009 Post Office took the decision to remove the BDM role and
the Area Sales Manager structure was created and, as a result, if a smaller branch
required a site visit it would need to be requested from NBSC.
Auditing
90. In order to monitor and validate performance Post Office will often conduct audits of
branches. This allows Post Office to assure and verify its assets which are held in
branches and to ensure compliance with regulatory and business requirements.
91. Audits can take place:
91.1 when arisk at a branch has been identified (eg. the branch is continually suffering
shortfalls);
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91.2 on the transfer of the branch to a new subpostmaster (a further audit will often take
place 6-9 months after the date of transfer); or
91.3 following a robbery or burglary.
92. As it is not possible for Post Office to visit and audit every branch each year, it also
undertakes random sampled audits whereby branches are selected at random to be
audited. Whilst this has the benefit of validating the stock held within a branch and
ensuring Post Office’s systems and practices are being adhered to, it also assists Post
Office with risk profiling e.g if 5% of branches randomly selected show a particular
discrepancy it could be projected that Post Office is exposed to that discrepancy across
5% of its branches.
93. Whilst the precise nature of the audit will depend on the reason for the audit (eg. if it is as
a result of a robbery, audits are carried out to verify the loss.suffered, primarily an audit
consists of an inspection of the cash and stock held by the branch. This may be followed
by a Compliance Audit to ensure regulatory and business requirements are met. Audits
are undertaken on an entirely objective basis and will include checks such as:
93.1 for branches with paystations or lottery terminals, ensuring any overnight
Transaction Acknowledgements (an automated way to account for transactions
carried out for clients such as Camelot, see section [xxx])have been properly
accepted;
93.2 checking the cash declaration for the previous trading day;
93.3 counting and recording the cheques held in'the branch against the record
maintained on Horizon;
93.4 verifying the currency held in branch; and
93.5 counting and recording the amount of stock held in branch against the record
maintained on Horizon.
94. The results of the audit are discussed with the subpostmaster and, in the event of
financial irregularities»may resultin the subpostmaster being suspended or being asked
to “make good’ the loss i.e. to pay the loss to Post Office from the subpostmaster’s own
funds. Alternatively, transaction corrections may be required (see sectionIXXIabeVs) and
if compliance issues are identified this may be followed up by the Branch Standards
Team who will identify and assist the subpostmaster in rectifying the compliance issues. If
an issue cannot be»rectified by the Branch Standards Team, the Team can arrange for a
Field Advisor to visit the branch and/or for further training.
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Branch errors
95. In Post Office’s experience there are a variety of reasons why a branch may encounter a
discrepancy between the amount of cash and stock on hand and the amount of cash and
stock recorded on Horizon — this situation is commonly referred to as a "balancing
discrepancy".
96. Below are number of situations in which a balancing discrepancy can occur due to simple
errors in the operations of a branch. It should be noted that some of the situations below
may cause a gain for a subpostmaster or only cause a temporary loss. However, this can
cause real losses to be hidden:
96.1 If an error causes a surplus of cash in the branch, this mayoff-set a smaller loss
caused by another error. In that scenario, the loss error may not be revealed, as
the overall branch accounts will balance or show a surplus; or
96.2 If a surplus error occurs in one month but is later discovered and corrected via a
TC in a subsequent month, then the TC will have affect againstthat later month's
account and the accounts for the later month may show a loss even though all
transactions in that later period have been conducted)correctly.
Example:
A branch suffers two errors, one creating a £100.gain and another causing a £100 loss.
At the end of the trading period, the branch's accounts.will balance as the two errors
effectively cancel each other out for balancing purposes.
If in the next trading period the surplus error (i.e. the gain of £100) is discovered, a TC is
sent to the branch which increases the amountof cash recorded in the branch accounts.
If all the remaining transactions throughout the rest of that trading are conducted correctly
the branch will still show a loss at the end of the trading period due to the TC. Therefore,
whilst the loss ofthe branch shows in the current trading period, the error which caused
the loss occurred in the previous trading period.
97. Anumber of the errors below will only be visible to those working in the branch. It is often
not possible for Post Office to identify these errors remotely as Post Office only has
access to the transaction information recorded in Horizon by the branch staff (which as
described below may not accurately record the actual cash and stock movements in the
branch). When discrepancies occur Post Office looks to find possible explanations other
than those below. If no other source of the discrepancy can be found then, by a process
of elimination, the discrepancy will have most likely occurred through an error in the
branch
Miss-key
98. A miss-key is the term used when staff enter the wrong value of a transaction into Horizon
compared to the actual amount of the transaction. The difficulty with a mis-key error is
that only the employee who conducted the transaction will be able to prevent or
retrospectively identify this error.
