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Initial Complaint Review and Mediation Scheme
Suspense Account
This paper
This paper has been prepared for Second Sight in response to the following question raised by
Second Sight:
“Could any SPMRs have been charged by Post Office Ltd for amounts that become incorporated in
suspense account balances that were subsequently taken into profit by POL or any of its
Counterparty Companies, or that remain as credit balances on the balance sheet of POL or any of
its Counterparty Companies?”
Summary Postion
Post Office principally pays its clients according to transaction information originating from
branches. If the transaction is completed correctly the branch accounts will balance (ie. they will
show no loss or surplus of cash or stock). Post Office will then deal separately with any
reconciliation discrepancy with a client.
If a branch, a client or a customer suspects an error with a transaction then there are processes in
place for investigating that suspected error. Where an error is suspected in branch and a
transaction correction is sent to that branch, the branch has full visibility of that transaction
correction and has the ability to challenge that transaction correction. So long as the branch
validly challenges the transaction correction with the necessary supporting paperwork from the
branch's records, the branch will not be held liable for the underlying discrepancy.
Client reconciliation - how it works
Horizon collects data on a substantial volume of transactions which allows it to identify issues by
branch, transaction type, client and method of payment according to how the transaction was
recorded in the branch. In conjunction with clients, and subject to data protection requirements,
Post Office can also sometimes track transactions back to individual customers or, in many cases,
the subpostmaster may themselves recall the customer involved through their own knowledge of
their customer base.
For many services, the transactional records as recorded in Horizon in branch are the so/e data
stream regarding activity in a branch. For a number of transactions and methods of payment,
though, it is possible to compare the transactional records as recorded in Horizon with the clients’
view of the transactions. In these latter cases, the daily transactional totals recorded in Horizon by
the subpostmaster are matched with clients’ records which in almost all cases are the same. In
the rare cases where there is a mis-match, Post Office investigates the difference - a process
which can involve the subpostmasterand the client.
Where an error is suspected in branch, a transaction correction may be issued with relevant
evidence to correct the accounting record of what has happened in branch. This may occur, for
example, where there is a discrepancy between the branch records and the client records. If a
difference arose where the client records exceeded the branch records then for services where the
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customer was paying money in that could lead to a charge from Post Office to the branch or where
the customer was withdrawing money it could lead to a credit from Post Office to the branch.
The transaction correction process is fully visible to each branch and corrections cannot be made
without an subpostmaster having accepted them. Subpostmasters may also challenge a
transaction correction which would result in the transaction correction being put on hold pending
further investigation by Post Office. For some transactions, the branch may hold additional
paperwork or evidence not available to Post Office. Often branches are asked to submit this extra
evidence to Post Office in order to validate the subpostmaster's challenge.
It should be noted that assuming the branch paid out or took from the customer cash to the same
value as the actual transaction, then there will be no physical loss of cash and the transaction
correction will simply correct the accounting error.
However, the branch is accountable for any failure to follow correct operating procedures in terms
of processing transactions. It is the case that a subpostmaster may bear a loss if they have
incorrectly processed a transaction or failed to follow the necessary processes for correcting that
transaction or should they accept a transaction correction even though they were holding the
necessary evidence to disprove the transaction correction.
Example
An ATM is directly connected to the LINK network and hence to the banks. Customer withdrawals
are therefore reported direct to the customer banks and to Bank of Ireland as the provider of the
ATMs. Bank of Ireland therefore knows how much should be paid to Post Office for the value of
withdrawals done in the Post Office estate. In tandem with this, subpostmasters are required to
record in Horizon the value dispensed to customers on a daily basis (as shown on the 16:30-16:30
receipt)
If a subpostmaster erroneously records the wrong cash dispensed figure on Horizon, this would be
revealed as a discrepancy once the Horizon figures were compared to the Bank of Ireland figures
directly recorded from the ATM. However, this would not cause a cash loss, only an accounting
error, that would be corrected by a transaction correction
Alternatively, if (in theory) Bank of Ireland's figures were incorrect, it would be a relatively
straightforward exercise for a subpostmaster to challenge a transaction correction and submit to
Post Office the 16:30-16:30 receipt from the ATM that would prove they have entered the correct
figure into Horizon.
Suspense account
The proposition underlying Second Sight’s question is that where the Counterparty Company - the
“client”- informs Post Office that an amount due to the client is greater than that recorded by the
Branch, that charge is automatically passed onto the branch, and the branch has limited data on
which to investigate discrepancies. Second Sight appears to assert that this results in a systemic
control weakness. This assertion is incorrect given that:
+ Post Office and the client are often able to resolve differences between themselves in the first
instance, or are able to resolve them with the help of the subpostmaster, before getting to the
stage of issuing a transaction correction.
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+ A transaction correction will be issued where appropriate with supporting evidence and the
subpostmaster can either accept or challenge (on the basis of the evidence and other
information held in branch or available on Horizon).
+ Horizon provides a subpostmaster with a number of ‘reports’ which can be used to resolve
queries in branch.
It is acknowledged that Post Office has a suspense account for discrepancies between Horizon
records and client records. These discrepancies are held for 3 years for investigation before being
released to Post Office's profit and loss account.
This does not however operate to the disadvantage of subpostmasters. As described above, there
are extensive processes in place to investigate Horizon-client discrepancies. To the extent that
Post Office issues a transaction correction to a branch then the transaction correction and its
evidence may be challenged by the branch. So long as a subpostmaster challenges a transaction
correction and submits the applicable evidence to show there is no error on their part, Post Office
will withdraw the transaction correction even where the client does not accept the evidence from
the branch. The unresolved discrepancy therefore does not fall on the branch, but rests in the
suspense account to be resolved between Post Office and the client.
Post Office notes that in addition to the assurance processes referred to in this note, Second Sight
have given subposmasters the opportunity to challenge specific transactions or transaction
corrections through the Spot Review process and through the Scheme. The outcomes of those
investigations have not revealed any findings that overturn Post Office's position.
Other issues
In the narrative supporting the central question, Second Sight also raise a number of other issues
which we would like to address:
+ Second Sight claims to have seen many cases where a non-cash payment does not hit the
customer's bank account, particularly in relation to power or communications interruptions
which Second Sight alleges can cause one side of a transaction to fail. Post Office has already
set out in some detail what happens in relation to power or other communications disruptions
and the subject is covered in Second Sight’s Part One Mediation Briefing Report. In addition,
the issue Second Sight refers to as a “one-sided transaction” is being dealt with separately.
+ Likewise with other examples quoted where Second Sight alleges errors have occurred - it is
not possible to comment on those in the absence of more detail and the opportunity to
properly investigate what happened in those instances. However, assuming that these
examples relate to cases in the Scheme, Post Office will investigate them in the normal way.
+ In relation to comments made by Post office about challenging regulated and audited entities,
this was not meant to be interpreted as meaning those entities would never make
administrative errors. The reasoning was simply that such entities are regulated and are
required to have systems and processes in place to comply with industry standards. It is,
therefore, not wrong of Post Office to assume that those systems and processes work properly
unless there is evidence to suggest that they do not.
29 July 2014
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