Example:
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A personal banking customer may wish to deposit £1000 into their 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 who in turn contacts its customer. The customer will be asked to
confirm the amount deposited at the branch. However, the receipt printed from Horizon
and provided to the customer will show a deposit of £10,000 and, therefore, the
rectification process relies largely on the honesty and memory of the customer and the
willingness of the customer and their bank to engage in the resolution activity.
There are well documented processes for such error and a high resolution rate. However, in
the worst case, where the customer insists the original receipt was.a fair reflection of the
transaction they did, then the branch may be held liable as it was their mistake that created
the loss. Consideration would be given to the circumstances of the branch in reaching a final
decision.
Mixing retail and Post Office business
99. Generally, a branch must keep 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 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
100. At the end of a customer transactionypayment needs to be made to or received from the
customer. Even if the transaction is correctly. recorded on 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 the customer.
Example:
A business banking.customer may present documentation to deposit £1000 into their
business banking account. If at the end of the transaction £1000 in cash is given to the
customer instead of taking £1000 in cash from the customer there will be a shortage to
the branch of £2000, made up of the deposit entry £1000 being correctly input onto
Horizon (Horizon then expects to receive £1000) and the settlement out to cash of a
further £1000 which will be deducted from the cash in branch.
Accidental loss
101. 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 which
is snatched by a customer without branch knowledge.
102. In the first two of these examples the honesty of the finder and the ability to identify the
money as coming from the branch is required to return the money to the branch.
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103. In the third example unless the person is caught in the act of snatching 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 be unaware
of how the loss had occurred.
104. 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.
Miscounting cash on hand
105. Cash must be physically counted at the end of each day and when\completing a Branch
Trading Statement. When completing the physical cash count, notes:and coins can
sometimes be miscounted or missed altogether. When counting cash quickly a bag of
coins or a bundle of notes can also be missed.
106. Another instance of where this can happen is where 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 lottery scratchcards,
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.
107. Cash remittance pouches that have also. been made up in preparation for the Cash in
Transit collection drivers may be erroneously counted as part of the cash declaration.
Horizon does notinclude this amount within the cash holding figure (as it is deemed to
have been remitted out of the branch even if the pouch has not yet been physically
collected) and, therefore, the branch would be declaring a gain in this instance.
Cash remittance errors
108. If there is mistake made between the amount that is remmed in or out and what is
received or sent by or to the Post office cash centre, then this will lead to a branch
discrepancy.
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.
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Stock remittances
109. Branches receive their stock (postage, MVLs etc) from Post Office either via Cash in
Transit or Royal Mail Special Delivery. The branch is responsible for checking that the
amount of stock received matches the advice note delivered with the order and remming
the stock onto the correct lines in Horizon.
110. Branches are required to return some value stock items back to Swindon. This is usually
connected to Special Stamps which should be withdrawn from sale. The branch has to
rem out the stamps on Horizon and return the amount via the same method as receipt.
Swindon will, therefore, receive and process large amounts of stock and only check 10%
of stock returned. Errors can therefore be made in placing the wrong amount of stock
into remittance pouches or inputting the wrong value of the remittance on Horizon.
Cheque handling
111, Branches can accept cheques as payment for certain products and services. Customers
can cash personal cheques up to certain amount.or 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 where subpostmasters do not follow the operational process which can cause a
loss:
111.1 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 not be possible to link a missing cheque to a transaction record.
111.2 The method of payment has notbeen correctly recorded on Horizon
Example:
If a cheque is presented,by a customer to pay for a transaction, but the transaction is
accidently settled as a cash transaction, the value of cheques held in the branch
recorded by Horizon will not match the value of the actual cheques held in the
branch. At the end of each day a cheque listing is printed from Horizon. This printout
should be checked against the cheques held in branch and if it does not match,
Horizon should be corrected before remitting out the cheques to Post Office. After
remming out the cheques, a further cheque listing should then be printed to confirm
that no cheques are held in branch. If a branch has not ensured that the cheques in
branch match Horizon’s record before remming out the cheques, then the cash in
the branch will show a shortfall and the amount that is received at the cheque
processing centre will not match the amount that has been entered onto Horizon.
This is because Horizon calculates how much cash should be in a branch based on
the “cash” settlement option that is pressed at the end of each transaction. Therefore,
if the “cash” option has been pressed instead of the “cheque” option, Horizon will
expert there to be more cash in the branch than is actually held. This may generate a
Transaction Correction to correct the account unless the branch reverses the
transaction and records it accurately as a cheque transaction.
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112. Branches must 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 exactly 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.
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o
. 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 absorb this loss and
not pass it on to the subpostmaster. In the vast 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.
Connectivity
114. Each Horizon terminal requires a telecommunications signahin order to record
transactions to the central Post Office data centres. Each branch uses the signal to
communicate with a data centre where all transaction data is sent, and this in turn
communicates with Post Office's clients(such as banks, DVLA and local authorities) to
complete transactions. The router in each branch which communicates with data centres
needs to be connected to both a power supply anda. communication channel to complete
customer transactions. Connectivity issues can arise for'example when there is an
interruption in power supply orif.a user is already logged on to a terminal but attempts to
log on to a second terminal using the same log in details.
115. When serving a customer, transactions. for certain products send information directly to
data centres during the transaction i.e. moneygram, online banking, postal orders (known
as recoverable transactions), and.some where no interaction with the data centres
happens untilthe customer transaction is completed on Horizon i.e. mail transaction,
automated bill payments (known as non-recoverable transactions).
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a
. If there is an interruption to the power supply during a customer transaction, for example,
a power cut due to severe weather, the Horizon user will be prompted, once the system is
reconnected and the user is logged back on, with a message containing instructions on
how to recover the interrupted transaction. The message explains whether the customer's
transaction was completed and whether any payment needs to be received or made. The
steps which need to be taken (as directed by Horizon) will depend on whether the
transaction is recoverable or non-recoverable.
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3
. Similarly, if there is an interruption to the communication channel, for example, a
telephone line cut and/or a failure to connect to the mobile backup device during a
customer transaction, Horizon will prompt the user with an on-screen messages
explaining what to do to and whether to cancel or retry the transaction.
118. If the Horizon user does not follow the recovery instructions correctly, this could result in a
balancing error as well as having a negative impact on the completion of the customer's
transaction.
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119. Fujitsu proactively monitor the primary and back-up connectivity between branches and
data centres. If Fujitsu is alerted to a connectivity issue it will investigate and resolve the
issue. As a result, Fujitsu will not wait for the branch to contact Post Office to raise an
issue about connectivity - as soon as an issue is detected it will seek to resolve it.
Transacting from the wrong stock unit
120. Horizon has the capability to create what Post Office call stock units, which in effect are
virtual tills. There are no mandatory business requirements for how many stock units a
branch has to have orthey are physically deployed. Basically, the cash and stock for a
branch can be divided into a number of stock units for members of staff to serve
customers from. Some branches operate on “individual” stock units. This means that
cash and stock is transferred from the main branch stock to the individual stock unit. The
person allocated to this stock unit normally has a separate drawer in which to store cash
and stock and they are responsible for balancing that particular stock unit. When
branches have balancing problems, it is normally recommended to»adopt this approach
so mis-balances can be identified to specific individuals. Some branches operate “shared”
stock units. In effect, this means that all the branch staff serve from oné:pool of cash and
stock.
121. When a member of staff within a branch is serving a customer they log onto Horizon with
their own user ID and password and tag:themselves to a stock unit containing cash and
stock (either their own individual stock unit or'a.shared stock.unit). If a user accidentally
tags themselves to the wrong stock unit and serves»a customer or transfers cash or stock,
then the accounts will record the transactions against one stock unit but the physical cash
and stock will move in/out of a.drawer allocated to a different stock unit.
122. This can be corrected by either reversing the transactions and putting them through the
correct stock unit, or calculating the cash value of the transactions and transferring the
money to the correct stock units
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In theory, there should be no net overall discrepancy to the branch as any losses in one
stock unit will be compensated by the gains in the other stock unit. However, taken in
isolation this can appear like an error has occurred in one of the stock units and can
cause confusion\obscuring other errors.
Outstanding transfers between stock units
124. Where a branch has more than one stock unit in use (please see paragraph Xx for an
explanation as to stock units) there may be times when cash and/or stock are transferred
from one stock to another.
125. For example if stock unit AA is running short of cash, stock unit BB may transfer money to
allow customer service to continue smoothly. The user in stock unit BB should choose the
transfer out option in Horizon and choose the correct stock unit (in this case stock unit
AA) and transfer the cash out. A receipt is printed which is kept in stock unit BB to confirm
this. The user in stock unit AA then needs to accept the cash on Horizon and print their
own receipt to confirm this. At this time a Branch Trading Statement or (at any other time)
a report called “Transfer Reconciliation” can be printed from Horizon to confirm that there
are no outstanding transfers pending and that all totals are equal to zero.
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Transaction Acknowledgements
126. Some Post Office transactions eg. Camelot(Lottery)/Paystation™/Post & Go are not
transacted through a Horizon terminal but instead via separate machine. However, the
cash taken for these transactions needs to be accounted for on Horizon as part of the
overall branch balance.
127. Transaction Acknowledgements (TAs) were introduced to automate the process of
reconciling the data being sent directly from the separate machines and the amount of
cash that should be processed through Horizon. The transactions for Camelot, paystation
and Post and Go are processed overnight and the “Transaction Acknowledgement” is
sent to the branch the following morning confirming all transactions that took place the
previous day. For example, lottery tickets (not scratchcards) are sold to customers via the
lottery terminal. The data from these sales goes straight to Camelot and the branch takes
payment for the ticket and puts the cash into a separate drawer on the lottery terminal.
The following day, the branch will be sent an electronic TA which will appear as a
message for the first person who logs onto Horizon. The TA identifies the total amount of
sales transacted through the lottery terminal for the previous day and informs the person
how much cash should be transferred from the lottery till drawer to the Horizon terminal
drawer.
128. Prior to TAs being launched the subpostmaster would have to obtain the relevant print
outs from each machine (i.e. the lottery terminal) and then input these figures onto
Horizon and reconcile any cash owed. The launch of TAs removed the need for the
subpostmaster to manually input figures onto'Horizon. Historically, errors could occur in
manually reconciling these transactions.
129. Even with the TA process, errors.can occur if the cash from the lottery terminal is not
transferred to Post Office or if the user accidentally pays the cash amount into the wrong
stock unit. Alternatively, if the subpostmaster accepts the TA but does not pay in the
relevant cash then there willbe a shortage.
Product specific errors eg. DVLA Motor Vehicle Licences
130. Failure to follow the correct process for accounting for certain products can cause errors.
A good example is the accounting process for MVL discs (commonly referred to as tax
discs).
13
. 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 car,
the branch is responsible for destroying the discs and following a process to inform Post
Office that they have been destroyed.
132. When destroying the discs, if the branch does not follow all of the steps of “spoiling the
disc” and remitting it out to Post Office, Horizon will still record the disc as being in the
branch, even though the disc has been destroyed.
133. When the branch comes to balance 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 liable to the DVLA
for the "lost" disc.
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134. Failure to follow the 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 on Horizon, but no payment is actually taken, the branch has to reverse the
transaction and the disc. There are a number of steps that the branch needs to follow.
The branch has to reverse both the disc and the payment. If they only reverse the disc
out of the system then the stock of discs will balance, but the branch will miss-balance in
terms of the cash.
Theft from Post Office
135. Theft by branch staff can and has occured. It may involve staff taking cash or stock
directly from safes or drawers where the branch has not put sufficient controls in place.
These shortages would be identified when a physical cash count and declaration is made,
but it is not possible for Post Office to remotely identify when the theft occurred. Some
thefts may also be accompanied by an effort to disguise the theft eg. creating false
transactions or gains.
Examples:
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 becreated to mask an amount of cash that is
missing but the pouch is reversed before the dispatch, returning more value stock than is
actually received (creating a negative stock figure. 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 £10k is missing, before the cash declaration is made,
the branch could make up a cash remittance pouch to cover the discrepancy of what isn't
there, so in effect the branch will not‘show a discrepancy on Horizon. Once the cash is
declared, the branch will reverse the remittance pouch from the system.
An overall branch balance.is obtained by combining the cash and stock value figures. If
the branchhas created a negative stock figure, it will potentially mask a loss on the
balance, for example, recording more cheques as being dispatched than are cleared.
136. It is possible to identify the user ID that was used to undertake these transactions but it is
difficult to prove exactly when the actual theft occurred.
Theft from customers
137. Theft from customers can also occur. Although this may not necessarily result in a
branch miss-balance, if the customer complains to Post Office, Post Office may
compensate or reimburse the customer and, therefore, Post Office incurs a loss.
Example:
A member of staff targets a vulnerable Post Office Card account customer and confuses
the customer to the extent that the staff undertake the transaction twice but convince the
customer it has only happened once and only make one payment to the customer.
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Schedule 1: List of Products
A.
«
Yer
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Schedule 2: Glossary of Post Office terms
A.
«
Yer
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